WEBVTT 1 00:00:00.000 --> 00:00:01.234 Amy Irving. 2 00:00:01.234 --> 00:00:03.400 We'll be right back. 3 00:00:03.400 --> 00:00:05.567 Stay with us. 4 00:00:05.567 --> 00:00:07.767 For every Netscape story that 5 00:00:07.767 --> 00:00:09.934 begins with a brainy 6 00:00:09.934 --> 00:00:12.501 undergraduate with a good idea there are hundreds that never 7 00:00:12.501 --> 00:00:15.234 got out of the garage. 8 00:00:15.234 --> 00:00:18.067 Ann Winblad has made her name picking the winners and putting 9 00:00:18.067 --> 00:00:20.834 her venture fund behind them. 10 00:00:20.834 --> 00:00:23.801 She and a partner, John Hummer, opened the fund in 1989, the 11 00:00:23.801 --> 00:00:26.634 first venture fund devoted exclusively to software. 12 00:00:26.634 --> 00:00:28.868 She's on everyone's list of people who understand every 13 00:00:28.868 --> 00:00:31.434 aspect of the industry and how it will respond to the Internet 14 00:00:31.434 --> 00:00:34.000 and I'm pleased to have her on 15 00:00:34.000 --> 00:00:36.767 this broadcast. Welcome. 16 00:00:36.767 --> 00:00:39.400 Thank you. 17 00:00:39.400 --> 00:00:41.634 Great to see you. 18 00:00:41.634 --> 00:00:43.801 As I said to you, anybody who has a house at the Outer Banks 19 00:00:43.801 --> 00:00:45.701 in North Carolina has got to have some intelligence about 20 00:00:45.701 --> 00:00:47.367 what makes America wonderful. 21 00:00:47.367 --> 00:00:49.100 At least ought to read maps. 22 00:00:49.100 --> 00:00:52.067 Yes. Exactly. 23 00:00:52.067 --> 00:00:53.534 Who do you know that's making money on the Internet? 24 00:00:53.534 --> 00:00:55.000 Well, we have quite a few young 25 00:00:55.000 --> 00:00:56.501 companies that are 26 00:00:56.501 --> 00:00:58.367 less than a year old that have refined their business models to 27 00:00:58.367 --> 00:01:00.300 make money. 28 00:01:00.300 --> 00:01:02.000 Not people that are providing access, but people 29 00:01:02.000 --> 00:01:03.767 who are using the Internet to make money. 30 00:01:03.767 --> 00:01:05.634 So you mean not people-- 31 00:01:05.634 --> 00:01:07.501 That are advertiser-based. 32 00:01:07.501 --> 00:01:09.767 Okay, advertiser-based. 33 00:01:09.767 --> 00:01:12.133 I don't think that there is anyone making money on 100 34 00:01:12.133 --> 00:01:14.400 percent advertising-based venue and I don't think anyone plans 35 00:01:14.400 --> 00:01:17.100 on making money by selling just advertising. 36 00:01:17.100 --> 00:01:18.834 And in fact, if you look at most of the other media, which I'm 37 00:01:18.834 --> 00:01:20.567 not an expert in-- 38 00:01:20.567 --> 00:01:22.334 Yeah. 39 00:01:22.334 --> 00:01:24.067 --there are very, very few medias that are 100 40 00:01:24.067 --> 00:01:25.801 percent supported by advertising. 41 00:01:25.801 --> 00:01:27.634 Perhaps television is the out layer (? 42 00:01:27.634 --> 00:01:29.234 ) here. 43 00:01:29.234 --> 00:01:30.968 Yeah. 44 00:01:30.968 --> 00:01:32.901 But magazines do list brokering. 45 00:01:32.901 --> 00:01:35.033 Right. 46 00:01:35.033 --> 00:01:37.567 They syndicate content. 47 00:01:37.567 --> 00:01:39.868 There are many ways that revenue surrounds the enterprise. 48 00:01:39.868 --> 00:01:42.467 I think there are some businesses that see advertising 49 00:01:42.467 --> 00:01:44.968 as the sweet spot of their revenue generating, but not the 50 00:01:44.968 --> 00:01:47.501 end-all, be-all. 51 00:01:47.501 --> 00:01:50.200 And I do think that when we look at what happened in advertising 52 00:01:50.200 --> 00:01:53.400 last year, we were just at the start. 53 00:01:53.400 --> 00:01:56.734 Again, the expenditure per user was very small. 54 00:01:56.734 --> 00:02:00.267 Eighty percent of all the advertising dollars were 55 00:02:00.267 --> 00:02:03.267 expended by about 20 companies and many of those companies were 56 00:02:03.267 --> 00:02:06.200 companies like Microsoft and Netscape, who were spending in 57 00:02:06.200 --> 00:02:08.634 their own field to support themselves across the other 58 00:02:08.634 --> 00:02:11.167 technical enterprise. 59 00:02:11.167 --> 00:02:13.734 So advertisers are just beginning to be able to 60 00:02:13.734 --> 00:02:16.734 understand this. 61 00:02:16.734 --> 00:02:19.701 They themselves are just beginning to get the tools to 62 00:02:19.701 --> 00:02:22.167 actually build digital advertisements. 63 00:02:22.167 --> 00:02:25.100 You know, the banner will be long gone by the end of 1997 and 64 00:02:25.100 --> 00:02:27.868 we'll see true interstitial ads, like you 65 00:02:27.868 --> 00:02:30.934 would see on television. 66 00:02:30.934 --> 00:02:34.067 Paint the world that you see in the year 2000. 67 00:02:34.067 --> 00:02:37.534 As you go around and talk to the people who are doing the things 68 00:02:37.534 --> 00:02:41.067 now that will have an on-stream impact over the next four-- 69 00:02:41.067 --> 00:02:44.367 three years, what's that world going to look like in the year 70 00:02:44.367 --> 00:02:47.467 2000, in terms of people who look to the Internet for data, 71 00:02:47.467 --> 00:02:50.267 for information, perhaps for pictures and music? 