Keith Rabois' home-buying disruptor Opendoor, politics, innovation; Cyan Banister @AngelSummit E630

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That'S what it's all about, man, they said money is the root of all evil but funny how it feeds my people we ain't gonna live like equals.

Until we get the money spend the money and defeat you clear money is.

The root of all evil What? Funny how it feeds my people. We ain't gonna live like equals until we get the money, spend the money in the feature. Let me bring out Keith Raboi. Come on out. Keith, of course, serial. Good to see you, Keith. Serial entrepreneur, operator, and investor. So you're at Khosla Ventures. and you're running a company, how do you split time between those two now? Because it seemed like you were 100% CooslA and now it feels like this company is getting very big.

Well, so I spend a day a week at a company called Open Door, which I helped found with three co-founders in 2013, which we launched January of last year in Phoenix. And it's been doing really, really well. It allows you to sell your home in 30 seconds, hopefully online.

Yep.

Move out of your house and get paid in three days. and it's a completely unique value proposition. So it's cutting through the clutter in Phoenix. We launched in January of this year in Dallas, and hopefully we'll bring it to other markets later this year.

So the concept is like the car buying services where you can just sell your car right now. I can take my home and sell it to you, and you'll just take it off my hands in how many weeks?

We'll have it off your hands in as early as three days.

Three days.

So as soon as you wanna move out, you can have the cash. So unlike the car buying services, which there's a lot of, there's not really a good option for doing this. So for a normal American, their primary actual net worth is tied up in their house, and there's no liquidity to a house at all. So a car, you can drop off at a car dealership. It's a very commonly understood process. You generally get 7.9% less than Blue Book value if you take your car to a car dealer. So there's kind of this reservoir network of liquidity. But in a house, it takes 84 days on average in the United States to get a buyer. And about 20%, 17 to 20% of those people never get a buyer. So it's not as if you can just say, hey, I need to get a, I need money, I need to get out of this house. It's, I'm going to make it happen. It's really impossible to do that in less than 50, 60, 70 days, except in the Bay Area, where it's about 29 days.

And so how many homes do you keep in your inventory? Because this seems a lot different than owning cars, especially used cars.

Well, we'd like to keep none of the homes in our inventory. We'd like to sell them and resell them as fast as possible. In practice, it takes us days, weeks to sell a house correctly as well. So we wind up the faster we grow, the more homes we have in inventory. I read in the Wall Street Journal recently that we have a couple hundred homes in inventory. It's plus or minus right.

And then, so I'll sell my home at what level of discount? You mentioned before when I sell a car, it's an 8% discount. If I sell it to you and I sell you a million dollar home, am I taking an $80,000 haircut?

No, so let me give you some baselines here. So if you sell your house in the United States today, you generally pay about 6% to your realtor, which is fairly expensive actually, especially for high value homes.

Get to that level.

It's been that way for like 50, 60, 70 years and it just hasn't changed. So what we charge is we give you a valuation, which tells you what your home's worth, and then we charge a nine, approximately a 9% fee to move out of your house whenever you want. That compares to about 6% that you'd have to pay a real estate agent, so it includes that. So it's about a 3% delta on average. However, we also clean up the house for you. Like generally if I was gonna sell my house, I'd have to paint the walls, mow the lawn, fix the pool, do all those things, and that stuff adds up. So we do all that for you, so you can just move out. We'll value the house sort of sight unseen, and unless there's structural damage, we.

Won'T discount for that. Now how do you, so that's, it's really innovative to buy the homes this way. Is it your money? Did you raise venture capital to hold these homes, or did you raise a bond? Because if you have 300 homes, and it looked like the average home was a three, 400, $1,000 home. I'm not perfect at math, but this is going to be hundreds of millions and quickly billions of dollars. Which money is this holding the home?

So yeah, so originally we raised about $10 million to just prove that we could do this, which was purely our equity capital. Then we added a little bit of venture debt like most companies have in Silicon Valley provided nicely by Silicon Valley Bank, but just a little bit. And then we validated that we could do this accurately. Then we went out to the market of people who have a lot of money and extend debt and said, please give us some because we want to get more homes that we can't afford to. Fortunately, there's a precedent in this market, which is if I was a normal person, I would buy my home today for about 20% down, so with a cash payment, and then 80% debt. So there's a well understood sort of economic model for buying houses with leverage. So we went to the people who like to buy houses and said, give us a lot of money. and we'll buy roughly in the same formula, 20% our money, 80% leveraged.

