#216 Unveiling AI's Impact on Startups, Jobs, and Society with Sid Mohasseb

0:00:01 - Mehmet
Hello and welcome back to a new episode of the CTO show with Mehmet. Today I'm very pleased to have with me joining from the West Coast and thank you, sid, for staying late at this time. The way I like to do it, I keep it to my guests to introduce themselves, because I believe no one can introduce someone better than them. So the floor is yours, sid. Tell us a little bit about yourself and your background. 

0:00:25 - Sid
Hello, mehmet, and hello to your audience. Yeah, this is Sid Mohasseb. Some folks call me the entrepreneur philosopher because I focus on entrepreneurship. I've been an entrepreneur for 40-some odd years. I've started many companies, made investments in many more and also been consultants to some of the big names across the globe. But I do have a tendency to find the philosophy and success, as opposed to just the mechanical pieces. 

I don't believe that life and entrepreneurship is like going to IKEA and getting a piece of furniture and that comes with the instructions for A to B and B to C. Success is in our mindset, in our philosophy and how we approach things. The idea is that we are not them. You are not them. You are you. It's your authentic self and your capabilities that would lead to your success. That's me. In terms of background, as I mentioned, I've started many companies. I've had a venture farm that makes early stage companies. I teach I'm a professor at USC, university of Southern California. Now I teach both in engineering school and in business school. I also am an author. I've got a few books. The one behind me is the latest, which is the Authentic Entrepreneur's Way you are not them. The other one is the Caterpillar's Edge, both best sellers that I'm very proud of. I do a lot of writing about various topics, from AI and its implications in our future To entrepreneurship. I write for Forbes, I write for Time Newsweek, london School of Economics, harvard Business Review and so forth. 

0:02:40 - Mehmet
That's me. Welcome, again, said, to the show. I'm very pleased that we've been connected together. Let's start a little bit where you ended talking about AI, because you can cover it from a practical perspective and maybe from an academic perspective as well, the debate that always we bring it to the show. Recently, at some stage, it slowed down, but now again we are hearing this about AI or people. It's like something that everyone is concerned. Sometimes these concerns are right. Sometimes these concerns, they seem not reasonable. What are you observing outside, being also, as I said, in both sides in the practical business side and the academic side? What can you tell us about what's happening? 

0:03:50 - Sid
If you want to focus on what AI can do for us and AI is, by the way, a big term it's pretty confused. People talk about machine learning as AI. Some have a tool that does automation. They call it AI. It's a pretty confused term. Assuming that we focus on where a machine can learn from the past behaviors, which is, from data, and apply decisions or drive decisions that would influence the future, let's stick with that definition. Hopefully there's learning that happens from that perspective, which they call reinforced learning, in terms of getting technical, that can apply to future. 

For example, an autonomous car learns from how you brake, how you stop at the stoplight and all that sort of behavior things. It's observed people driving for 800 million miles or some outrageous number. As a result, certain teams develop certain things that can behave. It can always. Situations can always change. There are no two situations exactly the same, meaning you're driving to a particular cross road that's 65 miles an hour, somebody else is at 52.5. The other guy is raining. It's 23 degrees outside, or 67 degrees, it's raining. All of those conditions are never really exactly perfectly the same. There is some learning that applies to new things that happen. Let's assume that's the parabola that we're talking about. In that case, there are many studies now that McKinsey and others have done that suggests that by 2030, some go to 2035, somewhere around 13 to $14 trillion with a T of economic impact would be created by AI. Now let me put that in context. The GDP of China is about 17 trillion. 

So, the report, by the way, was a few years back in terms of. So it means that the equivalent of 1.4 billion people, as in China, working for an entire year, because that's the GDP of China will be realized every year because of AI. 

That is a significant number. So whenever there is such an economic impact, money will flow. People will go there. So is the movement unavoidable? Absolutely, it has economic impact Now. So is it real? Yes, it has to stay, absolutely. Is it going to change some jobs? Absolutely. You know, when cars were originally introduced by Ford, the people who drove horse and buggy had to change. They had to learn something new, do something new. So is it going to impact jobs Absolutely. Is it going to create new jobs? Absolutely. So let's say it's going to impact somewhere around 800 million jobs. Impact, not eliminate impact. 

So, 300 million would be eliminated. This is worldwide out of about 5 billion jobs that exist in the world. So it's going to impact about 10, 15% of the jobs. Most of the people used to think that it would impact the manufacturing jobs most and that's why it wasn't a big deal. Now people are seeing that it's impacting the knowledge workers job and that's why you see all the who's. Not because the knowledge workers, as long as it was the poor workers in the factory, it was okay, it wasn't a problem. Now, if it's the writers, oh that's a big problem. If it's the engineers or the coders, oh that's a big problem. 

