All-In Summit: Bill Gurley presents 2,851 Miles

I'm Bill Gurley I got the Silicon Valley in about 1997 and was fortunate enough to become a venture capitalist in 98. and the entire you know first year of my career I had zero interest in interacting with any form of government it didn't seem necessary for what I was trying to do I was working with Founders and software and Technology I didn't see what it would bring me until one day where I ran into an issue which I'll tell you about later that required me to understand what was going on in Washington so I checked in with a few advisors they introduced me to this lawyer in DC turns out D.C lawyers do a lot of things that aren't lawyering and and he listened to where they have yourself call you back he calls me back

he says bill I got exactly what you need I found a congressman on the committee That Matters to what you're talking about and I can set up a meeting I go great I'll fly out he goes no no no don't fly out he's coming to you because he's coming to me that's pretty nice he goes do you have a conference room a cinema venture capitalist we have lots of conference rooms so he said I needed to get some people together and and here's the catch they need to bring five thousand dollars each hung up the phone started thinking all right I got six people we got board members CEO five thousand thirty thousand dollars call me back next week how's it going great I got six people five thousand dollars ready to go because most of these meetings have 10

to 12 people says [ __ ] like now I'm inviting people that don't even have anything to do with this thing and like having to help them out I'm up to 60k I hang up he called me back a week later he goes Bill how's it going like ah [ __ ] I got 12 people you know everybody's got a check we're ready to go I'm losing interest at this point he goes do they have spouses I'm like what kind of question is this do they have spouses he goes yeah let's let's have their spouses write five thousand dollars each I go our conference room's not big enough for the spouse he goes they don't have to come this is a True Story by the way true story and it would go on to happen two more times in my life and then I stopped meeting with congressman

foreign the reason that I needed to engage relates to this company my fourth VC investment was in a company called tropos networks we had industrial grade mesh Wi-Fi you could mount it on a telephone pole and bathe a city in in Wi-Fi Broadband it was awesome we are so excited about it we were changing the world it was disruptive Google got excited about it Earthling got excited about it but the customer I loved the most that got excited about were Mayors there are hundreds of Mayors all over the country that wanted to provide free Wi-Fi service across their downtown area it would help with Public Safety economic development of course digital divide so we we were so thrilled I was so pumped I was sure we had a winner here and then one day these two people got excited which turned out not to be a

good thing this is Mayor Street of Philadelphia and his CIO Diana Neff they got just as excited as I did they were idealistic they were you know optimistic maybe they were quixotic maybe I was too because the next thing that happened is what caused me to get that meeting you can't read this but it says lobbyists try to kill Philly Wireless plan and in the article it says Philly's plan to offer an inexpensive wireless internet service the most ambitious yet collided with commercial interest collided with commercial interest there were no voters or citizens up in arms about this commercial interest how many of you I know this younger crowd how many of you are old enough to remember Schoolhouse Rock awesome so like you I learned about how Congress works by ABC Saturday morning television and they told us there's a phrase in this I looked up the script it said some

folks back home wanted a law so they called their local Congressman implying that the people that have the need are the citizens and the people that write the law the congressman imagine how surprised there was when I read this Philadelphia was embarking on the research phase of the project when Verizon successfully pushed a bill through the state legislature Verizon's writing legislation how does that work now it turns out this wasn't even our biggest problem because another company's headquartered in Philadelphia named Comcast they had put a bill on Governor Randall's desk proposal drafted by lobbyists for the telecommunications companies this isn't what I learned on Schoolhouse Rock

the governor whose bill that was on the desk of is Ed Rendell he's on the right before he was governor he was mayor of Philadelphia the gentleman in the middle is named Michael Nutter he would go on to replace Street and was a longtime council member but the guy on the left was the real Nemesis this is David Cohen Chief lobbyist for Comcast now David Cohen is the corporate lobbying what Bob Marley is to reggae he's like there's just there's no there's no second uh the New York Times did a profile of him called Comcast real repairman in which they say is the most important executive in the whole company and I fundamentally believe that um It also says he's probably one of the most Savvy corporate political operatives in the history of U.S

business the article on the right from The Inquirer calls him Philadelphia's most powerful unelected official I don't even know how you can put those words together so here we are here we are in our little conference room with our spousal enhanced checkbooks and this is like a second grader challenging Michael Jordan to a game on one-on-one for money like we had we were pissing in the ocean we had no chance no chance now guess who offers Citywide Wi-Fi that one's easy um ATT would join this fight within two years they would outlaw Municipal Broadband in over 22 States they just write it into the books and and just took took the power of these local decision makers away from them all in the interest of the of the city of the

