Talking with Giants: An Interview with Legendary Investor Tim Draper (Part 3)

Tim Draper has been changing the world his entire career. He invests in entrepreneurial endeavors that are shifting how we operate in the world, in such innovations as Tesla, Skype, and Bitcoin. This “Part 3” section focuses on the inspirational mindset he uses to approach every investment he makes.

In my interview with him, it became very clear what a visionary he is, or more to the point, how he embraces change and looks for other like-minded thinkers to partner with. The interview provides strong insights into his view of the world, a philosophy that he articulated and advice he gave during our conversation: “Embrace the change and evolve with it. People who embrace change, they’re happier. They do well.”

I believe that any investor who embraces these concepts will be able to change the world with their financial support. Here are some inspirational takeaways:

  • Get Excited About the Weird Ones

    As an investor assesses whether or not to invest in a particular entrepreneur, it’s important to see if you can catch the vision, no matter how quirky. Draper noted, “they don’t have to be misfits; they just have to be willing to look at the world in a new way. They have to be able to twist it a little.” Draper said that when you’re looking for startups to invest in, “the weird ones do well.” He talked about some of his more unique investments:

    • Hotmail was radical at the time in offering free, web-based email but was eventually sold to Microsoft.
    • Draper’s partner was concerned when he invested in Skype and asked, “What? We’re going to back two outlaws? They’re not even allowed in this country.”
    • At the time that Draper invested in Tesla (before Elon Musk joined the company), comparisons were made to the DeLorean, and people noted that there had not been a successful car company startup for over 50 years.
    • Draper‘s original investment in Bitcoin went down from something like $632 to $230, but today it’s above $9500, so it seems to be working out all right. When asked about naysayers, Draper said, “I knew in my heart that this was a better currency; it’s going to be everywhere. Eventually it’s going to be worth $86 trillion so what do I care what people think of it now?”
  • Embrace the “Other” Category

    When speaking about whether to target certain sectors, I asked, “Do you just focus on the person and sort of make it up as you go along, or do you have a very strict focus around, ‘I want exposure to these emerging trends and areas?’” He admitted that many of his best investments have come not from planned sectors that he actively sought out but more from his openness and willingness to allocate investment funds to an “Other” category. He explained that he and his partners would plan to invest a certain amount in targeted categories (i.e. hardware or software) but they always earmarked monies for “Other.” He then smiled and said sheepishly, “‘Other’ turned out to be the Internet, or Skype, or Tesla, or SpaceX.” He laughed as he explained how then his team would make adjustments as they moved forward: “So then it’s like, ‘Okay, we’re going to do ‘Marketplaces,’ ‘Internet,’ ‘Software’ and ‘Other,’ and then ‘Other’ turns out to be Bitcoin . . . So you know this is a business where you really want to back ‘Other.’” (There’s an understatement!)

  • Don’t Let the Perceived Concentration of Industry Power Intimidate You

    At one point in the conversation, we were talking about the concentration of power that can seem insurmountable. While our team was working to build Vungle, everyone lamented the uber-power of FANG (Facebook, Apple, Netflix, Google). Draper dismissed this easily, reminding us that at one time, IBM had all the power and that smart entrepreneurs would ignore that. He is confident that there are endless opportunities for those who have a vision and are nimble enough to take advantage of those opportunities. He explained it this way: “Big companies are like big ships out in the sea. If some new technology comes along, they can turn, like, five degrees an hour, okay? A small ship can turn 90 degrees in a second, and shoot in just the right direction. So, if you’re a big company like that, it’s harder for you to adjust to all of these new changes—and the changes happen like clockwork. In fact, they’re happening even faster than they ever did before. Moore’s Law said $1,000 worth of compute power doubles every 18 months. Now, it’s like every 12 to 14 months it’s doubling, so that means that there’s a new platform every year that’s twice as powerful as the one before, and FANG is now 20 or 30 years old. Think about how many platforms they’ve missed in that time! There are plenty of opportunities.”

    Draper identified several trends that are creating incredible opportunities for entrepreneurs. Here’s what he said about these areas:

    • Decentralization: “I’m big on the decentralization of the world. Bitcoin was just the start. I think that you’re going to see decentralization everywhere—in insurance, in banking, and in every industry possible.”
    • Transportation: “I do think Tesla . . . and SpaceX opened the door to amazing changes in transportation. There are a slew of great transportation startups that are happening, all sorts of creative ideas. It sort of makes me feel like we’re back with the Wright brothers when they were just starting to fly.”
    • Healthcare: “Healthcare is going to be much more bespoke, specific to you, but they’re going to have all sorts of data about you. There’s no way a doctor could do as good a diagnosis as the cloud can do on you right now, because the cloud knows what your Fitbit results were, where you’ve traveled, what seat you sat on in the airplane, what you ate for breakfast, as well as your healthcare records, your genetic history, and your blood test results or whatever else. So, the cloud is going to have a much better idea of how to do diagnoses.”
    • Therapeutics: “I think they’re going to be very specific to people, and that will all come because the compute power is getting better, and better, and better. People are already designing really interesting drugs on the screen and they’re tying them to various diseases.”

My thanks to Tim Draper for taking the time to sit with me. As you watch this interview, you will see what I came to know over the course of years of partnering with him at Vungle, that he is a man with the means and the mindset to imagine a world much different, much better than the one we live in now. Anyone who aspires to invest in startups can learn a lot about this man’s thought processes and needs to embrace his optimistic view of entrepreneurial opportunity. As he said during the interview, “There are some really interesting things happening in the near future that, you know, make huge changes to humanity.”

If you’d like to read the other sections of my discussion with Tim, click below:

You can watch the whole conversation here or check out other videos on my YouTube channel here: