Peter Thiel, Reid Hoffman & Xavier Niel speak together in Italy

Is entrepreneurship something that you can teach? Peter, I'll begin with you.

Well, I think it's a very difficult subject to teach. So I think there certainly are certain aspects of founding a business that are repeatable. There's certain mistakes you shouldn't make. And so I think there's maybe 30% of what it takes to found a successful business can be taught. How do you split the equity among the founders? You know, how do you raise capital? There's sort of a lot of procedural things. But I always think the 70%, that's sort of the magic part of the business that makes it unique that can't be taught. Because I think the great—you know, we're sort of talking about scalable technology businesses or scalable businesses generally is sort of what I'm thinking about. So I'm not thinking about opening a hot dog stand.

So I think that definitely can be taught, but that may not be the sort of business that you actually want to start. And so the kind of scalable business I think will at its core do something unique that nobody else in your city or country or world or school is doing. And so it's in its nature something that's very hard to teach. And because education always is backward-looking, it teaches things about the past. It can even be quite counterproductive.

Tell us, if you can, the thinking behind your fellowship whereby you pay people to drop out of college and, I think as you put it, people who want to build something rather than sit in a classroom. And you're encouraging them to do this. Some people have found this controversial. Explain to us why you think it's a worthwhile enterprise.

Well, we never say "drop out" of college. We say "stopping out" of college. So in the U.S., you can always go back. You can go back five, 10 years later if you would like. It's been about 20 people a year. We're now in the eighth year of the program. Maybe 20% of the people have actually gone back to college and then the others have started companies or gone on to do other kinds of things in Silicon Valley. I think the—I think the idea is that there is no right time to start a business. If you have a great idea, it makes sense to do it quite early. A lot of successful businesses were in fact started by people when they were still quite young. And then, of course, there are aspects of the college system in the U.S. that whatever can be said for them are probably quite counterproductive for entrepreneurship and innovation.

And one of the issues I'm especially focused on is the enormous student debt burden people end up with, where you typically end up with upwards of $100,000 of student debt after graduating from a four-year college. And then you are forced to take a sort of moderately well-paying professional job that will make it much harder to take the kind of risk that you need to start a business. So I think it's an incredible public-policy disaster that we sort of end up with students that are sort of indentured workers for life in the U.S. Student debt's gone from $300 billion to $1.3 trillion over the last 15 years, and that's sort of a problem. My program doesn't solve that all by itself, but that's a big problem.

One good way to solve that is what you've done, Xavier, which is create a school where there is no tuition. People don't have to pay at all. How do you achieve that? And tell us a bit about 42 School and how it's functioning so far.

42 is a school in Paris and now in other countries where you can go and you learn only one thing: how to code. And the idea was, if you know how to code, you can have a job and you can create by your—if you have a good idea, you can create your own company, your own job. So, this was the two ideas. So, in this school today in France, you have 3,500 students. It's a three-years program. With—we ask you to come to this school, we ask you only two things: your name and your date of birth. That's all. We don't ask anything more. And then you have to test, and you passed these two tests, you can go in this school. And the school is totally free. You have no teacher, which is another thing, but the school is totally free. You have no tuition. We give you money, so we have a deal with the French bank, and they pay the three years, the money you need for three years.

And we are building 1,000 flats for them in the same place. A lot of them are sleeping on the ground in the school, which is not so good. So we have created flats for them. And at the end, we have the best coders—not computer science, the best coders in the world. But the way it works, you don't have any teacher in the school. It's peer-to-peer learning. So students are learning by themselves. It's a way we learn to talk, to speak. We learn by talking with our parents, with our brothers, sisters. And this is the way it works. So you learn by exchanging with other students. But it's packed because it's a 40,000-square-foot building in which you have 3,500 students. So it's kind of packed, but it creates a great energy.

And you've recently opened in California, right?

So we have one in California, one in Belgium, one in Ukraine, two in South Africa, only for women.

And how have Americans taken to that unique idea of free education?

At the beginning, it was very complicated. It's in Fremont. It was very complicated because in the US, people usually think that the school is free. If you have no tuition in the school, it's a bad school. So first, or you have a trick. So it means you have a trick. OK, I will have to pay for the dormitory. I will have to pay for the parking. I will have to pay for something. So they thought that it was not a real thing. So it was tough. But so for one year, we had only 1,000 students. It was small. And now it works. So for the next, we have a selection process called—in French, sorry. It means you take 1,000 people for one month, and you ask them to work for 450 hours. And in France, we have 70,000 applications a year.

In the US, it was more 5,000. But now it's OK. And for the next, I think we have 1,300 students for one month. So it works.

And Reid, you have, I think, been a critic of the diploma certification in US higher education. Is that right?

Well, I've suggested that it evolve its technology. I don't know if that's a critique or not.

Does it have any sort of technology? Explain what you mean by that. What are your concerns with the conventional education system with respect to sort of innovation and entrepreneurship in the US?

