Mike Maples, founding partner at Floodgate, joins Lucas Bagno and Ian Cinnamon to discuss:
– Why there has been an “epidemic of fakery” in society over the last 50 years or so. Mike says that institutions are pretending to be working rather than doing actual work.
– Why the right “angle of attack” for societal problems is not head-on but rather to create something completely different than changes the subject entirely.
– Why he advises founders to make sure they are working on an idea that is worthy of their time and why as a founder you need to “get out of the present and start living in the future.”
– How Silicon Valley can have more empathy and make the case for broader prosperity.
– How to build connection and shared purpose in an American society that is increasingly tribal.
Transcript
Lucas Bagno:
Hello, everyone. Welcome to another episode of Village Global’s Venture Stories. Mike Maples is a co-founding partner at Floodgate. He’s been on the Forbes Midas List eight times in the last decade. Some of Mike’s investments include Twitter, Twitch TV, Clover Health, Okta, Hadrian, and Applied Intuition. Before becoming a full-time investor, Mike was involved as a founder and operating executive at back-to-back startup IPOs, including Tivoli Systems and Motive. Mike is known for coining the term Thunder Lizards, which is a metaphor derived from Godzilla that describes a tiny number of truly exceptional companies that are wildly disruptive capitalist mutations. Mike likes to think of himself as a hunter of the atomic eggs that beget these companies. And now, on to the show.
Mike Maples:
Thanks for having me.
Lucas Bagno:
Awesome. Well, Mike, really excited to have you on the show here today with Ian. I guess, to kick us off, we’re co-investors in companies like Hadrian and Applied Intuition, and I’m sure you’ve backed the companies that also work with DOD or serve America’s strategic capabilities. What excites you about the space and why does it matter to you?
Mike Maples:
There’s a set of topics that I like to call America Next, which sort of represents a concerted effort to break free of the limitations of our current thinking and institutions. I hope I’m not going too far back down the rabbit hole here, but when I think about just where we are in general, in 1971 the first microprocessor came out and in 1973 ethernet came out. But also in 1971, Nixon took us off the gold standard. And I think that history is going to come to ultimately realize that the economics of mass production and mass distribution peaked in the ’60s and that mass production and mass distribution used to drive the creation of abundance in the economy and used to drive the productivity of our institutions, whether it’s the military, education, the government. And why is that? Well, mass production and mass distribution have a tendency to centralize the means of production.
Mike Maples:
You had a world in the ’60s where you had three networks, two superpowers, one phone company. That’s kind of the way the world got to. What I believe happened with the microprocessor and the ethernet is that mass production and mass distribution are no longer the primary animating force of the economy. It’s mass computation and mass connectivity. And that if you look objectively at the institutions that were invented before the microprocessor and ethernet, I don’t think they’re succeeding. And the ones that seem to be succeeding, I think for the most part, are fake. Fortune 500 spends 800 billion a year to buy back its own stock. Fake growth. We have a problem of fake news from a lot of the corporate media. We have fake progress in K to 12, where we try to shift the goal post on standards and admission criteria. We don’t even allow ourselves by union contracts to measure things half the time.
Mike Maples:
And so we have this fakery that I believe is representative of institutions that are no longer able to conduct their core mission without camouflaging the fact that they’ve exceeded their useful capacities. So what they do is they play these shell games, the Fed jacks with the money supply, the Fortune 500 buys back its own stock, the US military pretends Afghanistan is working. In all of those cases, these centralized institutions transformed from being service providers to rent seekers. They became more interested in preserving their power and their institutional framework than they were in conducting the core mission of their business. I believe that that’s been true for a while, by the way. And so I think fake growth in businesses is as pervasive as fake news is in politics and media, but it’s like we just daydream that it’s not true.
Mike Maples:
And so there’s a site that I like a lot called wtfhappenedin1971.com and it talks about the impact of all this stuff, the financialization of our economy, just fakery across the board. So I think if there’s one good thing that COVID had showed us was it laid that bare for everyone to see. You could see in dramatic contrast and relief the institutions that worked versus the ones that didn’t. I tried to get a passport. It was supposed to take two days, because I did the rush my passport option. Six weeks later, I didn’t have one. I almost couldn’t travel. Does anybody doubt that if Amazon was in charge of making passports that that would never happen? Right? And Amazon didn’t say, “Well, I can’t do a passport because of COVID. I can’t ship you stuff because of COVID.” But all the failed institutions that were invented before the microprocessor and the ethernet made excuses like that, acted as if that was a legitimate reason not to function, not to serve.
