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Turns Out Silicon Valley Is A Bunch Of (Chaos) Monkeys

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Antonio Garcia Martinez, Silicon Valley, Chaos Monkeys

With Antonio Garcia Martinez, Former Product Manager at Facebook and author of Chaos Monkeys: Obscene Fortune and Random Failure in Silicon Valley

For those of us a million miles away, Silicon Valley seems like a magical place where dreams and outsized fortunes are made.  But as Antonio Martinez’s book, Chaos Monkeys: Obscene Fortune and Random Failure in Silicon Valley, shows, it’s quite a mess under the façade.

Antonio Martinez’s Path To Silicon Valley

Antonio graduated from UC Berkeley, then went to work for Goldman Sachs and saw the credit bubble grow and burst.  He then headed back to the Bay Area and joined a startup because he believed technology would survive the economic apocalypse, and he was right.

About six months into the startup, Antonio realized that his company wasn’t going to make it.  He saw the CEO as a sociopath who was very good at sales but terrible at the actual business of developing and selling a product.  Despite having raised $130 million, the company never managed to ship a product customers wanted.

Startup Success

On the upside, that startup was where he met two of his co-founders for AdGrok, the entrepreneurial chapter of his life.  AdGrok helped small businesses with advertising on Google while Google was busy chasing large companies.  Antonio Martinez and his co-founders took their concept to Y Combinator, a seed investor that funds companies and takes founders through a three-month startup boot camp.  AdGrok then got to pitch its concept to the cream of Silicon Valley venture capitalists and landed $500,000 in venture funding in 2010, when risk aversion ran high and easy money was hard to come by.

VC Pitching Not Akin To Shark Tank

Antonio notes that raising venture funding is nowhere as glitzy and quick as what we see on Shark Tank.  While there is the performative aspect of the pitch, in the real world, investors dig much deeper into the technology behind products, the competition, the business model, etc., with very pointed questions.

Why Chaos Monkeys?

Antonio Martinez titled his book Chaos Monkeys after a piece of software that was built by Netflix and because the term is an apt metaphor for the chaos in Silicon Valley.  He sees the Valley as a zoo that houses society’s chaos monkeys who randomly shut things down, such as Uber making taxi medallions worthless or AirBnB sticking it to hotels with disruptive technology.

When Antonio goes to “demo days” as a Y Combinator alumnus, he constantly sees new disruptive ideas that make some white or blue collar workers obsolete, without anyone really thinking of the deeper social repercussions of such obsolescence.

AirBnBs Rule Barcelona To Its Detriment

To underscore his point, Antonio Martinez talks of how AirBnBs have completely roiled the real estate market in Barcelona, with beautiful old buildings falling apart because their owners don’t care about maintenance and are solely focused on renting them out to tourists, who do not treat these buildings as places they need to maintain or care about the way an owner would.

Facebook As Workplace

Antonio sold AdGrok to Twitter and ended up working at Facebook a year before its IPO.  He views acquisitions, such as AdGrok, mostly as a way to acquire engineers in the Valley, so these acqui-hires are really failures in disguise.

When Antonio joined Facebook, it was a raucous place with a frat boy atmosphere.  After its IPO, things tamed down and Facebook acquired a big-company vibe.  While Antonio skewers a lot of people in his book, he thinks highly of Mark Zuckerberg as a genius who has recruited brilliant and very motivated people, fired by a similar vision, who, in turn, recruit other great people to foster a creative dynamism.  Zuckerberg’s genius is in creating that culture and maintaining it over the years.

With Chaos Monkeys all wrapped up, Antonio Martinez hopes to spend some time sailing across the South Pacific.


Disclosure: The opinions expressed are those of the interviewee and not necessarily United Capital.  Interviewee is not a representative of United Capital. Investing involves risk and investors should carefully consider their own investment objectives and never rely on any single chart, graph or marketing piece to make decisions.  Content provided is intended for informational purposes only, is not a recommendation to buy or sell any securities, and should not be considered tax, legal, investment advice. Please contact your tax, legal, financial professional with questions about your specific needs and circumstances.  The information contained herein was obtained from sources believed to be reliable, however their accuracy and completeness cannot be guaranteed. All data are driven from publicly available information and has not been independently verified by United Capital.