72 00:02:50.267 --> 00:02:52.901 Well, I think one thing you have to be careful of 73 00:02:52.901 --> 00:02:55.033 is that venture capitalists are the opportunists, not the 74 00:02:55.033 --> 00:02:57.167 visionaries, so-- 75 00:02:57.167 --> 00:02:59.300 Right. 76 00:02:59.300 --> 00:03:01.133 --whenever we put on our visionary hats, our 77 00:03:01.133 --> 00:03:02.934 entrepreneurs tend to scold us. 78 00:03:02.934 --> 00:03:04.767 But temporarily, I'll stick on the visionary hat and-- 79 00:03:04.767 --> 00:03:06.601 But the venture capitalists-- because they back 80 00:03:06.601 --> 00:03:08.400 the visionaries, is that the deal? 81 00:03:08.400 --> 00:03:10.467 That's exactly right. 82 00:03:10.467 --> 00:03:12.367 And they provide the sort of strategy as to how 83 00:03:12.367 --> 00:03:14.467 do you take a dream and make it a reality. 84 00:03:14.467 --> 00:03:16.734 Absolutely. 85 00:03:16.734 --> 00:03:18.901 We help these entrepreneurs, who really have convinced us that 86 00:03:18.901 --> 00:03:21.234 there is a future that they can own, build real business models, 87 00:03:21.234 --> 00:03:23.601 make connections in industry, integrate better employees into 88 00:03:23.601 --> 00:03:26.000 the company. 89 00:03:26.000 --> 00:03:28.534 We're basically a new company assistance integrator. 90 00:03:28.534 --> 00:03:31.667 But back to your question of what will happen 91 00:03:31.667 --> 00:03:35.334 by the year 2000. 92 00:03:35.334 --> 00:03:38.801 I think it's already been demonstrated that some behavior 93 00:03:38.801 --> 00:03:41.634 can be modified, that for basic goods and services -- books, 94 00:03:41.634 --> 00:03:45.267 compact discs -- that people are willing to actually go to a 95 00:03:45.267 --> 00:03:47.534 digital store and buy that product. 96 00:03:47.534 --> 00:03:49.767 Yeah. 97 00:03:49.767 --> 00:03:52.033 And AMAZON. COM's a good example of that. 98 00:03:52.033 --> 00:03:54.267 Nathan Myhrvold, our mutual friend, buys all his 99 00:03:54.267 --> 00:03:56.234 books from AMAZON.COM. 100 00:03:56.234 --> 00:03:58.167 And he buys a lot of books, I hear. 101 00:03:58.167 --> 00:03:59.801 I know. 102 00:03:59.801 --> 00:04:02.868 And I buy most of my books from AMAZON. COM, too. 103 00:04:02.868 --> 00:04:04.267 And what's the advantage of 104 00:04:04.267 --> 00:04:05.667 buying them from AMAZON.COM? 105 00:04:05.667 --> 00:04:07.033 Well, the advantage of buying them 106 00:04:07.033 --> 00:04:08.434 there is that I 107 00:04:08.434 --> 00:04:10.734 tend to actually find the books I want and I actually can do 108 00:04:10.734 --> 00:04:13.601 more efficient exploring. 109 00:04:13.601 --> 00:04:16.801 Yeah. 110 00:04:16.801 --> 00:04:20.100 I can also notify AMAZON.COM about the kinds of 111 00:04:20.100 --> 00:04:22.901 books I'm looking for and in the future, sites like AMAZON.COM, 112 00:04:22.901 --> 00:04:26.000 using newer technologies, will be able to predict what I might 113 00:04:26.000 --> 00:04:29.133 buy, based on other behavior I've exhibited. 114 00:04:29.133 --> 00:04:32.167 We can do that digitally. 115 00:04:32.167 --> 00:04:35.834 It'll know, ''Hey, this is a person that tends to do this. 116 00:04:35.834 --> 00:04:39.167 Thus they will want these books.'' And so they can 117 00:04:39.167 --> 00:04:42.767 actually make a tighter connection to me, as a customer, 118 00:04:42.767 --> 00:04:46.367 and give me more of what I want, even when I get on there as a 119 00:04:46.367 --> 00:04:50.200 tired Internet browser and want it. 120 00:04:50.200 --> 00:04:54.300 So the-- a digital customer is very, very different and what we 121 00:04:54.300 --> 00:04:58.367 can do with a digital customer, what we can know about them, how 122 00:04:58.367 --> 00:05:01.767 we can service them, is very different than wandering around 123 00:05:01.767 --> 00:05:05.667 in a store where I can have a social experience, but I might 124 00:05:05.667 --> 00:05:09.834 never connect as a customer and the yield from me, as a 125 00:05:09.834 --> 00:05:13.534 customer, might be lower. 126 00:05:13.534 --> 00:05:16.567 When you started out, did you have any-- how 127 00:05:16.567 --> 00:05:19.334 does-- how did you end up where you are now, coming out of 128 00:05:19.334 --> 00:05:21.934 Minnesota, a cheerleader-- 129 00:05:21.934 --> 00:05:24.367 And class valedictorian. 130 00:05:24.367 --> 00:05:26.701 And class valedictorian, as well. 131 00:05:26.701 --> 00:05:28.934 And you end up later in software. 132 00:05:28.934 --> 00:05:30.868 You start your own business and you invest $500, I think it was, 133 00:05:30.868 --> 00:05:32.834 of your own money and you sell that business 134 00:05:32.834 --> 00:05:34.868 later for $15 million. 135 00:05:34.868 --> 00:05:40.267 How did that happen? 136 00:05:40.267 --> 00:05:45.133 Why does-- why did you get a head start on this business 137 00:05:45.133 --> 00:05:49.534 that's so-- so fascinates us and mesmerizes our attention at the 138 00:05:49.534 --> 00:05:53.567 end of this century? 139 00:05:53.567 --> 00:05:57.100 Well, there was a new science just beginning to 140 00:05:57.100 --> 00:06:00.434 develop that was just beginning to be taught. 