commercial interests not the citizen I want to talk about another piece of Telecom legislation my my partnership back in those days invested in Telecom equipment and so we were very interested in Telecommunications Act of 1996. this was heralded as the most important telecommunications reform in 62 years now this one's simple I'm just going to use the headlines from Wikipedia the Telecommunications Act of 1996 had two goals to promote competition and to encourage the rapid development of new technologies let's see how things went in 1996 the top four had 48 markets here four or five years later after this heralded legislation they're up to 85 percent that didn't work let's check in on the second one were they promoting Innovation this is a

chart of VC dollars into Telecom equipment this used to be 15 of what VCS did um within 10 years it had gone below one percent and a year later the mvca stopped tracking it now if you want to talk to one of the expert VCS in telecommunications equipment it'll be easy to do because they're retired this Market's gone there is no more innovation in Telecom equipment so what happens here how can you possibly have a super important Bill signed by and implemented by one of the most heralded presidents that we've in our generation that doesn't just fail failing would be things stay the same and you don't accomplish the goal this did the did even worse it created the opposite thing of what it was supposed to go do let me introduce you to George Stigler he's the 1982 Nobel Prize winner in

economics and the father of regulatory capture this is his most famous quote as a rule regulation is acquired by the industry and is designed and operated primarily for its benefit I like to say regulation is the friend of the incumbent quick audience interaction moment that's the one thing I want you to take away so on the count of three scream regulation is the friend of the incumbent one two three yes amen all right so this is this the only slide I have with bullets because this is going to be a two-minute regulate regulatory capture 101 all from George stigler's notes the first thing he says in regulatory capture a special interest is prioritized over the general interest of the public sound familiar for my other

stories leading to a net loss for society a net loss for society that's important the two mechanisms they usually use is the second bullet limited market entry and price protection or even price increases which I'll show you more of and then the mechanisms of influence are money made worse by citizens united exposure just time around people and then three revolving doors this is super important and I'll show you one great example of that that's people moving in and out when they interviewed Christy on the Pod the other day they were talking about this in the military all right this is a piece of Morgan Stanley research from 1999 someone took the time to go study five pieces of major U.S legislation that had happened over the years and how the incumbent stocks did after the legislation and let's just steal a few sentences from this conclude that Landmark regulatory action is a tendency to improve returns for the

largest players in the targeting industry long-term investors should consider capitalizing on any temporary weakness caused by market reaction deregulation many attempts to increase competition or improve customer experience have failed this is reinforcing what Stigler taught us here's a very simple quick one number of new banks in the U.S 2009 nothing Dodd-Frank like that's what happens all right two really good stories you might not even believe them because they're so outlandish does everyone know who epic is it's hard to know because they're not public it's a very large private company in Wisconsin that is the largest player in medical or EHR software medical records and this is their CEO Judith Faulkner now in

get the year right 2009 Obama put her on his health I.T Council she was the only corporate representative should not surprise you that she's a major donor to Obama now Obama passed the American Recovery Act that was his big piece of stimulus kind of like Biden's inflation act that happened recently and tucked underneath that easy to hide in this big bill is an act that was the acronyms high tech it's this health information technology thing and then they created an agency called onc that oversaw it now this is the part you're not going to believe they came up with a brilliant idea I have to assume she helped encourage this um doctors would receive forty four thousand dollars each if they bought software 38 billion dollars this is true you can

look it up I'm not making it up forty four thousand dollars to give it to a doctor Implement some software many of you run companies that'd be pretty cool right the government passed the law if they buy your software they get money make it a lot easier now you may be thinking are doctors needy but here's the catch you remember this happened because the mortgage meltdown doctors own multiple homes so they have multiple mortgages so like they probably needed the assistant now there's two more things about this act they're also unbelievable first there's a there's a flaw if if someone said younger pay people to buy software most people would be like well you're gonna have a problem they're gonna buy it and they're not going to use it right well they thought of that so guess what the second phase doctors