Well, it's not as much, actually, as a function of entrepreneurship, because I'm not sure, actually, how much diploma or certification that you actually need for entrepreneurship. There isn't a, "Oh, I'm applying for a job." That usually tends to be the, "I am qualifying myself for this." You know, maybe there's technical skills and so forth that would be useful for making sure that, you know, an investor knows that you have, but they don't usually look at certifications. They actually look at your actual skills. The specific thing that you're referring to that I wrote an essay on was kind of the question as if you actually think about how technology reinvents a number of things, and one of the key things that you need to be happening to have a workforce essentially being dynamic and actually being skilled for new opportunities, as opposed to having a diploma, which is like, for example, you know, Bachelor of Science, Symbolic Systems, and, you know, that's what essentially Stanford says to the world about what I am, and you actually want a much more detailed set of kind of skills and kind of awareness that actually maps up to a variety of different kinds of

of jobs and kind of career tracks and other kinds of things, and you want that to be dynamic throughout essentially your working life and career, and not just kind of as you graduate from a university. And that was the, if you think about it, the summary conversation that I put on this was, don't have a sheepskin, the old technology from medieval ages, actually, in fact, have a modern, active digital profile which is being contributed to by many authorities as you go through your work life.

Irrespective of the education system, talk to me a bit, if you could, Peter, because I'm thinking of you, because you are relocating from San Francisco to LA, both your home and some of your businesses. Is there an advantage to geographical place? It's long been assumed that Silicon Valley is where all the capital is and where all the talent is and other people will struggle to succeed elsewhere. Is that still the case? And tell us why you're moving to LA.

Well, this is always the very big question is, what, what's made Silicon Valley work? What's made it? What's made it unique? And, and it's hard to answer because sort of we have a sample size of, of really, there's just been one Silicon Valley historically. You can't really do scientific studies when you have a sample size of one. But the kinds of answers that I think have been broadly correct is that there's something about the network effects that's been very powerful. We have critical mass of entrepreneurs, of people who've started it, the ideas, the capital. And so it's sort of been a place where things happen. There was a talk I gave, and Reid was on this panel, we gave at Stanford University in early 2005.

And the question was, where would we find the next Google? And at the time, it was a search problem, but you couldn't type it into a search engine. It was a student audience. They all wanted to know what's the next Google we can go work at. And I told them there was a 50% chance the next Google was within five miles, within eight kilometers of the room we were in. And you just had to knock on a bunch of garage doors and figure it out. So it was still not that easy. But I was reducing the surface area of the planet by a factor of one million. And you had to just go find it. I would argue it turned out to be Facebook. We were both investors in it at the time. We didn't actually know this was going to happen.

It was 1.9 miles from that room, 1.8 miles by bicycle. But if I were to give that same speech today, I think it would be much less than 50% chance within a 50-mile radius. And so I think there was something, it was sort of a unique moment for the last 20 years where the internet, which is this global technology, had a monopoly in one particular place. And I think that the knowledge of how to start companies is more diffuse. I think capital is more diffuse. And then there are these network effects that can also go wrong. In Silicon Valley, the specific thing that's gone wrong is it's become prohibitive to start a business. So if you have $4,000 for a one-bedroom apartment per month in rent, that can work if you're working at a big company like Google or Facebook.

And paradoxically, it makes it actually much harder to start the kind of business. Y Combinator, which is sort of one of the big accelerator programs, four years ago people would come to Silicon Valley and stay. Now it's more common for them to come and move back to where they started. This doesn't mean that I think you can start a business anywhere, because I do think you have these network effects in larger cities that are important. But if I were to bet on it over the next decade, I think it'll be far more outside of Silicon Valley. And certainly relative to what people think. People think it will all continue to be in Silicon Valley. And relative to that, I think, as an investor, the opportunities will be much better outside.

Xavier, would the next Google or Uber or Amazon appear in Station F in Paris? That's an easy question.

I hope so. No, no. But when you look, I agree. And if you look at the total GDP, Europe, it's 25% of the global GDP. US, it's 25% of the global GDP. but if you look only at internet capitalization internet market capitalization is 60 60 60 60 in the us and three percent in europe and if we want i i'm a european i'm a french guy and if i want to for my kids and for my family in the next 50 years. If I want them to stay and to live in a part of the world which has the same level, you need to create this kind of new company. You need to create some internet companies because today's internet companies will be the bigger, they are already the bigger group, the biggest company in the world. But we need to have this kind of thing.

And the idea was to create a place somewhere in Europe, in Paris. And with other initiatives, you have a good one in Turin, in Turin, in Torino—I don't know if you say it in English—a good one with other people in Munich, in München. But you need to create in Europe places where you can create this network effect. So the idea was to create in Paris, to buy an old railway station and to build inside this thing a place called Station F, where you have today more than 1,000 startups there. It's physical, they are in the building, they are inside the place, where they can work together and where they can create or try to create a big company, a big startup. They can stay only between six months and one year, so they have to leave fast.

But what we wanted is to create a network effect, not only in this place. In Paris, I think we have, I don't know, 50 or 60 incubators. But we needed something big to have many companies coming to this place. And for the time being, it's pretty successful because we have 25% of the companies in this place, which were created outside of France. Some in the US, but if you have a startup in the climate world, it's complicated to stay in the US. So some of them moved to France. And something great also, we have 40% of the startups in this place which were created by women, which is completely the opposite of the usual world in the tech—I don't know if you know a lot of women who are tech entrepreneurs.

Xavier, can I ask, is that something that you have sort of insisted upon or created or induced in any way, or has that just happened organically?

Yeah, but the place is managed by women, so maybe it helps a little bit. It's managed by a girl. Her name is Roxanne Varza. And she was born in Palo Alto. And she moved to France. So she has the entrepreneurial culture. And also, she wants, I think, to help women. So maybe it helps a little bit.

