Dylan Ratigan Show | January 18, 2012
>>> we are in the middle of a crisis.
>> they're just not creating jobs.
>> the american middle class got nowhere in the decade of the 2000s .
>> look at the jobs. okay? we can't afford to joke around anymore.
>> the problem is larger than the proposals.
>> that could mean an additional 1.9 million jobs.
>> it would create 100,000 new jobs here in the united states .
>> it will add 11.5 million new jobs for americans.
>> 30 million jobs. that's what we truly need. it's a big number. but america is where big ideas are born. from the inventions of thomas edison to the first airplane flight of the wright brothers to the ottawa assembly line of henry ford america became the industrial giant and into the digital age with the microsofting of bill gates and the apple of his eye steve jobs .
>> there it is right there. what's made america the engine that runs the world is innovation. so we begin our 30 million jobs tour from the 21st century 's cradle of innovation, silicon valley , and the show for wednesday, january 18th , starts right now. good afternoon to you. welcome to san jose , california. nice to see you. we are on top of the hotel valencia overlooking silicon valley , a true, literal cradle of innovation where problems, people, and capital, money are coming together every single day to solve problems. you know what that means. you solve a problem you create a job. in this case lots of them. this is the high tech home to companies like apple, cisco, hp, google, ebay, oracle. the list goes on. but the cradles of innovation like this are not limited to the technology sector. we can create them in health, energy, education as well. more on that a bit later in the show but for the unique synthesis of education and investment, ideas and action , is the reason why we chose this location to start our big 30 million jobs tour. 30 million you ask? that is the number we need right now to create enough opportunity for full and complete u.s. employment. we have plenty of problems. that would seem to be plenty of jobs. to get there however will require that the pillers of industry do their part along with the cradles of innovation. david will be joining us a little later in the show to describe that to us coming up. but we now introduce you to two folks who know an awful lot about putting money, people, and ideas together to put americans to work. ted as managing partner at a world leading venture capital firm here in silicon veil eighalley that has supported hundreds of entrepreneurs from amazon to google to genentech and garth from stanford university 's business school . together stanford university and the investment community in this area have created an ecosystem where ideas become profitable, job creating businesses. a pleasure to have both of you here. stanford has taken a unique point of view relative to a relationship with an investor like ted. you go out of your way to recruit people like ted and others to look at the ideas coming out of your university. why has stanford assumed that position?
>> well, you're exactly right. it's because we're not just about creating the innovations but in helping our students and faculty take those ideas and take those innovations, commercializing them through an innovation chain that takes them from the university into the valley and beyond. and in order to do that, those ideas have to come under scrutiny from investors, from other entrepreneurs, and they need the support and financial capital of course to get them launched on that journey.
>> would kleiner perkins be what it is if you didn't have an educational system and a culture like that?
>> silicon valley wouldn't be what it is without having stanford in its back yard. and the relationships that are forged and the realization by stanford that their teachers are not just educators but they themselves are entrepreneurs and to embrace that, to encourage them to spend the time with the venture capitalists in other, and their ph.d students and to spin companies out. it's what's made this valley come alive.
>> and it's something that at least on its surface would seem to be possible for other universities to do this. in other words, it is -- there is no reason the entire uc system couldn't do this, the entire sunni system back east. the state colleges and other prestigious universities. am i naive?
>> no, i don't think you are. i think it as matter of culture and approach and the kinds of approach to innovation and support for commercialization that has become part of the lifeblood of stanford university i think is in fact rem basketball at other places.
>> let's talk about the 30 million jobs number. obviously nobody has a linear plan. i can't imagine someone is going to show up and say if we do ten things we'll have 30 million jobs. why is the environment so important? why is it the focus not on the list of what we're going to do, ted, but the actual environment you're able to work in, really the determining factor?
>> innovation has been one of the core drivers of the united states ' economic system for decades and decades. and one of the reasons is it's driven by the desire to take risk. you have to be a risk taker. you cannot be in an environment and culture that is inherently conservative. most of what we do fails. most --
>> you're one of the best in the world.
>> that's okay. it is okay to fail. it's actually applauded to fail. we call that scar tissue . and the more scar tissue you have the better an entrepreneur you're going to be. and you have to be in a supportive environment that supports that. i'm talking about a banking environment that will lend you money knowing it's on a wing and a prayer and they may not get paid back. educational environment that wants its students to maybe even take a sabatical from school for a little bit of time to go start something out. encourage this risk taking. it is hard to just snap your fingers and just make that happen in texas or new york or seattle or wherever. it happens but in smaller pockets.