Mike Maples:
So to me, America Next is more than… Hadrian’s about outer space, right? Applied Intuition is about autonomous vehicles and frontier technology. But for me, America Next is about getting real about where our infrastructure needs to get better, getting real about how do we become competitive in terms of how we educate people, in terms of how we build things. It means no longer accepting the fact that it can take hundreds of millions of dollars to paint a bike lane in San Francisco and we think that’s okay. It’s not okay. The only reason we daydream it’s okay is we’ve gotten used to it and we need to stop accepting that. And so, to me, those are the themes that I’m interested in when I think about America Next. It’s like western world getting its mojo back and saying that breakthroughs are what we’re about and that we’re not going to engage in these fake conversations about fake nonsense.
Ian Cinnamon:
Love that. And I think that resonates so deeply in a lot of levels, especially with what we’ve been discussing with the theme of this show, which is Solarpunk, which is what is the optimistic view if everything goes right around what the world looks like moving forward. So, I guess, with that in mind, with America Next and how you think about this, you gave the example that perhaps if Amazon were running our passport service, you would’ve had your passport in same-day shipping, right? Like immediately.
Mike Maples:
Yeah.
Ian Cinnamon:
Do you think that this is best solved by getting new political officials in who understand this innovation? Is it by large companies? Is it by startups? It’s a combination of them is probably going to be the most likely answer. But, I guess, how do you think about those different avenues of how to actually solve this? And especially for our entrepreneurs that are probably listening to this show, how do you think emerging companies can help solve some of these problems that you’re outlining?
Mike Maples:
I think that I would answer that in different ways, depending on the timeframes we’re talking about. But, in general, I’m a big believer in Clay Christensen. One of the things I always internalized about Clay Christensen is that when you’re an upstart, frontal attacks almost never work. For example, I haven’t invested in any companies, especially not in recent times, that sell directly to K to 12 educational entities. The reason is not that I don’t care about K to 12 education. The reason is that I think that the teachers unions have become a coercive rent-seeking force in K to 12 education. And so I would never want to sell a product that tries to overturn that directly, because frontal attacks don’t work. And so quite often, if you want to innovate, you have to exit the institutional value network and create a new one and then just show the world that your approach is so superior that people start to gravitate to your idea, to your breakthrough.
Mike Maples:
And so I think that we are going to see in a lot of cases that the institutions that predated the ethernet and the microprocessor will not ultimately survive in a fundamental way, that we will need to create new institutions that exit those prior institutions. And that’s always happened. That’s happened throughout history. And so I think that that’s where the opportunity for entrepreneurs will be. And I think that now, like the military, it may have been tougher to sell to in the past than it might be in the world ahead, because now military is like, “Look, we need to do something about the fact that China is a geopolitical rival for real. What’s going to happen with Taiwan? Look what’s happening with Ukraine.”
Mike Maples:
There’s people out there who don’t wish us well and we can’t continue to play these fake games, like what we played in Afghanistan. We need to get back to how we are at our best. And I think that more and more people are realizing that, what are we serving here? Are we serving the outcomes that we want? Are we serving the institution that we’re beholden to? I think more and more we’re going to see people rise in these institutions that are going to have a bias towards trying something new with new companies. But I’d be very careful about trying to unseat traditional players on their playing field.
Ian Cinnamon:
When you describe the right angle of attack not being a head-on attack but looking at it from a different perspective or that breakthrough perspective, I know that you have a pretty defined way of thinking about what it means to be a breakthrough. Can you just articulate that, so that everyone can kind of get on the same page with when you say that word, what you’re thinking about?
Mike Maples:
Sure, yeah. So the way I look at it, and this goes beyond America Next, but so to me, fundamentally, the idea of a breakthrough is you break free from the rules of the present. And so, ultimately, for a breakthrough to be valid it has to change how people think and act. Before Twitter, people never tweeted. And the same is true of cooking and driving and flying. What was once out of the realm of human capabilities becomes the new normal for human capabilities. We do those things now without even thinking about it. To me, that’s just the arc of all human progress. What happens through time is that people come up with breakthrough ideas that change the way people think and act and then confer on people new capabilities that one day they take for granted and then that becomes the new normal.
Mike Maples:
So when I think about that, I think that is a process that has a mechanism to it. There is some type of an inflection that’s bigger than any one company and that inflection creates an exponential powering of a possible change event. An entrepreneur takes that inflection and many more and then has an insight. An insight is an unrevealed truth about the future that not many people know yet and then that insight translates into an idea. To me, the idea is really kind of the reason I think we’ve done well with pivots is that in my world an idea is a reference implementation of an insight, but it might change. We might change and pivot as long as the insight is correct.