And I do want to speak about diversity slightly later in the panel. But before we do that, Reid, one of the questions that's popped up at the top of this list relates to our discussion about geography and place, which is: why is Europe, quote-unquote, lagging behind U.S. companies in technology? Why do you think that is? And why are there so many more unicorns in the U.S. and China than there are in Europe?

Look, I think that probably most people in the room know this set of factors. But there's obviously a deep talent bench here. There's actually a lot of invention and innovation and thinking. The single market isn't as much of a single market as it thinks. It tends to be broken up. You generally need a lot more flexibility with talent and labor than generally happens in many European countries. And then the other kind of portion of this is you actually need to generally be able to kind of ask for forgiveness versus permission. And there tends to be a—like, for example, within the U.S., changes, if you say, 'Oh, it's going to change,' people inherently think that's going to be good. When I encounter that in Europe, it's usually, 'Well, is that a good thing or not, right?'

And so they're kind of regulating that sort of change. And so I think all of those things are factors. Now, the interesting opportunity both, you know, as kind of Xavier was mentioning and everyone else, is that there's so much deep talent here, it should be a solvable problem. But obviously, because that deep talent's here, that means that the structural challenges to make it work are hard.

Peter, what do you think about the reasons—we were speaking a bit about this last night—the reasons why Europe may be struggling to compete with tech companies in the U.S. and China?

Well, the thing I'm struck by—and this is if you have the 60% versus 3% market capitalization—it's sort of the failure to create these very large internet companies, where the market capitalization is dominated by the Facebooks, the Googles, the Amazons, if we actually go through the numbers. And the question is sort of why that is. And it's sort of like a—I want to say it's always this cultural failure of extreme ambition. So there's some risk aversion. But I think ambition is just not considered cool in Europe and not considered socially appropriate. You're always supposed to downplay that. And so if you can be moderately successful in a startup, that's pretty good. And maybe you sell it when it's worth $30 million or $50 million.

But the way you build an enormous business is that you never sell it. Now, sometimes it's the right thing to sell the company, but the great businesses somehow have to keep getting scaled and scaled. The anecdote I always tell on the Facebook side was the single most important decision the company made was—it was summer 2006. We had a $1 billion acquisition offer from Yahoo. There were three of us on the board: myself, another investor, Mark Zuckerberg. The two of us as investors thought we should probably just take the money. You know, full disclosure, Mark started the board meeting by saying, 'You know, this should be just a 10-minute board meeting. We're just—this is a formality. We have to say no.'

The two of us said, "Well, you should talk about it. You own 25% of the company. You're 22 years old. You'll make $250 million." Mark said, "I don't know what I would do with $250 million. I would probably just start another internet social networking company, but I kind of like the one I have, so why should I sell it?" And we sort of talked about this for like eight hours. And at the end, you know, we decided not to do it. And... "He decided." Well, it was, you know, he did convince us. I mean, I was, you know, but... but... but... And then the rest is history. I think that if you had this conversation in Europe, it would be something like, "I can't believe they're offering us a billion dollars. I will try not to be too excited."

And that's sort of how the conversation would go.

Do you not think that you talk about it almost as sort of a failing of cultural ambition, but isn't it just a different set of cultural priorities? I mean, Europe may not have as many unicorns, but Europeans are healthier, they have better well-being, they're better educated, they live longer.

Well, that's the way. I don't know if that's—you have to make the comparison, upper-middle-class Americans, upper-middle-class Europeans. I'm not sure it's that different on that level. So I think those are slightly different problems on the US side. But I certainly think that, and I think there's nothing wrong with those things, but they at some point do become an excuse. A work-life balance is a good thing. A work-life-life-life-life balance, probably not that helpful for entrepreneurship. I always thought that Berlin, for example, was going to be a great place for innovation. And now I just sort of think it's the city people move to in their 20s to retire. And so that's probably not quite the right aesthetic.

Amplifying the ambition point, I think that it would disqualify—I think I would not invest in anyone who is pitching me who emphasized that what they needed was work-life balance.

Tell why is that, explain that, because some people say work-life balance is good for success in business.

It might be good for success when you're an employee at a large organization. Startups, the metaphor I use, is you throw yourself off a cliff and you assemble an airplane on the way down. And if you're thinking that this is a period where, "Hey, at 5 o'clock I go home and I enjoy my game of tennis and watch a movie and da, da, da"—no, no. Like, this is a "solve this problem," and you're essentially the falling dead until you actually manage to assemble the plane. And so that is not a work-life balance. One of the funniest conversations I had was a former, not current, governor of Colorado came by to say, "Hey, we want to create Silicon Valley in Denver and Boulder, and what we have is work-life balance."

And I said, "Great, you can have all those entrepreneurs. They can all go be there."

Xavier, is this fair? Are Europeans less hardworking than Americans in your experience?

It depends. Now, I agree, but I think you have a difference with the US, which is crazy. If you use a cab in New York City, the driver, he thinks it's possible for him to become a billionaire. If you take a cab in Milan or in Paris, he thinks that the country is not working and that everything is bad. So you need optimism. You need to think that it's possible to create something and to be successful, which is usually really the case in the US and not the case in Europe. And if you don't have optimism, if you are not optimistic, it's impossible to be successful. So you have to create these things. So it means you need examples. You need to show that it's possible to be successful in Europe. And it's complicated because we don't...

