S1 | Technology

Sal Khan: The Era of Online Learning | SALT Talks #3

“The issue of the digital divide in households is still prevalent. New York City has given out over 200,000 devices since the pandemic, a sign that it’s feasible for us to provide access to those without devices over a short period of time.”

Khan Academy is a non-profit educational organization that provides free online classes by way of video, as well as supplementary educational tools. Founder Sal Khan piloted the idea tutoring his cousin who was struggling with math and was soon after tutoring 10-15 of his cousins around the country. He then began uploading recordings of these lessons to YouTube, quitting his job as a hedge fund analyst to fully focus on the endeavor.

The good news: the digital divide at schools has greatly been reduced. The bad news: 70% of kids who, when they go to community college, have to be remediated in some way, usually at the middle school level.

Learning should not be bound by time or space. In a potentially unpopular opinion, Sal believes summer break should be eliminated in favor of shorter, 2-3 week long breaks throughout the year.

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SPEAKER

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Sal Khan

Founder

Khan Academy

MODERATOR

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Anthony Scaramucci

Founder & Managing Partner

SkyBridge

EPISODE TRANSCRIPT

John Darsie (00:08):

Welcome, everyone, to SALT Talks. I'm John Darsie. I'm the managing director of SALT. SALT Talks, in lieu of our global gatherings, the SALT conferences, we try to bring you leading voices from finance, technology, and geopolitics digitally in your homes the same we do at our SALT conferences.

John Darsie (00:28):

Today, we're very excited to have Sal Khan joining us for a SALT talk. Sal is sort of the man of the hour. With everyone quarantined at homes with their families, the Khan Academy, which he started, has served as a really prolific learning platform for people that are homeschooling their children, and it's obviously been very important for families that are educating their children at home right now. So, Sal, thank you for joining us. I'm going to flip over to Anthony Scaramucci, the founder of SkyBridge and of SALT, to conduct the interview with Sal. Thank you, again, for joining us, Sal, and we look forward to the conversation.

Sal Khan (01:03):

Thanks, John.

Anthony Scaramucci (01:05):

Hey, Sal, thank you so much for being here. Unfortunately, this was the week of our SALT conference this year. You did an amazing job last year at our conference, Sal, so we're very grateful to you.

Anthony Scaramucci (01:16):

Everybody knows who you are, but we'd like to know how you became who you are, and we're just wondering if you could spend a few minutes talking about your personal background and your journey to doing what you're doing right now.

Sal Khan (01:31):

Yeah, and I can start arbitrarily far back, and let me know if you want to double click on any of it. I grew up in Louisiana; fairly humble background; ended up being a financial aide kid, going to MIT, having an engineering background. After business school, I ended up working as an analyst at a hedge fund, and it was around that time that I just found out... it was right after my wedding, actually, back in 2004... that my cousin, Nadia, who was 12 years old at time, was having trouble in math.

Sal Khan (02:06):

When she told me that, I said, "Hey, I'm 100 percent sure that you can be good at that. How about when you go back to New Orleans, I tutor you?" I guess it's very relevant now, it was distance learning, but it was back in 2004. Long story short, it was unit conversion she was having trouble with; she learned the unit conversion and she got caught up with her class. She even got a little ahead of her class. At that point, I became what I call a tiger cousin, and I convinced her school to let her retake her placement exam, and she got from a remedial track into an advanced track. Then, word spread around my family that free tutoring was going on, and before I knew it, I had about 10 or 15 cousins around the country that I was tutoring every day after work.

Sal Khan (02:47):

With a tech background, I started writing software for them. I saw a lot of them... the reason why they were struggling is that they had gaps from fifth grade or sixth grade, and that's why they were having trouble in seventh grade or eighth grade... so, just a way for them to practice, for me, as their teacher or their tutor to understand what they're working on, how long it's taking them, what they might need extra help in.

Sal Khan (03:05):

That was the first Khan Academy. It had nothing to do with videos. A friend of mine... I was showing this off at a dinner party, and all my friends knew I had this crazy project with my family on the side, and the host of the party said, "Well, this is all cool, Sal, but how are you scaling your lessons?" I told him, "Yeah, it's hard to do with 15 cousins what I was originally doing with one or two," and he said, "Why don't you record some of them as lessons, put them onto YouTube for your family?"

Sal Khan (03:33):

I immediately thought it was a horrible idea. I said, "YouTube is for cats playing piano. It's not for serious math." But I gate it a shot, regardless, and that kind of took on a life of its own.

Sal Khan (03:46):

So, you fast forward, 2009; set it up as a not-for-profit. I had trouble focusing on my day job at that point, so I quit. We were living off of savings for a little bit, trying to convince someone to realize that the social return on investment even then seemed astronomical. It was a hard year, but by early 2010, some foundations started to see that this was a really valuable thing. So, that's where we got our start as a real organization.

Sal Khan (04:13):

When I quit my job, it was about 50 or 100,000 people. Actually, when we got our first funding, it was about 100,000 folks were using Khan Academy; now, we have about 100 million registered users.

Anthony Scaramucci (04:25):

Has that gone up? I'm assuming it has gone up as a result of COVID-19. How has your footprint changed as a result of the COVID-19 crisis?

Sal Khan (04:39):

It seems like a lifetime ago now. About three months ago, we started seeing our traffic pick up in Asia, especially South Korea, where we have one of our... there's 45 translation projects around the world of Khan Academy... and some teachers started emailing us from South Korea saying, "Hey, there are school closures, and that's why we're leaning heavily on Khan Academy." That's where it first dawned on us that this was even a thing.

Sal Khan (04:59):

Then, we started saying, "Maybe this is going to happen to other places." We started stress-testing our servers, saying, "Maybe we'll get 2X to load, who knows," thinking that's the most we would see, and we said, "Maybe we should start preparing if that happened to give structure for parents so that they can know how to homeschool or quarantine-school their kids," resources for teachers, started running webinars.

Sal Khan (05:23):

Then, I think it was the first week of March, when California was one of the first states that had murmurs of maybe the schools would be closed the next week, that we said, "We have to go into full gear," and so we just ramped up all of those efforts. That Monday, It was California and several states in the West, and then by the end of that week, it was pretty much the entire country, and then much of the world was closed. We saw our traffic, by the end of that week, be about 3X of what it typically is, and that's kept up. Parent registrations are 20 times what we typically see, and student and teacher registrations are five to ten times what we would typically see in that time period.

Sal Khan (06:03):

So, before, we had about 30 million learning minutes per day on Khan Academy; now, we're approaching 90 million learning minutes per day.

Anthony Scaramucci (06:12):

I don't know if you would know this answer, but I'm curious... the ballpark number of public school systems on a percentage basis that are using Khan Academy. I know the local town I live in, Manhasset, is using you guys K-12. Do you find that you have high density saturation throughout the entire U.S., or is it just certain areas, or what's the footprint in the U.S. look like?

Sal Khan (06:37):

Yeah, some of that we're still trying to figure out. Before COVID, about half of our usage was what we call teacher-directed. A teacher has a Khan Academy account, and he or she will have at least 10 students on Khan Academy, and they can look at their data, so they had a connection on the platform. That was half of our what we call learning time on Khan Academy before the crisis, and it seems to continue to be about half of our learning time after the crisis. So, it seems like everything has gone up 2X to 3X after the crisis.

Sal Khan (07:11):

There's some districts that we have very formal partnerships with: places like Clark County, which is Las Vegas, and those counties or those school districts were very easily able to transition to Khan Academy, and we can pinpoint, we can say, "Oh, that's Clark County. That's what they're doing now." But we've heard a lot of other places, a lot of other cities, counties, school districts... you can imagine they had to close with two, three days notice; they would just list us on a list, like, "Go use Khan Academy for this many minutes every day," or their teachers would say, "Hey, use Khan Academy, where it's a teacher-by-teacher thing."

Sal Khan (07:44):

So, that's a little bit less formal, so it's harder for us to track some of this, because it wasn't a formal district partnership, but we're hearing a lot of anecdotal stories and that seems to play out in the data.

Anthony Scaramucci (07:55):

When you think about our educational system and the unevenness of it at K-12, and you were talking about gaps that even your family members were experiencing, and you had to give a broad overview... let's say you were testifying in front of Congress, and said, "Okay, this is what the K-12 educational system looks like in America. Here are the K-12 strengths. Here are the K-12 weaknesses, and here's a policy initiative that we could put in place to help even out the playing field"... what would your assessment be of all that?

Sal Khan (08:30):

That's a big, big, big, big question.

