Reid Hoffman: The Future of TikTok and The Inflection AI Deal | E1163

Think about what, like, 20 years ago, if you had portrayed that, they'd say, 'Oh, that's the Jetsons, that's the city of the future.' I'm like, 'No, it's right here.' And what they're doing on it is more like, you know, I look back at your grandfather or your grandpa, and they would write a letter, wait two days for a response. Yes, and we'd message, and it's done in a second. Exactly. A friend of mine said we will, in the future, vote for algorithms to run countries, not for people.

No, no, no. And part of that reason is because, look, if you look at what the AI revolution is, it's a shift from 'we program the computer'—and obviously we're still programming it—but as opposed to programming knowledge into it, we're giving it a learning algorithm. So the learning algorithm then goes through a whole set of training sequences to become a cognitively sophisticated device. That particular quote presumes that the algorithm is something like that, as it were, that you kind of look at the algorithm. And actually, in fact, what we want is a really robust learning system that has learned a lot of really great things, incorporated a lot of human feedback into that, and is making good actions and judgments based on that. And by the way, that's what we hope for from our leaders—whether they're leaders in politics, leaders in investing, leaders in entrepreneurship, leaders in academia, leaders in journalism. We are learning machines that have learned good judgment in these questions.

Yes, for the following reason. The problem that I have with these critics is that the real issue is AI is a human amplifier. It's part of the thesis that I've been going out and trying to get people to understand: actually, in fact, it's a human amplifier. For a large number of years—I don't know if a large number of years is 10 or 500 or whatever—but it's a human amplifier. And amplifying bad people too is the question. So whether it's a terrorist, a criminal, a rogue state, and so we go, 'Oh, the robots are coming.' It's like, I'm a lot less worried that the robots are coming than Putin is coming with his AI enablement. So let's focus on the bad humans and what's happening there, and then pay attention some to the science fiction side.

Good, great. Right. I actually think that part of the reason they're saying that is the American electorate right now hasn't really fully remembered the corruption and incompetencies of Trump. They think, 'Oh, the world is a fragile place. I'm unhappy with the global conflict, the tragedy in Gaza, the huge stimulus from COVID, prices have gone up, and I'm agitated.' So they're like, 'Well, I'm agitated, Biden's president.' But when people start remembering that Trump agitated for an insurrection that killed police officers, when he was convicted by a jury that said not only did you do sexual assault but you slandered about it in a jury thing, they will begin to get much more negative. So it isn't that you're overestimating the knowledge of the American populace—I hope not. And I think there's real work ahead of us to remind people about what a Chernobyl Trump is. But I think if we successfully remind them, and also by the way, Biden has passed more bipartisan legislation than any president in decades, done stuff for the climate, stuff on inflation reduction, and helped assemble the world on Ukraine.

Of course, but by the way, vote for any president, you're voting for the staff. But Biden selects his staff. I mean, look, we have had a whole history of presidents where the staff does everything, and he is the person who selects it. Look, I've had a two-hour lunch with Biden. It's very popular to say, 'Well, he's old, he's not cognitively with it.' In a two-hour conversation, he was asking questions about AI, explaining nuance in Israel, saying, 'This is what I care about for your average worker, and this is what we need to be doing. How can you technology industry help the average worker?' It was a two-hour robust conversation. He's good.

There's almost a little bit of implicature in the question that income equality is the most important feature. I think that AI will raise incomes—both for working-class people and for middle-class people and for wealthier people. I think it'll raise incomes across all of them, and so I'm actually quite positive on that. I can make arguments for how AI provides productivity increases and is positive on each of these levels. Now, there's some jobs where we'll just want the AI to be doing it versus the human. For example, driving—we actually want AI driving because they don't get drunk, they don't get tired, they have a lot more sensors to pay attention to the world around them, like lidar and infrared, so they can see the kid running out from behind the parked car. There are all kinds of reasons why we would want that. Those jobs change. But in each of these cases, for example, if you look at one of Greylock's portfolio companies, Cresta, they did a study of which people in customer service were most benefited by early AI, and it was the entry-level people—the people coming in and learning the job much more quickly. That's a pattern you can see across this, so I think it's beneficial across the entire thing.

