♪ >> he made his name as a top tech analysts on wall street, leading coverage of the end of the ipo. then, bill gurley made his way to the promised land of silicon valley. joining benchmark capital in 1999. almost right away, the bubble burst. he wrote the market down and then up and then down, and then up again, along the way making early bets on some of the hottest names. twitter. uber. snapchat. instagram. joining me today bill gurley.

you sounded the alarm about -- taking on an unprecedented amount of risk. >> the cause of this risk-taking is an abundant amount of capital. lately it has been a push into startups. the problem is, it is much easier to run a company that is losing money than one that is profitable. so we have a lot of companies raising money with high valuations, and they say, hey, these companies are going to make it. these are the breakout winners. i am not going to sure, just because they have not passed that test improving that they have legs over the long-term. >> which companies argue sure that? >> certain sectors are more prone to arbitrage. i think e-commerce is a dangerous one. the problem is, no one really gives up.

no one says, oh, our numbers aren't working. they just keep hoping it is going to get better. they press it. >> what you most worried about? >> bad factors in the ecosystem. companies that don't have long-term economic models that perverting these rents that people pay and the costs that you pay for employees. the market that you may be in against a competitor. where they might just try to spend to win. >> now i want to talk to you a little about what 1999 looked like. but first we are here. you were born and raised in texas. what kind of kid were you? what did you want to be when you grow up? >> my father grew up on a rural farm in north carolina. playing with model airplanes. he got an error nautical aeineering degree -- ronautical engineering degree and moved to johnson space

center and worked at nasa and half of the fathers on my street were nasa fathers. when the apollo launches would happen, we would drive 14 hours for a three minute launch and drive back. [laughter] >> did you want to be an astronaut? >> i think i was too tall to even qualify. >> let's talk about that. you played college basketball. what did you learn in team sports? >> i struggled to stay on the end of the bench. i was not being a starter and not getting a lot of playing time. it was a humbling experience. it creates drive. when i got to my next place, where i had more of an advantage, a push me to try even harder. >> you studied engineering. what did you hope to do? >> my sister was employed at compaq in houston, so my first job out of college was at compaq were my sister was. we were working on designs for desktop computers. >> you went to the university of florida. you got your mba at the university of texas. these are not typical schools.

that silicon valley recruits run. so i wonder, is silicon valley missing the next bill gurley? >> it's possible. i went to work at wall street and i was an odd duckling against the group. >> you have covered compaq, you have covered microsoft, you have covered dell. tell me about the days of the tech analysts in the 90's. experiences,first i was walking in the tent at the conference. those days you look around, there is michael dell, and you could just walk up and talk to him. and i thought, oh my god. >> even back then -- >> oh yeah. >> did you know? >> oh yeah. when i was covering microsoft they had an annual analyst meeting in redmond, and someone, the second trip someone handed me a card and said you are going , to be at bill's table tonight.

i was like, 27, 28? >> does it matter if amazon never turns a significant profit? >> it only matters if wall street discusses it. ♪ >> how do you become a top tech

analyst? what does that involve? it seems like there is lots of hustling. >> the research was not generating as much profit on its own, and i was experimenting with this freemium model where i was blasting it out. that is when i started above the crowd. it started way back then. >> above the crowd. a play on your height. you are 6'9"? >> 6'9". a very famous banker recruited you. what did you learn from him? >> i got a call. he said, what do you want to do long-term? i said, i want to become a venture capitalist.

and worked for me. analystdo become a lead on amazon? >> shortly thereafter. when i joined frank and got into the competition for who was going to be the lead banker at amazon -- >> what was that like? >> it was exciting. obviously getting exposure to someone like jeff bezos was amazingly rewarding. i have been able to keep up with him. he is a large investor in our fund and one of the smartest quickest thinkers i have ever , been exposed to. >> what has surprised you most about amazon and jeff bezos 20 years later? >> he has convinced wall street that he is playing the super long-term game. and they let him forgo profits for what is now 20 years. [laughter] it kind of goes back to what we were talking about with those overfunded startups.

