Tech Deciphered

37 – When to talk and when to keep your mouth shut… we sort of predicted the FTX debacle. Really!

29 Nov 2022

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We sort of predicted the FTX and SBF debacle… seriously! How much are CEOs’ political and socio-economic views welcome publicly? How about employees’? How much is too much? In this episode of season 3 of Tech Deciphered, we talk about founders & CEOs activism, employee activism and share our tips on when to talk and when to just… keep your mouth shut. Navigation: Intro (01:34) Section 1: Founders & CEOs activism (02:13) Section 2: M&A changes everything (20:09) Section 3: Employee activism (27:38) Section 4: Bring it all together (39:24) Conclusion (44:57) Our co-hosts: Bertrand Schmitt, Entrepreneur in Residence at Red River West, co-founder of App Annie / Data.ai, business angel, advisor to startups and VC funds, @bschmitt Nuno Goncalves Pedro, Investor, Managing Partner, Founder at Chamaeleon, @ngpedro Our show: Tech DECIPHERED brings you the Entrepreneur and Investor views on Big Tech, VC and Start-up news, opinion pieces and research. We decipher their meaning, and add inside knowledge and context. Being nerds, we also discuss the latest gadgets and pop culture news Subscribe To Our Podcast Intro (01:34) Nuno Goncalves Pedro Welcome to Episode 37 of Tech Deciphered. In this episode, we will address CEO and employee activism. How much is too much? We will touch upon a few CEO-activism events that are recent. We will also talk about how M&A changes everything. Nuno Goncalves Pedro We will then address employee activism, which has become more exacerbated over the last three years. Finally, we’ll bring it all together. How much is too much? Should you be in the media all the time? How much should your PR department control of what you say? How much should you listen to your employees? How much, as an employee, should you actually speak out? Section 1: Founders & CEOs activism (02:13) Bertrand Schmitt I think Nuno that’s a timely topic and it’s something that, for the good or for the worse, has been changing, maybe quite dramatically, if you compare the last decade versus how businesses used to be run before. I guess, of course, it’s thanks to change in technologies. You have your cell phone always available. You can talk to people. You can record, you can tweet, you can do video. Bertrand Schmitt I guess step by step, CEOs, employees discovers that they actually could have more of a voice, and there might be less need for a middleman to express your opinion. As a result, you communicate more easily. If you stop communicating publicly, challenges can start to increase. It’s a brand-new world out there. Nuno Goncalves Pedro As Spiderman would say, or actually his uncle, “With great power comes great responsibility.” Unfortunately, sometimes, people forget the responsibility piece and maybe they tweet at the wrong times of the day, or they say the wrong things without really checking themselves up. Part of it we’ll discuss today. Sometimes when you share on social media, obviously, it lacks context, it’s misinterpreted, or sometimes it’s just plainly wrong, which is also the case. Nuno Goncalves Pedro Shall we start? How much should one have an opinion on specific topics, geopolitical topics that are important socially? How much should a CEO or founder have an opinion on? Maybe we’ll talk about a few examples. Bertrand Schmitt I think traditionally, the approach was, if you’re in the economic sphere, you are out of the public sphere, you are out of the political sphere, and you are very careful and measured about how you communicate. Usually, you have a big PR department, all focused on supporting you and the message you are supposed to convey, and you certainly don’t go off the cuff. Bertrand Schmitt Obviously, things have changed since the past 10 years. It’s not easy for a CEO to make that decision to do more, but sometimes you have no choice. I think some interesting examples, a few years back, maybe actually with COVID, we saw some tension about, basically, should you be focused as a company on your mission first at the extent of anything else? Bertrand Schmitt We have seen quite a bit happening in that sphere. Maybe two companies have, in some ways, best showcased to extremes. On one side, you have the Salesforce of the world who is definitely trying to take every topic out there that you can find and trying to push the company itself and its employees to become “good citizens” and to influence the public sphere. We can remember, for instance, how Salesforce was pushing for new taxation scheme in San Francisco, hopefully, to help some people. Nuno Goncalves Pedro Others beyond themselves, because I do think that they got at some point some tax break as a company in SF and that may have rippled to others. Bertrand Schmitt Some would say that it was a clever ploy to actually make it more painful for other companies, especially the competitors to operate in San Francisco. It depends how you position it. It was clearly positioned as a of being a good citizen by Salesforce, but not everyone would agree. Bertrand Schmitt But on the other end of the spectrum, we have a company like Coinbase, where, basically, there was a lot of internal pushback for more discussion internally around what’s happening in public policy, what’s happening in the US. At some point, the CEOs say, “Oh, this is good and nice.” Bertrand Schmitt But ultimately, we are mission-focused company, and this is not our problem. Our problem is, as employees, to focus our efforts and energy on our mission. If we believe our mission is important, that should help you believe you are focused on the right thing, and there is no need to do anything else, at least, during your work hours. Of course, obviously, what you do on your personal time and your personal name is a different story. Bertrand Schmitt But that should be enough. We believe that it’s creating too much risk of division of the company to have this constant debate about what should be done from a political perspective. That’s not productive or conducing of a good well-run company that wants to be focused on its mission. Bertrand Schmitt I think that, obviously, Coinbase, as well as many companies, have a very important deep mission, and that could be seen as a very fair statement. They think these two companies, Salesforce, Coinbase are really the two