The fact of the matter is it's going to impact both and it's going to impact it, in my opinion, positively. It's going to have an evolution in our gen that's starting now, but I'm not sure if it would be realized in our generation. Let me explain myself. Fast forward, when your cars are driving by themselves, where you don't have to spend hours and hours on the phone to connect or disconnect your phone if it doesn't work to call some call center to all that stuff, that's what I call mundane taxing things that we've done. That means you and I would have a lot of time on our hand. 

0:09:11 - Mehmet
Right. 

0:09:11 - Sid
So what are we going to do? Sit in our cars, go around the thing, play with Facebook or Instagram every day in our backseat because we're not driving. There is going to be an inevitable push for us to enter a new era of evolution, which is an era that has to do with innovation and creativity. We have to now evolve in a different dimension than the way we have been evolving in our physical format and so forth. So is that going to happen in my lifetime? Likely not, but is it unavoidable? Absolutely, I think. 61% I think this was a Reuters survey recently 61% of people are afraid of AI. 

And 70% say I don't know enough, but maybe it looks like I have to be afraid. So that's almost 88% of people. That's a lot of people. Now, if you go on media and say, hey, all is good, nothing, nobody is going to turn to the TV to that. And nowadays we have every media has to have a heading that's provoking, so people click on it, so it's a clickbait of something. So what we have is all of this hoopla has started a pretty robust and not necessarily truthful or fact-based conversation. Now it is true that the writers, for example, have been on strike in the United States for quite a while. 

And they say well, what if the AI writes some sort of a script? And then what are we going to get out of it? If you're only as good as the AI, which is the history, or it's duplicating, we've got a problem and we're avoiding to evolve in the right direction. What happens to our residuals then? Because some AI can do so. These are real issues that people are facing in terms of changing their job and their income and so forth, but is the answer stopping growth and evolution and change? I don't think we're going to have enough force to push back against the economic $13 trillion annual economic impact. So either we get with the flow or we'll be pushed out of the way, just like those guys who wrote the horse and buggies and refused to go get a driver's license. So it is a complex problem that has been made more complex because of all these that are impacting people in a way. 

Now, the other thing that's important in this argument of AI and the evolution and what's going to happen is this idea of if we should fear AI for other reasons than jobs, for example, taking control of our world, them becoming the master and us the slaves. So, for one thing, ai machines are learning from us, our biases. It consumes data which includes all of our biases, and that's what's being duplicated, that's what we're telling. It's like a guideline. We're saying behave this way. 

It's like if we tell a car or teach a car and the thought of a car hey, every time you see a pedestrian go hit him. Well, is that a bad machine? Absolutely is a bad machine. But we told them how to behave because somebody who was crazy was driving that car and that's what where the car learned. The problem is, I think, that the fear is our biases. So when people are saying, oh, it's all deep fake and it's all these things that people are clicking on things and it's changing their opinion because of the fake news and the fake this and all that, guess what? Who's generating that? We're generating, we're teaching the machine. Should we be afraid of the machine or should we be afraid of ourselves? 

0:14:06 - Mehmet
That's 100% right said. Very valid point, I would say. 

0:14:11 - Sid
But we blame the machine and that's a problem. 

0:14:17 - Mehmet
I always tell this, like you know and I was discussing with a guest, you know, one time you know, like, if AI is generating bad content sometime because actually we have bad content out there and the AI is just consuming this and regenerating it again, so we can't blame on it Like I would just put my two cents here and then I want to take it further from there. 

So like, yeah, it's going to change the job, you know nature of the jobs or what we're going to be doing, Absolutely yes, but taking control, I don't know. 

Like maybe I'm not seeing it, at least again, not in my lifetime and not in even the long term as well, because this is something that's a little bit philosophical about consciousness and about the ability to do like long term planning. I don't know, I don't want to talk big because technology can evolve, but the thing you know now, with all this hype that happened, actually AI is not something you know you and me we know this very well but because you know change. Ept appeared at the end of last year, so all this hype came from there and then people started to figure out oh, like, we can do these kinds of things. Now you touch base on something which I wonder myself and I'm always trying to get answers from different people, whether on the show or outside Like what we will be doing if machines are doing 90% of what we are doing now? Right, so that would be the kind of life we will having. 