So many examples to show. But if you want to be successful, you need to be a hard worker. I'm so crazy. When I go in Station F at midnight, so you have 1,000 startups. It's midnight. You go into the place, and you have 10 poor guys working. Where are the other 5,000? And in fact, they are dancing, or they are having a good lunch at the corner of the street. It's great, but I'm not sure it's the one in which you want to invest.

Okay. One of the things, Peter, you mentioned was the success of the big tech companies. But one criticism I sometimes hear from venture capitalists or concern is that these monopolies have got so big that it's stifling. It's very difficult if you're a startup. You'll either be copied or killed or maybe acquired in your infancy or in your adolescence. And that that is discouraging capital from entering the world of innovation and entrepreneurship. Do you think that's a fair criticism?

You know, it's always a two-edged criticism. Certainly as a venture capitalist, it is always a concern because I think the very big tech companies are still reasonably nimble, reasonably aggressive, and they've not slowed down as much as big companies do. Even Microsoft, which is perhaps the oldest of the big five, is actually still a very dynamic tech player. But I think the other side of it is that if you're a new company, you want to be doing something that's very innovative, very different, and maybe the ideas are too incremental. So I think big companies are better at doing incremental things. Small companies maybe are better doing bigger innovations. And so if the idea set is just incremental, that may be a critique of the ideas rather than the big companies.

The other thing, in terms of entrepreneurs, is companies have a limited set of really good focus. So for example, if you're coming and you're pitching, 'We're going to start a new search engine. And our search engine is going to really dominate on desktop or mobile.' And you're like, 'OK, how is that going to work?' Then that's actually, in fact, very challenging, unless you have something that's a really unique idea. Because Google, et cetera, is very focused on that. Now, that being said, so for example, one of the investments that Mike Volpi and I have made is a company called Aurora, which is autonomous vehicles. And even though Waymo has developed a bunch of good technology, we think that a team that is 100% focused on that and is doing that in the way that is idiosyncratically the right way for that to be built has a good shot.

And so I actually think that it's mostly an illusion to say that it's the big companies' competition, which is the reason to wave off. Because even when you have a good tech stack from a good company like Google, I think there's still an opportunity. It's only when you're going after the main thing from that one company where its size really makes a difference, then you're just being foolish, unless you have a really

Very unique idea. You mentioned just before a conversation with a former governor of Colorado who wanted to sort of encourage innovation and business in the state. What can states, nation-states in particular, European states do, if anything, to encourage innovation? And John, in his introductory remarks, talked about immigration. To what extent do you think that's a sort of significant factor, that governments should sort of encourage innovation because—immigration, because a corollary of that will be more innovation, entrepreneurship?

So I think it's absolutely essential to have immigration. Like, one of the things that I've used to talk to a number of different U.S. mayors and governors and other folks about is that, you know, you've created a powerful entrepreneurial ecosystem when entrepreneurs will move there in order to do that. Because entrepreneurs realize they've jumped off a cliff and are assembling an airplane on the way down. So they're willing to move to do it. Like, the ones who are bold and so forth—Zuckerberg moved from Boston to Silicon Valley. They're like, 'Let's actually, in fact, go to where I have the best possible chance at this very difficult game.' And so what that means is actually, in fact, you have a—and it's by zone.

So, for example, if you're a software entrepreneur, moving to Silicon Valley is useful. If you're a movie entrepreneur and you come to Silicon Valley to do that, that seems to be a mistake. You should go to L.A. or New York or other places—I'm speaking within the U.S. here. And so, it's where is that network that best launches, supports... And one of the things to comment on the earlier things: the startup culture now exists in easily 50 to 100 places in the world, maybe significantly more than that. That is necessary, not sufficient. It's scale-up. It's a network in order to get to scale as per the market caps. That's actually, in, fact, what I think is the actually major, interesting story about Silicon Valley.

People still say the startup story in Silicon Valley—that's necessary but now replicated in a number of different places. And that's the reason why I'm working on this book. Blitzscaling is coming out in October because it's the scale-up, and scale-up at speed, e.g., blitzscale, which is the key thing. And tell us a bit about that?

Do you think that blitzscaling, as you, as you have coined this phrase, is something that is, is dependent upon governments that are, that are supportive of that process, or is it something independent of that? It's just something that you have to have the right management practices and business practices to achieve?

Well, as Diego opened, the very first thing is don't get in the way. A lot of governments tend to get in the way, right? And that essentially restricts it. I do think that there is a variety of things that governments can do to help. Immigration, talent is one thing. A strong educational base for, you know, making as many good opportunities to create the kind of skills of the future. So, you know, great new universities, other kinds of things are essential to this. I think the speed and ease of which a company formations... So, there's an interesting book written decades ago within the U.S., which is called "Regional Advantage" by AnnaLee Saxenian, who basically asked herself this question about: if venture capital was invented anywhere in the world, it was invented in Boston.

All the things that you think apply to Silicon Valley are in Boston: technical universities, technical companies, venture capital invented there, and so forth. Why did Silicon Valley completely outstrip Boston? Part of that's because when you get to the nuances of things like anti-competes in employment contracts, which you say, 'Well, but that's part of intellectual property, and that's part of what you should enable companies to do.' But once you have that kind of blanket thing, the problem is that quells entrepreneurship. Because, 'I have an idea and I want to go.' Well, the big company is going to sue the small company on the anti-compete basis. That just kills a small company. Whereas in California, enforcing anti-competes is nearly impossible.

