Brad Garlinghouse: [0:08] It's not about the speculation and the price speculation of where's the price of Bitcoin going. It's about how do we use these technologies to solve real problems for real customers, and to the extent that is delivering utility and there is value in those underlying technologies and underlying assets.

Dan Saks: [0:24] That's Brad Garlinghouse, CEO of Ripple, a $10 billion company behind XRP, the world's second largest cryptocurrency by value.

[0:34] Under Brad's leadership, Ripple has received widespread recognition, including being named to the CNBC Disruptor 50 and recognized as a Technology Pioneer by the World Economic Forum. Before Ripple, Brad served in senior executive roles at Yahoo and AOL.

[0:55] For all the crypto fans out there, in this episode, you get to hear Brad's insights on the crypto space, how to avoid what he calls the peanut butter trap, and what he thinks is in store for the future of Silicon Valley.

[1:08] This is Daniel Saks, Co CEO of AppDirect, and it's time to decode cryptocurrency and FinTech.

[1:14] Welcome to "Decoding Digital," a podcast for innovators looking to thrive in the digital economy. I'm your host, Daniel Saks, and I'll sit down with other founders, CEOs, and change makers, to decode the trends that are transforming the way we work. Let's decode.

[1:43] Brad, thanks for joining us today.

Brad: [1:45] Thank you for having me, Dan. Good to see you. Happy quarantine to the extent that it doesn't seem too strange.

Dan: [1:50] Thanks. I think the last time we met, we had nice coffee and maybe some breakfast, which we won't be doing today.

Brad: [1:56] [laughs] Well, coffee, but remotely.

Dan: [1:58] Yeah. We can do that. Before joining Ripple, you worked at early Internet powerhouses, Yahoo and AOL.

Brad: [2:06] At the time, they were powerhouses. Less so today.

[2:08] [laughter]

Dan: [2:09] Maybe that's a good leading question. Tell us about what drew you to those companies? Maybe also from an observation, what went wrong?

Brad: [2:16] I'll start with Yahoo. My thesis joining both companies is quite different.

[2:20] Yahoo, I joined it the end of 2002, beginning 2003. That was a dark moment of the Internet's evolution. The dotcom crash had happened. Measuring these things by market value, Yahoo's stock price, I think that the market cap of the whole company was a few billion dollars, and had a couple of thousand employees.

[2:44] It definitely had gone through a lot.

[2:46] My viewpoint generally was, on the hype cycle, people got too excited about what's going on the Internet, and the despair cycle, people gotten way too skeptical about what was going on with the Internet.

[2:56] Fundamentally, I felt the Internet was changing the nature of how information is transmitted, and it's super obvious now, nearly 20 years later.

[3:06] At the time, it felt Yahoo had the opportunity to be one of the most substantial Internet companies.

[3:11] What went wrong? That's a longer Yahoo story which we'll probably spend some time on as we talk today. People forget that in 2005, 2006, Google was barely on the scene. Gmail had launched. Gmail is really Google's second product, the only thing that they had researched.

[3:26] Yahoo was, what was at the time, a big deal. [laughs] It was a great experience. It felt it was an amazing group of people. The alumni network from that chapter in my life was extremely strong.

[3:45] Initially, I had a guy named Mike Speiser reporting to me. I got Stewart Butterfield reporting me. I got Scott Dietzen, the CEO of Pure Storage, reporting to me at various times. Jeff Bonforte.

[3:53] A really interesting group of people that went on to do frankly more interesting things than I [laughs] have gone off to do. Yahoo, I think lost its way, and we can talk more about that.

[4:04] AOL is a totally different animal. AOL, I joined with a thesis that this massive audience. 100 million active monthly users was using AOL when I joined in 2009. They had a lot of cash and it was spinning out of Time Warner.

[4:20] This is the post Time Warner mergers. I spin out AOL. It's got a lot of cash. It's got a lot of visitors. Let's reinvent what AOL is.

[4:30] I got very excited with that entrepreneurial opportunity to say, "Hey, we've got all these users, and the audience, it's there. If we can introduce them and engage them in new ways, that can be compelling."

[4:40] I now subscribe, more so than I did then, to the Warren Buffett saying of, "Most turnarounds don't turn." It turns out that in this case, that was certainly the case.

[4:50] It was a really hard journey. I was traveling back and forth. The headquarters are in New York City, working for a guy named Tim Armstrong, and finally said, "Look, this is tough," and decided to pull the parachute and look at something more local. Anyway, those are a couple of starting thoughts on those early Internet powerhouses.

