From Ghaziabad to Silicon Valley: Nikhil Kamath x Nikesh Arora | People by WTF | Ep. 11

1. 0:00 – 1:51

   Intro

   1. NKNikhil Kamath0:00

      [upbeat music] Nikesh Arora. Oh, boy, where do we begin? A boy from Ghaziabad, who's now one of the highest-paid execs in the world. That's Nikesh for you. He's collected degrees like people collect Pokémon. Constantly pivoted way before it was cool, worked at Google after landing an accidental interview with Larry Page, then at SoftBank, and now leads Palo Alto Networks, a big name in cybersecurity. Let's find out how not sticking to a lane worked in his favor. [upbeat music]

   2. NKNikhil Kamath1:06

      Hi, Nikesh. Thank you for doing this.

   3. NANikesh Arora1:09

      My pleasure.

   4. NKNikhil Kamath1:10

      Uh, I don't know where to begin. There's no fixed agenda for today or not-- There isn't one particular thing I want out.

   5. NANikesh Arora1:18

      Mm-hmm.

   6. NKNikhil Kamath1:19

      Uh, our audience is largely the entrepreneur, wannabe entrepreneur crowd in India, and we meet people who have gone down their path, been really successful, such as yourself, and try to tell them what they can learn from someone like you.

   7. NANikesh Arora1:36

      Or what-- Yeah, from either doing what I did or not doing what I did.

   8. NKNikhil Kamath1:40

      Yeah. Yeah.

   9. NANikesh Arora1:40

      Perfect. All right.

   10. NKNikhil Kamath1:41

       Sometimes we find not doing what someone did is as useful-

   11. NANikesh Arora1:44

       For sure.

   12. NKNikhil Kamath1:44

       -if not more.

   13. NANikesh Arora1:45

       For sure.

   14. NKNikhil Kamath1:46

       Uh, so maybe we can begin by you telling us a bit about yourself, and we

2. 1:51 – 4:17

   Nikesh’s Early Years

   1. NKNikhil Kamath1:51

      start from there.

   2. NANikesh Arora1:51

      Where would you like to start? Uh...

   3. NKNikhil Kamath1:53

      Childhood. [chuckles]

   4. NANikesh Arora1:55

      Ah. As you know, I grew up in India. Uh, my father was in the Indian Air Force. So, you know, you grow up in the Indian Air Force, you grow up with just enough means, so you have a good life, but, uh, no different than every other person who grows up in India, where you have to be resourceful, you have to be, um-- you have to work hard to get above the crowd and, and, uh, and sort of make something out of your life. And in that context, and my parents are amazing. Uh, my father passed away a few years ago, but, uh, he worked in the Air Force for his entire life. He was a lawyer, uh, and his job was to solve thorny legal issues, both within and without. And, you know, when you live in a family like that, where every day he's trying to get people to do the right thing, uh, the sort of the... You absorb the implicit culture of the high integrity you see around you. So, you know, I have my f- father to thank for a life of integrity, where he had to make decisions against all odds. He had to make decisions about lots of things, where, you know, i-it was crystal clear for him, given that the role he has was always to pick the right side, that somehow that became the mantra in our family, that he always had to do the right thing, irrespective of the cost, and so that sort of, that sort of you, you get that from your father. And my mother, uh, you know, rare for her time, she's a masters in math and Sanskrit, so she was very along, along, along the lines of that education empowers, and whatever you do, you have to be smart, you have to be well-read, and you have to, to do that. And, you know, she provided the nurturing element in the family. So I was very blessed. Uh, the difference is, when you work in the Air Force, you move around every few years. So it brings a sense of impermanence, it brings a sense of, uh, instability, perhaps, and the question is: what do you make out of it? So, you know, on the flip side, you, you get to adapt to many situations, and you can pick up your bags and move, uh, because you've done that naturally over your life. So, so those are some of the, sort of, sort of the, I'd say, the key building blocks of one's personality as you grow up.

   5. NKNikhil Kamath4:04

      Right. And how did the transition from growing up in Ghaziabad and going to school in Delhi to where you sit today-- I must say, uh, you have a very pretty

3. 4:17 – 8:13

   The Real Threats in Cybersecurity

   1. NKNikhil Kamath4:17

      office.

   2. NANikesh Arora4:17

      [chuckles] Thank you.

   3. NKNikhil Kamath4:19

      But everybody seems really scared of you.

   4. NANikesh Arora4:22

      Ah, that's interesting. How did you pick that up?

   5. NKNikhil Kamath4:26

      Before you arrived...

   6. NANikesh Arora4:26

      Yes.

   7. NKNikhil Kamath4:27

      Like, people were like: "He's coming now, he's coming now, he's coming now." And they really were freaking out. Like, I've been to some secure buildings in my life-

   8. NANikesh Arora4:35

      Mm-hmm.

   9. NKNikhil Kamath4:35

      -but you have some crazy amount of security going on here as well.

   10. NANikesh Arora4:39

       Well, remember, we're in the security business, so we're a trophy company-

   11. NKNikhil Kamath4:42

       [chuckles]

   12. NANikesh Arora4:42

       -to break the security defenses off.

   13. NKNikhil Kamath4:44

       Right.

   14. NANikesh Arora4:44

       Because, as you can imagine, the security industry comes from an underpinning where it was-- You know, your perception of a security person generally is that, if you think back a few years ago, is that kid sitting in his parents' basement, playing Call of Duty, on the side, hacking into the FBI computers and showing, "Look, I can do it."

   15. NKNikhil Kamath5:00

       Mm-hmm.

   16. NANikesh Arora5:01

       There's no economic motivation. There's more of a trophy kill, and that sort of feeling persists in the security industry. If you go after somebody, go after the people who are entrusted with protecting everybody else, so we do have to have more security than you expect. You know-

   17. NKNikhil Kamath5:14

       Has it happened?

   18. NANikesh Arora5:17

       Uh, there is a general belief that, uh, most security companies, and now infrastructure software companies, are constantly attacked.

   19. NKNikhil Kamath5:26

       Right.

   20. NANikesh Arora5:26

       Because, uh, you know, ten, fifteen years ago, the philosophy was, you wanted something, you went after it, and you got it. You know, you want to hack into Nikhil's life, you go hack Nikhil, you find out what he wants. Then they said: "Well, that's a lot of work. Why don't we just go hack into a Gmail platform or email platform, and then, like, go and get whatever I want from whoever?" So people started going towards what we call supply chain attacks. You went after a big piece of infrastructure-

   21. NKNikhil Kamath5:51

       Mm-hmm.

   22. NANikesh Arora5:51

       -and whoever was utilizing that piece of infrastructure would then be fair game. So, you know, we, we joke in our industry, hacking has gone from a hobby to a profession. When you do something professionally, you do it right. So yeah, it happens a lot.

   23. NKNikhil Kamath6:03

       Is that because the incentives have gotten more aligned now?

   24. NANikesh Arora6:07

       ... Well, uh, if you think about it, there's something to the tune of north of ten billion dollars that is either extorted or ransomwared, or taken from individuals in some sort of Ponzi schemes, which is based on digital sort of hacking. So-

   25. NKNikhil Kamath6:26

       Every year?

   26. NANikesh Arora6:26

       Yeah. So it's a lot of money.

   27. NKNikhil Kamath6:28

       Yeah, but that doesn't sound like a earth-shattering problem, that amount of money.

   28. NANikesh Arora6:32

       Well, it's an earth-shattering problem because think about it, uh, it's still the Wild West, right?

   29. NKNikhil Kamath6:36

       Yeah.

   30. NANikesh Arora6:36

       Because there's no recourse. Think about it, it's the lowest conviction-
4. 8:13 – 10:31

   What Will Outlast the Disruptions?

   1. NKNikhil Kamath8:13

      I have a private equity fund, Nikesh, and I have been trying to figure out what industry might thrive in ten years, post all the disruption of today. I'm sure disruptions will continue to come by, but how does cybersecurity change? And as a investor who's looking to get allocation, if I have a broad portfolio-

   2. NANikesh Arora8:36

      Yeah

   3. NKNikhil Kamath8:36

      ... what percentage of that do you think should go into something like cybersecurity?

   4. NANikesh Arora8:40

      Like, if you analyze cybersecurity, it didn't exist as an industry sub-vertical of significance till about twenty-five years ago.

