Clear he wasnt quite ready to step down. Now arora is one of the most prominent free agents in silicon valley. Joining me today on bloombergs studio 1. 0, former softbank president and google chief business officer, nikesh arora. Nikesh, thanks so much for joining us. Its great to have you. Nikesh well, thank you very much for having me. Emily i want to start at the beginning. You were born in india. Your dad was in the air force. Tell me about your up bringing. Nikesh i grew up in a lower middle class family in india. My father worked for the Indian Air Force like you mentioned. We moved every few years from city to city, wherever his job took him. And we grew up with some degree of discipline in the house, because thats what you get when you work for someone in the armed forces. Emily tell me about how you came to the United States and your initial experience. Nikesh i got accepted to northeastern. We had Foreign Exchange controls so you could cash about 200 or 300. So i had 200 or 300 in my pocket, and i had my fathers retirement account of 3000. When i showed up here, he said you can have it as long as you give it back to me before i need it. Emily and you knew you couldnt go back unless nikesh no. Emily unless you were a success. Nikesh unless i was able to pay him back. Emily how did you end up at google . Nikesh well, id been at tmobile. I had done a small startup in the u. K. , which got merged into tmobile. I worked there for a few years. I came back to the u. K. , and i was trying to figure out what to do next. One thing led to another. I met we hit it off. He introduced me to larry and sergey, who happened to be visiting europe the week after. I spent an hour Walking Around the British Museum with sergey. And then he and larry invited me to come to california. And i spent time meeting many people, many of them you know, eric schmidt, sheryl sandberg, tim armstrong. And that was it. Emily now, google had just gone public, but the Business Model was still to be set in stone. Right . Nikesh the Business Model was pretty robust. Google was doing around 2 billion in revenue at that point in time. But id say the International Operations and scaling was still very early. Tim armstrong did a great job, because the team he ran was doing really well and he already put that into place. We took the model that tim built and deployed it across europe. Tim and i used to compete on how big can we make it. Emily google has since become alphabet, dominates the online ad market. What do you see as the biggest risk to googles Business Model now . Nikesh we fail to realize how much effort and execution it takes to build an advertising juggernaut, which google has built and has in place, which works really well. I think facebook has built one, too. I dont think there is a third. I dont think there is a third platform out there which has the scale to be able to build what google and facebook have built. So i think we are going to see more and more concentration at google and facebook in the advertising space. And i think that is not going away soon. Emily so, would you say it is a duopoly, and is that ok . Nikesh its a duopoly, yes, for now. There are many other players who are relevant in the advertising space, both offline and online, whether its going to be snapchat or twitter or pinterest in the future, or some of the traditional players who are actually doing a phenomenal job of transitioning from offline to online. So i think there will be many players in the space, yes. For the forseeable future, will google and facebook be the largest players . Yes. Emily do you think there will ever be a third player, a third company, that takes a third of that pie . Nikesh i think its going to be hard. But i do think there will be a collection of companies, which, amongst themselves, might command as much advertising share as google or facebook does, but it wont be one third company, at least for now. Emily roger mcinerney, who invested in google and facebook early, just wrote an oped in usa today saying, i am terrified by the damage being done by these internet monopolies. Like gambling, nicotine, alcohol, or heroin, facebook and google, most importantly through youtube, produce shortterm happiness with serious negative consequences in the longterm. The fault lies with advertising Business Models that drive companies to maximize attention at all costs, leading to ever more aggressive brain hacking. How do you respond to that . Nikesh every marketers dream is to try and get you to passionately love their brand. I dont think its any different in wanting that whether it is online or offline advertising. Consumers are smart enough that they get bombarded by advertising and it overwhelms the primary purpose of what they went somewhere for, whether it s the newspaper, online website, whether its the video. This sort of they sort of vote by walking away. Emily you ran googles International Operation for five years. They just got a 2. 