254. The outsider’s edge: How Sir Michael Moritz built a billion-dollar empire

13:42Sir Michael Moritz:He wasn't thinking about being diverse. I was very lucky to get hired because I didn't have the background that you'd expect for somebody going into the venture business. Because I was a journalist, I had a humanities background and no science background, no work experience in a technology. But no, it wasn't a question of diversity as much as he couldn't figure out what would make a successful venture capitalist because he felt that the people he thought would be successful venture capitalists, they hadn't succeeded. The few that had been very successful had unlikely backgrounds. So that was the reason.

14:21Sir Michael Moritz:It wasn't because I came from Britain or represented anything else. It was just he wasn't quite short. So he took a flyer.

14:30Steph:And it obviously worked.

14:33Sir Michael Moritz:Yes, I'm not complaining.

14:35Steph:Yeah. And that, do you think then that that's because you looked at it differently from other people? Because, you know, I've heard you talk about how being, it's a bit like being a journalist, being an investor in the sense of, you know, it's storytelling. It's decision making based on, you know, what you find out, the evidence you find out and how you then present that and communicate it.

14:55Sir Michael Moritz:I didn't realize it at the time because I felt very much out of place in the venture business because I didn't have the conventional stripes on my arm that you'd expect for someone in the venture business. And I think most of the peers of Don Valentine, who was the founder of Sequoia, who hired me, thought he had lost his marbles. But I had two big advantages, which I only discovered in retrospect. The first was Oxford and the second was journalism and both taught me the same skills. And when I went to Oxford, you know, I was brought up under the tutorial system and we were assigned a topic. I studied history about which we knew nothing at the beginning of every week, assigned a bunch of books, had to come back a week later with a 2 ,500, 3 ,000 word essay where we had to pretend to a certain degree of mastery over the particular topic.

15:54Sir Michael Moritz:Fast forward to journalism. You get assigned a story about a topic or a subject you know nothing about. I've been there. You've been through this. You had to read this book. And you plunge into it and you've got to figure out who's pulling the wool over your eyes, who the charlatans are, who the honest brokers are. You've got to assimilate all the information very quickly. And then in the case of journalism, you have to write a story or host a podcast with a point of view. That's the same as investing. very much the same as investing you know you you meet an entrepreneur and you listen to his or her description of first of all you don't know them you listen to the description of the business that they're trying to start you're trying to figure out as much as possible about whether the individual and the business makes sense and you never have all the information that you want if you have all

17:00Steph:the information that you want it's too late and so so then given the companies that through you invested in you know we're talking about all the biggest players your googles you know your youtubes your airbnbs and everything else was there something in those moments of meeting those those founders those entrepreneurs i mean because you talk don't you about how it's a long process it's not overnight success and you know it takes a a long long time so and that's a big commitment especially in a world where we're very much plugged into short-termism, whether that's politics or shareholder pressure or whatever it is.

17:36Steph:So how do you know who to commit to?

17:39Sir Michael Moritz:You don't.

17:40Steph:Right. I want the secrets to become a billionaire.

17:45Sir Michael Moritz:Particularly when somebody's 20 or 21 years old, 22 years old, you have no idea how they're going to develop as an individual. I didn't understand this at the beginning, but again, there's a bit of a pattern that runs through it. So, the first thing I think that becomes a distinguishing mark is the ability of somebody who on the whole is fairly young, not always, but on the whole is fairly young, who can educate you about something that you know very, very little about or who sees something extremely differently and who also has mastered the subject. and so you can go back to the beginning say I'll give you one example of this of the personal computer business Bill Gates got interested in personal computers when he was 12 or 13 years old he knew more about personal computers than all the big muckety mucks running all the computer companies and so I think first of all it's the humility that you need to show us say a 40 year old or a 50-year-old to somebody who's 22, but who knows a lot more about one particular topic than you.

18:56Second thing that you need from that individual is a sense that they can communicate

19:05Sir Michael Moritz:very clearly because so much of the challenge or so many of the challenges associated with a company are all associated with being able to describe what it is and how you see your company evolving over time. Because you've got to persuade somebody, some bright engineers to leave a job someplace. You've got to persuade perhaps more investors later on to invest in your company. You've got to persuade customers to buy a service or product that they didn't know that you need. So being able to lucidly describe the benefits of this product that you've concocted, the service you've concocted is very important.