got paid 17 000 more dollars to prove that they were using it this is called meaningful use it's plastered all over the website of all the HR vendors at the time it gets even better so the the onc decided the threshold of features you would need for your software to comply with this mandate and I'm assuming they kind of took epics feature set and plowed it into this spreadsheet but they got the Department of Justice to enforce people that didn't have the feature set that were getting the payments and you had three record fines 155 million 57 million 145 million against the Lesser competitors of epic unreal if you've studied the innovator's Dilemma the way startups disrupt is they come in with lower feature products but a feature that really matters to the customer in a simpler product and they

move up they put a brick wall there so you couldn't come up um it's just amazing um Obama in an interview with Ezra Klein said this was the most disappointing part of Obamacare I mean I think if any of us were in the room when they scratched this thing out I could have told them that it would have failed I mean paying people to do stuff is just it's not going to work now you may ask am I am I unhappy with Judith I'm disgusted with it but but if I were a judge in the Olympic regulatory capture competition I'm giving her a 10. this is fantastic fantastic [Applause] all right one more revolving doors there's one more so many of you know what this is this is a a coven rapid antigen test now this is based on a very simple piece of technology hopefully David will will

confirm this when he comes back up um called a lateral flow assay now this technology was developed 80 years ago in 1943 and it's a complete commodity the the packaging Almost Doesn't Matter you could probably use the strip without it now before I tell you what happened in the U.S let me tell you what happened in Europe Germany leaned heavily into rapid tests they got their scientists together and they evaluated 122 different vendors and validated 96 of them here they are on the right 96 different vendors the day okayed and as a result in the German Market you could buy five tests for 375 or 75 Euro cents a test UK leaned in as well they they got him in such numbers and so cheap they they distribute them to people's homes so what was going on in the U.S around that time the New York the New York

Times did a um article like here's what's going on with antigen tests first of all they fought him forever and I I think that may be character as well because the hospitals were making a ton of money on PCR tests I think they they made as much money as they did on vaccines but that's another story here it says all the manufacturings are ramping up production but right now they're hard to find and then it lists which tests are available and they only list three vendors Abbott Elementary vendors now you can play along on your phone if you want to go on LinkedIn this guy's name is Timothy stenzel now he works for the FDA and he runs the group that oversees which antigen test gets approved I know this because he would write scathing letters to the ones he rejected that you can also look up

online now guess what you're not going to be surprised five years that could help four years at Abbott it gets worse president Biden decided finally to lean into antigen tests and authorize two billion dollars to go purchase tests he should have gone to Germany and bought him out of the stores but instead but but instead he bought him from these guys now I don't know if you've ever used this test all that packaging is complete and utter [ __ ] and unnecessary that popsicle stick thing like everyone else uses the lateral flu essay plastic thing that you can buy super cheap this was over engineered um and then and then I got really pissed because the Wall Street Journal wrote an article that was a Victory lap for Abbotts antigen test execution and how well they did in the market and I've never met Brianna or Peter but I I hope they get to watch this because the first thing they should have done in the

article was put a big picture of Timothy stenzel because that's why this thing worked and they they write the eye-catching card on a lollipop stick as if oh it was so cute everyone bought it like foreign if you tried to sell that thing in Germany how many would sell zero Lay It twelve dollars a test yesterday Just for kicks kind of I went online this is Walgreens and CVS antigen tests there's seven tests they're all exactly 23.99 what is that that's not a Marketplace that's not open competition um I also went on boots the the famous UK there the tests are about a dollar fifty dollar sixty per today so you have a 6X differential in these tests today and by the way I'm not even talking about the fact that our citizenry may have been you know much enhanced by having rapid tests at a much lower price if they were treated as the commodity they were

of course they weren't now Washington's got its eyes on Silicon Valley and it's from both sides we got Lindsey Graham we got Elizabeth Warren there's an article here that says major green agrees with AOC breaking up big Tech and you say why why did why are they so interested in Tech this is a poll of Voters voters don't care voters are more worried about the industries where there's a lot of regulatory capture but they want to come after Tech I think I know why I think they want them in the system like the military like Finance like Telecom they want them in the system because there's money now if Elizabeth Warren attacks big Tech you think they might go fund the competitor then you probably can't read this but this is open Secrets spend time on open Secrets four of the top 10 contributors to Elizabeth Warner alphabet Apple Microsoft Amazon

you attack them they have to come to you some of the some of our peers in Silicon Valley seem to want them to come too I think they've read Stigler Circle please regulate us Brian's on later so this is risky the more regulation the more I think he's right by the way the more regulation the better for coinbase that's exactly what Stigler would say marker Zuckerberg needs wants and must have regulation I get it Mark and Sam's just getting started he wants regulation too now there's a really scary thing in this AI space the the incumbents that are running to meet with all the government

um are spreading something that I don't think is accurate or Fair they're spreading a negative open source uh message and I think it's precisely because they know it's their biggest threat and I think what Matt has done with llama too is actually super interesting all right I'm going to wrap up with three things um three takeaways first I'm not convinced we're very good at regulation all four of the stories I told you were failures like they were a net loss for society as Stigler says this is a picture of Patrick Monahan who was one of the best Senators I think we've ever had he kept a picture of a pin behind his desk as a reminder he felt like