7 billion fined by the eu. There are more inquiries open. How big a threat are these european regulatory issues . Nikesh i dont think they are a serious threat to the longterm business. Google is a phenomenally innovative company, which works in so many different products. I dont think that any one conversation is a longterm threat. If they are required to modernize things that is between them and the regulatory authorities, but i think broadly speaking google is innovating in some of the different areas and has it is more of a Technology Company that is constantly innovating rather than a company that has one particular track that they will be trapped on. Emily now, when it comes to facebook, amazon, apple, microsoft what do you think is the biggest threat to google . Nikesh i dont think about threats to google because i dont work there anymore. I think all these three platforms have tremendous power of distribution. And whenever they introduce new services or new ideas, they can deploy that to a billion or 2 billion people around the world. Thats huge. Theres never been a platform that lets you touch 2 billion people and a reasonably frictionless faction. Emily do you think google can ever catch up to amazon in the cloud . Nikesh its an interesting notion we seem to perpetrate. We all seem to want to talk about winners and losers. And we seem to think when there s a winner, theres got to be a loser. I think it is perfectly fine for multiple companies to exist in a space and do well. I think we are so early in the journey of the cloud that in 10 years from now you will see that all the early leads will normalize to some degree. If you look back and see the thousands of companies who have not even initiated their transition to the cloud, eventually they will have to end up there at some point in time. So, i think were so early that it wont matter. Emily all of these companies are making a big bet on original content. Is that a smart bet . Will it put too much of a dent in margins . Nikesh im not sure that this huge move by Large Companies to go into original content is going to result to a whole lot. A lot of money gets spent in content. So, yes, if you are willing to make a bet, which netflix is doing, billions of dollars per year to make a business, you might get somewhere in disrupting traditional content players. Eventually this will converge around one or two large players, and i think you should not underestimate the platforms. And the platforms as we discussed are facebook, amazon, apple, and google. So as long as they can figure out a mechanism to distribute content and allow the content creators and content providers to make a fair share in that process, i dont know how much all of them need to get into it. Emily Travis Kalanick leaving uber right call . Emily how do you see the state of ai, and who is ahead, and who will win there . Nikesh i think the ai conversation is as clear as mud. I think we are in early days of ai. A lot of areas where you want to apply ai, we dont have good data. So its going to be garbage in, garbage out. The technical horsepower exists, but to apply it, we need to start really getting smart about collecting data and being able to utilize it. So i dont think anybody is ahead. Emily do you think elon musks doomsday scenario is overblown . Or irresponsible, as Mark Zuckerberg says. Nikesh i love elon. He is one of the most interesting tech visionaries we have amongst us. We need people like him to have these conversations, but i think he might be a little early on his prediction. Emily what about self driving cars, which tesla is working on . Google, apple. What happens there . Nikesh im the camp that thinks it will be a while before we see a large proliferation of self driving cars around us. I think the economics, the regulation, the retooling required to get this to happen at scale, is far, far away. And i think we havent thought about the ownership models in the societal problems that its going to cause, or how do you park these cars . Where do you put them . We may see people who can do closed loop tests and show you that things can work, that could happen in short order. But i think the largescale deployment and having an impact on the rental business or ride hailing business is still further away than we think. Emily should uber and lyft and didi, google, and apple, should all these companies be working on self driving cars . Nikesh i think different answers for different companies. I dont think the ride hailing businesses should make their own self driving cars at this point. Emily why not . Nikesh i think its early. I think the ride hailing industry hasnt settled down. We havent quite figured out where that industry is going to stabilize. I think they have lots and lots of work to do in logistics and the way they move cars from one place to the other, managing supply and demand. And they are very early in their evolution. I think if they focused on creating Operational Excellence in their current business, they might be better off. And theres lots of tech Companies Working on selfdriving cars. I think a Partnership Approach might be better than trying to do it themselves. Emily i know you spent a lot of time thinking about the ride hailing business. When you were at softbank, you put a massive bet on didi. Nikesh yeah, both masa and i had long conversations about ride hailing. We were very impressed by the uber model. But at that point in time, we felt softbank would be better served investing in some of the other players. So, we invested in ola in india very early. We invested in grab taxi in southeast asia. We also partnered with alibaba and tencent and invested in didi. I think subsequently since i have left softbank, masa has doubled down on many of those bets. I think when you can find an industry where you feel that somebody has developed a product or service from which there is no going back, so its here to stay, its a great place to be. Its like when things go from a nice to have to a must have in your life, you realize this is a winning scenario. And you understand that this is going to get more and more popular over time. I think its clear in china that didi is kind of the only player. I think you can see where, if they keep executing well, this is a huge opportunity for them. This also plays into the needs of the country, where you dont want to have car ownership. You want more green cars. And its much easier to take large players like didi and get them to work with the