On today’s show, we welcome Andreas Ramos. Andreas moved to Silicon Valley in 1992, where he worked in engineering at SGI, SUN Microsystems, Brio, IMSI, and other companies. He did translations and localization in six languages at these companies before joining Acxiom as head of the digital agency, where he worked with Global Fortune 200 clients. Andreas then led global SEO at Cisco, where he worked in 44 languages in 86 countries. He is now an Adjunct Professor of Digital Marketing at CSTU and INSEEC, and is the author of 16 books on SEO/SEM with seven Amazon #1 Best Sellers.
In this episode, you’ll learn:
- What are some stories of the rise and fall of some giant companies in Silicon Valley?
- Will Google and some of these monster tech companies hold their lead in the future?
- Which companies are recruiting the best engineers?
- Which technology sectors might be areas to keep an eye on in the future?
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Disclaimer to the Transcripts:
Intro 00:00
You’re listening to The Silicon Valley Podcast.
Shawn Flynn 00:02
On today’s show, we sit down with Andreas Ramos, who moved to Silicon Valley in 1992, where he worked in engineering at SGI, Sun Microsystems, Brio, IMSI, and other companies where he did translation and localization. And then led global SEO at Cisco. On today’s episode, you’ll learn: will Google and some of these monster tech companies hold their lead in the future; which companies are recruiting the best engineers, and what technology sectors might be areas to keep an eye on in the future. This and much more on today’s episode of Silicon Valley.
Intro 00:40
Welcome to the Silicon Valley Podcast with your host Shawn Flynn who interviews famous Entrepreneurs, Venture Capitalists and Leaders in Tech. Learn their secrets and see tomorrow’s world today.
Shawn Flynn 01:03
Andreas, thank you for taking the time today to be on Silicon Valley. Welcome.
Andreas Ramos 01:07
Thank you so much for inviting me.
Shawn Flynn 01:09
Andreas, you told me stories about sitting in the same office as Craig from Craigslist. You have such a history here in the valley, and you’ve seen companies come and go, but can we just find out a little bit more about yourself and your background up till now?
Andreas Ramos 01:24
Sure. Back in ’85 or so when Microsoft DOS came out, IBM developed the first PC. I was about to write my thesis. I was working on a doctorate in philosophy. And these were much better way to write it than with electric typewriters. I bought a PC and learned how to program. I began to work with computers, making software, selling software. Tech grew really fast. In ’92, I came to Silicon Valley to work in more computer companies.
Shawn Flynn 01:54
1992 till now though, give us a little bit of information.
Andreas Ramos 01:58
Okay, back in ’92. It’s really hard to imagine today. There was so little here. It was all sleepy town. 237 freeway was a two-lane blacktop road, going through fruit fields, orchards 280 freeway. Hardly anybody on [the road;] a car would be a mile ahead of you and another car a mile behind you. It’s just basically nobody here. The companies were small. We all thought, “Okay, this is fun.” We never thought it would get bigger than this. There was a guy. We struggled with the first websites. They came out and we thought, “Oh, this is cool.” You can see pictures on the web. And so of course we put pictures of our girlfriends or cats on the first website. This kid at Stanford in his dorm room began collecting websites. Every time we found a new website, we sent it to him.
So, Jerry Yang from Yahoo. So, we all knew each other, we all emailed back and forth. And later I went to work at SGI. That was the… people nowadays, they go to the Google campus see giant buildings everywhere. That all used to be SGI. We built all of that. And then SGI collapsed. A few years later, Google found these abandoned buildings and moved in. Then after that, I worked at a startup here near Great America and shared this large cube with this other guy who was a really intense engineer. Let’s put it that way. He was so intense, upper management hated him. He was so good. They didn’t dare fire him, they tolerated him. And that was of course Craig from Craigslist. Craig Newmark.
Andreas Ramos 03:22
So, I was working on my project. We’re working really intense. We work 10 hours a day, 15 hours a day and late at night there would be food. Then, I’ll work on my projects. He will work on his projects, and I will help him out with his stuff. He’ll help me out with my stuff and his friends from his high school up in Napa, will tell him, “Hey, Craig, we want to sell stuff online like bicycle. It was like a yard sale. Could you build something for that?” And Craig said, “Sure. I’ll pick some kind of list for that.” And that’s how I started, and he built that startup at night on his own, and we will look at the code and figure out, fix things, and make things. And then Craig, from that, it grew and grew and grew. And today, I think he makes something like 100 million dollars a year in personal income from Craigslist. He thought the CEO either. He works the technical support at Craigslist, actually.