extreme of that positioning. Should you be involved in politics, at least internally or should you be much less? Nuno Goncalves Pedro It’s interesting because if we go back in time, once upon a time, there was a world where, as you said, there were PR departments, comms directors that were in full control of their CEOs, there were message houses that were followed, media training that was held regularly practice, people talked like really politicians. There was a separation between internal communications and external communications, or internal communications was, by nature, more open, although also fleshed out but more open. Nuno Goncalves Pedro External communications was a lot more focused on what key messages we want to give the market, how will that affect our stock price. Then all of a sudden, all changed. It changed with social media. It changed with the leaking of internal memos. It changed with leaking of town halls that were videotaped and recorded. Nuno Goncalves Pedro All of a sudden, we’ve gone into a world, where, on the one hand, and we’ll talk about employees later on, employees are sharing stuff that maybe they shouldn’t be about what’s going on in the company; and CEOs, in some ways, are acting in arenas that maybe they should be a bit more thoughtful about. The extreme example obviously is our great friend, Elon Musk. Everything that he does seems to be a meme. Nuno Goncalves Pedro We’ve talked about him in the past. Amazing one-man marketing machine. I don’t think it’s one man. He has people working with him, but definitely he’s the meme machine. Not mean, but meme machine. Everything got a bit fuzzy. Nuno Goncalves Pedro The distinction between internal and external is not there anymore. People say what’s going on, their minds. I share my perspectives on what’s happening in the market might not be aligned with my board of directors, might not be aligned with most of my company, actually. It doesn’t matter. Nuno Goncalves Pedro We’ve gone from a world in which people are saying, “You know what? We are a company. We have something we want to do, your logic of mission driven. We are of our own value system, and this is why we abide by the external stuff is the external stuff.” Nuno Goncalves Pedro Then we have the other part of the world, where it’s just like, everything’s open. I’ll just do whatever I need to do to get my company out there to manifest my perspectives on what’s happening in the market. I need to be very aggressive and active about it.” Nuno Goncalves Pedro In some ways, actually market Salesforce is a little bit more to the middle than to the extreme. Maybe Elon is the extreme example here. Marc is very thoughtful on how Salesforce will show up. Obviously, he has his principles. There’s a value system that they abide by. Nuno Goncalves Pedro Maybe Elon is at the other extreme, which is like, “I have perspectives on everything. Tesla is not the only company I’m running. This is my perspective right now.” Nuno Goncalves Pedro I think that’s a little bit too much. Honestly, at that point in time, you have people that are a little bit bigger than life, in some ways. I’m not saying that what Elon is doing is not creating value for his companies. It’s actually, quite the opposite, probably he’s creating a lot of value for his companies. Nuno Goncalves Pedro But it’s incredibly risky. You’re going to unavoidably step on people’s toes that you shouldn’t. You’re going to be operating in an arena that you’re probably not well-equipped to participate. Nuno Goncalves Pedro I think, for me, that’s the biggest objection I have is when I hear a CEO opining on something that’s geopolitical in nature, that is a social logic or social environment piece, where, in all honesty, I’m not sure why that person is better equipped to have an opinion in it than experts in the field or others. Nuno Goncalves Pedro They can say, “Well, I’ve talked to experts. It’s great hearsay.” But it’s like, “Why are we listening from you on this specific topic?” Again, this is not a stab at Elon, there’s many others that do it. But I’m like, “Why do we listen to you?” Nuno Goncalves Pedro That’s the other side of the fence. The other side of the fence is we, the consumers, we, the people that consume social media and that consume what is being put out there, how much are we aware that some of this is just generally noise, that actually, in all honesty, it shouldn’t manifest itself? It shouldn’t really be that important. It doesn’t really frame something that is fact-based. It’s just an opinion of a guy or a girl. Okay, we’ll listen to it because it’s their opinion. But that’s about it. Bertrand Schmitt I think at the same time, interestingly enough, when you think about Elon Musk counts out definitely, multiple sides to this coin, Dogecoin, should I say. But on one side, you could argue that he has been successful with Tesla and SpaceX, thanks to his visibility in this media, thanks to his public visibility, and that helped him to decrease the need for marketing. Bertrand Schmitt As a reminder, that’s one of the few companies today, Tesla. Without the PR department. There is no more PR department. It was removed by Elon himself. That’s also the question. Is he talking as a spokesperson of Tesla or SpaceX or is he just Elon Musk, who happens to be also the CEO of Tesla and SpaceX. Bertrand Schmitt That’s part of the question, because definitely, it has been a big win for him in terms of followership. I mean, 100 million plus people following him on Twitter. That’s just huge and game changer. Bertrand Schmitt But to put some of this in perspective, it’s coming, for instance, as simply as real all legal risks. When you are smoking pot on Joe Rogan podcast, when you are claiming to have an offer to bring Tesla back to being a private company, when you are talking about your perspective on the war in Ukraine, for instance, a few days after that, we had some apparently rumors that he’s going to get investigated, there is some real downside that might be significant and non-trivial for Elon. Bertrand Schmitt At the same time, because you are CEO, why should you stop having opinions and keeping them private? It can be tough. Sometimes you could argue that for a lot of companies or startups, having a very visible CEO can help dramatically your marketing. Nuno Goncalves Pedro I think there should be a line, and that line should be enforced by regulators. In the US, FTC