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Steve Ballmer Interviewed by Greg Bettinelli | Upfront Summit 2020

Steve Ballmer
Chief Executive Officer at Khotckevich Inc
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Upfront Summit 2020
January 30, 2020, Pasadena, CA, United States
Upfront Summit 2020
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Steve Ballmer Interviewed by Greg Bettinelli | Upfront Summit 2020
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About speakers

Steve Ballmer
Chief Executive Officer at Khotckevich Inc
Greg Bettinelli
Partner at Upfront Ventures

Steven Anthony is an American businessman and investor who was the chief executive officer of Microsoft from January 13, 2000to February 4, 2014, and is the current owner of the Los Angeles Clippers of the National Basketball Association (NBA). As of October 2019, his personal wealth is estimated at US $51.9 billion ranking him the 16th richest person in the world.

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About the talk

Topic: Business

Chairman of the LA Clippers and former Microsoft CEO Steve Ballmer sits down with Upfront Ventures partner Greg Bettinelli to discuss:

- How he got into basketball ownership and how a basketball team is like a tech company

- Why philanthropy matters and how to measure government impact

- Operating as a non-founder business lead and why he encourages everyone to drop out

- His favorite search engine

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I'm Greg bettinelli partner upfront Ventures. I'd love to introduce tiia Steve Ballmer chairman of Los Angeles Clippers. I told Steve backstage that every year I get a Sleek. Who's the one person we need who's the one person who made in for 6 years at that? We have to get bomb or we have to get bomber. He's everything about LA and sports and Tack. He's here a lot with the Clippers and we got into the Rose Bowl we waited for we we host the granddaddy of them all so welcome. Thank you pleasure to be here thinks. I'm super say it's kind of like you to know those eat at eBay auctions where

you got the bid on having lunch with the CEO. I kind of feel like I want it. So don't worry about the super excited in the Rose Bowl in LA this weekend for those who've been in LA with the Kobe passing in the tragedy. I know you being in the NBA as an owner as well as being the other team Los Angeles talk a little bit about Kobe and the Clippers and Kobe in the Lakers and how you About it for the NBA first. Obviously a tragedy anytime anybody dies that young let alone the

number of people who passed away at least the way I read it, you know, not only Kobe and his daughter and family, but there will be at least one or two people or orphaned as a result. I mean, it's just it's just a tragedy Beyond tragedies. I would say in my perspectives a Clipper fan. Kobe's got to go down as one of the top handful of players ever at least on the stuff. I care about competitiveness to termination winning impressive off the cord and on the cord. I

actually first got to know him is he was talking about Venture Capital. Very well, but it wasn't through the contacts to basketball at all. We just stand here bunch of our players were deeply affected been played with Kobe and a real tragedy digesting. It just it's sad and it sucks like and then everything else in a couple, but we'll move and obviously I think Kobe we wanted some to play as well. Let's talk about the Clippers, 1 2 3 You're wearing a pat Beverley Jersey. You got to be able to make a shot from here. Otherwise, you may not be worthy.

Live PD plays 94 ft. It isn't just about his scoring ability. He's a grinder a lot like me went to Arkansas a right like you are kind of player. Absolutely sweet Lee Williams. I can't score like I have a deceptive 3-point shot, but you should have heard that he actually was playing basketball to 10 years ago. That's very good. But let's talk about 30 years of Microsoft just talked a little bit about how you got into the be in the business and then how would actually became reality basketball team? So

I've always wanted to do that. No just outside the bounds of what I I could dream about starting in 1988 or 9. When Paul Allen bought the who co-founded Microsoft bought the Portland Trail Blazers, he would say to me who this is post Microsoft going public and in my head always banging on me that this would be something I'd really enjoy the sonics came up for sale in the early 90s. I had young kids doesn't seem like a smart thing to do to be CEO of full-time job be CEO of a big company being a dad David Stern said to me unless you're prepared to have people

give your kids shet. Yo Sunday morning when you run into a bronze you shouldn't buy basketball team. So I stayed away from the Seattle Team then it look like the Seattle team was going to leave. 2013 we thought we could get Sacramento. I was going to be assertive behind-the-scenes partner and then I retired and my kids were mostly out of school. And the first thing I did literally within 2 weeks after leaving Microsoft is I went and visited Adam Silver I said,

okay. It's moving at the Seattle thing that's going to be kind of hard. We have to Seattle move. We decided to really a bad idea for teens to move cuz you disappoint fanbases. So, you know, if you go look at the box there for sale, but they're not moving. That was discouraging to me. I will say and I said how about some of these teams that have no older owners not even for example the Clippers. I've always loved La since I lived here for a few months and 79 anyway,