141 00:06:00.434 --> 00:06:03.901 I went to a college which was heavily endowed by 142 00:06:03.901 --> 00:06:06.000 Control Data Corporation-- 143 00:06:06.000 --> 00:06:08.067 Yeah. 144 00:06:08.067 --> 00:06:10.167 --a company thought of as a long-ago-- 145 00:06:10.167 --> 00:06:12.267 Who used to be headquartered in Minneapolis and 146 00:06:12.267 --> 00:06:14.334 may still be. 147 00:06:14.334 --> 00:06:16.400 Absolutely. 148 00:06:16.400 --> 00:06:18.434 Yeah. 149 00:06:18.434 --> 00:06:20.334 Absolutely. And Mr. Norris 150 00:06:20.334 --> 00:06:22.300 really liked education and tended to sprinkle large 151 00:06:22.300 --> 00:06:24.000 computers around on college campuses in his own geography. 152 00:06:24.000 --> 00:06:25.567 And so I got a chance to learn programming pretty early-- not 153 00:06:25.567 --> 00:06:27.901 as early as many entrepreneurs who learn now in high school-- 154 00:06:27.901 --> 00:06:29.901 Yeah. 155 00:06:29.901 --> 00:06:31.934 --but in college. 156 00:06:31.934 --> 00:06:33.968 And I really liked it and, to me, it was-- it was-- 157 00:06:33.968 --> 00:06:36.000 What? 158 00:06:36.000 --> 00:06:38.033 It was addictive. I mean, it really was something 159 00:06:38.033 --> 00:06:42.234 where, ''Wow!'' 160 00:06:42.234 --> 00:06:44.334 What was addictive about it? 161 00:06:44.334 --> 00:06:46.434 Well, first of all, it was new and if you learned 162 00:06:46.434 --> 00:06:48.133 how to program, you were sort of someone special. 163 00:06:48.133 --> 00:06:49.834 I mean, you were the nerdiest of the nerds, or whatever it is 164 00:06:49.834 --> 00:06:51.567 that you were called at that time-- 165 00:06:51.567 --> 00:06:53.267 And to be called ''nerd'' was a 166 00:06:53.267 --> 00:06:54.968 word of praise or-- 167 00:06:54.968 --> 00:06:56.901 No, not then. 168 00:06:56.901 --> 00:06:58.601 --a word of offense? 169 00:06:58.601 --> 00:07:00.367 Oh, not then. 170 00:07:00.367 --> 00:07:01.968 In the '70s, it was considered very fringe-y. 171 00:07:01.968 --> 00:07:03.634 Yeah. 172 00:07:03.634 --> 00:07:05.701 You know, your parents wondered 173 00:07:05.701 --> 00:07:07.267 what you were doing. 174 00:07:07.267 --> 00:07:10.367 ''Why don't you go back to the mainstream?'' 175 00:07:10.367 --> 00:07:11.701 And ''What are you doing in your room and why 176 00:07:11.701 --> 00:07:14.367 don't you ever come out for light?'' 177 00:07:14.367 --> 00:07:15.667 Exactly. And you know, you should do something 178 00:07:15.667 --> 00:07:17.000 else other than sit in 179 00:07:17.000 --> 00:07:18.801 front of that computer and, you know, this is just some passing 180 00:07:18.801 --> 00:07:20.400 phase you'll get through. 181 00:07:20.400 --> 00:07:22.133 But I think people really-- that really understood programming 182 00:07:22.133 --> 00:07:24.334 and really liked it realized that they could 183 00:07:24.334 --> 00:07:26.434 build products themselves. 184 00:07:26.434 --> 00:07:28.934 I mean, I think there's an entrepreneur in a lot of people 185 00:07:28.934 --> 00:07:31.801 and-- but many, many businesses require a lot of capital. 186 00:07:31.801 --> 00:07:34.234 They're very capital-intensive. 187 00:07:34.234 --> 00:07:36.667 To really enter into the software industry is a very 188 00:07:36.667 --> 00:07:39.133 capital-efficient process, even more efficient today 189 00:07:39.133 --> 00:07:41.601 than when I started. 190 00:07:41.601 --> 00:07:44.033 When I started, my business, the first 191 00:07:44.033 --> 00:07:46.501 personal computer I bought 192 00:07:46.501 --> 00:07:48.767 cost $25,000 and it was probably era one of Moore's law. 193 00:07:48.767 --> 00:07:51.067 Yeah. 194 00:07:51.067 --> 00:07:53.334 It was very slow, very limited-- 195 00:07:53.334 --> 00:07:55.167 ''Everything changes in six months,'' or what 196 00:07:55.167 --> 00:07:57.033 is that-- 197 00:07:57.033 --> 00:07:58.868 But today-- 198 00:07:58.868 --> 00:08:00.701 What is Moore's law, ''Everything changes in six 199 00:08:00.701 --> 00:08:02.534 months'' or-- 200 00:08:02.534 --> 00:08:05.300 Absolutely. Absolutely. 201 00:08:05.300 --> 00:08:07.934 And-- but today, for the entrepreneur to start in the 202 00:08:07.934 --> 00:08:10.667 software business is perhaps less than $1,000 to have 203 00:08:10.667 --> 00:08:12.267 basically all the tools they want-- 204 00:08:12.267 --> 00:08:13.834 Yeah. 205 00:08:13.834 --> 00:08:15.400 --to start building a product. 206 00:08:15.400 --> 00:08:16.968 And what did it take the two guys at Yahoo to 207 00:08:16.968 --> 00:08:18.534 start that? 208 00:08:18.534 --> 00:08:20.400 Not-- nothing. 209 00:08:20.400 --> 00:08:22.501 Nothing. 210 00:08:22.501 --> 00:08:24.534 I mean, they were-- they were leveraging college 211 00:08:24.534 --> 00:08:26.567 campus computers, so virtually it cost them nothing to start. 212 00:08:26.567 --> 00:08:28.767 I mean, they were right there at Stanford University in an 213 00:08:28.767 --> 00:08:30.701 environment, again, rich in computing resources, so the 214 00:08:30.701 --> 00:08:33.000 capital intensity for them was virtually sweat equity. 215 00:08:33.000 --> 00:08:35.734 Now, what do you worry about, thinking about all 216 00:08:35.734 --> 00:08:38.667 that you have seen today? 