♪ emily: he got his start as a journalist with a front row seat to steve jobs' inner circle. and wrote the seminal book on the early years at apple. then, michael moritz decided to try his luck in venture capital. he went on to become one of the most heralded investors in silicon valley history, joining the boards of google and yahoo!, then, a few years ago, took a step back for a rare health condition he has never revealed. joining me today on "studio 1.0," sir michael moritz, chairman of sequoia capital and co-author of the new book

"leading." sir michael, thank you so much for joining us. sir michael: it is a pleasure. emily: you wrote this book with another sir, sir alex ferguson, the legendary former manager of manchester united. he is one of the revered names in football, or as we call it, soccer. what drew you to this project as a journalist turned tech investor? sir michael: i always followed united. not as a raving fan. but as a young boy, i started to follow them and i followed them through the years. but then, working in silicon valley, working hard to help build sequoia, i was very curious about organizations that had succeeded for a very long time, and performed at an extremely high level. and particularly those organizations that had been run by one individual. and there just are not that many of them. emily: you both, in your careers, have been tasked with

taking undervalued assets and making them profitable. sir michael: he grew up in scotland, and i grew up in wales. both of us sort of have an outsider's mentality. and also, i think, a fair amount of a big work ethic. emily: he is credited with transforming this faltering club into a $3 billion public company. what was key to his success? what are the lessons for men and women in business here? sir michael: i wish i had done this, or thought about all these topics 30 years ago. because i know i certainly would have been far more effective. one is patience. two is a long-term view. three is developing people inside of the organization, particularly young people, and bringing them along. because if you are successful doing that, you build great consistency, loyalty. and it is easier to instill the

sort of levels of performance that you want. emily: you boil down the traits to a distinctive leader to just two. one is obsession. and two, capacity for dealing with people. sir michael: you might look at jeff bezos, or larry page, or mark zuckerberg. these people are obsessed with, at the beginning, the products that they want to build, and then their company. and i think the very successful people are great at building teams around them. microsoft, for example, in its heyday, had a very stable management team. the same has been true at apple. emily: you are so well known for your time chronicling the early days of apple. you spent time with jobs. you were in favor with him, you were out of favor with him. i wonder what you learned by watching steve so closely about

what makes a good leader and what makes a bad leader? sir michael: for steve, the product was never good enough, whether it was a computer or a phone or a tablet. he was always thinking about the next thing. i think that is the distinctive hallmark of a truly great leader. is that great is never great enough. emily: there were a lot of qualities about steve that, you know, are so controversial. is the jobs model a good one? sir michael: i am a huge admirer. was a huge admirer, am a huge admirer of steve. and it is very easy for people to sit and snipe. i am no psychiatrist or shrink, but i don't think any of us really understand the emotional consequences of being put up for adoption, and how that affects your life afterwards. and what people also do not see about steve -- and i am not trying to whitewash the fellow -- is that this was an

individual, very capable, when he wished, of showing great empathy and compassion. steve is the most remarkable person that i have met. emily: just out of curiosity, where did you leave it with him? sir michael: sadly, unfinished. polite on business terms, but that was about it. emily: you wrote the famous "time" cover story about the machine of the year. and you were a journalist at the dawn of the pc revolution. i want to talk to you about some up-and-coming leaders in technology. the sort of archetypes. brian chesky. you are an investor at airbnb. and travis kalanick at uber. sir michael: brian exemplifies the wonderful traits of a leader. he is obsessed with his company. for him, there is always another hill, mountain to climb. he pushes his team very hard to

do the impossible. he has a very long-term view of his business. and he has got a lot of energy. he's got a lot of optimism. about the prospect. he is a fantastic leader. emily: what about travis kalanick? sir michael: travis is somebody i do not pretend to know well. emily: he is so controversial. sir michael: controversial -- have you met anyone who is not controversial that has done interesting things? emily: having known three decades of leaders in silicon valley, do you think you have to be arrogant to be successful? sir michael: four decades. emily: four decades. excuse me. sir michael: lots of leaders have to make decisions about going in directions that may be is not popular in the organization. and sometimes, it spills over into arrogance. i'm different from how i was in my 20's. bill gates, who is in his 50's, is very different from what he

was in his 20's. everybody learns a lot in their pursuit. so, the understandable energy and enthusiasm sometimes spills over to arrogance, and some people in their 20's tend to get softened over time. emily: you wrote this book before jack dorsey was named ceo of twitter. and you say the only silicon valley company that grew from "strength to strength," as you say, as it swapped ceo's, was intel in their first 30 years. so, do you think twitter can become the second in history? sir michael: i think it is far better to bring a founder back who still feels a real sense of dedication and ownership with the company than going out and hiring an outside hand. jack has not been bashful about saying that the product of twitter needs improving. that is where his strengths lie. as the product improves, presumably, consumer satisfaction and the business