Now, the inequality question is a much more fraught question for the following reason: I don't know of any human society organization where we don't run on the basis of inequality. Better investor, worse investor; better entrepreneur, worse entrepreneur; better business, worse investment; getting into college, etc. We run our entire human society on inequality. Even places ostensibly communist—who's in charge, who gives orders? Human beings are tribal creatures, so we have inequality inherently in the system. We try to orient it so that people can, through hard work and talents, rise up. I think equality of opportunity and equality of ability to make amazing things of themselves is a really good thing. But the end result is inequality. Then you say, 'Well, how much inequality is too much?' Obviously, there is an answer. When it's like, 'I am the autocratic ruler, say I'm Putin, and I say half of the country belongs to me, and everyone has to do what I say or I kill them'—that would be a problem. But people say, 'Well, a CEO shouldn't make more than 20 times what the entry level makes.' Where do you get your magic number? It just breeds the most ridiculous stock compensation, which led to the worst situations. So I want equality of opportunity, massive economic opportunity, ability to do your best work and express your talent. And I think AI can do all of that.

I think we want it to benefit both massively. One of my biggest worries is actually regulation. Obviously, being in Europe, one of our biggest skills... Yes, I'm terrified that we're just going to regulate every element to the point of it not being able to progress. It's a definite risk. This is one of the reasons why the vast majority of stuff I talk about technology and AI is: we will have much better tools to make much better things for human beings and society in the future. Let's make sure we get there to building those tools. For example, your average press person, your average government official will say, 'What's the most important thing in AI? We make sure those big tech companies don't dominate with AI.' I was like, 'Well, that's interesting. I think your most important job is: I have a line of sight to a medical assistant probably better than your average general practitioner on every smartphone. Don't you think your actual job is how do you get that on everyone's smartphone, so every single person in your country—maybe in the world—has potential access to good medical advice? Wouldn't you think that's your top job? Or how about a tutor for any age of human being in any subject? Wouldn't having access to all of that for every child in your country be your top job?' So interesting when you look at the balance sheet of a country—if you can impact the healthcare budget or the education budget by 5%, oh my gosh, yes. So that's the orientation, and that's the blind spot from the press and the dialogue.

When you talk to the right smart people, the answer is yes. For example, in Europe recently, because you've seen some of it, McCon has been doing a good job. The White House executive order—very good. The UK AI Safety Institute leading in the world, really good, helping the US, etc. So we have some glimmer of light. It was interesting, speaking of the UK AI Safety, it was Mr. Clifford—Matt Clifford—and he asked a brilliant question: 'What should be the AI strategy of medium-sized countries?' Which non-US country is doing it best? You can tell that's Matt's question, not mine exactly. It's a great question. Matt Clifford did a very strong public service by stepping out from his entrepreneur-first role temporarily to go and help the country set up the AI Safety Institute. And Ian Hogarth and Henry Doot—they're all doing really good work. When everyone around the world asks me where they should look for where the best work is being done, I'm pointing to them. So that's best in the world so far. Everyone should learn from them.

So I would say, for medium-sized countries, the basic answer is: don't try to just replicate everything. Don't try to say, 'We are going to have our own GPT-4 model or whatever the current time slice is, and that will be our own Bangladeshi version.' Because just like, say, you're going to have your own OS for your phone, your own OS for your computer—no, that doesn't make sense. What does make sense is to say, 'Given that these technology trends are happening, and that AI is a steam engine of the mind—just as the steam engine gave us physical superpowers, AI gives us mental superpowers—we'll have a cognitive industrial revolution across this, and it'll be much faster than the industrial revolution because of the speed it can spread through the world via the internet and mobile.' So when you're Indonesia or something else, you say, 'We know the tech companies are building these things. We know these things are possible with open source models. How do I most help my citizens, my industry, and my people participate in this?' For example, you don't say, 'I'm going to build my own supercomputer.' It's like, 'How do I get the right access from the hyperscalers to good compute that helps my industry and my citizens? How can I nudge them to provide systems and services that fit my cultural values?' So it's like a startup developer: you're not necessarily going to build your own frontier model, but you're going to build upon these platforms being constructed for things that help your society.