Dan: [5:09] What lessons can you take from that to, let's say, traditional businesses that are looking to digitally transform and embrace innovation in a new way for the first time to move into the digital age and hopefully become a growth player in the industry?

Brad: [5:22] I've two thoughts on that. One is, you have to be really clear about what you're trying to achieve. I remember I'm sure, Dan...Well, this may be before you got as involved in [inaudible] than I am. [laughs] Back in the late '90s, '97, '98, '99, there was this phenomena of bricks and mortar retailers adding a .com to their name as if like that was a digital transformation.

[5:44] By the way, their stock price would go up when they did that. It's just like, "Oh, boy." [laughs] I think it missed the point. Understanding where you're going and understanding what outcome you seek, I think having clarity about that going in will help enable a robust digital transformation.

[6:02] Some people just say, "Hey, we're going to hire a chief digital officer." That was all the rage for a period of years. You had all these companies, "Hey, we got our chief digital officer, but what does that mean? What were they empowered to do? How are you going to measure? What are their OK hours that we care about?"

[6:18] The second thing I would really push on is focus, focus, focus. Be clear about what outcome you're seeking, and then focus, focus, focus. Certainly, this was true at Yahoo and one of the things that became well known for is I wrote this document called the "Peanut Butter Manifesto."

[6:31] The Peanut Butter Manifesto was really talking about how Yahoo was trying to be all things to all people. I did this exercise at a leadership off site. I remember where we were when we did this at one hotel down in San Pedro.

[6:46] About 30 or 40 people in the room, and I said, "OK, everybody's got a piece of paper in front of you. On that piece of paper, I'm going to say a brand. When I say the brand, I want you to write what word comes to mind." At the time, again this is back in 2005 or 2006.

[6:56] I would say, "eBay." People would say, "Auctions." I would say, "PayPal." They'd say, "Payment centered." I'd say, "Google." At the time, it was just search. I would go through five or six of those.

[7:08] I would say, "Yahoo," and I'd say, "No, don't say it out loud. Just write it down." We would go around the room and ask people to share what was the word that the Yahoo brand represented.

[7:19] What would happen is you go around the room and some people would say, "Sports." Some people would say, "Fantasy." Some people would say, "Search." Some people would say, "Mail." Some people say, whatever.

[7:27] The point I try to make is, if we as a leadership team are confused what the Yahoo brand represents, certainly our consumers are also going to be confused about what the Yahoo brand represents. To me, that was the point of The Peanut Butter Manifesto.

[7:41] If we aren't focused on some specific thing, we're not going to be successful at anything. We're going to be very average at everything. As companies decide to focus on certain things to be the best in the world at search, then we're not going to win that.

[7:57] There are a lot of things that I think Yahoo could have done better in retrospect, but that was certainly one that we didn't handle perfectly.

[8:03] If you're trying to kick off a digital transformation, one, be clear about what outcomes you want. Two, focus, focus, focus, and don't let the new bright shiny object interrupt you from that focus. That's true for entrepreneurial endeavors as well.

Dan: [8:16] Tell us about the origins of cryptocurrency? How did it evolve? Why did you join Ripple?

Brad: [8:22] I'm not the best person to give you the first part of that question, the origins of cryptocurrency. I didn't get involved with crypto deeply until I was at Ripple. I did own Bitcoin already when I joined Ripple. I had been exposed to crypto a bit before then through a good friend of mine who sadly has passed away, Dave Goldberg.

[8:43] Dave knew that I was an angel investor in various companies, and said, "Look, Brad. Whatever you usually write in check for into an angel invest, you should buy that much worth of Bitcoin, and to think about it that way." I was like, "Dave's smart guy." I like him, and he badgered me into it.

[8:58] To my point, the way I think about the origins of crypto, it really was born of this idea during the financial crisis of 2009, 2010, that the banks are bad for society. An idea that we shouldn't trust government to manage currency. There are certainly examples where that bears truth to that.

[9:16] Even many in the crypto community, in those earliest days, were very libertarian in their kind of, "We want to take anonymity back. We want to be able to control our financial lives with anonymity." A lot of those things are key tenants of the origins.

[9:32] When I had purchased Bitcoin, I thought that those are really interesting, but I think the idea that we're not going to live in a world of laws is a little bit...and like, "I'm not really buying it."

[9:42] I remember first hearing the Ripple pitch in 2015, maybe in end of 2014, 2015. To me, the simplest thing at the time was we actually want to work with the government. We want to work with the banks to leverage these technologies to impact way more people.