217 00:08:38.667 --> 00:08:41.567 I mean, what are your concerns, as we sort of march so far and 218 00:08:41.567 --> 00:08:44.467 so fast because of the Internet, because of the P.C., because of 219 00:08:44.467 --> 00:08:47.300 the convergence of so many of these high-tech fields? 220 00:08:47.300 --> 00:08:49.701 Well, I worry about a lot of things. 221 00:08:49.701 --> 00:08:51.734 Like Andy Grove, you know, I tend to be paranoid and-- 222 00:08:51.734 --> 00:08:54.067 Andy wrote a book-- the title of his book is 223 00:08:54.067 --> 00:08:56.267 Only the Paranoid Survive. 224 00:08:56.267 --> 00:09:00.534 Yeah. 225 00:09:00.534 --> 00:09:04.000 And the same issue of capital efficiency also creates very few 226 00:09:04.000 --> 00:09:07.100 barriers to entry. 227 00:09:07.100 --> 00:09:09.934 There are very few unique ideas. 228 00:09:09.934 --> 00:09:12.534 Yeah. 229 00:09:12.534 --> 00:09:14.434 And it then depends upon superb execution on the 230 00:09:14.434 --> 00:09:16.300 part of the entrepreneur-- 231 00:09:16.300 --> 00:09:18.167 Right. 232 00:09:18.167 --> 00:09:20.067 --to build a real business. And I worry about 233 00:09:20.067 --> 00:09:21.934 every deal we do, that-- that a business 234 00:09:21.934 --> 00:09:24.267 cannot be scaled quickly and correctly around the opportunity 235 00:09:24.267 --> 00:09:26.601 and that the entrepreneurs make as few mistakes as possible and 236 00:09:26.601 --> 00:09:28.934 get every competitive advantage available. 237 00:09:28.934 --> 00:09:31.267 And I also worry about a segment being very, very 238 00:09:31.267 --> 00:09:33.567 popular, all of 239 00:09:33.567 --> 00:09:36.567 a sudden. 240 00:09:36.567 --> 00:09:39.300 When we started our venture firm in 1989, we had to have 150 241 00:09:39.300 --> 00:09:41.601 meetings to raise our first $30 million and our-- 242 00:09:41.601 --> 00:09:43.834 the problem was-- 243 00:09:43.834 --> 00:09:45.033 This is building your fund for investing-- 244 00:09:45.033 --> 00:09:46.234 Absolutely. 245 00:09:46.234 --> 00:09:47.434 --in ventures. 246 00:09:47.434 --> 00:09:48.634 I mean, absolutely, because people thought 247 00:09:48.634 --> 00:09:49.834 investing in software was the stupidest thing 248 00:09:49.834 --> 00:09:51.033 they've ever heard. 249 00:09:51.033 --> 00:09:52.634 This was when? 250 00:09:52.634 --> 00:09:54.367 In '89. 251 00:09:54.367 --> 00:09:56.167 Yeah. 252 00:09:56.167 --> 00:09:58.000 In 1989, the end of '89, in fact. 253 00:09:58.000 --> 00:09:59.868 So that isn't very long ago, either. 254 00:09:59.868 --> 00:10:01.534 And now it's a very popular segment. 255 00:10:01.534 --> 00:10:04.100 It's becoming extremely over-invested. 256 00:10:04.100 --> 00:10:06.767 The segment cannot support all the customers that-- companies 257 00:10:06.767 --> 00:10:09.100 that are being invested. 258 00:10:09.100 --> 00:10:11.434 In fact, in 1995 there was almost $3 million a day being 259 00:10:11.434 --> 00:10:13.734 invested in Internet companies by venture capitalists. 260 00:10:13.734 --> 00:10:16.067 Are you satisfied just to 261 00:10:16.067 --> 00:10:18.400 be a venture capitalist? 262 00:10:18.400 --> 00:10:21.334 Is there any part of you says, ''I would like to 263 00:10:21.334 --> 00:10:24.167 be running a business?'' 264 00:10:24.167 --> 00:10:27.100 Now, you have a business, obviously, a venture capitalism 265 00:10:27.100 --> 00:10:30.367 business, but being an entrepreneur, creating a product 266 00:10:30.367 --> 00:10:33.334 rather than investing in somebody else's product? 267 00:10:33.334 --> 00:10:36.067 You know, I think coaching is just as challenging 268 00:10:36.067 --> 00:10:38.701 as playing the game and in the NBA, years ago I think they used 269 00:10:38.701 --> 00:10:41.367 to have this thing called the ''player-coach.'' I don't 270 00:10:41.367 --> 00:10:44.400 remember ever seeing a game where the coach ripped their 271 00:10:44.400 --> 00:10:47.734 suit off and played, but I remember the terminology. 272 00:10:47.734 --> 00:10:50.734 And you don't see that anymore. 273 00:10:50.734 --> 00:10:53.801 The coaches, you know, have great looks of exasperation, but 274 00:10:53.801 --> 00:10:56.834 it's really, really tough to keep the strategy going for a 275 00:10:56.834 --> 00:11:00.734 very fast-paced game. 276 00:11:00.734 --> 00:11:04.467 So I am extremely challenged in the coaching role. 277 00:11:04.467 --> 00:11:08.100 Look at Scott McNealy and Bill Gates and Larry 278 00:11:08.100 --> 00:11:11.334 Ellison and Marc Andreessen and Barksdale and Jim Clark 279 00:11:11.334 --> 00:11:14.000 and all those people, who are the big names in the business. 280 00:11:14.000 --> 00:11:16.868 And I'm leaving lots of them out-- and Andy Grove and others. 281 00:11:16.868 --> 00:11:19.667 What do they share in common? 282 00:11:19.667 --> 00:11:22.000 What is there? 283 00:11:22.000 --> 00:11:24.367 They're on everybody's list and you are, too, and Esther Dyson, 284 00:11:24.367 --> 00:11:26.367 as the most popular, influential, powerful people in 285 00:11:26.367 --> 00:11:28.734 this whole business. 286 00:11:28.734 --> 00:11:30.767 What do those people share who've shown 287 00:11:30.767 --> 00:11:33.000 entrepreneurial genius? 