Read The Entire Transcript Here

Steve Pomeranz: I just read a great book.  For all of us a million miles away from Silicon Valley, we’ll view the Valley as some magical place where dreams are made.  This book shows how the sausage is really made out there.  Guess what?  It’s a sausage, so it’s not always a pretty sight.  The book is Chaos Monkeys: Obscene Fortune and Random Failure in Silicon Valley, and I asked the author to join me today to see if we can paint you a part of the picture that I think will satisfy any of your voyeuristic tendencies.  My guest, Antonio García Martínez, welcome to the show, Antonio.

Antonio Garcia Martinez: Thank you, Steve.  Thanks for having me.

Steve Pomeranz: You’ve got a long story here.  Let’s start out.  Obviously, we have limited time, but you went to work Out of Harvard; you went to Goldman Sachs and stayed there a couple of years.  Take me past Goldman Sachs when you headed west.  What happened then?

Antonio Garcia Martinez: Just to correct, because I don’t want to misconstrue.  I graduated from Berkeley actually.

Steve Pomeranz: Berkeley, I’m sorry.  Okay.

Antonio Garcia Martinez: Yeah.  Yeah, so the story starts with me reading Michael Lewis’s Liar’s Poker and being unduly influenced by that presumably cautionary tale and, instead, of course, finding it to be a siren song, I went to Goldman.  I saw the whole credit bubble grow to bursting and pop.  Then I went back to the Bay Area of my grad school days.  That’s how the whole tech part of the story started.

Steve Pomeranz: Yeah, so your timing wasn’t very good there in Wall Street, I guess.

Antonio Garcia Martinez: No, my timing has almost been almost always precisely wrong, actually, but I did predict or foresee that tech would survive the economic apocalypse to some degree and still do well.  That was a good move, at least.

Steve Pomeranz: I guess they thought you were crazy leaving Wall Street to go out and try your hand at some risky startup.

Antonio Garcia Martinez: Right.  Like any world, Wall Street is very self-absorbed.  A lot of the people on the desk had never been west of the Mississippi or west of Baltimore even.  The thought that you’d fly off to some startup in California just seemed like the most ludicrous thing in the world.

Steve Pomeranz: You went to work for a company and it turned out you weren’t crazy about the company.  As a matter of fact, you identified early on before everyone else that the company was really headed for its demise.  I think you characterized the people who worked there as being kind of hypnotized into the dream of and not really seeing the reality there, but you did see the reality.  Talk about Adchemy.  Tell us about that.

Antonio Garcia Martinez: Yeah.  Before I seem too prescient, I fell for it as well the first half year or year, mostly because I didn’t really know how to recognize the signs of impending doom in a startup.  The CEO was—I describe him as a sociopath, and I think it’s probably safe to say that.  He was very good at sales.  He was very good at projecting an image, but when it comes to the actual business of developing a product and then successfully positioning it in the market, selling it, and making money off of it, that’s a whole different ball of wax.

Yeah, the company basically never actually shipped a product that anyone wanted to buy, despite getting through $130 million of investment and lasting for, I don’t know, seven or eight years.  Yeah, I think after a year, it was obvious to all but the most deluded that the company was going nowhere.  On the upside, of course, that’s where I met my—the recruitment was actually pretty decent—and so that’s where I met my two founders that led to the next chapter, which is the company that we started.

Steve Pomeranz: Yeah.  The company’s name was AdGrok, if I’m saying that right.

Antonio Garcia Martinez: Yeah.  Yeah.

Steve Pomeranz: The idea was to try to bring a small business person into the Google world because that niche had not been filled.  Google was really more interested in working with these very large companies, not so much with small businesses.