Mike Maples:
A company that I hold near and dear of recent times would be Lyft. The inflections were GPS chips given away in smartphones and smartphone adoption was at 10%. We thought it was going to go to 50%. So you’d say, “Okay, if you combine those inflections, you could envision a world where the sharing economy could be in cars.” You could have a network of active riders and drivers, all of whom could locate each other. For the first time, you could confer those capabilities on people. And so the idea initially wasn’t Lyft. It was Zimride. But the insight was correct. And so, as a result, even though Zimride wasn’t the best, highest purpose use of the insight, they were able to pivot to a better idea that was. And so to me, that’s the cycle at work. It’s like there’s a reason breakthroughs happen and it can be understood as a set of mechanisms that mutually reinforce and magnify each other.
Lucas Bagno:
Mike, to connect both of those topics together, both America Next and the topic of breakthroughs, what do you think are the potential breakthroughs that we’re going through now that companies can capitalize on in the context of rebuilding our institutions?
Mike Maples:
Well, I think that most of them end up relating to leveraging software-defined networks and AI. In the early days, I thought, okay, these network-centric businesses, the ones that we invested in, were kind of pure play networks. Twitter, Twitch. Things like that. Okta. But then we started to realize that software-defined networks were animating the entire economy and that were the fundamental force multipliers that business people would have. And so then we started to say, “Okay, well, what would that mean for transportation? What would that mean for energy? What would that mean for housing?” All these things. It really hit me, because we mistakenly passed on Airbnb, but fortunately we were ready to receive the insight when we saw Lyft. But there’s no way the taxis are going to have a better service than Lyft, unless the government just protects them and allows a corrupt system to persist.
Mike Maples:
But there’s no theoretically possible way that someone using methods of capitalism from the 20th century is going to defeat somebody using them from the 21st century software-defined network centric models. It’s just not going to happen. And so the way I look at it is what entrepreneurs need to do is not do a better something. They need to come up with breakthroughs. And what entrepreneurs do is they leverage inflections as an asymmetric warfare weapon against the present. Inflections are what allow an entrepreneur to enter a new market with something that’s not better but that changes the subject completely. And so that’s what we want to do is we want to find these big change events that are bigger than us, that then we can harness to create something that the world hasn’t seen before.
Lucas Bagno:
Historically, some of the companies in frontier tech or hard tech, some people would say that they’ve had a harder time getting funded than traditional SaaS companies. Some people would say that it was never the bottleneck. I’m curious if you have a perspective there or if you think that the dynamic for companies in those spaces or companies that want to work with the government in building, in deep tech, how is that going to change over the next few years?
Mike Maples:
Well, yeah, so I think that earlier, when I mentioned Lyft as an example and the inflections, you really have two different types. We’ve talked in the past in the industry about this technology adoption life cycle, that people adopt technology at a certain rate. What I think I’ve come to learn in my own investing is that there’s really two things that are married with each other. There’s the adoption life cycle, but there’s also the inception life cycle. There are people who are living in the future right now who are seeing inflections that other people don’t see. It’s like what William Gibson said, “The future is already here. It’s just not evenly distributed.” But the adoption life cycle and the inception life cycle have a relationship, like in a dance, where technology leads and adoption follows in the dance. But we have to have both people or there’s no dance.
Mike Maples:
It’s like salt dissolving in water. Water can’t dissolve salt in the absence of salt. Salt can’t dissolve in the absence of water. They have a symbiotic relationship. And so what’s happening, I believe, that excites me about military, and some of the things in government and some of these America Next themes, is that people’s mindset is shifting. People are starting to say, “Hey, you know what? I think it does make sense to have telemedicine visits be the default mechanism for visiting.” That has nothing to do with technology. It has to do with people’s propensity to adopt it at scale.
Mike Maples:
And so my belief is that the military will decide that they have to get serious about a lot of these new innovations and that they have to do what’s necessary to adopt new technologies quicker. And I think that that will give the entrepreneur a big advantage, because now when they’re able to harness the technology they’ll be able to not just deliver a product, but they’ll have people who are willing to have a discussion that changes the subject, because they’re looking for new ideas rather than just, how do I preserve my career?
Ian Cinnamon:
I love that. What can entrepreneurs do to push that adoption pace forward instead of just sitting around and waiting? What are things that could be done to help move that needle in the right direction?
Mike Maples:
It’s funny. What I find, I don’t know if this will resonate with you, Ian, but in my experience, I’ve actually never struggled with entrepreneurs having the ideas. I find the opposite is true. I find that ideas are easy. They’re kind of a dime a dozen and that, if anything, entrepreneurs, being optimists by nature, too often pursue ideas that aren’t worthy of their talent. And so what I try to do with an entrepreneur is I try to say, “Look, it’s not my job to have ideas or even tell you how to get ideas, but I can help you stress test it.” So like, “Okay, you have an idea. What’s the insight? What is your non-obvious truth about the future that you’ve discovered. By the way, are you really living in the future? Or do you just have an idea about the future? What inflections power your idea?”