   5. NKNikhil Kamath8:49

      Mm-hmm.

   6. NANikesh Arora8:49

      If you go back, you know, I was at Banaras doing a, [clears throat] um, commencement address at BHU, and I was reflecting when I went to school there in 'eighty-nine. We had one ICL 1904. There was nothing called an iPhone, and that computer was five thousand times less powerful than one iPhone.

   7. NKNikhil Kamath9:10

      Right.

   8. NANikesh Arora9:11

      So in, you know, what was then thirty years, you've got five thousand times the power in a thing we carry in our, in our back pocket.

   9. NKNikhil Kamath9:19

      Mm-hmm.

   10. NANikesh Arora9:19

       Uh, but it's about 2005, I think, was when we started getting the app economy, and everything started getting connected. So that was not even twenty years ago. Twenty years ago, we were not worried about getting hacked because most of us were using our phones to call somebody-

   11. NKNikhil Kamath9:34

       Mm-hmm

   12. NANikesh Arora9:34

       ... or at best, send a sort of old form text.

   13. NKNikhil Kamath9:37

       Right.

   14. NANikesh Arora9:37

       So if you believe the entire connectivity revolution has explored in the last twenty years and continues to sort of grow exponentially with where we are, uh, in our problems, we call that the attack surface continues to expand.

   15. NKNikhil Kamath9:48

       Mm-hmm.

   16. NANikesh Arora9:48

       Now, you can attack five billion online people around the world. You can attack every company.

   17. NKNikhil Kamath9:52

       Mm-hmm.

   18. NANikesh Arora9:52

       In the past, no company was connected to their consumers. So if you believe the attack surface continues to expand exponentially, and every service becomes somewhat useless without connectivity. Now, your car has to be connected. If you can't connect to your car, you can't get into your Waymo. And tomorrow, I'm pretty sure robotic arms will be connected, and humanoids will be connected. So if the attack surface continues to expand, there is... the demand function is secured.

   19. NKNikhil Kamath10:17

       Right.

   20. NANikesh Arora10:17

       Now, the question is, can you satisfy the demand function with the right technology? And that becomes so the cybersecurity industry. So I don't know how it'll compare to other industries, but I'm pretty sure it is a gift that'll keep on giving.

   21. NKNikhil Kamath10:30

       Will it come down

5. 10:31 – 12:44

   Rethinking Safety in a Changing World

   1. NKNikhil Kamath10:31

      to who has more compute, and by virtue of that, they can hack into something? If I had more co- compute than Palo Alto, for example, would it be possible for me to hack into it?

   2. NANikesh Arora10:41

      So there is that, you know, prevailing theory that when quantum comes about, it'll break every key, which is true. It will break every key that is there today. But-

   3. NKNikhil Kamath10:47

      Can you explain how that is? I read that, but I couldn't understand because I'm a totally non-technical person.

   4. NANikesh Arora10:52

      So the way it works is when you communicate to something else, and you're trying to send data in an encrypted fashion, I send-- I encrypt it, I send it to you, we decrypt it to your end, so nobody to intercept it and steal it or observe it or read it.

   5. NKNikhil Kamath11:06

      Mm.

   6. NANikesh Arora11:06

      Right? Now, the industry has a protocol where there is a protocol which defines how to decrypt, how to share keys, so you have the key that is required to decrypt the communication I sent you. Those keys are effectively co- codified in such a way that it's hard to break them, but it would require a lot of compute to break them. But with the arrival of quantum, they will be able to break those keys in seconds or minutes as compared to days.

   7. NKNikhil Kamath11:32

      Because quantum has more computing power.

   8. NANikesh Arora11:33

      So much compute power, right. So if you could do that, you need a whole new set of keys.

   9. NKNikhil Kamath11:37

      Mm-hmm.

   10. NANikesh Arora11:37

       Or you need more complicated, but you need keys that quantum can't break-

   11. NKNikhil Kamath11:41

       Mm-hmm

   12. NANikesh Arora11:41

       ... which means you need a new set of protocols to define it. So there is this prevailing theory that when quantum comes about, it'll break today's encryption. So everything will be decryptable, and hence observable, and hence, could lead to potential hacks. Now, the sad truth is, most hacks today are way less sophisticated than that.

   13. NKNikhil Kamath11:59

       Mm-hmm.

   14. NANikesh Arora12:00

       Right? Typically, they are human beings who make errors in configuration, human beings who click on the wrong email that comes to you, human beings who leave their password on a yellow sticky on the side of the computer to make it easy for people to get into. So I think from that perspective, we have enough of a crisis right now. We don't need yet another one from a compute perspective. But I think on the flip side, the possibility, uh, of-... this notion of AI, which will start figuring out on the fly where the, the gaps, mis- misconfigurations, or the errors are, and be able to be much more intelligent at providing more real-time protection are gonna be. So I think the opportunity is gonna be more in AI-based analytics and real-time protection to start with, than just really throwing more computers at the problem.

6. 12:44 – 14:55

   How to Look at the Cybersecurity Landscape

   1. NKNikhil Kamath12:45

      So from three lens, as an investor, as an individual, and speaking to the people who are starting small enterprises across the world, as an investor, if I want exposure to cybersecurity, how should I look at it? Like, what should I look out for in a company?

   2. NANikesh Arora13:02

      Um, if you're looking at a startup category-

   3. NKNikhil Kamath13:07

      Yeah.

   4. NANikesh Arora13:08

      -the most likely categories which we'll see outsized returns are categories where a new attack vector is being born, and there are many ideas about how to secure the attack vector, and many people are experimenting. Take the current example of AI.

   5. NKNikhil Kamath13:26

      Mm-hmm.

   6. NANikesh Arora13:26

      We all talk about AI, and we were just getting our arms around ChatGPT and LLMs, and suddenly you have coding assistants, and now we're talking about agentic AI.

   7. NKNikhil Kamath13:34

      Mm-hmm.

   8. NANikesh Arora13:34

      All these things, uh, that are out there. I don't think there is a general agreement on what agentic AI means in the world.

   9. NKNikhil Kamath13:42

      Mm-hmm.

   10. NANikesh Arora13:43

       Right? And I was, I was talking to somebody this morning, and I was saying, "To me, my manifestation of agentic AI is a Waymo in San Francisco." You get in a Waymo, you let the car decide where to take you. You let the car decide when to brake, when to turn.

   11. NKNikhil Kamath13:55

       Mm-hmm.

   12. NANikesh Arora13:55

       That's giving agency to the car.

   13. NKNikhil Kamath13:57

       Right.

   14. NANikesh Arora13:57

       Hence, it becomes agentic AI.

   15. NKNikhil Kamath13:59

       Right.

   16. NANikesh Arora13:59

       Now, I don't think most enterprises or human beings are ready-

   17. NKNikhil Kamath14:03

       Right

   18. NANikesh Arora14:03

       ... to give an AI agent control.

   19. NKNikhil Kamath14:06

       Right.

   20. NANikesh Arora14:06

       As simple things like, you know, you can-- If I told you, it's easy to imagine that if you were coming to San Francisco, you'll ask your favorite AI bot or LLM or agent to find you a nice restaurant where you like to eat. It'll understand your preferences and know who your friends are and say, "I wanna eat with my two friends. I wanna eat a nice Indian meal. Find me a restaurant which is more like in my taste and make the reservation."

   21. NKNikhil Kamath14:27

       Mm-hmm.

   22. NANikesh Arora14:27

       Now, if you trust AI to do all of that for you and show up blindly over there, that would be called giving agency to that agent to let it decide for you.

   23. NKNikhil Kamath14:35

       Right.

   24. NANikesh Arora14:36

       I don't think we're ready as human beings to let even that basic-- to hand over that basic agency. So, so sort of long way of saying that, if you're building technology, uh, think about those scenarios. Think about a scenario that if Nikhil gave agency to an agent, and somebody took over that agent, what chaos would they be able to cause,

7. 14:55 – 23:42

   Where AI is Taking the Industry

   1. NANikesh Arora14:55

      right?

   2. NKNikhil Kamath14:56

      And this will happen when AI moves from, in many ways, for a lot of people, including me, it's very question and answer right now.

   3. NANikesh Arora15:03

      Yes.