And you did all this, I believe, at around the same time the housing market peaked and it just took a huge blip and the stock market corrected 20%.

It varies by city. We only do primary residential real estate, so we don't do vacation homes. Primary residential real estate in different cities in the United States moves differently. So it's not as if there's one macro correction. Even in 2008 when the entire economy changed, massive disruption, Silicon Valley prices barely moved. Days on market per home extended a bit and prices were roughly flat, but they didn't really come down. And so each market moves somewhat differently. So in Dallas, where we are, it's pretty much an appreciating market right now. slightly appreciating as well, but it was by accident. We didn't know that those markets would be appreciating when we entered them.

So there is some way for you to mitigate against the housing swings, and that is maybe having multiple cities which might work counter to each other.

Exactly. That's the primary reason we're expanding to different markets is housing markets haven't moved historically in the last 100 years together. So our risk of holding inventory decreases the more cities we're in.

Okay, so you buy the homes, you inventory them. This has got to make real estate brokers a little bit upset because you're not buying through a real estate agent. You're going directly to the home buyer.

We're generally buying directly from the home buyer, but when we sell our houses, we're perfectly happy if people in the audience want to buy a house and show up with their own agent, and we pay out the full commission when.

You show up with a buying agent. Okay. However, when you buy the home and they sell it, you've just eliminated two agents. And then when you sell it, you've eliminated the third agent. So three or four agents are removed from the process.

You're way too smart.

It took me a minute, but 75% of agent revenue has been eliminated.

It's the choice of the user. So the consumer chooses, do they want an agent to help them? If the agent helps them, we pay them full market price. We don't try to negotiate. We don't like discount. We pay whatever the agent commission is in whatever market we're in. no questions asked. We actually help agents though make some money too. So lots of agents take on annoying clients that think their house is worth a lot. So I have a house, I think it's worth a million. In reality, it's worth 800,000. And this agent's representing me trying to sell the house and she gets very frustrated 'cause she doesn't get paid anything until that house closes. So we have a new tool for her to enter the information about my house, plug it in and say, Hey, what offer would you give me? And then we give them an offer and then she tries to convince them her client to take our offer and then she gets paid. So we're actually pretty attractive to some agents as well. We also don't hassle over dumb things. So most real estate is done in a very fragmented way. It's like all individual buyers, individual sellers, people get very emotional. It's kind of an irrational market because it's all of us like negotiating back and forth. None of us are professionals. Agents like working with us because we just have a model. Your house is worth this. Great. The transaction's closed. Like there's not a lot of, well, you know, that that color on the wall, like it's ugly.

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It's a little bit like, I'll give you a less loaded example. Like many of us have hired executive recruiters. Yeah. Executive recruiters are kind of brokers between the company and the the person you're trying to hire. And they only get paid when the person's hired. So they have an incentive to close that deal as fast as possible. They have incentive slightly to increase the compensation because they get a fraction of the first year compensation. Agents are no different. They have their own incentives, which mostly to close the transaction fast. There's some academic literature on this, actually, if you're interested. There's some really rigorous studies in various journals of economics that have studied how agents behave versus when they're selling their own home. And there's definitely a misalignment of incentives that shows up in the literature.

Keep their homes on the market for twice as long as their clients.

And they generally make about 2% more.

So they will hold out for the price and they get it. Let's talk about the selling side. You have 300-400 homes in inventory or something. What are you doing to innovate on the sales side? I know there's a lot of interesting ideas you have around innovating on the sell side.

Yeah, so the process of buying a home isn't particularly exciting either. If any of you want to buy a home in the Bay Area, you should try it. Basically, the only way to do it is you show up at an open house between 2 and 4 p.m. on Sunday. And if you want to go visit that home at night, you can't do it. If you want to go visit on Thursday because you have to work on Sunday, you can't do it. So we took a look at the buying side experience, although we started primarily on the seller side innovation. And we said, well, you should be able to see a home at a minimum. You should be able to see a home 24/7. So we put like electronic locks on all of our homes. You can just walk up to the home whenever you want and you can walk it into the house, which has a couple benefits. One, you can see what it's like during the day versus at night. So you know there's no plane that flies over your house and creates this ridiculous noise or no train that goes by and you know it doesn't allow you to sleep properly. So that's been very comforting. People also just when they're driving down a neighborhood see a house, they weren't really in the market, but they're like, that's the house I really want. I've always wanted to live there. And so you can just go up to the door and tour the house. In addition, there's no sales process.