288 00:11:33.000 --> 00:11:35.567 Well, I think there's one thing-- 289 00:11:35.567 --> 00:11:37.467 Other than competition. 290 00:11:37.467 --> 00:11:39.367 Yeah. 291 00:11:39.367 --> 00:11:41.267 And drive and ambition. 292 00:11:41.267 --> 00:11:43.167 I think there's one thing that-- it's-- they've 293 00:11:43.167 --> 00:11:45.067 made a long-term commitment to one thing, to one 294 00:11:45.067 --> 00:11:50.000 industry, to one company. 295 00:11:50.000 --> 00:11:52.501 A lot of entrepreneurs coming into the business now believe 296 00:11:52.501 --> 00:11:54.934 that it is a gold rush, that you're in there for a few years, 297 00:11:54.934 --> 00:11:57.567 your company goes public, you have a pile of money and-- 298 00:11:57.567 --> 00:12:00.167 Yeah. 299 00:12:00.167 --> 00:12:02.834 --then you're set for life. 300 00:12:02.834 --> 00:12:05.334 And I think Scott McNeely, Bill Gates, Andy Grove are not 301 00:12:05.334 --> 00:12:08.267 motivated by money. 302 00:12:08.267 --> 00:12:10.934 They are not counting their dollars every day. 303 00:12:10.934 --> 00:12:13.701 They are focusing on their business. 304 00:12:13.701 --> 00:12:16.567 They are motivated by building companies in this really 305 00:12:16.567 --> 00:12:19.501 exciting new segment. 306 00:12:19.501 --> 00:12:22.601 They are not motivated by counting the dollars in their 307 00:12:22.601 --> 00:12:25.868 bank account and they could have all retired years ago. 308 00:12:25.868 --> 00:12:29.133 There are very, very few entrepreneurs that are going to 309 00:12:29.133 --> 00:12:31.834 stick with the segment for their entire career. 310 00:12:31.834 --> 00:12:34.667 Everybody that is anyone in this industry could have retired a 311 00:12:34.667 --> 00:12:36.734 long time ago because more money has come to us-- 312 00:12:36.734 --> 00:12:38.801 Right. 313 00:12:38.801 --> 00:12:40.868 --than we ever expected in our lifetimes. 314 00:12:40.868 --> 00:12:42.934 Time magazine-- my friend, 315 00:12:42.934 --> 00:12:45.000 Walter Isaacson-- ''The 316 00:12:45.000 --> 00:12:47.701 private world of Bill Gates-- a surprising visit with the man 317 00:12:47.701 --> 00:12:50.267 who is shaping our future''-- your friend-- you checked into a 318 00:12:50.267 --> 00:12:53.100 hotel last night here in New York and someone says, 319 00:12:53.100 --> 00:12:55.868 ''Winblad-- Winblad-- are you the same person that's in here?'' 320 00:12:55.868 --> 00:12:58.534 This is a story called ''In Search of the Real Bill Gates.'' 321 00:12:58.534 --> 00:13:01.200 And it goes on and it's a fascinating and well-written and 322 00:13:01.200 --> 00:13:04.234 nicely-done story, mentioning some of the people we have 323 00:13:04.234 --> 00:13:07.033 talked about, from Nathan Myhrvold to Steve Balmer. 324 00:13:07.033 --> 00:13:09.634 And guess who is also mentioned in here? 325 00:13:09.634 --> 00:13:12.067 (reading) ''Another of Gates's vacation companions, Ann 326 00:13:12.067 --> 00:13:14.501 Winblad, the software entrepreneur and venture 327 00:13:14.501 --> 00:13:16.834 capitalist he dated during the 1980s. 328 00:13:16.834 --> 00:13:19.067 They met''-- you know. 329 00:13:19.067 --> 00:13:21.234 But what this is, is not a story-- is 330 00:13:21.234 --> 00:13:23.133 a story of a friendship. 331 00:13:23.133 --> 00:13:25.067 Uh-huh. 332 00:13:25.067 --> 00:13:27.901 It really is. 333 00:13:27.901 --> 00:13:30.701 How did it start? 334 00:13:30.701 --> 00:13:33.701 What's it-- you know, because there's a wonderful quote in 335 00:13:33.701 --> 00:13:36.234 which you talk about you two overachievers-- I think the 336 00:13:36.234 --> 00:13:38.367 quote is yours, it may have been Bill Gates-- overachievers all 337 00:13:38.367 --> 00:13:41.000 of a sudden, in a sense, for a moment, saying, ''How great is 338 00:13:41.000 --> 00:13:44.100 this,'' you know? 339 00:13:44.100 --> 00:13:49.200 Right. 340 00:13:49.200 --> 00:13:52.234 ''We ambitious, overworking, hard-driving, 341 00:13:52.234 --> 00:13:55.234 overachievers found ourself at the center-- or part of this 342 00:13:55.234 --> 00:13:58.267 universe that's so driving so much of the world.'' 343 00:13:58.267 --> 00:14:01.267 Well, I can remember in about 1985, as Microsoft 344 00:14:01.267 --> 00:14:04.267 was about to go public, and Bill was worried 345 00:14:04.267 --> 00:14:07.300 about Microsoft going 346 00:14:07.300 --> 00:14:11.234 public and we were in North Carolina at my beach house and 347 00:14:11.234 --> 00:14:15.534 walking along the beach and Bill said to me, ''You know, Ann, I 348 00:14:15.534 --> 00:14:19.968 have really squeezed my brain. 349 00:14:19.968 --> 00:14:24.000 I've really thought of every idea I can possibly think of and 350 00:14:24.000 --> 00:14:27.634 I know I can get Microsoft to $500 million in revenue, but I 351 00:14:27.634 --> 00:14:31.901 cannot see past that.'' Well, in 1985, Microsoft was about, you 352 00:14:31.901 --> 00:14:35.434 know, $70 million, $80 million in revenues and it had just hit 353 00:14:35.434 --> 00:14:38.934 that number, doubling from the year before. 