   4. NKNikhil Kamath15:04

      You're talking about when it is able to do more sequential tasks in a way.

   5. NANikesh Arora15:07

      Able to do things, right?

   6. NKNikhil Kamath15:08

      And everybody's trying to solve for that, right?

   7. NANikesh Arora15:09

      Yes. So there's two elements, right? There's the planning element and the doing element.

   8. NKNikhil Kamath15:13

      Right.

   9. NANikesh Arora15:13

      Today, it does a task.

   10. NKNikhil Kamath15:15

       Right.

   11. NANikesh Arora15:15

       It book me an airline ticket. When do you want to go?

   12. NKNikhil Kamath15:17

       Yeah.

   13. NANikesh Arora15:17

       It's kinda like writing a piece of code.

   14. NKNikhil Kamath15:18

       Yeah.

   15. NANikesh Arora15:18

       But it says, "Find the best option."

   16. NKNikhil Kamath15:21

       Yeah.

   17. NANikesh Arora15:21

       "Infer what the best option is."

   18. NKNikhil Kamath15:22

       Yeah.

   19. NANikesh Arora15:23

       "Figure out what's most convenient to me. Figure out the time I should be flying from here. Figure out that allows me to get there at the right time-

   20. NKNikhil Kamath15:29

       Mm-hmm

   21. NANikesh Arora15:29

       ... based on my calendar or whatever you have you." Something is planning this. That inference engine of everybody's trying to build-

   22. NKNikhil Kamath15:35

       Yeah

   23. NANikesh Arora15:35

       ... for every use case.

   24. NKNikhil Kamath15:36

       Yeah.

   25. NANikesh Arora15:36

       That inference engine then we, we connect, let's call it, to a do engine, and if you can infer and do, that becomes your agent.

   26. NKNikhil Kamath15:43

       Yeah.

   27. NANikesh Arora15:44

       Now, the good news is, that's gonna be fun. Exciting news for cybersecurity is that, once that happens, I don't have to bother you. I can just take over your agent-

   28. NKNikhil Kamath15:53

       Right

   29. NANikesh Arora15:53

       ... and cause chaos.

   30. NKNikhil Kamath15:54

       Right.
8. 23:42 – 25:44

   If Interfaces Don’t Matter, What Does?

   1. NKNikhil Kamath23:42

      The interface in businesses like us, I agree with you a hundred percent, will become irrelevant. If I could use the analogy of, say, cryptocurrency and the blockchain, I think where people like us come in is, we're essentially not a company of interface, but a company with a regulatory moat.

   2. NANikesh Arora24:04

      You're, you're what I call a system of record.

   3. NKNikhil Kamath24:06

      Yeah.

   4. NANikesh Arora24:07

      You have track-

   5. NKNikhil Kamath24:08

      Yeah

   6. NANikesh Arora24:08

      ... of how many shares I own.

   7. NKNikhil Kamath24:09

      Yeah.

   8. NANikesh Arora24:09

      You're a system of record.

   9. NKNikhil Kamath24:10

      Yeah.

   10. NANikesh Arora24:10

       If you were to vanish tomorrow-

   11. NKNikhil Kamath24:11

       Yeah

   12. NANikesh Arora24:11

       ... I wouldn't know what my net worth is, if I was a zero-dollar customer. So, yeah, so you're a system of record, and system of records will stay.

   13. NKNikhil Kamath24:18

       Yeah.

   14. NANikesh Arora24:18

       But the entire product development process of how I interface with the system of record will change.

   15. NKNikhil Kamath24:22

       System of record will stay when there is regulation behind it, which mandates them to stay, or will the same apply to a technology like blockchain, where there might not be a regulator mandating the system of record?

   16. NANikesh Arora24:33

       It doesn't have to be a regulator, right? A system of record is almost like, I would say-... something that is built over time.

   17. NKNikhil Kamath24:40

       Right.

   18. NANikesh Arora24:40

       Right? Well, either it's mandated by regulation, mandated by enterprises. I have a, I have-- You-- I'm pretty sure you and I have both have payroll systems-

   19. NKNikhil Kamath24:47

       Yeah.

   20. NANikesh Arora24:47

       -which are systems of record.

   21. NKNikhil Kamath24:48

       Yeah.

   22. NANikesh Arora24:48

       They're not mandated by regulation.

   23. NKNikhil Kamath24:50

       Mm-hmm.

   24. NANikesh Arora24:50

       But if you have a payroll system, if it goes away tomorrow, you won't know how much you paid someone and how much you have to pay them. The whole mode of interaction of me with your payroll system may be fundamentally different-

   25. NKNikhil Kamath24:58

       Yeah

   26. NANikesh Arora24:59

       ... and your head of HR, and that might be different, but the system of record will stay-

   27. NKNikhil Kamath25:02

       Mm-hmm

   28. NANikesh Arora25:02

       ... because it's required as part of your business process to exist. Now, a system of record could also be there purely because of the fact that I have great market share.

   29. NKNikhil Kamath25:11

       Mm-hmm.

   30. NANikesh Arora25:11

       Hence, I have the record of that data somewhere, and it's too painful for you to replace that system of record. Even though it's not mandated by regulation, it just happens to be that was where it is. So there is, there is a prevailing theory that the big will become bigger because they are-- if they are smart enough and fast enough, agi- and agile enough to be able to change the mode of interaction with the system of record. And I think that's going to make a lot of enterprise software rethink how it's built, how it's run, and how it's managed.

9. 25:44 – 32:15

   What Happens When AI is Everywhere?

   1. NKNikhil Kamath25:44

      So if AI becomes democratic, [chuckles] democratic in the means that everybody evolves to a point where everybody's like each other, how big does the role of a brand play in something like this? Why do I pick A over B? Is it just utilitarian, or is there a brand play involved?

   2. NANikesh Arora26:02

      Well, I, I thought you were asking a societal question, which is a much harder question.

   3. NKNikhil Kamath26:05

      Yeah.

   4. NANikesh Arora26:05

      I'll stick with the brand question. [chuckles]

   5. NKNikhil Kamath26:06

      I'll come to that next. [chuckles]

   6. NANikesh Arora26:07

      I'll stick with the brand, I'll stick with the brand question where you're now. Uh, I think, look, brands are correlated experiences-

   7. NKNikhil Kamath26:13

      Right

   8. NANikesh Arora26:13

      ... and trust, and, and perception, right?

   9. NKNikhil Kamath26:16

      Mm-hmm.

   10. NANikesh Arora26:17

       You know, why do you spend a lot more money for a Cartier bracelet for your wife or your girlfriend-

   11. NKNikhil Kamath26:23

       Mm-hmm

   12. NANikesh Arora26:24

       ... than you would for something made by your local jeweler?

   13. NKNikhil Kamath26:27

       Mm-hmm.

   14. NANikesh Arora26:27

       If you, if you-- The raw material is the same. The cogs are pretty much the same.

   15. NKNikhil Kamath26:31

       Mm-hmm.

   16. NANikesh Arora26:31

       But you pay more for the perception, for the brand, for the experience, the trust, the loyalty. So I think the brand encompasses a lot more than the raw material from that perspective. I don't know how democratization of AI changes that. Let's, let's take a look at it from a slightly different angle.

   17. NKNikhil Kamath26:49

       Mm-hmm.

   18. NANikesh Arora26:50

       You know, the way I see, this is partly the societal comment, right? A-- When things like Google came about-

   19. NKNikhil Kamath26:56

       Mm-hmm

   20. NANikesh Arora26:56

       ... if you go historically, historically, information was power, right?

   21. NKNikhil Kamath27:00

       Mm-hmm.

   22. NANikesh Arora27:00

       Caste systems based on power-

   23. NKNikhil Kamath27:02

       Mm-hmm

   24. NANikesh Arora27:02

       ... which is basically fundamentally based on information. The highest caste was-

   25. NKNikhil Kamath27:05

       Yeah

   26. NANikesh Arora27:05

       ... owned the information and dictated-

   27. NKNikhil Kamath27:07

       Yeah

   28. NANikesh Arora27:07

       ... how society should behave.

   29. NKNikhil Kamath27:08

       Mm-hmm.