I don't think that it is an unusual threat to US democracy. Although I do think that one of the things is, look, China banned Western social media and other companies. So I think it's not unfair to say, 'Hey, if you're banning ours, we can ban yours.' I think that's the baseline of fairness. Now, that being said, part of the Chinese approach to these things is they view that all of their companies essentially work for their government. They think that's true of the West too—they don't realize that actually, in fact, we operate differently. Google does not work for the US government. Microsoft does not work for the US government. There are ways they are accountable by law, but they have to go through a legal process. And given that legal process doesn't exist within China, one worries about security vulnerabilities and other things because the companies don't have the kind of autonomy that our companies have—where, for example, they can sue and say, 'No, we're not going to respond to this subpoena or request from the government because we think that's an illegal order,' which you can't really do in China. So that kind of thing does present a possible concern and risk. I don't have any data that suggests they're doing anything right now, but it's possible, and you want to close down that possibility. Now, what the US government proposed was to say, 'Get to a form of governance that is not the Chinese form of governance—that is within the Western divesting as a version of that.' If TikTok or ByteDance became a public company, launched on the NASDAQ or something, that would give it the kind of governance that would say, 'Great, we understand that the governance is by public rule of law, not potentially corruptible by a government that doesn't have that public rule of law.' That's a good place to be.

I think ByteDance waits for the election because they presume that Trump could get bought off by investors. Since he's a coin-operated person in his entire life—not just in his presidency. He did a great Domino's Pizza ad from the '90s, it's brilliant, very good. But he is completely coin-operated. And so, you know, it's not that he's for sale—it's that he's for sale for so cheap.

No, no. And you know, it'd be difficult given the harm that I think he's doing to the country and the world. I think he's amongst the greatest ills—he's made huge negative damage in the world.

There's two different questions there. One: Zuckerberg is one of the best meta-strategists—and I deliberately punt on 'meta'—but meta-strategist, like what is the game we're playing? Of any technology leader on the planet, I learned from him on this. He's super good. In fact, one of the things I have to do is send him the speech I just did in Peru, because I was referring to 'Carthago delenda est,' and I hadn't realized that was actually one of the things he put on his T-shirt until I saw a picture recently. But he's a really great meta-strategist, and I think he's seriously underappreciated for that. Now, in the question of public markets, I think part of what you have to do is build communication and credibility over time with public markets, where they go, 'Okay, you haven't surprised us. You may have made a new announcement, but you've been building towards it.' So they tend to react when you say, 'Look, we're doing really well, but our profitability is going to go down because we're going to invest in all this stuff.' They go, 'Ah, we don't understand how to process that.' So the surprise response is a negative response. I think obviously the public market should have responded differently because I think he is a great meta-strategist, and his turn into AI, who is going to matter fundamentally here, is 100% correct. I totally agree with you, and I also love his brand change.

Why don't we watch first, just because then I'll put both my answer and my commentary on the Reed AI answer together.

I've changed my mind on how fast generative AI is advancing. I initially thought significant breakthroughs in creative fields would take longer, but AI tools have rapidly evolved in writing, art, and music.

So on this one, it's funny—it's almost like you could accuse Reed AI of being like the wise person with the elephant, because it's an AI. It's like, 'What I most changed my mind on is AI and how it's accelerating.' And it's like, 'Nope, actually I haven't changed my mind on AI stuff in the last 12 years—not 12 months, 12 years.' Yes, I have changed my mind, and I would say that my answer to this question is almost much more of the response to AI. Because while I think I'm confident that this will still happen, trying to get people to see the positive sides—like, look, most people are like, 'Oh my God, why are we building this AI? It's dangerous, risk discourse, risk discourse.' Look, we have amazing things in front of us, and that's why it's worth navigating the risk. The slowness by which persuading journalists, academics, and other people to say, 'Hey, by the way, your discourse around AI is like the discourse when the printing press was launched—people would say it spreads misinformation.' You're like, 'Okay, by the way, the printing press was a good thing, you might have noticed.' So let's think about what could possibly go right. And the slowness by which they're getting to what could possibly go right—I think we just have this propensity to be negative in a lot of ways, humanity.

Okay, you can—it's like showing yourself your report card. Yes.