0:16:08 - Sid
So that's a good question. Let me touch on something that you mentioned first and then we'll take it there. I had a conversation with someone who I mean people always ask me because of you know all of my writings, everything. So what do you think about this AI thing? You know everybody, just kind of, and I was talking to somebody and began to talk about hey, imagine a future that you know a doctor has X number of you know, reads N number of books. A machine can read everything and it's fresh and it's real. The doctor gets tired and doesn't remember, but in a diagnostics way, an AI machine can do a much better job as diagnostics and disease. 

This is a fact. It's not, it's not, I'm not making it up. It's happening now. It's not future, it's not okay Now. This is what she. This is what she replied. She says no, it's all wrong. When I go to Google and I type in stuff or go to chat GPT and I type in, I have a stomach and this it doesn't give me the right answer. So we are comparing a chat GPT or a Google search to what it is done by massive machines with. That is very focused on reading thousands of medical books and is categorized with cognitive science, and so it's because we read and do a Google search we think this is. 

0:17:48 - Mehmet
AI Right Unfortunately. 

0:17:50 - Sid
This is what we see. And, of course, if we do a Google thing and our doctors become a Google search, yes, we have a problem, but it is not. So now let's go to what do we do when we don't have to do all the work? So I use a calculator example when I was going to school and that was when I'm aging myself. That was when the first time calculators were introduced and we were prohibited to use calculator. 

Right, we made a crime. You know, it was like eating, and it did that. Now, today, we use calculators, we use Excel spreadsheets, we use all this stuff. It's not a problem. Did it make us dumber? No, no. 

If that argument is if we use a knife when they invented the knife, if we started using the knife, our teeth would not be as sharp and therefore we shouldn't use the knife, right? Is that a reasonable argument? I don't think so. So the argument of what do we do when we do? We don't do the stupid things that we're doing now. We're doing these things because the capacity of our mind is such, because we need certain capacity, innovation, certain capabilities to do certain tasks. So if we send a shuttle to the moon or Mars or we create the James Hubble thing, that goes all the way to you know. So why are we using computers to do all those calculations? Let's hire a bunch of 1000 people to simultaneously do that. It just, it's ludicrous. We use technology to enhance our life and to develop new frontiers. Now the question is what are those frontiers? What are we able to do? Some of it is unless people came to the West and explored what's in the West, they wouldn't know what's in the West. 

They can imagine what's in the West, so can I imagine what's in the West? What's after? I think that we're going to be, as I said, there's going to be a period of confusion because we're used to the sameness of what we do. We're, you know, if we have, if we don't spend an hour to go to work and then spend an hour to come back and do the certain things, and then then we don't know what to do If we have to. Like I know a lot of people who are uncomfortable because the food comes to their home and they, you know, they get the door dash or an Uber Eats or something. Well, I like to go to the grocery store and buy my stuff, but is that a? Is that something that really makes sense to drive and go there and go through these aisles and pick up this stuff? 

No, I enjoy it too, by the way, I enjoy it, because that's what we've been trained to do. That's what? But is that the only way of doing it? 

That doesn't mean that we have to be hermets, send things to buy our groceries and then don't meet anybody, never get out of our home, maybe we should go to the park and order the food and engage and communicate that I have fun and go dancing and go do a lot of other things that you know. If, if AI can produce significantly more food, then maybe we don't need to have all these lines drawn and hate each other and fight each other over who owns the grain. 

and maybe, maybe Again, I don't know what West looks like, I don't know what, but I can imagine that if you take all of these nonsensical works that we do, there's going to be plenty of time for us, and the only way I can see it filling it in the best way is innovation, creativity, getting to know each other more, communicating, enjoying life. There is more to life than going to work and driving a car and stopping to get gas and calling customer service because our credit card is this and that or all this stuff that we do. Yeah. 

0:22:36 - Mehmet
Yeah, actually, you know a couple of. I was doing solo episodes, like couple of months back before I started to make it, just only with guests. So, and at that time I think I saw the you know, one of these articles that you just mentioned that are clickbait definitely, and you know I couldn't resist. And that day I wanted to discuss something else. I prepared the script from one previous day but all of a sudden I said you know what? I have to answer this. I have to. Maybe one person will listen to me. That's fine, I don't mind. 

But I had to get this message out and I said, like guys, like, are you like, are you kind of how I would say it Like, are you sadist? Do you want people to stay sitting behind a desk doing something that a machine can do, while this guy, he can be more creative, he can create art, he can. I don't know, maybe he's good at discovering places, so why we are forcing people, putting them? It's a jail, right. So whether it's you are at home behind your, your zoom, or whether you are in the office in a cubicle and you're asking him or her to repeat tasks which are for me, maybe at that time they were not like this because they needed. Like you know, they were new, but now they are dumb, right. So why I need to stay doing dumb things? And I mean dumb? It's not because they are stupid things, but because they can be automated. 