19:49Sir Michael Moritz:And then the third thing is this sort of unquenchable hunger and drive and tenacity and resilience and persistence. And often these people aren't the easiest sorts of people to deal with or communicate with because they're very strong will. But you need a strong willed person.

20:11Steph:It's so interesting that because I guess getting all three of those things is quite rare because, for example, you know, with communication, it's not something you essentially get a qualification in. I think often, particularly in the UK, the education system falls down on any kind of training around communication. It feels like it's classed as a soft skill, which does my head in as a phrase because I think it's the most important skill, quite frankly. And so to get all of those three together feels like it's probably rarer.

20:43Sir Michael Moritz:It's very, very difficult. Now, it doesn't mean that they necessarily have to be evocative storytellers in the way that would hold the attention of a podcast audience for 30 minutes. But I'll give you, you know, one example. So, and Larry Page, who is one of the founders, this enormously talented man, one of the founders of Google. And, you know, I asked, and it took me, I didn't get it straight away. It took me some time to understand it. I said, you know, what is it that you see in the future of Google? And he said, I want to put the Internet on my hard drive. Today, obviously, Google has put the Internet on a whole bunch of servers and data centers all over the world.

21:37Sir Michael Moritz:But the Internet is there on Larry's hard drive, on running hundreds, maybe millions of computers all over the world. That was in 1998, 1999. And it's true today. And then you have other people. The most well-known example and the most mesmerizing storyteller, and this is a man who could hold an audience in the palm of his hand for 30 minutes. Larry's a very, very shy, introverted fellow. Steve Jobs, mesmerizing storyteller. Absolutely mesmerizing. And he could persuade anyone to do anything. Yeah. Steve was a bit of an outlier in many respects, but one of the ways in which he was an outlier was that he had the sensibility of a liberal arts graduate, although he never graduated from college.

22:35Sir Michael Moritz:But he was interested in writing, in poetry, in culture, in snow accident that Apple many years later produced a documentary about Bob Dylan that Steve had come up with. And he had a poetic sensibility that most of the other founders in Silicon Valley that I've come across don't come close to possessing. Steve was without doubt the most mesmerizing storyteller that I've ever seen in Silicon Valley.

23:09Steph:But Michael, this is absolutely enthralling. There's loads more to ask you, but let's sit tight for a quick break.

23:18Steph:So good, so good, so good.

23:20Sir Michael Moritz:New markdowns up to 70 % off are at Nordstrom Rack stores now. And that means so many new reasons to rack. Because I always find something amazing. Just so many good brands. Because there's always something new. Join the Nordiclub to unlock exclusive discounts, shop new arrivals first, and more. Plus, buy online and pick up at your favorite rack store for free. Great brands, great prices. That's why you rack. When you want your spring break to feel like... And your kid's pool day to feel like... And your hotel bed to feel like... Ooh, and room service to feel like. Because at Hilton, hospitality feels like.

24:07Sir Michael Moritz:Your cabana's ready. Would you like fresh towels? It matters where you stay.

24:13Steph:Book now at Hilton.com. Hilton, for the stay. This episode is brought to you by Vanguard. Now, when it comes to your finances, you want to work with companies you trust, don't you? It can be really complicated when you're investing, you know, trying to work out where your money's going. And it can be confusing, can't it? And that's where Vanguard comes in because they always put investors first. And they're delivering on that promise for 50 million investors worldwide with a wide range of funds and a platform that keeps costs low and makes investing simple. You can also open an ISA or a self-invested personal pension, choosing investments yourself or letting Vanguard choose them for you.

24:56Steph:Search Vanguard Investor to find out more. Now, when investing, your capital is at risk. Tax rules apply. It feels like the common denominator is, again, linking back to the title of your book, it's the outsider. And I often wonder this because, you know, not to compare myself to you, you know, incredibly successful entrepreneurs and things. But I, you know, I come from a working class background, joined because I was an engineer when I started out. I was one of very few women. So I was the outsider from that perspective. Then when I joined the media, I was the only one with a regional accent in the BBC doing national news.