Shawn Flynn 04:20
So you’ve seen companies come and go in your time here in Silicon Valley, you’d mentioned SGI, what makes a company succeed? What are some stories that you have? Because most people at home when they think Silicon Valley, they think, success, they think all these people driving around in new Teslas and McClellans, or these fancy cars. But a lot of people forget that these Titans come and go pretty quickly in the valley here.
Andreas Ramos 04:44
It’s amazing how much it changes here, how quickly it changes here. These cycles last, basically like two or three years. Companies start to grow super-fast, and then collapse really quickly. And that is because of technology itself this is what engineers learn to do. Engineers optimize the people outside of Silicon Valley Outside of engineering, they don’t really understand that, I think optimizing, make it a little bit better. No. A company starts, Shawn, you develop a new process for doing something. And it becomes really big. And now you have a huge company. So other engineers, they can’t compete against you. Because you have the technology, you’ve developed that. The only thing they can do is make it better, which means using Google slogan: smaller, cheaper or faster. If they could come up with some way to make it 10 times smaller, or 10 times cheaper, or 10 times faster, then they can kill your company. That’s what engineers do. They develop and optimize the software, the hardware, and make it better. That comes out. And the old company with me, two years old, basically collapses because the entire market moves over to the new system, which is 10 times smaller, cheaper, faster.
Shawn Flynn 05:57
Do you have any examples from your time here of companies that you could talk about where it was kind of obvious the technology was changing, and then maybe they just didn’t catch up?
Andreas Ramos 06:08
Oh, SGI is a really great example. Silicon Graphics, SGI, was the mega company at the time. They built the chips that go into every graphics machine, everything. Every kind of animation, movies, all that Toy Story with our development using AI chips, and it was all built on Unix. At the time, the Unix engineers, I truly believe and knew and they’re always unique with the optimal operating system, far better than anything else. So, they built everything for Unix. But the guys up in Seattle, Microsoft, came out with Windows. And of course, the first versions of Windows were not very good, but they kept making it better, better, and better. But the Unix people ignored that because they use Unix. Nobody would be caught dead using Windows. But Microsoft can make a better.
And at SGI, we will do processes perfect. We realized that it was impossible to do it on the SGI machine. An SGI computer costs $30,000 to do web development. It was crazy, if you could buy a $3,000 PC that can do it better. SGI insisted $30,000 machine. We had you work on the machine, and we realized it was faster to do it on a Windows machine. We put the work on, take it home, enjoy it at home all night, bring it back the next day. And then present it at SGI. This went on for years and years. We kept refusing to use Unix and then it came to the end. The market simply moved away from SGI’s $30,000 machine and went over to Windows PCs which are really cheap.
Shawn Flynn 07:38
With stories like this and experiences, are you seeing similar patterns right now with companies here in the valley?
Andreas Ramos 07:46
Oh, yes. What happens is companies become really big. The first two years they grow really quickly. They get to several thousand employees or more. They start becoming bureaucratic. It’s not process, the layers of management or anything, Shawn, you have to navigate through a minefield of bureaucrats, company politics, and bureaucracy, and so on. That slows every process down. Instead of building a web page, but really honestly shocked. You and I could knock together a 30-page website in a weekend. It’s that easy to do that quickly. But when I work with each large company, a billion dollar company, it takes nine months to reproduce a 30 page site, because every Vice President, every director of the company, wants to put their hands and make decisions about colors of parts, and this and that, it becomes an endless process of bureaucracy, and having to do with all that. So, it’s really hard to do anything. At the same time, the company ossifies itself down to the technology, they know the process they know. They stop looking at other new technologies, because they were successful two years ago. They keep on doing the same thing. But they typically don’t look outside and realize that other companies are doing things either cheaper or faster.
Shawn Flynn 08:59
So are there any companies in particular right now that you’re looking at that you think there’s some competition growing, or you see competition out there that you think might lead the market sometime soon?
Andreas Ramos 09:11
The best example I could think of right now is Google. Google developed search technology back in 1999. Based on counting links, the more links you had, the higher your score. It worked really well until about 2002 or so, when the spammers realized all the deal with lots of links. So, they began bombarding Google with links. In 2006, Google realized I had to have something different. So, they started using people who evaluate websites, humans. 10,000 people were looking at websites about machine language tools to evaluate websites. And that worked really well. By 2009 or so, Google, basically solved the problem with search from 2009 to 2012. There just has to be tweaks on that, minor adjustments, improvements. Google stopped developing after 2009. What you see today is very much the same from 10 years ago now.
