Sam is also one of the first people I saw taking action to help fight COVID-19. I was curious to talk to him about what that looks like for him, what he's investing in at the moment, and also how he thinks investors in general can help to support relief and research efforts.
As a self-proclaimed science nerd since childhood--he even wrote a paper about Dr. Anthony Fauci in high school--Sam has a deep-seated belief in the power of science to see us through this difficult time and into a more stable future. His observations on the way the biotech industry has mobilized as a unified, powerful force directed at solving a single problem are inspiring, and they inject some positivity into the world at a bleak moment. He thinks we're on the verge of a paradigm shift in both science and crisis prevention.
He also offers advice for startups, who are facing difficult decisions as we move forward. Work is being affected by COVID-19 as dramatically as everything else, and Sam put forth what he calls his "contrarian view" of how the ways we're adapting now will and will not change the nature of remote work and business travel once we've all settled into our new normal. His appreciation for our healthcare workers and his faith in science are the through-line of our discussion.
You can listen to the episode on Apple Podcasts, Google podcasts, or wherever else you like to download podcasts.
Many of you who read my podcast launch post requested full transcripts as well. You can find my conversation with Sam in that format below.
Here are a few highlights from the show:
- Sam talks about how and when the virus came onto his radar, which was earlier than it was for many of us, and how he decided to focus on funding groups trying to make a difference. (2:17)
- Some of the teams and projects Sam has been impressed with and how inspired he's been by the way the biotech industry has pulled together and operated with newfound speed. (6:56)
- A look at how many biotech companies and non-biotech entrepreneurs have pivoted to work exclusively on COVID-19. (7:35)
- Sam gives advice for investors looking to help. (11:45)
- We talk about relief efforts Sam has been involved in, including helping to allocate capital the critical places that might be less obvious. (15:14)
- The volunteer site helpwithcovid.com and also fundraising tips for those looking for capital. (16:07)
- We discuss the importance of facilitating people's ability to do work, especially for leaders who have the flexibility to offer employees the chance to help. (18:12)
- The role of science and our relationship to it, and how that might change. (20:01)
- The cycle time of biotech, why it will change going forward, and and why that matters. (21:43)
- Sam describes his daily setup including social distancing (26:20)
- Sam outs himself as a long-time Fauci fanboy (28:08)
- Advice for startups and why Sam believes this is a moment when great startups will emerge and get stronger. They need to reduce volatility, be more bearish on what might happen, and also prioritize their obligations towards their employees, communities and themselves as people. (29:24)
- We talk about the social and economic impact of all the technology we've all been using to make our lives possible these last weeks. (35:09)
- Sam tells us what's giving him hope right now: healthcare workers. And how he believes we'll get out of the crisis: faith in science and experts. (37:23)
- Thoughts on what our takeaway as a society will be from this period, and why the interconnected nature of the world matters. (38:18)
- Sam's path from science nerd to startup investor to his current role, which he thinks is the most important thing he'll ever do. (40:51)
- Final thoughts on what we need to do to get out of this crisis and safeguard against the next one. (42:52)
Show-related links:
- YCombinator
- OpenAI
- helpwithcovid.com
- C19 Coalition
- Funding for COVID-19 Projects
- 1billionmasks
- Sam's blog: https://blog.samaltman.com/
- Sam on Twitter: @sama
- Eric on Twitter: @ericries
Transcript: Out of the Crisis #1, Sam Altman
Eric Ries: Welcome to Out of the Crisis. This is Eric Ries. My hope with this series is to highlight the people and teams who are working to address the COVID-19 crisis in sharing the stories of those that are leading is to inspire others to take action. That really is what is needed now. By now, I mean today, in the coming weeks and months.
Everyone's 2020 plans have been blown to hell. Nobody can make a strategic plan now for next year or the year after. We'll need at least a month to even understand what this business context means. All of us have an obligation to act right now in ways that minimize the damage, that look after the people who are affected, but most importantly, begin to lay that foundation for the future, to make those investments that can only be made in a crisis, to support people, to figure out what went wrong and how to prevent it next time, and to build new capabilities that will allow us to react quickly, whatever the situation is, no matter how uncertain it gets.
