david: he went from farming maple syrup to philosophy at oxford, and now is one of silicon valley's most famous investors. reid hoffman has always been fascinated by technology and human networking. from creating his own undergraduate major at stanford o founding paypal, hoffman created linkedin and made big bets on facebook and airbnb. now some of the same questions that have driven him through his life are front and center, finding the best balance between social media and human interaction. and how much is too much

technology? on this edition of "bloomberg big decisions," reid hoffman. reid hoffman, welcome to bloomberg "bloomberg big decisions." "blitzscaling" you have out. what made you think in this way? reid: so, "blitzscaling" is the practice in silicon valley. it is grow to a globally relevant company, transformational company. the thing that got me writing the book and doing the podcast and all these things was that silicon valley is still the startup story. silicon valley, is half of nasdaq. why is that? we have the startups, and startups succeed. that is true. that is true in 100 plus areas in the world now. what is important is the way we

get this to massive scale quickly, airbnb, uber, facebook, linkedin, and this set of techniques about how you go to markets, hire talent, scale the company, what business models you create, and allow silicon valley to do this. david: when is it stupid to blitzscale? reid: it is prior torching -- prioritizingspeed over efficiency. it is frequently driven by competition. in this hyper connected world, competition comes from everywhere in this hyper connected world. ctually, the first to scale is the business that wins. the first to scale is the

business that sets all the rules. so it is primarily driven by competition. david: when is it reckless to blitzscale? reid: you don't have the competitive lens. if you feel,will i be able to pull this together in a macro business? if you don't have the ingredients to think abouthow will the mature business look like? it's not that you have it all figured out, but if you scale of business where that unit economics won't work and you can't get them to work, you will create this big crater. those may be risks you will take, but you try not to take them unless you need to. david: in "blitzscaling," you worry about the efficiencies? reid: usually it is we think we have this important new area. we want to get to size, so airbnb. this is the new domain of how you travel, how you experience local markets, and we will get

into this -- by the way, airbnb is still in the litzscale stage. as it gets established, then we can shift from growth to efficiency. we are still acquiring customers, but how do he make a product a lot more polished? how do we make our business operations more effective in terms of capital escalation. david: what about twitter? is it in that phase of a more mature business where it needs to be efficient and improve its product? reid: this is one of the paradoxes of blitzscaling. twitter, next phase of growth is more efficiency. it depends on the ideas you have. it is not a scientific measurement. do we have ideas we can play against? part of the reason you are

investing your investment thesis is should i invest in them, or should i operate towards efficiency? if you have a good idea how to take twitter to the next level, you may be in a blitzscaling phase. or you may move again to a blitzscaling pays. -- phase. if you don't come you start focusing on efficiency. david: does that mean if you are in this successful, high-growth tech company that you want to be looking for other arrows in your quiver? facebook, google did the same thing. reid: yes, all of the great tech companies and all tech companies are saying how do we build these amazing tech products in the future are looking for the next major areas to build themselves or acquire, combine, and grow. that is the central pattern by which the major companies 10 years from now are the ones doing that today. david: as you look at it, that

would suggest facebook is on the right track. as far as you can tell on the outside. google is on the right track, although concerned about facebook, right? amazon? reid: absolutely. david: do you raise questions about snap, twitter? reid: those are the existential challenges for those companies. the management teams can figure them out. evan spiegel is a good product inventor. jack dorsey is a good product inventor. i would not put it past them to figure out what the right thing is. that is the challenging part of the business. david: as you go from a potential transition from this geometric growth and blitzscaling into becoming efficient and improving your product, do you need to change your people? reid: you see that in a lot of great companies, amazon, facebook, at a number of companies where they balance the two. for example, even part of what

is amazing about microsoft is they are blitzscaling azure. that's always a possibility to do this amazing new thing in a company that's always been successful in other things. david: you have a great analogy about pirate turning into the admiral of the navy. do we have a pirate at tesla or an admiral in the navy? reid: we might have a pirate-admiral. he is obviously extraordinarily good at taking hard problems and building a new car company from scratch, a new software platform on top of it, doing luxury and mainstream, and doing more than anyone would expect you could do. there is the admiral. on the other hand, he makes pirate declarations. the reason he is doing this is he is trying to change the

status quo and saying we should focus on five years and 10 years versus the now. and people bringing him back to short sellers make him irritated. i think focusing on the five years or 10 years is what he's doing and we all want him to be successful there. david: as you talk with sheryl sandbergs and mark zuckerbergs of the world, how do you get in front of this instead of the appearance you are being dragged kicking and screaming? ♪

♪ david: so let's talk about the tech world. and how it interacts with the rest of the world. what are the obligations, the moral obligations, of the tech world as it has become a very big business for the rest of us? reid: it is one of the chapters in the book "blitzscaling." what is responsible blitzscaling? i think the thing the tech industry has been learning is oh,we are not just challengers

to disruptors. we are becoming part of the social and logistics infrastructure. as we have become part of that infrastructure and we get to scale, our responsibilities change. we can't just say hey, trust us, we're building new products. we have to be transparent. we have to be in dialogue with society. we have to be more careful about which risks we take because we have a greater impact with that. david: does technology have a brand problem? we love facebook or twitter, whatever social media we're on, but at the same time, there are questions being raised now. can we trust these people with our information, data, patterns? or not? is there a branding problem here? reid: there is definitely a brand challenge at the moment, but i think it is more teenage years as we grow. but it is recoverable. you ask a lot of people do they love their iphone, their technology service. the answer is generally yes. we as the tech industry nowneed

to say, do people also want to feel safe? they don't feel safe because of cyber hacking or my information was hacked, so we now need a higher level of safety. that needs to be added into the way we communicate with people. david: you spend a lot of time with the leaders of tech in silicon valley. do they get it? reid: i think they are learning. do they have it 100%? not yet. they are on a learning curve that is moving fast, so they will get there. david: what is the role of government regulation, u.s. government regulation? is there or should there be regulation? reid: it is possible some regulation could be good. it is easy to do a lot of damage to the tech industry and our position in the world, the inventions of the future, then to this lead in the industry we have than it is to help, so we should be very careful.

where the dialogue should be is not should we regulate or not regulate as much as, what is the target? what do we want out of the social media companies? what do we want on the handling of data? what do we want on the new evolution of these technological platforms, ai and so forth? what are the guidelines? we want you guys telling us about the issues, reporting on them, and be more transparent about them so we can see how we need to push you, to push the dialogue, inquiry, or regulation. that is where the conversation needs to be. david: if there were constructive regular a lation, would it be on the subject of meaningful disclosure? reid: the question is to figure out what kind of transparency do we think would be most helpful and most meaningful to us. the very first thing would be tell us about this stuff, and if you are not being isclosive, then we will make

ou disclose with regulation. is it about how your data is eing used? and your buy-in to that? those probably are, but how do you do that in a way that leads to a lot of ability to innovate in the future? david: as you talk with sheryl sandbergs and mark zuckerbergs of the world, what is the discussion of how you get in front of this rather than the appearance you are getting dragged kicking and screaming? reid: the key thing is to show that you are being transparent that you are investing in the things people care about, election integrity, data security, and not just to do it, but show people you are doing it. to show people, you say,i hear what your worries are and we are working on it.

it may take us a few iterations to learn exactly, but we care about and are investing in it, and to be talking about that. i think they are on path to those conversations. david: how does the tech industry responsibly participate in the chinese market, but not have the chinese government act as a sensor? we are seeing it with google. reid: so it is one of these things where each tech company has to have its own mission. the mission for google is all the world's information at your fingertips. the mission for linkedin, is economic opportunity for everyone max michael acksonning -- maximizing talent connections and opportunity. when you are one of these tech companies, you have to say how does my mission intersect with this market. based on the intersection of the market, we will negotiate with the governments bout how to best reach that.

you do have to be responsible to your local government. for example, linkedin, china is much easier. we are not about all the world's information at your fingertips. we are about maximizing your economic opportunity, so that works well there. it is challenging for google because the chinese government says we want to control which information our populace sees, and that makes it challenging for google and one of the problems they need to sort out. david: what about technology helping us with climate change, education, poverty, inequality of income and wealth? reid: so many big problems, the solution is technology. i do think tech companies, which have the abilities and power, should focus on this. linkedin , in a context, how do we have

constant upgrades of skills for the new jobs. that is a linkedin responsibility, microsoft responsibility. i think climate change is probably the best addressed through new energy technologies making coal clean. -- lf as an invest major, as an investor,i have been investing in some of the energy tech companies, partly with the breakthrough energy coalition that bill gates has pulled together. i think the ability to apply technology to solving these fundamental human problems is part of the responsibility of technologists and the tech industry, so absolutely. with these major projects, you need to work together. if you're doing energy, you need to concentrate,how does the regulation work? how does the infrastructure work? the collaboration is a much better solution. david: artificial intelligence is a race to see how far we can get how fast. are we in danger of falling behind china? are we behind china already? eid: i think we are ahead.

i think the depth of decades of r&d and technology and bringing the brightest minds of everyone in the world together to work on it here -- it gives us a lead in artificial intelligence. however, the chinese are being smart in saying we know this is where the industries of the future will be built, so we are investing in it. we should be doing that too. david: you started as a coo, not ceo. not a chief strategy officer. how much did that influence your subsequent career? ♪