government and getting the green stuff, electric cars. Emily so uber has pulled out of china. Uber has pulled out of russia. Do you see them making the same decisions in india, in southeast asia, in brazil . Nikesh i actually believe its possible for two players to coexist in the market and coexist happily. But i think it requires the markets to rationalize and stabilize. There are Many Industries who have multiple players that coexist like telecom services. There are four players in the United States. They are competing every day but some of them making large amounts of money like the cable industry. I think its a large market. Im sure they can. Can they go it alone . I think they probably could. Emily do you see that with uber and lyft in the u. S. . That this is a twocompany market . Nikesh as of now it is. [laughter] emily does that continue . Nikesh well, its hard to tell, but i think it will continue for some time. But as you know, there are so many different conversations and moves going on in the market that its hard to call where it s going to settle down and stabilize. Emily Travis Kalanick leaving uber, right call . Nikesh i think for now, yes. I think somebody needed to take responsibility for all the things we read about in the past year. And i think leaders are expected to step up and take responsibility for all the good and all the bad. I think, as we all have heard and read, they had some serious cultural issues and issues in their operations, and somebody had to take responsibility. And i think whether travis took it or the board encouraged him to take it and that was the right decision. Emily can that be fixed . Can the culture be changed . Can uber accomplish what it needs to without a founder at the helm . Nikesh we all talk about uber and the Great Service and product that it has created for people. I think the credit goes to the early team at the uber, their doggedness, the ability to take on a whole bunch of things against all odds and build a great product for the consumer. Should they have done certain things differently . Yes. And some of those things need to be fixed. Should they have a different culture based on everything we have read . Yes. Clearly, a leadership change is needed and that is being talked about. I think it will be a challenge, because every situation we see, the Risk Appetite changes when you take a founder out of the equation. The good news is uber has multiple founders and some of the others are still involved. One could hope they can provide the backbone for the Risk Appetite while a new leader goes ahead and works with them on cultural issues and tries to make uber the company as good as uber the product. Emily your name has been floated for the ceo job. For uber. Are you up for the job . Nikesh i think the board has made clear they are looking for a ceo, an existing ceo. Emily are you interested . Nikesh i cannot answer that question, since i have not had any conversations. Emily you have not had any conversations . Nikesh no, i have not. Emily so, whats your advice then to whoever ends up in that job . Nikesh whoever ends up in that role has both a cultural set of issues to fix and also a full series of operational things to do. Because at the end of the day, if you dont have Operational Excellence in a company, you actually have cultural problems as well. I think coupled with that, whoever is in the role has to work on the leadership issues both i think within the company and the board. They have a fractious board and they also have a Management Team which needs a cohesive leadership approach. Emily you were the heir apparent. You were supposed to succeed him. What happened . Emily what game is massa playing by approaching uber to invest in uber after investing in all ubers rivals around the world . Whats going on there . Nikesh thats a great question for massa. You should have them on and asking that question. Emily what do you make of the moves he is making . They are very bold moves. Nikesh massa is one amazing thing one thing he has that i havent seen anywhere else in the world is as we get older, as we get more successful, our Risk Appetite changes. As hard as you try not to change it, it does change. But masa has zero change in his Risk Appetite, he just wants bigger and bolder things. And hes an amazing optimist. He looks at a 300year vision or a 50year vision. He doesnt do things in three months, six months, nine months, thought processes. Hes found some partners who he s working with to give him access to a huge amount of capital, and hes out there busy sowing the seeds for creating this cohesive information revolution. Thats what i can see from where i stand. Emily you were the heir apparent. You were supposed to succeed him. Nikesh yes. Emily what happened . Nikesh i think when he and i got together, we had an amazing two years. And we saw eyetoeye on many things. In his life, when he turned 60, he was going to take a backseat and be more chairmanlike and find a ceo to perpetrate his legacy. And the legacy of softbank. When he and i met when he was 57, he said, you know what . After a year of being together, he said, i think you would be a great successor. I said great. As it came closer to him turning 60, sometime this month, he realized that he wasnt done as is evident from the last year, he seems to have renewed energy. And he definitely wants to see this information revolution through with all the investing that hes doing. Emily so, there were some shareholders that complained about you, said you had a conflict of interest, that you are overpaid. Did that play any role in you leaving . Did you ever get to the bottom of who was behind that . Nikesh no, we never got to the bottom of who was behind it, but