Of the bellweathers of technology. Sysco pe ratio if you take out cash in the bank is four. Thats unbelievable. Theyre trading why is that . So number one, many investors have many questions about these companies an thats always, goes back to the innovation part were talking about. Whether they can sustain the performance. Whether they can sustain the performance. A lot of investors have questions, microsoft l Windows Phone be big in phones will the tablet work. How will they do in competing with google, so on and so forth. But the other thing is i think people are in a really bad mood and particularly in a bad mood about technology. And i think were still bad mood. I think were living through the psychological scarring from the dotcom crash. This is 2001. Absolutely. So from the time of the great, the crash of 29 to the relighting of the stock market as something would you want to invest in was basically 25 years, basically to the mid 50s. Right. And so one of the things that you learn from the Great Depression is Equity Investors without got hit by the Great Depression never believed in stocks ever again. They just didnt and it took a new that hadnt gone through the crash to get excited about equities. Warren buffett was one of those. That is when he started. These day was we see in the valley is the people who lived through the crash, in many ways theyre defined by it they remember how good it was and how horrible it was it is hard to get out of this thing. Basically somehow we got dheeted or we got lied to. The press suffers from this. You could argue that they had overcome it because of what happened to valuations, cant you, in terms of, i mean look at the facebook ipo. Look at market valuations of google. Look how much money google has made since its original ipo. Googles pe ratio. How about gooelings stock price. Google stock price has gone up but you say their earnings have gone up faster. So the relationship between the two has gone down as earnings have gone up. Thats right. Disconnect, same with microsoft and sysco. Apple has delivered annual Earnings Growth which is 70 . Unprecedented for a company that size. Making it the largest Market Company in the world. On the other hand their pe has collapsed so their peecash is like 8. But its got to be a bigger reason than the idea that people dont trusting it tech companies. Since 2001 they have memories of the scars. I think people are bitter and skin call, up set about the crash. And heres why i say this. Because now were starting to see people enter tech, entrepreneurs, executives, press and investors who enter tech without didnt go through 290 2000 crash. Mark zuckerberg is representative of that. Now were seeing todays 22yearold was in junior high or elementary school. During the dotcom bubble. They just have a completely different mindset. Completely unaffected. Its striking, they dont even know what happened it is like a historical. They might as well be reading about the civil war. It didnt seem to affect you. You know, emotional ups and downsment you go through, a roller coaster. Tell me what the downs were. The downs, i mean i have come to expect it. You know, im a big believer there is never as it is always somewhere in the middle. But no, i mean look, literally onier youre being told that you are like the next year youre being told that you done. Netscape, what you did at netscape was phenomenal where. Is netscape today. It doesnt prevent the other it doesnt prevent the other side of the story. I just love being in the industry. So i dont have a problem with it. I plan nobody this industry for the rest of my life. It had no scars for you. I try hard to have it not. I try hard to not have lingering effects because i think compromises your ability to see clearly for what is happening now. Rose investor class. And the entrepreneur class. The people who come up with a lot of entrepreneurs. Rose but the Venture Capital class, did it have an impact on john doer. I wouldnt john specifically i dont think but, a lot of Venture Capitalists. I will give you an example amount of lot road off Consumer Internet, so basically dotcom so Consumer Internet so, Internet Companies that sell something to consumers, content companies, media, social med back, whatever. A lot between 2002 and 2006 or 7 just simply would not touch those companies. And of course thats when facebook was started and twitter and linked in was started. Do you think youre less hungry once you get famously rich. You could say that. But on the other hand, and some people have retired. Quite a few people have retired and are literally on the beach, unavailable. Or doing other things. Or doing other things. People like nathan and. But look, they are hellbent to come after, Windows Phone 8, they Just Announced. Hardware business, building tablet, going hard, very a grifs, they bought scythe, yammer this week which su a great New Enterprise web services company. What does it do. It is basically a social networking for inside companies,. So each company can create its own social network. And tie the employees and tie in the customers. It provides software to do that. One of the top guys from paypal mafia. They are something. They are amazing. So there was just a magnetic affect where they brought in a tremendous group of talented people like reid 406man and chad hurley who started youtube. Amazing alumni. Exactly so just very smart people and they are all over the valley and doing all kinds of things. It is basically, iq test 101 for Venture Capitalist is pap pay mafia member comes in, you say yes like really. It doesnt take a lot of brains. Somebody from pay pal who usd to be part of that mafia is an alumni they come and say here is my ychlted you say how much dow need. Heres the blank check. Explain to me what you think the genius of Mark Zuckerberg is. So i would say he is a genius is comprehensive. Aess enpsyche pedestrian weekly of what you want for founder and c. E. O. Meaning he knows everything. He has taught himself to be good at everything. He didnt start out that way but he has become that way. He applied himself to learning how to be a c. E. O. He