Andreas Ramos 10:04
Google then became mega search engine and is really good at indexing pages. It has a six roughly around 130 trillion pages, as trillion with a T. The ability for, for example, Shawn Flynn here, you can find one page about him. But you can find all the other pages about him, how they relate to him. You can’t find out where he went to school, all of that, you don’t really get much of that you should be fine. The search results. Plagued with that problem, we can begin. They had to do something better about search. So again, optimize, better, cheaper, faster. LinkedIn began building their own machine learning algorithms and their own teams of 5000 humans to evaluate pages. So now if I want to look for someone, Shawn Flynn, I should find him in LinkedIn better. Get great information about… LinkedIn has a tool called Sales Navigator. People don’t know about. You pay $80 a month, you get Sales Navigator. And now you see all the people who are connected to Shawn. I see where you went to school, all the jobs he’s had before and where he is working now. All the things he joins. News releases about Shawn. And there is a score about how significant he is too. So LinkedIn is a better search tool for finding people. The only index is 600 million people. Here I can find investors, connections, buyers, customers, staffers. I can use LinkedIn as a far better people search engine than Google.
Andreas Ramos 11:35
Same thing is going on with many other tools, or shopping for example, Amazon is a far better shopping site than Google. I want to buy something, I go to Amazon. One click, I buy it. Amazon advertising now, they’ll be really growing really quickly. Instagram turns into a shopping site, a better travel site. People see all the places they want to go, the worldwide popular tourist destination, so swamped with people, it’s hard. You don’t see that on Instagram when you have to go there. Instagram has a tremendous opportunity to build a travel service. You see the site, you buy the ticket. Pinterest has turned into a huge shopping site. The women that go on Pinterest is 80%. Women, they see dresses and picture frames and also to think for the house and they can click on it, and buy directly from Pinterest. Because Google is so big, the smaller size has to get a better way to search for things on their sites. You see a fragmentation of the search market. People take away from Google.
Shawn Flynn 12:34
So is this similar like Craigslist, how all these startups decided to take one little item from Craigslist and make it into a company? But instead now, all these companies are taking one page from Google and making that into a company?
Andreas Ramos 12:48
Exactly. *Kakou is so large, so *Java and the smaller companies, look at what they can do. They cannot compete against Google, it would be a waste of time to go and try a new search engine. So instead, look at pieces of Google and figure out how you would be better, cheaper or faster.
Shawn Flynn 13:07
Do you think any of the other search engines DuckDuckGo, or Internet Explorer, Firefox will have a chance against them in the coming years?
Andreas Ramos 13:17
Look, folks, I love DuckDuckGo, best, my primary search engine. I really like DuckDuckGo but it has no chance of competing against Google because Google has established itself as the company or the brand. We think of hamburgers, McDonald’s hamburgers, they own the concept of hamburger. You think of running shoes, Nike owns running shoes. The same thing with search. Google simply owns the concept. So it’s impossible for an outsider to come in and compete against Google. That can’t happen.
Shawn Flynn 13:48
All these websites, you first have to go to Google to search to get to LinkedIn. Is it going to change in the future where maybe you just always stay on LinkedIn and use other websites connected with it, or are you always going to go back to your homepage, your Google?
Andreas Ramos 14:05
People are using Google when they’re searching for things. Also you see other tools and not going to Google to search LinkedIn, going directly to LinkedIn, using Sales Navigator at LinkedIn. I don’t think there’s a way to go from Google to self-navigate. So, using LinkedIn to search in LinkedIn, going to Instagram. I read yesterday morning that Facebook traffic has dropped 26% in the last year. One year. That’s a tremendous drop. A lot of people say, “Oh, yeah, Facebook is collapsing.” No problem. Mark Zuckerberg sleeps well at night, because Facebook owns Instagram. What’s happened is young people, the 13-14-year-old to the 24-year-olds have to be migrated away from Facebook over to Instagram. So, whether they’re in one end of the room or the other end of the room, they are still within the Facebook Empire, so that’s fine for Facebook itself, the corporate site… People are using these other sites… A few things: they go to Pinterest to look at things for the house. They’re going to Instagram. Look at location sites and things like that.
Shawn Flynn 15:11
Andreas, you have this huge social media background. What do you see as the future for social media marketing and advertising? Is there going to be disruptions in the industry?