0:24:04 - Sid
Someone, they can you know they can automate it in some way. Because people are afraid. We're all afraid because we are hooked. We are addicted to the sameness of the past. It's comfortable for us, it brings certain routines and sameness to it. If I say, don't do this and this and this, then your first question was so what do I do? That fear of what do I do drives you to not want to do it. You know the other side. 

So people change for two reasons, and I talk about this in my I think it's in my first book and I've written articles about this idea of change. Right, people change for two reasons. Two things have to be exist for people to change. One, that has to be a severe a severe opportunity or danger. A severe opportunity or danger. The second is okay. So there is a severe opportunity that I'll say oh, what I see? I'm going to change to something that is significantly better than what I have. Or I see that what I have is diminishing in value, is getting worse, so I've got to change to something that might be better. Under those two circumstances, I'll change. Okay. Now the direction of change has to do with trust. 

Which direction do I change? Do I trust myself In companies? I use this analogy with management when you go and leadership says, hey, do this and do that and go in this area. We got to change to do this, we got to change to do that. If people don't trust you, they're not going to go in that direction. First you got to show them that this is significant and severe opportunity or danger, and then they've got to trust you to follow you to the new place that you tell them is better. The problem is people feel that there is a danger. They don't see the opportunity like what we talked about. 

They feel the danger but they don't have the trust. So one element of change exists today, because of the media and blah, blah, blah, blah, blah, blah, blah, blah, blah, all that stuff. They are fearful but they don't trust. They don't trust which direction. They don't trust of adopting this because they feel the capitalism machine wants to get them out of a job. And then how do they eat? And they don't trust because they haven't seen it. Nobody explains it to them because it's complicated, because those who know want to be making more money and make things more complicated in order to right, because the labor union wants to negotiate a new deal. They don't tell the people what it is. So, all of those fears and the lack of trust it needs a proper change path and the lack of trust. So is a people dumb? No, they understand that if something can be done faster, better, cheaper, it's a good thing to do. As long as it's to my favor, okay, this, as long as to my favor, is not understood, communicated and delivered. Well, okay, agree, and that's the problem. That is the problem. The problem is that that and this is. 

You know, I wrote, I wrote an article, I don't know, I think it was the hill that published it, or something about this idea that we put these people in charge and we say, hey, these guys are like Miss Kamala Harris, and you know this is I'm not taking it personal, I'm not a Democrat or a Republican here, I've just yeah, I don't know an academician, the philosophy, whatever. I don't have a particular beef with anybody, except we put somebody in charge and we say she is the czar of AI. Okay, does she know anything about AI? Nope, okay. Then we say, okay, she doesn't. 

But leadership doesn't mean that, you know, the president of IBM doesn't necessarily know how to make computers. I get that All right, but then she goes and creates a team of who? Of seven or 10 different companies, as with a Google and open AI, and Amazon and and Microsoft and a bunch of people who all have a dog in this race. They are not unbiased, they're very biased. The fact that they control the data, the fact that they control the pipeline, the fact that and then they come up with regulations that are very for them. 

0:28:53 - Mehmet
Yeah. 

0:28:55 - Sid
And that doesn't do anything, it's just you know. And then they go out to the populist thing is about privacy. Oh, privacy this and privacy that. So let's make these companies secure the data. Why is data important? Because data is the ingredient of an AI machine. Without data, there is no AI. Without data, there is no learning. So we have these companies control the data because of privacy. So who maintains the control? These guys, right, we are. So we are spending in America billions and billions of dollars and be with a billion in protecting our healthcare information. Every time we go to a doctor, there's 17 things that we have to we have to sign, and it does, and it does, and they have machines. And then you duplicate this and he put good, it's complicated. 

It is of dollars is being invested. So what? Somebody knows that I have hernia. Okay, so let them know I have hernia. What's the big deal? But if, but, if we share, it is pretty likely that that collective data would drive a resolution, a cure to cancer, to this, to that, to hernia, because it can be used for learning the computing process and you know all of these quantum computing stuff that's making things a lot faster, can help us discover drugs and so forth. But we are so adamant about this privacy which is pushed by this stuff at these six good companies, or 10 companies and companies control the privacy of the data and therefore it's all good. 

0:30:37 - Mehmet
Are we seeing any change in that said like, because you know, like, everyone says big tech, everyone you know. I had many guests also where you know they. They shared their concern that everything is in the hands of these big companies. Like are we seeing a shift in this? 