   30. NANikesh Arora27:08

       And look, you know, historically, a lot of power has been because of an information disadvantage or asymmetry.
10. 32:15 – 35:57

    Why Language Models Are Just the Starting Point

    1. NANikesh Arora32:15

       AI is a thousand times smarter in five years-

    2. NKNikhil Kamath32:17

       Mm-hmm

    3. NANikesh Arora32:17

       ... let alone five thousand times-

    4. NKNikhil Kamath32:19

       Mm-hmm

    5. NANikesh Arora32:19

       ... what is the art of the possible?

    6. NKNikhil Kamath32:21

       I love how you're explaining. [laughing]

    7. NANikesh Arora32:23

       [laughing]

    8. NKNikhil Kamath32:25

       Would you like to prophesize how the world might look in ten years?

    9. NANikesh Arora32:29

       No.

    10. NKNikhil Kamath32:29

        Just a major a guess.

    11. NANikesh Arora32:30

        No, I, I don't know if, uh, prophesizing is to any value, right?

    12. NKNikhil Kamath32:35

        Mm-hmm.

    13. NANikesh Arora32:35

        I think you have to take an optimistic outlook towards this. You can prophesize a draconian set of outcomes.

    14. NKNikhil Kamath32:42

        Mm-hmm.

    15. NANikesh Arora32:42

        You can prophesize an out, you know, optimistic set of outcomes.

    16. NKNikhil Kamath32:45

        Mm-hmm.

    17. NANikesh Arora32:45

        We all were, you know, you know, we've all lived through this in recent past where we had a pandemic, and if you looked at prefo- prophesizing the pandemic, you said, "The pandemic is gonna persist for five years."

    18. NKNikhil Kamath32:56

        Right.

    19. NANikesh Arora32:56

        I'm pretty sure there would be as many doomsday prophecies as there were-

    20. NKNikhil Kamath32:59

        Mm-hmm

    21. NANikesh Arora32:59

        ... uh, possibly more than optimistic prophecies. But look around you.

    22. NKNikhil Kamath33:03

        Yeah.

    23. NANikesh Arora33:03

        A very extremely resilient society. I think we forget historical lessons, and people will say, "Oh, my God, what's gonna happen? AI is gonna take my job. What's it gonna do?"

    24. NKNikhil Kamath33:11

        Mm-hmm.

    25. NANikesh Arora33:11

        Well, guess what, you know? I don't see anybody buying picks and shovels and digging up the ground to plant wheat.

    26. NKNikhil Kamath33:17

        Mm-hmm.

    27. NANikesh Arora33:17

        Right? Things that happened, and we all found something else to do. So I'm sure we'll find things to do. We'll find, find ways to, uh, propel society further, right? Um, and, and I'm sure things that get solved easily-

    28. NKNikhil Kamath33:36

        Mm-hmm

    29. NANikesh Arora33:36

        ... will create new opportunities, just have no doubt.

    30. NKNikhil Kamath33:39

        I was talking to one of our private equity common friends, and he seemed to think that the models, the language models, will become like the device, like the iPhone today.
11. 35:57 – 38:33

    Build the Brain or Protect It?

    1. NKNikhil Kamath35:58

       As an investor, better use of my dollar to be building a wrapper on a brain or trying to secure the brain?

    2. NANikesh Arora36:05

       Well, clearly, the trying to secure the brain, you're asking my question.

    3. NKNikhil Kamath36:11

       [laughing]

    4. NANikesh Arora36:11

       The cybersecurity, I'm just trying to-- I'm still staying in the philosophical part of it. [laughing] Okay. Uh, look, I think everybody who's solving a problem, necessary or unnecessary, right?

    5. NKNikhil Kamath36:26

       Mm-hmm.

    6. NANikesh Arora36:27

       I mean, the application world, some people are solving necessary problems, some people unnecessary problems.

    7. NKNikhil Kamath36:31

       Mm-hmm.

    8. NANikesh Arora36:31

       We really need more social-

    9. NKNikhil Kamath36:32

       Mm-hmm

    10. NANikesh Arora36:32

        ... you know, media and social applications, possibly not, but somebody's trying to solve it. I think everybody is going to see how they can apply this brain towards solving their specific problem. And as an investor, a lot bigger share shifts will happen-

    11. NKNikhil Kamath36:48

        Mm-hmm

    12. NANikesh Arora36:49

        ... in what is, I'll say, a stabler ecosystem for now.... A lot of people will lose share, a lot of people will gain share, depending how they use the brain to solve the problem. Which is what happened in the last technological inflection, right? Why does Amazon exist? They s- they used the, the technology inflection of the internet and connectivity to solve the problem, known problem differently, and caused a share shift between traditional retail and today, right?

    13. NKNikhil Kamath37:10

        Mm-hmm.

    14. NANikesh Arora37:10

        Why did Google exist? Because it shifted outline, you know, traditional advertising, online advertising, because it's used the inflection point of the internet and mobility, et cetera, to cause that to happen. So the question is, or the point is, people will use this technology inflection of democratization of intelligence-

    15. NKNikhil Kamath37:25

        Mm-hmm

    16. NANikesh Arora37:26

        ... to create, to solve the same problem differently. And the ones who solve it differently, faster, much more efficiently, lower friction, lower cost, better economic value, and better outcome, are gonna have a disproportionate share shift in their direction from legacy players. Now, and if I, if I had a dollar for every time I heard a legacy player saying, "I'm smart, this time I'll figure it out"-

    17. NKNikhil Kamath37:46

        Mm-hmm

    18. NANikesh Arora37:46

        ... then none of the new economy industry should exist and startups shouldn't exist. So by definition, people will build better solutions, better mousetraps, and the idea, the opportunity for investor has never been larger in that context than just focusing on securing the model. Which it will, will- which look, which will not be non-lucrative.

    19. NKNikhil Kamath38:04

        Mm-hmm.

    20. NANikesh Arora38:05

        But it's almost securing the model is harder to discern which person is gonna secure the model better. It's easier, possibly as an investor to say, take a human experience and say, "I get it." That experience can be fundamentally transformed by applying smarter, more intelligence to it.

    21. NKNikhil Kamath38:19

        And securing a model might not be so interesting if so many models get to the point where they're almost the same.

    22. NANikesh Arora38:26

        Leave that to us, we'll take it. [laughing] Another le- legacy incumbent saying, "Oh, we've got this problem solved." [laughing]

    23. NKNikhil Kamath38:32

        Very

12. 38:33 – 41:23

    What Founders Should Pay Attention To

    1. NKNikhil Kamath38:33

       interesting. So that was from an investor's lens. Me, as a young person starting a company, how do I look at cybersecurity? How do I... What, what are the three things I have to do?

    2. NANikesh Arora38:47

       Broadly starting a company, or just you want to start a cybersecurity company?

    3. NKNikhil Kamath38:49

       No, no, broadly starting a company. I'll come to starting a cybersecurity company in the end.

    4. NANikesh Arora38:54

       Look, what's fascinating is, um, for the first time in my life, from a technology perspective, I'm seeking out young twenty-three or twenty-five-year-old founders to learn from them. Normally, I'm the sage old man with white hair, and people come to me and say: "Hey, can we talk about starting a company, and how do you-

    5. NKNikhil Kamath39:14

       Yeah

    6. NANikesh Arora39:14

       ... scale it? How do you make it bigger? How do you live a life like yours at Google, SoftBank, or Palo Alto?" Right now, I'm re- I reached out to the founder of, you know, Windsurf, or I reached out to the founder of, you know, uh, Console.ai or Factory, and I'm sitting down and picking their brain. This morning, I, I was talking to a founder of an autonomous car company saying: "Tell me how this new world works. How do you see it? How does this AI gonna impact it? How are you building a company which is so fundamentally different than mine?" Because I'm sitting there saying, "I might be legacy." Because technology is moving so fast, and it's being done so differently. And I read about these companies which hit hundred million in ARR, not that it's, you know, it's, it's an achievement, but it's, it's much faster than anybody else that are doing it. I see people who say-

    7. NKNikhil Kamath39:54

       Yeah

    8. NANikesh Arora39:55

       ... "Oh, I, I was watching an exchange on, on X between two people saying, 'Well, thank you, we built this feature in seventy-two hours and shipped it. It couldn't have been done between the two of our companies if you guys hadn't put your heart and soul to it. And oh, by the way, thanks to our coding agent.'" So I'm sitting saying, the pace of innovation-

    9. NKNikhil Kamath40:11

       Mm-hmm

    10. NANikesh Arora40:11

        ... has fundamentally inflected, and I feel like I just don't want to be sitting here, you know, gazing at my own navel saying, "Oh, my God, you know, we've got this covered." So it hasn't been more uncertain than today.