And that's a good thing for entrepreneurship. That gives you an example of the kind of things governments can be doing. Because you're saying, well, we're going to enforce non-competes. We're going to make it really easy for large companies to sue small companies. We're going to be doing that kind of thing. Well, you're killing entrepreneurship. That's essentially getting in the way. And that was one of the differences just within the US context between Boston and Silicon Valley.

Xavier, do you think European governments are encouraging innovation?

Europe, it's not only one thing. It's a mix of lots of countries. On the immigration thing, in France, inside Station F, you can get a visa in 24 hours. If you work in the tech world, you come in the place, and you have a visa. You can come to France completely legally. But if you have some talents for tech, if you have a startup, so usually you come, not illegally if you have a startup, but if you come to this place, you get a visa in 24 hours. So I think the more you have the government in your business, the worse is the output. So we try to have them. Usually when I meet a minister, ministry, the French president, or these kind of people in France, they ask me, "OK, what can we do in France to help the country?"

And the answer is always the same. "Please don't change anything. We need stability first. We need stability. And we don't want to have you inside our business." When we start to have you inside our business, it's a nightmare. It doesn't work. So we need to have them outside of the thing. We need to have a way to justice. We need to have an army, what you want, these kind of things. Régalien, I don't know how you translate this French word. But we need this thing from them. But we don't want them to be part of an entrepreneurial ecosystem. It destroys this ecosystem because you have the word "entrepreneur" and the opposite word is "state." So this is two most opposite words, and so if you try to mix them, you cannot do anything.

I'd like there to be all these links between good government policy and entrepreneurship, but I think it's shocking how little there is. And by a number of measures, California is perhaps the worst governed state in the United States. The education system is number 49 in the country. The roads don't work. In San Francisco, the police doesn't work. You have 30,000 car break-ins a year. You have homeless people shooting heroin midday on the street.

Taxes in California are completely crazy. You pay more taxes in California than in France. Can you imagine this thing?

And so it's extraordinarily—the tax rates are well north of 50% on income in California, or around 50% on income. And it sort of works in spite of that. So that's always sort of a—you know, I often think it's almost the opposite, where the network effects have been so good in Silicon Valley that it didn't—that you could have an extremely dysfunctional government, and it could be like this tax, and people had to pay the tax because they had to move to Silicon Valley, and you didn't have, you know, and so it sort of worked in spite of it.

There's obviously also lots of immigration in and around Silicon Valley. What do you think will be the effect of the US government's restrictions on immigration?

Well, I don't think the high-talent immigration policy has changed. It has.

I mean, the Department of Homeland Security are trying to remove, for example, the entrepreneur visa, which is a start-up visa, which is a visa that allows people who have VC funding to spend five years... Well, let me push back on a slightly different level.

I think that it's... It's not always quite clear how much it makes a difference for the large-scale entrepreneurs that we're talking about today. So it's true immigrants are vastly overrepresented among small-business owners, although you also have to remember a lot of small businesses aren't particularly good businesses. If you look at the very successful businesses, they're often much more started by people who, in some sense, know the local networks and are insiders in different ways. There's always sort of my biography. I was an immigrant. My parents—I moved to the States when I was a year old, was born in Germany. And so it's sort of an immigration story. But then you could also say it's a super local story.

I grew up in San Francisco, Silicon Valley, from fifth grade onwards. I spent seven years at Stanford. I was there in the '90s when, you know, the boom, the tech boom happened, and so I was somehow super close to the network. The politically correct story, biography, I would always give is the immigration one. But I think it was also sort of an insider story just as much. And something like that, I think, is true of a shocking number of the successful people. So we should be honest about the biographies.

Well, except that, you know, look, Zuck moved from Boston, Pierre moved from Boston, Larry and Sergey, from different areas, going to Stanford, but connected. So it isn't as local as you're suggesting.

I think, if we look at how overrepresented Stanford is on the entrepreneur side, that suggests it's shockingly local.

Actually, there is a positive local effect. I'm contesting your specific theory that the scale is grown in the locale.

I would suggest you're underestimating the scale of the local effect. This would just be the Stanford versus Harvard dichotomy, which is extraordinary how much it mattered that you went to Stanford versus Harvard. And we were lucky that we picked—we were fortunate that we picked—Stanford. I'd like to say it wasn't a matter of luck, but that's probably not entirely true.

But if you could just tell me what you think about the U.S. government's decision to rescind the startup visa, which was an Obama-era, Obama administration executive order that would have allowed more entrepreneurs to access the U.S.?

I don't think it's a good thing, but I don't think it matters as much as you think. Because? Because of all the reasons I just gave.

Okay. Peter, you've talked about blitzscaling. I'd like you to sort of elaborate on that slightly, because I think one of the questions that keeps coming up on my iPad here is, What's the key for companies that want to move very quickly from start-up to credible mid-sized companies? What's your answer to them in a condensed way? People can buy your book from October, but if you can give us a quick preview.

Well, you said Peter, but do you mean Reed? Oh, sorry. Reed. I did mean Reed. Yeah, I was like, your book in October would be very interesting. I'd love to read it. So the key thing, part of the parallel with blitzscaling, which obviously is a parallel to this term Blitzkrieg, which was actually coined by a British historian—it wasn't actually, in fact, an internal German term—is how do you essentially do the absolute minimum things in order to get to scale as fast as possible? The parallel from Blitzkrieg was: previously, military discipline was advance only as far as your supply chain. Blitzkrieg was: go as fast as possible, get to a strategic location, and have enough ammunition for one battle.

