All-In Summit 2023: Bill Gurley presents "2,851 Miles"

I'm Bill Gurley. I got to Silicon Valley in about 1997 and was fortunate enough to become a venture capitalist in '98. And the entire 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 D.C. Turns out D.C. lawyers do a lot of things that aren't lawyering. And he listened to what I had. He said, 'I'll 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.' He goes, 'He's coming to me? That's pretty nice.' He goes, 'Do you have a conference room?' I said, 'I'm a venture capitalist. We have lots of conference rooms.' So he said, 'I need you to get some people together. And here's the catch: they need to bring $5,000 each.' Hung up the phone. Started thinking, 'All right, I got six people. We got board members, CEO, $5,000, $30,000.' He's calling me back next week. 'How's it going?' 'Great, I got six people, $5,000.'

'We're ready to go.' He goes, 'Most of these meetings have 10 to 12 people.' I said, 'Shit.' 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 calls me back a week later. He goes, 'Bill, how's it going?' I go, 'Oh, shit, 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 have their spouses write $5,000 each.' I go, 'Our conference room's not big enough for the spouses.' 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 congressmen. 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 Wi-Fi broadband. It was awesome. We were so excited about it. We were changing the world. It was disruptive. Google got excited about it. EarthLink got excited about it. But the customer I loved the most that got excited about it 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, and, of course, digital divide.

So 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 is a 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 are the congressmen. Imagine how surprised I 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 is headquartered in Philadelphia named Comcast. They had put a bill on Governor Rendell's desk, a 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 councilmember. But the guy on the left was the real nemesis. This is David Cohen, chief lobbyist for Comcast. Now, David Cohen is to corporate lobbying what Bob Marley is to reggae.

There's no second. The New York Times did a profile of him called "Comcast's Real Repairman," in which they say he's the most important executive in the whole company, and I fundamentally believe that. 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 of one-on-one for money. Like, we were pissing in the ocean. We had no chance, no chance.

Now guess who offers citywide Wi-Fi? That one's easy. AT&T would join this fight. Within two years, they would outlaw municipal broadband in over 22 states. They'd just write it into the books and just took the power of these local decision-makers away from them, all in the commercial interest, not the citizen. I want to talk about another piece of telecom legislation. My partnership back in those days invested in telecom equipment, and so we were very interested in the 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% market share. Five years later, after this heralded legislation, they're up to 85%. 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. Within 10 years, it had gone below 1%, and a year later, the NVCA 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 in our generation that doesn't just fail?

Failing would be things stay the same and you don't accomplish the goal. This 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. "Regulation is the friend of the incumbent." Yes. Amen.

All right. So, this is the only slide I have with bullets, because this is going to be a two-minute 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 from 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 Christie 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 US 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 has a tendency to improve returns for the largest players in the targeted industry. Long-term investors should consider capitalizing on any temporary weakness caused by market reaction to regulation. 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 US: 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 EHR software, medical records. And this is their CEO, Judith Faulkner. In, get the year right, 2009, Obama put her on his Health IT 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 acronym's HITECH.

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. Doctors would receive $44,000 each if they bought software. $38 billion. This is true. You can look it up. I'm not making it up. $44,000, give it to a doctor, implement some software. Many of you run companies. That'd be pretty cool, right? The government passed a 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. Remember, this happened because of the mortgage meltdown. Doctors own multiple homes, so they have multiple mortgages.

They probably needed the assistant. Now, there's two more things about this act that are also unbelievable. First, there's a flaw. If someone said, yeah, I'm going to pay people to buy software, most people would be like, well, you're going to have a problem. They're going to 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 to prove they were using it. It was called meaningful use. It was plastered all over the website of all the EHR vendors at the time. It gets even better. So 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 Epic's feature set and plowed it into this spreadsheet.