Antonio Garcia Martinez: Right.  In case your listeners aren’t familiar with how Google works, when you do a search query, the little things in yellow are actually ads.  For all that Google does when it comes to maps, email, self-driving cars, whatever, 97% or whatever of its revenue just comes from those little text ads next to your search results.  That’s a $50 billion a year business.  That’s just what Google sees, right?  There’s layers of companies on top of Google.  As you cite, they never really focused on the small business market, so the person with the small e-commerce site, or the local plumber, or whatever that wants to get found via Google, didn’t really have the tools.  AdGrok, along with other companies, was trying to solve that.  It’s one of the lessons of the book that every business problem doesn’t necessarily actually have a technical solution, as we discovered, because almost all the companies failed, as AdGrok effectively was failing.

Steve Pomeranz: Yeah.  We’ll get to that in a second, but what was particularly interesting about this is that with this new company, somehow you were able to attract some of the top venture capitalists and incubators out in Silicon Valley.  I think that’s probably one of the most interesting parts of the story because it’s almost like by attracting these individuals, it was like actually having a degree from Harvard in what would it represent in the East Coast.

Antonio Garcia Martinez: Yeah.  The accelerator that I had gone into was called Y Combinator, which is a wonky math term, but it’s basically a company that produces other companies.  It’s a big deal in Silicon Valley.  It produced companies like Dropbox, Airbnb, other companies you might have heard of.  It’s famous for having its boot camp, which is basically a three-month process in which they bring you in, often with not much of a product at all, and you pitch at what’s called “demo day”, in which the cream of Silicon Valley venture capitalists show up.  You pitch them, and then you raise money, and so the story begins.

Yeah, even in a company in which we had no personal entrepreneurial track record…we had no revenue at that point.  In fact, we were actually getting sued by this other company we talked about.  Nonetheless, and despite my general incompetence at raising money and doing the CEO thing, we still raised half a million dollars in almost no time.  It doesn’t sound like that much, I guess.  It certainly isn’t a lot these days, but in 2010, the valuation and the amount was about standard for the first fundraising round for a company.  Yeah, that’s how we made it happen.

Steve Pomeranz: There wasn’t as much funny money back then as there is now because that was coming right out of the crash.  Money…people were, I think, more risk-averse in 2010.  Now, 500,000 doesn’t sound like a lot, but I think perhaps back then it was.  You mentioned pitching, learning how to pitch to these companies.  It reminds me of what we see on TV, the reality show Shark Tank.  That’s kind of the common person’s vision for startups to get money.  How close do you think that process that we see so well edited and so on on Shark Tank is to the real world?

Antonio Garcia Martinez: You know it’s funny because one of my investors, as I’m sure you noticed, Chris Sacca, is now on Shark Tank.  It’s funny, because I’ve pitched him in his pre Shark Tank days.  I’ve only seen scenes from Shark TankShark Tank strikes me as very glitzy.  It’s almost like America’s Got Talent or like the Eurovision contest, but the prize is investment.  It’s not quite accurate in that things aren’t really that glitzy and glamorous in Silicon Valley.  I think even in the worst VC pitches, there’s kind of a focus on products or the market or whatever technical thing you’re trying to perform.  There is real content there.  Sure, there’s a performative aspect to it, but in a half-hour or 45-minute pitch, you will get to some details.  Some VCs are technically inclined and do ask real pointed questions.  I think it’s something like that, but maybe not quite as Hollywood.

Steve Pomeranz: Yeah, we’ve interviewed a number of the judges from Shark Tank.  They tell us the behind the scenes story.  It’s not as if that’s the first time a pitch has been made, even though it’s made to seem like that.  My guest is Antonio García Martínez, and the book is Chaos Monkeys: Obscene Fortune and Random Failure in Silicon ValleyAntonio, what is Chaos Monkeys?

Antonio Garcia Martinez: Yeah, everyone asks that question.  It’s a good one.  Picture a wild monkey rampaging through a data center, the sort of air-conditioned rooms with stacks of servers that run the information economy.  There’s actually a piece of software called the Chaos Monkey that was built by Netflix.  What it does is it literally goes and shuts down random servers in a data center.  Then they test if they can still stream you House of Cards or whatever.

Steve Pomeranz: I see.