    11. NKNikhil Kamath40:24

        Right.

    12. NANikesh Arora40:25

        So a- all I can advise people who are out there is, uh, you know, teach us something [laughing] because they've got it figured out.

    13. NKNikhil Kamath40:33

        Yeah.

    14. NANikesh Arora40:33

        But more so, I think the n- the, the wave of technology that is coming is gonna allow people to build businesses faster-

    15. NKNikhil Kamath40:41

        Mm-hmm

    16. NANikesh Arora40:41

        ... more agility, a lower number of people, and fundamentally rethink them.

    17. NKNikhil Kamath40:45

        Mm-hmm.

    18. NANikesh Arora40:46

        And if you're not doing that, if your rethink is marginal-

    19. NKNikhil Kamath40:50

        Mm-hmm

    20. NANikesh Arora40:50

        ... if you're looking for a ten, twenty percent improvement, don't bother, because things are about to move ten X. So I think self-reflect on the idea. If your idea is not ten X worthy, you're solving the wrong problem.

    21. NKNikhil Kamath41:03

        I feel the exact same way. I've met a bunch of really bright kids every day for lunch and dinner the last week, and I just feel stupid. Like-

    22. NANikesh Arora41:12

        [laughing]

    23. NKNikhil Kamath41:13

        ... I'm like, that's why I'm here for longer than I was meant to, and I want to come back because I feel like suddenly this area has become some kind of a hub.

13. 41:23 – 42:28

    Lessons from the Evolution of Silicon Valley

    1. NANikesh Arora41:23

       It's fascinating, you know, two or three years ago, and it happens every four or five years, right?

    2. NKNikhil Kamath41:28

       Mm.

    3. NANikesh Arora41:28

       You know, I moved here in two thousand and nine, and I, I just moved because I was, you know, gonna be part of Google's team. Uh, uh, and I moved here at that point in time, the, the buzz was social, right? You know, it was Snapchat and Facebook, and, and YouTube was going from strength to strength, and Instagram was getting bought, and, you know, WhatsApp was getting bought. And that was kind of the time in, in, you know, two thousand nine, ten-ish timeframe. And then people say: "Oh, my God, this, this wave is coming to an end. What's gonna happen?" And suddenly, so the crypto wave arrived. Like, suddenly everything was crypto around you, and there was crypto, crypto, crypto, blockchain-

    4. NKNikhil Kamath42:03

       Mm-hmm

    5. NANikesh Arora42:04

       ... you know, whole bunch of coins and whole bunch of stuff, the SPAC wave. And again, people call the end of San Francisco and said: "Oh, my God, it's a city you can't go to." And suddenly, it's the AI wave.

    6. NKNikhil Kamath42:13

       Mm-hmm.

    7. NANikesh Arora42:13

       AI companies out there buying up real estate in San Francisco-

    8. NKNikhil Kamath42:16

       Yeah

    9. NANikesh Arora42:16

       ... and building businesses. And if you ask the world, where is the hub of AI? It seems to be here. Every AI model that is being built-

    10. NKNikhil Kamath42:25

        Mm-hmm

    11. NANikesh Arora42:25

        ... with a reason, except perhaps in China, is headquartered

14. 42:28 – 46:31

    Should India Build Its Own Model?

    1. NANikesh Arora42:28

       here.

    2. NKNikhil Kamath42:29

       Do you think India should try and build a model? We are trying.

    3. NANikesh Arora42:33

       Um, we should. I think the question becomes, is a CapEx question. You know, uh, we can talk, I mean, you're much smarter about the Indian ecosystem than I will ever be. India has not shown a propensity for large CapEx projects with unclear returns.... mm-hmm, perhaps is the best way to say it.

    4. NKNikhil Kamath42:55

       Yeah.

    5. NANikesh Arora42:55

       Right? Uh, you can't walk around and raise fifty billion dollars-

    6. NKNikhil Kamath43:00

       Mm-hmm.

    7. NANikesh Arora43:01

       -uh, and build two nuclear plants to fund AGI today, irrespective of who you are and irrespective of who your investors are from the Indian subcontinent.

    8. NKNikhil Kamath43:14

       Yeah.

    9. NANikesh Arora43:15

       And, you know, so that, that's where I think the, the constraint there is the appetite for people to deploy large amounts of capital.

    10. NKNikhil Kamath43:23

        I agree with you, but on the flip side, in a world which is getting increasingly fragmented on the geopolitical lens, and tariffs, and all of that, the question is also, if somebody turns off a tap that we have built so much upon, what happens then?

    11. NANikesh Arora43:41

        Explain that.

    12. NKNikhil Kamath43:42

        Like, let's say we've used a model based out of China as the base to a lot of stuff that we have worked on, and one day they shut it down, and India doesn't have its own. What happens then?

    13. NANikesh Arora43:52

        Look, there will always be the next version of the model.

    14. NKNikhil Kamath43:56

        Mm-hmm.

    15. NANikesh Arora43:57

        So even if you were using one, and they didn't-

    16. NKNikhil Kamath43:59

        You can transition quickly

    17. NANikesh Arora44:00

        ... give you access to the new one, then you have the less smarter model because the next one's smarter, faster, better, cheaper, right? So that, that risk is constantly there. It's not just access to the current model that you have.

    18. NKNikhil Kamath44:10

        Mm-hmm.

    19. NANikesh Arora44:11

        Um, one would hope that with the arms race we talked about, there's north of ten thousand models on Hugging Face, many of them-

    20. NKNikhil Kamath44:20

        Yeah

    21. NANikesh Arora44:20

        ... open source. So at least there is state- there is art out, the prior art out there, which allows you to experiment and play with it. But I think-

    22. NKNikhil Kamath44:26

        But even when they open source a model, they don't open source the weights they have used. They-

    23. NANikesh Arora44:31

        There are some models-

    24. NKNikhil Kamath44:31

        Open source in train

    25. NANikesh Arora44:31

        ... you can modify weights. So look, I understand the value of having a frontier model of your own, where you can control your own destiny. It comes at a high cost today. The question is, yes, should... I mean, the unequivocally answer-

    26. NKNikhil Kamath44:44

        [chuckles]

    27. NANikesh Arora44:44

        ... is, yes, we should-

    28. NKNikhil Kamath44:45

        Yeah

    29. NANikesh Arora44:45

        ... in India. The question is: who has the financial capacity-

    30. NKNikhil Kamath44:48

        Yeah
15. 46:31 – 50:00

    Are AI Bets Overblown?

    1. NKNikhil Kamath46:32

       The last thing I wanted to ask you on AI is, somebody described it to me in this manner, that they said world output is about a hundred trillion dollars. Let's assume fifty, fifty percent of that is in services. Even if AI is able to disrupt ten percent of that, five trillion dollars, will justify all the money spent on infra and CapEx that has gone into the world of AI right now?

    2. NANikesh Arora46:59

       Right.

    3. NKNikhil Kamath47:00

       If you were to have a dollar to invest into every AI company today, do you think it's overinflated? Do you think it'll make money in a decade at today's valuation?

    4. NANikesh Arora47:11

       That's a hard call, right? Now, normalizing for execution, some people will execute better than the others.

    5. NKNikhil Kamath47:19

       Mm-hmm.

    6. NANikesh Arora47:20

       Right? Some people will be able to sustain better than the others, and as you know better than I do, in the world of businesses which are not making money, you- your survival is only guaranteed till the next fundraise.

    7. NKNikhil Kamath47:34

       Yeah.

    8. NANikesh Arora47:34

       Right?

    9. NKNikhil Kamath47:35

       Yeah.

    10. NANikesh Arora47:35

        So if I had a dollar to give, and you said, "Well, you're making money in ten years," the question is, can you sustain the fundraising through that period until you turn cash flow positive?

    11. NKNikhil Kamath47:44

        Mm-hmm.