is protecting consumers. It needs to get involved if it believes that there are things that are being done that are nefarious to consumers done by a specific CEO. Nuno Goncalves Pedro Be it who maybe be. We’re not just talking about Elon. It might be another person altogether. We’ve seen celebrities getting in trouble recently because of the whole crypto craze. Nuno Goncalves Pedro I think that line should be there. The SEC is there to defend a different line, a line around propping up the value of stock, how securities are being actually pushed into the market. Those regulations should be actually abided by. We are not in the far West. There are rules, and they need to abide by. Nuno Goncalves Pedro On the other hand, and I think you and I both agree on this, there are people that are doing well, at least in our opinion, at sharing their opinions without crossing some of these lines. Nuno Goncalves Pedro When Aaron Levie at Box is an example that we both discussed at length. You like him; I like him as well. I don’t know if he has a PR department or an agency working with him, but the way he manifests his opinions are at times funny. They are clear, but they are not, I think, breaking any laws or going across any boundaries. Maybe tomorrow, we’ll realize that he has been taken to court by someone. But anyway. Nuno Goncalves Pedro But that type of tonality, where you still have an opinion. You’re Aaron Levie. You’re the CEO and founder of Box. You have a view on what’s going on in the world. You share that. But you’re, at that point, where I am not crossing the line on influencing consumers to do certain things, on popping up the value of my stock, et cetera, et cetera. There is a way to do that properly. Nuno Goncalves Pedro Honestly, if anything, and this is my manifestation, and again, I’m not speaking about anyone specifically, I feel the SEC and the FTC have been very nice in many circumstances towards some of these manifestations. The crypto craze, in particular, was silly. People propping up tokens and stuff that had absolutely no vetting on. There was no due diligence. Nuno Goncalves Pedro This stuff lost people money. What happens? Who’s going to defend consumers. Who’s going to be the voice saying, this is not okay? It can’t be the platforms themselves. It can’t be Twitter itself. It can’t be the platforms themselves by themselves. Bertrand Schmitt I don’t think it should be the platform. I agree with you. I don’t think it should be the platforms. Nuno Goncalves Pedro I think the platforms have a certain role in terms of moderating content, in terms of the activities that are done within the platform, in terms of what is wildly accepted or unaccepted. But they are not the sensors. They are not the guys who define the line. The line should be defined by someone that is put there to actually define the line, and those are regulators. They are the agencies that regulate us, that protect consumers, that protect us in general. Bertrand Schmitt To follow up on what you say, and there is a lot to go through, I agree mostly with you. Aaron Levie, CEO of Box, definitely a great Twitter figure. From what I understand, he’s definitely doing it by himself, and his marketing department doesn’t know what he’s tweeting in advance. Bertrand Schmitt But I think he definitely has been careful and has listened to his lawyers and communication professionals in terms of what he can or should not tweet about. He has probably found the right balance. He’s team independent from his company. Sometimes his marketing team might have to do some work to follow up, but at the same time, he’s never crossing any lines at least as far as I know. Bertrand Schmitt If we take on some of your points, we need the regulators. I agree. In general, I will say it’s when we go into specifics that I might agree less in the sense of, we see too often regulators themselves crossing the line and going way beyond that charter, and it’s happening on a regular basis. I think it’s a huge problem, the overreach of regulators. Bertrand Schmitt Yes, there need to be some level of regulations, but it has to be fair, applied to everyone the same way, not just the people you don’t like at some point. It also should not be beyond the powers of a regulator. There are definitely questions about who should be regulating crypto. Bertrand Schmitt It’s nice to see the SEC trying to take that over. It’s not clear it’s in their charter. Once it is, I’m fine with that. But obviously, crypto is a risky space. I think there are many things in crypto that went wrong. If the SEC wanted to do the right things, they had many opportunities. Bertrand Schmitt Recently, there’s been a lot of stories about how some of the most senior staff has been leaving in rebellion to what’s happening there. I think it’s not as easy as there are laws and regulators. Sometimes laws might be wrong, and the regulator might not follow the laws themselves, or arbitrally, picks a fight. Bertrand Schmitt But overall, like you, I believe that you want to be careful. If you’re a public figure, that’s fine, but it can be challenging. It can be a lot of work to have to retract some statements. Finding the right balance is important. Bertrand Schmitt That’s true that, historically, if you look at the public sphere by being more aggressive, by being more extreme, that might be a way to get more followership faster, and that might tempt people. But that might be dangerous down the line. Nuno Goncalves Pedro Yeah, absolutely the case. Sometimes it gets more serious. We have Jamie Dimon thing with JPMorgan and the hearings in front of Congress. Do you want to talk a little bit about? Bertrand Schmitt Yeah, that’s an interesting one. Because someone, as a CEO, whether you like it or not, you are put under the spotlight. I think Jamie is someone who is probably going for the spotlight. But in that situation, sometimes you are forced to. Bertrand Schmitt Quite recently, there was hearing in front of Congress, where some questions were asked of CEOs. At some point, you are forced to take a side. You cannot always be in the middle trying to please everyone. In some ways, that might be what you have to do, as CEO, to please everyone. Bertrand Schmitt But up to a point, there was this interesting statement from him answering some questions about stopping oil and gas production or investment for the bank. Some representatives were asking them to divest