At halfway point, you'd have to make a decision to go or turn around. Because if you went and lost, you lost terribly. You just lost everything. And so there's a very similar parallel to the set of things that are going on to building these very scale companies because frequently you raise a ton of capital before you actually really know your user acquisitions or your unit economic costs. You actually, in fact, are working out a bunch of things that may actually work in the kind of whole market as you're going. You're constantly reorganizing. You do not have a personnel, an operationally efficient infrastructure in terms of how you're operating, because you're moving at super-fast rates in order to realize this kind of scale opportunity.

And there's a set of management techniques, a set of financing techniques, a set of go-to-market, and you're trying to figure out how to do that as fast as possible. And so, for example, some of the earliest ones within the first Internet boom was, 'Well, let's make customer service email-only. Let's operate that way so we can move to scale and then be dealing with that in a kind of an efficient queued system, which is less than what customers want.' If you ask most customer service, they want to be on the telephone for it. But you're going to do that in order to be able to move fast, in order to be able to scale fast, and not be overloaded by what essentially would be a customer service call center.

And so those are the kinds of things that we detail in some amount in the book, and then kind of working through stories of companies, and then kind of deriving principles.

Xavier, we've had quite a few questions about the social impact of entrepreneurship and innovation. How do you measure that? And how important is it to you when you're making investment decisions?

When you make an investment decision, you don't think about the global thing. But no, what I like, it's if you want to change a country, if you want to change a city, you need entrepreneurs. So you need to create this ecosystem in the place where you want to change things. So it means you need a university, you need many startups, kind of a network effect, and you need money. So when you have these three things and you have some people thinking to change the way a place or location is working, you can create something.

Peter or Reid, does it matter to either of you whether startups promise to change the world, to use that cliche?

You know, it used to matter. It used to be a factor that I thought was very important, that you want a business to be more—and I still think you want a business to be more than about making money. You want it to have some sort of inspired, transcendent purpose that motivates people, some sense that if you weren't doing what you're working on, nobody in the world would be doing it and it would not happen. I'm always a little bit nervous about mission, values, culture as applied to businesses, because I think these terms get hijacked so easily. And so if you talk about a company's mission or a company's culture, in 2005, I think these were actually good things to talk about in those terms. In 2018, these have become euphemisms that mean often the exact opposite.

They're the sort of words that the HR department will use if it has the most dysfunctional HR practices imaginable or something like that. And so there is something about these things that's both correct, but then they get hijacked almost all the time in my experience. And so I think the culture and the mission that I always just go back to is just, do they have an idea? Are they going to succeed? Are they going to win?

Succeed, and according to the metric of financial return?

Starting with financial return as a VC, yes. Are you going to win? I like ideas and I like winning. You sound like Donald Trump.

Reid, do you have a measure outside of financial success?

Well, look, as a professional venture capitalist, you're trying to create massive-value businesses. And if you're not creating massive-value businesses, then the likelihood you're going to succeed on a mission in a commercial world is also much reduced. Because when you actually have a seriously valued business, you have the resources to invest in hiring the incredible talent. This is an interesting analysis. Like when you compare, for example, you know, kind of these new-world tech companies to traditional companies, the market capitalizations, P/E ratios, et cetera, allow the new tech companies to pay a ton of money to new talent, like for example, AI, machine learning talent, et cetera, in order to keep investing in that future.

That's important if you're going to realize a mission. So I actually tend to think it's a bit of a false dichotomy to say business or mission. You actually want both. Now, part of the thing that you want in a mission is, I think, the strongest companies have the, 'We are all in service to the mission,' right? Now, yes, part of the mission is an amazing business; that matters, right? And if you're like, 'Oh, I don't care about the business, I only care about the mission,' it's like, 'No, then the likelihood you're going to succeed on mission is a lot lower in this sphere.' But part of it isn't, 'Work for me because you're going to make a lot of money.' It's, 'Work for me because we're going to transform the following thing.'

This is the thing that we are doing. We are all in service to this mission. And those businesses tend to go a lot further. Now, some of that's a little bit retrospective. You say, 'Oh, these are great companies, great cultures.' And you look, they're big, and you're maybe a little bit in hindsight. But I think you also see that when you actually have these cultures that everyone is holding each other accountable to—and part of how you know when you have a good culture is not all A-players work at your company. It's people who have a particular kind of magnetic alignment with that culture. Sometimes it's a team sport, sometimes it's high engineering IQ, sometimes it's—there's a whole stack of different things.

And I think that culture in alignment with that mission is part of what makes those super great companies.

One of the reasons I think this is commonly debated at the moment is because there is a sort of increased awareness of the negative repercussions of modern technology. Do you think it's incumbent upon founders at the inception to think about the potential unintended consequences of their technologies that may be very financially successful but harmful to society?

So I'll reference my earlier point where Americans think change is good and Europeans think change is questionable and you have to think about it from the very beginning. So you just gave me a very European question just to be super precise. That's right. You're in Europe. You have to expect it. No, no, I understand. I was just making sure that that was well understood. So I think that you should always be thinking about, look, how does this work out to being a good thing? I think the very early-stage entrepreneurs should be taking the big risks, trying to figure out, 'Is this something that can actually really work, have a really positive upside?' and should not be overly worried about the downsides or risks or putting a whole bunch of energy into it.