I wanted to start with a recent conversation I had with Sam Altman. Sam was one of the first people I saw in the tech world jumping up and taking the leadership position related to COVID-19. Our conversation focuses on what investors can do, but also what all of us can do to help lead in a time like this. Although we're very clear in the conversation that the true heroes of this situation are the frontline medical personnel and the people in all walks of life, ordinary people, who put their lives on the line to keep our society functioning under these extraordinary circumstances, there is, nonetheless, a role for those who are in positions of privilege to play in leading our society out of the crisis.
Here's my conversation with Sam Altman.
Eric Ries: You were one of the first people who when the crisis was breaking, I saw your name all over Silicon Valley, in the Y Combinator forums. Your name was attached to a whole bunch of different things that seem to be related to getting us out of this crisis. I wonder if you could just talk a little bit about how did the virus and the pandemic first come onto your radar and what motivated you to want to jump in and try and help?
Sam Altman: I think like a lot of people, I just wanted to help in whatever way I could figure out, what I knew how to do. This is, well, out of my area of expertise. The thing that I thought I could help with was funding startups and research labs, nonprofits, whatever, that were trying to make a difference. Obviously, I think that in a time like this, this is when we should have a government response, but I don't think there's been enough of a government response focused on funding the things that can get us out of this.
I decided I would focus on that. I think I first heard about this in early January. I saw something online and then sort of a few people in my Twitter feed started tweeting about it a lot in sort of middle to late January. This is the kind of thing I worry about. I had been paying a lot of attention. I think that it's been really cool to see, as terrible as this is, one entire industry focus on one problem and the speed with which biotech startups and labs have been moving to figure out how to help with this has been quite inspiring.
I've never seen one industry do this. I've never seen biotech move this fast. Although I think it's going to take a while, I am optimistic that we're going to solve this particular crisis and also that the world is now woken up to the dangers of pandemics again in the modern era and we will have a huge amount of talent and resources go towards this.
ER: Before we get into the things that you've been funding and working on, you said that this is the kind of thing that you pay attention to. Talk about what your level of interest was in this or why it was on your radar before the crisis started?
SA: It's more just like I think that... And I'm not alone in this. I think a lot of people think this, that the risk of a pandemic and the health and economic impacts that would have on the world were just sort of like much higher than people realized. Couldn't guarantee this was going to happen this year, but we knew this would happen eventually. I don't think it was something clearly that the world was very prepared for.
ER: Why do you think people didn't take the warning seriously given that the experts in the field have been talking about this, I mean, for many years now?
SA: I think it was in the category of an important but not urgent problem. It's easy to put those aside. It's really sort of, I think, hard to think about something like this before it actually happens. It doesn't feel that real. I think unfortunately we just have a culture of ignoring a lot of experts.
ER: That is the truth. Was there a single moment for you that you remember where you woke up and said, "Wow, this really is real."
SA: This particular one or pandemic risk in general?
ER: This one in particular.
SA: Yes. I was very afraid early on when it seemed to be spreading quickly in Wuhan and then if you watch the Chinese case numbers, they sort of started to level off a little bit. I thought there was some chance that it would stay contained or that the rest of the world would follow their example and do really great in the stage where you still can contain it.
Then I remember seeing back when they were only maybe like a thousand worldwide cases outside of China, the shape of that graph, and I sort of realized at some point when it just looked like this perfect exponential, that it was beyond what was going to be contained.
ER: What was the first thing that you got involved in, in the response, once you had that moment?
SA: I don't remember the very first company. I generally think there are three ways or experts think, and I agree with them that there are three ways out of this. There's a good enough vaccine to get the virality rate below one. There is a very good treatment, good enough that people sort of aren't afraid and can live their lives. Then there's a great culture of testing and isolation like China did and I haven't heard a really convincing fourth.
I've been recently trying to focus on funding efforts in that category. Earlier on, I was also helping with efforts, trying to produce more ventilators or personal protective equipment. But at this point, I'm focused on things in those three categories and now that testing is really ramping up really more on the therapeutics and the vaccines.
ER: Do you want to walk us through some of the specific teams that have impressed you or that are making progress in those three areas?
SA: I will say, as a general statement, it ranges from labs to new companies, to existing startups and even bigger companies that have totally repurposed what they're doing. One of the coolest things is seeing everyone be willing to work together. People who don't like each other people who...everything. That's been awesome.
ER: Can you tell us some stories without naming the specific companies of people who have made that hard pivot and just dived into this with two feet?