and he said and then April of 2014 and it was kind of like the sun the moon and the stars aligned for me on the inside was not a simple one more on the Southside you not knowing where to go and who was actually can you talk a little bit about just as you are now lay back and remember there's a big blow up Doc Rivers have been a couple years is just about the playoffs in the Warriors talk about boycotting a game. The previous owner had made some comments that were outlandish and turns out that he's been doing that for a long time, but the transaction behind-the-scenes with something you

can make a great 30 for 30 episode on Sometime in the future but stuck a little bit about that. None of the people in this room need to learn but I'll share it with you when you have something that you want to sell. You usually have a clear path to sell. It might have an investment banker. You might have a business development person and do something this team. Basically the owner didn't want to sell the owner's wife knew she had to sell and I wanted to buy the only problem was I had no idea how to make contact

with the seller. There was no investment banker. There was nobody out fishing at nothing and literally a friend of mine and I did a soda but who do you know kind of things and we met a person who met a person who said yeah, I can get Shelly Sterling to to talk to you. Sterling's are mad right now. Wow. It's eventually thank goodness for me. It worked out there a banker did come in. There was a proper sale process and I overpaid according to almost all discussion of the time. I would say certainly relative to my joy. I did not overpay

and I think relative to what's happened with valuations of NBA teams now, not that I will sell before I die. But I think our team is appreciated quite nicely over that. Of time. Were you ever going to lose that transaction? No, no, I had a boundary about how I was going to go. My wife knew what my boundary was. I actually told me that the lawyer for the cell. What my boundary was I just said here. Here's the number just don't take advantage of me. The truth is if I had to I probably

would have gone higher. Labor of love, let's talk a little bit. Like you spend 30 years of Microsoft. Now your own the Clippers organizationally how different is it running you a fortune the largest company in the world you ran for many years from a market cap to 1 of 30 of an NBA team. That's not quite driven or run the same way Microsoft might have been more similarities and then you might think between the way a tech company works and Away basketball team works most companies. I know there's kind of

engineering side in a business side at the Clippers. We have an engineering side that happens to be called the basketball operations Department in the team. And then we have a business side that really has to drive the revenue and do great things very similar to what I actually experienced at Microsoft. I think most tech companies would tend to have if you're good. You have the two strong muscle strong. This possible which many startups never really achieve and I think they fail and you of course have to have a good a good product development team and a good product

which which we've done a good job so far with some luck on the Clippers, that's a similarity the old days before software-as-a-service you used to do major and minor upgrades to products the Clippers. We do major upgrades on the summer. We do minor updates at the trade deadline. That means we fix our product because that's the time when everybody comes together to do this stuff. So there are a lot of similarities like most tech companies. I would also say Engineers are treated. I don't know if I should say like Gods but

Engineers are treated very very well most tech companies. So there are a lot of a lot of similarities the fact that there's only 30 teams means while the business side is complicated. There is some there's something of a lesser amount of competition on the business side. It doesn't mean that there's not a lot of scrapping and selling and clawing and you know doing everything you need to do to have sufficient Revenue to pay your players. But the truth of the matter is you

have not the same kind of direct competition on the basketball side. The competition is in a sense broader what tech business do, you know where you can have 30 credible competitors every year. It's almost more competitive in that sense. What have you learned about Clipper fan relative to know you were in Seattle? You didn't live and breathe Clippers as a kid, you're pissing span and obviously followed the price on X when they were there, but what have you learned about the Clipper fans specially in the city with the Lakers and the history which was an underperforming

team for least 35 in the last 40 years. How many if you grew up in either LA or New York show hands Okay, everybody else doesn't know what this is like it's amazing. If you grew up any place other than LA and New York, you only had one team to cheer for you name the sport one team to cheer for the whole Community Gets behind it. It's it's great. People are fired up. It's weird actually have it was weird for me. First time that it will happen in my life to have two teams in a market. You actually have

to say why should somebody be a fan of one team or the other now, that's true except generally one team also has incumbency the Knicks in New York the Lakers the New York Giants versus the Jets the Yankees versus the Mets the Dodgers etcetera etcetera and so really deciding how is let me say you are the Legacy number two teams. How do you differentiate yourself to fans? How do you differentiate yourself? Play the free-agent. So you might want to have come work for you. And how do you do something? That's consistent with the fanbase you have today lar