Mike Maples:
What’s interesting is a lot of people will, if I say, “Okay, inflections beget insights beget ideas,” they’ll say, “Well, that sounds obvious.” But then I’ll say, “Okay, great. Now let’s come back to your idea. What’s your insight? What are your inflections?” And so what you see is that just because it’s obvious doesn’t mean people do the obvious. They talk themselves into believing that their idea has breakthrough potential when it just doesn’t. And why is that? I like to say, “Before you get out of the building, you want to get out of the present.” And so one of my favorite expressions when I’m being pitched by a founder is, “Is that really from the future?” And so I got pitched last week. They said, “Hey, I’ve got this idea for a healthcare solution that mitigates pain and people are going to care about that.”
Mike Maples:
I said, “Okay, what future are you living in right now? And what other people living in the future have you talked to about this?” “Well, I believe the future is going to have this.” I’m like, “I’m not interested in your ideas about the future. I’m interested in whether you’re living in it right now, today, as a verb.” And so my view about the future is that breakthroughs are built by people who are living in the future now and they have better intuition about what needs to be built, because they’re building what’s missing in the future as they experience it. And so my number one piece of advice to any entrepreneur is get out of the present, because getting out of the present, it’s like in a video game having this awesome cheat code, where you have just unlimited machine gun fire and everybody else has slingshots.
Mike Maples:
People living in the future, they see inflections coming over the horizon quicker. There’s fewer of them. There’s less noise. When they build stuff, their intuition about what to build is more right, because they’re not trying to think of a startup. They’re trying to build what’s missing in the future as they’re experiencing it. And so if you’re interested in building something for the military or interested in building something for climate change or whatever, to me, the key is to not wrongly assume that vision is about looking over a mountain with binoculars of the future. It’s about living in it directly and getting your hands dirty and then building what’s missing there.
Ian Cinnamon:
I love that. Run over the mountain and be there.
Mike Maples:
That’s right. Marc Andreessen, when he was doing the Mosaic browser, he wasn’t thinking about the market for browsers. He was at a super computer lab at the University of Illinois, trying to help researchers collaborate. He was trying to make the internet immediately more useful for him. When you build things that solve a desperate need that you have, you’re much more likely to have the right intuition about what needs to be built. If you’re living in the present, you’re going to build for problems in the present for people in the present. And so if you live in the future, you’re going to build for problems in the future for people living in the future. And so then the only thing that matters is, am I living in a valid future? Am I living in a future that is representative of what the someday bigger future will be? But to me, that’s what breakthrough entrepreneurship is really about. It’s not thinking of startups from the vantage point of the present.
Ian Cinnamon:
I think that’s incredible. And, I guess, part of what makes you such an incredible investor, is your ability to say, “Is the future that you’re living in and the problem that you’re solving a valid future that is actually going to happen?” I think your ability to assess that is, obviously, very clear from your track record of investing. To bring this back a little bit to the government side, one thing that I personally, and I know Lucas as well, has found fascinating has been this almost back and forth of whether traditional, large tech companies are going to embrace working with the government or not.
Ian Cinnamon:
We’ve seen with the program that used to be called Project Maven, for example, Google employees walking out, refusing to be part of that, other tech companies looking at it from the polar opposite direction and saying, “It’s our duty to do this.” Do you think there’s a trend that’s changing in how both large companies, individual employees, and startups are perceiving working with governments, especially in light of the terrible atrocities that are currently happening in Ukraine? We’re seeing Elon Musk delivering Starlink terminals to those geographies. How do you think people are now changing in their mindset of working with governments?
Mike Maples:
I don’t know. A lot has been made out of some of the things that Google has said and done and I don’t know if Google is as representative of a lot of Silicon Valley, as some might suggest. I think that what a lot of people fail to consider is, why do we have a military in the first place? We don’t have a military in the first place just to hurt people. We have it for the same reason we have the police. In a free society, the rights of the people need to be protected. And so we make a trade-off. We say, “We’re going to give some people in our society force power, but for the purpose of protecting the rights of our people.” They don’t always enact that responsibility 100% right, but if we want to have a free society, there has to be someone who enforces that freedom, always. And so, to some degree, to be anti-military is to be anti-freedom, because you’re just denying the reality of the need to protect the rights of our society in the first place.