put far more work into being a great c. E. O. Than people realize and i much better c. E. O. Than people realize. One of the best ceos in the world at age 28, by the way. Rate wait a minute, one of the best c. E. O. S in the world. Yeah. And so. Youre not just comparing with other 28 years old but are you saying basically for a guy who runs a company with a huge market cap. Yeah. Hes at the top. 4,000 employees, 4 billion revenue last year. What is it edition or knows that makes it that so. Its acrosstheboard. He built an amazing team. By the way he built the hard way because there was a fair amount of churn in the ranks at facebook until he stibl lyzed and now he has maybe the top, one of the top 2 or 3 teams in the valley, acrosstheboard, engineering, marketing, legal. And the right coo in cheryl. Exactly. From google. Exactly. Hes done that tremendous visionary. He completely understand was he wants to do with facebook. What does he want to do. He wants to connect the world. He wants to make the world more open and connected. He will have a billion soon. Yes, thats right. But thats not enough. I mean just so he connects the world. What will he do with the world connected, that is the question. That is one of the questions. Hes going to do a lot and lots of other people will do a lot on top of that. Facebook is an enabling engine for a lot of other businesses, nonprofits, political movements, on and on and on. Is he going to essentially have the field to himself or will binge be a player. There are lots of people who would love to be facebook and so there is going to be, you know, thousands of startups that will come at him in the next ten years. I would suggest a topic you and i have discussed about when steve jobs died. Characterize him again for us what made him steve jobs. Well, it was so a whole bunch of things. Obviously vision, obviously product genius. We talk a lot in the valley about founder c. E. O. S and the role of it, app sell one of the few companies where we have run the experiment through the full lifecycle, the experiment of the company with the founder, without founder and again with the founder and we see, how it went. So he is the great example of the founder c. E. O. Of the visionary who is able to run the company. I think one of the really underappreciated parts and i think he thought he was underappreciated on this is apple, he said the thing he was proudest of building in his career not a particular device. It was kroting a Great Company. A Great Company which goes back to what we started talking about which is app sell in apple delivers innovation. Today its an iphone, tomorrow an ipad but it is innovation and it will keep changing and they will keep coming out with new products. What would it be without steve at the helm. Apple has been under steve one of the best companies in the history of the world about being an innovation machine. Why do you think that was . Because it because this was a guy who understood that if you create the best product, and do everything with a maniacal look at detail. Uhhuh. And you have some sense of taste and style and demanding that the engineering be as good tas can be yes, but it also runs deeper than that. It was also very deep technology. I actually think the press sometime focuses too much on the design part which is important. Underneath that thats why i do that i said design and engineering. Behind app sell very deep technology. These are very sophisticated. Very good at building sophisticated technology, hardware and Software Including chips. I never have known the question, i asked this yesterday, why is it that steve, you were into all these technologies at the same time steve was or earlier, tablet, touch, come on, he was. Yeah, the difference bill stepped down from microsoft right in the same era when steve stepped back up at apple. This is my point. Like its very hard, the problem with history, you cant run the experiment over again in the alternate scenario, where bill gates stayed at microsoft and has been there for the last 12 years. We dont know how much things would have been different. Could have been better, worse, well never do. We do know with apple, it was not the same without steve. So steve has. Rose we know it is not the same. Apple without steve, in the interim period between when steve got fired and when he came back we know it was not the same. So now apple today, there is a tremendous challenge which is to keep going. But what they have the benefit of this Amazing Organization which is the other part he did was attracting all these incredible people. All these guys, scott, and all these guys. And they stayed there too. Something ought to be said about that. The bench, its bench is incredibly deep there will be some turnover but the bench is very deep. Look, if are you at apple you doing the best work, you will probably ever going to do. There is something to be said, you know, these this is the greatest thinging underappreciated as a c. E. O. Same as Mark Zuckerberg, magnet for brilliant people because they will do the best work they will ever do in their lives in this environment. Larry page a good c. E. O. I think so. As good as newer in the job, early indications are very positive. Founder. C. E. O. Yeah, exactly. Founder c. E. O. Hes put a very sharp focus in that company on product, it was he is actually i think if anything consciously modelling his management approach after steve which was generally very good thing to do in our industry. So yeah, hes organized the company. He took, hes taken a very laser sharp product focus and the product lines, as far as we can tell 100 of the time in the Company Working with the engineers on the products and hes got talented. Why do you think he wanted to be c. E. O. Again. I think hes my read is that he saw a bigger opportunity for google and thought he was the right person to make that happen. I mean i think its the same with steve. I think he sees he thought codo the job in a way that he wanted to see it done. Yeah. And have a much bigger longterm impact. The really great founder c. E. O. S view that if they just have enough time