    12. NANikesh Arora47:44

        Otherwise, we've seen companies which have gone away-

    13. NKNikhil Kamath47:47

        Mm

    14. NANikesh Arora47:47

        ... because they were not able to raise their next round, or the round was so dilutive that nobody wanted to deal with it or... So, you know, all those conditions notwithstanding, I think it's a bigger question from an economic value proposition you're asking. You know, is there enough there there here in the entire industry that it justifies what is being spent today?

    15. NKNikhil Kamath48:02

        Mm-hmm.

    16. NANikesh Arora48:03

        But without regard for-

    17. NKNikhil Kamath48:04

        Mm-hmm

    18. NANikesh Arora48:05

        ... which company you invest in, let's take the company dynamics out. Look, prima facie, it, it, it seems to be the prevailing wisdom, right? The fact that people are raising money have, you know, the companies that raised money at two billion dollars, six months ago raising money at four billion dollars, right now is unprecedented.

    19. NKNikhil Kamath48:20

        Yeah.

    20. NANikesh Arora48:20

        You never heard that degree of development and conviction that is happening in the market today. So clearly, there is a gold rush. Now, we've seen past gold rushes.

    21. NKNikhil Kamath48:28

        Mm-hmm.

    22. NANikesh Arora48:28

        So I'll give you the answer in two parts. You know, it's kind of like the, you know, overestimating the short term, underestimating the long-term answer, which is, I think the long-term trend-

    23. NKNikhil Kamath48:40

        Mm-hmm

    24. NANikesh Arora48:40

        ... points towards something like you hypothesized, that there is enough opportunity to eliminate redundancy, run work, you know, repetitive tasks, and solving the same problem multiple times, which was never leverageable, right? Now, you hire a consulting firm to do a project in Company A, how many B, C, D, E through, you know-... Z are gonna pay the same amount of money to do the same project because there's no democratization of intelligence. Intelligence is captive, and it's being sold one at a time. When it's democratized, everybody gets the same time, which means it lowers the cost to deliver it. So that, if you apply that logic, the logic suggests that, yes, we can shave off a lot of, a lot of inefficiency, a lot of increased economic value tremendously, which should justify this desire to invest in democratizing intelligence. Which should justify the fact that once this democratized intelligence is made available generally to all of us, we will find a way of creating more economic value because we'll get faster, you know, higher quality, lower friction, and more competence/better output. Short term, it goes back to the execution questions as to which is the right one of these?

    25. NKNikhil Kamath49:44

        Yeah.

    26. NANikesh Arora49:45

        Does it make sense? Is there enough, uh, economic value in the category-

    27. NKNikhil Kamath49:50

        Mm

    28. NANikesh Arora49:50

        ... that you're putting billions of dollars to work, that it justifies the category? So I think all those questions, uh, it could be a Robin Hood moment. It could be people taking from the rich and giving to the poor. [chuckles]

16. 50:00 – 54:15

    What’s Holding Innovation Back in India?

    1. NKNikhil Kamath50:00

       [chuckles] I was having this conversation with someone last week on how we can get India to be a lot more innovative, and we were trying to figure out why, on the scale of innovation, uh, new ideas per se, not enough have been rooted from there in the past. We had this debate around a whole bunch of things, you know, budget for research in academia, stuff like that. But it seems to come down to one thing, that the risk capital available there, like you just said, a kid out of Stanford could get twenty million to go and build an idea.

    2. NANikesh Arora50:35

       Actually, better still, a kid dropped out of Stanford.

    3. NKNikhil Kamath50:37

       Yeah. [laughing]

    4. NANikesh Arora50:37

       They have a higher chance. [laughing]

    5. NKNikhil Kamath50:39

       Yeah, I met, like, two dozen of them last night-

    6. NANikesh Arora50:42

       Exactly right. Yeah.

    7. NKNikhil Kamath50:42

       ... and the, I was telling them, the seniors who are just, like, finishing college, I'm like: "There has been no better time for anyone to have graduated from Stanford than you guys-"

    8. NANikesh Arora50:52

       That's right.

    9. NKNikhil Kamath50:52

       " ... because whatever you come up with, you'll get funded."

    10. NANikesh Arora50:53

        That's been true every five years, by the way, but okay.

    11. NKNikhil Kamath50:55

        Yeah. [chuckles]

    12. NANikesh Arora50:56

        It's just you're telling us we're getting old, right?

    13. NKNikhil Kamath50:58

        Yeah.

    14. NANikesh Arora50:58

        Right.

    15. NKNikhil Kamath50:59

        Yeah. But what do you think it is? What should India change? Is it risk capital?

    16. NANikesh Arora51:04

        Like, this debate comes up everywhere, right?

    17. NKNikhil Kamath51:06

        Yeah.

    18. NANikesh Arora51:06

        You know, for the last twenty-five years, I've been asked, you know, why is there one Silicon Valley-

    19. NKNikhil Kamath51:11

        Mm-hmm

    20. NANikesh Arora51:11

        ... and why are there not many Silicon Valleys in the world? And, you know, you wanna make Silicon Valley of India in Bangalore, or Israel is the Silicon Valley of, uh... Sorry, uh, you know, uh, yeah, is the Silicon Valley, um, for cybersecurity, et cetera. I think it boils down to a combination-

    21. NKNikhil Kamath51:28

        Mm-hmm

    22. NANikesh Arora51:28

        ... of things, and I think it's, it's hard to get the combination of things together in one place.

    23. NKNikhil Kamath51:35

        Mm-hmm.

    24. NANikesh Arora51:36

        Uh, partly it's sort of things like you've identified, risk capital-

    25. NKNikhil Kamath51:40

        Mm-hmm

    26. NANikesh Arora51:41

        ... is part, uh, talent and resources.

    27. NKNikhil Kamath51:44

        Mm-hmm.

    28. NANikesh Arora51:44

        It's part, uh, infrastructure, it's part availability, all of that. It's part ease of doing business, and all those things sort of fit in a mixer, and you shake it and, you know, a lot of that gets in there. I think it's, it's also partly the acceptance of failure.

    29. NKNikhil Kamath52:02

        Yeah.

    30. NANikesh Arora52:03

        Right? Culturally, I grew up there, and you grew up there.
17. 54:15 – 59:25

    Education as a Social Experience

    1. NKNikhil Kamath54:15

       So you went to IIT and then MS from Boston and MBA from Northeastern. That's-

    2. NANikesh Arora54:20

       The other way around, but same difference.

    3. NKNikhil Kamath54:21

       That's a lot of studying.

    4. NANikesh Arora54:23

       Not really. It's a lot easier to study in the US than it is in India, so-

    5. NKNikhil Kamath54:27

       Mm

    6. NANikesh Arora54:27

       ... you could study and work here at the same time.

    7. NKNikhil Kamath54:29

       So it was study and work at the same time?

    8. NANikesh Arora54:31

       No, the, the, I came here to go to business school at Northeastern. Uh, I wasn't smart enough to get into the IMs in India. They're too competitive.

    9. NKNikhil Kamath54:39

       But you were at IIT-

    10. NANikesh Arora54:40

        I was at IIT

    11. NKNikhil Kamath54:41

        ... which is possibly more competitive.

    12. NANikesh Arora54:42

        Well, that point in time, a lot less than it is today, but I think they have more of them right now than they were then. I was there, it was about six of them, and we were called ITB. We're not even IIT. We're not even a full-fledged IIT at that point in time. Uh, yeah, I did that. Couldn't get into business school in India. I didn't even try that hard. I think I left in the middle of the CAT exam and went to watch a movie with-... uh, my girlfriend at that point in time, so maybe it was me. Um, came to the US. Uh, they said I have to teach computer science. I hadn't studied computer science, it was a slight problem, so I spent the summer brushing up on whatever I could learn, and I taught computer science at Northeastern. I went to business school there. Um, it was '92 when I graduated, it was a recession. It was hard to get a job. Uh, I wrote 400-plus letters to people applying for a job and, you know, like, sometimes the printer ran out of ink, but I knew it was a rejection letter, but pretty much it said in the first sentence, but they forgot the signature part.

    13. NKNikhil Kamath55:36

        Mm-hmm.

    14. NANikesh Arora55:36

        So I had, like, 400... I still have them. I have 400 rejection letters of my life lying in my house, and one theme that was kind of persistent through all of them when I applied, 'cause, you know, you know how you have, like, those yearbooks?