Sal Khan (08:33):

A couple of things: I'll start in fairly simple ones, which is, this crisis has put in start contrast the digital divide. People have been talking about the digital divide for a very, very long time. The country has done a great job, actually, in closing the digital divide when it comes to schools. It's still not perfect, but with things like the E-Rate program... 10 years ago, when I was getting into this journey full-time, we'd go to a lot of schools, and they would say, "Well, we have one laptop cart, but we don't really have good internet connection." Now, we don't have as many of those conversations; even in fairly under-resourced areas, we're seeing that they have some type of devices and a decent internet connectivity, but obviously at home, now we have a major, major issue.

Sal Khan (09:15):

New York City... I was talking to Chancellor Richard Carranza a couple of days ago... they were able to distribute 300,000 laptops in record time to the students of New York City, and get them internet access. The negative of this crisis, it's show the inequity, and having internet access and a device now at home, it isn't just about accessing Khan Academy; it's frankly just to stay sane, to be able to stay connected with friends and family right now. Obviously, it has economic opportunities. New York has just shown that, almost overnight, they've been able to largely close the digital divide. It is doable, so I'm hoping the silver lining... or one policy recommendation, to your original question... is we should close that as soon as possible. It can be done fast.

Sal Khan (10:02):

It's not free; it's very expensive, but when you compare it to some of the other programs, some of the federal stimulus dollars over the last couple of months... it's a trillion here, a trillion there... the cost of getting every family in the country who doesn't already have internet access some baseline level of access with a reasonable device... we're talking about 10 or 20 billion dollars, which is a fraction, it's one percent of those stimulus packages. That would have, I believe, not just academic consequences; it would have economic consequences. It would allow people to participate in their work remotely and things like that. So, that's one very simple thing, and that needs to be there for Khan Academy to be able to do its work to level the playing field.

Sal Khan (10:45):

I would say the other thing is... an unfortunate statistic that I quote a lot is, 70 percent of American kids, when they go to community college, have to be remediated in some way. That remediation isn't at the 11th grade level or the 12th grade level; it's usually at the middle school level. So, what's happening... and this is most pronounced in math, and in some degree, to reading comprehension, but most pronounced in math... you're in fifth grade, there's a unit on decimals, you got an 80 percent; you get labeled a C student; the whole class moves on to the next concept, probably a concept that's going to build on that gap, and so you're not going to be able to get 100 percent on that.

Sal Khan (11:25):

The process keeps continuing, you get a gap there, a gap there, and then all of a sudden, you get to an algebra class and nothing makes sense, because there's an equation that has a decimal in it, has a negative number in it, has a fraction in it, and you're shaky in all of those things. The students get disengaged, and oftentimes the system has to water down the curriculum to just hopefully promote those students, but then you know when they get to college, or community college, the system is like, "You're not even ready to learn algebra because your gaps are so bad."

Sal Khan (11:50):

Every teacher knows this. Every teachers knows that when they have 30 kids show up, they all have different gaps, they're all in different places. In fact, the test scores show it. We take the trouble of doing the standardized testing the year before. You know, especially in a lot of high-need areas, 30 percent of the kids might be behind grade level, 40 percent. We're working with a teacher in Hesperia, California; 90 percent of his students are two or three grade levels behind. But a lot of teachers feel pressure, and they say, "Well, let me at least go through the motions of my grade level, and at least that will be something, people would be exposed."

Sal Khan (12:22):

But we're seeing that if teachers and schools and systems allow students to work at their own time and pace on Khan Academy, they can fill in all those gaps, and then they can accelerate. This teacher, Tim Vandenberg... people can do a web search, Tim Vandenberg and Khan Academy, to learn about him... but he has all of his sixth graders in Hesperia start at the basics on Khan Academy, start at one plus one, and then parallel, they do their sixth grade work at their own time and pace on our platform, and by the end of the year, he has most of his students above grade level. These are kids that were two, three grade levels behind.

Sal Khan (12:54):

So, that would be second part. Get the digital divide would be the first one, close that; it's expensive, but a lot cheaper than a lot of other things we're doing. The second thing is, use personalized learning tools, and these are free tools, to allow students to learn continuously, all the time, including over the summer, and as you go back to school, it's always a problem that kids are all over the place; huge variance in preparedness. That variance is going to be even worse this coming back to school because of COVID, so heavily leverage these tools.

Sal Khan (13:23):

These tools always had a value, even before COVID, where it's about personalization, allowing students to fill in their gaps, engage in mastery learning. But then, if you do have to close, and it looks like this next school year is going to be pretty weird in terms of a lot of uncertainty, you can then lean pretty heavily on it.

Sal Khan (13:40):

Then, the last piece, I would say, is movement towards more competency-based learning. There's these two camps: one is, you can kind of call it the seat time-based learning, like, sit in this chair, kind of do what you're told, and by the end of the year, we'll kind of pass you on to the next level. The other model is, well, however you learn it, as long as you learn it, we'll give you credit for it.

Sal Khan (14:04):

We've always advocated that learning should not be bound by time or space, and the outcome of the learning, the proof of the learning, should matter more than the path on how you got there. The COVID crisis shows... it's blown up the path. We don't know when and how kids are learning, and by definition, it can't be bound by time or space. So, hopefully, a way that people... let's say someone masters a concept on Khan Academy, and they're able to take what we have, a course challenge on it, and a teacher proctors it... maybe they can get college algebra credit, which would resolve a huge problem at the community college system. Maybe they could get high school credit for it, regardless of how they learned it.

Sal Khan (14:40):

So, those would be my three: digital divide, a personalized mastery learning for continuous learning all the time, and then get to a competency model where people can start to get credits for doing some of this work.

Anthony Scaramucci (14:52):

I think it's a brilliant exposition of where we need to go. Do you think that common core has, by and large, been a benefit to our society from a public school perspective, or has it been a detriment, or neutral? I'm speaking as a parent who can't teach my kids math anymore, because they look at the way I do my math and they think I'm crazy.

Sal Khan (15:13):

Yeah, I know common core is a hot button issue. I mean, I'll tell you my honest appraisal of it. For those who don't know the history, it was a bunch of states getting together and saying... it was really governors' initiatives, and it was bipartisan at the time, where they were saying, "Hey, right now, the textbook publishers only pay attention to Texas, Florida, New York and California. It's kind of silly that we have these very specific curricula for each of these different states. Why don't the states get together and see if we can come up with a common core?"

Sal Khan (15:51):

That seems to me like it makes a lot of sense. You don't have all of this fragmentation of all these different curricula, and it makes it very hard for people to develop materials. You can imagine our issue at Khan Academy. We're trying to make something that's not just for the nation, for the world, but even at a national level, it is nice to have some things that you can anchor on, so I think that is a good idea.

Sal Khan (16:13):

Now when they did the common core, there were some principles that I actually think made a lot of sense... this principle of, go deep on fewer things versus try to go broad on a lot of things, and they did look at curricula from places like Singapore and Norway and Finland, and places that seemed to be doing well on that front as a model.

Sal Khan (16:33):

So, I think all of that was good input. Then, you start the standards creation process, which I'm friends with some of the people who are directly involved in it, and that is a sausage-making process, and it's like passing a bill in Congress; there's a lot of horse trading, everyone has their pet projects, and I think through that process, sometimes these things get a little bit bloated. Even though common core was very much intentional about, "Hey, we want to focus on just the absolute core and fewer but deeper skills," there probably is more in there than there might need to be.

Sal Khan (17:08):

Then, I think the biggest thing that I feel is that standards, by themselves, are standards, and what matters much more are the implementation of the standards. Some of the stuff that I think common core might have caused a little bit of friction is, a lot of teachers were already feeling really overwhelmed, a lot of districts were already feeling overwhelmed, and then when the standards changed, and if the textbooks weren't ready to support them... and to your point, there was some fairly different things in the common core, in terms of how they even approached the procedures you and I learned on how to multiply decimals, just to use that example again.

Anthony Scaramucci (17:43):

Sure.

Sal Khan (17:43):

I know, for teachers, that was a shock, so I think that created a little bit of upheaval, and then obviously, it got politicized above and beyond that.

Sal Khan (17:52):

In terms of standards, there's a lot of good in them. There's some stuff that if I were emperor of the standards, I might do a little bit differently, but I think the most important thing is how you implement. There's a lot of states that are not common core, but especially in math, their functionally very, very, very close to it.

Anthony Scaramucci (18:13):

If you had to go back, though, do you like common core or dislike it? What's your opinion? Or are you just practically living it with, one way or the other?

Sal Khan (18:22):

I'm the latter. If we didn't have a common core, Khan Academy... we have mapping projects to other states, to the Florida standards, we're working on the Texas standards, so we're still having to do that. Obviously, we're doing that for the Brazilian national standards and the standards in the various states in India, so it's a lot of complexity that we're trying to deal with.

Sal Khan (18:46):

Especially in math, which is where we're strongest now, though we're going into other subjects like English, language arts, and the sciences... I would say if you're good in math in anywhere, you'll be good anywhere else. A student who is good at math in California... if their family moves to Texas, they'll do just fine on the Texas standards, and vice versa. So, I feel like sometimes people... it's like religious denominations; there might not be as much difference as people like to make of it, especially on the math side. There's a very, very high correlation between students being able to do effectively in one versus the other.