he gets to play a different game he convinced them it is ok. >> is it ok? >> i think it were multiple periods in amazon's life where people doubted that it had a long-term life, and they forced him to show more profitability. which he did. >> it doesn't matter if amazon and then backed off. does not turn a significant profit? >> it only matters if wall street comes to doubt that they can. >> will amazon have the confidence of wall street indefinitely? >> i bet they will for a long time. when they did the ipo they were only selling books. i have been fortunate enough to work with a number of companies that have made it past just being successful, where they just had more than an ipo. it is remarkably hard to create a second and third act. there are very few executives. of course, larry has proven he can do it. >> larry page? >> yes.

even larry ellison has proven that. they don't let the game be defined by where they started. most people cannot do it. >> what about google? eric schmidt recently said that amazon is their biggest rival. >> to qualify, he made the comments in an antitrust meeting. he wanted to highlight the competition. there the nature of search is some truth. -- the nature of search has been changing. if you are going to search for an item to buy from an e-commerce search on amazon, you know what the reviews are, you know what the categories are, you know whether to select prime or not. now google is doing something really interesting. the are taking on this endeavor called google express, or google shopping express. which, i cannot make the math work. i am just waiting for someone in press to follow around one of these vehicles and add up how many stops there are. i don't see how it can work.

>> also they are trying to do delivery drones. >> well, don't get me started on these drones. carsrones and self driving , they are a distraction to keep the media from talking about -- >> so you are not a fan of those? >> i find the whole drone thing kind of distracting. amazon did it, then they did it, and everyone releases a drone. >> what about self driving cars? >> i am more skeptical than most. using artificial intelligence across a broad array is really hard. a self driving car is right 99.9%. is that good enough? so the minute that someone is hit and killed, how many nines do you need before these can get out on the street with everyone else? because they are going to be held to a much higher bar than humans are. human error people expect. >> so if you are skeptical about some of these self driving cars and run deliveries, what do you think about google's long-term

future? >> google has done this one thing which is remarkable, and that is that they probably spent -- developed android, and spent $2 billion, $3 billion making it come true. of theve taken over 85% most critical operating systems. it may be one of the most ambitious and successful business efforts of all time. >> between google, amazon, apple, and facebook, these are companies that have been referred as the four horsemen of today. who has the most to worry about? >> i think amazon prime is pretty remarkable. i would put them in the safe camp. i think google, with the profitability, and the insane footprint as android, i would put them in the same camp as well. on facebook, i think they are working towards an interesting challenge. they have lost the trust.

when you ask someone, and you'd ask if they have certainty on somebody see their facebook -- who is seeing their facebook content, 90% would say no. i think it would create anxiety that would make room for snapchat and companies like nextdoor. because that lack of trust limits what you can do next. >> and apple? >> i think apple's only problem -- only problem is android. just flat out. apple should have paid anything for waze. if you are going to pay $3 billion for a headphone company, and $2 billion for a map company, it is a no-brainer. i think they should've found another way to find a way to buy nest. >> should apple by twitter? >> i don't think they would know what to do with it. that is why i would probably say no. twitter has one of the most amazing modes.

they have the most important people in almost any field in the world. remarkably committed to their own persona in the system. >> peter thiel recently criticized twitter, calling it a horribly mismanaged program -- company, probably "a lot of pot smoking going on over there. how do you respond to that? >> he is on a book tour, right? >> i think so. >> once you make a statement about that about a management team that has made a $30 billion company, i think you lose all credibility yourself. >> what else could uber do? you have seen them deliver christmas trees and kittens, but really, what is next? ♪ >> what is the myth of bill

gurley and what is the reality? >> i don't know if i can separate the two. i think over the last five years, people have made a big deal over -- do you have operating experience? in the next five years, if the market plays out like i think it is going to be, people are going to say, we should have asked if you have investor experience. >> andrew horowitz will only hire partners who were former .eo's >> there is a lot of marketing messages. >> you span a generational shift between the old and the new. would you describe it that way? >> when i came in, john doerr and mike moritz where the legends of the game. i competed with them on the google deal and messed that up.