investment. He put a strong statement, which I believe, was to his honor, that putting brakes on oil and gas production would be a road to hell for America. That was a very strong statement, very typical of a Wall Street CEO. Bertrand Schmitt But I think, at some point, you also want to put a line in the scene. Because at some point, if you keep agree on some things, you’re just going to be bad business and that might be very far from what you believe yourself. Nuno Goncalves Pedro Yes, and ultimately, you have to stand for something. Bertrand Schmitt Exactly. Nuno Goncalves Pedro The wishy-washiness that we see sometimes in politics, unfortunately, actually, doesn’t work as well in some cases in the corporate world- Bertrand Schmitt Up to a point. Nuno Goncalves Pedro -certainly, when it comes to managing a company, for example. We know there’s wishy-washiness as well in managing companies. But the point I’m trying to make is there is in effect that is very strong in that wishy-washiness, at times, if you are the CEO of a company, for example. You say, this day, once, the other day, whatever, actually the market, if you’re a public company, could crash you, and could destroy you. You just said, three months ago your strategy is X, now it’s Y, and what happened? Nuno Goncalves Pedro Again, I know that sometimes some of these argumentations are less related to the core of the company. But in the case of Jamie, obviously, for example, there was a lot of, not just traits put into question, but also later on, he had a very public view on crypto. I think part of it was warranted, which was this notion that crypto and Web3 was, in some ways, there was a lot of noise in it. There was a lot of things in it that were not proper, that weren’t right. Nuno Goncalves Pedro He may have manifested himself in the wrong way. He had to backtrack some of his comments later on as his own bank and the company that he leads has had to go into it as well. But here is a case of, honestly, there are effects on your business. Those effects on your business need to be taken into account and need to be put forward in a strong way, maybe slightly changing tack. Section 2: M&A changes everything (20:09) Nuno Goncalves Pedro Everything is great if you’re the CEO and if you’re the founder of the company until you’re acquired. Then when you’re acquired someone else owns you. Shockingly enough, although you might be a really large acquisition and you might be quite a big deal, the runner is a different runner. Nuno Goncalves Pedro We had this controversy, obviously, with WhatsApp and Facebook. Brian Acton, in particular, one of the co-founders of WhatsApp, left early and left a bunch of money at the table. I think was $800 million or something that he didn’t really vest on his earnout or that he didn’t get from his earnout, but a significant amount of money, and then very publicly came out and tweeted for delete Facebook, funded the start of the Signal Foundation. Signal already existed. Nuno Goncalves Pedro But the foundation he was funding it himself with a bunch of money. I think I forget the exact number, but maybe 50 million, something like that. So significant. I know on this one we have slightly different views. But I think, Brian, on the one hand realized, well, what I was promise before maybe is not what’s happening now and this huge amount of money that was paid for the company that I co-founded had some strings attached in the end and maybe became disillusioned at a certain point in time. Nuno Goncalves Pedro I know you have a different view than I do on this, but I’ll let you express your view in a second. For me, the one thing we would surely agree is once you sell, you’re in the hands of someone else, and that’s life. He came out publicly. He was very aggressive about it. His co-founder, Jan Koum was not. He put money where his mouth was with Signal. Nuno Goncalves Pedro And the Signal Foundation, I have to say, I still believe it took some balls to do that and it still took balls for him to leave earlier than [inaudible 00:20:11] was done, although he still made a lot of money out of it. I understand, but M&A does change everything. Bertrand Schmitt Yes, it does change everything because suddenly you’re not in control. And sometimes it’s interesting to see people who are surprised that they sold 100% of the stock of their company. So many things don’t happen as they wanted or expected. And of course, I’m not talking about just the first three months, but first two or two years might go very well or little surprise, but can change dramatically after that. And it’s normal. Bertrand Schmitt Part of it is that companies evolve, roles evolve, strategy evolve, the environment evolve itself. I’m not sure how much we disagree because it did some interesting action in terms of investing in the Signal Foundation. The thing, for me, why it’s a bit surprising is that at some point, it’s tough to say you didn’t know who you sold to. Bertrand Schmitt It’s easy to have this new earned dollars, billions of dollars selling to Facebook, and sometimes say you don’t like how Facebook is making money. At some point, you wanted money, you got the guy who got the most money and he’s paying you. And if you really didn’t like the company, the guy just don’t sell your business. Bertrand Schmitt But at the same time, if WhatsApp, from my perspective, was never going to monetize its product, it would have never been worth much at the end of the day. The only way for this company to be worth 20 billion or more was to definitely find ways to monetize. And it’s tough to monetize to the levels we are talking about 20 billion worth. Bertrand Schmitt We thought basically doing some advertising and leveraging the brand, doing cross promotions regarding the data. Again, I respect, but at the same time, I feel that it’s easy to have remorse after selling for so much. Nuno Goncalves Pedro I agree with everything you said, and obviously, 20 billion is a lot of money to pay. Initially, it was 19 billion, I think. When the transaction, it was done was 21-point something billion. And part of it was as an earn-out, as I discussed and mentioned to Brian and Jan. So they made a lot of money. Nuno Goncalves Pedro There are things that are probably discussed within the logic of the deal of how the asset is going to be used after it’s acquired. I don’t think it’s out of the realm of possibility that when that discussion