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 and a simpler product, and they move up. They put a brick wall there, so you couldn't come up. It's just amazing. 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 unhappy with Judith? I'm disgusted with it. But if I were a judge in the Olympic regulatory capture competition, I'm giving her a 10. This is fantastic. Fantastic. All right, one more. Revolving doors. This is one more. So many of you know what this is. This is a COVID rapid antigen test. Now, this is based on a very simple piece of technology, hopefully David will confirm this when he comes back up, called a lateral flow assay. Now, this technology was developed 80 years ago in 1943, and it's a complete commodity. The packaging almost doesn't matter. You could probably use the strip without it. Now, before I tell you what happened in the US, 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 that they okayed. And as a result, in the German market, you could buy five tests for €3.75 or 75 euro cents a test. UK leaned in as well. They got them in such numbers and so cheap, they distributed them to people's homes. So what was going on in the US? Around that time, the New York Times did an article like, here's what's going on with antigen tests. First of all, they fought them forever. And I think that may be captured as well, because the hospitals were making a ton of money on PCR tests. I think they made as much money as they did on vaccines.

But that's another story. Here it says all the manufacturers 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, Ellume, I don't know, Ellume, and Quidel. Three 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 at Quidel, four years at Abbott. It gets worse. President Biden decided finally to lean into antigen tests and authorized $2 billion to go purchase tests.

He should have gone to Germany and bought them out of the stores, but instead... But instead he bought them from these guys. Now, I don't know if you've ever used this test. All that packaging is complete and utter bullshit and unnecessary. That popsicle stick thing, like everyone else uses the lateral flow assay plastic thing that you can buy super cheap. This was over-engineered. And then I got really pissed because the Wall Street Journal wrote an article that was a victory lap for Abbott's antigen test execution and how well they did in the market. And I've never met Brianna or Peter, but 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 write the eye-catching part on a lollipop stick as if, oh, it was so cute everyone bought it. Like... If you tried to sell that thing in Germany, how many would sell? Zero. Like at $12 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. I also went on Boots, the famous UK chemist. The tests are about $1.50, $1.60 per test 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've got Lindsey Graham, we've got Elizabeth Warren. There's an article here that says, Marjorie Greene agrees with AOC on breaking up Big Tech. And you say, why? 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'd think they might go fund her competitor.

And you probably can't read this, but this is OpenSecrets. Spend time on OpenSecrets. Four of the top ten contributors to Elizabeth Warren are Alphabet, Apple, Microsoft, Amazon. You attack them, they have to come to you. 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. Mark Zuckerberg needs, wants, and must have regulation. I get it, Mark. And Sam's just getting started. He wants regulation, too. There's a really scary thing in this AI space.

The incumbents that are running to meet with all the government are spreading something that I don't think is accurate or fair. They're spreading a negative open source message. And I think it's precisely because they know it's their biggest threat. And I think what Meta has done with Llama 2 is actually super interesting. All right, I'm going to wrap up with three things, 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 Moynihan, 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 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 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 we're very good at it. That's the first thing. Second, I think regulatory capture gives capitalism a bad name.

A couple of people yesterday said, "Oh, we gotta fix capitalism." I think where capitalism's broken is where the capture's the highest, right? Like I just showed you some examples. You've seen these charts of price across time, and the highly competitive products coming out of Silicon Valley are dropping like crazy. It's healthcare 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 really cover 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 is 2,851 miles away from Washington. And as these people put their eyes towards this, I would state the following. The reason Silicon Valley has been so successful is because it's so fucking far away from Washington, D.C. Thank you.

Ladies and gentlemen, Bill fucking Gurley.

That was it. Highlight. I think we know the best talk. Let's all go home.

I think the best talk in the history of All-In. Oh, and 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 in the deck. And if you take from it whatever you get, that's where it's going to go. I just think the regulatory capture is bad.

So whenever you have it, you've got to run far, far away from it.

Basically, this is what we do at poker all day. Gurley, you put a pin in it. What's the solution? What can we do? I figured you'd go there.

Yeah.

You know, the first thing—is politics an answer?

Yeah, the thing that's actionable from my point of view is just massive transparency. So I'd love to see what OpenSecrets does be kind of mandated and way more transparent. Like the minute a check lands, everyone knows. Put it on Twitter. 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 disclosures. 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. That was really the only thing I thought blockchain could handle. But anyway, that's just a side. Poor Brian was watching it, by the way. It gets trickier after that. One, you guys talked about Christie with this when you were talking about the military-industrial complex.

