Someone graduating from college this year with a computer science degree has pretty good job prospects. But “not everybody should be a coder,” and those who don’t code may find themselves more in demand over time, investor Mark Cuban says.
“Creativity, collaboration, communication skills: Those things are super important and are going to be the difference between make or break,” Cuban said on the latest episode of Recode Decode with Kara Swisher, in a joint interview with Revolution CEO Steve Case. “In an AI world, you have to be knowledgeable about something, right?”
He went on to say that AI will get smarter if and only if it is fed with good data and not spitting out faulty conclusions, like the ones that are already causing problems in the real world. Lower-skilled workers will be labeling data, he predicted, while higher-skilled workers with “domain knowledge” will be the ones designing the desired outcomes of neural networks and sussing out where they might go wrong.
“Twenty years from now, if you are a coder, you might be out of a job,” Cuban said. “Because it’s just math and so, whatever we’re defining the AI to do, someone’s got to know the topic. If you’re doing an AI to emulate Shakespeare, somebody better know Shakespeare … the coding major who graduates this year probably has better short-term opportunity than the liberal arts major that’s a Shakespeare expert, but long term, it’s like people who learned COBOL or Fortran and thought that was the future and they were going to be covered forever.”
Below, we’ve shared a lightly edited full transcript of Kara’s conversation with Mark and Steve.
Kara Swisher: So we’re going to bring another chair out. And we’re going to bring out two people that I have met when they didn’t have any money, which was a nicer time. They were much nicer, but they are nice guys. And we’re going to talk a little bit about where we’re also going in innovation.
Anyway, so coming out right now, Mark Cuban, who wants to be known as “an entrepreneur who fucks up a lot of the time,” and Steve Case. Come on out. Hi, guys.
Steve Case: Hey.
Good to see you again.
Mark Cuban: What up, Kara?
How you doing?
Cuban: I’m great.
So this is technology entrepreneur — I’m reading — the headline here is “Technology Entrepreneurship as a Force for Social Progress.” You guys met how long ago? We all met 20 years ago, correct?
Case: Over 20 years ago.
Cuban: 20, yeah.
So Steve backstage was telling me a story when you were trying to buy his company, right?
Case: Well, he was trying to sell his company, we didn’t consider buying it. He ended up selling it to a Yahoo for $6 billion and we thought that was a little high. Of course, we are not one to …
Cuban: It was a bargain!
Yeah, so …
Case: I think at the time we were worth, I don’t know, maybe $100 billion, so I know I’m not one to talk, but I thought it was a little pricey. But he was smart, he got a deal and kind of called in his stock and made a bunch of money and bought a team and then became Mr. Shark Tank, so it’s a great entrepreneurial run. And now he’s celebrating entrepreneurs from all over the country, which is awesome.
So let’s talk about that. You guys started off with your businesses as they were in early internet, that’s where you made a lot of your money. And you all made the money, but then you shifted quite a bit in your careers. And one of the things, Steve, you’ve done is moved on to the idea — and I know you did this with me three years ago, we started talking about this idea — about, the next internet has to be made up of social entrepreneurship, it has to be regulated, they have to be thinking about bigger social issues, and we have to find talent elsewhere, because we’re on a downward spiral of innovation.
So talk a little bit about what you’ve been doing and where you are right now.
Case: Well, there’s really two themes that drive what I’m doing now. One is what I’ve called — which goes back to what you were saying — the “third wave” of the internet. We all were a part of the first wave, getting everybody online. When we started AOL in 1985, only 3 percent of people were online and they were online one hour a week. So it’s kind of early days. And that whole first 20 years was just getting everybody connected, the on-ramps, the servers, everything.
That set the stage for the second wave, which has been mostly about software and apps, writing on top of the internet, mostly on top of smartphones, Facebook, Google, etc.
And the third wave is really integrating the internet in a much more seamless way throughout our lives, changing how we think about health care and food and agriculture and smart cities, but it does require a different mindset, I believe. Partnerships are way more important. Policy, regulatory issues are way more important. These are regulated sectors.
And a second idea is this Rise of the Rest idea, how do we make sure entrepreneurship is happening everywhere in the country and entrepreneurs everywhere are getting backed, and Mark does a lot of this as well. Last year, for the investors out there, I guess all of you, 75 percent of venture capital in this country went to just three states: California, New York, and Massachusetts. 75 percent. So the other 47 states …
Most of it’s California, right? Is that correct?
Case: California gets more than 50 percent alone. New York and Massachusetts are 11-12 percent. So Ohio? Less than 1 percent. Virginia? Less than 1 percent. Michigan? Less than 1 percent. Last week I was in Florida as part of our Rise of the Rest tour, third-largest state, 1.3 percent. Texas, everything’s bigger in Texas? Little bit bigger. Less than 2 percent. So the reality is most of the money is backing the entrepreneurs in places like Silicon Valley, not in many parts of the country, and since startups create most of the jobs, that’s a problem.