will improve as well. emily: how do you see this playing out? does this bubble burst? or is there a soft landing? ♪

emily: as you said, you grew up in wales and you somehow made it to silicon valley. what kind of kid were you and how did you get here? sir michael: i got here through no grand plan. i went to college in britain, and this was the britain of the mid-1970's. it was not a particularly enticing place if you were a young graduate looking for opportunity. so, i came here and was very lucky to get a scholarship to come and study here. and then after that was lucky again to get a job at "time" magazine, who eventually sent me out to silicon valley. i'm a history major, knew nothing about technology. eventually, through a stroke of

great luck, a fellow who had started sequoia, don valentine, took a risk on me. emily: what are the qualities that you think you had as a journalist that made you a good investor? sir michael: i am not sure that i am a good investor, because we always keep making mistakes. the investment business, the venture business, some of the other businesses we are in in sequoia, it is a very humbling pursuit. as soon as you think you are good at it, you get chopped off at the knees. journalism, though, was very pretty helpful. because you are often parachuted into stories that you know absolutely nothing about. you have to get your bearings extremely quickly. you've got to deal with imperfect information. and then you have to have a point of view, if you are a journalist, or you make an investment decision, if you are investor. you are trying to read people. you are trying to gauge sentiment.

i found the fact that i had been trained to make up my mind about a confusing set of information extremely helpful. emily: andreessen horowitz has really perpetuated this idea that good vc's need to be former founders or former ceo's. of which you are neither. sir michael: i think it's difficult to tell from someone's background whether or not they will be successful in the venture business. we have a lot of company founders at sequoia. but there is also room for lots of other people to succeed as well. being in the investment business is also different from running a company. people like us, we are not running the company. we are trying to help these companies as much as possible. the other thing that people miss is that we are working very hard on building our own organization, because unless you have that at the heart of everything, you cannot make

consistent investment. emily: you say in the book that the minute you think you are winning, that is dangerous. and sequoia may be the most successful venture capital firm in history. what do you do from within to evolve the firm and stay on the edge? sir michael: it begins with consistency. showing up for work every day. i know -- emily: a lot of people show up for work every day. they are not sequoia. sir michael: it is true, but it sounds simple. it is easy to start easing back and not working quite as hard. and not seeking the same level of success, not having the same hunger, getting arrogant, becoming complacent, believing that you are as good as your press clippings, which are never true. we still act like this in the belief that we are only as good as two things.

one, the next person that we hire to become part of sequoia. and the second is our next investment. emily: if the headline of sequoia's slide deck was "r.i.p. good times" during the financial crisis, what would the headline be today? sir michael: "gravity has not been repealed." emily: what do you mean by that? sir michael: that things eventually will fall down to earth if they are not properly constructed. emily: so how do you see this playing out? does this bubble burst? or is there a soft landing? sir michael: it is a more rational time than 1999, because i don't think there is a sort of universal feeling that every company is going to be a massive success, and people are a bit more discriminating. and some of them are going to come a cropper. emily: "come a cropper." is that a british phrase? what does that mean? sir michael: they will fail. emily: they will fail.

sir michael: it is the law of corporate and business evolution. if people get too big for their britches, if the company is run poorly, if the money is wasted, if the product or service does not really fulfill its promise, the companies deserve to fail. emily: how protected are late stage investments in this environment? sir michael: many late stage investments are not investments. they are just well-disguised forms of debt. many of them are very well protected because of the terms that investors have put around them. emily: the ratchets. sir michael: the ratchets, the liquidation preferences. these are not really equity investments, they are debt. emily: but is that a dangerous trend? these ratchets and the guarantee that investors will get a certain amount back? sir michael: if the companies do not perform, yes. it is high-risk poker. emily: what about the risk of down rounds and high ipo's?