fans. If you ask him, there's one thing the all-time in a season ticket holder since 84 on this team since 91. I believe I have weathered the bad days what the fine cut of the culture and character of our fanbase resilient gritty determined otherwise, how could you possibly have stayed a Clipper fan since 1983 to be to be frank? I am so in a sense that became the defining base because we do need to say who we are because the other team is just the team that's not just their the team this

one a lot of championships. So y'all that became obvious to us about two years. I'm looking at the billions actor who runs our business operations about two years ago that became Very obvious to us. And then the question is at the end of the day your product also defines your culture your product meaning your team and we were fortunate to have a team that also look like our fanbase top pretty resilient hard playing guys Pat Beverley who's Jersey that the greatest wearing or Montrezl Harrell and now the superstars we've

added Paul George and Kawhi Leonard and that's partly because we look to add people with that characteristic and we've been lucky enough that the superstars that we can convince to come join our team have that characteristic. So that's how I describe our fan base. By the way. I would have said for me personally and for Microsoft and general Hoth gritty long-term determine if you fail at first you come again you fail again you come again you fail you come and keep coming. Certainly the businesses that have historically paid for Microsoft Office

didn't happen overnight Windows didn't happen overnight Microsoft. This will shock people who are younger had credible credibility problems up the yin-yang for about 15 years becoming an Enterprise company Microsoft got another battle like that right now in Cloud platform work, but the termination commitment and drive. I happened to very much appreciate personally. And is that why cover fans deserve their own Arena? You know, if you're trying to say why am I different than the other guy playing in The Other Guys same building when people say oh, yeah, that's the

other guys building. I feel a little sorry right now for the Chargers. Everybody calls it Rams Stadium. Some of the same issues. And so for us to have our own brand our own Arena our own personality. I think that's important. Now these Arenas turn out they're really expensive. So I would say if the return on investment was a complete dog. I don't know whether we should have our same building but they are decent. They're not great rates of return. We don't see a tremendous rate of return, but I'm in S&P index investor. That's all I do is S&P index plus

Microsoft and I think I can probably see the S&P Index Fund in an arena, but just one quart. I love them. How deep is an investor either even want to take their semi smart as I think I'm semi smart, you know, there's many smart people out there to invest your money and then we're going to be wrong. You don't spend This is awesome. So we're still going to overtime by the way. So you don't just spend your time with the Clipper. So you actually spent a lot of time on the philanthropic side as

well as with your own family office around doing initiatives that drive transparency the information. He talked a little bit about usafacts. I have a prop here, but you can talk about it. When I drop this 80-page documents isn't 2019 version. I'll talk to him about Microsoft called myself generally hired not ready to sign up for anything new wanted to be busy. But wanted to keep flexible if you will with my time and my wife said to me look dude, it's been great. You've

been doing this Microsoft thing for years, but I've been focused on our philanthropic efforts by myself. You're going to come help me. And our focus is in kids and families in the United States where the kids are not likely to have. Let me just call it a shot at the American dream simply by fact where they were born in the environments in which into which they were born. So my wife says you're going to get on this with me and I said look at the end of the day government pays for all this stuff. So what's the real role of philanthropy? Whether it's Medicaid or food stamps or many

other supports for these families. And of course, she said dude we can do better than that. We we have to make our unique contribution for those of you have spouses or significant others. Of course, that is what I want up doing but I decided I really wanted to understand whether I was right. I was going to prove my wife wrong. This was all really government-funded stuff in philanthropy didn't matter. So I embarked on an Excursion using my favorite. Search engine Bing. I'm sure holy red. I just don't sell it,

but it's a goodbye. Jelly Belly good to me anyway, so I started with my favorite search engine and sit like I really want to understand how much money government raise is how much money really gets transferred essentially from more affluent people to Whatsapp when people and it was very hard to find the data. It's hither and yon and it's almost impossible to see it rolled up in aggregated in any reasonable form former. CEO is What would I do if I wanted to learn about a company public ago? It's get

its 10K eggs are beautiful their objective. There's no BS and you can't make forward statement about what happened. It's pure in a in an objective comprehensive format that was impossible to find so I decided I wanted Go create a 10K for government in the United States if you're going to do it you might as well do an annual report. And so we've been creating out for three years a 10K in an annual report Great Gatsby a printout of the annual reports and it is like

it really is like a 10K same sections all government money is accounted for nachos Federal but also state and local and since the the goal of government is actually not to optimize the difference between its revenues and expenses. We also came up and picked out and found the outcome measures we bring in so much money. We spend so much on education. Will the output is how well-educated are well-educated for example, even though the student-teacher ratios have gone from 24