354 00:14:38.934 --> 00:14:41.801 So to me, I was amazed because $500 million in revenue was an 355 00:14:41.801 --> 00:14:44.567 amazing number. 356 00:14:44.567 --> 00:14:47.234 I mean, to even have a $100 million software company-- 357 00:14:47.234 --> 00:14:49.634 Yeah. 358 00:14:49.634 --> 00:14:52.033 --in 1984, '85, was just unheard of. 359 00:14:52.033 --> 00:14:54.400 (unintelligible) 360 00:14:54.400 --> 00:14:56.801 But it really just does give you some scale of, 361 00:14:56.801 --> 00:14:59.200 you know, how much broader this 362 00:14:59.200 --> 00:15:02.734 industry has become. 363 00:15:02.734 --> 00:15:06.400 I think that one of the things about Bill, which is why I 364 00:15:06.400 --> 00:15:09.868 treasure our friendship, is that, you know, here he was, 365 00:15:09.868 --> 00:15:12.834 squeezing his brain and he got to $500 million in revenue. 366 00:15:12.834 --> 00:15:15.334 And my question was not, ''Why are you worrying?'' 367 00:15:15.334 --> 00:15:17.701 My question was, ''How did you get $500 million? 368 00:15:17.701 --> 00:15:20.367 It's an amazing number. 369 00:15:20.367 --> 00:15:23.367 Show me how you did that. 370 00:15:23.367 --> 00:15:26.334 What did you squeeze that out of?'' 371 00:15:26.334 --> 00:15:29.033 And I think that there are, you know, very few people even 372 00:15:29.033 --> 00:15:31.601 in this industry that are willing to look ahead and really 373 00:15:31.601 --> 00:15:34.000 squeeze their brains to get to that number. 374 00:15:34.000 --> 00:15:35.534 You know-- 375 00:15:35.534 --> 00:15:37.067 Well, why do you say that? I mean, why-- 376 00:15:37.067 --> 00:15:38.601 Oh, I really-- 377 00:15:38.601 --> 00:15:40.167 --are there so few people willing to squeeze 378 00:15:40.167 --> 00:15:41.701 their brains to get to that number? 379 00:15:41.701 --> 00:15:44.033 Well, I mean, that number now is-- 380 00:15:44.033 --> 00:15:46.400 Well, whatever number it is. 381 00:15:46.400 --> 00:15:48.801 I mean, it's almost like you're saying that what stood out about 382 00:15:48.801 --> 00:15:50.868 Bill Gates is that he was squeezing his brain more than 383 00:15:50.868 --> 00:15:52.667 anyone else to say, ''How do I get to this level? 384 00:15:52.667 --> 00:15:54.501 How do I break through the next barrier and the next barrier''-- 385 00:15:54.501 --> 00:15:57.968 Right. Right. 386 00:15:57.968 --> 00:16:01.067 --''and the next barrier?'' 387 00:16:01.067 --> 00:16:02.634 That's what I am saying. And I think that people 388 00:16:02.634 --> 00:16:04.167 just think opportunity is going to 389 00:16:04.167 --> 00:16:07.033 march our way and that we can just sort of add to 390 00:16:07.033 --> 00:16:09.734 it in little hunks. 391 00:16:09.734 --> 00:16:12.701 But the reason that Bill is so important to this industry is 392 00:16:12.701 --> 00:16:16.167 that whatever the size his company is, he's thinking about 393 00:16:16.167 --> 00:16:19.634 how he can make it twice as big. 394 00:16:19.634 --> 00:16:22.467 He is expanding the size of the entire software industry. 395 00:16:22.467 --> 00:16:25.534 Now, software before was a very small number of companies, 396 00:16:25.534 --> 00:16:28.400 number of gross revenues worldwide, 397 00:16:28.400 --> 00:16:31.133 number of even applications. 398 00:16:31.133 --> 00:16:34.300 All of a sudden, software is going to embrace commerce. 399 00:16:34.300 --> 00:16:37.734 It's going to embrace entertainment. 400 00:16:37.734 --> 00:16:41.234 It's going to embrace information. 401 00:16:41.234 --> 00:16:44.434 It's going to embrace ownership of the vast majority of consumer 402 00:16:44.434 --> 00:16:47.234 customers and that is going to be the software industry. 403 00:16:47.234 --> 00:16:49.634 You know, there'll be this old analog world that-- that will 404 00:16:49.634 --> 00:16:51.667 have been there, once-- 405 00:16:51.667 --> 00:16:54.367 Yeah. So the digital world rules. 406 00:16:54.367 --> 00:17:00.567 Right. Exactly. 407 00:17:00.567 --> 00:17:03.801 I mean, it-- my niece once said to my sister, when Nickelodeon 408 00:17:03.801 --> 00:17:07.000 got popular and they were re-showing all the 409 00:17:07.000 --> 00:17:10.467 black-and-white television series from the '50s, ''Mom, 410 00:17:10.467 --> 00:17:15.534 were you there when color happened?'' 411 00:17:15.534 --> 00:17:19.601 thinking it was a grand, psychedelic event. 412 00:17:19.601 --> 00:17:23.167 You know, the next generation will say, ''Mom, were you there 413 00:17:23.167 --> 00:17:27.067 when digital happened?' '-- 414 00:17:27.067 --> 00:17:29.033 Yeah. 415 00:17:29.033 --> 00:17:31.000 --as if it was sort of one large psychedelic 416 00:17:31.000 --> 00:17:32.968 event because it is. 417 00:17:32.968 --> 00:17:34.934 We're finally on the cusp of actually growing 418 00:17:34.934 --> 00:17:36.901 a real, real industry. 