It’s also a great, I think, investment arbitrage, because most of the capital is in one place, not surprisingly supply/demand, you all know the dynamics, valuations tend to be higher. And in most parts of the country, they tend to be lower. So it’s a big opportunity to, you know, the third wave and the rise of the rest will converge.
That’s the dream, to find these big companies, but they do tend to coalesce. Mark, but you weren’t, you were unusual. You were one of the few, as I recall, that was anywhere else, I didn’t have to travel very far, and I remember Marc Andreessen wouldn’t leave the Hobie’s in Palo Alto. I think he went between his house and Hobie’s. They didn’t want to go anywhere and they wanted to stay within the Stanford corridor essentially. So talk a little bit about this, because it’s always been the idea that this was going to happen, that there was going to be Silicon Holler and Silicon this. It has not happened.
Cuban: But Scooter said it best, you know, when you were talking to him last, if you’re on a mission and you’re driven, it doesn’t matter where you are, and effectively, tech has become the industry in Silicon Valley, like the movie industry in Los Angeles. That creates its own set of problems.
I didn’t have to deal with the politics, I didn’t have to deal with looking over somebody’s shoulder for the next big deal, hiring somebody to be an administrator who said, “I’m only there until I get my startup funded.” Right? In Dallas, people come to work and we get the job done, so it really didn’t matter. The whole promise of the internet back in the mid-90s was you connect everybody anywhere, and so it never even dawned on me that I should be in Silicon Valley or to move. And in fact, it was so much more friction-free being in Dallas, it made it a lot easier.
Case: Also, a little history lesson, Ms. Swisher …
Case: The first wave of the internet was super distributed. Mark was in Texas; Sprint was in Kansas City; Hayes, the big modem company, was in Atlanta; CompuServe, the online service, was in Columbus, Ohio; Prodigy was White Plains, New York; IBM’s PC operations were in Boca Raton; and we were outside of Washington, DC. Microsoft actually started in Albuquerque and moved to Seattle. I could give you a dozen other examples.
Cuban: If you go before that, even, remember there was Wang and Digital …
Yeah, which, that was corridor 128.
Cuban: Yeah, the 128 outside of Boston, right, and so all you had in Silicon Valley back in the early days of PCs and networking was HP and Apple.
It still is … 50 percent of the venture capital money goes there, what, how do you shift that out? It didn’t happen that way, it coalesced in one place.
Case: Oh no, it coalesced in the second wave. When it became about software, Silicon Valley rose to prominence, arguably dominance. My point is the first wave, that was not the case. The third wave, I do not believe that will be the case. The reason for that is, a lot of the domain expertise that’s going to be critical in the third wave, the partnerships that are going to be critical in the third wave, are in the middle of the country.
Health care, for example, sure, Stanford does some awesome things, but MD Anderson in Texas; Cleveland Clinic in Ohio; Mayo in Minnesota; Johns Hopkins in Maryland, Baltimore, those are the centers of excellence. The big health care plans are United Health in Minnesota, a bunch of companies in Nashville.
In farming, ag tech, the big companies are Monsanto, headquartered in St. Louis, Louisville, Lincoln, Nebraska, that’s where the expertise is, so there’s an opportunity because that domain expertise is going to matter more, partnerships are going to matter more to build up these sectors in these cities, but it’s not going to happen if all the money is somewhere else. As a result, we’ve seen the last several decades, I’m sure this is true for people here, family members, there’s a massive brain drain. The people who grew up in a lot of these places left because the money was there, the opportunity was there.
Cuban: But it’s changed, it’s a lot different now. Look, in terms of capital invested, yes, the percentages are absolutely correct, but in terms of number of businesses started, it’s shifting dramatically.
Cuban: Yeah, because over the last 10 years, you need a laptop and a broadband connection, which is more prevalent, and a cloud account, whether it’s AWS or whatever, and now with AI, it’s even more so. When you’re in those concentrated areas, you’re competing for resources, whereas AI isn’t based in Silicon Valley. The best technologists are coming out of Montreal, Boston, Pittsburgh, Austin. Silicon Valley can be their own little world, it’s an open opportunity for us.
Case: I’ll give you three examples from last week, as we were in Rise of the Rest tour in Florida. In Orlando, amazing things happening around our interactive entertainment, obviously Disney is there, but also Electronic Arts has 1,000 people there, the University created a program around Interactive Entertainment, booming. Space Coast, 50 years ago inspired us all with Apollo 11, there’s a ton of space tech startups in that Space Coast area. And finally, in Miami, Chewy was an e-commerce company acquired for $3 billion, 10,000 employees outside of Miami. Magic Leap, one of the most interesting technology companies out there, they’ve raised over $2 billion, have 1,700 employees.
Jury’s still out on that one, though.
Case: What’s that?
The jury’s still out on that one.
Case: The jury’s still out, but the jury’s out on everything. When you started covering us, more people didn’t think we were going … you got an assignment that nobody else at the Washington Post wanted to cover because nobody believed in the internet. Stuff happened. But the point is …
Let me just say, I drove out to Vienna, Virginia, and nobody else did, but keep going.
