his success. our reporters, yahoo!'s becky worley and martin giant on the economists this week on "press here." good morning. i'm scott mcgrew. silicon valley seems like a big place but if you have worked here long enough you know a surprisingly small number of people are behind nearly everything. reed hoffman is one of those people. if you could examine just about any silicon valley start-up with a micro scope you would find hoffman's fingerprints. he made millions when ebay bought paypal. then he founded the business social network linkedin and made millions more as he took that company public. he's reinvested his wealth in nearly 100 new companies like facebook and game maker zynga. now he's giving a million dollars to kiva, allowing any new user to lend $25 of

hoffman's money to an entrepreneur in the developing world. wired magazine said if facebook's mark zuckerberg represents silicon valley's world conquering hubris, reed hoffman is the more modest, searching soul. joined by becky worley, let's start with kiva. it's your millions but i decide where a little portion of it goes. >> we want to make sure people knew this was a way to empower entrepreneurs around the world. the simple vehicle is to provide a large quantity of money so people can loan my money to an entrepreneur. >> like a sample at costco. give us a shot. if you like it, do it again. >> if you like it.

fantastic. >> this is almost exhausted. by the time people see this your money will be exhausted but other people will come in as well. >> one of the ideas is that this is a great new model of philanthropy and people say, for providing a loan which i get the vast majority back i can help entrepreneurs around the world and help other people do this. other people have contacted kiva to cothe same program. that was part of the reason. >> it's international and dom oh stick now. you can allocate where you want your money to go and what type of entrepreneurs you want to support. >> and to be clear to the viewer, you get the money back most of the time it's a small loan you make. >> it's a 2% loss rate. >> which is better than any bank has ever gotten i.'s astounding. >> so instead of giving to charity you're making it

available to eventually take back if you so choose but making it available to others. >> the classic line is teach to fish rather than give fish. that becomes self-sustaining. in a loan you say to the entrepreneur who wants to buy a taxi, start a corner store, do a delivery service, here is a sum of money to create a business and that can support you and your family. so it's a loan. when they get the business up and going, make a profit, pay back the loan and there is an ongoing business. it's part of the good of the world entrepreneurs can bring. >> and in america is amounts of money have to be larger than the developing world. it takes more. what's the difference in size? >> i don't know the exact. from looking at the site, sometimes four or five. they have analytics on it. >> you sit on the board, but you don't run it day to day.

>> i help with key product things. we had a discussion about whether to use it in the u.s. we decided it was important to do everywhere so we also launched the u.s. a year ago. >> on the subject of big money zynga which you are a big investor in is giving a secondary offering. this is your opportunity to sell zynga. >> i'm on the board. so my ability to comment is limited. >> i understand. this may be a recurring theme. we respect and understand when you are not permitted to say things due to federal law. >> but we still want to know. >> the public record i'm selling a little bit of the secondary. i can confirm that. >> you sold facebook early as well. >> yes. mostly financial diversification. the vast majority of my economic positions are in a limited number of companies. you get a little bit of diversification. >> does it matter anymore?

if you invested in papal and linkedin and facebook and zynga, at what point -- does it not become fun anymore? the entrepreneur side is fun. do you care what you bought and sold? >> well, yes. partly because, for example, i have sold very little linkedin because i work there a lot. i'm trying to create something in the future. that's where my energy goes. >> you keep your linkedin stock because you live there -- work there. >> live there. >> that's right. >> there are reasons other than financial you don't sell linkedin. an employee at linkedin may sell it to pay for college. >> of course. >> this is not on issue for you. when does the buying and selling of your own companies. there is almost no financial -- you know, you're not going to buy a boat. >> certainly not. but one of the most entertaining

pieces of the wall street journal coverage of the ipo was reed hoffman is selling some to buy his second yacht. >> really? >> if you could deliver it, that would be nice. >> just call paul allen. >> liquidity matters. for example, doing things like the kiva loan. helping another nonprofit called endeavor which does entrepreneurship, setting up a catalyst fund. liquidity is useful. having some liquidity means you can do actions in the world. that matters. >> are you trying to ask if it is funny money to you? is this a game of the sims? you love the work so the result doesn't matter except as a way to keep score? >> i don't keep score. it's what i can achieve in the world. it's not funny money because you're doing things. but it's the outcome of what

you're achieving. for example, one thing i appreciate by having them successful is i can be on the board, say i have an idea for a program. if we do this we can get more people to understand the gem of what kiva is and i can help you with that. that matters. it's not a way of keeping score as much as a way of how do you have the world be a better place because you're in it. >> scott mentioned you invested in a wide range b of companies. i saw you say once social media, also like the seven deadly sins. >> yes. >> you've got greed with linkedin because you're building your career. you have sloth with zynga and i guess you could say vanity with facebook. because it's about me. what about the four others? i particularly want to know lust. >> facebook is in there given the number of divorces --

>> lust, it could be. >> there are other seven deadly sins. those are the primary ones when investing in the internet. those are the primary ones that are triggered. the reason i use the line is to get people to sit up. it's a dry, mechanical game. the things you're investing matter to people. it's a deep psychological infrastructure people have run afoul of. so what can work for hundreds of millions of people? of course also in the aspiration, how do i take control of my economic life, stay connected with friends? it's not just the seven deadly sins undercurrent but a way to make people think, when you are investing you're creating things. it's not just a question of looking at the p & l and the balance sheet. what kind of human eco-system am i creating here? >> we'll take a quick commercial break and continue our conversation with you.