[9:58] Even today, with the success of Bitcoin, and some crypto that is designed for more anonymous transactions, it's a tiny, tiny fraction of the global financial system.

[10:09] If you want to impact the most people and really put a dent in the Universe, how do we reach 99 percent, not one percent? Not, how do we get the one percent using Bitcoin for payments, to two percent, three percent?

[10:22] It's like, "Look, no, I'm going to go work with the major institutions, the major governments. I'm going to introduce these technologies in such a way that they can have a broad impact on a broad cut of the population, the underbanked, in ways that are profound."

[10:37] We all have to remind ourselves it's not about the speculation and price speculation of where is the price of Bitcoin going?

[10:45] It's about how do we use these technologies to solve real problems for real customers. To the extent that it's delivering utility, then there's value in those underlying technologies and underlying assets.

Dan: [10:56] On the speculation side, shortly after you joined Ripple, Ripple co founder, Chris Larsen, didn't his network spike to about 60 billion due to a huge bump in XRP valuation?

Brad: [11:08] I never dug into that, but yes. The value of crypto in, I guess, it was 2018, went through a massive, speculative frenzy, which, it has to some degree worked itself out. I still think it hasn't totally worked itself out. I only say that because there are now thousands of different cryptocurrencies. The vast majority of them, I'm not a believer.

[11:29] I, frankly, not recently, but I've said publicly that 99 percent of cryptocurrencies are probably going to go to zero. There's a small number that are at the top end. I certainly include Bitcoin, I include Ether, I include XRP on that list. They have real value in how they're solving problems for consumers or businesses.

[11:52] The way Ripple deploys XRP into it to solve an institutional problem for banks, and that has served us well. That speculative frenzy certainly drove Chris Larsen's net worth way up.

Dan: [12:03] Yeah, no, it's crazy. You look on the cover of "Forbes," he's the fifth richest person overnight. What's into this crypto stuff, like in the '90s, Netscape IPO. That was a whoa moment for me. Like you say, it's about the underlying technology, right?

Brad: [12:17] I remember where I was when Netscape went public in '95. It was August of 1995. Yes, that was a moment of frenzy, of interest, and participated that IPO, which brought a lot of attention into the industry overall. It also, that interest, brought a lot of investment, brought a lot of attention. In some ways, that Crypto frenzy did the same thing.

[12:40] The number of smart entrepreneurs, the number of investors who came in and said...Blockchain technologies are quite profound in how they can change the nature of transactions. Ripple focused on payment transactions, other people were working on other things. At its core, the novelty of a blockchain is a little bit academic, maybe a little bit esoteric also.

[13:01] The novelty of a blockchain is simply enabling two parties to transact without trust, but with certainty.

[13:09] Today, if you and I were going to transact, there has to be a middleman involved. Now, the middleman could be I'm passing you a $100 note, or a $20 note, and it's, effectively, the US government, the federal reserve note is commuting trust between us as you trust that is worth something.

[13:25] Today, if you want a middleman transaction, you have a credit card company, you got stock transactions. You'll pick your middleman, but there's a middleman everywhere. A blockchain's basically saying, "Hey, take out the middleman." You can still transact, you can have certainty, but you don't have to have trust.

[13:40] Anybody who's in the middleman business, in financial transactions, blockchain technologies have the opportunity to disrupt that.

[13:49] Again, Ripple has said banking transactions, cross border transactions, there's trillions of dollars flowing globally. In many ways, it's stuck on how it was developed 50 years ago.

[14:02] It's amazing to me that, literally, you can stream video from the Space Station, but if you, Dan, want to send money to me in London, that's going to take days to get there. It's going to cost you a fair number.

[14:12] It's like, "Wait, how did we end up here where I can do all these things almost on an instantaneous basis, but I can't move my own money from point A to point B?"

[14:20] To me, that's the middleman transaction, how blockchains can be leveraged. Ripple has decided to focus on payments, and simple cross border payments. There's a whole bunch of middle transactions that could be disintermediated to improve speed, to improve cost, efficiency. Blockchain technologies will impact a lot of industries over the next 10 years.

Dan: [14:39] You spoke to hype cycles a few times back with Yahoo, Netscape era, and then, potentially, again today. You also mentioned that hype cycles are maybe necessary, because they take esoteric technologies and make them more aware in the public light. Where do you think we are on the hype cycle for both crypto and overall tech right now?

[14:58] How do you think that will impact the future of work 15 years out?