Case: That’s the rise of the rest, thank you for supporting it. My point about Magic Leap is 1,700 people, mostly in Plantation, Florida, 45 minutes north of Miami, hundreds of top-quality engineers have been recruited, left Silicon Valley to go there because they believed that was the opportunity and they got well-funded.
We just saw in the last year, Duo Security got acquired in Ann Arbor for $3 billion, Qualtrics in Salt Lake City got acquired for $8 billion. There are examples of this happening, but people are not paying attention, investors are missing out on what I think is one of the great arbitrage …
Two questions. Mark, why are investors not paying attention to this? And two, one of the statistics that I just saw is startups are at its lowest point in 30 years now. Is that correct?
Cuban: Well, two different questions, right? So, I think investors are investing more locally because you can’t miss it. I mean, every decent-sized city has a variety of universities and STEM, and there’s a variety of opportunities there, and it’s cheap. Particularly for a tech startup, even a health care startup, it costs next to nothing, so I don’t think they have to go out and make the rounds for VCs.
In terms of startups, up until the mid ’90s, you had … barbershops was a startup, right? You had labor, different types of labor, those types of startups have diminished dramatically because people aren’t coming out of school, learning trades and just rolling out and starting a company. If you pull that out, I haven’t seen any shortage of startups, I haven’t seen any shortage of people wanting to start companies.
We’re not having … We have thousands, 50,000-plus people trying out for Shark Tank every year, so I think if you looked at different categories of startups, maybe you’ll see some categories really falling back, particularly trades-driven ones, but I think technologically …
Where are they, then? Let’s start first: How do you get … you have 50,000 apply, so you think there’s no shortage in startups anywhere in the country. What about you?
Case: Well, startups are down, that is the data, but there’s also an ethos that leads more people, particularly younger people that want to start companies, they often feel like they have to leave where they are to go to someplace else. And the answer to your earlier question about why the investors focus on that, it’s not insane. Basically, investors like pattern recognition, they do more in the future of what’s worked in the past, and the last 10 years, the best-performing venture funds in Silicon Valley have mostly invested in Silicon Valley, so let’s do more of it. That doesn’t mean it’s going to change, but people are just doing more of the same. Venture capitalists, it’s convenient, they like to … you have to get on a plane to go to some other places. They’d rather get in their car, some would rather bike to the company …
Cuban: I think the disconnect, VCs aren’t the greatest source of capital.
Cuban: VCs chase growing companies. They want to put the last money in. They want to be in Lyft and Uber right before they go public because they create puts and play all kinds of games and say they’re in unicorns. The reality is, the companies I get that I’ve invested in, $5,000, $10,000, $50,000, $500,000, a million, whatever it is, they’re everywhere but Silicon Valley and they’re my best companies. To me, if somebody comes to me from Silicon Valley, their opportunity is minimal because it tells me that they’re not recognizing the rents are higher, the employees are higher, they’re not in it for the right reason, that they’d be anywhere else if they were.
I’m seeing no shortage of opportunities, no shortage of investments, other people I know, investors, no shortage, and the returns are great. VCs just play it completely different, PE plays it completely different. Angel and seed, I don’t see any …
Case: The other piece of it is, and Jim Breyer, who’s, I know, here is one of the investors in the risers. Finally, we have 40 individuals, Jeff Bezos, Howard Schultz, Ray Dalio, Reubenstein, Jim, John Doerr, people like that, great group of folks.
Jim Breyer told us, when we were talking about this, that because of his success back in Facebook and Excel, and now Breyer Capital, he kind of knows everybody in Silicon Valley and because of what he’s done in China, he kind of knows a lot of things in China, he doesn’t really have a network in most parts of the country, both to source deals and then to create the support mechanism around these companies. So that’s another reason why they don’t do it.
But just because they don’t do it doesn’t mean they will do it, and in the future, I think more and more people will pay attention to this, more and more will see there’s outsized investment opportunities, because when these companies go public, nobody says, “Oh, it’s in Columbus, Ohio, there should be a discount.” But at that venture stage, there absolutely is a discount.
Case: Because of the supply, demand, and balance. That will close over the next 20 years. We are just trying to figure out ways to accelerate it.
Cuban: How many accelerators are there now in every single city?
Cuban: You don’t hear stories about accelerators closing every other minute, right? They’re popping up everywhere for every group, for every vertical. They’re just nonstop and that tells you, right? All the accelerators aren’t based in Silicon Valley.
Cuban: They’re everywhere else. Nashville to Tyler, Texas, to Dubuque, Iowa. They all have accelerators and there’s business competitions everywhere. Every college has got an entrepreneurship group right now.
Cuban: There’s kids coming out of every community college. There’s no shortage. I think we’re measuring wrong when we say that there’s fewer companies being started. That there’s no capital going outside of Silicon Valley. The biggest deals, by far …
Cuban: No question, right? But, all this talk about “the decline of entrepreneurship,” bullshit.
Cuban: Right? Bullshit. I mean, it’s not even close. It’s so cheap. You can start anything, anywhere, anytime.
Case: There is a problem, though. Several problems, just to be blunt.
I want to talk about … what are the challenges?