0:30:56 - Sid
No, no, I mean there was, there was a. There was a series of regulations that has come out regulating AI, regulating this. The most recent one was spending $140 million or something creating policies that protects privacy. So the center is about privacy. Why? Because the common man on the street and American, we care about our privacy. This is, this is as American as apple pie and capitalism is privacy. 

So all of this efforts is to control the privacy, when really the problem is not privacy. The problem is, if we don't control how we learn the AI, the building it, shaping it, taking it out of the control of a few people, our AI machines are not going to be as good as the Chinese period, hmm, period, there is no. It's like you're telling me hey, who, who builds the tallest building, the bigger building, the one that has the material to build the building? You got to have concrete to build a hundred story building. If I, if I control the concrete and don't give you the concrete, I don't care if you're the greatest engineer in the world. You can't build something that doesn't have the material. 

0:32:21 - Mehmet
So do you think that we need to focus on protecting the data rather than protecting the privacy? 

0:32:28 - Sid
Yes, that's exactly what it is. Here's the thing we have. We spend all this money to protect our privacy, but we don't have rules or laws that if somebody actually abuses the use, let's get that guy and nail him to the wall. 

Yeah, because you know police at every corner, at every place, because we don't want to take the guy who is at fault and does something wrong and penalize him. Let's penalize those who are not doing things right, who are abusing systems to the extent possible, but not limit ourselves in terms of being able to be who we are. You know our privacy is absolutely important, but you who are impeding my privacy are at fault. It shouldn't be that I have to live within the walls of 16 story buildings and it isn't that because you are the abuser who wants to come in and abuse me. That doesn't make any sense, but that's what we do. 

0:33:34 - Mehmet
It's really thought provoking because you know, and when I think about it, you know, like these guys, they know plenty of information about us. It's not only in the United States, it's like on a global level. And you know, I don't want to go too much back in history and mention names of companies, but you know, there were like big scandals about, you know, data being passed to advertisers and you know these advertisers, they were targeting a lot of other people to target their Of course it's being done today, mehmet. 

So how we should do, how we should be Someone like you and me, how we should react, what should be our reaction? 

0:34:18 - Sid
Well, here's the thing. I think we should get the message out. I think we should try to have the conversation and that is precisely why I'm talking to you, mehmet. This is exactly what I'm talking to you for so that I could get this message out that A the BS that you're being told on the media is just to create clicks. It's just to create this illusion of change. Takes these two things and you have to build the trust. And it's not about I'm not against privacy, don't get me wrong. 

I'm just saying if I have a thief, do I have to build 17 layers of things around my home because there is a person who is a thief and is an abuser, or do I have policies to take care of that guy so that I can see the view, so that I don't have to be blocked by this castle of things, so that I can live, so that I can communicate, so that I can meet my neighbors Not that I have to be in my home at two o'clock. It just doesn't make any sense. We are confusing privacy with protectionism. We're essentially, by doing this and doing it, we are impeding our own freedom because we don't have laws and regulations that punishes the abusers Very limited. Oh, we slap them in the back. We shouldn't do this. 

Okay, the guy does the game. We have companies after companies, something like this, and a reputation management and this, and that we have hundreds of companies and they're all trying to protect us from who? From the infringers, from the people who are, but we don't have proper laws and we don't do anything with them. So let's do something with them so that you prevent them from coming in If somebody has given somebody's bank account, get that guy close all of his bank accounts. 

He's got nothing to do and he has to do free work for the rest of his life. You do that for 10 people. They won't come into your bank account again. 

0:36:44 - Mehmet
Yeah, so what's the alternative? 

0:36:48 - Sid
Like again the fear of every guest. 

0:36:52 - Mehmet
They shared with me and, okay, I think everyone shared this fear is that these guys are so strong and what they try to do and I'm talking here purely technology and business, by the way so whenever something new comes up, what they try to do is they swallow it and they make it part of their bigger ecosystem. And so how and because you have this background of entrepreneurship and now you are an angel investor so how we can encourage more startups, more new companies, more of these alternatives and again, I'm not, don't anyone misunderstand me, I'm not, you know, an anti-fang or something here, but you know, I like to have alternatives, like I need to always have like two, three alternatives in front of my hand. But what we are seeing that you see, always they acquire, you know, acquire, acquire, acquire and end up by okay, we have now in the AI like two major players right, if you look about something else, maybe two or three players and the rest are they're not here anymore. 