call it thirty years ago down to 18 to investing more and more. In kids and we're getting not much better outcomes and many of these things were interesting people can agree or disagree on on what to do people can actually disagree on whether the outcomes are good and bad but I don't think it's fair and right for people to actually disagree numerically on what happened in the past. That is to be pretty unacceptable happens. We living environment today where people want to talk about fake news etcetera at least the past by the number numbers by the

way are non-partisan adjectives are partisan numbers are not partisan. And so we put this thing together now, we also do some other I'll call him Products off of our platform to to try to focus topics and bring even more numbers around those two to focus and by the way, My wife and I were both right government does fund most of the assistance that goes to poor families and yet there's an important role for philanthropy to fill in gap. The government does not pay for what I found most interesting

cuz I think maybe we're all feeling a bit vulnerable last few days is Facebook there's a lot of people dying that they feel shouldn't be dying. Did you see that the numbers? I mean, I would just weather prenatal or Pinot birth, whether it's opioids and Other Drugs like it's crazy that we don't see in this audience, but it just feels very me on American is right turn, but I know you've talked about that live in the past. Yeah, let me I'm going to say this in a completely non-judgmental form. It's very important because that's consistent with what we're trying to do. If you take a

look at it by the Numbers the number of people who died through some of the things and for some of the reasons that we see in the Press is a relatively small percentage of the number of people who die each year. It doesn't mean it's not tragic. It doesn't mean it's not a void voidable but it is a relatively small percentage. If you are government you can look at those numbers and say what can we do that's essentially free. It doesn't cost us more money. That's what they call an economics of Pareto optimal solution. All of those things should be done. If

you want to go further. Let's say provide more counseling services with folks with addiction and mental health issues. That cost money and then somebody has to make a judgment. Can we save that money someplace else? If not, is that the next best use of government money or should it be in education or balancing the budget or wherever and we put the data together and the people have to decide what they believe is the right Next Step because everybody's priorities are different you will find people who would not prioritise addiction issues.

You'll find other people who young they make prioritize the environment and even those things trade-off in terms of government resources. We try to frame the topic for people certainly from a philanthropic standpoint. We do ask ourselves. What are the questions that would be most important to us all if you focus in on this notion of the American dream So we have a few minutes left and I think this is a tech. I can go talk Hoops all day and talk data all day, but talk a little bit about what's happening today with technology you you know spent a large portion of

your time as leader of Microsoft dealing with gov the government and their view of what Microsoft shouldn't shouldn't be we're now seeing that come to fruition on the company's we talk a lot of the Facebook the Google the Amazons the apples not a silly handicapping who's going to come out but how would is that impact an organization? How does that impact Innovation? How would you broadly kind of recreate what we think will be happening over the next couple years in this environment. Yeah, three or four things number one. There's no doubt that being subject to

lawsuit subject to regulatory pressure in a very visible public way being condemned by your government for your for your actions. That's a very difficult thing on organizations. It hurts people who work there who think they've behaved in a perfectly moral way to be called in moral I can speak for experience when a federal judge ordered our company to be broken up. We literally went to a management Retreat to talk about strategy and the first thing our sales leader the time was supposed

to report on what he saw in the field and he just got up there and said, I am a moral person. I am a moral person. We must be viewed as a moral company and we hijacked the retreat and spend all of our time talking about what that meant. So you have what? Let me call Morales shoes you have distraction issues because as soon as quote morality gets dragged into it, then people say this is the most important priority in our company not just because of survival or being broken up or being regulated out of existence, but it becomes the most important issue and there

is a distraction Factor around that I was telling myself most of the time it was not a distraction Factor yet. If I look just at my own first five or so years is CL the amount of time. I spent personally trying to resolve our issues with the US and European governments was very high. So it is a distraction number three. I tell people engage faster and settle faster with the government than you ever see. Dragging these things out is not a very smart idea. You certainly want to resolve all these matters before you get anywhere near

legislation. It is far easier to talk to a regulator who can get smart about the issues then it is the sort of brute force of legislation being passed. So I would sort of frame frame those things up the other thing you have to ask yourself because you will be asked the company will be asked to do additional technical work in the grand scheme of things Microsoft certainly did we had the document protocols to huge amount of time. We have to create new versions of Windows took an extraordinary amount of time. I think in the world today were two people are talking

about privacy and and essentially fake ads and fake news. It's almost harder the burden to come up. It's not as obvious what the technology is, that should be built because you have to essentially under What are the social norms in the Red Hat Society would put on you and the only legitimate spokesperson for that is government which means you also have to recognize there is a legitimate role for society to express itself through its government in terms of where capitalism works by wife always sort of cheese doesn't she says

capitalism has to be better and I said capitalism is perfect. It always does exactly what it's told to do. So government has to decide what it's telling it to do and people have to operate that framework and I think that's going to be very important for her number of the company's you mentioned another one last question again back to the more the early Microsoft days. You are not a Founder, but you were early you were the 30th employee 1980 you left Stanford Business School to join the team. Just talk a little bit about the