Case: I was going to tell you. I’m pretty bullish on this here. Challenge number one is the capital, which makes people leave. Challenge two is this talent issue, where some of the best people … we were at Silicon Valley, speaking at the TechCrunch conference, maybe 2,000 people in the room, I asked for a show of hands, how many people were from the greater San Francisco Bay Area, less than 10 percent. Sensing everybody from Silicon Valley is from someplace else.
Case: As a result, because they left, they’re less likely to start companies there, and as the companies succeed, they don’t necessarily have the talent to help scale it.
Case: You’ve got to address the capital issue, then you have to address the talent issue. And you also need to create more of a fearlessness in some of these communities. There are a lot of parts of the country that are a little cautious, a little risk averse. One of the great things about Silicon Valley is this anything is possible. Change the world.
Which is the not-great thing about Silicon Valley.
Case: Sometimes it’s to an extreme, but having a little more of that kind of confidence.
Cuban: That’s definitely when you have to deal with scale, right? So if you run a fund, you have to hit numbers, right? And you guys do amazing things and I think you are smarter than 99 percent of them out there because you’re going places where other people aren’t. But the reality of technology right now is, AI is changing everything.
Cuban: And so, what does it take to learn AI? So I sit there and do my machine learning tutorials. I do my neural network tutorials and so I understand it and there’s a lot of bullshit. More bullshit coming from Silicon Valley, but any kid, right, can make that effort and learn how to create a neural network. Get on to AWS. Get $100,000 credit, go through their school and get it. There is no shortage of opportunity. It takes brains.
Cuban: It takes effort. It’s like Scooter said, you’ve got to break through barriers and just do what it takes, but there’s no barriers anymore, at all.
I think he’s correct in the amount of talent around you and connecting …
You don’t think so?
Cuban: I generate a world. No, not at all.
Cuban: Because, in an AI world, you need domain expertise and domain expertise comes from everywhere, so if I’m building a machine-learning tool and probably half the people here have dealt with machine learning and neural networks, they need people who understand the vertical that they’re approaching. That’s not the type of expertise that Silicon Valley has.
You don’t have people who are experts in real estate just moving to Silicon Valley to be an expert in real estate. They’re all around the world. If you want medical expertise, you go to UPMC in Pittsburgh, right? Oil and gas, you get it out of Texas. And all these vertical applications, just like back in the day, we wrote software for different verticals and applied it. Then we put it on a network, then we put it on the net, then we integrated mobile. If you have vertical expertise and you are willing to sit down and scrub through AI, learn how to use data and how data’s becoming so much more valuable, Silicon Valley certainly doesn’t have any type of monopoly on data.
Cuban: We can talk Facebook and a lot of those other things, but in terms of startups …
Case: The talent issue, though, does get more difficult as these companies do scale. They’re going from 10 people to 50 people or 100 people …
Cuban: But that’s the same for any type of company.
Case: You’re going to 1,000 people or 2,000 people, it is an issue, which is why you have to slow the brain drain and create this boomerang of talent. But what Mark is saying around this domain expertise, that builds on my third wave comments, is incredibly important. Again, this is where Silicon Valley might get trapped in its own dogma. The belief, as you know, in Silicon Valley is essentially, ignorance is a competitive advantage.
Case: Naivete is a competitive advantage.
Case: Examples like PayPal. It’s famously said, the reason they were successful is they knew nothing about the credit card industry and therefore brought fresh insights that led to PayPal. That is true. I grant them that.
Case: But knowing nothing about health care is not going to give you the partnerships that you need.
Case: Not going to give you … being able to deal with some of the regulatory issues. You actually do need to know something about health care. You actually do need to know …
I had a Silicon Valley person tell me a couple years ago that building cars was trivial. And I hit them. The concept of it, I was like, it’s not trivial. No, it’s easy. Everything else is hard. And I said, no, actually manufacturing something is hard. So it was a discussion about where autonomous cars were going.
This was not Elon Musk. He does not think it’s trivial. Obviously.
Case: He definitely doesn’t think it now.
He definitely doesn’t think it now. Absolutely.
So, when you think about what you need then throughout our country to create, I want to get to social progress by the end, but to create great entrepreneurs. Now you do it on your show and it’s showbizzy kind of thing with the stuff like that, but I want to talk about what the essential elements of entrepreneurship now need to be. And what we need in this county to have, to create that through the education system, but what do you think the key parts going forward to the next year are for entrepreneurs? Because they change over time.
Cuban: I think we need to start educating … the reason I do Shark Tank, it sends the message that if someone walking on the stage can do it, you can be anywhere and do the same thing. Being an entrepreneur is just taking a step, having that idea, having that willingness and taking the next step and just doing it. It’s just a matter of encouraging it. It’s not like it’s some special god-given talent that entrepreneurs have.
Well, they sell it like that. There’s an ethos around it, that they’re special in some fashion.
Cuban: Yeah, maybe once you get there, some people like to brag and talk that way, but we all, that have kids, when my 9-year-old comes back and sells a little bracelet that he made or my daughter puts something together and sells it, or someone has a lemonade stand, yes. What special talent is that?