How do you technically do that? You have like one of those key codes.

I sign up on your side. You sort of text us and then we validate your ID and then we unlock the house. And there's drop counts there. Like we're basically using, you know, classic Silica Valley products. And people like the no pressure. So sometimes when you go to our house, there's an agent hand holding you through everything. You don't want to offend them by leaving super quickly, but sometimes you just know instantly this is just not the right house. So if you're there by yourself, you can just leave and no one cares. So we found that to be really unique, but we have a couple other buyer side innovations coming later this year that could be pretty creative.

Oh, really? So you're gonna sell in a more creative fashion.

We're gonna allow people to buy more easily, maybe with more options. There's just a lot of friction in buying just Selling is a really acute pain point, but there's friction in buying too.

Let me run something up the flagpole and see if you salute. Would I be able to rent the home for you for three months, maybe try before I buy?

Yeah, there's a lot of demand. So it's a really good idea. There's a lot of demand. If you have a house and you're selling it, you'll see a reasonable number of people who come visit you and take this open house will ask about this. But most sellers who are normal people can't afford to do that because I need all the cash upfront and I can't afford to let you rent it. Or I need to know confidently that I'm selling this house so I can go buy a new one. This doesn't work for a normal seller, but it could work for a company like us because we don't need the money upfront and we're gonna be in the business of buying and selling a lot of houses anyway, so if you.

Don'T wanna stay there, it's not that big a deal for us. Yeah, it's interesting if you staged the homes, You could keep your own staging inventory, stage it, and then I could Airbnb it essentially directly from you without using Airbnb, obviously. Or you could put it on Airbnb.

As a marketing tool.

I stay in it for a couple of weeks and I really feel comfortable because that's one of the things I wanted to do when I was buying a home, like the noise issue and what it's like there at night and.

Be great to be able to rent the house out. Yeah, I think most people, it would reduce a lot of friction. People hesitate a lot. I mean, obviously a home is a major purchase. The median home in the United States is roughly $250,000. That's a big deal for anybody. So reducing that uncertainty and the scary nature of, well, what if I don't like it for some reason, could be a real value proposition.

How many homes do you think, now that you've figured out the model, we have over 100 million domiciles here, right, in the country? Is it 120 or something? I'm not sure exactly.

I think about it by city, but let's say in Phoenix last year, 82,000 people. listed their home for sale, 57,000 people sold it, and Phoenix is about the fifth largest city in the United States.

Right, so we're talking about hundreds of.

Thousands of homes changing hands.

5 million last year changed hands. Right, so how much in and you've already hold 300 or 400, whatever it is. How many homes do you think you'll be holding at scale when you get this business going?

Well, there's a big variable there, which is not just the number of homes, but how long do we hold? And there's a lot of details that go into how long does it take us. So things that would sound mundane and trivial is like, how long does it take us from the time we buy a home to get the home photographed professionally? That takes a day. Well, maybe we can get it down to an hour. You know, like there's all these like process points. The biggest area though that takes the longest time is to get a mortgage. So most people in the United States, 80% of people buy a home with a mortgage. It takes, believe it or not, three weeks to four weeks, 30 to 40 days. to get a mortgage arranged in the United States, which is absurd because there's one formula that every bank uses. So it's like insane that it takes 30 or 40 days to get a mortgage. So we actually sell the house in quotes, like by contract very, very quickly, like a matter of eight to 20 days. But then we sit around waiting for the buyer to clear their mortgage with their bank, which is like ridiculous. So one way or the other, we'll fix that, and that'll reduce our inventory.

Hold time by a massive amount. Given the price of these homes and your ability to raise capital based on your reputation and the amount of free capital in the world, you would be able to just run your own mortgage entity, wouldn't you?

There's just a lot of complexity to mortgages. It's like, but yes, we could do our own mortgage or at least a short-term mortgage that converts into a longer-term mortgage.

Give them like a gap.

It's like technically like a gap mortgage. Yeah, six-month mortgage to get your mortgage settled and then it instantly converts over. There's a lot of precedent for that in different markets, but we will need to solve this because just waiting around for 30 or 40 days to go by isn't good for the buyer, and it's certainly not good for our sort of cash flow, cash structure, financial situation.