0:38:04 - Sid
So how we can complicated things that work, mehmet, the very complicated things that work. So let me give you, let me give you my perspective that again, I you know, you could see, that I'm pretty opinionated, so I do a lot of opinion pieces for different places. So at one point I wrote an article about Elon Musk and I said you see, we've given this guy $2 billion to build Tesla Excellent, it's subsidized, he's done a great job. I'm not arguing that he's smart, I'm not arguing. Then we are giving him some hundreds of hundreds of millions of dollars to send the shuttles to the moon and back and to the Mars and whatever. Then we have taught him how to shoot from those things, because we've got military things on top of these, you know things to shoot asteroids out of space. Okay, then we have this thing that he's doing, that's neural network that sends pulses to you know. Okay, that's fine, he's a smart guy, that's good. Now we've given him the control of over 2,800 satellites, with an option for him to buy up to 40,000 or so satellites I don't know the exact. The FCC has given him to put 40,000 satellites up in the air, and he's the only one that has purchased this and has control of this. 

Now, I don't know if you have seen any of these James Bond movies with villains that have good intentions, but no one man should have this much control and he wants to give everybody free internet, nonsense, free internet. And then if he decides to flip the coin, the whole internal, it's just, and he's practicing it at Twitter. He doesn't like you? Boom, you're off, mm-hmm. Okay, now imagine he had the control of the communication of the world. That's a problem. So when I did this article, I had TV stations after either kids, after people coming after me that why don't you like Elon? It says it's not about Elon, it's about me, it's about you. It's. No man should have this much control over our lives. 

The problem is the politicians get paid to vote in a certain way. The problem is the lobbyists derive certain things in a certain way and you and I, because Google is free and it gives us something for free, we go back there every day because it solves our problem. We choose to give us, give them our data, we choose. Can we go a different way? Likely, not, because we don't have an alternative, as you said, but there are ways that we can control this if we had regulation that, if you use my data, pay me for that data. Pay me for the data that I'm giving you. You're building an AI machine. That's okay. Use my data, but pay me. Let me share the benefit of whatever you make, and then we're good. Then I guarantee you nobody. Nobody would have a problem with anybody using their data if they were being paid for it actually your friend himself alone. 

0:41:35 - Mehmet
He's doing it now because now, after he shifted to X, so he's paying people who post and get impression there and calling it ad revenue, which is a small proof, honestly, because when people didn't understand why he's doing this, but it was the smartest move. You know, against what META did with the threat. So because he wanted to keep people there and he created this high that if you keep posting here, so we're gonna pay you money if you get. First they make it, I think, 15 million. Then they reduce it to 5 million impressions in 3 months. So and what are people doing? 

0:42:13 - Sid
they are sharing data, like they are posting their ideas and here's the thing if, if, if, if you pay people for the, why is it? Why is Google successful in? In 8 seconds you type something, you ask for a piece of information. In 8 seconds it gives you something. It may not be the perfect answer, but it gets you closer to where you want to go and you are more than willing to give them that search, that information to do that. Then they say, hey, I'm gonna give you a free Google Doc, I'm gonna give you a free spreadsheet, I'm gonna give you a free this and a free that. And yeah, it's free. That's exactly what we're doing. We're exchanging our information for that. And then we say why are they using it? Well, they're giving you something if the exchange is not right. 

If you're not happy with what you're getting which is the answer to some, some, some searches or the user then don't do it. But you obviously have an exchange between you and Google, you and Facebook that says I enjoy looking at these pictures, I enjoy sharing some stuff and in return I'll give you my data because that's for free and I'm giving. We are giving it, we are doing, and then we're saying why are they making money off of our data? We give it to them. Somehow they've got to make some money. They're giving us something for free. You don't want it, let them charge. Then you charge for your data. Everybody is good and happy and your privacy is no issue right, right. 

0:43:56 - Mehmet
But by the way, people wait. This is the. This is the funniest part if you tell people now you have to pay. 

We don't, we don't want to yeah, and I take for example, again an example from Google, like you, youtube. So if you go for the premium, you would not see the ads right. And then do you have full? I would say freedom to do whatever you want, but say you know what? No, no, I will watch this ad, I'm fine with it. And always there is a saying it's an old saying, it's not mine like if something is free you are, you are actually the product right. 

So now, shifting gears, a little bit said, and because you know you are an angel investor and you know you are seeing it from both perspectives. So, and based on all what we discussed so far, what is the next generation start up should look like and should they go? Because you, couple of times you mentioned about, you know capitalism and this, and this brings to my mind VCs, and you know equity managers and hedge funds. And so I'll start where should start ups be? First, going from I mean, technology perspective, maybe, and second, are we going to see, you know, start ups also shifting from these big investors toward something like yourself, like maybe angel investors, and maybe even bootstrapping the business? 