The biggest misconception is that AI will completely replace human jobs. In reality, AI will augment human capabilities, transforming jobs and creating new opportunities we can't even imagine yet.

So I broadly agree with this one. I guess Reed AI is going to answer 'AI is the answer' in each of your questions, clearly—once more, the wise person and the elephant. But I do think that what people presume is that with a massive increase in cognitive capability, that will just create a bunch of people on the dole. And actually, in fact, I think what it's doing is transforming a lot of jobs. Just as we discussed, learning how to do prompts and learning how to use it will be an essential tool. For example, even most jobs require some facility with reading, so you'll have to be able to use these tools in some useful way. But I think there will be lots of new and interesting human jobs.

Well, I think we'll have a whole swath of jobs in the kind of prompt engineering, AI research assistant, kind of directors.

Okay, biggest business influence or inspiration, and why them. Okay, this is fun. My prediction will be we'll get this one wrong, but we'll see. Let's see how this goes, because by the way, as I told you, I hadn't listened. Can you predict this? Yeah, I don't know actually what it will say. I have a little bit of zero idea, and it's one of the reasons why I'm surprised. Yes, and so part of what we decided in doing this fun thing is I literally have not listened to any of these answers before, right here, right now.

I'd say Satya Nadella. His leadership at Microsoft, focusing on empathy, innovation, and a growth mindset, has profoundly influenced my views on leadership and culture, especially as I've watched him successfully navigate rapid technological changes while fostering an inclusive and innovative environment.

So it's not bad—it's not bad. It gave pretty good points. It was much better than I was expecting. Most VCs I interview, yes, incredible. So points to Reed AI. Look, Satya has been probably the thing I most learned from—how do you do cultural transformation of massive scale organizations? And he has demonstrated that that is doable and possible in ways that I don't know if anyone ever has before.

Well, I think part of the benefit is he comes to Microsoft as an outsider-insider. His whole career was through Microsoft, but he was in charge of Bing, in charge of Azure, the one launching new strange projects versus the person sitting on top of Office. That gave him both this outsider-insider perspective: 'I understand what is great about Microsoft, and I also understand how Microsoft needs to grow and evolve.' Those two things together have made him amazing in his transformation. And he's willing to take these really bold risks—like, for example, 'I'm going to put a billion dollars into a 501(c)(3) on a partnership with OpenAI.' He does these bets that are super smart, even though I think the vast majority of public company CEOs would never make that bet.

Oh, and then five days later when I stopped answering this question—like, what's immediately coming to mind is some investments that didn't work out. I think I'm not going to call them out because it seems ungentlemanly as a partner in a VC. But there are a couple of investments I've made that I thought, 'Oh, this is going to be great and huge,' and it was completely fumbled.

They're different. In one case, it was the people. In another case, it was the difficulty of the market. Part of what you learn as you get more experience in VC is that sometimes markets are just wrong—difficult. Now, here's one that I got wrong initially that will be fun to share. We were talking about bad competition being the central thing. So I think I was one of the first couple of people that Elon Musk pitched SpaceX to, and I literally kind of laughed at him. Because, by the way, to my defense, his pitch was: 'I'm going to be the first person to send life to Mars because I'm going to send a turtle to Mars.' And you're like, 'That's not a business.' That was the pitch.

It's there, another slide. And there was a fool in the room, but the fool wasn't Elon—the fool was me. And the thing I learned from watching Elon's rocket success—pun intended—was that if an industry has had decades of technological innovation that are not reflected in the market because the structure of the market locks in this anti-innovation oligarchy, it's hard because there's something locking it in. But if you can break it, it's huge. And Elon is one of those people who takes the whole concrete wall down with him when he's going through it. So if someone can do that, it can be really good. That was an instance of a mistake, because I should have said, 'Yes, I will invest in this.' And now, of course, I've updated: when I think it's somebody who could take on the structural change of a market because the technology has already been built, then I will consider investing.

Look, I think they're both very smart. There's a deep value in allocating capital to the kinds of products, services, and companies that could be transformations of the world. So maybe there are other things that would be better—like being entrepreneurs or CEOs—but I think it's a real contribution.