Sal Khan (19:27):

So, if I had my druthers, I think getting some uniformity... I think it's great that it was kind of a state-driven effort, at least, initially, and that had a lot of good energy around it. I think, unfortunately, it got a little bit too political. If I could wave a magic wand, I wish it didn't get politicized in that way, but I think the notion of having more commonality across states does help a lot of folks, including Khan Academy, be able to serve more people.

Anthony Scaramucci (19:53):

Obviously, I've been using it for a very long time. You've met one of my children who just recently graduated from business school. If you were... and you are... a parent is here at home, trying to help the kid; you get called all the time. "Sal, what's your best advice? I'm a parent struggling here at home. I've got the phone, the distractions; I'm trying to get the kids' schoolwork done." What do you tell the parents to do?

Sal Khan (20:26):

I'll put my disclaimer first, but whenever I get a question like that, I immediately have images of my kids, and I'm like, "Wow, I hope people don't see that moment in my household, because it doesn't look that perfect!"

Sal Khan (20:38):

I have an 11-year-old, an eight-year-old, and a five-year-old, and I have to say, my children's school has done a great job. The teachers have done an amazing job, and especially for the older student... the school always focused on the students having agency and autonomy, and then having-

Anthony Scaramucci (20:54):

That's good, Sal, because the superintendent of that school is on this call right now. We're going to invite him in to question you in a second, but keep going.

Sal Khan (21:03):

So, my older kids have actually done quite... they've been able to transition quite seamlessly; as you can imagine, the five-year-old, it's been a little bit more difficult, but even he is getting into his rhythm. What I remind myself, what I remind my wife, what I remind families everywhere is... if you think that you need to replicate the entire school experience, you're setting yourself up for disappointment and failure, probably.

Sal Khan (21:28):

The important thing to realize is this is different. First of all, take care of yourself first. If you're getting anxious, if you're getting stressed, that's the worst thing. Your kids are going to feel it, and then that's going to manifest in random ways and unhelpful ways. It will probably just cycle onto each other, and you'll just all get more anxious and stressed.

Sal Khan (21:47):

The other thing is if you try to do too much, you're going to get than anxiety and stress. It's different for age groups, but if students are able to get 30 minutes to an hour of math a day... actually, even 30 minutes to 40 minutes a day of math, 30 to 40 minutes a day of reading of some sort, maybe reading comprehension, and 30 to 40 minutes a day of some form of writing, that's great, and especially if they're able to do that not only through the end of the school year, but they're able to continue through the summer, they're going to be well-prepared.

Sal Khan (22:20):

When I tell parents that, including myself, it feels a little lighter. It's like, "Okay, actually, my child is getting an hour and a half a day, two hours a day," but that felt like they're not getting enough. I would say, once you're able to do that, if you're able to fall into a pattern there, then you can start to think about adding more, but there's a huge value... as a parent working at home, and there's been some teachers doing amazing stuff to support the parents working at home, and obviously, the teachers are doing video conferences and check-ins with the kids, and running tutoring sessions and things like that. But the one advantage that the parent has is that you have a lower student-to-teacher ratio than most teachers have to deal with.

Sal Khan (22:58):

So, what I recommend is, get that, let's say, one and a half to three hours a day of that core learning, leverage Khan Academy, read books, have the kids do journaling; hopefully, the school is also giving them some work to do; and then over lunch, if there's some young person who leaves this crisis not understanding DNA, RNA, viruses, epidemiology, even the economy and things like that... this is a huge opportunity to just have really interesting conversations with your kids. Watch TED Talks. Watch... I don't know how many of the SALT Talks, but watch those and discuss them.

Sal Khan (23:37):

For folks... I've been doing things like that with my kids, and they're learning a lot of intangibles that they might not have had if we weren't in this crisis. So, yeah, I would say don't beat up on yourself, focus on the core, and then from that, build on top of it. Obviously for high school students, it's more on the student than the parent, but then you could layer on the sciences and the social sciences, and things like SAT preparation.

Anthony Scaramucci (24:01):

There are a couple of questions. We promised people about 45 minutes in and out, so I'm going to turn it over to John Darsie, my colleague. You have some questions from the audience, right, John?

John Darsie (24:10):

Yeah, you touched on it briefly earlier, Sal, about the challenges of socialization in a digital learning-from-home environment. What are ways that you can apply digital tools for socializing children? I know we're all sort of sitting at home. Some people are getting a little bit stir crazy as we all work from home for the last 50 or 60 days. What are tools from the educational side of things that you can use to develop those socialization skills in children?

Sal Khan (24:38):

Yeah, that's a really big question, and there's no perfect answers to that right now. What we've seen work well is... I know a lot of schools have sent home packets, or you're leveraging tools like Khan Academy, and so kids can do that type of work at their own time and pace, maybe sitting down next to a parent or an older sibling who can help them along, help them stay engaged.

Sal Khan (25:03):

But what I've seen work really well is when the teachers are able to do check-ins with students in a smaller group setting. This is actually something we've always advocated for, let all the kids learn at their own time and pace, and then the teacher has all of the data to understand who is stuck and who is not, and then they do those one-on-one or those... a group of four students, small group interaction. I think that's one super powerful form of socialization.

Sal Khan (25:28):

I think we all remember being in a classroom of 30, 35 students, and if you weren't the teacher's pet or if you weren't the problem kid, sometimes you could get lost in the middle. I remember those moments where a teacher did say, "Hey, Sal, let me talk to you about that," and even that five minute conversation? I remember those. Those are the moments where I am like, "Oh, wow, this teacher really took the trouble for me, directly." And so, I think there's something very powerful about teachers using this crisis to kind of break open their traditional model.

Sal Khan (26:00):

The traditional model, I have that 55 minutes with 30, 35 kids; I do what I can; you're spread thin. You might be able to talk to a few of them individually. Now, there might be more leaning on the asynchronous, but now the teacher's time can spend also on, "Hey, the four of you? Why don't you come on to Zoom or Google Meet or Skype, and we're going to talk about study skills or ways that I can help unblock you as a teacher." I think those small sessions are really, really, really powerful.

Sal Khan (26:28):

Another thing: obviously, we're all trying to be very cognizant of screen time, but just to stay sane these days, we have to get on Zoom with friends and family. I've seen my kids; they're doing puzzles with their friends online. There are sites where you can actually do jigsaw puzzles digitally with your friends. I just saw that yesterday; I thought that was pretty cool. They're playing board games on either side. We have a family friend, he was the dungeon master for us and we played those games over Zoom.

Sal Khan (26:59):

So, people are getting really creative. I think there are ways, with things like Zoom and all these video conferencing tools. It's not the best. Obviously, it can't be a replacement for being in the same room, but you can get pretty far, and there's some benefits. You can invite your grandparents from 2000 miles away to participate, or your cousins, and we've definitely been doing a lot of that in the family, which has been a silver lining.

Anthony Scaramucci (27:20):

Sal, you mentioned the screen time. A lot of parents are very concerned about it; we are here in our own house. Do you think that this sort of accelerates or exacerbates future screen time, where the kids now are... there's productive screen time and there's non-productive screen time, but there's lots of screen time. Do you think that this is going to be a problem for us once things normalize?

Sal Khan (27:45):

It's a brave new world right now. We don't know. I think, if anything... I tend to run optimistic... this might be an exercise in, finally, screen time becoming more productive. We know a lot of folks have talked about anxiety, depression in college age kids these days is through the roof; a lot of people are able to tie that pretty closely to, that's the generation that got on social media pretty early, and the cyber-bullying, and just comparing themselves to others. That is very negative screen time. Not always... there's good stuff on social media, too, but some of the stuff that can happen to young people on social media and some of their mental images they form of themselves and others can be very negative. You need to be conscientious of that, of how do you help them navigate that. You won't just shut it down, because they're going to go there, and there's some good things, but how do you navigate that?

Sal Khan (28:40):

Now, people are doing, hopefully, more learning. They're doing even some productive socialization in the ways we just talked about, and to your point, it's all about productive versus not productive, and it's all about, what are you doing outside of the screen time? The productive, as we said, it's learning; it's having a Socratic dialogue with your friends; it can even be doing a puzzle or playing a constructive game with your friends, some form of socialization.

Sal Khan (29:06):

My oldest kid is doing all sorts of video editing now. He's trying to make these... I think they call them these Vines, these short videos where he's doing all these magic tricks. I was like, "That's pretty cool." He has time now. That screen time is very creative. My daughter, she's eight, she's doing all this stop-motion animation. I love it. That's really great creative time for them.

