♪ david: he went from farming maple syrup to philosophy at oxford, and has now become 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 to 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 just how much is too much technology? on this edition of "bloomberg big decisions," reid hoffman. reid hoffman, welcome to "bloomberg big decisions." reid: it's great to be here. david: "blitzscaling" you have out. what made you think in this way? reid: so, "blitzscaling" is the practice we do in silicon valley. it's grow to a globally relevant company, transformational company of industries. 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, half of nasdaq. why is that? we have the startups, and startups succeed. that's true.

but that's true in 100 plus areas in the world now. what's 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. those are the things that allow silicon valley to do this. david: when is it stupid to blitzscale? reid: when it prioritizes speed over efficiency. it's frequently driven by competition. in this hyper connected world, competition comes from everywhere in this hyper connected world. actually, the first to scale is the business that wins. the first to scale is the business that sets all the

rules. so it's primarily driven by competition. david: when is it reckless to blitzscale? reid: i think it's reckless 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 about how 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. so, those may be risks you will be willing to take, but you try not to take them unless you need to. david: in "blitzscaling," you worry about the efficiencies? reid: usually it's, 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're going to get this into this massive shape -- by the way, airbnb is still in the blitzscale stage. as it gets established, then we can shift from growth to efficiency. we're 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? blitzscaling and apply it to some real world situations. 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's 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 of, how do i take twitter to the next level? you may be in a blitzscaling phase. or you may move again to a blitzscaling 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. and i think that's 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? you think that would be right. reid: absolutely. david: but do you raise questions about snap, twitter? reid: i think those are the existential challenges for those companies. and i think management teams can figure them out. evan spiegel is a good product inventor. jack dorsey is a good product inventor. i wouldn't put it past them to figure out what the right thing is. that's 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. you see that with jeff bezos at amazon, at facebook, at a number of companies where they balance the two. for example, even part of what

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

's 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 sandberg's of the world and the 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 if you will, of the tech world as it has become a very big business for the rest of us? reid: so, it's one of the

book "blitzscaling," "what's responsible blitzscaling?" i think the thing the tech industry has been learning is oh, we're not just challengers to disruptors. we're 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. and 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. at the same time, there are some real questions being raised now. can we trust these people with our information, data, patterns? or not? is there a branding problem here? reid: there's definitely a brand challenge at the moment, but i think it's more a little bit like teenage years as we grow. but it's 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, now need 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 there, and 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're learning. do they have it 100%? not yet. they're on a learning curve that 's moving fast, so they will get there. david: what's 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's 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 i think 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? and what are some of the kind of guidelines? we want you guys telling us about the issues, reporting on them, and we want you to be more transparent about them so we can see how we need to push you, to push the dialogue, inquiry, or regulation. and i think that's where the conversation needs to be. david: and if there were constructive regulation, 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? i do think the very first thing would be tell us about this stuff.

and if you're not being disclosive, then we'll make you disclose with regulation. is it about how your data is being 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 sandberg's of the world and the 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: i think the key thing is to show that you're being transparent that you're 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're 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're 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're seeing it right now with google. reid: so, it's 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 maximizing talent connections and opportunity. when you're one of these tech companies, you have to say how does my mission intersect with this market?

and based on the intersection of the market, we'll negotiate with the governments about how to best reach that. you do have to be responsible to your local government. for example, linkedin, china is much easier. we're not about all the world's information at your fingertips. we're about maximizing your economic opportunity, so that works well there. it's more 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. so, i do think the tech companies, which have the abilities and power, should focus on this. for example, in a linkedin context, how do we have constant upgrades of skills for the new

jobs in industry? that's a linkedin responsibility, microsoft responsibility. i think climate change is probably best addressed through new energy technologies making coal clean. myself as an investor, i've been investing in some of the energy tech companies, partly with the breakthrough energy coalition that bill gates has pulled together. i think that the ability to apply technology to solving these fundamental human problems is part of the responsibility of technologists and the tech industry, so absolutely. but with some of 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 major 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?

reid: so, i think we're 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 still 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're 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 am doing philosophy that applies to you today?

reid: actually, surprisingly, philosophy has been more important to me than any background in business. the reason is, it's precision in thinking, thinking about human nature, what an investment thesis is and how you measure that when you're trying to create something new, something from nothing. those kinds of tools, this thinking about possibility, thinking crisply, measuring it is a way of creating measurements against the investment thesis, are 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? that is to say, i don't know all the answers, but i still have to make a decision now. reid: i think i didn't have the difficulty of making a pragmatic decision. i think the thing that you had to learn was that make the

decision now, and realize you're 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 had been born somewhere other than palo alto, somewhere outside of silicon valley? reid: i'm one of those people that think i'm enormously lucky. being born in the u.s., the opportunities that were presented to me are not opportunities i would've gotten elsewhere. we learn from our environments and the challenges in front of us. i'm certain i wouldn't be this reid hoffman. i hope i'd be a different, interesting reid hoffman, but the environment i'm in, we all should 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 symbolic systems about artificial intelligence, cognitive science. we are these unique creatures that think and speak in languages. that's part of how we think and that's part of how we understand the world and each other. it's part of how we coordinate and discover truth. and symbolic systems is a study of that. and 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, applying 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: so, the future itself is always uncertain. we ourselves evolve.

the process in which what is humanity is evolving, synthetic biology, artificial intelligence, 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. but 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 a chief 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's 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 wasn't just run the corporation,

whereas, i have major problems i need you to solve, go solve it. this range from, ok, what's our 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 be? 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 a little bit between 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: i think it's relatively rare. part of the thing most people need to learn is most people think they are better strategists than they are.

i think it's 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's the idea that matters. that's the classic thing, 2% inspiration, 98% perspiration. you still need the inspiration to go in the right direction, but you need to execute it well. david: often we don't know the strategy was successful or not because we never really did 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, -- have we accomplished today, what have we accomplished this week? one of my favorite questions is

this theory, there's no difference in theory and practice. it's that combination of theory and practice as what you try to do as a successful entrepreneur. david: you've had to make a lot of decisions. think back on one that was counterintuitive, either i didn't 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 would become the inflection point, i would've said, no, no,

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. ♪

ramy: coming up, stories that shaped the week in this around the world. they split decision in the midterm elections. the president's party keeps the senate. voters flip the house to democrats. >> the question, are they going to legislate or investigate? ramy: a split decision from amazon. the fomc has done is november rate decision. tesla decides in import share. decision to show up on the bottom line as companies report earnings. >> substantial justification for the