Let me ask you about the insane market here in San Francisco. What do you think the solution is to what we're experiencing right now? It's pretty horrific out there. The NIMBYism and the lack of development or the sort of places you can only develop in certain areas. What do you think the end game is here? Is it just going to be a disaster forever?

Well, it's related to the overall economy. I mean, right now, the residential real estate market as well as the commercial market is actually flattening slash going down. There's signals if you know where to look that things are cooling off, which is a signal of the, you know, economy as a whole. So I don't think it'll come all the way back down to affordable, but it's it's stopped going this way and starting to turn this way. So that'll help, but the reality is there's not enough inventory in San Francisco for the number of people that want to live here. So you can do a couple things. You can create more inventory. Unfortunately, it tends to take time. Even if you didn't have the regulatory and political pressure problems, it just takes time. You can't build a house overnight, and so it's not going to solve things tomorrow. Or you can make it more desirable to live other places. So a couple years ago, I started actually tweeting about this, like, Oakland's a great place to, in theory, build a company. The weather is better than San Francisco. The views are pretty good. It's close to Berkeley. Just no one wanted to be there, which doesn't make any sense. Even San Jose, like if you think about San Jose, could be a hub for innovation. It's very close to Stanford and other universities. It is, you know, totally accessible from San Hill Road. So you can get our money. You know, all the-- and the weather is actually better too. It's warm, sunny every single day, as opposed to like raining like this. So, you know, there's lots of alternatives that people aren't exploring. And then the third thing is there is a bit of environmental sort of extremism in California, particularly Northern California. If you drive down 280, there's clearly plenty of places to build housing, infinite places to build housing if someone had the willpower to do it. Or go to Stanford. I mean, look at Stanford. Stanford uses like 1 to 10% of its campus, and the rest is these beautiful Foothills, which has value in and of itself, but there's a policy and an economic trade-off decision that people are making that rather have lots of foothills than houses. And at some point, you may have to change that balance a bit.

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I think I think there's a couple big challenges in a market like San Francisco, which fortunately there's only San Francisco and maybe parts of New York that are like this. One is that it's not that hard to sell a house right now. So as I said, it takes 29 days. If you try to sell your house and you put a sign outside, you'll probably have people show up really fast. So our value proposition to the seller is a lot less right now. Second thing is the median house in San Francisco is right now is a million dollars. So it's 4x the national average. That means our model inaccuracy is very expensive. So every mistake we made is real money. Yeah, let's say we make, you know, a mistake in Phoenix, we're off by $1,000 here or there. Here, multiply that by four. And that adds up a lot. So I think there's two challenges. That said, we can help on the buyer side pretty soon because it's a seller's market, so buyers need help. I think we'll get around to it eventually, but it's not a priority. I mean, we need to get to 50, 60 cities. This should work everywhere. So there's no reason to like obsess about San Francisco other than the fact.

That we all live here. Do you think Airbnb being the homes while you're in the process of selling them would be wise if you had it at a very high price? It's off the market for the weekends when people want to use it. It's on, and you could do it dynamically like that?

Yeah, there's a logic to that, which is one of the costs we carry, the cost of while we're holding this house, because we're using debt, we have to pay off that debt. So there's an implicit cost per day for every day we have a house. if we rented it out, we presumably could charge more than the rental cost, the rent, the financing cost to us. So it'd make our economics more attractive, as well as it could be a great lead generation. If it was for people visiting the city, it's obviously not going to yield sales. But if it's for people local, and they want Airbnb, it's tested out.

That might bring us buyers, which would be a pretty good business. You'd monetize the people visiting homes.

It is so brilliant. Yeah, if you could do that at scale, that's really cool. Plus Airbnb, I think is more supply constrained than demand constrained, so we create more places to stay.

Let me ask you some questions about the overall market. I know you're pretty candid and you're pretty out there on Twitter. You put yourself out there, which we love.

Just follow your example.

Yeah, you've got a couple more IQ points. So our good friend David Sachs, you guys went to school together is cleaning up the mess over at Zenefits. What do you think about what happened over there candidly and his ability to clean it up?