Sal Khan (29:27):

And so, as a parent, if they're relatively constructive in that, and they're having time to go run outside, be out in nature, play, at least with each other, that's a great thing. If someone has an only child at home... I have three kids at home, so they've kind of been able to be a little bit of a thing by themselves, but I've imagined that if there's only one child, maybe you can socially distance with another family so that at least your child gets some interaction with other peers or kids their age. It's more about making sure you're getting time out running, playing, et cetera, and that the screen time is as productive as possible.

Sal Khan (30:06):

I'll throw out another thing, to earlier, which is... I remind this to myself, I tell this to my wife. We can get so caught up as parents, saying, "Oh, my kid is beyond the 30 minute screen time allocation. Am I a bad parent? Look, they're eating M&Ms at the same time. I'm a really bad parent." You start to really get in your head of like, "My kids, their future is ruined." That stress that we put on ourselves as parents? That's just going to make us more testy. It's just going to make the house harder for everyone, and that's far worse for the kids than anything else. If the kids-

Anthony Scaramucci (30:44):

Hey, my six-year-old eating Pepperidge Farm Extra Sharp Cheddar crackers in bed at 11:35 PM? I'm okay, Sal? You're not going to turn me in?

Sal Khan (30:56):

You're a worse parent than I am, but yeah, if it would cause you anxiety or stress if you didn't allow that to happen, then yeah... I think that, with a happy, loving Anthony Scaramucci dad? Far better than eating broccoli properly at the dinner table and Dad is yelling randomly.

Anthony Scaramucci (31:16):

All right, I'm going to tell my wife that when she's complaining to me, when I'm sitting there munching on the Goldfish with my six-year-old at 11:35.

Anthony Scaramucci (31:24):

Sal, you wrote an amazing book, by the way, a couple of years ago, The One World Schoolhouse. It's probably six or seven years ago. I read it, then I heard you speak at Mitt Romney's event at E2 and SALT; I guess it was in Park City a few years back. Something really struck me about you; you were saying about artificial intelligence and the future of education, and the notion that we may be able to create an intellectual capital uplift in every single nation school. I was wondering if you could just articulate that vision to people before we let you go.

Sal Khan (32:02):

Even pre-COVID, the writing's on the wall. We made a big bet as a society about 200 years ago for free mass public education; that was as we were getting into the thick of the Industrial Revolution, and it paid off. I know there's a lot of imperfect things about the public school system, but there's a lot of amazing things about it. Pre-public school system, you had 20, 30, 40, 50 percent, depending on the country, illiteracy rates, and now in places like the U.S., it's sub-one percent illiteracy rates, and that's, to a large degree, I believe why so many people were able to participate in the Industrial Revolution, and we have a fairly broad-based middle class. So, it's no coincidence that the U.S., the U.K., Germany, Japan... the first countries that had mass public education were also the industrial powers and had a fairly large middle class in the 19th and 20th centuries.

Sal Khan (32:53):

This next revolution we're getting into? That Industrial Revolution labor permit, it's getting altered. At the bottom, the need for labor, especially relatively low-skill labor, that's where a lot of that automation, and to some degree, globalization, collapses that. The middle layer, which... some of these white collar, but it's really information processing jobs; that's what computers are good at. And so, where do all those people go? Either all this productivity, from all the technology, artificial intelligence, whatever else... all of that value goes to the top of that pyramid, and in order to have a stable society, you'd have to have some mass redistribution or something; otherwise, you'll probably have a revolution on your hands because the inequality would get out of hand... or, you figure out a way for as many of these people to participate in the top of that pyramid, to essentially invert the pyramid. I call it the Star Trek reality.

Sal Khan (33:45):

A lot of folks don't watch it from an economic point of view, but in Star Trek, everyone is an artist, a researcher, an engineer, an explorer. It sounds utopian, but I think it's our only option. I mean, we could default to the more dystopian reality, where a lot of people are just not going to be able to participate, but why not try for the more utopian one?

Sal Khan (34:05):

I always give the example: a thousand years ago, if you were a member of a clergy, someone who knew how to read, and I say, "The kid on the corner who is begging? Should we teach him how to read?" That member of the clergy said, "Well, he's not even capable of reading." Maybe with a great education system, maybe 30 or 40 percent of the population could read; back then, maybe 20 percent actually were reading. And so, if I ask folks now, what percentage of the population do you think could work at Google or start the next tech company or write a great novel, or find the cure for the next pandemic, today you would say that's sub-five percent, probably sub-one percent, and you'd say, with a great education system, maybe 10, 20, 30 percent.

Sal Khan (34:46):

Well, we're seeing over and over again all the themes we just talked about. You let kids learn at their own time and pace, let them not be bound by time or space, have ways for them to get credit at any point in their life... I think that number will be much higher, and all of these laid-off truck drivers and other folks that we might see... and this is all pre-COVID, because of automation... they will have a chance to re-tool themselves and be able to participate at the top of that.

Sal Khan (35:10):

Then, COVID has just made all of this even more stark. Obviously, we're going into some type of a major economic situation right now. The unemployment rate is off the charts. The knowledge work, remote work; this stuff is only going to become more and more valuable, but hopefully we'll have the tools for people to re-tool themselves also virtually.

Anthony Scaramucci (35:29):

I want to kick it over to what John... he's got one or two more questions from the audience, but thanks, Sal, I think it's a brilliant exposition of what's happening.

John Darsie (35:37):

Yeah, Sal, in terms of the general framework of how we think about education in this country and, largely, around the world, the idea that we take summers off is sort of a relic of the agricultural era when children needed to come home and help plow the fields. The idea that we sit in front of a teacher who lectures you, and then you go home and you do your homework... that's another concept you've talked about.

John Darsie (36:00):

Some people call it flipping the classroom in terms of making school more interactive during the day and allowing children to learn at their own pace when they're at home. You've called it the blended classroom. Just talk about what you think would be the ideal vision for how school would be structured. In inner cities, especially, there's a lot of difficulty with children when they come out of school for the summer; in Chicago, for example, Chance the Rapper has spent a lot of time and money trying to help inner-city kids have something to do during the summer. So, talk about what the ideal framework would be for education in this country.

Sal Khan (36:33):

Thanks. You touched on two very important... to Anthony's previous question, about if I could wave a magic wand... the other thing is the schedule. There's actually two: there's summer and after school. School, most places, ends at 2:00, 3:00 in the afternoon. It was really designed for a model where you have one income earner, and your mom is at home baking apple pie, and we know that that is not the norm any more. I mean, when I grew up, I grew up in a single mother household. I was one of those, they called them in the '80s latchkey kids. I would watch TV for a couple of hours until my mom came home.

Sal Khan (37:08):

That's a major source of inequity, because the summers, that's not only a time for not learning, it's well documented that's a time for forgetting, and middle class, upper-middle class, affluent families... they get their kids enriching programs, not just in the summer, they get them after school time; while kids who don't have the resources, they atrophy at those times. So, that leads to some of that inequity. Even the well-resourced kids are also forgetting over the summer, so for everyone, it makes no sense.

Sal Khan (37:40):

I think one thing to do is either eliminate summer, or just spread... even spread the school year through summer, so that instead of having one three month break and then a two week winter break, you have a couple of three week breaks through the year. I would go that way. I would actually try to go as close to full year, full day as possible, and I would try to get a school day closer to 5:00 or 6:00 ending time.

Sal Khan (38:03):

I know a lot of people immediately say, "Hold on a second. That sounds horrible. Some of my best memories were in the summer where I had all this time, or after school with extracurricular," and what I say is, "I agree with you." If school is able to have more time and space like that, then you can have some of what you remember as the really enriching parts of summer actually happen during school. We started a school, our Khan Lab school, where we do exactly that. So, those are the two.

Sal Khan (38:29):

Then, to your point about what you do, people always talk about technology, should technology be used, et cetera, et cetera. I always say, put technology aside. You should always say, "What is your goal," and then, "What are your resources at the disposal to solve that goal?" So, if your goal is, kids need to be engaged and they need to learn, and they want socialization, the answer is, well, get as much as you can get down when they're not in the room, so that when the human beings get together in the room, there's as much connection, as much conversation, as much activity as possible.

Sal Khan (38:59):

Our historic system... in some humanities classes, they've always done that. You come, you do your reading ahead of time, and then you're ready to have a conversation. But especially in a lot of math and science classes, while you're doing homework, you have no feedback of whether you're getting right or wrong. You have no support at home. A lot of kids have no support at home to get through it, and then they come to class and they have to sit quietly, even though they want to interact. They want to even talk about the math, but they have to sit passively and listen, which is very hard for any of us to do. Most of us as adults don't have to sit passively that long as often.

Sal Khan (39:31):

And so, there's an opportunity, even putting technology aside... when you get together, that's when you should do the problem solving, because that's where the teacher can walk around, understand where the kids are, help unblock them; students can help each other. When you see students and teachers in that type of environment, they all feel energized. They don't feel depleted. They don't feel bored in the same way. Then, on their own time and pace, if they can watch a lecture, a YouTube video, if they can work on their own time and pace on Khan Academy, that's great.