So obviously Keith is super smart. He's worked for me twice—once at PayPal, once at LinkedIn. And I provided him his instrumental reference for working at Square and a sack of other things. So I called Keith because he had worked with the founders longer and earlier, and I just literally met them a couple of days before. I was sorting through the questions: 'What are the questions a smart person might have once they've sat with this project for more than a couple of days, and have you got answers to those questions? How do you think about it?' Which is what I do on every investment. And Keith was quite helpful to my making my decision because he said, 'Look, I've met them, I've talked to them. They're smart, they're first-principle thinkers. They're not hiding any skeletons in the closet.' That is, as you know, as an investor, extremely helpful, because you're like, 'I met them three days ago, it seems very exciting. Let's offer them a term sheet right now.' So all of that was quite good, which is the reason I invested and joined the board. And I was trying to persuade Keith to get a little more closely involved too. I think he was a happy investor, but he wasn't.

Well, maybe it's something along the lines of that it actually has the marketplace demonstrates the network effects that we expect to have. But that's why I like marketplaces—because they have network effects. I'm not quite sure what line he's remembering. We'll have to ask him.

Oh, here we go. Yes.

First-time founders often don't iterate quickly enough based on customer feedback. Rapid iteration and adaptability are key to finding product-market fit and achieving sustainable growth.

That's interesting—not bad, not bad. It is definitely one of the major failure points, because the over-belief that your vision is the one perfect vision versus getting data. Part of what I suggest to founders is that they should always be trying to get disproving data to their investment thesis on their business and on their product. Even by going around and asking smart people, 'What do you think of my product? What will go wrong with my business?' and aggregating that—it doesn't mean everyone who gives you something is right. Maybe most are irrelevant, trivial, wrong. But when you begin to hear the pattern, that's where you go, 'Oh, I need to adjust.' And you might even learn you need to adjust before you've launched your product.

Yes, the way they build the cap table, the way they craft their ICP—everything is distribution. Yes, that would be another classic one: distribution, especially in mobile internet software, is more important than quality of product.

Yeah, so look, that's always the challenge in startups. And it's one of the reasons why the internet has been much better for entrepreneurs than mobile ecosystems, because the mobile ecosystems are controlled by solitary providers in ways that the internet is not. That's why we've seen a lot more generativity on the internet than mobile ecosystems.

Okay, okay. Oh, interesting. This is going to be a talking to Reed AI. He's sending Reed AI to these 20 VCs—I just get him to do it.

In 10 years, I'll be leading an AI-driven public health initiative to predict and combat pandemics, and pioneering AI education systems to reduce global inequality. I'll be shaping international AI ethics regulations and involved in space exploration projects using AI to support humanity's expansion to other planets.

So Reed AI will certainly be doing that, because I'll be setting Reed AI to do all those things. We're going to be very busy. Space, income inequality, left out climate change—it's just one week, yes, exactly.

Yes, yes. Look, it's part of the earlier questions. I don't know if—look, I always learn. I'm a student of decision-making, so I'm always looking back on decisions I have made. It isn't that I would necessarily remake them, but how would I learn to make decisions better in the future in everything I'm doing? So I wouldn't say, 'Would I make that decision differently? Would I end up in a different life path that would be better than the one I'm in?' I thought it was interesting that when Elon was interviewed, they said, 'Are you happy?' and he said, 'I think most people think they want to be me, but actually they wouldn't.' I thought that was a kind of harrowing moment, actually. Yeah, no, I look, I think he is driven. And by the way, anyone who achieves that much amazing success is driven, and that level of drivenness is very stressful. So you have to go with that stress. And Jensen said something similar—like, 'Would you advise people to be entrepreneurs?' and he was like, 'Oh my God, it's so hard.' Yeah, I didn't love that. And he also said, 'We should lower our expectations because it will make us more resilient.' I was like, 'No, no, keep your expectations.' And by the way, I think in retrospect, he said, 'No, no, I'd still do it again.' After he thought about it more, he was like, 'Okay, no, no.'