25:34Steph:And that was a big thing. And people were like, how can she possibly be intelligent with that voice and all that jazz? but it became my superpower because then you get underestimated I think and that is like you're you're like come on then underestimate me and let's see what I do next and I wonder if that's the sense I got from what you're talking about in terms of outsiders is I mean you can sink or swim can't you as an outsider but it's how you choose to

25:58Sir Michael Moritz:there's also benefit as you as you were suggesting that you know the the expectations that others have for you are so low.

26:07Steph:Yes.

26:08Sir Michael Moritz:That maybe for me when I got into the venture business, for you when you got into journalism originally, there's really only one way to go.

26:20Steph:Yeah.

26:20Sir Michael Moritz:I think it's a bit different for the entrepreneurs because there they're doing something beyond just building their own life. I mean, they're building a company along with it. And that's a much harder undertaking than what I've done as an individual.

26:42Steph:We often talk on the show about, you know, tech in the UK and investment in the UK and how we can encourage more of it. And why is it if we do set up a great tech company here, it's often the Americans who come in and buy it. The example being obviously Google. DeepMind is one of the ones we talk about. If you were, you know, talking to a young tech entrepreneur now, would you still say to them, would you say to them to go to America? Is it still Silicon Valley where it's at? Because, you know, I know I've heard you talk about when you were starting out as a journalist and it was Evelyn Wall, wasn't it?

27:16Steph:The foreign editor at the Times who'd said to you, go to America.

27:20Sir Michael Moritz:Bill Deeds. Yes, Bill Deeds, sorry.

27:21Steph:And he told you to, you know, go to America. And so did you, I mean, would you say that to a young tech entrepreneur now?

27:29Sir Michael Moritz:Well, it's a little nuanced. But what I would say, I think, is I think if you want to start your company, look, Demis at DeepMind did this brilliantly up to a certain point, obviously, when he sold his company to Google. I think if you're intent on starting a company in Britain, what you need to do is ensure that the people around you, please don't. Go on, just say it. With some exceptions. Yeah. I hope people listening aren't too insulted. Make sure you're not surrounded by people from Britain.

28:11Steph:Right. So what does that mean?

28:13Sir Michael Moritz:That means. A mindset or a. It means hiring people who come from companies where they've experienced great success or they know what great success tastes like. It means not having a British board of directors. It means having Americans largely. And maybe you'll find people from elsewhere. But make sure you have a U.S.-dominated board of directors if you're starting your business.

28:44Steph:because they've had success more than we ever have. So therefore I've got the experience. Right.

28:50Sir Michael Moritz:And they can lift the aspirations and ambitions.

28:52Steph:That's depressing though, hearing that. You've got to have Americans on board in order to do well. Do you see a point where we can change the balance? So what do we need to do? I guess we just need to have some mega successful companies that we don't sell to the Americans and then...

29:08Sir Michael Moritz:Yeah, and then that can... I mean, that's certainly what happened in Silicon Valley, which is, and it's like anything else. I mean, any time you have a sort of great cultural flourishing, it doesn't matter whether it's in Florence or Amsterdam or perhaps today in Silicon Valley or Shenzhen, you have patterns of success and incredibly successful people all the way around you. And you're just surrounded by them. And they're prepared to answer an email, have a breakfast with you, have a coffee with you, share advice, all of that sort of stuff. which is invaluable if you're building a company. And you can't, if you're building a young tech company, be surrounded, particularly on a board of directors, by people who may be very well-meaning, they may be very smart, but their only experience in life is as having come from a career in a large multinational company.

30:06Sir Michael Moritz:It's a different milieu.

30:08Steph:But I guess the other argument to this is it could be British people go to America, get the experience, come back.

30:14Sir Michael Moritz:For sure.

30:15Steph:For sure. Yeah.

30:16Sir Michael Moritz:I think there's some examples of that.