Sal Khan (40:01):

When you talk about blended learning, flipped classroom kind of got attached to us even though it's not my idea. It's actually teachers brought that up to me, as like, "Hey, we're kind of flipped things around," but as you soon as you do that, you get a guy saying, "Well, you don't have to be dogmatic about, this has to happen at home and this has to happen at school." You can say, "Either home or school, do whatever is most appropriate for the child."

Sal Khan (40:21):

So, you can imagine at school, some kids are working at their own time and pace on Khan Academy, but the teacher says, "I'm going to take five aside and do a more focused conversation, or unblock them, or motivate them in some way." As soon as you do that, it also opens up other things.

Sal Khan (40:36):

If I'm the lecturer, and I just lecture, that, by definition, has to be one case fits all, but as soon as you release that assumption that we come to class to work, and work on something that's appropriate for us, and if you have tools like Khan Academy, now all of a sudden every kid can learn at their own speed. You don't have to separate the "honors kids" from the non-honors kids or the remedial kids. You can have them all in the same room, and they can even help each other. You could have mixed age environments. You could have two teachers with twice as many students, and they're co-teaching. So, that's kind of the blended vision.

Anthony Scaramucci (41:09):

Sal, before we finish, give us a public service advertisement for Khan Academy. There's many people who would like to donate some money to you. Where do they go? How do they do it?

Sal Khan (41:20):

Thanks for asking that, Anthony. Khan Academy, for those are aren't aware, we're not for profit. We're mission-free world class education for anyone, anywhere. I don't own Khan Academy. Everyone listening owns as much of Khan Academy as I do. The only reason we're able to do this, and if you go to... and people are weirded out by us sometimes, because you go, there's no ads; it's all completely free. People think there's going to be a bait and switch at some point, and the reason why we can do that is because of philanthropic donations.

Sal Khan (41:49):

There's many amazing philanthropists. We actually have over 100,000 people who donate as little as three dollars, and then we have major foundations, major corporations, who have donates as well. We were running at a deficit even pre-COVID, because we've been wanting to make some of this investments for teachers and schools and add more content areas, and then you can imagine post-COVID with our usage being 3X of what it normally is, and us wanting to accelerate all sorts of things. We want to build out English and language arts. We want to add more grade levels.

Sal Khan (42:16):

We have an early-learning app called Khan Academy Kids, which just recently has shown incredible efficacy, where they showed high-need kids whose families made $25,000 a year... they were at about the 30th percentile on kindergarten readiness, compared to the 50th percentile, which is your average kid in the country... just 20 minutes a day for 40 days on Khan Academy Kids, which is our early-learning app for younger kids up to first grade, starting in Pre-K... those kids completely closed the gap, and it was as effective or more effective than some very, very, very expensive interventions, and this is obviously something that could be downloaded on anyone's smartphone.

Sal Khan (42:52):

So, the only way we're able to do all of this work is through donations. So, yeah, we would love to talk to anyone who wants to help [crosstalk 00:43:03].

Anthony Scaramucci (43:02):

Where do they go, Sal, to make those donations?

Sal Khan (43:03):

You can go to KhanAcademy.org/donate, and if someone is representing a corporation who would like to participate... a lot of big corporations, folks like Bank of America, Google, Novartis, Imgen, AT&T, Fastly... they've been helping up, but we need more help. I think there's an opportunity for them where, not only can you help us give free education, but we want to recognize those corporations, too. The Khan Academy Kids... I've been trying to find a corporation. It seems like a no-brainer. We would be happy to say, made possible by so-and-so every time. We had a million downloads just in the last few weeks. A large chunk of all young families that are in kind of household formation are using this app right now, and we create a lot of pixie dust, so we're always looking for people who would be open to supporting things like that, and we would love to help spread the pixie dust for them, too.

Anthony Scaramucci (43:53):

Well, that would be awesome, Sal. We're certainly here to help you out. We really appreciate your time today. Thank you so much, and we'll be in touch. I've got to get you back to the SALT conference. We have to figure out where it's going to be next year, but I want you to be there. You're an amazing guy, and congratulations on everything you're doing for the country and for the world.

Sal Khan (44:13):

Oh, thank you so much. I'm honored to be here.

Chamath Palihapitiya: The State of Venture Capital | SALT Talks #2

“There needs to be a reimagining of how the infrastructure of the world should look and should work.”

Chamath Palihapitiya, Founder & Chief Executive Officer of Social Capital, believes there is a dispersion occurring in both the public and private markets between the “have’s” and the “have-nots.” The cycle of building a company and profiting from it is broken, as it now takes too long to see a profit.

Politically, he believes there will be a changing of the guard come 2024. “Politically, this is the last gasp for Boomers.” There will be new alternatives on both sides but in general, there will be a shift to the left. Things like higher education cannot become akin to luxury goods.

How do we emerge from the COVID-19 pandemic successfully? Chamath gives us the metaphor of a patient brought to the ER with a gunshot wound. Stop the bleeding (put money in the hands of the people), conduct the surgery (incentivize good behavior by companies) and rehabilitate to 100% health (attack structural issues).

LISTEN AND SUBSCRIBE

SPEAKER

chamath-portrait.jpeg

Chamath Palihapitiya

CEO

Social Capital

MODERATOR

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Anthony Scaramucci

Founder & Managing Partner

SkyBridge

EPISODE TRANSCRIPT

John Darsie (00:09):

Welcome to SALT Talks, a series of digital interviews with the world's foremost thinkers, creators and entrepreneurs. Today, we are very thrilled to be welcoming Chamath Palihapitiya to Salt Talks, but just as we do at our global conferences, we try to provide a platform, both for big ideas and to provide our audience a window into the minds of leading a business executives, entrepreneurs, and innovators. Chamath as you may know, is the founder of Social Capital. He is also a part owner of the Golden State Warriors, and now the chairman of Virgin Galactic, which he took public by a special purpose acquisition vehicle, which Anthony and Chamath will likely talk about today. But I want to turn it over to Anthony Scaramucci who's going to be doing the interview. Anthony, as most of is the founder and managing partner of SkyBridge Capital, a leading alternative investment firm, as well as the chairman of SALT. Anthony, I'll let you take it away.

Anthony Scaramucci (01:06):

Okay, well, John, I appreciate it. Chamath, I'm going to dig right into it with you. We're going to make this a Chris 45 minutes if that's okay. And you've got a lot of philosophical thoughts about inequality, your personal journey to where you are now. And I was just wondering if you could give us a good two or three minute explanation of how you've gotten to where you are and where are you exactly on the whole idea of inequality where we need to go?

Chamath Palihapitiya (01:36):

Sure. I'm a Sri Lankan by birth. I'm 43 years old. I was born in '76 in Columbus, Sri Lanka. My parents immigrated to Canada when I was six. My dad worked in the embassy there, and at the time there was a civil war between the Singhalese and the Tamils. We were Singhalese, and it was not safe for my father and our family to go back. So then we stayed in Canada. This will give you a sense of where I'm coming from, but we claimed refugee status because my father's life was threatened. We got refugee status, grew up on social assistance, on welfare and in Canada, parents tried hard to work off and on. My mom was a housekeeper. I went to college in Canada, again, relatively cheaply, did an engineering degree at University of Waterloo. And after a year working at an investment bank, after an engineering degree, I traded interest rate derivatives at Bank of Montreal. I moved to California, I worked at a series of startups, and I ended up working at AOL Rose through the ranks of AOL.

Chamath Palihapitiya (02:53):

In my mid twenties was running a division there then came back to the West Coast, joined Facebook early on, helped them scale their business, was one of the principal executives in its seminal growth phase, led the growth of the business. And then in 2011, I started investing full-time at Social Capital. And in 2017, really unwound a lot of the typical LPGP relationships and then transformed the business to be more of a technology holding company with this idea that we would use a permanent capital base to buy and hold long duration assets, and then take them public and eventually take social capital public. That's my life in a nutshell.

Chamath Palihapitiya (03:43):

My political philosophy is, I would say, ideologically promiscuous. There are some very firm beliefs that I have about a social safety net because I directly benefited from it. And then there are some very strong beliefs I have about open markets and capitalism, because I've been a direct beneficiary of those. And it would be a lie to basically say that I've come to these conclusions more from an academic perspective, these are very much lived experiences. And so I think that I'm probably a centrist who believes in extremely free open markets, thoughtful longterm allocation of capital, but a strict code of ethics around the social safety infrastructure we provide to our fellow citizens so that the rest of us who want to compete in the open markets can do so without the fear of revolution.

Anthony Scaramucci (04:40):

Are you a UBI Fan like Andrew Yang or?