419 00:17:36.901 --> 00:17:38.868 Yeah. 420 00:17:38.868 --> 00:17:40.868 But I mean, my sense is, is that-- and maybe it's true with 421 00:17:40.868 --> 00:17:42.834 Bill Gates and maybe it's true with a few others-- is that 422 00:17:42.834 --> 00:17:44.567 they're finding their way, they're not seeing their way, 423 00:17:44.567 --> 00:17:46.367 and that no one necessarily is looking around the corner and 424 00:17:46.367 --> 00:17:48.667 saying, ''This is the way it's going to be 10 years from now'' 425 00:17:48.667 --> 00:17:50.667 because they don't know. 426 00:17:50.667 --> 00:17:52.834 What they're doing is year-by-year. 427 00:17:52.834 --> 00:17:54.934 Simply because they live with the idea of alertness, they're 428 00:17:54.934 --> 00:17:57.033 finding their way. 429 00:17:57.033 --> 00:17:58.868 Well, I think there's some of that is correct, 430 00:17:58.868 --> 00:18:00.701 but not-- 431 00:18:00.701 --> 00:18:02.534 Do you think that's essentially wrong? 432 00:18:02.534 --> 00:18:04.334 I don't think it's essentially wrong, but I think 433 00:18:04.334 --> 00:18:06.167 it has some errors in it. 434 00:18:06.167 --> 00:18:08.400 I think that there are people who are saying, ''Gee,'' you 435 00:18:08.400 --> 00:18:10.567 know, ''our business is changing,'' you know, ''and we 436 00:18:10.567 --> 00:18:12.834 have to really look ahead to that changed business. 437 00:18:12.834 --> 00:18:15.400 What will we own? 438 00:18:15.400 --> 00:18:18.267 How will we make a profit at owning that? 439 00:18:18.267 --> 00:18:21.434 What technology will we need to maintain that ownership?'' 440 00:18:21.434 --> 00:18:24.067 And as our industry has gotten bigger and we've gotten now not 441 00:18:24.067 --> 00:18:27.000 $100 million companies, but billion-dollar companies 442 00:18:27.000 --> 00:18:29.667 competing against each other, you cannot just wait to drive 443 00:18:29.667 --> 00:18:32.367 around the corners. 444 00:18:32.367 --> 00:18:35.033 You at least have to have someone scouting ahead to see, 445 00:18:35.033 --> 00:18:37.534 you know, if you're going to fall off the edge of the earth 446 00:18:37.534 --> 00:18:39.901 when you do that-- 447 00:18:39.901 --> 00:18:41.901 I don't mean you-- 448 00:18:41.901 --> 00:18:43.267 --otherwise someone-- 449 00:18:43.267 --> 00:18:44.634 You don't do it blindly, but-- 450 00:18:44.634 --> 00:18:46.000 --will take your spot. 451 00:18:46.000 --> 00:18:47.367 --but, in a sense, I mean, it's-- Bill Gates 452 00:18:47.367 --> 00:18:48.734 didn't see the Internet. I mean, the story's not quite as 453 00:18:48.734 --> 00:18:50.100 extreme as it's told, that 454 00:18:50.100 --> 00:18:52.234 somehow this great behemoth all of a sudden was there and he 455 00:18:52.234 --> 00:18:54.067 realized he had to join it, but he didn't quite see the 456 00:18:54.067 --> 00:18:56.000 implications of it as much as one might 457 00:18:56.000 --> 00:18:58.100 have assumed he would-- 458 00:18:58.100 --> 00:19:00.167 Well, he-- 459 00:19:00.167 --> 00:19:02.267 --if he was a visionary. 460 00:19:02.267 --> 00:19:04.367 He-- I think he made another strategic assumption 461 00:19:04.367 --> 00:19:06.467 set and when they were working on the Microsoft 462 00:19:06.467 --> 00:19:08.968 network, they assumed that they could embrace on-line customers 463 00:19:08.968 --> 00:19:11.367 in much more of a proprietary-- 464 00:19:11.367 --> 00:19:13.400 Right. 465 00:19:13.400 --> 00:19:15.200 --network. So they had been living under-- 466 00:19:15.200 --> 00:19:17.033 There would be a big-- 467 00:19:17.033 --> 00:19:18.901 --a different strategic-- 468 00:19:18.901 --> 00:19:20.801 They would be a big AOL. 469 00:19:20.801 --> 00:19:22.501 Exactly. A different strategic assumption set. 470 00:19:22.501 --> 00:19:24.000 Now, the reason that Microsoft could move so quickly is they 471 00:19:24.000 --> 00:19:25.534 knew what those assumptions were. 472 00:19:25.534 --> 00:19:27.033 Right. 473 00:19:27.033 --> 00:19:28.567 And as soon as they started 474 00:19:28.567 --> 00:19:30.067 seeing those assumptions 475 00:19:30.067 --> 00:19:31.734 becoming invalid, they realized they had to change the 476 00:19:31.734 --> 00:19:33.501 assumption set. 477 00:19:33.501 --> 00:19:35.300 It wasn't like they were operating in a 478 00:19:35.300 --> 00:19:36.901 little tactical level. 479 00:19:36.901 --> 00:19:38.367 And so the good companies are doing that. 480 00:19:38.367 --> 00:19:39.934 They're saying, ''Hey, I have to lay down what my forward-going 481 00:19:39.934 --> 00:19:41.634 assumptions are. 482 00:19:41.634 --> 00:19:43.467 I better know what they are. 483 00:19:43.467 --> 00:19:45.734 There aren't very many of them, but I better lay them down. 484 00:19:45.734 --> 00:19:47.100 And I better have those tattooed to me so when I look in the 485 00:19:47.100 --> 00:19:48.467 mirror every morning, I say, 'Are these 486 00:19:48.467 --> 00:19:49.834 still correct?' '' 487 00:19:49.834 --> 00:19:51.200 And ''I better be paranoid that I 488 00:19:51.200 --> 00:19:52.567 don't know it all.'' 489 00:19:52.567 --> 00:19:54.334 Absolutely. Absolutely. 490 00:19:54.334 --> 00:19:56.133 All right. 491 00:19:56.133 --> 00:19:57.734 But back to the friendship between you and-- (crosstalk) 492 00:19:57.734 --> 00:19:59.534 Yeah, we're back to the friendship. 493 00:19:59.534 --> 00:20:01.367 (crosstalk) How is it different from your 494 00:20:01.367 --> 00:20:03.234 friendship with other people? 