SA: Yes. But the cool thing that I really think is, it would be hard for me to name a reasonably sized biotech startup that's anywhere in the realm of this sort of work that has not sort of changed what they're doing and put everything else on hold just to work on this.
There are companies that were... some that make more sense like companies that were working on antibody therapies for other things. They just put their entire work and plans on hold and said, "We are going to get antibiotics from recovered patients and we're going to figure out. We're going to sequence them, figure out what to do, and we're going to make antibodies for COVID-19."
It's just like the CEO woke up one day six weeks ago, decided to make the entire change and the entire company came in the next day doing something different. There are entrepreneurs who have a background in biotech, but were doing a non biotech thing, who put their web services or whatever company on hold and said, "I know something that could be helpful to people trying to produce a vaccine here. I'm going to make a company to start that."
There have been a lot of examples for that for testing. Then there have been entrepreneurs who sort of don't do anything in the realm of biotech but can somehow help with logistics or distribution or whatever that like, "I am going to ask my friends who do run biotech companies or hospitals or whatever, what they need me to do and then all of our plans are out the window. We're just going to do that."
ER: We've really never seen anything like that in our lifetime in terms of the whole industry, just putting everything on hold and all hands on deck.
SA: I don't think we have. I think it's going to be... I mean, I think there's many ways in which this is going to... not many. I think there's a handful of ways in which this is going to be a before and after moment for the world. But one of them is, I think biotech is going to move with a different clock cycle.
ER: It could be an incredible silver lining. I do think it's also interesting given how... I've talked to a lot of CEOs of companies of pretty much every size you can imagine since it started. It seems like a lot of the larger companies are struggling to respond and react quickly. Yet, it's the startup community that has gone all in on decisive action, even though relatively speaking, the cost for some of these startups, it'll be suspending the whole company or maybe risking the whole company on the solution. What have you noticed in that kind of the startup community's ability to move fast and kind of double down on this?
SA: I want to echo again that in a perfect world, this response would be led by the government, not the private sector.
ER: Of course.
SA: I think this is the kind of thing the government's supposed to be good at. And big companies are supposed to have a hard time turning on a dime. I don't fault them for that. Startups have more flexibility and less to lose so they can do more. I'd love to see big companies do more, but I understand the challenges. The economic impacts here are obviously just massive. A lot of medium sized or larger companies will not survive it. Them prioritizing, trying to keep their employees getting paychecks, I think is understandable and fine.
But the people who can help and are able to help, I think that's been awesome to see. Again, terrible thing to be in the situation we're in, but watching the business world come together and say, "Those of us that can help, what can we do?" That's been cool. A thing I'd love to see more of and that I hope will start to happen is more investors helping out with startups or medium sized companies that need funding and connections.
I think we'll start to see that, but I'd love to see it happen faster. There's incredibly talented people that want to figure out how to help and what they need is capital and connections.
ER: If someone right now is listening and they're in that category, how would you urge them to get started? I think for a lot of people it has been overwhelming to know how to help, how to start, what to do. It's such a big problem. How would you advise them?
SA: For an investor?
ER: Yeah.
SA: If you put out the word to your network, and I've done this myself and seen other people try it as well, that you would like to allocate significant capital, ideally both for profit and nonprofit, but even just for profit, two companies trying to fight COVID, you will be overwhelmed with the response. I got much more of one than I ever imagined and very high quality people that wanted to work on it, new companies or pivots, temporary pivots.
The trick is to be able to evaluate them and most investors will probably need to rely on experts to help them with diligence. But I've also been pleasantly surprised with just how many people are willing to help. Again, this is this moment where everyone wants to pitch in, and we need more capital focused on the problem.
ER: Beyond investors, what type of people are needed to help? If you're not an investor, you're not a health care worker, what can you do?
SA: Well, I think the people who can help most at this point are the scientists. The healthcare system is going to do its thing and I think they're going to make the best of an extraordinary difficult situation. I think when we look back at this, the healthcare system is going to be the equivalent of the first responders on 911. The risk that these people are taking to keep as many people as they can, healthy and alive is incredible. We will remember that with an incredible debt of gratitude for a long time.