happened, that WhatsApp was seen a little bit as a community driver in terms of messaging encrypted end-to-end and not by itself, a source of monetization in and of itself, it might have been that was part of discussion. Nuno Goncalves Pedro It might have been that there was a discussion where certain stuff was promised and then lawyers go and do agreements. And that’s not in the agreements and nobody really did the final check because the amount is so big at some point. You’re like I’m not going to have an argument on that clause. I’m giving a little bit more benefit of the doubt, I think. Nuno Goncalves Pedro I’m not saying there were naive or there were naive people in here, but deals are complex. I’m sure there are things that were promised in how things were done. I’m not sure you would be as vocally aggressive as he was on the whole end-to-end encryption of WhatsApp. Nuno Goncalves Pedro And still, Facebook is mentioning this. I just saw an ad yesterday where Facebook is talking about end-to-end encryption. I was like, how is that possible? If then you serve me ads in your platforms that are just matching the conversation I just had. I’m not saying they’re lying. I’m honest to God, I’m not saying they’re lying. I don’t want to get sued. But honest to God, all of us have had this experience. Nuno Goncalves Pedro We have conversations on WhatsApp and then we get served ads that magically are not just on the same topic, sometimes literally on the same thing that we just had a conversation on, either on Instagram or Facebook. What’s going on? And so it can’t be that it’s end-to-end encrypted. I mean, just it can’t be. Nuno Goncalves Pedro Again, there are manifestations out there of what was done that lead me to believe there were things discussed in that deal that really didn’t follow through. The fact that we still see these ads leads me to believe that there’s still things that are being propagated out there that might not be totally true or kosher. But again, I’m just a guy who has 10 different messaging tools on his mobile phone. So it’s fine. Bertrand Schmitt And sticking to Facebook, we also got the situation where the CEO of Oculus sold his company to Facebook, Palmer Luckey, at some point was forced to leave Facebook, and it looks like it was connected to its political position and he was not very public about it. I think it was some stuff where I found out, I’m not saying he was ashamed of anything, but he was careful of not being public about his opinion. Bertrand Schmitt But still, it came to hit very hard and looks like he was pushed out, but definitely not his choice to leave Facebook. And it came as a surprise that even if you’re not public being a public figure means that a lot of things you are doing would be scrutinized and some stuff that others could do without anyone noticing or knowing if you are a public figure having sold your business for billion plus, suddenly might become more visible or might make you a target, whether you like it or not. Nuno Goncalves Pedro I think political views coming into the fore in an explicit way that affect the company is one thing. I think political views coming out to fore, but they don’t really necessarily affect the company much is a different thing. Again, it is what it is. He also did very well in this transaction, I’m sure. It’s sad that maybe it ended in the way that it did. I’m sure that he’s enraged for a variety of reasons. Nuno Goncalves Pedro I don’t have an opinion on who’s right or wrong in any case, but that would be my line. My line is if it came to the fore it has a direct effect on the company, it’s one thing if it doesn’t, then it’s not okay. People have their own lives, right? Bertrand Schmitt Yeah. You have your own life, you have your own opinion, and you’re entitled to them. And if on top of it you are especially public about it to think that you can get fired for political opinions and views, especially when they are not specifically extreme, feels very surprising. I actually don’t think it’s okay to be frank. Nuno Goncalves Pedro Maybe switching tacks. And there’s plenty of examples of all these M&A changes everything. And we didn’t want to take a stab at Facebook. These are two very notorious cases, but there’s many other great M&A transactions that Facebook did that didn’t end up in this way. And many other companies have even probably more examples than Facebook. Again, we didn’t want to take a stab. Section 3: Employee activism (27:38) Nuno Goncalves Pedro But switching tack to employees and employee activism, we already talked about all the leaking of memos that’s going on and recordings of town halls and journalists that know stuff immediately after it happened. Or sometimes when it’s happening, I guess there’s maybe a direct, a live blog of people sending stuff to journalists. I’m not sure. Nuno Goncalves Pedro But there have been very strong views by employees manifested on a variety of things. And maybe we start with shall we build things for military or not? And the whole example around, for example, Google, and Google working or not working for the military and their employee views. Bertrand Schmitt It’s very surprising for me, this movement, to go back to your point about leaking me most on hold. If you take Google, that’s really a way the company was built on to have these tunnels where you can talk, where you can talk freely. That can be an honest exchange of ideas and perspective. And suddenly you cannot do that anymore, because if everything you say, everything you present got linked to the press, it’s very difficult to be transparent and honest as you would like. Bertrand Schmitt If you take a Google, it’s really a change of mentality, how you have to work if you cannot run the business, how you used to, because now so many things leak out easily. But if we go back to your point, building for the military or not. Recently, Google abundant its efforts and they were not that big to start with, to work and support the military. Bertrand Schmitt Of course, I just see others don’t mind, they’re competitors, others like Microsoft and others on top, of course, typical defense companies. I think for me, it’s pretty hard to understand that there is so much pushback because you are not supportive of the military of your country or at least doing work and support in some ways for me and maybe we are moving to opinions. But that’s what a lot of companies are doing