"press here" will be back in a minute.

we want to thank our founder and chairman reed hoffman along with the cofounders of the company who years ago had this idea that by combining the value of offline networks with the power and scale of the internet they could transform the way the world works. eight years later, over a hundred million members later that's what we are doing. >> reed hoffman and jeff weiner winning an award with the ernst & young entrepreneur of the world. then you're head somewhere in june. >> monaco. >> i knew it started with an m. this goes back to what we were talking about earlier. it's not the money.

it's the entrepreneurship that excites you. >> it's about innovation and creation. one of the metaphors i use is you jump off a cliff and assemble an airplane on the way down. it encapsulates different things. you're trying to get something to fly but you have mortal risk as you start it. you're rushing toward the ground. to do it, you have to bring all kinds of different problems. one thing i love is that it's the way we create and invent the future. it's the way we treat all the institutions. this company was once started entrepreneurially as a function. it's more important now than ever. if you look at the world globalizing and the way industries are transforming at a faster pace the intention clock is even more important than ever. >> we have known each other a long time. far too polite to mention your book about entrepreneurship. so i will do it. you have a book about

entrepreneurship, reed. one of the key central ideas is even if you don't start a business, you yourself are an entrepreneur of yourself. >> yes. the key thing is if you look at the fact that my co-author ben and i saw a billboard on 101 saying a million people in the world can do your job. what makes you special? how do you have a kmet tif edge, manage in the right way? we think the pattern by which entrepreneurs start companies is the same playbook to lead lives. the same concepts, getting a competitive edge, flexible planning, business intelligence. >> martin is nodding and nodding. am i am. there was a passage in the book where you talk about a magazine journalist. you say anyone who is a magazine journalist who's been in their job a long time, you're stuck. you're networking everywhere.

i'm in real trouble. so people should be quitting their jobs and bouncing around. that will make us fit for the future. >> not necessarily that you have to quit your job but you should be taking risks in terms of experimenting with things to know what the lay of the land is in terms of how the industry is changing. the new skills you need to be competitive each year and the way that new opportunities can open up through the globalization. that could mean it doesn't have to be quitting. it could be doing writing on the side. it could be publishing a book. it could be -- book is outmoded. maybe a blog. >> that's fun for him. >> the point being -- train yourself. don't wait for a company to train you. go learn the technology. go learn something quickly

before all your competitors in your own company do. >> yes. in fact by doing that you can make yourself more valuable to your company. the question is how does the company adapt? it adapts because people look at the world around them. they say, oh, we should be doing this, learning this, trying this. this is how, for example, the media landscape will change. this is what we should do online, with twitter, with blogs, ittumblr. >> do you worry about linkin becoming a big old company? >> we work for big old companies and people say, try this. well, we have a form to fill out and you have to talk to the board. >> you transitioned from being a zodiac to the titanic. how do you feel about it with linkedin? >> it's big, old. >> i think you always have to be paranoid and terrified that

that's where you are heading. you need to correct for it. one of the things we talk about is you can never say, we're done now. one of the ways we do it at linkedin is we have a company group and everyone can say, here is what i think we should be doing. something we should pay attention to. sometimes i get employees saying, remember this phrase you talk about how to stay entrepreneurial. could you start a discussion so we can talk about that and be staying nimble? for example, one of the things i tell early stage entrepreneurs if you are not embarrassed by the first product release you released too late. it's time. one of the employees came to me and i will start this discussion within the linkedin group. could you reinforce that? we are getting too risk averse in the product lunches. we need to be anymore blnimbler. ideas and input from what you see happening with competitors.

you see it happen with other professionals you know to how do we akapt? >> i have seen argument that is say companies ask the ipos become less. there is something about cashing out that takes the entrepreneurial dynamism out of it. >> and you're responsible for more people. >> and you have to answer to oh the financial markets. do you buy that argument? >> there is pressure there. the pressure is the usual pressure is quarterly earnings. if you take a risk and stumble in public, there is always egg on the face that comes from this. you have to steer hard against it and say, we have a whole chapter about how to take intelligent risk as individuals. the same thing is true as companies. if you are not taking risk, you're not innovating. you can't innovate without risk. >> do you think google is sufficient to focus solely on social and take as much of the