But I think the thing where one person can make a difference or a small group of people is a startup that does something in one of those three categories that I mentioned earlier. I think a lot more people can figure out ways to help out than they think. I just saw a friend of mine who's a finance person temporarily pause his job and volunteer to be the CFO or investor, whatever investor relations person for a startup was trying to work on a cure so that the founders could have more time to do the science. I think people are finding all kinds of ways to help out.
ER: Well I echo what you said about the medical first responders, if you will, it's been amazing to see people rally to get PPE for those folks to try to help them and support them in whatever way possible. I don't want this conversation to minimize the just incredible national tragedy of the federal government's lack of leadership here and the fact that we missed the window to do prevention and mitigation.
Therefore, I don't want to sound like, "Oh, we're overly focused on the silver lining." The human and economic toll of this is absolutely devastating. But I've seen that too, the kind of response of individual people of civic society, of people just stepping up and being leaders in whatever way they can to address whatever part of the crisis it's been really inspiring. Do you have-
SA: In my... Okay. It means most people step up in a crisis. They don't disappoint you and that has certainly been true mostly here.
ER: Are you involved in some of those efforts you mentioned earlier about ventilators and equipment?
SA: Yeah. Earlier, I funded maybe three or four efforts trying to make new ventilators for example. I have since been more focused on what I view as this next phase. I think there's now a lot of... I'm sort of a believer and try to allocate capital where it is most needed relative to how much is there. There's not so many really great people focused on helping with the equipment side that I've tried to move on to these other areas.
ER: That makes a lot of sense. Now, we have the problem of lack of coordination of those people who are all bidding against each other on the same gray market in China. If anyone's interested in learning more about that-
SA: Learn more.
ER: Yeah, yeah. Go to ppecoalition.com, you can learn more about the problem there. Let's say somebody has an idea, but they need funding, they need volunteers. What would you advise them to do? How can they get the word out?
SA: A friend of mine named, Radu, made a site called Help With COVID for connecting volunteers to projects. It's been-
ER: That's helpwithcovid.com, right?
SA: HelpwithCovid.com. Then for fundraising, I think we are now at a moment where many investors are considering really jumping in here and fast and be indecisive. I would encourage people to just reach out to the normal crew of Silicon Valley Investors [for]... nonprofit capital or for a research lab. I think a lot of the family offices are not making this a significant priority.
ER: Are you aware of anybody who's trying to coordinate among those different funding sources, make it easier for people to access?
SA: No, but that would be a good thing to do.
ER: Yeah. Someone should post that to Help With COVID.
SA: They should.
ER: I'll just say on Help With COVID, I now have three or four projects listed there, I found that incredibly helpful and have probably placed, I don't know, maybe a hundred volunteers just from a few minutes. It’s just astonishing.
SA: That's been super inspiring to see. In a normal environment, something like that wouldn't work, right? Someone throws together a website, it says, "List a project or volunteer." And people would be like, "Okay, whatever." I think the fact that that works shows how many people really want to figure out how they can help.
ER: That is one of the big surprises for me is how many people who have come, applied for a volunteer position through Help With COVID are like legitimate Silicon Valley people, either I know who they are or they have a big time job. It surprised me that their own companies aren't giving them enough opportunities to be part of the relief effort that they're having to go through Help With COVID.
Do you have advice for people who are leading companies, how they should be engaging their own employees or their company's resources to get people involved in the relief efforts? Of course, they can work on antibodies. That would be a pretty obvious connection, but what about the rest of us?
SA: I think we've seen a handful of companies now tell their engineers that if you want to take paid time off to go work on a software project related to COVID... One particular example that came up recently was a contact tracing software that you could do that, and I thought that was a really cool response. Again, like different companies have different flexibility and so many companies are just trying to stay in business. But for companies that have the flexibility to offer something like that, I think that's a wonderful thing to do.
ER: I've really found it has helped a lot with morale. At LTSE, we're in a relatively strong place and so we haven't had this kind of crisis fundraising and grappling with some of the harder choices that I know a lot of startups are making.
SA: Yeah.
ER: For people who are in a privileged position, it's actually psychologically very difficult to feel like there's this problem and you're not part of the solution and you feel like you should be doing something. I think that's really powerful for companies to think about as a way of investing in their own employees and their skills... so they encourage them to be part of it.