Mike Maples:
Now, I don’t think that the people who think that way are malicious, necessarily. I just think a lot of people in tech are pretty sheltered from this reality. It’s kind of a reflection of growing up in a world that benefits from the protection of freedom without understanding what’s required to protect it. It’s also growing up in a world where, if I’m smart and get good grades and go to the right schools and hang out with the right set of elite people, I’m going to get merit badges and kudos and good jobs. And so a lot of the people in these companies never saw a world where there had to be people out there on the front lines, protecting rights. And so they just, I believe, have a very sheltered view of how this stuff really works. But I don’t necessarily think that they’re malicious. I just think that they’re just… People talk about bigotry. For me, this is a different type of bigotry. It’s unfortunate, but I don’t think it characterizes most people.
Lucas Bagno:
Right. Mike, we spent a lot of time talking about breakthroughs and startups. Now we touched a little bit on big tech. It would be fun to switch a little bit more about to the other side of it, which is government itself and broader topics around America. When you look at the United States today, what keeps you up at night?
Mike Maples:
Gosh, let’s see. The main thing that keeps me up at night right now is earlier we were talking about living in the future or the past. What I find is, at any given point in time, most people are living in the present, some people right now are actually living in the past, some people are living in the future. I think that most people who are living in the present are just seduced in a trance from this fake stuff, fake growth, fake news. There’s fakery all around them. I think part of the reason that that happens is that it keeps people… It’s kind of like the opiate of the people. It’s to say, “Everything is fine. It’s growing. Progress is happening all around.”
Mike Maples:
People who live in the past, I find interesting. I mean, make America great, almost axiomatic, is living in the past, right? It’s defined as wanting to return to the past again. But you don’t just have MAGA right, you also have MAGA left, people who want to go back to the past and have trade unions be all powerful and tax people at 90% and stuff like that. It’s just a different type of being caught in the past. The people in the future, I think the problem that they’ve had is a lack of empathy, and they’ve expressed breakthrough ideas in ways that offend people or scare people. But we also haven’t had enough leadership in our society to make an unapologetic case for why breakthroughs are good, for why breakthroughs are the reason we’re not still a bunch of apes throwing sticks at each other in the dirt.
Mike Maples:
It’s like in any given breakthrough there’s always good to it and bad to it, but the good almost massively always outweighs the bad. But in the short term, the present fights back against that. And so we need to do a better job, those of us who believe in breakthroughs. We need to talk about people who build breakthroughs like we talk about the Greatest Generation a hundred years ago. We need more people who don’t believe that a good life is about going with the flow, that it’s about creating a better future and forcing a choice about pursuing that better future and expressing it in a way where we all have a shared sense of purpose about it. The same way we did when we built the transcontinental railroad. The same way we did when we decided to land on the moon.
Mike Maples:
Right now, because we have too many leaders living in the past, in the present, too many leaders saying, “Don’t worry about it” and saying fake stuff, too many leaders taking advantage of people’s anxieties and pitting people against each other and tribalistic us-versus-them stuff, we’re losing the opportunity to create the breakthrough generation. That’s what keeps me up at night is that we can destroy each other out of our cynicism or we can lift each other up out of shared purpose. We need more people who aren’t afraid to say what that shared purpose can be and why there’s something in that shared purpose for everybody, not just techies.
Lucas Bagno:
I love that, Mike, and I couldn’t agree with you more. I think one of the things that we see in tech that I think you mentioned, and it’s maybe the lack of empathy, it’s we’re just living in the future and those people don’t get us. Over the last decade, we’ve seen a lot of people that just try to completely override the rules and just hope that the government will catch up to them. How can we do it differently? What are the misconceptions that maybe people in tech or people that are living in the future have about people that don’t get them or that are living in the present?
Mike Maples:
Well, I think that sometimes I think that Silicon Valley, in particular, is very vulnerable to lack of empathy in interactions with people. That’s reflected in the language. For example, artificial intelligence. When you think about it, what kind of term is that? Or robots eating the jobs, software eating the world. I’m like, okay. I’m not sure that I’d feel good about that if I don’t know much about software. And so mass computation, mass connectivity, both of them have exponentially increasing power, which means that they can both bring abundance to every man, woman, and child in the world. That’s what we need to make the case for. We need to show that if we get out of our own way we can bring abundance to everybody. We need to show people why that is and why it’s worth being excited about and why everybody can benefit from it, not just people in Silicon Valley or people who’ve got CS degrees at MIT and Stanford.
Mike Maples:
What’s interesting to me is let’s say you go to say Kansas. I grew up in Oklahoma. If I go to Oklahoma and talk to some of my friends there, people have this wrong idea that some people in Oklahoma voted for Trump because they’re protectionist or they can’t compete in the world economy. My friends that I grew up with in Oklahoma aren’t wishing for their kid’s better welfare. They’re saying, “Hey, I just want to know… I used to know what the game was. If I join a company, work hard, play by the rules, I get ahead, I get promoted, I retire, I get my gold watch, I get my pension. But that was the metaphor for the 20th century. That was the “organization man”.