>> how influential is policy? private policy and public policy to determining the appetite for risk? what you just said was if you don't have an appetite for risk you won't have a cradle of innovation.
>> policy matters a lot. and there's certainly a lot of things going on in congress that have inhibited companies from wanting to go public. that's another case of inhibiting risk taking. going public is a scary thing. well, if we put in a bunch of policy and costs that makes it harder the fewer companies we have going public the fewer jobs will be created. there is a direct correlation to that. policy matters because you want to encourage risk. if you start to close the gap between long-term capital gains let's say and income tax and make the policy, why spend a large amount of money with high risk over five to ten years if you're not incented to do so? we certainly know we are a culture of incentives as well. so washington matters. policy matters. and keeping an eye on do we still focus on encouraging innovation, encouraging risk taking versus inhibiting it is going to matter a lot.
>> the critical thing there when you look at it is ultimately, garth , an appetite to have the ruthlessness to sort through these things but also the compassion to understand that there is going to be a high failure rate but it is in those failures that lessons are learned, information is revealed, and new things emerge. i get the sense a lot in this country right now that we have an aversion to failure. we would rather be mediocre than fail. am i wrong in that perception? does policy influence that?
>> policy does. and public attitude does. we're visited on a routine basis from governments in other areas that want to talk about how do you replicate this? and one of the things that i think is hardest to understand is what it takes to have a positive attitude toward risk taking and therefore the tolerance that comes or the lack of stigma from failure. failure has no stigma in the valley. there are plenty of stories of folks like ted who have had an entrepreneur fail, get up, dust himself or herself off, and then they funded them again in a second company because they're stronger and they've learned lessons. that's counterintuitive in a lot of other parts of the world.
>> so describe that a little bit. what is it about -- obviously you're a business. you want ultimately to get enough returns from your investments so you can continue to invest. how is it that you reconcile a willingness to indulge the failures, and invest with them again?
>> if venture capitalists made money on every investment it means they're not pushing the envelope and taking enough risk. you are looking for entrepreneurs that are look forgue something disruptive in the market place that no one has ever tried before. by definition no one has ever done it before. how can it all work? it can't possibly all work. a lot of it fails. and that's okay. what you're looking for is that spark, the inner desire, the mission inside these entrepreneurs that they're willing to walk through the walls to try as hard as they possibly can to see if they can make it work. and, you know what? rarely do these businesses just kind of go up and to the right. it's not usually a straight line . usually a journey. how you navigate that journey will determine whether you'll end up with a successful company in the end. they're not all huge or googles. they're not all facebooks but that's okay. they can generate jobs.
>> and you learn no matter what. regardless of the outcome there is an author i've been enjoying right now who we've had on the show and his whole premise is how matters. it's how not how much. i'd love to hear just a little bit more from you garth on just the importance of how and how it's actually the answer not just the question but the way you work together, how you work together is also the answer.
>> i think often the greatest learning actually comes from the failures. i think when you're successful, maybe you don't think as hard about the how. you don't think as hard about what is it that connected the dots that made you successful. when you fail, you'll think hard about it for a long time. because you have the scars from that. so one of the reasons that we invite the entrepreneurship community and the venture community in to stanford all the time is that they have more of that patent recognition. they have more data on which they can connect the dots that will help an aspiring entrepreneur and give him the confidence. sometimes the entrepreneur will say i want to go the modest route as opposed to go for the home run . and somebody who has seen a lot of cases will give them the confidence to really take that step.
>> something else i want to stress about stanford if i may.
>> that they do better than any university in the entire country which is around what we call the technology transfer which was an invention takes place inside of the stanford labs. they use technology transfer meaning to put it into a startup company to be financed and create something new as a strategic weapon versus as purely a money making venture or as a negative. hey, that technology is leaving our university. many other universities just hold on to it and they make it hard. stanford 's case, they make it actually easy. let's get that and see if we can get it applied. let's see if we can make a company out of it. if so the world will be a better place . that is a different viewpoint than any place i've ever seen.
>> i think that is exactly right. much more frequently and effectively the idea leaves the university with a person. so often it is the student who had the idea in the lab, maybe even the faculty member whose lab it was in. and helping those people who have the idea and therefore know more about the innovation and more about the technology than anybody else on the planet. giving them the resources and the assistance to take that into a new innovation.
>> wonderful. and it really speaks to a confidence that there is an expectation and a certainty that more new ideas will continue to come along than it is that ideas are not, there is not just one idea. there is a constant flow we all live in our own brains and know that. wonderful conversations. thank you both for your time today. again, thank you so much. thank you for teaching us today.