Cuban: It’s just a parent encouraging or letting people know. Now, when we say entrepreneurship is dying, socialism is coming, yada, yada, yada. I mean, that’s self-defeating.
Case: But Shark Tank, I think, has been terrific in educating people about what startups are and entrepreneurship is. When I was growing up, those were not common concepts. Even when I graduated from college, it wasn’t like a startup ecosystem. There wasn’t much venture capital, certainly not backing 21-year-olds. So, just creating that sense of possibility is super important.
But going back to your question around how we kind of train them. K12 is obviously broken and one of the areas we need to focus on is the skills for the future, for the jobs of the future. Some of that, coding is important for people who have the aptitude, but not everybody should be a coder. The other one, the other C’s, I think, will define this third wave: Creativity, collaboration, communication skills. Those things are super important and are going to be the difference between make or break.
Cuban: You just have to be good. In an AI world, you have to be knowledgeable about something, right?
Some specific thing. Like ag tech or …
Cuban: You have to have some domain knowledge, because the whole idea of building a neural network is identifying what’s going to feed what, right? What’s the outcome that you want? And knowing what is right and what it wrong and where biases are and being able to test for it.
Cuban: It’s not the programmers, because AI is going to … 20 years from now, if you are a coder, you might be out of a job.
Cuban: Right? Because it’s just math and so, whatever we’re defining the AI to do, someone’s got to know the topic. If you’re doing an AI to emulate Shakespeare, somebody better know Shakespeare.
Cuban: And that is a key component. So I think a liberal arts major is just as important in the future as a coding major.
Cuban: Now the coding major who graduates this year probably has better short-term opportunity than the liberal arts major that’s a Shakespeare expert, but long term, it’s like people who learned Cobol or Fortran and thought that was the future and they were going to be covered forever.
Cuban: The value’s going to diminish over time.
So how do you bring that into the educational system? Because a lot of it has been focused on code, like let’s code, let’s code. And I’ve always thought that’s going to be replaced, like eventually, like you were saying.
Cuban: So go to markcubanai.org.
Cuban: Literally, we did for some disadvantaged schools in Dallas, Microsoft and I and a couple other groups, we got together and started teaching kids, using spreadsheets, how to do machine learning. And how easy it is so, here’s the set of data and if flowers all have this certain identifiable aspects, what’s the probability of the next type of flower going to be? And it’s easy to learn.
Cuban: Somebody’s just got to do it. And we’re not alone. Where I grew up in Pittsburgh, there’s Montour High School …
Cuban: That is doing the same type of things. It’s like, when we were getting started, PCs were so hard. Getting on the network, you had to have a TCPI client. A modem. It was so hard. AI’s going to be second nature going forward, but if you make it comfortable for people now, that’s where the innovation and the entrepreneurs come from because they see things that are difficult to other people and they think it’s second nature, just like apps. Apps used to be a big deal.
Cuban: Now, no one even thinks about them.
Is there enough push by the government to push these things? So, the government was a partner in this for many years, this idea, or maybe they weren’t. How do you …
Case: No, I think there’ve been a number of things that … President Obama asked me to chair something called Start Up America eight or nine years ago, and President Trump talked about it earlier today. I was a big fan and still am of opportunity zones that create incentives to get more capital, more people in more places.
So there is a role at the federal government, obviously there’s a role at the state and local government to kind of set the table, set the stage. But, ultimately, it comes down to the entrepreneurs. It comes down to entrepreneurs with ideas. We just collectively need to make sure we’re lifting up entrepreneurs everywhere. Funding entrepreneurs everywhere and helping to scale these companies.
Cuban: But the biggest issue for entrepreneurs, for capitalists, for those of us that are successful is, if someone is only going to be paid by the hour, they’re only going to be paid by the hour and they’re always going to fall behind, and income distribution is … disparity’s going to get wider and wider. We as entrepreneurs have got to make a point to give stock to everybody that works for us. Period. End of story. No exceptions, because that’s the only way people are going to get any type of equity appreciation.
Part two to that, it’s our responsibility, right? Capitalism isn’t bad. It’s when capitalists don’t pay attention. It’s like running a business. Our country is a lot like running a business. Some people might not like to say that, but you can’t just look at the short term in the immediate aspect. You’ve got to look at the long term, and if we don’t start recognizing that, the more disadvantaged people become, the greater the disparity. We’re at risk at social unrest because when social unrest, you get a Ferguson. Ask what happened to the businesses in Ferguson, right?
Cuban: They got torched, right? And the greater the disparity, the more people rebel. And so, it’s our responsibility. And what I try to do with my Shark Tank companies is in terms of diversity, here’s why it makes sense. Here’s why you hire people of color. They do things and understand and have a perspective you don’t have. Here’s why you want all your employees to have stock.
Why is that so difficult, in terms of shares? Uber is going public. The drivers are striking at Uber and Lyft today because they don’t have pieces of it. Now, I know it’s complex. I’ve heard the speeches from both CEOs on why they can’t …
Cuban: It’s not complex.