    15. NKNikhil Kamath55:47

        Yeah.

    16. NANikesh Arora55:47

        My MBA yearbook said, "Most likely to end up on Wall Street."

    17. NKNikhil Kamath55:52

        Mm.

    18. NANikesh Arora55:52

        My Wall Street rejection said, "Not into finance." There's a bit of a cognitive disconnect between my peers and-

    19. NKNikhil Kamath55:57

        Yeah

    20. NANikesh Arora55:58

        ... and the Street. And, uh, so that's why I got a master's in finance from BC. I felt like I had to compensate for lack of finance, and I ended up getting a CFA as well at that point in time. Yeah, but that's what caused the, the back-to-back two degrees, and I was lucky enough to... In those days, I think systems weren't as robust. I had seven rejection letters from Fidelity before I got a job for the eighth person, so thank God they weren't comparing notes.

    21. NKNikhil Kamath56:23

        Does education hold the same value today? In today's world, would you spend as many years doing what you did?

    22. NANikesh Arora56:30

        You know, the older we get, the more we value education and experience.

    23. NKNikhil Kamath56:34

        Mm-hmm.

    24. NANikesh Arora56:35

        The younger we are, the more irreverent we are of experience and education. So I-

    25. NKNikhil Kamath56:39

        I think I, I agree with-

    26. NANikesh Arora56:40

        Staying the stereotype, I should value education [chuckles] and experience more.

    27. NKNikhil Kamath56:43

        So you don't have to.

    28. NANikesh Arora56:44

        But I think the 22-year-old kid who I met, who's building a hundred billion dollar company, will tell you that I'm full of shit and all my experiences are not-

    29. NKNikhil Kamath56:50

        Yeah

    30. NANikesh Arora56:50

        ... and he's got more risk appetite than I do.
18. 59:25 – 1:00:08

    Moving into Tech and Leadership

    1. NKNikhil Kamath59:26

       So you transitioned to tech after Fidelity. That's a completely different career.

    2. NANikesh Arora59:31

       Not quite.

    3. NKNikhil Kamath59:32

       Mm.

    4. NANikesh Arora59:32

       You know, we could say IIT was tech or is tech.

    5. NKNikhil Kamath59:34

       Mm-hmm.

    6. NANikesh Arora59:35

       When I went to business school, I was teaching some version of tech. Uh, at Fidelity, actually, I worked in their technology department in finance the first five years I was there. So still analyzing tech, the wrong tech. When I went to Putnam, I was analyzing tech and telecom as a buy-side analyst. So I was always paying attention to the business of tech, perhaps is a better way to describe it. I was never spending time coding or writing code. Uh, if I did, maybe I'd have founded a company myself and be much smarter. But no, I was always involved in the business of tech.

    7. NKNikhil Kamath1:00:07

       Right.

19. 1:00:08 – 1:06:38

    Building vs Leading: What to Choose

    1. NKNikhil Kamath1:00:08

       That's actually, uh, a novelty, which is a new thing almost in society, where not founders of company, but executives, I think you're like the poster child of that, who become extremely wealthy and billionaires and all of that. Do you see a diff-

    2. NANikesh Arora1:00:24

       As I'm sorry, I'm, I'm trying to find where the slur is in that, but go on. [chuckles]

    3. NKNikhil Kamath1:00:28

       [chuckles] So these two paths of, of either founding a company or being an executive like yourself, I think there's a smaller crowd like you, which have done exceptionally well. How do you think those journeys are different, and what kind of personality type is suited for which?

    4. NANikesh Arora1:00:49

       That's an interesting question. Look, we live in Silicon Valley, so, you know, there was a big debate, as you may remember, maybe twelve, fourteen, eighteen months ago. Brian Chesky sparked it off, the founder mode-

    5. NKNikhil Kamath1:01:00

       Mm-hmm

    6. NANikesh Arora1:01:00

       ... where somehow-

    7. NKNikhil Kamath1:01:01

       Yeah

    8. NANikesh Arora1:01:01

       ... founders were more, uh-... had a higher moral right-

    9. NKNikhil Kamath1:01:08

       Yeah

    10. NANikesh Arora1:01:08

        ... to go run, build great businesses long-term and bigger ones than possibly executives. And I think, look, at the end of the day, eventually, a company, company is a combination of a product and a business around it.

    11. NKNikhil Kamath1:01:20

        Mm-hmm.

    12. NANikesh Arora1:01:21

        A product-only company is not a company. Eventually, somebody has to show up with the economics for that product to-

    13. NKNikhil Kamath1:01:27

        Yeah

    14. NANikesh Arora1:01:27

        ... have been worthy of being invested in. We just had this conversation about AI.

    15. NKNikhil Kamath1:01:30

        Mm-hmm.

    16. NANikesh Arora1:01:30

        You know, $5 trillion of services will be saved, hence it makes sense to invest all this. Now, the question becomes, you know, horses for courses. What is the right time for a product-impassioned individual to go ahead and build the best product in the world, as long as they can get the right capital attracted to go build a product? At what point in time does that product need to be wrapped with the right application or business model-

    17. NKNikhil Kamath1:01:59

        Mm

    18. NANikesh Arora1:02:00

        ... where it becomes a business that actually generates value for the buyer or the other side? Now, I think the answer is slightly different in, let's call them consumer businesses and enterprise businesses. In the consumer business, you can build a great product, you can create value, and you can find some basic, fundamental economic mechanism, like charge a subscription-

    19. NKNikhil Kamath1:02:20

        Mm

    20. NANikesh Arora1:02:20

        ... or sell advertising against it. Those are a little easier. Advertising is harder than subscription. If you're running Netflix, at the end, you pay 19 bucks, you don't pay 19 bucks, I'm gonna keep working the product, and then you should pay me 19 bucks, right? And I have to worry about each one of you because there's so many of you.

    21. NKNikhil Kamath1:02:33

        Mm-hmm.

    22. NANikesh Arora1:02:33

        If some leave, it's okay. There are many consumer businesses where you're fundamentally a product company with distribution and marketing, right? And then over time, your moat becomes distribution, and your product sometimes doesn't stay as good, but you still own distribution. Right? There are examples of that in the world. But eventually, if you don't build a good product, though, even those companies begin to peter off, so let's leave it there. In that case, it perhaps makes even more sense for a founder to persist-

    23. NKNikhil Kamath1:02:58

        Mm

    24. NANikesh Arora1:02:58

        ... where there's this constant need to product innovate because that drives the entire distribution and consumption of the product. In the case of enterprise, you see a different variation, and if you look at this example used of executives, I saw a recent article somewhere, it talks about executives. I'd say 75% of those executives named there are actually enterprise CEOs.

    25. NKNikhil Kamath1:03:18

        Mm-hmm.

    26. NANikesh Arora1:03:19

        Not consumer CEOs, funnily enough. And the reason is because enterprise is a combination of great product, building a business ecosystem around it, and making sure that you build an effective motion around delivering that innovation to various businesses, which is a combination of not just like... I met a founder the other day of an enterprise company. He say, "I love building the product. I hate going to cu- customers and trying to explain to them why this is a great product. I lose patience because they don't understand why this is a great product, and then eventually, I have to take them to dinner to get them to buy."

    27. NKNikhil Kamath1:03:51

        Mm-hmm.

    28. NANikesh Arora1:03:52

        And the founder doesn't like that. He wants to build a great product. Business executives say that's par for the course, you know? "I gotta do all of these things that about..." So, look, I am as product-obsessed and petrified as they come.

    29. NKNikhil Kamath1:04:06

        Mm.

    30. NANikesh Arora1:04:06

        I'm constantly, you know, challenging myself, especially my biggest, you know-- as I said to you, my, one of my current fears is what happens with AI-
20. 1:06:38 – 1:16:11

    Stories from Google & SoftBank

    1. NKNikhil Kamath1:06:38

       The most vivid memory or recollection I have is, when you joined SoftBank, you were all over the news in India-

    2. NANikesh Arora1:06:47

       And in Japan

    3. NKNikhil Kamath1:06:47

       ... for your salary and stuff.