Well, I think the part of the Reed AI answer that's absolutely correct is how do I help not just industry, but society and the global ecosystem realize the human amplification benefits of AI. Some of that is public policy, but how can we have a new golden era of humanity? Just as in my book 'Impromptu' and my speeches in Bologna and Peru about 'Homo Tech'—we evolve ourselves through technology. How do we have that grand step forward for humanity? That is what I would like to be continuing to contribute to. And in 10 years, maybe I'm doing that more as a thinker, an advisor, than as a board member, investor, inventor—although maybe it's all of the above.

That's a great question. We ask a version of it on my podcast 'Possible' actually. I should have an answer given that I asked the question. Reed AI—there are so many questions that I ask that I do not have answers to. I'm just lucky that no one turns the tables. Yes. I guess what I would say is: what are the things that I love and have learned about the Silicon Valley approach to building the next world—our future world—and what are the things that I think Silicon Valley still needs to learn?

So on the first, I have learned so much by just the fortune of having gone to Stanford and learned about software entrepreneurship. I never would have gone and sought out Silicon Valley—it was literally 'oops, I'm a student at Stanford, and a bunch of my friends have started doing this, and I started paying attention and said, 'Hey, that's cool, let me go do that.' There's a ton. One: every scale problem you think of—30 to 80% of the solution is technology. Criminal justice, economic justice, medical, climate change—having an orientation of how do we deploy technology to help that scale problem, because technology changes the possibility curve, changes the cost curve. So how do we do that? And Silicon Valley is one of the most intense places in the world of how do we organize corporations, organizations, and startups to tackle new technological problems. How do we take risk, allocate initial early capital in a seed, evaluate it, grow it, build networks and teams around it? How do we have an entire entrepreneurial network within Silicon Valley where the coopetition is very important—both competing and cooperating? The classic theory is 'no, you should compete and not talk to each other.' It's like, 'No, you should talk to each other all the time and compete intensely.' That whole approach to how we solve problems—and the classic aphorism is 'to a hammer, everything looks like a nail.' But it is an amazing hammer, and it works on a lot of things—not everything, but a lot of things. So that's what I'd say: the things I've learned from Silicon Valley. And obviously, there's a whole bunch of entrepreneurial lessons, like your distribution strategy for a software thing is more important than your product.

And then on the things that Silicon Valley needs to learn: by nature, the whole 'Hey, we're pirates, we're disruptors' is like, 'Hey, we're building this new thing, just trust us.' It's like, 'Look, now technology is really centrally part of the fabric of human life.' So you can't just have your engagement with the world be 'I'm going to go build something that's going to totally change your life, and just trust us when we give it to you.' You need to be in conversation more—whether through the press or directly with government—saying, 'Here's our theory about how the world should be, here's how we're operating, here's our intent, here's the things we're doing.' It doesn't have to be revealing your secret product plan, but an explicit sense of 'here is how we're trying to be in the mix of society, and these are the things we care about.' So that people can be in dialogue when they say, 'Well, actually, in this part, for example, whether you're a phone provider or a social network, we care about what you're doing with kids. We don't think you're being smart yet about what you're doing with kids, and we'd like you to tell us more about how you're navigating mental health issues or peer pressure.' The fact that kids' bullying at school can follow them home—what are you doing to help with that? Because that really matters to us. Being in dialogue about that, I think, is now we're no longer just the pirates and disruptors—we are part of the genetics of what happens in society. With power comes responsibility. We need to take that responsibility. And the minimum beginning of responsibility is dialogue.

Well, it was a genius invention that came about of necessity because the Chinese government didn't want to have any social networks with more than 500 followers. So how do you drop out the whole following mechanism and still get high-scale? People are producing content, individuals are consuming content. How do you make that happen? Because the way social networks like LinkedIn and others made this happen is through a graph—I have a graph of connections, a graph of followers. And they couldn't do it that way—they couldn't do followers all at once like YouTube. So what they did is they paid for so much content to be created, but that created a scale effect in the entire thing. Because TikTok watches you the moment you launch the app—how many seconds did you spend on this? Did you swipe? It's learning about you to the next thing, because it's matching you to the flow of current content. Now, it's a social network as much as there are individuals creating stuff that's being consumed by other individuals. But it's not a social network in that 'I'm connected to my friend Harry on LinkedIn.' Sure.

It has been an absolute pleasure, and I look forward to the next.