Case: At AOL, every employee had stock.
For example, the drivers. Some are part-time. Some are not part-time. Some are …
Case: It’s trickier with a workforce like that.
With a workforce like that.
Case: That’s true.
Would that be something you would say, like drivers who contributed to Uber and Lyft for …
Cuban: I mean, if it was my company? For sure, right? Scooter said the same thing earlier. Abso-fucking-lutely. Right? If it was up to me. If all your employees didn’t have stock, all your capital gains from your stocks would be taxed as regular income. If all your employees had … thank you, my one person, especially in this crowd. But …
“We want to keep all the money!”
Cuban: Are we going to carried interest now …
Case: Like a rebellion here.
Exactly. I do agree with you. I was saying something like that to somebody in Silicon Valley, you can either start paying everyone and getting people more equal in pay or you can pay to armor plate your Teslas. That’s …
Cuban: Well, that’s exactly right. Or pay everybody in cash and let them buy stock, if that’s what they want to do, right?
Cuban: Because then the disparity would decline as well.
Case: But there’s another piece to this, now that we’re on the topic. Some other data points, just to make sure that everybody knows it. I mentioned the 75 percent of venture capital going to three states. Last year in this country, over 90 percent of venture capital went to men. Less than 10 percent went to women.
Case: Last year, less than 1 percent went to African Americans, so it’s a great entrepreneurial nation, I’m proud of it, I think it’s still the innovative, entrepreneurial country in the world, I’m proud of that. But the data does say, it does matter where you live. It does matter what you look like. And it kind of does matter who you know. Whether you have an idea, you have a shot.
And that is not fair, but it’s also stupid for us as investors. There are a lot of great entrepreneurs, a lot of great ideas, that didn’t necessarily go to the school we went to, didn’t necessarily work for the company you worked for. How do you open up your aperture and find them in different places? And that’s why they’re going to be, create some of the biggest investment returned over the next 10, 20 years.
At the risk of being extraordinarily ironic, two tall white men, can you explain to me how we are going to get diversity?
Cuban: I can just put my money where my mouth is. I invested in a woman, Arlan Hamilton, and gave her, to start, a million dollars, and I said, “Don’t spend more than 100K in any one place, because I want you to hit as many companies as possible,” and that just got started. I invested in a woman, Ravneet [Vohra], who has a company, Wear Your Voice. If you go to … that deals with women, people of color, disadvantaged communities and just as a voice for them. If you go to markcuban.com you’ll see I have women-owned companies, or women-run companies, listed.
But why does it happen still? Why does it … It still …
Case: Because most venture capitalists will look in the rearview mirror in investing, and the people like the past. We’ve got three funds at Revolution. Revolution Growth, The Later Stage, Revolution Ventures, and this Rise of the Rest seed fund. The Rise the Rest seed fund, I think now almost 40 percent of the investments have invested in over 100 companies. Our strategy is to make initial seed investments and then double down on winners. As you’d expect, about 40 percent are women or people of color.
Last week on our Rise of the Rest tour, I mentioned some of the cities we’re in. We had five pitch competitions, 540 companies applied, 40 were selected, eight per city. We invested one in each city. Four of the five were women. So they’re obviously out there, you just have to make an effort to reach out and go to places where most people don’t go to, and reach out to communities, even in those places that aren’t always brought to the table.
Again, I think it’s the right thing to do. It’s the fair thing to do. It’s the moral thing to do. It’s also a great investment if nobody else is backing them, you have an unusual investment edge, and I think it’ll become clearer, that fact, over the coming years.
Case: Yeah, particularly as the demographics change in the country.
Case: Right? I learned a hard lesson with the Mavericks. We went through a lot of issues that I missed, and I brought in some smart people that taught me a lot, right? I had white guys trying to sell to Latino moms Mavericks tickets. That’s just dumb as fuck. Right? But I learned to bring in the population that I want … and use them that I wanted to sell to.
But they taught me more than that, right? Things that I never considered, that they were aware of, that were opportunities. It took that for me to learn. As I’m able to demonstrate by going to places that other people aren’t, like you’re saying in terms of operational opportunities and sales, then it becomes obvious. Hopefully it lifts those people up, they branch off and start on their own, and then it takes off on its own.
It’s stubborn, though. It hasn’t changed. The numbers in Silicon Valley still …
Case: Right. Silicon Valley is not the real world.
I know that. I get that, but it just doesn’t change where the money is going.
Case: No one cares about Silicon Valley anymore.
Good. Okay, good.
Cuban: So you’re going to have to move, Kara.
I’m going to have to … I have. I have, so…
Cuban: I know.
Case: Anybody here care about Silicon Valley? Hell no.
They like some of the IPOs that are coming.
Case: No, I want to be quite… I am critical sometimes of Silicon Valley. It’s awesome. It will continue to be the most innovative ecosystem in the country. There really … No, I’m serious about it. And there will continue to be great investment opportunities there. But it’s insane that essentially all venture capital is backing entrepreneurs just there. That over 50 percent is in California, but 80 percent of that is really in Northern California.