Chamath Palihapitiya (04:44):

It's interesting. I would not have claimed myself to be a UBI fan until this pandemic. I think that those are tools that are really important in exigent circumstances and I would put the pandemic as the most obvious case for where UBI makes sense. It comes in part from a social safety net perspective, but the much larger motivation from my belief in UBI is one around how to ... and what I think we are in right now, which is a deflationary supercycle quite honestly. And we are in for decades of Japanese style malaise unless we jumpstart the economy. And I think the most obvious way which people refuse to admit is that, we're consumer driven, led GDP growth country and we need to get enough money into the hands of people where they aren't psychologically incentivized to save, but to spend.

Anthony Scaramucci (05:45):

Talk about the deflation supercycle for a second, because you think some of that is being induced by the fed and some people actually, there's a lot of people listening in that are in the financial services industry. They think the fed's creation is creating inflation. I personally don't. I do see the deflationary cycle in terms of the excess factory, labor, all that stuff, but define that supercycle for people. And why do you think that is perhaps intractable?

Chamath Palihapitiya (06:13):

I think this is a ... by the way you're framing is actually excellent. It's exactly that. We're on the track to something that I think is intractable because the accelerant of deflation is the fed and the printing of money, but the inception of this deflationary cycle is actually in tech businesses. So let's just take a step back and look at the five best tech businesses in the world, and think about the incentives that they create in the consumer's mind and have done, especially in the last decade. If you wanted social connection, you can go to Facebook and get an enormity of that for free. If you want information and access to content that basically crushes any asymmetry that anybody else would have over you, you can get that from Google for free. If you wanted to entertain yourself with video content and not pay $130 to your MSO cable provider, you can get that from Netflix or YouTube, essentially close to free.

Chamath Palihapitiya (07:16):

If you want to communicate across channels and not have to pay a telecom provider, you can get that from Microsoft and Facebook and Google, essentially for free. If you want things that are cheap and available in instantaneous seconds and minutes, if you wait long enough for Amazon, they'll give you that also essentially for free. So what has been happening slowly is that these enormous companies have created tons of value, but by doing it in ways that have ingrained in the consumer, that cheaper, faster, and better is always on the horizon. And so for you to wait, you get rewarded. And so what that does is an incentive to save money. And so when you look at what happened in the savings rate after the great financial crisis, I think a lot of what happened was if you even assume that the quantitative easing had some trickle down effect and that money got into the hands of consumers, they didn't see the need to spend it, Anthony.

Chamath Palihapitiya (08:14):

They were like, I'm just going to save this because you know what? I have exactly what I want and incremental things I want will just be cheaper tomorrow. And so why spend this money today? And it gave them some amount of psychological safety. So we've been reinforcing that mechanic for a decade coming into this crisis. And then on top of that, you add trillions and trillions of dollars. What happens then is people now look at that money and they say, "Well, I never needed the money before, as much as I, I'm going to need it today versus tomorrow. So I'm just going to save." And so what people think is, "Well, I need to put this to work in a place where I can actually save and compound." So then you see this asset bubble inflate.

Chamath Palihapitiya (08:53):

So I think that this duality working together. Technology on the one hand drives the entire world to believe in deflation, to want deflation because you're getting value. And then the monetary supply basically reinforces that that money, which becomes a less and less useful commodity should go back into the asset markets, because it's not something that is a useful instrument today, and it will become increasingly less useful tomorrow. So when you put those two factors together, that's what's creating this supercycle.

Anthony Scaramucci (09:23):

Yeah. I see all of that and I think it's a brilliant analysis of it, but the one fear if your essential bank or that you're having deflation is debt repayment and the economic term that emerged in the 1930s called debt destruction. So let me just give you the math. I'm a person that has a $50,000 income or $60,000 income. I've got $200,000 of debt. In that deflationary supercycle, wages are also going down Chamath. And so let's give you this example. I'm going from 60 to $30,000. Look at what just happened to my debt. Moreover, let's say I'm a government, I'm sitting on $24 trillion of debt, but I'm in a deflationary supercycle. I'm now forced to pay the debt back with dollars that are worth more than the dollars that I borrowed. And that makes it almost impossible. So what do you say about the collision between deflation and the debt cycle that we're in?

Chamath Palihapitiya (10:21):

Well, that's exactly what is going to happen. I've spent a lot of time playing poker, I played blackjack. I've been in Vegas a lot. And I remember one time I was playing blackjack and the person beside me was clapping and the dealer said to him, "Hope is not a strategy." And I would say that central bankers wanting inflation because they realize that this is happening also is not a strategy. This is why I think going back to UBI to close the loop is really quite an interesting idea in a moment like this, because I think what it has the ability to do is to get enough money into the hands of consumers that exceeds the nominal marginal value of that saved dollar. And that's when you will actually start to see more spending. And in that more spending, because you've gone through a few years or in this case decades now of deflation, demand can very quickly outstrip supply and then you restart the inflationary cycle.

Chamath Palihapitiya (11:23):

And I think that that would be wonderful. We've all read Paul Tudor Jones's letter net by now. I think even central bankers would say the best way to manage all these debts is through an inflationary cycle. Everybody wants it. I think the question is, how do you start it? And I think that knowing that there's so much money supply there, the only way to drive the velocity of money in my opinion, is to get money in the hands of consumers and let them spend our way out of this where the incremental saved dollar is not worth it.

Anthony Scaramucci (11:57):

Yeah. No, I agree. And so the secondary question of this is, you've got a lot of opinions on artificial intelligence and the ramping of artificial intelligence, which will also lower the cost of goods and services. 3D printing lowers the cost of goods and services. And so at some point, don't you think, and I'll ask it rhetorically, but I'm interested in really to get your reaction the political landscape has to change. Right now we're in a baby boomer political landscape where these guys, as David Rubinstein had said on Monday, they won't leave the stage. You've got 75 plus year old people running for office, and they're killing each other in that sort of self-righteous way. So we're getting left strategies and right strategies opposed to right and wrong strategies. And so how do you intersect that line into the diagram that you and I are discussing? What do you think happens politically?

Chamath Palihapitiya (12:55):

I think politically, this is the last gasp for boomers, and I think that in 2024, you're going to start to see a slate of young emerging alternatives on both sides. And what's interesting is I think at some point between now and 2024, the alt left and the alt right will realize that political ideology is not aligned, but it's a circle and they'll meet somewhere. And then all of a sudden realize, "Oh my gosh, we may be the exact same person." So then everything will reflexively come back to a more neutral kind of positioning.

Chamath Palihapitiya (13:30):

I think the standard bearers of this new movement, the ones on the left are a little bit easier to identify than the ones on the right, but I think that you're going to see a generally progressive shift to the left, and that to be a winning Republican candidate in eight to 10 years will mean you're a Democrat, some version of a Democrat or a free market Democrat. That's I think going to happen for sure. And I think that that force has left the stable. So we just have to buy our time between now and then, and minimize the damage.

Chamath Palihapitiya (14:10):

The one thing that you said, which is true is that we have to keep a pace of all these technologies that are going to be increasingly deflationary by design. One of the things that I think we also have to do is have to have a government regime that's willing to spend money. Now, the good news is both the Democrats and the Republicans have torn this bandaid off of this modern monetary theory approach of like, let's just spend, spend, spend and print print print. And I think that that's reasonable if you direct that capital into really meaningful sinks that slow the deflationary supercycle down.

Chamath Palihapitiya (14:46):

So for example, on the one hand where you're going to see the advent of AI that could theoretically reduce the earnings power of people, on the other side, I think we need to make it a national priority to fly to Mars. Not because we should, but because we could. And you can sink trillions and trillions of dollars of capital there. We may decide that we want hypersonic aircraft, not because we need it, but because we want it and you can sink hundreds of billions of capital into that.

Chamath Palihapitiya (15:18):

And so there needs to be this re-imagining of how the infrastructure of the world should look and should work. And re-imagining ourselves, not just as people that live on the earth, but also in other planets. And while it seems crazy, the reason is because it can consume all of this capital in a way that's productive, in a way that doesn't necessarily just create a downstream asset bubble because that has to deflate and then it will eventually reinflate. And all of that destruction will further segment society in ways that make political disruption more likely. And I think that we don't want that or we shouldn't want that.

Anthony Scaramucci (16:01):

I get it. You don't want a society where people are going to take a Tiki torches and pitchforks and March on the people that are holding the assets. So therefore you've got to flatten it out. You've got to even out the K through 12 education system. And I think you and I are in a general agreement that, I don't want equal outcomes, but I do want people to have a broader likelihood of equal opportunity. Meaning, if you grow up like me or the way you grew up, my grandmother was a maid. She turned beds. My father was a crane operator. And so I got very lucky getting into a good public school, which allowed me to hone my academic skills. I just worry about that generation. Now they have such an uneven educational footprint. You don't know if they can get to the arc of the American dream or [crosstalk 00:16:52].