emphasis off innovation is a good step or a bad step? >> look at android. >> fair enough. to refocus from some of the high priority innovations, sort of resource that's given to really allocate and say social is where we need to innovate and it has to be social. >> i think they are doing what a smart, large company would do when you say, okay, this is a major trend that will affect the internet. we should be playing with it, too. we are willing to take risks. we are just going to keep going at this until we get something. >> focusing the innovation. >> google is in beta. >> exactly. the phrase we use in the book is you're never a finished product. you always need to think, as a journalist what am i doing many the next year or two? we borrowed that because gmail which was a launched product that hundreds of millions of

people were using was in the label beta for eight years. by the way, it's not finished yet. >> minimize expectations. >> mark zuckerberg said don't laun when it's perfect. launch. i'm paraphrasing. that said, apple generally launches when the damn thing is gorgeous, perfect. >> i think it depends on which industry you're in. hardware, you have long lead cycles and massive recalls. the product better be polished when you get there. apple in terms of the hardware, software blend is the strongest company on the planet, in history in terms of doing that. they are still learning things about the internet. their ability to do the internet isn't as strong as other companies. >> steve jobs always said am is a hardware company. their perfection model fit it is hardware product cycle but not software. they have been iterative there.

they have a dual strategy. >> we're going to take a commercial. back with reed hoffman in a minute.

welcome back. we're talking with reed hoffman, becky worley. >> in the spirit of your commitment to social i reached out to my followers on twitter, google plus and linkedin and said what would you ask reed hoffman. from crystal tingle on twitter -- hoping that's not your real name -- who do you wish you were connected to that you're not? >> great question. >> besides crystal tingle. >> i'm not sure crystal tingle. >> she or he, i'm sure, is lovely. >> wow. i don't get asked that question

often. when i was asked that question several years ago it was ray chambers. then i got to meet him. ray was working on malaria no more and as a special ambassador to the u.n. on solving global problems. a week later i was on the phone with him. i guess because of the borrow of start of america i have met president obama several times. talking about entrepreneurship and how important that would be. that would be on the high list but that already happened. wow. >> do you know what the answer is? you are seriously connected. >> you have been friends with mark pinkus. not many people have been friends with him.

he's a hard fellow to get to know. together the two of you invested and created zynga. >> well, he created it. >> you invested. that's a big part of it. and you own a patent. you own the social networking patent -- the two of you. >> it's about how you go to a site, someone else signs up. >> we got it in 2003 primarily because it was coming up on auction. we were worried the industry might get shot down. essentially a large company that wanted to take it over. maybe split it. >> basically for instant messaging.

it seems to be a damaging trend. everyone spends their time and money on lawyers instead of building companies. can we stop it? >> ultimately the patent system needs reform. it is what it is currently. the notion should be we should be focused on how to build great industries and not how to essentially become patent rolls as a function of it. the goal of the patent industry is return for investing. it might work in the pharmaceutical industry. it's gone off course. i guess it needs to be different shaped than it is today. on the other hand, of course, essentially this is one of the problems with historical regulation. the entire industry -- the default inertia of what it is. there is no strong political impetus for the whole eco-system

to work more helpfully. the dean of the media lab says could you create something that says what's the design of what it should be? so we know what to get besniend. >> if you own the patent on inviting people to be your friend. have you used it against someone? >> nope. >> why not? that's the model. you're an investor in facebook. i understand why you haven't used it against facebook. but you haven't done that. >> fund meancally both mark and i are positive on entrepreneurship, creation. the reason we bought this in 2003 was because it was not an economic investment to try to say, ooh, we could buy it at this price and make money -- >> you were protecting things you were doing at the time. mark was with tribe at the time doing social nushing. >> we were protecting our things and everything else as well. it's not that we say we would never use it.

maybe there was a reply. but the strategy has been all along. make sure we can allow them to get constructive. not shut them down. >> go ahead. >> i think the big question i had about mark pinkus, in the book you have positive ideas about creating allies and nus networks of people. mark is really a disruptive personality which has been good. i think he's been -- he's gotten maligning press along those lines. my question is when you talk about building allies and the networks, how do you manage this idea of disruptive personalities. >> two questions. first, mark is a hard-driving person that occasionally people go sideways with. that's not mark's fault. just to be clear.

he's hard driving. part of the reason he's succeeded. in addition to myself he has a number of good friends. >> i just want to be clear on that part of it. the next part is part of when you decide someone is an ally or a friend, you backslide. when and if mark has challenges with me or vice versa, we talk about it. we get to the right place. part of the thing is you choose your alliance, your network around you or the people that you are going through the world with. it's partially your responsibility when you think they need to do something different or better. you go to home and you have the the conversation and fix it. part of the thing is you choose folks you want to go accomplish something with. all of mark's detractors, not only has he created a great

company, but he's extremely generous to people in the company. you can see housing prices in san francisco are about to rise. >> we have to go to break. reed, thank you very much. back in a minute.

that's our oh show for this week. thanks to reed for spending the half hour with us. if you missed the start of the show, you can watch the entire thing as many times as you wish at pressheretv.com. thanks for making us part of your sunday morning. .

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