SA:... to be doing anything at all and it feels really good to be helping other people to do anything at all. I had this period back to back once where I was just like reading about this impending disaster and feeling like I couldn't do anything. Then another where I was working 16 hours a day trying to help and hopefully it actually turned out to be helpful. But the difference in my own personal mood when I had something to do versus nothing about this was so different.
ER: I had the totally same experience. It's been nerve wracking and so stressful to be working on the solution. But at least you're doing something, it's so much better than despair. We'll talk a little bit about the role of science and how this might change people's relationship to science in our society. You had said at the beginning that we have kind of a culture of not listening to experts and you certainly have lived through an age now where there's been a diminishment of science in the public eye and kind of reduced institutional credibility of scientific institutions.
Now, all of a sudden, all of us are praying in our homes every day that scientists will make a breakthrough that will allow this nightmare to pass. What do you think the consequences of that are going to be for our society?
SA: I try not to make predictions about long term mass scale human behavior because I usually get them wrong. But I do think there will be at least a short term moment where after a period of a lot of despair, and economic, and health disaster, a huge number of people die in tragedy, by mega tragedy, by any metric. Science, I think at some point in the next year, is going to deliver for us and we will get either a pretty effective vaccine or a very effective treatment for this and that is going to feel like a magic moment.
People will be able to walk the world again and life will be back to some semblance of normal. I mean, I think people will be in fear of another pandemic as they should be, but that will be a moment that will feel like a miracle. I think for some period of time, there should be some return to a belief in and gratitude for science and scientists.
ER: I want to talk a little bit about something you said at the beginning, if you don't mind, where you were saying that this will change the clock cycle, cycle time of biotech?
SA: Yeah.
ER: Just expand on that a little bit and talk about why you think that could potentially be important.
SA: Let's say I'm working with 20 companies that I've, in some cases, known for a while and some are brand new that are working on this. I've got some data points on maybe five companies that I already knew and invested more in to focus on this. I sort of have a sense of how much they used to get done in a month and how much they now get done in a day and they feel within striking distance of each other. I'd say biotech startups now feel like they are moving with the urgency and efficiency of software startups.
I don't think people go back from that. The things that I always say you need for a startup to be successful are a fast cycle time and low costs. Biotech had the capability to have those things but didn't have them in practice and now they do. Once people have tasted that, they won't-
ER: They never go back. I've seen it in so many industries through lean startup in manufacturing, in all kinds of R&D heavy places that once you get that taste of the possibility of going fast, it can be a wellspring of so much startup activity.
SA: Yeah, totally.
ER: It's interesting because you said that they had the capability earlier, but didn't do it. So, just talk a little bit about the mental shift, the mindset change, that this crisis has driven for those folks who have realized something new with the same tools they had before.
SA: Well, I think people just now feel something where they're like, every day that we don't get this done is one day more of this current awful situation. So, let's get as much done every day. It's as humanly possible.
ER: So, tell me a little bit about why you personally have moved from despair to hope about the crisis?
SA: The main reason is just that the scientists working on these things and the early results they've had in the lab or in animal studies. Again, you never know. You try these things in humans sometimes and they don't work. But there are so many things that seem individually really promising, some of which we have similar data like creating antibodies and using that for a treatment to have like a more educated guess.
But the probability of none of them working seems low. Now, none of them will work really fast and unfortunately, this is going to get worse before it gets better. But I do think we're not going to be locked in our homes forever.
ER: Do you want to talk a little bit about just for people who don't know the background of how long these things take and why they take so long? Like, how a vaccine gets made or anything like that?
SA: Yeah. It's easy to blame the FDA and I think they deserve a lot of it for making things take a long time. They do generally keep us safe. If you're going to create a new molecule and inject it into a lot of people or give them pill or whatever, I would say it doesn't need to take as long as it does, but it should be done with caution and that does take some time. If you're going to give people a vaccine, it takes a while to find out how well that works unless you're going to spray virus in their face.
There are some things that can move quickly. One thing that I'm hopeful for but it may not happen is repurposing existing approved drugs or new combinations or reformulations of drugs. That could happen pretty quickly. There were a number of drugs that might help for this that were already not approved, but pretty far along in the process and those could happen quickly. But what won't be the case in sort of the 10 years that people say it takes to get a new vaccine into humans. It's going to be much faster than that this time.
ER: Tell us one good thing that's happened to you this past week.