It doesn't mean they shouldn't be thinking about it. But if, for example, you're saying, well, I'm going to start this new kind of internet service. And what I'm going to spend the first year doing is making Fort Knox on the data so that no one can access the data. And I'm not working on the features that consumers are going to love. You're going to fail spectacularly. So that's a terrible idea of how you're going about it. Now, you should be thinking, well, ultimately, I need to be protecting the data. As we get to scale, I need to make sure that people feel protected, feel transparent, feel in control. I don't need to be building that as I'm going. But that's as I'm going to scale, not from the very beginning.

And one of the things is to understand which ones are really desperate problems and which ones are, okay, that was suboptimal. Which one is a car accident and which one's a scrape on the car? Like, you take scrapes as risks, because you're going to try to build something amazing at scale. And that's actually part of when I was giving the earlier answer about American and European is, well, take the risk. Don't take mortal risks. Try to be responsible at the really serious ones, the things that create real harm. But take the other risk and move fast in order to do it.

Some people would say that the speed with which Facebook grew initially and its willingness to give third-party developers sort of unbridled access virtually to user data was an example of a rather catastrophic failure to anticipate that risk.

So look, I think that Facebook, in retrospect, regrets that particular decision. I'm speaking as an outsider. I think that the key thing is they said, look, we know that we ourselves have used this data to create amazing things that really make a difference in people's lives. We want to give other entrepreneurs the ability to do that. So they had a good intent in terms of what they were doing. What they didn't factor in is, okay, they knew they had good intent, but there are other people out there who had bad intent and that they needed to guard against that. That was one of the learnings of the thing. Now, I would actually, as an outsider, contest how much that actually, in fact, you know, had a, you know, like say, oh, Cambridge Analytica, you know, stole 87 million, you know, kind of profiles of data and then they used that for political hacking.

And that was a problem. People didn't want to be participants in that. They didn't want that to happen. They felt, as individual citizens, you have to go do that. Years ago, even before the Cambridge Analytica stuff came to light, Facebook already started changing those patterns. Because they said, look, this good thing for the consumers is not coming out. We're worried about this. And so we're already, in fact, changing that pattern. That shift actually, in fact, was already in the process of happening. And so I think that that was in a category of a regret of a mistake earlier. But maybe I'll end on this particular point for this, because it's really important. Technology is dynamic. It's changing.

So a classic, again, kind of governmental response is to say, well, we should set up the rules such that that would never happen. Well, if you're going to set up the rules such that that would never happen, you're also going to block a lot of good things that should happen. The fact that you take a risk, an accident happens, and then you fix it is actually, in fact, a part of progress. And so key to getting the best possible interesting upsides is part of entrepreneurship and is part of creating the future.

Xavier, you mentioned, did you say what percent, 40% of founders, is that right, at Station F are women? Yeah, 40, 4-0. 4-0, which is very high. Crazy, crazy big. Crazy good, okay. But just explain why you think diversity matters and why it has been proven so difficult for companies in the U.S. to match that sort of gender representation?

I cannot talk for the U.S., but what I saw in France, if you want to create a great startup—which is a great startup, maybe it's in Europe—you mix worlds which are complicated, but you need to mix people who are completely different. If you have two people coming from the same school, same great French school, creating together their startups, they think the same way, and at the end you have something which is not a great company. But when you take someone coming from Africa, you mix him with a woman coming from Germany, and you mix them with a guy coming from a great French school, they all think differently, and you create something. And the best startups, a lot of great startups we have now in France, were created by students coming from 42.

So it means usually people coming from the poor suburbs outside of Paris, more technical, very technical, no culture, small school background. And you mix them with people coming from a great MBA school in France. And when they are together, they have a good idea. They create great things, far better things than when they are alone. So it's not a philosophy thing. It's a thing I saw many times in my country. So I don't know if you can replicate this thing in other places in the world, but it works there.

Peter, why do you think only one in five engineers at Google and Facebook are women?

Well, I mean, that's obviously a super debated kind of a topic.

What's your view on it?

Oh, I think these things are probably very over-determined. Whenever you start a question with the word 'why', I think my rule is it's always a complicated answer, and 'why' questions are notoriously difficult to answer. My suspicion is that, in terms of the Silicon Valley diversity debate, that it's not quite the right question, and it always gets framed in terms of engineers or executives, but I think the way Xavier framed it is actually better, that it's a question about founders, because the founders are the ones that set the culture for Silicon Valley, that are the real role models. And if you look at the 200—again, I don't have the why, but if you look at the 200 or so unicorn companies in the US—

Only five of them have women co-founders. So that's much worse than the Google/Facebook numbers. That's the problem that I would submit you have to solve. That's the question you should be asking. I don't have an answer to that question either, but that's the question you should be asking.

What about if I begin with a 'how'? How do you solve that problem?

I'm joking. Well, that depends on who you are. If you're a woman, you should found one of these companies. And if you're a man and a venture capitalist? I don't think the venture capital—I think that that always gets exaggerated in terms of the importance. I think venture capital is... That's also a very European perspective. The problem is always a lack of venture capital. There is no shortage of venture capital. We're flooded with capital. We have negative interest rates. There's crazy amounts of capital. The conversation I've had at Founders Fund for the last three years is it's so hard to invest in anything. We should be investing in less. There's way too much capital. That's not the gating factor.