495 00:20:03.234 --> 00:20:04.534 I mean, there is-- I mean, you still walk on the beach, you 496 00:20:04.534 --> 00:20:05.868 know, once a year-- 497 00:20:05.868 --> 00:20:07.167 Right. 498 00:20:07.167 --> 00:20:08.367 --in a sense, and this is 499 00:20:08.367 --> 00:20:09.567 a treasured friendship. 500 00:20:09.567 --> 00:20:10.801 Right. 501 00:20:10.801 --> 00:20:12.000 I mean, a lot of us ought to have people that we 502 00:20:12.000 --> 00:20:13.200 care so much about, you know, that we want to know what 503 00:20:13.200 --> 00:20:15.234 they're thinking, what they're doing and-- you know, even 504 00:20:15.234 --> 00:20:17.701 though the nature of the relationship has grown and gone 505 00:20:17.701 --> 00:20:20.167 on to other places. 506 00:20:20.167 --> 00:20:22.300 Well, I met Bill over a dozen years ago and both 507 00:20:22.300 --> 00:20:24.601 of us were fairly young then, Bill even younger than I was, 508 00:20:24.601 --> 00:20:26.634 since he is five years younger than me. 509 00:20:26.634 --> 00:20:28.567 Yes. 510 00:20:28.567 --> 00:20:30.901 So Bill was 28 years old and-- actually, so 511 00:20:30.901 --> 00:20:32.868 it's almost 13 years ago. 512 00:20:32.868 --> 00:20:35.167 And 28's a fairly young age. 513 00:20:35.167 --> 00:20:37.234 I mean, thinking back to myself at 28 is a 514 00:20:37.234 --> 00:20:39.200 pretty scary proposition. 515 00:20:39.200 --> 00:20:40.968 (unintelligible) 516 00:20:40.968 --> 00:20:42.801 And so basically, Bill's 28. 517 00:20:42.801 --> 00:20:44.667 You know, I'm 32. 518 00:20:44.667 --> 00:20:46.334 And we meet. 519 00:20:46.334 --> 00:20:48.067 You know, we have small companies. 520 00:20:48.067 --> 00:20:49.868 His is a little bit bigger than mine. 521 00:20:49.868 --> 00:20:51.701 Actually, I have cash. 522 00:20:51.701 --> 00:20:53.534 He has stock-- 523 00:20:53.534 --> 00:20:55.367 Yeah. 524 00:20:55.367 --> 00:20:57.200 --at that point in time. And so he's marveling 525 00:20:57.200 --> 00:20:59.000 that I've actually sold the company and I 526 00:20:59.000 --> 00:21:01.634 have real money and I'm marveling how big his company is 527 00:21:01.634 --> 00:21:04.000 getting and, you know, that he's going to run this big thing. 528 00:21:04.000 --> 00:21:06.133 But basically, at that point in time, the industry was very much 529 00:21:06.133 --> 00:21:07.968 like how you described it. 530 00:21:07.968 --> 00:21:10.267 It was a group grope. 531 00:21:10.267 --> 00:21:12.467 No one knew anything. 532 00:21:12.467 --> 00:21:14.801 Right. 533 00:21:14.801 --> 00:21:17.501 It was insensitive to massive amounts of mistakes 534 00:21:17.501 --> 00:21:20.467 made by entrepreneurs. 535 00:21:20.467 --> 00:21:22.767 Some of our inventions still live on. 536 00:21:22.767 --> 00:21:25.100 The shrink-wrapped software package-- 537 00:21:25.100 --> 00:21:27.100 Right. 538 00:21:27.100 --> 00:21:29.100 Who would invent a product that is hermetically 539 00:21:29.100 --> 00:21:31.100 sealed, where the only real estate you get to know to know 540 00:21:31.100 --> 00:21:33.100 what's in the box is on the back and you can't 541 00:21:33.100 --> 00:21:35.100 touch it, read it, 542 00:21:35.100 --> 00:21:37.100 see it or anything else? 543 00:21:37.100 --> 00:21:39.100 Well, our industry invented that silly thing, 544 00:21:39.100 --> 00:21:41.133 but-- so I met Bill 545 00:21:41.133 --> 00:21:44.000 at a time where he was still trying to figure things out and 546 00:21:44.000 --> 00:21:46.901 at a time where he wasn't any less smart than he is today. 547 00:21:46.901 --> 00:21:49.701 His intellect has remained the same. 548 00:21:49.701 --> 00:21:52.367 And so we got to share some of our wonder years together and, 549 00:21:52.367 --> 00:21:55.701 you know, really share a lot of ideas that were half-baked, 550 00:21:55.701 --> 00:21:58.767 well-baked, challenge each other, and so we've grown up 551 00:21:58.767 --> 00:22:01.934 together in this industry. 552 00:22:01.934 --> 00:22:04.834 And I think that it was a perchance meeting and it was at 553 00:22:04.834 --> 00:22:08.334 Esther Dyson's forum. 554 00:22:08.334 --> 00:22:10.901 We were both speakers and-- at that forum that year and met at 555 00:22:10.901 --> 00:22:13.467 the speakers' dinner. 556 00:22:13.467 --> 00:22:16.033 And so it was-- it was a perchance meeting where we 557 00:22:16.033 --> 00:22:18.634 developed a friendship, where we could stand 558 00:22:18.634 --> 00:22:21.200 outside the industry 559 00:22:21.200 --> 00:22:23.901 together, as well as look at it as players in the industry 560 00:22:23.901 --> 00:22:26.601 together, as well. 561 00:22:26.601 --> 00:22:29.200 I thank you for coming. 562 00:22:29.200 --> 00:22:31.567 Thank you for inviting me. 563 00:22:31.567 --> 00:22:33.601 It's great to meet you. 564 00:22:33.601 --> 00:22:35.400 We will-- as you say, you're not talking about what companies 565 00:22:35.400 --> 00:22:37.167 you're investing in, but we will keep our eyes on what's 566 00:22:37.167 --> 00:22:38.667 happening in the business and please come back. 567 00:22:38.667 --> 00:22:40.300 Thank you. 568 00:22:40.300 --> 00:22:41.934 It's great to have you here. 569 00:22:41.934 --> 00:22:43.567 Thank you for joining us. 570 00:22:43.567 --> We'll see you next time.