How Tech Insider Chamath Palihapitiya Wants to Disrupt Silicon Valley
Chamath Palihapitiya could be reveling in the status quo. The venture capitalist made a fortune serving as an early Facebook executive, started his own firm that now manages more than 2 billion in assets and even owns a piece of the NBA champions Golden State Warriors. Instead, he keeps talking about how Silicon Valley needs to change. In recent months, the 41-year-old founder and CEO of Social Capital has said that technology companies are "ripping apart the social fabric." He has criticized advertising-based business models that rely on collecting users' personal information. And during a long walk around Palo Alto in April, he told TIME that many of the people flocking to the Valley are driven by the prospect of getting their "slice of the pie," even though "comments about saving the world" are commonplace. "It makes San Francisco and Silicon Valley not too dissimilar to Wall Street," he said. "But it wraps itself in this moral high ground.", Palihapitiya isn't the only Silicon Valley insider to publicly criticize Big Tech. Tristan Harris, a former "design ethicist" at Google, has blasted peers for engineering products that are made to manipulate people's attention. Early Facebook investor Roger McNamee has accused the company of shirking responsibility for the bad things that happen on its platform. And engineer Erica Joy Baker has repeatedly called out the industry for not being inclusive of women and people of color. But while Palihapitiya acknowledges the shortcomings of the sector, he is more interested in talking about the positive effects the industry could be having. During our walk, he suggested that Silicon Valley players are distracted by chasing big payouts and not focused enough on solving hard problems in areas like health care and education. In his view, government institutions are failing and only entrepreneurs can fix them. "I felt like we were leaving behind all these other parts of the economy that needed the help way more than we needed a faster burrito," he said of the changes in his thinking since the days when his goal was to grow Facebook's user base. What really sets Palihapitiya apart from other tech dissidents is that he is trying to use Social Capital to change the way venture capital worksand to prove that tackling global issues like climate change can be just as lucrative as discovering the next Instagram. He says tech companies have a civic responsibility to create new jobs when they disrupt old ones and has set a lofty target he wants the companies Social Capital has invested in to create 10 million jobs and "impact" a quarter of the world's population by 2045. "I was struck by the size of his ambition," says Samantha Power, the former U.N. ambassador. Now a Harvard professor, she agreed to join Social Capital as an adviser after hearing his ideas. Yet even she was skeptical at first. "Can he do this?" she recalls thinking. "Is this real?", As we ambled along sunny streets, Palihapitiya ran into acquaintances and had friendly exchanges. He also exhibited the bluntness for which he has become notorious, describing board meetings as ego-driven "Kabuki theater" and criticizing startups for failing to include a "moral layer" in their thinking. At one point, I asked him if this kind of talk upsets his peers. Such criticism once inspired a prominent investor to stand up and shout at him during a conference. He shrugged off the suggestion. "I'm too successful and rich, so they can't do anything," he said. "I can stick to my guns, because there's a lot of people who believe what I believe and don't have a voice or a bully pulpit.", Halfway through the walk, Palihapitiya stopped and peeked over the fence of a home where he used to live, pointing to a detached structure in the backyard that once housed little besides a poker table and a computer. "That's where I started," he said of founding Social Capital in 2011. The company, which now occupies an industrial-chic 8,000-sq.-ft office in Palo Alto, does the traditional work of a VC firm, making investments in a bunch of companies with the expectation that some of them will explode in value. But it also acts like a tech firm, employing engineers to create products that are aimed at changing the way startups are discovered and aided by their backers. The CEO's fundamental belief is that data, not intuition, should drive investment decisions for venture capitalists. This is why the firm is beta-testing a system known as CaaS short for capital-as-a-service. The software tool allows startups to upload data about their businesses, which algorithms then use to flag worthy investments. Venture capitalistswho skew white, male and affluenthave been criticized for giving more attention to hopefuls who remind them of themselves. By taking surface factors out of the equation and building a tool that can process information at a much faster rate than humans can pitch, the team at Social Capital hopes to better spot overlooked ideas and founders. "Entrepreneurs are littered all around the world," Palihapitiya says, suggesting that many are in danger of being ignored if the process of finding them isn't automated. So far the system has picked a diverse set of winners. Of the roughly 5,000 companies to upload their metrics over the past year, the 76 that have won investments are based in 24 countries 80 of the founders are nonwhite, and 30 are women compared to 4 of all VC deals that went to female founders in 2017. "People really do conflate luck and skill," Palihapitiya says of fellow VCs. "I just don't believe in gut." Although the most common industry for those companies is Internet technology, health care and education rank second and third. Palihapitiya was born in Sri Lanka and moved to Ottawa when he was 6. He grew up poor but went on to study electrical engineering at college and climbed the ranks of consumer-tech companies like Winamp and AOL before landing a life-changing job at Facebook. One reason the CEO says his thinking has evolved since he left the social-media company is that he has experienced the clarity that can come from personal hardship. His best friend died unexpectedly in 2015, soon after his father had succumbed to complications related to diabetes. A father of three himself, Palihapitiya credits therapy for helping him overcome "psychological turbulence" and making him more clear-eyed. "I'm in this constant motion now, particularly in the last year or two, where I'm re-evaluating everything," he says. "Try, test, learn, iterate, improve, keep going.", This approach can be disruptive to colleagues as well as the larger industry. Palihapitiya says he surrounded himself with "pretty traditional folks" when he started Social Capital and went through years of painful turnover as he tried to develop a new model of investing. His two co-founders left last year, and this summer has brought four more high-profile departures. The churn is at least partly the result of trying too many new things in June, Palihapitiya announced the end of various projects that he said distracted from the firm's central mission. Companies in Silicon Valley are known for over-promising and then figuring out how they will deliver. Palihapitiya may highlight the gap between other entrepreneurs' rhetoric and actions, but it's not yet clear if he can live up to his own hype. He acknowledges as much. "We have to fake it until we make it," he says of getting the tech industry to buy into his vision of a more inclusive brand of capitalism. A spokesperson for the firm declined to say how many jobs Social Capital has created so far, emphasizing that it is "early days." The firm is putting money where the CEO's mouth is, having recently committed to investing 150 million in companies that aim to help vulnerable urban populations, for example. But he has yet to show that investing in a manner that is "beyond moral reproach" can consistently generate better returns than spotting the next blockbuster app. Near the end of our walk, Palihapitiya took me to the old HQ of Glooko, a diabetes-management company that he helped launch. Several of his family members are grappling with the disease. In the midst of talking about the difficulties of changing his firm, much less the Valley, he grew exuberant as he described the kind of impact a precision-medicine company can havenot just improving lives but extending them, and perhaps even saving them. "O.K. it's not billions of users on a photo app," he said. "But that kicks ass."