Congress should have to have something similar to the Hippocratic Oath that doctors have first Do no harm and the reason he has that point of view is he feels personally responsible for the homeless situation in America he signed an act with JFK in 1963 that shut down the mental health institutions it had a second piece that was supposed to prop something up this happens with with policy second part didn't happen emptied out the mental health and when everyone talks about the homeless problem they should read this interview with him because they don't go back and talk about this issue but it's very relevant so I don't think were very good at it that's the first thing second I think regulatory capture gives capitalism a Bad Name a couple people yesterday said oh we got to fix capitalism I think

where capitalism's Brokenness where the capture is the highest right like I just showed you some examples you've seen these charts of Christ you know across time and the highly competitive products coming out of Silicon Valley are dropping like crazy it's health care and education and those kind of things where you have price increases lastly one of my favorite authors is Matt Ridley and these two books um really cover the the span of human time and he talks about how three things technology Commerce and the sharing of ideas leads to prosperity for people leads to increases in standard of living and my big fear is that regulation is the opposite of this it's a blocker to Innovation so if you care about

prosperity and you kill Innovation you're going to kill Prosperity from my point of view so in closing the reason I picked this title is silicon Valley's 200 2851 miles away from Washington and as these people put their eyes towards this Iowa State the following the reason Silicon Valley has been so successful is because it's so [ __ ] far away from Washington DC thank you ladies and gentlemen Bill [ __ ] girlie well that was it highlight I think we know the best let's all go home I think the best the best talk in the history of all in um oh and uh we need to get it out there immediately so it can start going viral and I think it will go very viral yeah well you know I'm just a guy with some experiences and I put it together as a

deck and if you take from it whatever you get that's where it's gonna go the regulatory capture is bad so whenever um four four away from it basically this is what we do as a poker let's look you put a pin in it what's the solution what can we do I think you can go there yeah um you know the first is politics an answer yeah the the the thing that's actionable from my point of view is just massive transparency so I'd love to see what open Secrets does be kind of mandated and way more transparent like the minute it check lands everyone knows put it on Twitter yeah exit yeah whatever right like expose the hell out of it because there's a lot of like those meetings I

had don't show up as tropos they show up as all those people like there's a lot of obfuscation that's out there I think that one's potentially solvable um that was really the only thing I thought blockchain could handle but anyway that's just a sign um it gets trickier after that one um you guys talked about Christy with this when you're talking about the military industrial complex this rotating door thing is a massive problem if you study there are tons and tons of senators presidential candidates that are in the Senate they're out for two years and then they come back with 12 million dollars in their pocket right and that's happening all over Washington all the time and I don't know how and and Christy said it's impossible because they'd have to vote to stop this on their own and I I think citizens united

should go away right but it but it requires it requires the same boat you know and Gurley is the existing regulatory capture like entropy it only goes in one direction or is it feasible Is it feasible to unwind or it feels that way I mean yeah one one of the candidates you had on or maybe two were talking about like shutting down stuff that onc got shut down which is actually kind of unusual and nice but yeah I I don't I don't know I don't know I don't seem there have been attempts with with certain um presidents you know and well in the past of kind of deregulating but but even if that's done by The Regulators like I'm not even sure that totally well as I say you know on on AI I I think that what um what was discussed at that hearing that Sam Altman testified

out I think it's an existential threat to Silicon Valley because you know what Sam proposed was well we should have a new regulatory agency kind of like the atomic energy commission and we should have standards before AI software can get released and it gets vetted and we'll help you write the standards you remember and the reaction the pleasure and the reaction of the politicians I remember like all these Senators recorded saying wow this is such a nice young man this is not like the other Tech CEOs who've been testifying up here basically you know uh defying us you know how do we work with this person and they were saying all these nice things about him but the reason why I think this is an existential threat is because The