0:45:30 - Sid
so that's again one of those complicated questions. So, first of all, the hedge fund guys and the private equity guys and the VC guys are very different animals. They play with different rules and they play in different parks or ball parks, or however you want to call it. So let's talk about the start up ecosystem. In the start up ecosystem, it begins with you and your credit card. You make an investment and do something, and then you go to friends and family your cousin, your dad couldn't say no to you your mom, and you squeeze the second uncle. And then you go there, friends and family, and then you go to angels folks like me, and there are two kinds of angels. There are people who make money off of real estate and then, or their doctors, they've just got too much money to give it to somebody. Or there are people like me who are professional angels. This is what we do for a living. We're different. And then, after the angel investors, come to venture capitalist. 

Okay, the problem is that the model is is rather broken, and it's broken for a number of reasons. A, the expectation of returns is over the moon. That means every start up has to become Google, and the way it becomes Google, is this, this thing? That, hey, you pump more money, go, go market, market, market free, free this free that capture market share, spend more money and then, in order to raise more money, you have to increase the valuation of the company and all of a sudden, we have hundreds and hundreds of unicorns working, billions are they really worth billions? 

they're not, but they had to get them up because the first we see going in and then he doesn't want to. You know that guy doesn't want to say that, hey, my valuation went down, so he increases the one today and the next one, and the next one, and along the way what happens is you get, you get. You get companies like the one that that woman, elizabeth, whatever, did, or you get the fraudulent activities that happens because there's, there's, there's. They have to do a BS because realistically you can't grow something that fast and it's, it's nonsense. So that's what. The other thing is the size of these we see firms have grown significantly. 

For people that unfamiliar with venture capital firms, they're usually a couple of three guys. Usually that's the way it starts. They, some of them have some operating experience. Most of them are attorneys or they have good connections and so forth. They put 1% of the fund, 2% of the fund if they're, and then the rest of it is somebody else's money. They raise money from teachers union or from endowments or from the family of offices and so forth. So if there's a hundred million dollar fund, maybe a million came from these two, three guys. The rest of it are investors. So these guys are administrators, essentially. They they administered the fund and they have a lifetime seven years, ten years, somewhere on and they get a fee, a management fee two and a half percent two percent of the fund every year and and a carry that's 20% generally. So you sell the company, whatever, whatever over and above is split 80 20 between the VC firms and we see partners and the investors. 

Now what that means is, as I want to make more money as a VC, I have to have funds that are bigger, because at a hundred million, I make two and a half million dollars a year in my salary, in my. What if I had a billion dollar? I make 25 million, so every day. So my objective is to boom, boom, boom, fast, fast, create these funds, go from a hundred to 200 to 300 million dollars, so I get more. And then I've got spread as all the stuff. And now if I have a billion dollar or 500 million dollar fund and there is three of us, I can't make investments of a million or two. That means that I have to have a thousand investments. Who's going to sit on their board? Who's going to control him? Nobody. So I have to make investments that are 20 30 million dollars a pop. In order to do that, I need to get company. Hmm, okay, so that's the gap that that that's created. So there's a gap. There's a gap now. Here's what I've. You know, I talked to my mentor and talk to a lot of entrepreneurs every week. I talked to two or three new people. I see all these deals and so forth. 

There is an illusion that says a good company must be VC back. That's not true. If you go back in history the HVs of the world there's a lot of them that never had to be seen. This is an illusion that if you want to have a good business, you must have somebody else pay for it. That's not it. If you have the right value proposition, then you get something. Then you get somewhere. Ninety percent of the businesses don't necessarily need significant investment in all of them, and particularly now that we have the cloud and we have the this and we have the that and we have and we're going back to chat GPDs of the world, we now are reducing even the number of people you need to code, because some of the code can be generated. So the investments in creating a business is not as much as it used to be and you don't need as much stuff. But the illusion is what we've been told is that you need a venture capital in order to build a new business. 

My thinking is that we're going to not next year because of this gap that has created over time as building stuff particularly in tech because we see that focused on the technology a lot that's the majority of the silicon as creating solutions becomes easier to technology and AI and other things, the need for so much capital will go away and I think there is going to be a different dynamics between investors and startups, and I think a lot of startups, for no reason at all, get themselves tangled into this. Powerpoints that show a trillion dollars of market size multiply these numbers and they don't believe it. They know it's not going to go there. The VC who looks at it knows that, but it's a good show and everybody knows. The VC knows that the entrepreneur doesn't believe it and says, hey, if he rides there, maybe he gets one tenth of what he thinks he will get. So my thinking is that there's this gap and this gap is going to cause some of these little guys, the startups, to behave differently. 