>> why do you say you messed that up? >> they just said hey, let it go. biggest mistake of my career. >> what did 1999 look like compared to now? >> i just said risks are too high. i never said valuations are too high. i don't see -- i look at facebook or google, and they are trading at really low pe's actually. i don't think we had a valuation bubble. my bigger concern has to do with the larger burn rate. >> if the bubble does not pop, is there a downswing? >> two things that could cause a correction. ,ne would be some macroeconomic it's hard to predict macroeconomics. the second could be the firms doing late stage investing might change criteria. that's probably the more likely near-term catalyst for something like this, where they start to ask questions, do these

companies have a business model that can go the distance? we are more cautious. we are making investments, but we are more picky for sure. >> what does more picky mean? >> we see uber in this, uber in that. ideas just a fraction on the dial away from something else. that's bad. >> so don't invest in the uber in this? >> anything too close to the big thing. it might be something the big thing does some day. so it's another way of saying, look for things that are universally different. s board.re on uber' how did you get into the deal? >> i met with ryan and travis before they raised the seed round, and i could not convince my partners. we watched for 6-9 months. then we did what we could. >> and then they were convinced? >> yes. the thing that separates the return of the best firms is the single company that goes

forever, like google or facebook. >> you have not sold any shares of uber? >> neither has travis, which i think is really interesting. >> how big can uber become? >> when we made the investment, we did not know what i'm about to suggest, which is that it appears that uber, with its convenience and price points, will be competitive at some level against -- you know, the first thing is rental cars. now, we are anecdotally meeting lots of riders who say they have no regular car. that is something that we never had in our original investment thesis. it opens up an opportunity about as large a business opportunity could be. >> what is it like working with travis, the ceo? how does he compared to all the ceo's you worked with? back to bezos, dell?

>> you can't compare him to people who have built companies that are $100 million or more. -- $100 billion or more. that is pretty audacious. i would say if i looked along a vector, he is most like bezos. i would say the business is most like amazon. it is not like facebook, it is operational. but i find him to be most like jeff. the thing that is at least well understood about travis is his insanely good recruitment. jeff was always going into walmart and getting their cio, just going in and getting the best people he possibly could. and that is what travis has done. >> when you think of competitors like halo which just got out of the u.s. market, do these companies stand a chance? >> i don't know, i have often thought about it like this. first of all, a lot of the money goes to the driver. so it is a lower margin business, if you will. i think it is tough to compete. i think travis is very competitive. >> what else can uber do?

we have seen them deliver christmas trees and kittens, but really, what is next? >> when they raise money -- they had zero slides on these types of things, whatever might be next. that is not to say that the company is not interested, they are testing food delivery, they have done flower delivery on valentines, so i think it is something that they are watching. i think for the time we, -- time being everyone knows is critical to great execution. >> what about taking on fedex or ups? >> i would say that we are not as well-situated for that type of thing as we might be for a -- i know people that have put objects in uber. a lot of people have done that. do you know itw is not just a fad? >> looking at the investment, we talked to a number of kids who told us, facebook to us is like

linkedin to you. there is a true element that the younger generation wants to be able to communicate and have fun and not worry about whether it might have some kind of weight. so the numbers are staggering. evan is doing a great job. >> can evan spiegel mature into a rockstar ceo? >> i think so. he has said -- he has had some issues, but one of the things that benchmark truly strive to differentiate ourselves around is we want to be a partner to , the entrepreneur for a very long time. i think there is a growing trend in silicon valley which i am not a fan of, which is trial by social media. our job is to help these people through situations. not to abandon them. even though the press sometimes -- how can you? evan in particular is a very special person. he has a very keen sense of

product features that matter to his constituency, which is a common trait among some of the most successful entrepreneurs. >> is there more or less arrogance in silicon valley than there was before? >> there was probably more in 1999. >> back then? >> yeah. people have learned from 1999. even though a lot of young entrepreneurs today were not around, there are still lessons to learn. >> how do you make sure you are getting to the next snapchat, the next uber? >> one thing that differentiates us from everyone else you , mentioned that we don't have this huge, large staff. i would say that we are the leanest of anyone out there. we have often had our competitors ask, how do you get so much coverage with so few people? i think the answer is that we are doing it all day long. if you have the staff of 100 people, and you have to look after them. we are just out on the field. playing. >> bill gurley, thank you so much for joining us! so great to have you, thanks.

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