everywhere in the world to support directly or indirectly your military. Bertrand Schmitt Google obviously has a lot of employees who are not even American citizens, but it starts to get very murky for me. I understand, at some point, Google’s decision, but it feels like it was not Google’s decision. It was some employees pushing an agenda. Personally, I feel better if the best companies support the US military. Bertrand Schmitt From my perspective, it will be a better outcome because it will create a stronger military and it would create a better military. The last thing I want is an understaffed, undermanned, under-equipped, ill-equipped militaries that just create more mistakes and more risk from my perspective. I definitely expect in other countries that companies actually have no choice, but to support the military they ask to. At the very least, it should be the compelling decision, not a small slice of employees we decide. Nuno Goncalves Pedro Two different topics. One is the whole leaking thing. On the leaking thing, I don’t want to be a brute, but honestly, it’s very simple. If you leak stuff with a very specific purpose of informing journalists and others on what’s going inside the company, honestly, unless magically that’s a value of the company, you should be fired. It is what it is. Nuno Goncalves Pedro There has to be a degree of openness in town halls and sharing that is not conducive to then people just sharing stuff outside of the realm of the company, which is a trusted realm at the end of the day in doing so. Unless, again, as I said, it’s part of the values of the company that you’re very open and you share everything. I don’t know companies like that, but maybe they exist. Nuno Goncalves Pedro For me, it’s a fire-able offense. In all due respect, it’s not okay. And sometimes it might actually have confidential information on the company. There might be other things that are discussing those town halls that are strictly confidential. Again, absolutely not acceptable. Absolutely not acceptable, right? Bertrand Schmitt Totally in agreement. You cannot run a business like this. Nuno Goncalves Pedro You absolutely cannot run a business like that. The second topic is, should you serve military or not, et cetera? I’m not going to have a particular perspective on the Google example in whether they were just peer pressured. Google’s them in business with military and defense for decades. They have as one of their core industries that they serve in several of their product offerings, including Google Cloud, et cetera. Nuno Goncalves Pedro Honest to God, it is what it is. A couple of points I would make. One, at the end of the day, the notion that a lot of innovation actually gets driven by money from government is there. It’s true of the US. We always forget that venture capitalism. We talked about it in one of our previous episodes on VC. A lot of Silicon Valley was funded on that, on public-private partnerships, on money from defense, and we should not forget that. A lot of the amazing tech we have was funded by defense. Nuno Goncalves Pedro The second piece we should not forget, is it still the case today? We have DARPA, for example, leading the way on many things. We use the Internet. DARPA funded this thing early on, right, guys? Again, the defense agencies have put money into stuff that we use today as consumer. Thirdly. Bertrand Schmitt GPS. Nuno Goncalves Pedro GPS. There’s so many examples we could give. Thirdly, there’s entire ecosystems that in their first inception, in particular when it comes to frontier and deep tech, are funded by defense. If we look at Israel in particular, how many amazing frontier and deep tech companies? How much innovation has happened, for example, in cyber security that was funded by the Israeli Defense forces that then made its way into corporations, et cetera? Nuno Goncalves Pedro Again for me, it’s not a matter of oh, where’s the line? It’s a very complex line. I understand that Google stands to do no evil, and that’s still part of the motto. But at the end of the day, what is evil and where does the line stand? Sometimes, in this case, I think it’s actually relatively complex. Defense is an industry. It needs to be served. Someone will serve them. Nuno Goncalves Pedro And it has driven a lot of innovation. It funds a lot of innovation. Still to this day, it is what it is. And so the question then is, do you want to take that money or not? How much do you want to take off that money? Do you need to take it or not? All of those are more complex questions that need to be answered by CEOs, by their boards of directors, by their investors, but ultimately that it is what it is. Bertrand Schmitt It’s a very good point. I think that the defense industry is not just attack, but defense. So it’s here to defend your country, to defend your citizens, to defend IT, your team, your company ultimately. As you say, if you are not ready to take the money, somebody else will, but they might not have as good intention, good ethics. And so that’s a real question. If you don’t do it, someone will do it. Bertrand Schmitt On some other topics, not just this one, we have seen companies being influenced by employees for different situations. For instance, some companies are firing employees because they are not fitting well enough in their environment. Apple fired pretty visibly someone who was just joining the business. Antonio García Martínez, a writer who dare to wrote a book. I actually wrote this book at the time and it’s definitely entertaining. Bertrand Schmitt And yes, at some point, you might agree or disagree on how it’s presented, but it’s a book written to be entertaining. If I pick so many movies or music that are designed to be entertaining and I start to pick the sentence and what he said and I say, oh, no, I really don’t like what I’m hearing and it’s shocking and I cannot stand. Bertrand Schmitt And let’s absolutely never hire this guy who dare to write such a thing because it was entertainment and it’s bad and it’s shocking how I see the world. I think it’s really not okay. In that situation, it looks like Apple was perfectly aware, but the booksy word would have been difficult not to be aware, but decided under pressure from employees. This guy should be fired right away because some, not all, but some don’t want to work with a guy. That’s pretty shocking for me. Bertrand Schmitt First, it’s either Apple