Dynamics of being the non-founder who then overtime took a more active role you end up being a core Partners in the business, obviously, but with those Dynamics and is everything transferable to kind of what you learned in building Our Lady of the most successful company ever and how it relates to a lot of things that we see and do every day is investors. I was nappily minding my business deciding what to do for the summer between first and second gear business gold Bill Gates called we were friends from college and he said, you know, they would you be willing to

drop out and become our our business person. You're the only business guy. I know so you can be the business guy. I thought about that. I went and looked at, you know Consulting I had offers from Consulting and Investment Banking which you know, you get all puffed up and excited about that for your business school. Cuz those are kind of glamorous offers and I said well, I'm also going to go talk to this this friend of mine. He's got this small little company in Seattle and everybody saw you wouldn't do that. You're not going to do that. So I went and saw Bill and I said,

okay, this is kind of cool. This is joining quote. We are two and a half the company was two and a half million a year in Revenue 30 people, but it sounded like a market leader in a business. I knew I knew very little about software programs in high school and college but Bill was the smartest guy I ever knew and this seemed promising besides these Elite institutions. They let you drop back in as easily as they let you drop out. So it's really a very light encourage people to drop out all the time. People will take you back if it's stunning how low risk it is to drop

out. But anyway, if you have children, I'm sorry. I just said that and my father believe me he was not down for that program. So I went and joined as the business person and I would say our first year was very tough is very tough bill was founder and CEO his partner. Paul. Allen was really kind of driving the product Direction with Bill and Bill and I have a lot of a knock-down-drag-out the first year very painful actually in the first month. I was there. I told Bill the company Was Eighteen people shy

of what was needed to do all the work Bill said I didn't ask you to drop out of school to bankrupt this company and he was a little irony ice to find all these little sheets around Bill's house. I was staying with him. We didn't have enough money at the time to put people up. Hotels names of customers and names of people go with with paranoid about this since we'd write down every contract every employee in what they had to be paid to keep reading that the company was going to stay afloat. Finally after a month of brutal argument over this

topic. He said try to hire one good person and then we'll figure out about the other 17. Well when I left we were 88,000 people more than that and but but it's not an easy thing when you bring somebody else in I don't think Microsoft looks like it looks without the combination of Paul Allen Bill Gates me. We were we were the founding owners when we went from being a partnership to Corporation. And you know, that was our block. I remember incorporating the company. We made the share count add up to 10 million for the three of us and that was

kind of the nucleus and we build from there. In night in 2000 Bill asked me to take over as CEO and I was okay and I was a good number to you know, okay, you make a decision on their set them. Do you really want me to be CEO or you just looking for a figurehead does not really want you to be CEO the next year was again miserable miserable because it's okay. We're flipping rules. I have an accountability now for product strategy and so that the the process of having multiple people really involved in the

leadership of a startup or even a somewhat develop company particularly if you start with very young guys, I was 24 when I started at Microsoft Bill. Why don't we still 24 at the time to you? Say wow, we were kind of like a I would say, you know, we're over tester on testosterone. That is what we were fighting and yelling and screaming some of which state is part of the culture but really blending talents and I'm sure all of you see it in your in your portfolio companies for those of you who are in The Venture

business really getting a strong Technical and product presence in the strong business presence can be complicated. If you really want the two to work together if all you want is a Salesforce and product makes all the decisions fine. If you really does the expression that was important to me over my time at Microsoft because it didn't always work this way. You want a bill what you want to spell and you want to sell what you want to build. And often times the sellers would makeup products that nobody was building and the product team was selling products that were

making products. Then we're unsellable. The only way to do that is to have a strong partnership at the top and it ain't easy baby. Really ATZ even between bugs have known each other since they were 18 19 years old by but this is been a we do have lunch coming and it's been awesome actually a big privilege for my career to spend time here with you. So I really appreciate that. call one last question. Johanns again. How many angelenos in the audience if you're an Angelina put your head up if you are a Clipper fan keep your head

up. The rest of you are all potential conference will be after you. Thanks very much.

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