This revolving 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 in their pocket. And that's happening all over Washington all the time. And I don't know how—and Christie said it's impossible because they'd have to vote to stop this on their own. And I think Citizens United should go away. Right. But, but it requires—it requires the same vote, 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, 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 see—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 would totally—how much of, uh—oh, go ahead, Sacks. Well, so say, you know, on—on AI, I—I think that what—um, what was discussed at that hearing that Sam Altman testified at, 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 all this? And the reaction... 'With pleasure.' And the reaction of the politicians, I remember all these senators were quoted saying, 'Wow, this is such a nice young man.'

'This is not like the other tech CEOs who've been testifying up here, basically defying us. 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 roadmaps. So if you subject AI to regulation, you're basically turning software into the next Big Pharma or into the next military-industrial complex. Washington will run the software industry. And everything we do in terms of funding these little startups, these companies with fresh ideas, it'll just be over. The government's going to do a code review.

There's no VC industry. Well, that's similar to what happened with that—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 mandating features of a software product?

I've got some product managers going to Washington getting approval for what they add to the product.

Another answer might be, just to your original question, Dave, is just awareness. So getting people more aware, and hopefully this kind of thing can help. 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 situation they're supposed to be looking after, that'd be helpful. But once again, the people that would choose to mandate this are the ones doing it.

Is it just the nature of government that it has to scale with time? 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 our civilization.

I fear—and you had Dalio's charts of decline—I fear that this is one of those things that causes the decline. And I fear that democracy and capitalism, you know, will kill each other over time, you know, for this very reason. I might point out 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 our previous ancestors.

The thing, when you dip your toe into that world, that is shocking is how low the threshold is of the dollars it takes to actually influence 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 cobble together enough money to get in front of that senator or that congressperson, 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's 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 the duration of how long that person's going to be there. So if someone from Silicon Valley has a problem, they run to Washington, and they get one meeting. But are they coming back? The teachers' union is going to be there for 100 years. So if you cozy up to them, it's forever. It's forever money. Yeah.

Why'd you do this, personally?

Why'd I do this? Yeah. Just frustrated, like, just, like— "You're mad as hell."

Anger's a powerful motivator. You've worked on this for a while, this presentation. I saw an early draft. It was clearly coming together. It's something you've been thinking about a long time.

Long time. 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. I probably can't get a meeting in Washington. I have trouble with investment banks also.

You saw the guys before talking about energy. It's a huge industry. There's enormous amounts of regulatory capture and lots of manipulation of laws in that sector. From that perspective and that lens, are you pro-fusion and the possibilities of fusion?

Less technologically, more... Well, not just fusion, but fission. I just retweeted something like an hour ago. Apparently, one of the fission plants that's been shut down in America, they just voted to reopen, which is great progress.

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 is so expensive in the U.S. and way more expensive than China is the regulatory burden that we have here.

China's building 400 nuclear fission power plants right now. That's their plan. It's not just in China.

And if you look at the antigen testing, imagine what the complexity of...

But this is what I want to ask you is like, you know, these large energy generators, the existing utilities, what is their incentive to not try to pull a Comcast when they see Bob and David close to the finish line?

Oh, you have to imagine that the oil and gas industry's been doing that this whole way.

For traditional nuclear, yeah.

Yeah, for traditional nuclear. This time we'll see them coming. I wonder, and I say this with a lot of naivete, I wonder if you could use open source around fission to try and lower the cost of building it and try and get more consistency in design.

Well, the big Achilles heel in energy, as an example, where it's impossible 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 spent a lot of time in, the rules on whether or not you can run power back in and at what rate are arbitrary across the entire country. That's very right.

Guys, 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 for doing this. Thanks everyone.

Wow. Wow. I'm going All-In with my besties. With my besties. With my besties. Besties are back. I'm going All-In.

Let your winners ride.

Rain Man, David Sacks.

We should all just get a room and just have one big huge orgy, because it's like this sexual tension that we just need to release somehow. We need to get merch, Sacks.