30:19Steph:Can I ask you about Trump? Because obviously, you know, the context of your book and, you know, you talk about this convulsive context, don't you, of Trump's America, the hatred, the intolerance and the kind of parallels you see in history with what your family went through. Can you just tell us a bit more about that? Because that is, you know, obviously something that's deeply concerning, the rise of anti-Semitism in the UK and in the US is, again, I mean, it's really depressing. It's kind of scary. And how does that feel for you? It's very kind of you, I think, as an honor to say that.

30:58Sir Michael Moritz:So I'm very careful in the book not to fall into the trap of labelling Trump or his acolytes as fascists. I don't call them Nazis. I don't think Trump himself is an anti-Semite. And even though he doesn't care or give a wit about what happens to these people who get detained in these terrible raids or get deported, he doesn't care about what happens to them or the circumstances into which they get shipped. I don't for a moment think he wants to set up slave camps or anything like that. The thing that frightens a minority, and it doesn't matter whether in America you come from Somalia or you come from China or Latin America or you're Muslim or you're Jewish, is that Trump has one of his gifts is he is able to prey on the anxieties and the frustrations and the jealousies of people.

32:03Sir Michael Moritz:People who feel that they've been ignored, that they've been dispossessed, that they've been left behind. And he knows how to incite a mob. A mob is the most terrifying prospect for any minority. And we all saw it on January the 6th with the onslaught on the Capitol.

32:28Steph:Yeah.

32:29Sir Michael Moritz:We've seen it recently, even though shamefully these people came dressed in uniforms of federal offices in Minneapolis. I see it occasionally on the streets of San Francisco where you have ice, you know, clusters of ice on the street. But for me, it started with, like a lot of other people in America, it started with this march. I think it was in 2017 in Charlottesville where you had people brandishing torches, yelling, chanting, the Jews will not defeat us. And that, you know, that had obviously echoes of what had come a long time before and followed by the fact that Trump himself wouldn't condemn the behavior, which, again, if you're a minority, leaves you feeling very vulnerable.

33:36Steph:Yeah, because there's that. I mean, we're seeing it across the world, aren't we? This playing to popularism coming from playing to people's knees and then legitimizing it and popularizing it. I think it's the trait of authoritarian leaders through history. Yeah. And I know in the book you talk about it's kind of a ratings thing. It's Trump.

33:59Sir Michael Moritz:He doesn't govern. He programs. He's a TV programmer. And 40 years ago, he couldn't bear the prospect of opening the New York Post and not finding his name somewhere in there, preferably on the front page. And today he needs to be able to always have the attention focused on him. So it doesn't matter whether the topic is Venezuela or Greenland or today, I think the Chagos Islands or Ukraine or anything else. It's got to be newsworthy. I had forgotten how exhausting and draining it was to have Trump as president because he cannot stand not being in the center of any news cycle.

34:47Steph:Yeah. But I mean, it's been I mean, you know, the way you talk about Trump, there's not many business leaders that are doing that. You know, people are shying away from calling out things.

34:56Sir Michael Moritz:I'm in a much easier position. So put yourself in the position of, say, Tim Cook, who runs Apple or Sundar Pichai, who runs Alphabet or Satya Nadella at Microsoft, they're in a terrible position. They're dealing with a mobster. They're dealing with a shakedown artist who, like Tony Soprano, grew up in Queens and is a bully and thug. And they know full well that if they cross this man, he will seek vengeance in one way or another, He has all the tools of state and policies in which to damage their enterprises. Their responsibility is to look after the welfare of their business. They know who he is.

35:47Sir Michael Moritz:They know that he is an absurd buffoon. And they're just wanting to protect their businesses best as they can.

35:59Steph:But at what cost to humanity?

36:07Steph:because there must be a point though as a business leader but you see i think there's

36:12Sir Michael Moritz:a big difference say between the business leaders in america today and the business leaders in germany in the 1930s it's not as if the business leaders are employing slave labor it's not as if they're developing chemicals to gas people. And all the other enabling things that the leader of Siemens and Krupp and BMW and Bayer and all those other large German companies did. The U.S. business leaders are not doing that. They're trying to survive without bringing damage upon their company.

36:57Steph:It doesn't, I don't know, disappoint or worry you that there aren't more people speaking out against him. I think maybe I'm too optimistic here. I like an optimist, though, so go on.