Mike Maples:
What people need to know in today’s world is that in the networked economy we’re returning back to this idea of self-agency. It’s not about everybody fends for themselves. It’s that everybody is empowered to live their own best life the way they want to. It’s not that robots are eating the jobs. It’s that robots and software are eating the need to be an employee of a company, if you don’t want to. You can be your own solopreneur. You can make more money than you ever would have working as a cog in the machine. And so we need to do a better job of making the case for the broad prosperity that people can have with technology, but we also need to treat people like adults. We need to say, “Look, if your kid was a farmer in the year 1900, you’re doing them a disservice if you don’t say, ‘You need to learn how to read,’ because that is simply just a denial of reality.”
Mike Maples:
People in today’s world who are not computer literate are not set up to succeed. That is just a fact. We can pretend that that’s not true, but then that’s engaging in more of the fakery that people are engaging in. Being able to tell the computers what to do, you had labor and capital, but software makes all of those things look tiny by comparison in terms of its power to move the world and have an impact and be a force multiplier for economic benefit. So I just think we just need to be more honest in the conversations that we have and it needs to be much less of tech as producers versus consumers. It needs to be all of us have a stake in creating breakthroughs that bring all of humanity forward and all of us have an opportunity to benefit from that.
Lucas Bagno:
We’ve talked a lot about a lot of things. People not believing in the future. Some people think that the world would end in a few decades. Others don’t want to have kids because they think the world is too bad. Young people are falling in love with socialism again. Would you put all of these things under this one umbrella of the rise of nihilism? And if so, how do you think this is related to the decadence that we see of our institutions?
Mike Maples:
Well, I think we talked a little bit about 1971 and the site WTF Happened in 1971. Maybe we should describe that a little bit. In 1971, there were fears of inflation and other aspects of the economy, so Nixon took us off the gold standard. It used to be that the dollar was a claim on gold. In theory, you could say, “Hey, I’ve got some dollars. I want to trade it for gold.” Having a gold standard gives governments an incentive to have discipline, because if they print more money its relative value compared to gold goes down and they inflate the currency. So ever since 1971, a whole bunch of things have happened that are not good. And I believe that most of why these things have happened is that the economy has gone from being centered around productivity growth to becoming overly financialized.
Mike Maples:
I’ll give you an example of how it happens. The Fed jacks with the money supply, keeps the interest rates low. So some hedge fund guy buys or borrows money at 0%, lends it to IBM so they can buy back their own stock, and the hedge fund guy front runs purchases and buys IBM. Did IBM generate any more profits? No. Did they create any jobs? Did they advance the standard of living? Did they create any breakthroughs? No. Did the wages of employees go up? No. Who benefited? Speculators and people in Wall Street and executives who get paid if the stock price goes up. But no actual productive economic activity happened.
Mike Maples:
And so that has happened writ large. Compensation gains compared to productivity gains for average workers have been bad. If you look at income inequality, it’s accelerated. That’s what you would expect to happen in a world where investment and productivity and innovation decisions begin to get crowded out by decisions that allow you to get rich by financial engineering. And so that’s the thing that I see that we’ve got to get past. And in order to get past it, you got to start by having an honest conversation about the fact that it’s happening and what then we need to do to sort of escape that trap.
Ian Cinnamon:
I think that’s an incredible overview. So shifting slightly to geopolitics here, how worried are you about potential international threats towards the West and specifically America? How do you think about threats from, let’s say, the CCP or what’s going on in the news now with Ukraine and Russia? How real do you think that is and it’s something that we should be actively worried about? Or do you think it’s something that is kind of in the back of our minds and it’s not a day-to-day concern?
Mike Maples:
I think that China represents a real challenge for us, but I think that the way we should internalize it is to realize, “Hey, they’re building buildings and hospitals and bridges way faster than us.” So why is that? Why don’t we get our mojo back and say, “It’s unacceptable for us to have a culture that thinks that it’s okay to take longer to build a building now than it took in 1915”? You think about how long it took to build the actual Golden Gate Bridge would never happen today in San Francisco. And so China is not going to take our freedom away. If we lose our freedom, it’ll be because we decided to quit remembering who we were. It’ll be because we voluntarily ceded leadership. But our system can be the best, but we have to set higher expectations for ourselves.
Mike Maples:
And so I try to take a positive view about China in the sense of, “Okay, good. Game on. We’ve got some competition. Let’s rock and roll. Let’s show that we can innovate better than we ever have before and that the only thing stopping us is us and our own frivolous, internal conversations and ideas that are holding us back.” But I think it’s ours to lose. It’s up to us in the end. And hey, when I think about competition, that’s exactly how I want it. You got them right where you want them.