Well, I think, yeah, David's incredibly talented. I think he's the perfect combination for a problem like this because he's very innovative and a quite good product visionary, but he's worked in regulated industries before. I mean, we worked together at PayPal. Obviously, financial services is heavily regulated, subject to lots of laws regulations actually probably even more regulated than Zenefits' market. So he understands both innovation and regulation, and that's a rare combination. So I expect to be a really good quarterback for the company's challenges. And I think he's acted decisively since taking over. If you just follow him on Twitter, it's actually amazing. He seems to be accomplishing more per day than most people do per week or month.

You've got to love the fact that he is tweet storming every week. Here is what Zenefits accomplished this week. one through nine.

Yeah, intangible, very tangible examples like whole new management team with bios and all the changes. And so that's been a very impressive. I mean, velocity in a company, velocity in a startup is one of the key things. It's, you know, you can tell sometimes from afar when a company's gonna make it. They have this operating tempo that's just super impressive. And it's very clear that he's got that, you know, mentality and it's being implemented.

But that tempo is kind of what got them in trouble, isn't it? So they had that boiler room sales mentality. They went crazy. They made some mistakes.

It's like tempo, tempo, tempo. How do you know it's tempo? It's like a tempo in a football game, right? So you can be disorganized in tempo in football and then people miss their blocks or they commit fouls. And then there's a tempo when you watch like a really well-run team, they snap to the line of scrimmage, they, you know, everything is perfectly synchronized. There's no wasted motion. They're, you know, they're running, they're running more plays than the other team. There's just a bunch of stuff like the Chip Kelly system, which everybody's going to see here next year. first year is going to be really interesting, but it's more like that. I think there are a couple of principles though between innovation and defying the rules and being too locked into the traditional way of acting. I think there's a big difference. And I sort of tweeted a little bit about this. There's three worlds, I guess, in startups. There's red, gray, and black. Or green, let's say, red, green, gray, black. Startups should be operating in the zone of ambiguity. That's perfectly fine. So there's reasonable arguments about this can be interpreted this way versus that way. Totally legitimate thing for a startup to do. What's not fine is where there's clearly a black and white like principle and rule that you just can't violate that intentionally. Okay, so examples in PayPal, we took a lot of liberty, let's say, with interpreting things in our favor, but we had a legal team underneath us saying, yes, actually, you know, we have a strong argument here. It's not 100% certain we would win, but we've already drafted, in fact, our brief in some cases that says we're actually right. And so I had that kind of in my back pocket, or David had it in his back pocket, and we'd be like, no, we're just gonna ignore this because we actually have been told by the best lawyers in the world that this isn't clear.

But if it's clearly established, you can't just ignore it. Right. And so a little bit of the Airbnb beg forgiveness. you know, hey, it's the person's home, they should have the right to do what they want with it. And hey, if we didn't collect the taxes properly, we can fix that.

But that's also vague, too. Like, what is the definition of a hotel? Right. That's not clear. Like, I mean, if you obviously there's some things if you market as a hotel, by definition, you'd probably be violating that statute. But when I rent my own home, even if I do it frequently, is that a hotel within the meaning of the law?

Not so clearly obvious. What is your best advice for entrepreneurs in 2016, you know, building businesses in terms of what to focus on? You've seen this movie so many times through so many cycles, but things have changed dramatically. Many more companies today, many more funding sources, many more opportunities, much lower cost to build a business. What is your best advice for the entrepreneurs here who want to be on stage next year with their idea? what should they focus on?

The shockingly difficult thing to do in these companies is to focus actually. So first principle is like focus and it says it's kind of a jargony word that is easy to kind of go in one year and out the other year. And then there's another kind of adage that tends to reinforce it. But I'll try to be a little bit more practical is Jim Barksdale used to have this great quote about the hardest thing in a company, the most important thing in a company is to make sure the main thing stays the main thing. And it's surprisingly easy to get this distracted by everything except the main thing. There's usually one or two things that actually really matter. And every single bit of energy, almost every single bit of energy, needs to get focused on solving those one or two things. But it is incredibly distracting to do everything else. And so Peter Thiel back in PayPal taught me the answer to this, which was he used to insist every single employee was allowed to do exactly one thing. Like one thing and not two, not three. And he wouldn't talk to you about anything else. If it wasn't your number one thing, it didn't matter. he wouldn't, you know, he just really run away sort of, or he wouldn't read your email, or, you know, when you did your annual review, David actually implemented, like, the first part of your annual review was what's the single most important thing you accomplished this year? And that was just like 80% of your grade. And so, like, you can reinforce that focus, but it's incredibly, like, it's almost unnatural for people to want to focus. I came up with a philosophy behind this, which is usually the A+ problems are really, really hard. So you can't just like snap your fingers and solve them. The B+ problems, usually if you're really good, you can come up with an answer pretty quickly of like how to do this. And then the C problems don't matter. So most people just being humans will solve B+ problems because you can kind of check this off your checklist every day. But no one sits around and bangs their head against the wall for a month to solve the A level problem. and hence the company doesn't solve the A level problem. You solve all the B problems, which creates a decent company, but not a spectacular company.