Chamath Palihapitiya (16:53):

To your point, I completely agree with you. Public education for me was my salvation and an amazing school in Canada that costs $10,000 a year. That was it. And what Canada and the rest of the world have refused to have happen is to allow higher education to become this luxury good that's like an LV bag of sorts where you want to be seen carrying around this $5,000 purse. It's kind of insane. And in that bag, you carry the same garbage that you would carry around in a $10 bag. And so what is the point?

Anthony Scaramucci (17:30):

I get it. I tell people that all the time, you can eat the pizza off of China or you eat it off a plastic plate. We're both eating pizza, but I want to ask you about the consumer orientation to space exploration, which I find absolutely fascinating. And I mentioned this to you. I've built a very nice relationship with Sir Richard Branson. He has been to the SALT Conferences and he like you is a great visionary. And so if you don't mind, could you spend a few minutes for our viewers of what the vision is for Virgin Galactic, where you see it in three or four years. But before you answer that question, I want to know my friend Matt, go to run zero gravity, have you been on the Vomit Comet? Have you ever flown up there and done the zero gravity turns and twists or not yet?

Chamath Palihapitiya (18:21):

I haven't. I haven't done it. But to-

Anthony Scaramucci (18:24):

Well, if you're up for it, I'm going to take you up there as my guest, but tell us where the future is for Virgin Galactic. What do you see?

Chamath Palihapitiya (18:33):

I'll tell you the Virgin story maybe in the context of the Apollo project because I think it's important. When we sent people to the moon in 1969, that became this incredible Thunderclap in the world, and it completely captured people's imagination. From a global hope perspective, it was an incredible validation of human ingenuity and capability. But underneath Anthony, there was something that very practical happened, which was, we invented an unbelievable number of industries. And the reason why space is such a compelling tip of the spear or a canary in a coal mine, whatever phrase you want to use is that it stresses every single law of physics that we know and understand. And that's why space has captured the imagination of so many people.

Chamath Palihapitiya (19:30):

It requires you to think of all of the basic things that we have today in a completely different light. From computers to clocks, to materials, to how you manage heat, all of these things that are understood today have to be completely re-imagined. When you do that, the second and third order markets for these innovations are so vast. So for example, you may care about climate change. Well, in order to really push climate change to the forefront, we are going to have to massively increase our battery density and the efficaciousness of our motors, electric motors. Well, underneath that is massive kinds of material science. Those innovations may never get funded in electrification. They will very likely get funded in space because you have to solve them to achieve these missions, and then it can trickle down to electrification as an example. And so you have to think about space as a way of it being a guinea pig for many of the things that we can use to improve the landscape of the world.

Chamath Palihapitiya (20:37):

So now you think about Virgin, what have they done? Well, what they've done is they've spent the last 15 years building a very safe, repeatable way of sending people into space and back, so into lower earth orbit and back so that they can experience gravity, see the edges of the earth surface, right. Be up there, float around, and then come back down. Now, what are they building in order to do it? They're building all kinds of really interesting materials. They're building a very novel way of managing the stability of a plane because remember at the end of the day, this is not a rocket that goes up and down. This is a plane that takes off and lands. It could literally take off and land from a LaGuardia or JFK. You don't need to go to Cape Canaveral.

Chamath Palihapitiya (21:21):

So how do you design wings that behave in useful ways at 350,000 feet, as well as 50,000 feet? It's building engines that can, with a reasonable carbon footprint, generate enormous amounts of thrust and energy. How do you do that? So they figured all of these things out. So in phase one, 600 odd people have already signed up to fly, hundred million dollars of booked business that we have to deliver. 9,000 people have been waiting in line to give us a deposit. Another 500 or so people I think have given us a small deposit in order to make the bigger deposit. So there's tens of billions of dollars of revenue at very, very high margin, to give people a once in a lifetime experience. But in doing it, our ambition, which we've talked about is taking those technologies and building a plane that can fly hypersonically.

Chamath Palihapitiya (22:22):

So you would go to JFK or LaGuardia, you would get on a plane, it would fly Mach 55. So imagine you need to go to Japan, Tokyo, that would be a sub two hour flight.

Anthony Scaramucci (22:34):

Amazing.

Chamath Palihapitiya (22:34):

You land in Tokyo, you do your meetings, you'd get back on the plane. You'd be back in LaGuardia, JFK at home with your family for dinner, and you would have spent the entire day in Tokyo.

Anthony Scaramucci (22:43):

Well, listen, it's amazing. And just for more context for our viewers, in Douglas Brinkley's book, Moonshot, the Apollo program, $25,000,001,969, which is basically about $400 billion today, and they estimated to your point over a trillion and a half dollars of positive externalities, it wasn't just Tang and posted notes and aluminum foil. It was everything. GPS, all the systems, telecommunication systems, the internet, the entire footprint that grid that information highway, the Apollo program in many ways paved the way for Facebook.

Chamath Palihapitiya (23:25):

You're extremely right.

Anthony Scaramucci (23:27):

It's nice to see that you've tied those two things back together. My colleague, John Dorsey has a question. He's sitting out there with all the dead animals on the wall that he's hiding from everybody at the ranch in Colorado. Go ahead, John.

John Darsie (23:42):

Chamath, you did a fascinating podcast a couple of years ago with Kara Swisher, and you've had a lot of interesting conversations with her. And you talk a lot about Silicon Valley and about how the culture is broken and the system of capital formation is broken. I would love for you to talk a little bit about your explanation of that theory, as well as how you think the pandemic might even exacerbate that the shift that we're seeing out of Silicon Valley or some of the disillusionment that people in the tech industry are seeing with Silicon Valley.

Chamath Palihapitiya (24:11):

I think that there's a dispersion happening and that dispersion is not dissimilar to what's happening in the public markets. If I had to characterize the public market dispersion, it's essentially that we are separating the haves and the have nots. And the haves are companies that traffic in bits. So Facebook, Apple, Amazon, Microsoft, Google above all others, but then underneath them, largely founder led technology businesses, that have the 80 to 90% gross margins, even if they're unprofitable. So those are the haves, they traffic in bits.

Chamath Palihapitiya (24:44):

The have nots or the companies that traffic in atoms. If you're a hotel company, an airline and auto business, those businesses are incredibly impaired and there's been an dispersion in the spread where you could basically essentially, if you bought the weighted S&P Index, which essentially is a way of getting synthetically long, these handful of tech businesses and shorted the unweighted index, which is, basically getting an equal weighting of everything else, you can see this massive dispersion spread by.

Chamath Palihapitiya (25:14):

That's happening in private markets as well. Except what we're looking at are companies that either are benefiting from the pandemic. So tailwinds that are driving positive growth and profitability. So companies like Coinbase, or Instacart, or Palo Alto Networks, which is public or Netskope, which is private, internet security businesses, or Slack which is a collaboration business. So there are these companies, a mixture of private and public, and then businesses that were second and third tier also rants are again, just getting crushed and they're being forced to fire and lay people off.

Chamath Palihapitiya (25:52):

Underneath that dynamic is something that's been broken in the valley for a while, which is that the cycle of building and profiting from companies has taken too long. It used to be the case that we would build a company for four to six years and then take it public. And then the public markets would participate in the last two or three years of evolving the business. Now, what happens is there's so much private money that these companies stagnate in the private markets for eight, nine and 10 years. The problem is that for LPs, it doesn't work because you have these 10 year fund lives. And if you're a growth fund, maybe a seven year fund life with a couple of one year renewals, the timing mismatch now that it's creating is this massive overhang where you have these paper values in IRRs that can't be monetized.

Chamath Palihapitiya (26:40):

And so that's feeding a cycle where even faster than normal, LPs are looking at secondary firms and saying, let me sell some of these things. Let me rebalanced my portfolio, because my publics are getting crushed. If you look at private equity, it's very challenged because they predominantly trafficking atoms. They're buying industrials companies, they're buying things that are real, tangible things that you buy with current free cashflow, that stuff is very trial to challenge. And so as a result, the IRRs that these pension funds and other LPs will see are going to be challenged. They then look at their venture exposure and say, "Wow, I have way too much exposure." And so then they're selling then the venture funds themselves are thinking to themselves, "Wow, I'm having a lot of trouble raising a new fund."

Chamath Palihapitiya (27:24):

So it's a very complicated cycle, John, but that's what we're engaged in right now is this essentially a massive multi-year long portfolio rebalancing. And the publics are leading the way so that dispersion is creating a dislocation. Private equity is the next domino to fall because when they really reset their portfolios and revalue them two, three, four quarters now into the full scale breadth of the consumer demand shock that we're dealing with, and then venture folks will have to take the backseat, but it's going to make valuations very challenging in the public markets. And you're going to be rewarded for having money to put to work.