Ian Cinnamon:
In order to wake up all of us and say, “How do we start building technology, thinking about breakthroughs, living in the future to really tackle this head on and to be able to build bridges and buildings and everything as quickly as some of these other countries,” do you think we need some sort of Sputnik moment? What does that look like? How do we open our eyes, in a sense?
Mike Maples:
I don’t know. That’s a really good question. For me, my business is seed funding and it pays the bills. But what I’m really in it for is breakthroughs. And so part of this is we in tech could be better at helping to show the optimistic case for breakthroughs going forward. We could all be better in society about… We have too many people who see that the Fed is jacking with the money supply, and so they get into financial services and then they loan money at practically 0%, so that they can make kind of a free profit just by shuttling money around. Those are people who aren’t making the system better. Those are people who are taking advantage of the system by going with the flow. And yes, they’ll get rich, but I just think that it’s such a better life to try to build breakthroughs.
Mike Maples:
You may not even be the richest person, but you’ll do better than good enough by far. But the other thing is someday you’ll get to look back on it, enjoy it twice, because you actually did something. And so I think we need more people who say, “Yeah, that’s what I want my life to be about. When you put it that way, I don’t want to just make money by going with the flow. I want to prosper and honor the gift of my time in this life by making a difference and by being part of movements that move the future on a better path.” So I think that part of it is we need to understand, all of us do, that we’re making choice in how we live our life and what we spend our time on, what our priorities are. Our time is going to be short. How do we want to honor the gift of our time? I think that’s number one.
Mike Maples:
Number two, we said this earlier, I mean, you all kind of alluded to, some people say, “Okay, well, Lyft and Uber were bad because they broke a bunch of laws and that’s all they really did, is they just broke a bunch of laws and they just pulled it off before anybody knew what was happening.” But you think about it, the taxi medallion system is legalized corruption. There is nothing about voluntary free trade that says we should have a taxi medallion system. It’s not even an example of capitalism. It’s an example of crony favoritism. And so one of the things I’ve noticed, by the way, is these new ideas, these new breakthroughs, there’s a mechanism by which entrepreneurs get scapegoated by the present when the present fights back. The first mechanism is they say, “Oh, my gosh. This is illegal. This is terrible. You guys are lawbreakers. You’re awful.”
Mike Maples:
Nobody ever mentions how much money the Fortune 500 spends lobbying politicians. Everybody says, “Hey, Zuckerberg’s terrible because Facebook doesn’t check facts well enough.” Well, the corporate media has led us into multiple wars. How many fact checkers do they hire? And like, okay, Zuck owns a lot of shares of Facebook. The New York Times inherited multi-generation institution with way less governance accountability. Where do you see the articles on that? By the way, I’m not trying to throw the New York Times under the bus. I’m just saying that there is a mechanism by which people who create breakthroughs get scapegoated, and it’s either you’re breaking the law, you’re doing a bunch of mean stuff, or here’s my other favorite one, “Oh, that’s not safe.” You know?
Mike Maples:
Bob Metcalfe told me when he was at 3Com that they were trying to do voice over IP and AT&T would say, “Well, no, we need to keep having just beige phones from AT&T forever, because that would be safer.” Like, “If we have phones that do anything other than be beige and ugly and the same, we, AT&T, cannot guarantee that calls will always go through 100% of the time. That’s not safe.” One of these days, I’m going to write a paper on this, about the ways that breakthrough builders get scapegoated. Because when you see the mechanism, you see it every day, all around you. You see the lie for what it is. And so part of me is like, part of why I want to help these founders is they don’t have enough people that say, “Hey, you know that stuff that they said about you? That’s crap. They’re not even trying to be honest. And don’t even worry about trying to negotiate with them, because they’re a bad faith actor in this conversation. It’s just an example of the present fighting back and just take it as an example of your winning because you cause that kind of a reaction.”
Mike Maples:
So that’s the other thing is if you can be part of breakthroughs, awesome. But I think also we should have a little bit more sympathy for the people who are building breakthroughs. These people are not normal people, but they do things for us that are transformational. And the process of scapegoating, once you see how it plays out, you see it over and over again and you start to realize, hey, wait a minute, the way that they’re criticizing these people, they don’t even play by their own rules. They don’t even hold themselves to that same standard. In fact, they’re worse about transgressing that standard than what they’re accusing this person of being. But they just try to crowd out any other kinds of opinions. And because they can’t play wealth creation games, they try to diminish someone’s status and play the status game.
I see founders get thrown under the bus in ways that they really shouldn’t. I don’t think what Adam Neumann did at WeWork is great. I’m not a proponent of Elizabeth Holmes. But that’s different. That’s different from, “Hey, I’ve got vested interests. I don’t like what you’re doing. And so I’m going to use the power of status and I’m going to use social norms to attack you and demonize you and unfairly criticize you as a person.” I think that happens too often and we should be more willing to stand up to it.