SA: I mean, a lot, right? I'm here, I'm not sick. I'm able to help. I'm cooped up, but with people that I love and I have no complaints. I feel terrible for what's happening to the world, trying to do my part to help them to be a good citizen, but I have no serious problems. Everything has been good.
ER: Can you just say a little bit about your personal social distancing setup and especially think about folks maybe that aren't totally on board with 100% social distancing or think it's an overreaction. Just say a little bit about what that's been like for you personally.
SA: I'm thankfully in lockdown with people I really like, but it's definitely hard not to see friends and not to go outside, even like basic stuff. You forget how nice it is to just walk through a grocery store or around the block or whatever. But I think there was this photo on Twitter that I really loved of healthcare workers saying, "Please stay home for our sakes." I think anything we can do, if we don't need to be out doing things to help if people can stay home and take social distancing really seriously even though it sucks. Zoom dinner parties are not the same thing as real dinner parties, not even close.
The day we get those back, we're going to appreciate them so much more. I think everyone who takes it really seriously slows the spread a lot and it's worth doing.
ER: I read somewhere that one infection prevented today saves 2,600 infections over the next three months.
SA: Wow. That seems surprising to me, but that is amazing.
ER: I mean, it's exponential. It's so wild and we have bad intuition for that.
SA: That is true.
ER: Hold on, let me just think for a second. Who else has impressed you with their leadership during this time? Who are the people you would say that that's a leader who has stepped up or who has kind of taken the right or bold action maybe when they didn't have to or it wasn't obviously the right thing to do?
SA: Can I pick Fauci? I mean, I know that's like a-
ER: Yeah. No, please. Whoever's on your mind, whoever you're-
SA: Yeah. I mean, I've already been a fan boy of his for a long time. I wrote a paper about him in high school.
ER: Really? Wait, hold on. Well, go back. Go back. Tell us about that.
SA: I don't remember how this first came about, but I had taken some interest in infectious disease in high school and my dad told me about him and I studied him for a term paper.
ER: What was the paper about?
SA: Just like infectious disease and him and sort of history of stuff in the past.
ER: That's so cool. What's it like seeing him on TV every day, all of a sudden?
SA: I think he's great. I think he is such a calming expert presence.
ER: Who else would you give kudos to? Anyone in the startup community, any other investors or CEOs who've impressed you?
SA: Again, there are many people in the community have done a great job. I think none of us deserve nearly as much credit as any healthcare worker that's still going to work every day.
ER: Do you mind talking a little bit about your conversations with startups in your portfolio, people who have reached out to you for advice about how to handle a crisis like this?
SA: Sure. Yeah. So a lot of startups have been reaching out for advice, not about how they can help with the epidemic, but how they can survive and not have to lay off their employees. I think, first of all, a downturn can be an amazing moment for startups. The only thing that is really cheap in a bubble is capital. All the other things that matter, aggregating talent, getting people to care, all of that stuff that's hard in a boom and easier now.
I think this is a moment from which great startups will emerge or strengthen. However, surviving it is important. Although I think startups are thoughtful about their expenses and how they can reign those in, there's another input in the burn calculation, which is revenue. The startups that have sent me their models so far for feedback do a good job on the expenses, but they do not get nearly bearish enough on what can happen to revenue.
ER: I've seen the same thing.
SA: People say, "Oh, I'm a SaaS company. My customers never go away. They never stop paying." Meanwhile, then I have a call with another company who is like, "Oh, I'm thinking about stopping paying. This company told me they'd never stopped paying. What do you think about that when I'm reducing my own expenses?" I think the important thing to really be severe about is modeling a decline in revenue as you're redoing your FP&A to survive this.
ER: What kind of advice have you given them about their personal obligations as leaders taking care of themselves, taking care of their teams, how to treat people with respect in very intense times? Oh, about those kinds of conversations that you've had?
SA: Yeah, that's probably what most of the conversations are about. I have this sort of general theory that when a founder calls asking for vague help, what they're really calling for is like a friend or a therapist. A lot of it is about that, which is just the overwhelming responsibility that founders feel right now. Also, just the intense uncertainty.
Not a lot of founders I know right now are sleeping great through the night.
ER: No.
SA: People are going to have to face some very tough decisions. I'd say most founders still don't realize how tough those decisions might get. I think there's still a little bit of delusion or access of hope or whatever you want to call it and we might overpay. But I think this is a moment to plan for the worst and hope for the best for startups that have relatively short runways, especially if revenue declines.