Cuban: What about angel and seed? Are you aware of just in terms of numbers for angel and seeds?
Case: It’s much broader. More more difficult. Much more difficult.
Cuban: Yeah, because I think that’s where it becomes …
So getting to that. Let’s get to finish with social progress, we only have a few minutes. Silicon Valley has gotten its head handed to it, recently, because of some of these issues around social progress, around stuff that they’ve been doing, around the bubble and everything else. How is that going to impact things and how do you look at that now? Because it could be a force for change, like we need to move this out of this group of 17 people who seemed to have messed up a few things here and there. How do you look at that? Is that … How does that happen? Does there have to be a giant Facebook-like company somewhere else? Does it have to be a lot of companies?
I had someone come up to me when I was talking about being invested in, more women. A venture capitalist came up to me in Silicon Valley and said, “You know what? There needs to be a Marcia Zuckerberg.”
I was very angry when he said that. But, my issue … the idea was, does that have to happen? The idea that there is something else, or just have to be just those …
Case: Well, it’s happening. We just don’t tell these stories. There’s a company in Wisconsin called Epic. It has 10,000 employees, started in … Essentially, owned by one woman, Judy Faulkner. It’s arguably the most important health IT company in the country, basically doing electronic medical records for almost every hospital. That’s outside of Madison, Wisconsin, and it’s a woman. It was harder for her to get going. As a result, she had to bootstrap it. As a result, she owns like 100 percent of the company and is a multi-billionaire.
How do you get more of those kind of … tell more of those stories. It’s kind of like the Hidden Figures thing. How do you get more women and people of color on the stage so they actually have a shot, and how do we collectively back them? Again, this is not … I’m not making a fundamentally moral case, I’m making an economic case. There are going to be more and more examples like that.
Cuban: You’re talking about storytelling. You’re talking storytelling, as well.
Cuban: I mean, literally, when I say ignore Silicon Valley, yes. Right? Because to Steve’s point, with Epic and Elders, they’re out there. But we get so caught up in telling their story, as opposed to the rest of the country’s story. Now, part of that should be the administration. They need to be celebrating entrepreneurship. They need to be out there telling those stories so that kids hear them. They get inspired. Girls hear them.
You know, I tell my two girls — who are 12 and 15 — girls who are in STEM and math and science and business rule the world. I mean, every opportunity is there for them, but we have to start telling those stories. We really, truly live in a storytelling country now. Everything is driven by stories, and if we don’t tell them then people don’t have something to connect to.
All right. Let’s finish up by telling what you think the most interesting areas are, especially around … Because a lot of the stuff that’s coming does have social progress elements.
Transportation changing? Could change climate change.
Investments in climate change technology. Investments in health care. Investments in food. There’s all kinds of stuff coming down the pike. Robotics, automation. They’re all big social questions.
Every one of them. It seems like every major trend coming up has … It’s not a dating app anymore.
Case: Of course. No, I think that’s exciting, exhilarating in a lot of ways, but also a little bit scary. The way I look at this is all those different technologies — AI, robotics, driverless trucks, etc. — there’s a lot of risk of job loss. I would say there’s a certainty of job loss. Some things we can’t envision will create lots of jobs that we presently can’t even imagine, but there will be some job loss.
But this is not a new idea. Two hundred years ago, over 90 percent of us worked on farms. Now it’s less than 2 percent. Why? Because technology made it easier to grow more food with fewer people. That’s a good thing! Thankfully, we followed that agricultural revolution with an industrial revolution, retrained people from working on farms to working in factories, and a lot of people got jobs…
Where are those, because …
Case: But we now need to …
This is happening much faster, one.
And two, there were … There was enormous social unrest.
Case: Correct. And there will be here.
There was enormous problems, and it’s been amplified today by social media, by …
Cuban: It doesn’t have to be, right? I think every major company, if you look at employment … Obviously, employment’s much higher, but unemployment’s much lower. Every major company has fewer employees yesterday than they do today, and they’ll have fewer tomorrow. They have to take responsibility for minimizing the disruption. Because if you’re a major corporation, and you’re just throwing people to the street and saying “unemployment rate’s low, go find something, you’re going to create more problems for yourself.”
I mean, look, there are going to be new mind-numbing jobs for AI. There are going to be labelers, right? Robotics will replace the mind-numbingness of an Amazon warehouse, but somebody’s going to have to label all that data, right? Because data is the key to anything you’re doing with AI. That will be the new mind-numbing jobs. But there’s other jobs. All that domain expertise within the government, labeling things, because as we get to government as a service, and there’s fewer employees in government but more people have to be responsible for maintaining and auditing algorithms, and …
Name what you think the big … Pick one, ag tech, any of them that you think is the one that you find the most interesting, if you had to pick one.
Case: It’s hard to pick one, because I think there’s a lot of interesting things. Health care, one sixth of the economy, still not very convenient, still not … certainly not affordable. Not even very accurate. M.D. Anderson says that when people come there for second opinions, 25 percent of the time, they reverse the first opinion. That’s a data problem. That’s an analysis problem. That’s a diagnosis problem. So that’s a big sector.