And what do you enjoy about being a venture capitalist? Why did you choose to do that? That was a little bit surprising for me, because you're known as a fabulous operator. Everybody likes to have you as their right hand man to go in there, like David Sack's way, and just get things focused and to keep people focused on the two or three things or one or two things that matter, why did you jump into the VC pool? Do you enjoy it?

Yeah, in many ways, being a VC is a great job. If you're intellectually curious, you get paid for learning about new things every day. If you're somewhat ADD, it's a great job. Every meeting, every person is totally different. Every hour on the hour. So it's like this all day long. And then the third thing is you get to work with the smartest, most ambitious people on the planet. Like, the only people I meet with basically are like the most ambitious, most talented people in the world. It's like learning to play basketball by like playing in an NBA game and thinking that that's a representative sample of humans playing basketball. And so that's pretty cool.

Yeah. What are the chances? You talk about politics once in a while on the Twitter. What are the chances that Trump gets the nomination?

Higher than I would like.

What does it say about the GOP that they can't field a team and that this has happened? I mean, you must be, let's know, you're a conservative, you're a member of the GOP. I don't know if you're a libertarian exactly, but I get the sense you're close to that. How embarrassing and/or frustrating is this for you?

This is a Mike Arrington question.

What's that?

This is the Mike Arrington question.

Yeah, except I smile and I'm a nice guy.

Yeah. A couple points. First of all, everybody should read Neil Postman's book Amusing Ourselves to Death. This predicted in 1984 exactly what's happening. It's an awesome book. I mean, I'm on the board of Reddit and I sort of recommended it to the whole board to read. So I think it's just fabulous. Lots of entrepreneurs I know have read it and really enjoyed it. Amusing Ourselves to Death. Yeah, definitely recommend that. Second thing is though, it is actually not the case that Republicans field fielded a bad set of candidates. It's just the voters aren't voting for them. If you look at the resumes of the 13 people who ran for the Republican nomination, they're incredibly impressive with people like in terms of standard bios, like the standard CVs. You're talking about the governors or former governors of Florida, Texas, Wisconsin, New York, New Jersey, Virginia. Like, I mean, like every state that matters, like there's some former governor or current governor running plus senators. But none of the, none of them The voters who are the audience, it's like shipping a good product on paper with a really good executive team that has a great LinkedIn profile, but none of the consumers, none of the users are downloading the app. That's basically the problem. So it's not necessarily obvious what to do when the people are just rejecting the traditional candidates. It's a little bit like building a startup. Basically, someone's coming out of left field with a completely different model. and in some ways is defying all the rules that people took for granted and is having success. I mean, that's what most of us do for a living. Can he win? I mean, he's gonna win the GOP. I don't want him to, but I actually don't think it's impossible to win either the nomination or the presidency.

To win the nomination, I think. And if he wins the nomination, what's.

His percentage chance of beating Hillary? Well, I think the percentage chance is higher than people think because he's shown like this disruptive ability. translating this back to entrepreneurial pursuits is he's clearly defying all of the rules in a way that's resonating with real people. And when you see that, you see it starting to scale, ignore that with a lot of peril. Just like incumbents ignore these startups all the time.

What will happen to our country if he's in office? Do you think what he's doing right now is some crazy game to get elected and then he comes right back to the center and starts acting logical and less racist and bigoted and insane? Or do you think he stays racist and sane, bigoted and just absolutely destroys everything that we've spent the last 230 years building?

That's a very neutrally worded question. I don't think anybody really knows the answer to that, because I think it's really hard to figure out how much of what he says and does is purely calculated marketing versus what he thinks. I think there's some truth, like some of it portrays clearly his own personality and thinking. Like I think you can't mask yourself that much, but some of it feels artificial too. And so I don't think anybody knows. And I don't think people know him well enough. Like there's not that many people that know him well enough to actually answer that authoritatively.

Are you nervous about this?