ER: I've been urging the startups that I talked to budget on a net burn basis, so that more spending is gated behind net burn targets. Therefore, if revenue declines, you automatically cut back or don't hire or do whatever you need to do. Do you have a favorite tactical tip in that category?
SA: I don't have good schematics. I don't have good rules for this. This doesn't scale, but for the startups that I'm really close to, I just try to look at their model and tell them where I think it's wrong. But I don't have good rules. Yours sounds like a good one, don't do that systematically.
I think a lot of VCs aren't helping by telling founders, "Oh, yeah, we're going to keep investing at the same pace as normal." They might even believe it and they might do that-
ER: Tell me about it.
SA: ... like science may deliver us a miracle here, but even if we got the vaccine in a month, which I don't think we will, we haven't run this experiment before of what happens when you freeze the economy and then start to-
ER: Try to restart it.
SA: And maybe that works. I sure hope it does. You cannot stimulate yourself out of a world where business entirely stops for very long. I don't know how this is going to go. I think it's always a little frustrating when you give advice to people, which is just... I don't know what's going to happen here, but it's the only true thing anyone can say. In times of great uncertainty, I think you should do what you can to reduce volatility.
ER: One of the reasons that these kinds of crises become macroeconomic depressions is that my spending is your revenue and vice versa.
SA: Right.
ER: So, everyone who's giving advice about cutting back... I've seen so many posts on the YC forums and elsewhere about how to renegotiate all your contracts with all your vendors, how to stop payment, how to get discounts. It's those same people who are saying and also make sure that you try to find new sources of revenue and checking with our customers and see if there are ways that you can serve them better. A lot of times, just the same companies that are going to be renegotiating with each other and struggling.
SA: This is worse for startups who mostly sell to other startups. This was the point that I was less eloquently making earlier, which is, if your assumption is you're going to cut back on spend but your revenue is not going to cut back and everybody else is assuming the same thing, something doesn't add up.
ER: It's going to be super painful. Let me do one more economics question then I want to close-
SA: Sure.
ER:... with some virus-led stuff. Is that all right?
SA: Great.
ER: One of the things I've been really thinking about, it's just struck me is the differences between now and 1918. I mean, there are so many. Of course, the world was at war at that time. The technology has advanced so much. We have so much better scientific understanding. But in terms of the economic consequences, one of the differences is think how much of our life has been able to kind of keep going thanks to technologies like Zoom. What do you think is going to be the impact economically and socially of... will it change people's relationship to technology or how they see the role of technology, if that winds up being one of the reasons why the economic damage was to some extent blunted?
SA: Well, I think most people actually like most technology and that you get a skewed opinion if you mostly listen to what the media thinks about technology. I think people already like the fact that they can do a video conference instead of driving somewhere for a meeting. I think that will only be more cherished now.
My contrarian view is that this whole thing is actually going to be a net negative for remote work and not a net positive. I think remote work is great for some people at some jobs some of the time. I think people are going to realize there's a whole set of things that are very hard to do remotely. Although everyone thinks remote work is now like just the whole world is going to shift, my contrarian view would be it goes to some of the other way.
ER: Yeah. I've wondered about how many conferences and how many meetings where people realize, "Gosh, we canceled that and it didn't matter." That I think will be true.
SA: I think there will be less business travel as a new default and that's not going to go away. I think people will realize like, "Is it really worth flying halfway around the world for one meeting and then flying back given the time and the cost and the carbon footprint and the jet lag and everything." Or, "Is that something I can do via Zoom?" That I don't expect to change. I think travel patterns will just be different for business. But in terms of people, like companies going fully remote, I expect a reaction in the other direction.
ER: Who is leading us out of this crisis?
SA: The health care workers keeping things going at all and the scientists working on tests, vaccines, and treatments, and the logistics people that will make everything in between happen.
ER: What gives you hope that we will get out of this crisis?
SA: Deep seated belief in science and that we have figured out how to vaccinate effectively against or treat many other viruses. I don't expect this one to be the one that we can't. The data that I've seen from companies or labs working on vaccines and treatments so far. Again, you never know and it's not going to be quick, but something in there should work.
ER: What do you hope we as a society will take away from this crisis and do differently in the future?