Now, this doesn't solve the problem of greed and exiting. We have a society that we've built, particularly the genders and the millennials, and all of us want quick money. We want to exit and buy a home that's $10 billion and we can't afford a home unless with $200,000,000, it's not possible. So they have programmed us. We've been programmed that we need quick money and that comes from an exit. That comes from an exit that comes either from an IPO or it comes from selling a company. That's how. Now we have a different group all these folks that are influencers and they make $50,000, $60,000 a month by posting stuff that says I like this thing or that thing. 

Well, yeah, marketing. I'm not sure how long that's going to last and we had people who made a lot of money because of the crypto stuff, which is basically gambling. There's no real asset class to it. I'm not against it If you've got the guts and the courage and know how, that's fine. Lots of people make money by trading derivatives on stock market, but it's not a real asset class. It doesn't have real, but a lot of people made a lot of money off of it and I think that's going to be a cycle like this. So we want quick money. That's my point, not criticizing the crypto or the influencer stuff, but we have people who want quick money. Now that attitude I don't think is going to change. I think that's a societal problem that is not just in America, but I think it has contaminated all over the world. 

The quick money and we justify it with how I want work-life balance. So I don't want to work and I want quick money and that's a problem, but that's what it is. 

0:55:17 - Mehmet
Yeah, true. So I think the best one who I always hear him mentioning and repeating him on his podcast I hope that one day I would be able to interview him is Navin Jayan. He said go solve a problem for one million people and then the money will come by itself. Absolutely. 

0:55:39 - Sid
Do you know where that statement comes from? That statement originally comes from. There's a firm called Kleiner Perkins. Tom Perkins, I believe, saw the Google deal. He was asked to be an investor a small investor, as an angel investor and he asked so what do you do? They said we have a million people searching on the engine. He says I don't care. But we don't have a business model. He says I don't care. You give me a million people, I'll figure out how to make money out of it. 

They said I don't have a business model, we don't know how to make money off of it. He said that's okay, you give me a million people, I'll figure out how to make money out of it. 

0:56:23 - Mehmet
Yeah, actually, even it applies to what's called solopreneurs or freelancers, because if you can't find what's called as we mentioned on another episode the other day fans, you can find 10,000 fans, and these 10,000 fans each one pays you $1 a month, so you have a $10,000 a month, right? 

0:56:49 - Sid
But see, here's the thing. This is again one of those quick buck ideas that, hey, if I have 10,000 fans, I charge them $1. But guess what? If you have the right value proposition, the right value, then you don't need to go after gimmicks of I get a dollar here and a $10 there and I bamboozled this or paid that for a click or pay. If you have genuine value propositions, people will pay for it, people will pay, and that's what we've gotten away from. We're looking for gimmicks as opposed to solutions and things that would really have value to people and people that can create those companies are going to be the winners of tomorrow, I believe. 

0:57:38 - Mehmet
Yeah, said like we almost come to the end where people can find more about you and you know if they want to connect. 

0:57:49 - Sid
If they want to connect. You see my name on the screen, sid Mohasseb. It's Sid at Mohassebcom. That's my email. If they want to learn more about the things that I do, they can go to Mohassebcom. And then there are links to my advisory work, there are links to my venture work, there are links to my other publications, there are links to all sorts of stuff. There are links to my books and all that. So Sid at Mohassebcom is the way they can email me. I would love to get their perspective on what we talked about and I don't mind being criticized the way I learn, so don't be shy. 

You can yell at me or scream at me with capital letters and emails, and if you like what I'm about, I would love to engage more with you as well. 

0:58:49 - Mehmet
Well, thank you very much, Sid. I will make sure that these links are in the episode description also as well, and thank you very much for your time today. I really appreciate it and this is how the you know. The same way I end my episodes. By the way, this is to the audience Guys, keep them coming, whether they are positive or negative. You hate it, you like it. I like to get feedbacks all the time. This is how the show actually is evolving, evolved and is still evolving. And if you are, you know, keen and you have ideas, you have thoughts, you have anything related to take entrepreneurship and start up world and you want to share it with the world, don't be shy. Reach out to me directly. You can find me on major social media platform. Mainly link it in where I'm most active. Send me a message. We can arrange it. Time zones is not a difference. We can find something in between and get the recording done, and thank you very much for tuning in and we'll meet again next episode. Thank you, thank you, bye. 

Transcribed by https://podium.page