Cutting Edge of all software development right now is AI you look at what every software company is doing AI is now part of their road maps so if you subject AI to regulation you're basically turning software into the next big Pharma or into the next you know military industrial complex Washington will run the software industry and everything we do in terms of funding these little startups you know these companies with you know fresh ideas it'll just be over the government's going to do a code review industry oh that's similar to what happened with that that there was a there was an Excel spreadsheet in that EHR example of the features you had to have in your product like can you imagine the government like mandating features of a software I got

some product managers going to Washington getting approval for where what they add to the product another answer um might be just uh to your original question Dave is just awareness so getting people more aware and hopefully this kind of thing can help um I think knowing what committees your legislators are on and when they're traveling to visit other states and other companies and stuff that have nothing to do with your local you know situation they're supposed to be looking after that'd be helpful right but but once again the people that you think it's just to mandate this are the ones doing it is it just the nature of government that it has to scale with time that it it because we all think about the government sitting outside of

a market but the government is a player in the market they consume capital and they distribute capital and the U.S federal government now is the largest consumer and distributor of capital in the history of humankind of of our civilization I fear and you had dalio's charts of decline you know I fear that this is one of those things that causes the decline and I fear that the democracy and capitalism you know will kill each other over time you know for this very reason I might point that we study the UK a little bit more they've kind of gone longer than most societies do they have some clever policies like losing party pays which causes one tenth of the litigation that we have and so I wonder if there's something to learn from from our um our previous ancestors the thing when you dip your toe into

that world that is shocking is it's the low how low the threshold is of the dollars it takes to actually influence it's hundreds of billions of dollars of laws getting written and that's where you also see some of this wrong-mindedness because you can get any Tom Dick and Harry to cut you know Cobble together enough money to get in front of that Senator or that Congress person and all of a sudden you see it reflected in law it's shocking actually I was talking some of you know David crane who um who an operative in California helping people try and get things done and I asked him about this and he said the one thing you have to keep in mind is that is the duration of how long that person

is going to be there so someone from Silicon Valley has a problem they run to Washington and they think they get one meeting but are they coming back you know the teachers union is going to be there for a hundred years right so if you're cozy up to them it's forever it's forever money yeah why'd you do this personally would I do this yeah you're just frustrated like just like you're mad as hell and there's a powerful I mean you know you've worked on this for a while yeah this presentation I saw an early draft it was clearly coming together it's something you've been thinking about a long long time I I've kept notes on it for 15 years every time I see something I write it down yeah and you're at a point in your life now where oh that's true yeah yeah like I probably can't get

a meeting in Washington I mean I have trouble with investment Banks also but um you saw you saw the guys um before talking about energy um it's a huge industry there's enormous amounts of regulatory capture and um and lots of manipulation of laws in that sector um from that perspective in that lens are you Pro Fusion and the possibilities of fusion not less but less technologically more yeah well not diffusion but but Vision I just retweeted something like an hour ago apparently they're gonna that one of the the plant one of the fission plants that's been shut down in America they just voted to restate which is a great you know progress right we turned around the anti-nuclear sentiment in what five years it seems like hopefully but

there's a long way to go because one of the reasons fission's so expensive in the U.S and way more expensive than China is the regulatory exactly China's building 400 nuclear fission power plants right now that's their plan that's their plan it's not just in China and if you look at the if you look at the antigen testing imagine with the complexity of but this is what I want to ask you is like you know these large energy generators the the existing utilities what is their incentive to not try to pull a Comcast when they see Bob and David close to the Finish oh you have to imagine that the oil and gas Industries been doing that this whole way right for traditional nuclear yeah yeah for traditional nuclear yes I wonder and I say this with a lot of nivete I wonder if if you could use open

source around fission to try and lower the cost of building it and and try and get more consistent well the big Achilles healing energy as an example where it's impossible to to capture regulatorily is that the big opening they left is that every individual here can become their own utility and they're subject to no oversight and so the real question is to your point if an open source or some very small modular reactor can be put in the hands of every individual and then they can make an individual decision that's very hard to regulate but in the Solar Market which I know you spend a lot of time in the rules on whether or not you can run power back in and at what rate that's right are arbitrary across the entire country that's right guys um I know I speak for everyone when I say that this has been an unbelievable highlight and a real treat Bill thank you so much

wow wow [Applause] [Music] Rain Man David's house and they've just gone [Music] besties [Music] oh foreign [Music]