the board established an independent committee which has looked at everything. They found no issues because there were none. So, there was nothing to look at. And masa was very, very supportive throughout the entire process. He tried to explain to people in the company that when you hire people from silicon valley, you have to pay them what they were getting paid in silicon valley. So, here we are. Emily are you still involved at softbank at all . Are you still advising them . Nikesh no, i was done with that last month. Emily so, from the outside i know you are supportive of the risktaking, but can he really take these risks . Nikesh i think he has the capital. He knows some of them will work really well and some will fail spectacularly. I think he believes he will do well and his track record speaks for himself. Emily softbank and massa are potentially behind a tmobile merger with sprint, which softbank owns. Is that a good idea and what does it mean for consumers . Nikesh do we need four operators in this capitalintensive industry, where people are sucking down more and more bandwidth and want access anywhere and everywhere for everything . Maybe not. And thats a question for the regulators. I think three players in that space will be perfectly fine. Whether the regulators allowed that to happen, whether massa and Deutsche Telekom and massa can get to a deal is is open for you to speculate as much as i can. Emily you led the way for softbank to invest in india, including the investments in snap deal. Some of the deals there are in trouble. Were those bets wrong, or would they be doing better if you were there . Nikesh i think its fair to say that the euphoria in the indian tech space was driven by the huge success we saw of the various Companies Going public in china. We said wait, if china can be so successful with over one billion people, maybe we should be concentrating on india, because this could very well be the next market to explode in a good way. And we should be investing there. So i think valuations got run up in that market in the spaces where youd seen success in china. Not so much in the ridehailing space because massa was early, but in ecommerce like the snap deal. I think the part that people did not factor in is jeff bezos decided he did not want the same fate in india that he had had in china. And when jeff decides to come in and invest billions of dollars into a market, now you have one very wellfunded player who has the technology and expertise around the world to execute the space. I think as you can see, flip card has generated the resources to do so. And snap deal was unable to in the process. So, that snap deal ended up with a similar backer who wanted to give them billions of dollars. I dont think its clear right now who is going to win in the longterm in the ecommerce space in india. But i think, as we all have learned, one has to be cautious betting against jeff bezos. Emily there is global and Political Uncertainty right now. There are new scandals coming out of washington every day. Should that impact investments, global tech investments . Nikesh weve always had different kinds of uncertainty in the market, which changed peoples outlook in the short term. And that causes times of overinvestment and times of underinvestment. Many people have not made money in times of overinvestment when valuations are high and its hard to find things to invest in because everybody wants to invest in them. But its been established again and again, when money is scarce and there are a lot of things to invest in, people make a lot of money. Thats if you take a contrarian bet. Right now if you find great opportunities, i would not worry about the uncertainty. Although, i seem to think the uncertainty is not impacting valuations based on the way the stock market is moving. Emily so what are you up to right now . Nikesh what am i up to . I just joined the board recently at richemont. Which is different from tech, a luxury goods segment. They have a little bit of tech investing they are doing to try to see how the industry transforms. I spent some time with some of the unicorns or decacorns in the valley, helping their founders and some of their Management Teams. Emily like who . Nikesh i am not at liberty to discuss who. But they are names youre aware of, and i spent time with my two young kids. Emily are you still investing, personally . Nikesh sparingly, yes. Emily where are we going to see you next . What is next for you . Nikesh i dont know what is next for me. I think i will continue to support various entrepreneurs in the valley until Something Interesting knocks me off my life of leisure and forces me to go work 80 hours a week. Emily nikesh arora, thank you so much for joining us. It has been great to have you. Nikesh thank you so much for having me. So new touch screens. And biometrics. In 574 branches. All done by. Yesterday. Banks arent just undergoing a face lift. Theyre undergoing a transformation. A data fueled, security driven shift in applications and customer experience. Which is why comcast business delivers Consistent Network Performance and speed across all your locations. Hello, mr. Deets. Every Branch Running like headquarters. Thats how you outmaneuver. Emily i am emily chang. This is the best of bloomberg technology, where we bring you the best of the weeks interviews in tech. We will break down the game plan for uber after the new boss meets the troops for the first time. Plus, apple goes all in on the touchscreen. The home button becomes a thing of the past as the date is set for the next big iphone event. He is one of the most recognizable names in the Tech Industry for decades
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