Oh yeah. I mean I think like absolutely this is super, it's like the highest beta thing the country's seen in a very long time. And beta means it can get asymmetrically much worse. Sometimes it works out better than you expect.

Yeah. It feels so uncharted. When you talk about Black Swans, this is one that if you look at what happened with the financial crisis, you know, we survived Armageddon. You look at the wars, we survived some really horrific, you know, situations with the wars, 9/11, Etc. This is one that, you know, if he gets in there and it's four years of this or eight years, like, what could be the damage?

Well, I think the damage is partially, like, structural, meaning this is, some of this stuff is independent of him and will persist into. independent of a particular candidate, meaning like this direct access to voters through social media and other channels. That is a new development that undermines the filters and the historical filters that have like limited what things people talk about, who can be successful, which has historically been a good thing across many fields, like any riddle middlemen has generally been a good thing that Silicon Valley has encouraged. And it's now playing out in politics, like all the middlemen are useless, and you're seeing some of the first generation of results of that. It doesn't mean the second generation is worse. It could be better. But this is a lot of social media and all the technologies coming together where the middlemen are losing their power and control. And generally, we should celebrate that.

Yeah. Is it the end of the two-party.

System in a way? It could be. I mean, there's a great set of either a blog or like Tweetstorm by Clay Shirky, I guess. Clay Shirky, yeah. He explains that. I don't know if that's really true. There's some natural drivers to a two-party system that makes some sense. So but the implications of people controlling like establishment people or elites controlling that may be over, although they may counter steer back and like put in more protections and installations. But I think the party that the individual voters may revolt on that.

Final question. Bloomberg comes into the race. What impact does it have? Does he get your vote? Are you interested in him as a candidate?

I think it's pretty irrelevant. First of all, there's one little subtle thing that people don't track as well as they should. There's very specific filing deadlines per state. So to be on the ballot, you actually have to start doing stuff like right now. And if you miss these deadlines, there's no way to get on the ballot, which means you know one can vote for you. So that's one big problem and they're running into those very, very soon. Second thing is, although his ideology has a lot of appeal in San Francisco and New York, it's not a mainstream ideology for the Midwest or South, so I don't think he could do that well. And third thing is if you don't get, you know, kind of, you remember your US Constitution from US history or something, if you don't get to 270 electoral votes, the decision of who is president of the United States is made by the US House of Representatives among the top three finishers, and that's almost surely going to be a set of Republicans. Has that happened? When's the last time that happened? Has it happened since, wow, it did happen in the 1800s.

It could happen.

It could happen and might have happened 1912. I got to remember my 1912-1916 history when Teddy Roosevelt ran as a third party. But I haven't read that stuff in a while.

Yeah. Well, listen, Keith, fascinating discussion. We're all super interested to see how Open Door does. It's phenomenally disruptive and clever idea. Can't wait to try it out. Hopefully you bring it to you.

We'll bring it to you. Just for you. All right. Well done, Keith.

Great job. Thank you for coming. Wow, that was great, huh?