37:11Sir Michael Moritz:Oh, good. But I think his power is beginning to wane. Right. You can already see the fractures in this MAGA Republican base. You have these nutcases like this congresswoman, Marjorie Taylor Greene, who was very convinced that, you know, the Jews operated lasers from space and controlled everything on Earth. And she has turned her back on Trump. I think after the elections in November, the midterm elections, when everybody, when all the candidates are vying for Trump's mantle, so this could be J.D. Vance or Marco Rubio or Ron DeSantis or Ted Cruz, they're going to turn on each other like a pack of hyenas.

37:57Sir Michael Moritz:And I also don't think that they will be able to intimidate and bully and threaten and terrify so much of their constituency as Trump has been able to do. I just don't think they're going to have that power.

38:14Steph:So will common sense prevail?

38:16Sir Michael Moritz:Yeah, I'm pretty. Let's hope so. And I think I hope for common sense to prevail without some of the extremists from the left, because I think in their own way, even though they stand for different things, they're as bad for America as some of the rightists.

38:32Steph:Yeah. In discussing this, you've obviously mentioned some of the so-called magnificent sevens, you know, these top companies who are absolutely flying in terms of market valuations and everything else. Some people are talking about whether that's a bubble, whether we're too dependent on AI and we've got all this hope in AI and actually when it shakes down, and it won't be the biggest thing to change the world as everyone thinks it's going to be. What's your thoughts on all of that?

38:58Sir Michael Moritz:I think this is the third and probably AI, third and maybe the fourth most significant technology shift that I have lived through. Although, you know, I wasn't really around so much for the, to some extent I was, for the birth of the microprocessor that just lit up everything. And then you had the big personal computing wave and then you had the internet. And all the connectivity associated with the internet and mobile phones.

39:27Sir Michael Moritz:AI builds on all of those as foundations. And as a result of the fact that you have so many devices connect to the internet, AI has taken off faster than any of the other. And in the history of Silicon Valley and technology evolution, every succeeding wave accelerates faster than the previous because the foundation on which they are layered is deeper and richer and bigger. So I think it's going to have profound consequences. And it will wind up with probably, you know, the emergence of a new breed of companies. There'll be one or two very, very significant companies that emerge. I think there are companies, particularly Alphabet, that will become even stronger as a result of the emergence of AI.

40:22Sir Michael Moritz:And then you're going to have a lot of carnage. A lot of investors are going to lose money. A lot of these companies that are high flowers with preposterous valuations at the moment are going to collapse by the wayside.

40:34Steph:Right. And what do you think is the kind of time frame for all this then?

40:37Sir Michael Moritz:I think it happens over the next five years. where the new, younger, bigger winners emerge and the rest begin to drown. Yeah.

40:50Steph:Get your life belt out. I know that's what I'm thinking with everything going on, all the political turmoil you're predicting and also everything going on with tech. But, I mean, can I just ask before we wrap things up then, it's really interesting to me, given what you've done in your career and writing this book, which is such a powerful and moving history of your family, but also with so many parallels to today. What is it that kind of motivates you now? And what is it that you've done so much? What's next and what motivates you?

41:22Sir Michael Moritz:Oh, I'm a hopeless dilettante, so I have too many interests. And, you know, investing is part of it. Writing is part of it. I'm deeply involved in San Francisco, both politically and also I started with another fellow media business in San Francisco. We operate a couple of luxury hotels and high end boutique hotels in Tuscany. I have my Manchester United field tea in the summer. I like to paint and cycle. So I'm involved in too many things, none of which I'm – and this isn't, you know, it sounds like false modesty, but it's not like I do any of these other things brilliantly. I'm just spread too thin.

42:11Sir Michael Moritz:But there's no absence of amusements at the beginning of every day.

42:16Steph:And does it – and this is a bit of a weird question and you might be like –

42:20Sir Michael Moritz:Where's she coming from? Yeah, yeah.

42:21Steph:But what does it feel like to be a billionaire? Because I just think that's the most surreal – and, you know, I know you've talked as well about – I've heard you talk about your mum not being bothered about your money and things like that. Oh, well, no, she was convinced I was a crook.