Anthony Scaramucci (28:10):

Chamath, when you think about the future, it's 15 years from today. We have all of this complexity. What you're basically describing is another big transition. It's a little bit like the industrial revolution back in the 1830s, where all of a sudden people got scared they were losing their jobs and then there was massive productivity uplink, if you will. And so I guess what I'm asking is, you and I know there's going to be an abundance. We know that there's going to be nanotechnology, biotechnology, immunotherapy. There's going to be an abundance. And I know you're worried about this because I listened to your interviews. You're worried that that's going to go to two or 3% of the people, and we're going to live in this ether of plutocrats, where the rest of the society is struggling.

Anthony Scaramucci (28:58):

And so you're a capitalist, obviously I'm a capitalist. And so how do we shatter the totems of political ideology to explain that to people so that they understand that if you give somebody some universal income or some base education, that's actually right in the Western Canon of liberalism. That's the way to allow them to experience their life to their true form, the way you were going to that $10,000 school, or I've been able to. So how do we shatter those totals? How do we get there?

Chamath Palihapitiya (29:31):

I think that the way that I look at it is that right now, we have very uneven starting lines and we can use money and we can use incentives to make sure that as much as possible and as often as possible, we have a very even starting line. And I think universal basic income is a very interesting tool to make sure that the uneven starting lines of today are not meaningfully exacerbated because the reality is looking today, middle of May, 2020, people that are relatively wealthy and had asset exposure, I don't think are very much feeling anything from this pandemic. But people who had normal blue collar jobs, have been affected meaningfully. 30 odd million, we're trending to 30 odd million people, and that's enormous. That's like saying, if you walk outside the United States, every fifth working man or woman that you see doesn't have a job that's in my mind, extremely scary.

Chamath Palihapitiya (30:37):

So the way that you destroy these totems, at least from my perspective is right now, when we're in a crisis, it's the equivalent of being gunned into the ER with a gunshot wound, you have to stop the bleeding. So tourniquet yourself and make sure that we can stabilize the patient. And I think money in the hands of people do that. Then it's about being able to successfully conduct the surgery and remove the gunshot wound. And I think how you do that is to make sure that the companies themselves who are employing you have some reasonably good behaviors coming out of this crisis better than the incentives they had coming into the crisis. And then the way you rehabilitate. So even after the gunshot wound, how do you get back to 90 or a 100% physical capability is that you have to go after some of these huge, big elephants that have been hanging around for a while.

Chamath Palihapitiya (31:35):

Number one at the top, top, top, I think Anthony is education. We have to figure out what to do on the student loan sign side and what to do about the quality of public school education and the compensation we pay teachers. It's kind of a joke. I have four kids, three of them are in school age, and I have to be honest with you, it is impossible for me to do a good job. And I think that those teachers should be paid 10 times more than they are. But then at the same time, I'm a little angry at them because I think between them and the administration, the administrators of our schools, they're so woefully unequipped, and I think this is 2020. And then my school is in the heart of Silicon Valley. How is this possible? So I think that there's a lot of stuff that you can do to make sure that the best teachers are teaching all the kids and that's a technological problem.

Anthony Scaramucci (32:32):

We're going to have Sal Kahanan later on, and that Sal has always preached that to me. It's like, we're trying to make a movie instead of getting George Lucas and Steve Spielberg together to make the movie, we're getting the local drama club to make the movie. And we have to figure out a way to push that expertise down and make it more broad. I know we're running out of time, but I'm very curious about this question and I hope you don't mind me answering it because it's a question about our polarity and politicization. And there was a new Yorker cartoon that I read about two weeks ago and I literally laughed out loud. It was a news anchor and he was sitting at a news desk and he said, "We just heard from our democratic weather person. Now let's get the weather from our Republican weather person." And that the point being that we're so politicized.

Anthony Scaramucci (33:25):

And so do you think Facebook is doing a good job? Do you think we can do a good ... is there a way to dial down some of the misinformation out there and dial up more of the objectivity because I think one of our biggest problems Chamath, is we can't even agree on the facts anymore, depending on where I'm watching or what channel I'm on, I'm getting a different set of facts than the guy next to me. And so we're arguing over the facts now, do you think we could do anything to change that?

Chamath Palihapitiya (34:03):

There's a great philosopher. His name is Rene Girard and he pioneered the school of thought, which essentially says that, people aren't really born with desires. They mimic and model desires from other people. And then they copy and they imitate. And then eventually though they imitate too much and it leads to conflict, and then you have to scapegoat somebody and there needs to be a grand sacrifice before you can reset and everything will be fine again. Right now we're in a cycle where it is very easy to confuse truth and popularity, and so people can do it because it appeases their mind. It makes it easier for them to be part of a tribe and take something as fact versus have to be in the uncomfortable process of re-underwriting, everything they hear.

Chamath Palihapitiya (34:55):

And Facebook in many ways is an impossible situation because they have to do a dance between what is really fact and what is a person's opinion and how do you allow free speech? And so I don't even think it's their problem. I think it's a decision that we, as a society, have chosen to undergo. So I think it will come to a head in the next four or five years. And I think that how it gets resolved, Anthony, like what is the scapegoating that happens? I think that probably there needs to be something like a new deal. and I don't want to say it's the green new deal, but I think it's a re-evaluation and rewrite of the compact we have as US citizens. And I think that that's coming.

Chamath Palihapitiya (35:45):

I don't think that that's necessarily a hundred percent of the rhetoric of Bernie Sanders, but I also think it's not a hundred percent of the rhetoric of Donald Trump. And it's going to be a total rewrite. And this is why I think that the United States in many ways is like a startup that's never failed because we always iterate and we'll recreate ourselves. And so I have a lot of trust and faith that eventually people will emerge on both sides, and they'll just say, "All right, screw the past. I'm tired of our parents bickering. Let's just sit down and shake hands and figure it out."

Anthony Scaramucci (36:21):

Well, listen, but generationally, if you really studied cycles of generations, you're now in the 80th year of the start of World War II. And so when you sit there and look at that, it's a lifetime ago, what starts to happen is another cycle starts. There was a book in 1996 called The Fourth Turning, which was an explanation of these cycles. And so we're there now, and it's going to require really good leadership to set that framing.

Anthony Scaramucci (36:49):

Just one other point on that, I find this fascinating as well, 27 constitutional amendments. The last one was a procedural one in 1993, but the biggest one, the most magnitude in terms of the body politic was the Civil Rights Amendment in '65. So we've really gone ... think about the country. It's 244 years old. We've gone 55 years without a real constitutional amendment to reset things and to re-graph things directionally. So I agree with that. I know we're running out of time, but I'd like you to end on a note if you don't mind, because I think you're an amazing person in terms of being able to see around the corner of where we're heading. It's five to 10 years out, build me the case for America, and where would you like to see America?

Chamath Palihapitiya (37:40):

I think in 10 years from now, I think what will have happen, I'm just going to paint my bright rose colored glasses view. We will have come out of the deflationary cycle. We will have seen some modest, reasonably good inflation, and we will have reinvigorated the US economy. We will have become a standard bearer for basically, Western Europe, South America, and parts of Africa. I think that the two super powers that exist will be us and China. And it will be one where it's mutually assured destruction. And so we choose to cooperate wherever possible and power share. That there will be a lot of high earning jobs because we will nationalize things that should be nationalized for national security purposes. And that we have reinvented education almost back as sort of a very much one to many model to your point that isn't cut across county or state lines anymore, but says, the best teachers teach the entire nation in a completely different way. And we have a body politic that, that is meeting in the middle and is much more like the 1980s Republicans versus Democrats versus the 2020s Republicans and Democrats.

Chamath Palihapitiya (39:04):

So I'm very hopeful. But we are going to go through three or four years of difficult treading to get there. And so we're in the middle of the grind. So this is not where things get easy, but by 2024, things will get much clearer.

Anthony Scaramucci (39:20):

Well, listen, we appreciate your time today. You've been amazing. I'm not a room raider, but I love your room. I love the sunlight coming in. You're doing fantastic. I've got the old fashioned HTTV screen. But I hope you'll take me up on the Vomit Comet. That's what the astronauts used to call that thing. My friend Matt Goad runs zero gravity and would love to go up there with you. I think you'd find it fascinating because you get to a certain level, they move the plane in a certain way. You're up in the air and you can experience some of that space flight that you yourself will look forward to.

Chamath Palihapitiya (39:54):

I would love to. I would love to.

Anthony Scaramucci (39:55):

Well, God bless you. Have a great weekend. Stay safe. That's it for SALT Talks this week. Have a great weekend everybody. And Chamath, I'll be in touch. I really look forward to our next event together.

Chamath Palihapitiya (40:07):

Thanks Anthony. Thanks John. Thanks everybody. Thank you.

Anthony Scaramucci (40:08):

All right, bye.