So I really dislike slides and I'm for someone who's invested in a lot of cutting edge companies, I'm very old fashioned. I have three by five cards. So my talk is about why Scott and I continue to be investors and how we do it, and basically just sort of why we do this at all. I hope that my talk's a little bit different than what you've heard today. I wasn't here this morning. But anyway, how we got started, Scott built a company that sold to Link Exchange, and he was one of the first investors in PayPal, and he was on the board. And later on, we worked together at a company that he founded called IronPort, which we sold to Cisco for $830 million in 2007. And after that, I didn't know what to do with the money that I made. That was the first time that I actually had worked at a startup that had a successful exit. And so Scott encouraged me to actually invest in angel investing. And so he started teaching me and mentoring me how he did his job, because he'd been doing this since probably like 98, 99. So my first two investments were Topsy and how I invested in Topsy was when I was working at IronPort, one of our competitors was Cloudmark, and I got to know them, and especially one of their employees, Bipl, was one of the founders. And so after we had sold the company, you know, we became, we were once frenemies, we became friends. And so I was able to write one of the first checks in Topsy, which was acquired by Apple. And then my other investment was SpaceX. So how do we do it? So over the years, we figured out how to complement each other. I'm an introvert, but to Scott, I'm actually extroverted if it tells you how introverted Scott is. So I do conferences, I do many of the first pitches, which leads Scott to do what he loves, which is legal, politics, philanthropy, and complex later stage financing, so I don't touch any of that. So it's really great because I actually really, really hate looking at term sheets and I really, really hate legal docs. But he loves it. I mean, that's like, it just makes him really, really excited. And you know, how do we find these companies? You know, it's all about your network. I get asked this question a lot. Everywhere I go, it's just like, how do you guys do so well? How do you find companies? Well, I work on extending the network and Scott farms our existing network. So out of network, we found Uber, Thumbtack, Topsy, interviewed Mykonos eShares, and in-network, SpaceX, Postmates, PowerSet, Zappos, and Slide. So if you think about it, a lot of our really good deal flow came from alumni. It came from people that we've worked with in the past that we've operated companies with, and it's also come from events like this. So I get asked a lot, like, do you actually find companies that are interesting at the Launch Festival? The answer is yes. So I invested in eShares off the stage. Interviewed came out of a hackathon. It was two guys who quit their job and they got up and they were so impressive that I wrote them a check the next day. Uber came out of Open Angel Forum, which is an event that Jason Calcanis did and so did Thumbtack. So yes, you can find really interesting companies at these events. But by dividing our skills, we are more successful. And I think that's what makes us kind of interesting. I don't see a lot of couples sharing their jobs the way that we do. And so I'd love to see more people do this. so if you are interested in, as a couple, getting into this space, please let me know. So why have we, if we've done so well, why do we keep doing this? Why not just sit Mai Tais on the beach? I get asked this a lot, especially by family members. They're like, well, since you invested in Uber, you're done, right? You don't need to do this anymore. Well, we're not fancy people. You know, sometimes I wear an aspirational brand or two, but Scott wears cargo pants and vendor shirts that are worn out. We drive a minivan. We live in a normal house. We have assistance. And so without our assistance, of course, we wouldn't be able to do all the things that we do. So I'm very thankful for them. You know, I hate to get political, but Scott and I are libertarians. I'm actually more extreme. People always tell me that I'm way too nice to be a libertarian, which kind of makes me laugh. But we believe in the greater good of capitalism, and we believe that the world We believe in a world that where products and services and jobs are created by entrepreneurs that people need and want. And we want to save people and businesses time and money, as well as creating platforms where people can find meaningful work. And we also look for companies that provide positive value in the world. And in that regard, Postmates and Uber probably make me the most proudest. You know, there's a lot of companies that we're obviously love. We have over 100 plus companies in our portfolio. But Uber employs thousands and thousands of people in ways that were never previously possible. So if you think about the flexibility that people have when they work for Uber, it's just amazing. So I'm gonna tell you two stories really quickly. One was an Uber ride that I had that really impacted me and made me very happy as an investor. I was riding in a car with a mother who has cancer, and she was able to go through chemotherapy as well as taking care of her daughter while driving. and so that she could work on her own terms and her own time. And for me, you know, that was so incredible to hear this story because otherwise she would be jobless. She would have no job. I met a Postmate the other day who's a mother who rides so that she can Postmate. That really impacted me. I talked to every Postmate and Uber driver, by the way. And she said, you know, I don't have time to exercise, so I ride my bike for Postmates and I make enough money so that I can Postmate. for my children. There are thousands of stories like this. So controversy aside, you know, think about what some of these companies have done, and I do truly believe they're a net positive for the world. So Scott and I are evergreen. We invest basically everything that we win back into the ecosystem, and the rest of it we do philanthropy. And one of our biggest causes is marijuana legalization. So we have spent millions Thank you. We have spent millions to help with legalization because we believe that people should not be imprisoned for it. And it's something we will push for until it is federally legalized. And so this is something we are very passionate about. And so a lot of our exits actually go into that. So this gives us purpose and meaning to what we do, which is what I suggest for everyone here if you're getting into this or if you're doing this is try to figure out what it is like Ariel Poler earlier was talking about augmented humans, that's what moves you, that's what you should build everything around. So everything that I invest in and Scott invests in gives us purpose and meaning and fits into the philosophy of what we believe about the world. So this goes for the entrepreneurs in the audience too. You shouldn't be building products or doing whatever it is you're doing if you don't really truly believe in it. If you're just in it to make money, I don't think that's really gonna excite you when you wake up in the morning and go to sleep at night. you should really have a reason for doing it. And then someday, hopefully, you'll become investors too when you exit. And that's it. Thank you.