new or didn’t analyze carefully enough what it means to bring someone with such visibility but at the same time, it feels like a case of giving in to the crowd. And obviously, you have questions about made acquisitions of people on their board, people who wrote stuff, people who wrote lyrics in music. Are we going to remove all the music on Apple music because it’s not okay? Bertrand Schmitt I think it’s raising too many questions. How you see it goes. If you have opinions and you communicate them, you can get fired. Obviously, it depends how you position them, in what context. Is it internal, external, is it on your own time? Is it representing the company? So you have to walk a fine line. It’s not always easy to find it because the line keeps moving. Bertrand Schmitt What was acceptable 20 years, 10 years, 5 years, 2 years ago might not be the same today. But we also have to be careful about analyzing that and overreacting to all of this. The crowd out there is aggressive, but that doesn’t mean you have to submit to it. Nuno Goncalves Pedro That sounds like a revolutionary motto. Maybe start a revolution next. I agree with the point you just made. Obviously, the line is a very fine line and you have to be thoughtful about it and you have to evaluate it within the context of the company you’re in. I personally very early in my career. And this person didn’t work directly in my unit and my team but I was part of a decision that led to the firing of someone for their views on racial diversity, et cetera. Nuno Goncalves Pedro And in this case, I still to this day believe that we took the right decision as a company. As I said, I was just a small part of the decision because the person wasn’t in my team, but we were consulted and it was a very complex decision for the company to make. But we’re talking about someone. And this was before I moved to the US. So this was not in the US. Nuno Goncalves Pedro But a Caucasian dude in the middle of a conversation, we’re having lunch and the guy says something like, I would close that neighbor. This is like a shanty town in that part of that country. I would close that shanty town and kill everyone in there. Bertrand Schmitt Wow. Nuno Goncalves Pedro And the people that live there are of color like 90-95%. And he had mentioned it already and he had made allusions in a very explicit way to which color explicitly had a problem with. And there was a guy next to him was one of our consultants who was a person of color and of that specific color. And in the middle of this charade, the guy says, well, it’s not about you. I respect you. You’re my coworker, whatever, but if that was the case, honestly, how can we then continue working with this person? Bertrand Schmitt This is insane. Nuno Goncalves Pedro People would say, well, but he was manifesting his views in an environment, which is a lunch. And he said to the other guy he wasn’t talking about. He was like, yeah. Bertrand Schmitt You should talk about killing people and the whole neighborhood. Come on. Nuno Goncalves Pedro But he said I would just close that things so that nobody would go down and put it on fire. Those are the exact. Bertrand Schmitt He’s crazy. Nuno Goncalves Pedro And at that point in time, with all due respect, I think that’s a fireable offense, it’s not going to work. Really sorry, it’s not aligned with our values. Please move on. Bertrand Schmitt What you describe remind me also an occasion we had to make a decision to fire someone on similar circumstances. And it’s obvious that if you are hateful, and you are in a company, you are working with other people. If your attitude is publicly to your colleague in front of them hateful, that’s a fire-able offense, that’s it. And that should be. Bertrand Schmitt As a company, you are here to provide people an opportunity to join a business, to make money, to develop yourself, to benefit from it, and not to be afraid of your colleagues. This is just not okay. This type of situation can be very shocking. Nuno Goncalves Pedro Absolutely. Bertrand Schmitt But I will say when it’s black and white, it’s bad, it’s horrible. But in some way, it’s easier because you can make that decision. It’s when you are inside gray zone where it’s tougher. Nuno Goncalves Pedro Bertrand, you feel this is a binary decision. But I had a conversation with someone I respect a lot who said, well, it’s not that easy because this was done in the context of a lunch. And he said to the other person that wasn’t about the other person. I was like, mate, all due respect. It’s like some guy comes and says, maybe one day I’ll just come with a machine gun into the office and just kill everyone. And we’re like, oh, yeah, cool. He said it within the context of lunch. Bertrand Schmitt Not really your team, but another team, another floor. Nuno Goncalves Pedro Honestly, yeah. At some point, you take the warning signals. Bertrand Schmitt Yeah. Section 4: Bring it all together (39:24) Nuno Goncalves Pedro Maybe we bring it all together and bring it to a more summarized vision of the world all through the first attempt at it. The first thing that is interesting for someone to actually think about is, is the time that you are spending on media or alerting people on the situation that is happening impactful and important, either for you individually, but more importantly, for the company? Nuno Goncalves Pedro I remember a book that I still love from Good to Great from Jim Collins, where he has this one chapter on leadership, and he talks about level four and level five leaders, where level five leaders are the ones that have the best performance. And he actually did some analysis. I haven’t read the book in a long time. So if I get this wrong, I apologize to everyone and Jim. Nuno Goncalves Pedro But I believe he was saying that actually level five leaders, which again, are the best leaders in terms of performance of their company had literally half of the media mentions or interactions than level four leaders. And what’s fascinating about that stat, that level five had around half of the mentions or interviews in media then level four is it’s actually based on a relatively scientific study. They looked at a bunch of years of data and maybe that is the point. Nuno Goncalves Pedro The point is that if you are in general a great successful CEO, founder CEO, senior executive, you’re spending most of your time focused on your company and not focused on