    4. NANikesh Arora1:06:48

       And in Japan as well, believe me. [chuckles]

    5. NKNikhil Kamath1:06:51

       And in Japan as well. [chuckles] How was that? How was that experience? How was Masa, how was working with him? How was it to be as popular as you were for your salary, of all things?

    6. NANikesh Arora1:07:00

       That's, that's far for the course, but it's not what you aspire for. It's kind of, that's a way of keeping score. People keep score that way, right?

    7. NKNikhil Kamath1:07:08

       Yeah.

    8. NANikesh Arora1:07:08

       That's the way it was like, you know-

    9. NKNikhil Kamath1:07:10

       Do you still keep score that way?

    10. NANikesh Arora1:07:12

        ... No, it's the way people keep score. Uh, and again, it's a tough question to answer.

    11. NKNikhil Kamath1:07:20

        Yeah.

    12. NANikesh Arora1:07:21

        What- there's no good answer to that question.

    13. NKNikhil Kamath1:07:23

        [chuckles]

    14. NANikesh Arora1:07:23

        Right? If you say, "I keep score that way"-

    15. NKNikhil Kamath1:07:24

        Yeah.

    16. NANikesh Arora1:07:24

        -then it makes it sound you're materialistic.

    17. NKNikhil Kamath1:07:26

        Yeah.

    18. NANikesh Arora1:07:27

        If you say, "I don't care," it makes you sound like you don't care-

    19. NKNikhil Kamath1:07:29

        If you were to ask me, I would have said yes, that question to me.

    20. NANikesh Arora1:07:32

        That's how people keep score, score.

    21. NKNikhil Kamath1:07:33

        Yeah.

    22. NANikesh Arora1:07:34

        Again, I think being well compensated is a good outcome.

    23. NKNikhil Kamath1:07:37

        Yeah.

    24. NANikesh Arora1:07:38

        Uh, you know, it sometimes becomes more or less, it's a different issue. Yeah, it's-

    25. NKNikhil Kamath1:07:41

        We live in a capitalistic world, and we all have voted for capitalism.

    26. NANikesh Arora1:07:45

        That's how we keep score.

    27. NKNikhil Kamath1:07:45

        Yeah.

    28. NANikesh Arora1:07:45

        Yeah, yeah. Although we, you know, we are constantly fighting the battle between democracy and capitalism, which sometimes end up at odds, but that's a different conversation.

    29. NKNikhil Kamath1:07:51

        Can't a democracies-- can't a democracy have capitalism?

    30. NANikesh Arora1:07:55

        No.
21. 1:16:11 – 1:20:18

    How Risk Appetite Evolves

    1. NKNikhil Kamath1:16:11

       Seems like a good way to live. If we have one life, and life is meant to be experienced, Masa's way.

    2. NANikesh Arora1:16:17

       Yes, Nikhil, I think that's, that's true, and you and I have the luxury to be able to say that.

    3. NKNikhil Kamath1:16:22

       Mm-hmm.

    4. NANikesh Arora1:16:23

       Uh, it doesn't work well with Maslow's hierarchy.

    5. NKNikhil Kamath1:16:26

       Mm. Explain.

    6. NANikesh Arora1:16:27

       You have to... Well, Maslow's hierarchy-

    7. NKNikhil Kamath1:16:29

       Yeah, I know

    8. NANikesh Arora1:16:29

       ... suggests that you know what it is, and, like, you know, when you find a person who has no food and-

    9. NKNikhil Kamath1:16:33

       Mm-hmm

    10. NANikesh Arora1:16:34

        ... no money and has to feed his family, he's not worried about taking more risk and living one life.

    11. NKNikhil Kamath1:16:38

        Mm.

    12. NANikesh Arora1:16:38

        He's looking to create that stability.

    13. NKNikhil Kamath1:16:40

        Mm-hmm.

    14. NANikesh Arora1:16:40

        So the risk appetite can change when you reach the aspiration state of your life. The point is, he recognized-

    15. NKNikhil Kamath1:16:46

        Do you think AI changes that, more people move higher up the order-

    16. NANikesh Arora1:16:49

        [chuckles]

    17. NKNikhil Kamath1:16:49

        ... in the hierarchy?

    18. NANikesh Arora1:16:51

        Oh, you're moving questions too fast. [chuckles]

    19. NKNikhil Kamath1:16:53

        [chuckles]

    20. NANikesh Arora1:16:53

        I wasn't done with the last one, thinking through that one. But, uh, do I think AI changes our risk appetite? I don't think anything changes Maslow's hierarchy.

    21. NKNikhil Kamath1:17:03

        Mm-hmm.

    22. NANikesh Arora1:17:03

        In fact, I think there is a risk in the short term that AI creates more fear around Maslow's hierarchy than not.

    23. NKNikhil Kamath1:17:11

        Because?

    24. NANikesh Arora1:17:13

        Look, if you read everything out there, if you see the signs, it seems like, you know, repetitive tasks are gonna get easily overtaken by AI, and that's kind of be, you know, its contribution to society in the next two to three years, which directly targeted- targets the early in career part of people's lives and the part where they're trying to go pay their college loans in this country or where they're trying to set, settle down-

    25. NKNikhil Kamath1:17:39

        Yeah

    26. NANikesh Arora1:17:39

        ... and, you know, get-

    27. NKNikhil Kamath1:17:40

        De-risk

    28. NANikesh Arora1:17:40

        ... get, get sort of their basic needs met.

    29. NKNikhil Kamath1:17:42

        Yeah.

    30. NANikesh Arora1:17:42

        So the question is, if I can't get out of college with a, with a, with a loan and find a job that I'm gonna be adding value on, then that probably impacts my, my Maslow's hierarchy more than it impacts my risk appetite.
22. 1:20:18 – 1:22:12

    Closing Reflections

    1. NKNikhil Kamath1:20:18

       Any fleeting thought, Nikesh? I must say, this is one of my favorite podcasts ever. [chuckles]

    2. NANikesh Arora1:20:23

       You must not have done many then. [laughing]

    3. NKNikhil Kamath1:20:25

       [laughing] I've loved this conversation. But any fleeting thought that you wanna, like, leave behind?

    4. NANikesh Arora1:20:32

       I'll let you ask the question. It's too generic a comment. We can talk about anything you want.

    5. NKNikhil Kamath1:20:36

       [laughing] Okay, since you've given me that privilege, I give you $100-

    6. NANikesh Arora1:20:43

       Mm-hmm

    7. NKNikhil Kamath1:20:43

       ... and I let you either go long or go short one sector for the next decade. Long one first.

    8. NANikesh Arora1:20:57

       Look, by definition, technology is lifelong long, right? If you look historically, uh, 35% of the S&P is made of technology companies. Thirty years ago it was none, right? So by definition, what has happened is technology has taken over majority of sectors in life, and there's a possibility it'll continue to take majority of sectors in life. Um, I'm sure this is gonna come bite me in the future, but, uh, on the short side, services has to be a short.

    9. NKNikhil Kamath1:21:25

       Yeah.

    10. NANikesh Arora1:21:26

        By definition, the whole idea of service is that we deploy humans towards repetitive tasks-

    11. NKNikhil Kamath1:21:31

        Mm-hmm

    12. NANikesh Arora1:21:31

        ... where we sell intelligence or process with people. If, if the impending opportunity in front of us, if that process is gonna be simplified or overtaken by AI, and intelligence is gonna be democratized, then there has to be a reshaping of the services economy.

    13. NKNikhil Kamath1:21:49

        [upbeat music] Makes sense. But thank you so much for taking the time and doing this.

    14. NANikesh Arora1:21:54

        My pleasure.

    15. NKNikhil Kamath1:21:55

        And, uh, hope to see you again soon.

    16. NANikesh Arora1:21:56

        Thank you. [chuckles]

    17. NKNikhil Kamath1:21:57

        Thank you. Cheers!

    18. NANikesh Arora1:21:59

        Well, I will make sure every time you made me do that, you'll just look it over, right? [laughing]

    19. NKNikhil Kamath1:22:02

        [laughing]

    20. NANikesh Arora1:22:03

        All right, thanks. Nice to see you, man.

    21. NKNikhil Kamath1:22:04

        Was that fun?

    22. NANikesh Arora1:22:05

        That was fun, yeah. [upbeat music]

Episode duration: 1:22:12