Antonio Garcia Martinez: It actually is a piece of diagnostic software.  I didn’t invent the term.  The way I use it though is sort of a metaphorical usage, in that in these days, Silicon Valley is sort of the zoo where society’s chaos monkeys are kept.  What I mean by that is they’ll look at, say, taxis and taxi medallions and say, “You know what, we’re not going to have taxis anymore.  We’re going to have this app called Uber and anyone can become a taxi driver,” and that’s it.  Suddenly a taxi medallion has zero value.  Or they say, “Hotels, why do we need hotels?  With Airbnb, anyone with a spare bedroom or a weekend cabin can suddenly become an innkeeper or a hotel keeper,” and we’re just going to change the way real estate works.  They basically rampage through society, knocking over or shutting down one or another industry by disruptive technology.  That’s what I mean by the chaos monkeys.

Steve Pomeranz: Okay.  I see the metaphor there.  Just like these monkeys going through and destroying everything, we don’t really know what the outcome is going to be of all these disruptive technologies.  I think part of the issue in our economies today and the feeling of insecurity by many has been caused by this drive towards disruption that you’re talking about.

Antonio Garcia Martinez: I think that’s absolutely right.  Now as an alum, I go to the demo days that I mentioned at Y Combinator, in which the companies pitch.  Almost every company is putting some white collar or blue collar role out of a job, like literally almost every single one.  That’s the reality of it.  I think one of the criticisms that one can level at Silicon Valley, and that I hope to make apparent in the book, is that I think people in Silicon Valley, or most people in Silicon Valley, I shouldn’t say all, aren’t really thinking about the repercussions.

I’ll show you an example.  This book was partially written in Barcelona.  I’m a Spanish citizen, and I just moved there to get away from Silicon Valley.  Barcelona is Airbnb’s largest market in Europe.  It has completely roiled the real estate market.  There are entire buildings, beautiful old buildings, that are probably falling apart because the owners don’t care about maintenance anymore, just because they’ve just rented them out to tourists.  They’re full of partying Swedes or Americans or whatever, and entire parts of the city are now nothing but Airbnb hotels, effectively.  That’s just one impact that, I know people who work at Airbnb, that they’ve just not thought through, and at some level, frankly don’t care about.  That’s one of the repercussions, potentially negative, for being the chaos monkey.

Steve Pomeranz: I recommend this book.  You can see the way Antonio speaks and his use of language.  The book is very smartly written, and it’s really quite funny.  I want to read some italicized descriptions of some things: “What makes a successful venture capitalist?” (and I’m quoting here.)  “In the day-to-day, the lifeblood of a VC wasn’t money.  It was deal flow.  Getting a first look at a potential Uber and Airbnb is what distinguished a first class VC from an also-ran.” Now, here’s a statement on getting picked by this Y Combinator and these very high-value individuals that you worked with when you started developing AdGrok.  You said these outfits are “bomb-throwing anarchists, subversives, mixed with cold-blooded execution, mixed with whimsy, a sort of technology-enabled 12- year-old boy.”

I think that’s what we’re talking about is this.  They’re out there.  I think greed is the main driver, and greed is basically good in my view.  It changes things.  It creates capitalism.  It creates new products and new services where there were none.  It improves our lives, but it also has many destructive characteristics.  Let’s get back to you.  You sold AdGrok to Twitter, and then you—I don’t know if you went totally to Twitter—but you did end up at Facebook.  Tell us about your Facebook experience.

Antonio Garcia Martinez: Yeah.  That deal, just to comment on that just a little bit, these early stage deals, they’re always touted as sort of these successes, right?  This acquisition.

Steve Pomeranz: Yeah.

Antonio Garcia Martinez: The reality is the market for engineering talent in Silicon Valley is so tight that the parts of the companies—what’s called the “corp dev” or corporate development—that buy other companies are really just glorified recruiters who basically buy engineers at volume.  That’s what all these acquisitions are about.  The company was absolutely failing and everyone realized this.  Everyone who’s actually been down the road realizes that what are called acquihires, acquisition plus hiring, are really failures in disguise.  That’s what happened.  In my case, as often happens, again, but it just is rarely talked about, the deal got all screwy and weird because I ended up going to Facebook while the rest of the company went to Twitter.