media and focused on the vision that others have on you that you’re focused on really making your company work. Nuno Goncalves Pedro So really interesting finding. It’s always been in the back of my mind and I’ve been thoughtful about it also in my roles and venture capital about talking in public, obviously creating and helping create our brand at Chameleon and prior to that at strive, but at the same time not overdo it, really be thoughtful about it, but very interesting conclusion there from that study. Bertrand Schmitt Yeah, I agree. I think that’s a very interesting point. They’re saying not so surprising. Of course, we have said when standard deviation of two difference with someone like Elon Musk, there is a very high correlation of time spend and success overall. If we pick an example actually that goes in your direction, I must have been surprised by the Tweetstorms over the past, I don’t know, 12 months from Bolt CEO Brian Baslow, who is now Bolt chairman. Bertrand Schmitt It was definitely a lot, very aggressive, very controversial, but I couldn’t help but feel a sentiment that it’s always somebody else’s fault. It’s not me if I couldn’t race, it’s not me if I couldn’t get to Y Combinator. It’s not bad people they are against me. It’s very surprising. So that one also is pretty disturbing. Nuno Goncalves Pedro Maybe the last question of them all in bringing all of this together is how much is too much? How much is too much? How much should you exaggerate in creating a little bit of this reality distortion field, what I call smoke and mirrors? Obviously, as an entrepreneur, there’s always this notion of fake it till you make it. Nuno Goncalves Pedro And not just entrepreneurs. We’ve seen very large companies being led by very senior people doing similar things. The good old days of vaporware at Microsoft come to mind, but how much is too much? We have obviously the case of Theranos, where the view is that it was too much and that there was maybe really fraud involved in the claims that were made and reworks Adam Neumann in what he did. Nuno Goncalves Pedro Was it really fraud or was it not fraud? And it was really more about propelling and creating this imagery that we work with something that it was not in the end, that we work was a platform, it was software enabled. And it wasn’t about just real estate and now we realize it’s really all about real estate. So how much is too much? How much is too much? Nuno Goncalves Pedro I’ll offer my two cents. You have to be always running a little bit ahead of schedule in some ways as a CEO. You always have to be surf talking about something that’s coming next but be thoughtful that it is achievable, that you know that within a timeline of maybe a year or two years it’s going to be achievable. If it’s a longer term vision, be thoughtful on how you convey that to potential investors, existing investors, to people around you. Nuno Goncalves Pedro And that won’t take away from your message. It won’t take away from your story. It won’t take you away from your reality distortion field that you may use externally and internally within the company. Having a little bit of that reality distortion field having a little bit of a higher bar and a push for everyone is important. We know it actually achieves great things, but there is such a thing as too much. Nuno Goncalves Pedro For me, the borderline is achievability, vision, clarity, and communication on when we will get there in particular internally or with your investors. That is for me the line. Bertrand Schmitt I think everyone talk about reality distortion. It has been coined after Steve Jobs and his ability to really present things in a way that will, of course, benefit his company introduces product in a way that would change people’s mind and perspective. But what was always great with Apple is our ability to deliver the goods. It’s not Tupperware forever for years. There is really an ability to deliver the goods. Bertrand Schmitt We work, for instance. I was shocked to see the numbers recently. They have a 2 billion market gap after 22 billion investment in the business. If you want to talk about destruction of shareholder values, that’s a prime example right there. Obviously, Theranos, we are there even more, we had total loss of equity in the business. Bertrand Schmitt I don’t know if at the end of the day, once you spot a CEO in Vanity Fair or VOGUE, it means it’s too late. It’s really not focused anymore about the company building the products, but about the individual. I think that’s definitely a risk. To conclude, I think we took the occasion today towards you. I’m not sure we try to pass judgment too much. Bertrand Schmitt Obviously, these are extremes that actually everyone should stay away from. But ultimately, I guess that some of this, your approach to PR, for your company, your products yourself, as to defense about your company, your mission, your own personality. It has to be adapted. It has to be genuine. But still, at the end of the day, the more you do, the more risk you create and the more history I shown that on average, it might not be that good for the business. Nuno Goncalves Pedro I agree with all the points you made. I think the net of it is there is such a thing as too much. And the primordial essence of your job as the CEO is to propel your company going forward. Now, that does mean that you do have to have some social media presence. You do have to create some branding around the company. And part of that branding will go through you, the CEO, and the founder. Nuno Goncalves Pedro It’s not that you should be absolutely outside of the world and just focus on the company, and not do anything, although we have since some CEOs that have been successful at doing that. But it’s more around what are the limits of conveying your opinions? What should your opinions be focused on? Nuno Goncalves Pedro And the net of it from this episode from my perspective is really around that. That you should stick to your lane, talk about things you understand, you know, talk about your company. Be passionate. Don’t just go and create controversies where there shouldn’t be any. Thank you, Bertrand. Bertrand Schmitt Thank you, Nuno.

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Tech Deciphered

37 – When to talk and when to keep your mouth shut… we sort of predicted the FTX debacle. Really!

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