-- and delayed ipo's? sir michael: it depends on the performance of each company. but we have gone through this period where the valuations in the private market are far in excess of what they are in the public market, so you have one bucket of bubbling water and another bucket of fairly cool water. if those two buckets are commingled, the temperature will even out. emily: what kinds of businesses do you see will be the first to go belly up, and what trends do you see that will last? sir michael: the businesses that go belly up are the ones that are run by people who deny reality. and do not use the money that they have raised very wisely. and think that there are a whole bunch of shortcuts to success. those things will come a cropper. but companies that are run prudently, that have got really good discipline about them, that have the right ethical compass

from the top, and also that have very distinctive products. those are going to flourish. emily: let's talk about on-demand economy. you were an early investor in webvan. you're an investor in instacart. there are questions about the model. sir michael: the one thing we got right about webvan, although we made a lot of horrible mistakes, was the consumer demand for this service is just through the roof. which is what young instacart is finding today. instacart, for example, it does not have huge factories or distribution centers. it does not have its own vans. it does not have all of the capital infrastructure that was required to build webvan. and it can manage a workforce through these incredibly powerful smartphones. and it is incumbent on instacart and its wonderful founder and ceo to make sure all of the

economics makes sense, which it will. but the company is providing a fantastic service to consumers, who just swear by it. emily: any concern about competition from uber? sir michael: we are always aware of competitors, particularly a company as successful as uber or amazon. but you can't define yourself by them, or run afraid. because then you are following. instacart is a very complicated business that is very difficult for any company to mimic. emily: how bullish are you now about alibaba and chinese internet companies? ♪

emily: i know you were really bullish on alibaba's ipo last year. how bullish are you now about alibaba and chinese internet companies? sir michael: despite the bedlam that we all read about, i will say something that will strike you as odd. i don't think anything has changed about china. the underlying consumer demand is very strong in china. the internet companies there, their business is very good. it is strong. it is healthy. it is vibrant. and we have built our own business there over the course of the last 13, 14 years --

emily: quite a robust business. sir michael: a very robust business, run by some wonderful people. and it's no accident that seven of the 20 most valuable internet companies today are chinese. because over the next 20 years, there is going to be far more business done between the technology companies that get started in china and get started in the u.s. than there has been over the last 20 years. emily: what does silicon valley have to learn from china? sir michael: i'm always struck by how eager people running chinese companies are to learn about their american counterparts. how frequently they come to the united states, how jammed their schedules are when they come here. i wish that the ceo's and founders of silicon valley companies did the same thing in china. because i think we could learn a

lot from them. and in mobile in particular, the products are different. the services are different. if any silicon valley company aspires to be a global company, china is going to be a very big part of their future. emily: now we are seeing airbnb start its own china-based company with a chinese ceo. sir michael: and linkedin as well. emily: linkedin as well. what does it take for u.s. tech companies to succeed in china? sir michael: we try not to make the mistakes that we watched others make. so, the first thing that you need to do is go there and admit you know nothing. you need to understand the market is different, and you definitely don't staff your company in china with people from america or europe. you also need to understand that there is a very different work ethic in china. people just happen to work a lot harder. so, it's a whole new level of competition. emily: sequoia is very

successful, but you have no women partners. what do you think your responsibility is there? sir michael: we think about it a lot. i like to think, and genuinely believe, that we are blind to somebody's sex, to their religion, to their background. we probably have more different nationalities working at sequoia than pretty much -- it's a very cosmopolitan setting. the fact that we have embraced china, we have embraced india, we have operated in israel for a long time, i think shows that. the real question i think that you might have is why, for example, are there not more women? we have many more women working in our china business than we do in our u.s. business. why is that the case?

i think the issue begins in the high schools. and where women, particularly in america and also in europe, tend to elect not to study the sciences when they are 11 and 12. so, suddenly the hiring pool is much smaller. emily: so you think it is a pipeline problem? because some would say, "well, you are not looking hard enough." sir michael: oh, we look very hard. in fact, we just hired a young woman from stanford, who is every bit as good as her peers, and if there are more like her, we will hire them. what we are not prepared to do is to lower our standards. but if there are fabulously bright, driven women who are really interested in technology, very hungry to succeed, and who can meet our performance standards, we will hire them all day and night. emily: 2012, you took a step back from day-to-day operations. how are you doing? we are seeing you taking on new boards. sir michael: yes, it is great. emily: what has it been like for

the last two or three years? sir michael: i've enjoyed it. i did so for a variety of reasons. that i talked about at the time, which we don't need to revisit. and i act as, i hope, a helpful team member. i am not involved in the management of the business at all. i am involved in several companies, some of them very young. and whenever somebody wants some help, at sequoia, i am more than happy to do it. go to india, go to china. we have a couple of investments in europe i am engaged with. but i also have a bit of time to do things like write a book with a wonderful man who managed a fantastic soccer team. emily: yeah, you could be sitting on a beach right now. sir michael: i can't imagine anything more boring than sitting on a beach. i think the vibrancy of life comes around new experiences and being around young people. emily: so, what is next for sir michael moritz?

sir michael: i have no idea. [laughter] sir michael: something will show up. emily: sir michael, thank you so much for joining us today on the show. it has been really great to have you here. sir michael: good. thank you for having me. emily: thank you. ♪ you shouldn't have to go far

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