there is no constraint on how big or important of a company they can build and impact they have. Begins with tom watson and hewlettpackard. Exactly. And innovation being the output as o toes opposed to any particular product. Explain that to me. Is innovation a culture, a mindset, its what . Its a whole bunch of things. A lot of it is talent being able to bet the best and bright toast work with you to build new products and a lot is psychologically being able to eat your own young, to be able to compete with yourself. This is this is the idea. When a Technology Company gets outinnovated its not usually because it couldnt built the thing t is because it didnt want to because it didnt want to kill what it already had in the market. It didnt want to be can ballistic. It didnt want to be can ballistic towards itself. These companies become big businesses and they are public and they have shareholders and end up with very high calibre professional ceos who have to deliver big is that what happened to microsoft. That i dont know. Why do you play it so careful when it comes to microsoft. Theyre an important company, fantastic. You dont want to offend them. Theyre doing a lot of things. What happens to you when you get to middle age. I have way too many complexes. Thats true. So like i said, too early to tell. Too early to tell. Too early to tell. Rose what will time tell us. These play out. Microsoft has a bunch of products entering the market. And theyre doing a dont you see it will early on in a product. Does a product simply you enter in the market and ten years later you say its going to be good. Dont you know. The iphone got, pardon my french t cot criticized heavily, i was going to use a more colourful term. By you. No all kinds of people in the industry. All signeds kinds say it is just crazy. A lot of people thought it was crazy. The first ipod got terrible reviews. They said this is ridiculous. By serious people. By people inside the Technology Industry saying look, an overpriced, under powered mp 3 product. Why would i buy this, by the way. Witness so there is a lot of in the moment, heat, energy. So what is the mission where is this thing going . So the stated mission of the company is to make the world more open and connected, right. And the idea is that when you give people the able to stay connected with all the people they care about and you make it so they can express new things about themselves or in communication with other people who they care about, then you just open up all these new possibilities. You make it so people can stay connected in ways they couldnt before. They can learn about new things whether its events happening in the world or ability to organize new things or learn about new products or new movies or music they want to listen to. It opens up a lot of new possibility when you can keep all of these connections open to the people you care about. What is it about that people want to be on facebook . They want to talk about themselves, what is the sort of essence of that . I think that people just have this core desire to express who they are. And i think it has always existed. One of the things that i think makes us human. But yeah, obviously to knows whats going on with your friends lives not just your friends but people you care about, right. People who you are interested and who arent your friends or maybe on the periphery of your social circle. Yeah, i think that those are all just core human needs. And until facebook there wasnt a great tool for doing that. But i think that a lot of that, building that up was the last five years. I think the next five year is going to be now are you connected to all these people. Now you can have better music listening, better movie watching experience. You can see what your friends are reading and learn what news you should read first. All of these things i think are going to get better. Thats the thing im most excited about for the next five years. If we do well i think five years from now people are really going look back and say wow over the last five years all these products have gotten better because im not doing the stuff alone, im doing with my friends. And its personal. Its not just bringing your friends with it, then it becomes personal to you. How you look at how people use most of the webs, most products even if are you logged in, if i looked over your two shoulders, you see the same stuff because its basically produced for the masses. Is the key to the monday etization of the future the fact that advertisers will believe this is the best way to reach people who are likely to buy their products . So marketers have always wanted personal relationships with consumers or relationships with where consumer does two things. Consumers buy their products and consumers tell their friends that they buy their products. Marketers have always been looking for that person who is to the just going to buy but spread the word to their friends. What we do on facebook is we enable marketers to find that and then if i do it on facebook im sharing with an average of 130 people. So it becomes word of mouth marketing at scale. So people can tell each other what they like which is for marketers the thing they have been looking for i think for a long time. Let me talk about what you know about all of us. It is this notion that constantly comes up. Is there anything you do not want to know about i done even think we think about it that way. Help me think about it in the right way how you think about it. Because like button, you know. Is powerful tool. Its not for us, though. Rose its for advertisers. People relate to each other. I think this is a core part of what makes Facebook Facebook is that we really are focused on users first. And for the longterm, right. We believe that if we build a product where people can connect and can express the things they want about themselves that over the very longterm well have a lot of people doing that. Because thats a core human thing where people want to do that and they will be very active. We will have opportunities to sell advertising and do all these things and build a great bus