Ian Cinnamon:
I love that. I’m excited to read. I really do want you to write that paper or something on it. I think that’s sorely needed. And I think you need to continue to encourage entrepreneurs to take those risks and take those big swings. Otherwise, the breakthroughs just aren’t going to happen.
Ian Cinnamon:
So if you are one of our listeners and you care about the future of America and American values, Mike, what do you recommend that our listeners do, given everything that we talked about?
Mike Maples:
Okay. Let’s see. I’ll answer that in a couple ways. One is there’s a book that I really like called The Coddling of the American Mind. It talks about ways of thinking that are better in this fragmented world. The first thing that he talked about is seek out challenges rather than eliminate or avoid everything that feels unsafe. And so part of why it takes so long to build a building or to do things is we have rampant, what he calls, safetyism. We have this tendency to say, “Anything that could be unsafe, we can’t do that.” Whereas, children, when they’re born, they’re meant to be antifragile, right? When you exercise a muscle, it gets stronger when it gets put under stress. And so that’s the first thing I’d say, is try to be an anti-fragile person, try to seek out challenges. Risk is not something that you avoid because you’re afraid of failure. Risk is something that you take because you’re motivated by upside.
Mike Maples:
And then the second thing would be watch out for cognitive distortions. It’s really easy to engage in emotional reasoning in us-versus-them tribalism, in repeating meme-worthy slogans that travel quickly, often more fast than the truth. And so trying to be seek-truth-over tribalism and avoiding cognitive distortions. And then, I think, a related thing is to take a generous view of other people and to look for nuance and don’t assume the worst about people. Don’t assume simplistic us-versus-them morality. I said something kind of critical earlier about the New York Times. I don’t think the people at the New York Times are bad. I just think that some of the incentives they have produce behaviors that are not always great. But when I’m talking to somebody from the New York Times, I’m not saying, “Oh, I don’t like you. You’re from the press. I don’t trust you.” I try to approach them assuming that they’re a good faith actor and they’re doing their job the best they can. I’m trying to do my job best I can.
Mike Maples:
We need more of that, I think, in how we approach people. I’d say just culturally we need to get back to that. But then in terms of just what to do in life, I just think life is short. Every day is a gift. And one of the best ways you can honor that gift is to devote your time in the service of things that you think are going to make a meaningful difference in this world, that honor the gift of your talents in the best way possible. And whether that means you’re the prime mover or founder or whether that means you join somebody’s movements, it’s like try to get involved with things that are going to move the future in a better direction. And don’t listen to the naysayers who say, “It can’t be done,” or the, “Here’s what could go wrong,” and all that stuff, because those are the people who are going with the flow and they’re never going to have the same kind of agency that you can have.
Lucas Bagno:
Mike, to wrap us up, we covered a lot of challenges that we needed to address as a country and that entrepreneurs need to deal with on a daily or monthly basis. In face of all of this, what keeps you optimistic?
Mike Maples:
I’m very optimistic about just the power of technology and founders to create breakthroughs that change the future. It’s weird. Every now and then I go down to San Francisco and you see that Twitter building and it’s this massive building with a big flag on the side. For somebody like me, that’s a lot to take in, because there was a time when it was Odeo out of business, here’s your money back, and we got this side thing over here called voicemail 2.0 or TWTTR. And so I just think that we’ve never lived in a time in human history where we can get the abundance of technology breakthroughs into the hands of more people than ever before, faster than ever before.
Mike Maples:
It kind of goes back to what is technology? It’s about conferring new capabilities on people that they didn’t have before, that they didn’t even know they could have, and that someday become mundane, they’re so obvious. But that’s what we need to keep doing. We need to remember that that is always within reach and that the people who are saying it’s not or the people are saying that it’s rigged in some way, they have an agenda and you should know that. Their agenda doesn’t have to be your agenda. Your agenda can be an unapologetic, future-oriented, positive, optimistic breakthrough kind of generation approach. That’s what I really want. I want to see someday maybe it’s the breakthrough generation. There’ll be a set of people, mostly young people, probably, who say, “You know what? I’m tired of talking about all the reasons we can’t do stuff and we’re going to get back to the reasons that we can and we’re going to show people.”
Lucas Bagno:
Awesome. Mike, this has been amazing. Thank you so much for the gift of your time.
Mike Maples:
Gosh. Thank you. It was fun, yeah. And good luck at Village. Great group of people. It’s a fun podcast to be part of. Hopefully, I didn’t stir too many things up in this one.
Ian Cinnamon:
It’s been fantastic. You’ve been amazing. Thank you so much.