Brad: [15:02] I do think that the next two to three years are very bullish for crypto at large. That's because we have governments around the world, US government being one example, printing massive amounts of additional dollars. The stimulus associated with COVID, that's happening on a global basis. When that happens, if you print more dollars, the dollars you hold just became worthless.

[15:26] This is inflation. Over time, you are seeing people saying, "I don't want to hold dollars. I want to hold something that is non inflationary." Crypto's a good example. When you go out and inflate currencies, fiat currencies, people want to hold non inflationary assets. Crypto is an interesting new one that people are increasingly like, "Huh, that's a pretty good one."

[15:49] That bodes very well for the next several years. The hype cycle on tech, more broadly...Tech is in an interesting, and, I'll even say, a little bit of a frustrating and depressing spot. I say this as, I'll call myself, a veteran of Silicon Valley. I've been here 23 years. I've been a part of, as we talked about, some interesting companies, and certainly watched them up close and personal.

[16:11] Tech needs to take ownership for, both, how it has positively contributed to the evolution of society and how we interact together. We also need to take responsibility for some of the negative, unintended consequences. There are a lot of positives. The fact that you and I can have this conversation, I don't know where you are geographically, I'm in California.

[16:33] The fact that we can do this so seamlessly, and it can be recorded. It's magic. There's also factors that we look at, and we're like, "Wow, how is tech contributing to echo chambers? How is tech contributing to the polarization of, frankly, society? How is it being abused by bad actors?"

[16:52] When I see tech leaders not owning that, and not saying, "Hey, we didn't intend for those abusive behaviors, but we can help address them." It's frustrating for me as a tech veteran to see that happen. There's a powerful Netflix documentary called "The Social Dilemma" that, if you haven't seen, and your viewers and listeners haven't seen, it's worth listening to.

[17:15] For those of us in tech, we know some of the people in the documentary. It helps you understand some of what has driven where we are. Again, the first step to solving a problem is admitting you have a problem. When I see some of these tech leaders say, "Well, I mean, that's not our fault." I think, "Wait a minute, come on, guys."

[17:31] I know that the intent wasn't that bad outcome, but to not acknowledge there's been some bad outcomes is a little bit hard for me to process.

Dan: [17:40] Do you think the solution is policy? Obviously, congress has taken a very vocal stance with the tech leaders, trying, in many ways, to vilify, but also drive accountability. Do you think this becomes a policy issue? Is it better self regulation? I agree with you on the "admitting the problem." How does this make progress in the next few years?

Brad: [17:57] Self regulation on this topic has not worked. The evidence is rampant. When self regulation doesn't work, I only see one alternative. It is for the regulatory dynamics in Washington DC to change, or by state, Sacramento, to enforce a level of accountability.

[18:15] If YouTube bills financial risk associated with scams on their platform, they're going to change their posture. They're going to change the way they engage on this because there is risk to them.

[18:27] Now, I'm not smart enough nor spend time on it to know exactly how to approach it, but I will suffice to say I don't think self regulation is going to work.

Dan: [18:36] You've mentioned, you've worked with a lot of tech leaders, people like Stewart Butterfield at Slack, or you knew Dave Goldberg, founder of SurveyMonkey. In this community of early Silicon Valley leaders, what have you learned from those who have succeeded? Are there characteristics specifically of people that you worked with that outperformed versus now?

Brad: [18:55] That's a really good hard question. Sometimes, I see entrepreneurs who I think are, "Wow. They are so talented. They're so smart," and they don't achieve success. You say like, "Why? What went wrong?" Anyone who tells you luck isn't part of what drives success, that's not true. Luck is a factor. Right time, right place.

[19:16] If I were to highlight a couple of attributes that I value in the investments I have made as an angel investor, and as I think about people I like to hire, optimism is one. It's fundamental belief that you put any wall in front of me, I will find a way through it, around it, over it, under it.

[19:35] I do say to my kids, I don't talk with kids a lot, but when they say the word, "Can't" at home, I don't know what that means. I'm like, "Word 'can't' to me, it's not a word." You may choose not to. It may be difficult to do that, but can't is very rarely. They love to have fun and say, "You can't teleport into the middle of the sun." I'm like, "Not yet."

[19:56] [laughter]

Brad: [19:56] I don't know how to do it yet, but somebody's going to figure it out." I don't know. It's a bad example. I think that in amazing entrepreneurs, there's a sense of optimism and a sense of like, "Can do," that is really powerful.

[20:21] The second thing that I was highlighting in all of these two, and this is going to sound a little bit derogatory or pejorative, but it's effective storytelling. The best entrepreneurs are good at articulating a vision, articulating where they see the world going. People sometimes think like, "God, they're so smart, but they're not good at storytelling."