SA: We talked earlier about a belief in experts. Some of the time, obviously, sometimes experts are wrong. I believe in science a lot of the time, a reminder that when the whole world focuses on one problem, no matter how bad it is, we can take it out pretty quickly. One thing that a lot of people have said, but I certainly myself feel is how much the whole world is like in things together and how some of us do or don't do something that affects all of us, and how interdependent all of these systems are. It's a terrible moment, but I sort of believe that sometimes you come out of terrible moments stronger and I hope we have a pretty big resurgence after we get through this.
ER: What's the expression--from your lips to God's ears?
SA: I think that's it.
ER: Yeah. What are you excited about in the next couple of weeks?
SA: Helping to kick off a handful of clinical trials.
ER: Any trials or experiments that you're waiting with baited breath to see the results that you have a special affinity for hoping that they'll work?
SA: I'm not sure if I can say yet. I will say I think I've been watching some of the antibody stuff that is being widely reported already with a lot of excitement.
ER: You've mentioned a few times your kind of deep abiding belief in science as an engine of progress and a way to get out of the crisis. Where did that come from you personally?
SA: I mean, I was like a science nerd growing up and the thing that I did in my spare time as a kid was read about science or the history of science or discovery or whatever. I don't invest that much in startups anymore, but the startups that I still do get excited about are sort of the big iron science projects.
I think being on the frontier of discovery is the most exciting thing in the world. I think it is truly remarkable what people can do and figure out and understand about the world. I think people should just be much more amazed all the time than they are.
ER: In the startup world, there are hardly anybody who doesn't know who you are, know your story already. But for those who are coming maybe from outside the startup world, just tell us a little bit about your path from a science nerd to a startup investor and to what you're doing now.
SA: Sure. I went to college, I studied a bunch of science and a lot of CS and I dropped out and started a company. I ran that for a while, became an investor, took over YCombinator and then while at YCombinator, got interested in science startups, helped start a handful of them, one of which is OpenAI, which is trying to do the science to discover how to make and then build superhuman general intelligence. That I believe will be the most important project I ever worked on by far and now I run that. But I'm taking a short refocus on startups to see if I can help fund startups working on COVID.
ER: I just wanted to personally say thank you for your leadership in this area and for the resources, and time, and energy you've put into defining solutions. Like I said, I wanted to interview you first because your name has popped up just absolutely everywhere as I've done my own relief work and just-
SA: That doesn't mean I'm doing a good job. That just means I'm just praying and praying. But thank you.
ER: Well, at least you're doing something.
SA: I'm writing a lot of checks. That part's true.
ER: Yeah. That part. I mean, I know a lot of people who could be doing that and too are doing a lot of talking or a lot of thinking about how to help. I worry that by the time they actually get around to taking any action, they'll miss their opportunity to truly make a difference.
SA: Honestly, it's kind of like this normal. I am normally this like pretty disciplined, thoughtful investor and this cowboy approach of like, "You know what? If I lose a bunch and do one thing that's helpful, it's worth it. So, I'm just going to come out swinging. It's been pretty fun.
ER: Yeah. Here's to silver linings. Let me ask you one last question, which is, where do you think we go from here? What we need to do to see the real impact that is needed to get us out of here? How can we get out of this crisis?
SA: We are going to get out of this specific one. Again, it will take longer than anyone will like. The economic and human damage will be extraordinary and terrifying, but we will get out of it. Where we need to go from here is to invest now so that this doesn't happen again. I don't yet know for sure what that looks like, but I do know that clearly, the private sector economics and incentives have not worked well enough for us to already develop rapid response antivirals, whatever you want.
ER: Yeah.
SA: We need to try something new. I think that means some version of aggressive government funding to make sure this doesn't happen again. I sure hope and expect will have the will to do that now.
ER: This has been Out of the Crisis. Out of the Crisis is hosted by me, Eric Ries, produced by LTSE's, Ben Ehrlich, and edited by Breaker's, Jacob Tender, music composed and performed by Cody Martin. Out of the Crisis was created in partnership with Breaker, the best platform to create and listen to podcasts.
For more information on ways you can help, visit helpwithcovid.com. I have several projects on there and feel free to message me that way. I'm also Eric Ries on Twitter, and if anyone has ideas or is working on a project related to solutions, please do reach out to me. Thanks for listening.
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