42:37Sir Michael Moritz:She was ready to turn me into any authority. I mean, if the policeman had knocked on the door, she would have said, yeah, he's guilty and here's his telephone number.

42:45Steph:Yeah.

42:45Sir Michael Moritz:Right.

42:46Steph:Is it weird because you're in this tiny minority of people and, you know, I just can't ever imagine what that's like. I mean, do you constantly have people asking you for money for a start?

42:56Sir Michael Moritz:Well, Harriet and I, Harriet, my wife, and I have decided we're going to try and give away as much of our money while we're around.

43:05Steph:She'll never spend it all for a start.

43:07Sir Michael Moritz:Around us. No, to give it away, you know, to various... To charity, philanthropic, you do a lot of philanthropy. Organisations. And, you know, we've done a bunch of... Most of what we do is in the San Francisco Bay Area. but we've done a few things here because we've been so lucky. And we started a big scholarship program 16, 17 years ago at Oxford. 14 % of the undergrads at Oxford are now on the scholarship program.

43:36Steph:Yeah, and the Booker Prize as well. We sponsored the Booker Prize.

43:38Sir Michael Moritz:We just gave the big first keystone gift to the National Gallery to expand its collection post-1900. So that's basically the big things that we've done in Britain. But then we're deeply invested in the community in San Francisco. And, yeah, I know everybody always asks this question. You know, the great relief and the great freedom associated with having money is you're alleviated from the worries.

44:07Steph:Yeah.

44:08Sir Michael Moritz:And it's so – it's liberating. You don't have to worry whether you're going to make your rent payment. You don't have to worry whether or not you can afford to buy two or three books or a fancy bottle of wine or something. It's those things that make the difference. But, you know, both Harriet and I still, when we go grocery shopping or something, you know, and we're buying raspberries, we're still staggered at the bill of the raspberries.

44:39Steph:Oh, for sure. I think that's what makes people wealthy too, though, is you're not forgetting. I bet you look at the receipt in a restaurant as well and check you haven't been overcharged for a glass of wine.

44:51Sir Michael Moritz:And, you know, that's one of the lucky things today. You can afford to leave a generous tip.

44:57Steph:Yeah.

44:59Sir Michael Moritz:No, it's very much. Look, I remember when I had no money and what it was like to, you know, have a couple of thousand dollars in the bank and nothing more. so I remember that it's not that long

45:12Steph:that's journalism isn't it

45:16Steph:I've got great hope in the fact though that you said the traits of making a good journalist is what makes you a good investor as someone who's small time investing that fills me

45:26Sir Michael Moritz:with great joy yeah read the road signs carefully

45:32Steph:yeah amazing Michael thank you so much it's been an absolute joy to chat to you it's been real fun thank you yeah and your book is out now isn't it but thank you very much for coming in.

45:40Sir Michael Moritz:Loved it. Cheers.

45:42Steph:Bye-bye. And that's it from us on The Rest is Money. Bye-bye.

45:50Sir Michael Moritz:Thought Sweetgreen was just salads? Think again. There's a new way to do Sweetgreen. Wrapped and ready.

45:57Steph:These handheld wraps pack bold flavor and 40 plus grams of protein into something hearty, satisfying, and built for life on the go. From craveable sauces to satisfying textures.

46:07Sir Michael Moritz:They're designed to keep you going without slowing you down. So put that fork down. Try the new wraps today in app or at order.sweetgreen.com.

46:17Steph:Available at participating locations only.

46:22Steph:Rinse knows that greatness takes time, but so does laundry. So Rinse will take your laundry and hand deliver it to your door expertly cleaned. And you can take the time pursuing your passions. Time once spent sorting and waiting, folding and queuing, now spent challenging and innovating and pushing your way to greatness. So pick up the Irish flute or those calligraphy pens or that daunting Beef Wellington recipe card and leave the laundry to us. Rinse. It's time to be great. Big game, big meeting, big crowd. However you're gathering, Sweetgreen Catering brings the bowl everyone wants. introducing the buffet-style sweet green bar, perfect for sharing, customizing, and keeping everyone happy.

47:05Steph:Because when the food's this good, people show up. Learn more at sweetgreen.com slash catering.