♪ david: let's talk about who reid hoffman is. you study philosophy. what did you take away from your experience that applies to you today? reid: surprisingly, philosophy

has been more important to me than any background in business. the reason is,it is precision in thinking, thinking about human nature, what an investment thesis is and how you measure that when you are trying to create something new,something from nothing. those tools, this thinking about possibility, thinking crisply, measuring it is a way of creating measurements against the investment thesis, all things that come back to my philosophical training. david: a great rigor in thinking. the goal of philosophy was to get as precise as you can get, which means it never ends. did you have any difficulty letting it go? i don't know all the answers, but i have to make a decision now. reid: i think i didn't have the difficulty of making a pragmatic decision. i think the thing you had to learn was that make the decision now, and realize you

are going to learn and you may make a different decision later, but the way you learned was making the decision now. david: would you have been reid hoffman if you were born somewhere other than palo alto, outside of silicon valley? reid: i think i am enormously lucky. being born in the u.s., the opportunities that were presented to me are not opportunities i would have gotten elsewhere. we learn from our environments and the challenges in front of us. i am certain i would not be this reid hoffman. i hope i would be a different, interesting reid hoffman, but the environment i am in, we should all be blessed with the opportunities presented. i feel very lucky. david: you brought back your philosophy to stanford. and you work on a new discipline, a interdisciplinary way of thinking. tell us about what that is. reid: i was the eighth person to declare this question about

artificial intelligence, cognitive science. we are these unique creatures that think and speak and -- in languages. that is part of how we think and understand the world and each other. it is part of how we coordinate nd discover truth. symbolic systems,it is a study of that. the reason i did it because what i was more interested in was not just one discipline, but the actual subject matter itself, applying philosophy, computer science, linguistics, logic, bringing all of these things together to understand what is humanity. david: you said we are unique creatures in our ability to do that. will we remain unique creatures? reid: the future is always uncertain. we ourselves evolve. the process in which what is humanity is evolving, synthetic biology, artificial fibernetics,of

these things in the next 50 to 100 years that will be pretty stunning in what is possible. i hope that humanity will be a central part of it. i think we work to make that the case. the real question is how do we evolve to be better versions of ourselves. that is the central question. david: you started as a coo, not ceo, not to strategy officer. i think you called it firefighter in chief. how much did that influence your subsequent career? reid: i was always doing strategy. it is part of the reason they wanted me in the company. when i stepped off the board, because i was on the board when paypal was founded, and i stepped off into the company, peter wanted me to solve the key problems. part of the coo title was any -- luss just run the corporation, whereas,major problem i need you to solve, go solve it. this range from, ok, what is ur relationship with ebay?

how is the underlying financial infrastructure going to work? what will be our interface with visa and mastercard? how will we grow? what is our business operations practices going to the? peter would hand me a different challenge. those challenges were central to the entrepreneur i became. david: the bifurcation may be artificial between operations and strategy. it mirrors philosophy versus making decisions. not everybody can do that. we know people who are great at thinking, not particularly good at getting it done. we know people who can get it done but not really thinking it through. do you have something who can do both together? reid: it is relatively rare. part of the thing most people need to learn is most people think they are better strategists than they are. it is a good thing to be

thinking how to learn to be a better strategist. i do that constantly. i try to learn from people, from how to think about this coming together strategically, and then a lot of times people think and say it is the idea that matters. that is the classic thing, 2% inspiration, 98% perspiration. you still need the inspiration, to go in the right direction, but you need to execute it ell. david: often we don't know if the strategy was successful or not because we did not do it. is that something you come across frequently? reid: entrepreneurs tended to be practical. they tend to know they're in an environment that is default dead. they tend to be, what have week, today, this week? one of my favorite questions is this theory, there is no differencein theory and practice. it is that combination of theory and practice as what you

try to do as a successful entrepreneur. david: you have had to make a lot of decisions. think back on one that was counterintuitive, either i did not think it would work and it worked beautifully to my surprise, or the reverse. boy, i was sure i was right and it blew up in my face. reid: i had a bunch of both. probably the funniest one was when peter teal said join the board of this thing called confinity, encryption on mobile phones. it was a terrible idea and would never work. it didn't, by the way. i was friends with peter and thought i would help. let me join forces and help. paypal became the inflection point in my career. if you had asked me if this ould become the inflection oint, i would have said, absolutely not. the idea will not work. that serendipity of the depth

of connections of the people you work with, live with, in your life is the kind of thing that leads to amazing opportunities you just didn't see. david: thank you so much. reid: pleasure. ♪

>> you are watching "the best of bloomberg daybreak: middle east." the headlines in the region this week -- u.s. sanctions on iran crucial oil industry. what will that mean for crude supply and global prices? change in qatar younger royals and prominent executives in the biggest shakeup since the saudi led boycott. as president erdogan blames some for khashoggi's death, there is a decision in riyadh. the u.s. re-imposes sanctions on iran costs critical oil industry monday raising pressure on the islamic republic, it scale back the ballistic missile program and its involvement in conflict across the middle east.