Steve Pomeranz: I see.  I want to hear more about Facebook because we have limited time.

Antonio Garcia Martinez: Sure.  Yeah, no, I joined Facebook a year before the IPO, when it was still kind of in meteoric startup mode.  I could do things like I homebrewed beer on campus, and I blew up the plumbing and flooded Zuck’s desk.  Everyone was just like, “Eh, so what.” It went from that very raucous, every sort of stereotype of the somewhat frat boy wild startup, to a year after the IPO when things got a little bit “big- company”, a little political.  You had middle managers trying to build fiefdoms, and the vibe changed.  I think that’s why Chaos Monkeys is kind of interesting because that period is really unique, to watch a company go from the mid-stage or early stage to the later stage, like boom, right there, in just two years.  That’s what Chaos Monkeys is about.

Steve Pomeranz: Your two years at Facebook, you wrote, “You resembled an Afghan warlord or pirate captain, fearsome in appearance to outsiders, the scourge of entire companies and industries, but actually barely in control of your small band of engineer-hooligans and always one step from mutiny.” I thought that was a great, terrific line.

Antonio Garcia Martinez: Yeah.  My official title was product manager for the ads targeting system, so, in terms of the beat, it was basically taking your data on Facebook and turning it into money.  In terms of the role, the product manager (that’s a classic role in Silicon Valley speak), what it means in normal speak is you’re sort of the CEO of the product in a way.  You’re the face and navigator for the product.  The joke is you have all the responsibility but none of the authority because, unlike a CEO, the engineers don’t actually report to you officially.  They usually report through their engineering manager.  In some sense, there was this weird duality.  To the outside world, I was ads targeting at Facebook, and every company wanted a piece of that.  Here I was with this big Facebook stick.  Internally, I had to grovel or cajole to these various engineers and try to get them to build things and more or less go in one direction.  That’s the sort of weird duality that I was trying to get at there.

Steve Pomeranz: You do build up some people in the book.  You skewer a number of people in the book.  What is your opinion of Mark Zuckerberg, the Facebook founder?

Antonio Garcia Martinez: Very positive.  I actually say in the book there, in one of the chapters, that Mark Zuckerberg is a genius.  He’s not a genius—everyone’s seen The Social Network, which is unfortunate, because it’s kind of a fictional …it’s a highly fictional movie—I mean genius in that he’s like this force of nature that has managed to recruit around him brilliant and very motivated people who are fired by a similar vision and who in turn go recruit other people and wrapped himself in this corporate culture in which a 23-year-old engineer feels empowered to look at Facebook and push some change and have it succeed or fail or whatever, but be in this constant maelstrom of really creative dynamism and constantly shipping new products, many of them frankly ill-thought-out or poorly executed, but whatever.  The point is to actually find that winner that opens the new chapter in social media.  Creating that culture and maintaining it over years, I think, is where the genius aspect comes in for Zuckerberg.

Steve Pomeranz: What’s next for you?

Antonio Garcia Martinez: That’s a great question.  I don’t want to spoil the end of it, but towards the end of the book…it’s a long story, but my mother died, actually.  They live in Miami, actually, in Florida.  Yeah, no, I was raised in Miami, the usual Miami Cuban boy.  When she died, you have these experiences of mortality, and you start rethinking your life.  My mental bucket list was two-fold: one to finish and publish this book that we’re talking about and then the other was to finally go sail across an ocean alone on a sailboat.  I had been raised sailing in Miami since I was a little boy.  It was always this deferred dream.  I think after this book PR dies down, I’m going to.  I have the boat that I’ve been working on, so I think I’m finally going to sail to the South Pacific and back, I think.

Steve Pomeranz: I wish you the best of luck.  The book is Chaos Monkeys: Obscene Fortune and Random Failure in Silicon Valley, my guest, Antonio García Martínez.  Antonio, what a pleasure.  Thanks so much.

Antonio Garcia Martinez: Thank you for having me.