I do think some of the use of AI … We talk about how it’ll eliminate jobs, we backed through Rise of the Rest a company in Baltimore called Catalyte using AI to identify people who have an aptitude for coding but never knew it. According to … Like a UPS truck driver. Suddenly, they go through this thing, they get put in this coding program, and they get a job that’s paying two or three times more. That’s a use of AI to actually give people more opportunity. There are things like that that will be byproducts of it.
But the other piece … This was news to me nine, 10 years ago, when I started working on some of these things in DC, that as you look at job creation in this country, essentially all the net jobs come from startups. Young, high-growth companies. Which is surprising people. Small business accounts for tons of jobs, but as a sector, doesn’t create new jobs. Restaurant on Main Street goes out of business, gets replaced by another one, same number of jobs. Big companies, Fortune 500, some are growing like Amazon, some are declining like GE. If you add the whole sector up, it’s not creating jobs. So you’ve got to be backing startups.
If you’re only backing startups in a few places on the coast and not in the middle of the country, we shouldn’t be surprised there are a lot of people that are kind of ticked off. It’s not that they feel left behind, they kind of are being left behind. So the best way to create a more inclusive innovation economy is to back more entrepreneurs, doing more interesting things in places all across the country.
And where do you … What do you think?
Cuban: Data freedom.
Cuban: Freedom. For instance, in health care. Insurance companies silo their data. So you get people who go and get a second opinion, and it’s different than the first. You’ve got Facebook, and we talk about Facebook and all their data. If the data was opened … We don’t want it. We don’t want to limit just to Facebook. Right? We don’t want to regulate them to the position where they’re the only ones that have access to it, whether it’s Facebook, Google, Amazon, wherever. You want it open.
Now when that becomes open, that becomes its own ecosystem. Right? Then anything is possible, so as the performance of processors increase and the availability of processing power is more available, if there’s more openness of data. If we force Facebook, not to wall themselves off, but to open them, even if it’s on a one-millisecond delay, or one-hour delay, or a one day, whatever it may be — Kitty, bar the door. Because then you’re sitting at home, and somebody who can put together algorithms and do whatever, anything is possible. That’s the advantage the Chinese have over us. They take all data and they have control of all of it. You take data faster …
Let’s be clear, they’re a surveillance economy, but go ahead.
Cuban: But no, but you get the point, right?
Cuban: I’m not talking about closing it, right? But a lot people are talking about regulating Amazon and Facebook. When Elizabeth Warren talks about breaking them up, you’re talking about the most advanced AI technologists that we have, and she’s talking about diminishing them. When you talk about regulating Facebook and Amazon, you’re talking about closing down their data, walling their data to just that company. That’s horrific, right? We have to be talking about opening it up, so it’s open access, even …
What would you do? What would be your proposal? And then we got to go.
Cuban: Open it up.
Open it up?
So have regulation to force them …
Cuban: Say, you’ve got to put this into the big pot, right? Of data. And if it’s a government project, where we’re taking all this data and opening it up and making it available to everybody. Now, all of a sudden, anything is possible. When you regulate them and wall it, and just they have access to it, we lose. It’s over.
Case: And this is not, again, a new idea. Part of the growth of the internet most people don’t pay attention to was what happened with the phone companies, with Judge Green breaking them up and then essentially requiring open access so companies like AOL actually could be part of the network.
Cuban: Good point.
Case: If that hadn’t happened, the internet wouldn’t be what it is today.
Case: So this idea of open data makes a ton of sense. I see we’re out of time. I’d just like to … Final point, just for the investor guys. I want to make sure you’re at least thinking about this. Personally, I think I’ve made two great trades in my life, and I think Rise of the Rest is the third. The first, like Mark was … Believing in the idea of the internet when nobody did.
Case: The second was merging AOL and Time Warner. What turned out to be the big … We’d gone from a market capital of $70 million when we went public in 1992 to $160 billion seven years later, and it turned out to be a good time to do it. Betting on these entrepreneurs …
Not everyone agrees with you on that one.
Case: I know, it didn’t work out. Obviously I’m super mad about how it worked out. But it was the right thing to do for our shareholders. This Rise of the Rest, I know there’s some skepticism, I’m sure people are kind of rolling their eyes, “Silicon Valley’s awesome, and that’s where all the great entrepreneurs are, that’s where all the great returns are going to be and will continue that way.”
I’m quite confident that over the coming years, this Rise of the Rest phenomenon will take off. I would just urge you to pay attention, because I think it’s going to create some of the great investment opportunities around, and most people are not. Most people are just looking in the rearview mirror and are doing more of what they have done in the past, and this time, it will be different.
Cuban: I’ll tell you, there’s a great entrepreneur in your neighborhood, I would find a great entrepreneurs that hopefully doesn’t look like you, and give them a chance. Because it doesn’t cost a lot anymore.
Cuban: And with your mentorship or help, that’s where great things happen.
Gosh, you almost sound like a socialist. Anyway …
Cuban: Hell no!
Mark Cuban, Steve Case. Thank you.
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