And it's always unsuccessful entrepreneurs who... who says, 'OK, we have a lack of capital in Europe.' If you are successful entrepreneurs, really, you have too much money. And in fact, in Europe, you help so much the startups. If you start a startup tomorrow in France, you are paid by the state for one year. So during one year, you have money for yourself to create your company. At least you will have, I don't know, between $200,000 and $500,000 to create your company from the state. But at one point, after one year, two years, you need real money coming from venture capitalists. And at this time, you start to be in the real market. And if you don't find money, your best answer is to say, 'OK, it's because I'm in Europe, so I don't have money.'

If you don't find money, no, the truth is that your company is not a good company. If you have a good company, you have always money coming from all over the world because investors want to make money wherever you are.

You're investing in 50 or 100 a year or something, so clearly... But let me just finish on one last question, which again is one that's come from the audience, and I'm afraid it's a difficult question. It's a bit of a 'why', which is, you know, one common complaint about the... the global consequence of the technology industry is that it's rapidly increasing inequality in the world. I think the net worth of the panel here is somewhere around $12 billion. That's not including my salary. But that's roughly sort of the GDP of Albania. So do you feel that your reward is proportionate to your skill and your hard work and everything you've put into your career, is the first question. The second question is, does technology bear responsibility for the rapid increase in inequality that we're seeing in the world?

So the first question, once again, a European focus. We are in Europe. Look, it's hard to know, especially since a lot of success involves luck and fortune along with hard work and maneuvering for that, it's hard to know what the right thing is. I tend to not worry as much about the perfect question, because I think it's very hard to know what's the ratio, what's the importance, is this too much, too little, et cetera. I think one can make arguments for that, and generally speaking, the capitalist argument is, well, free markets actually determine that, and that's fairer than the subjective argument of person A versus person B where we're arguing our sense of intuition and value. So that's the argument in favor of why it is markets play this out.

Now, that being said, I don't know if it's the right answer or not. What I do think is important is the question about equality frequently masks, I think, what is the fundamental, much more important thing, which is how do you give the bulk of society a credible path forward, games that they can win, ways they can make progress, ways that you can deploy and maximize as much talent as possible to both the individual's benefit and the society's benefit. And that's actually, I think, the thing that's most important. The problem with the inequality question is it says, oh, we'll solve that problem by trying to whack the wealthy on the head or something. And that's the solution to the problem? That's not the solution to the problem.

The solution is how do we have those paths of opportunity? And that's, I think, something extremely important. It's one of the reasons why I think École 42 is extremely important. How do we create those paths for that kind of opportunity, and how do we make it as broadly available as much as possible? And it can't just be technical, because only a subset of the population will have technical skills, but how do we do that? That's what I think the interesting question is.

Xavier, do you think the net impact of the technology industry is increasing or decreasing inequality in the world?

For me, being an entrepreneur is a chance. It means it gives a possibility. It's a big chance. 100 years ago, if you wanted to become rich, maybe it's not a good measure of success, but if you wanted to have money at this time, the only way was to—if you were born in a family where your parents had money, at this time you had the money to create a factory, then create a big company, and then to have a lot of money. Now, with entrepreneurs, with only a good idea, people who help you with a little money, you can create a big company. So if you look at Facebook, Google, or, I don't know, WeChat, or Amazon, or any of these companies, there was one guy coming from a regular family, middle-class family, who had the possibility to create one of the biggest companies in the world.

And so for me, entrepreneurship is a way of having new people coming in this kind of formal establishment.

I'm going to maybe challenge a little bit the premise of the question. So I actually, you know, even though inequality has gone up in our societies in recent decades, I think it's, again, why it's gone up is itself a complicated, multi-dimensional thing. And I always find it interesting how 100% of the explanation in these sorts of conversations seems to get blamed on technology. Just to give a two-variable thing, it's more than two variables, but another variable might be globalization. And in fact, we use the words globalization and technology often quite interchangeably. And the one time we don't use them interchangeably is when we ask this question, where we never say that globalization causes inequality.

We always say technology. And so I often wonder whether technology is simply a scapegoat for some of the real challenges we have from globalization. Now, this doesn't mean you should stop globalization. But I think if you ask the average person in the U.S. or Europe, they would tend to blame—they would tend to blame globalization much more than technology. If you ask someone like yourself, who's in the 90th percentile, they might blame technology much more than globalization. But I think if you ask them in the 50th percentile, they would blame globalization more than technology, and we should take that seriously.

Your previous co-founder at Palantir, Alex, in the previous panel said that he had a subconscious, unconscious fear that amid the techlash, he would be one of the first to be hanged. Do you fear, whether you believe it is justified or not, do you fear the consequences of the negative backlash against Silicon Valley and the tech industry more generally?

It is striking how—how much it's shifted in four years. So I do think that's very striking, how much more difficult it is to be on panels like this than it was four years ago, how much more difficult it is to talk about it. I think there are a lot of sort of things, a lot of ways Silicon Valley talks about it that are quite counterproductive. So I think the AI conversation in Silicon Valley simply sounds like we're getting rid of people's jobs. I don't think AI is actually happening in that way. But there are sort of all these ways that Silicon Valley talks about it that have certainly been extremely counterproductive.

Okay. I think we've reached the end of the panel. If you could all please join me in giving a round of applause to the panelists.