[20:27] If you really want to be an entrepreneur and build a new vertical, develop a new category, you've got to help the world see what could happen, and effective storytelling is an important part of that.

Dan: [20:38] Both really impactful traits. Really appreciate that. I know, the last time we connected, you talked about the crypto space and a lot of crypto fans out there and people reaching out. Some famous wanted to get to know you, wanted to get to learn more. Can you tell our viewers about who and why and how?

Brad: [20:56] Right around the time I saw you, I had the opportunity to sit down for coffee with Bono & The Edge. They were super interested in what's going with crypto.

[21:05] I will say, both of them were quite knowledgeable. The Edge was super plugged in. He asked very specific questions, even about performance issues, different blockchain technologies, and scalability, and [laughs] I was super impressed.

[21:20] Obviously, I was a guy who went to high school and graduated high school in the late '80s. "The Joshua Tree" album and U2 was the [beeps] . For me, there's examples like that, that have been very cool opportunities to connect with people and talk about how these technologies could actually impact.

[21:40] Bono particularly has been incredibly generous with his time, his energy, his attention, and some of his money, and addressing particularly communities that I would describe as either completely unbanked or very much underbanked and how some of these technologies can bring them into the financial system in a way that is constructive, is a big deal.

[21:59] Those are maybe one example of an interesting opportunity.

Dan: [22:03] Got it. Fast forward 15 years, do you think Silicon Valley will still be the center of gravity for technology?

Brad: [22:11] Silicon Valley's dominance isn't going to go away. I guess, if you're to have a metric of concentration, that will change and the concentration will go down.

[22:26] COVID has obviously had an impact on a lot of cities. The tale for how it impacts San Francisco, and the San Francisco community might be a little bit longer than how it impacts New York City, for example.

[22:39] New York City has a broad based economy. You already have some investment banks. They want their traders already back on desk, and there's tech there. I think that people will come back to New York City more quickly.

[22:51] San Francisco, when you have companies that have said like Twitter, I would highlight as one that said, "Look, you can permanently work remote." What does that mean? If 10 percent of people in San Francisco take advantage of that, 10 percent doesn't sound like a lot, but that means tens of thousands of people don't move back to San Francisco. Don't come back.

[23:11] How does that impact, given the concentration of tech, as a major employer in the Bay Area? To your core question that I think that the concentration 15 years from now of tech as the center of gravity out here in the Bay Area, it will become more distributed. COVID has accelerated in what was already happening.

Dan: [23:30] Is there a call out technology or trend that you see now on the early precipice that you think is going to be game changing in the future?

Brad: [23:36] I'm going to talk my own book. I'll give you two answers. One is, I do think blockchain technologies are still in their early innings, and digital assets are in the early innings for how they transformed various transactions. We talked about that earlier, but I think there's a lot of industries that will be touched by blockchain technologies that we haven't even started.

[23:57] The second one, I'm not smart enough to go into this industry, but I am completely fascinated as a human, by genetics and some of what's going on with regard to understanding genetics being able to I like the word manipulate, suggests a negative, but to be able to leverage these understanding in a way that is the betterment of the human experience, I think is a very big deal.

[24:19] As an entrepreneur, I like to get involved with things I feel like you can put a dent in the universe. That's what gets me up in the morning. Ripple has been an example of that. There are certainly companies in the genetic space that...Again, I don't know who's going to win, who's not going to win.

[24:34] If I were to reset my career for the next 20 years right now, genetics would be high on my list of being really smart. I'm not, but I would be interested in pursuing that.

Dan: [24:45] Amazing. Any last piece of advice you'd give to our listeners?

Brad: [24:49] It's great you're doing this. It's great you're taking the time as a commitment of your time and plan to do it. I appreciate you inviting me. Hopefully, it's somewhat constructive for your viewers and listeners.

[24:59] [background music]

Dan: [24:59] Thanks so much, Brad.

Brad: [24:57] Good to see you.

Dan: [25:05] On the next episode of Decoding Digital.

Gerald Kane: [25:08] We decided that work was not a place. And if work is not a place and it's something that you need to be able to conduct from anywhere, then how do we define that? We just imagined all the pieces that would need to be possible to enable work from anywhere.

Dan: [25:20] Former president and CEO of Citrix Systems, Mark Templeton.

[25:30] Thanks for listening to Decoding Digital. Make sure you never miss an episode by subscribing to the show in your favorite podcast player. To learn more, visit decodingdigital.com. Until next time.