Andreas Ramos 15:22
Oh, yeah. Social media, again, bumped along trying to figure out what it is. This sounds really odd, when it first started in 2002, 2004, it was called web 2.0. They found that you could use Java and JavaScript and also the AJAX, that you meant to make interactive web pages slowly became social media. When Mark Zuckerberg started Facebook, he didn’t really know what he had. And a year or two later, when he left Harvard and came to Palo Alto, he lived about two or three blocks from our house. He came here with four or five people from The Facebook as he called it back then. And they said, “Okay, now we’re in Palo Alto. Now, just stop wasting your time with this Facebook nonsense and start your real company.” “Really, we’re going to abandon Facebook?” But the investors were just saying, “No, no, no. Stay with Facebook. Grow that instead.” So they kept plugging at it and it grew. But they really understand what they had. People began asking, please make an app for it. And Mark Zuckerberg said, “No, we’re not going to put on mobile. It doesn’t work on mobile.” For a long time, they kept saying, we’re working on a better experience for mobile Which meant we’re not going to do it. But by 2009, the iPhone came out and that cemented pressure. With mobile, Facebook said, “Okay, okay, we’ll make an app.” I mean, that exploded from there. 80% of traffic now is through mobile, at that time it was called now the social mobile web. It is totally different from before Facebook came off premise. They had no idea what was going to happen. They simply bumped into it.
Andreas Ramos 16:54
The same thing with advertising. Sheryl Sandberg and others built the advertising at Facebook. It was a disaster for the first six years. In 2012, a few engineers rebuilt the engine, and it finally started working. And then Facebook is trying to make money. Again, they didn’t plan that, they didn’t really understand how it worked. The last few years now we’re going to the next space. It is no longer social media, now it is social marketing. If you have 10,000 followers, or more on Instagram, the app lets you set up a business site at Instagram to start selling stuff. That means products catalog, payment system, transactions, shipping. All that built it into Instagram, taking off Pinterest. So, these sites now realize it is still making money on advertising, they can make money on the sales of products. So, what you’re seeing is an evolution from social media into social marketing. Jennifer has a new pair of high heeled shoes, and her friends see that, and they want to buy that. So, what people see from each other what they have. Laura takes a ski vacation to Denver, great ski resort. Her friends see that, they want to go there. That is a new opportunity to sell tickets, travel plans and so on.
Shawn Flynn 18:09
Are there any changes in revenue for Google ads or these companies that are selling ads on their platforms?
Andreas Ramos 18:18
Oh, yeah. Look at the crucial blackboard here to the whiteboard. And let’s draw a graph here. So back in 2002, when I started, you have this line slowly that started growing. By 2004 to 2005, it spikes upward, it has a long steep climb, making lots of money. But by 2012-2014, it is trying to plateau. Revenue is slowing down. Google had pretty much made all the money they can from advertising. This has been going on for several years. You should look at Google’s revenue. It is slowing down. The growth is slowing down. Google is really worried once that starts to drop, the investors are going to say, “Okay, that’s it. It is over Google. Goodbye.” They’ll walk off and drop Google really quickly. So, Google has a big pet revenue number go up every quarter. And they do that by putting more ads, more types of ads, more opportunities for advertising revenue in Google.
Andreas Ramos 19:14
It used to be there were three ads at the top, and then links. Both go now on Google surfer; anything has money attached to it. Like, I take a flight the Shanghai, fly to Paris, or wherever. I buy a pair of ski boots, you’ll see the first four links or ads in the box from Google show more ads, more links. And finally, two thirds of the way down, you might proceed, please check your pages. So, for SEO, or links from sites they are basically not showing up at Google.
If you’re not in the first three or four links, you don’t exist. The first three or four links are all ads, who are making as much money as I can before the game stops.
Shawn Flynn 19:57
What do you think is going to change then in this game? Because right now Alexa and Siri, and all these voice software programs are out there where there is no screen, there is nothing to choose from. What happens then?
Andreas Ramos 20:11
Oh, it’s a really, really difficult problem. We see this in Alexa, Apple’s Siri, Samsung has Bixby. The Chinese has Taobao. And we had… all of them are developing Voice Search. Like I said, 80% of traffic to Google, and to Facebook, are mobile. 40 percent of the searches at Google are now Voice Search. People talking to their phones. Some of you may know that, two three weeks ago, Google came out with an upgrade to their algorithm called BERT. Don’t ask me what… Bi-directional something transformational something, something. Really obscure acronym by Bert and Ernie from Sesame Street. What it does is improve Google’s ability to understand language.
Before Google looked at search queries, what you typed into Google, one direction, from left to right, start left of the screen. And it worked across word by word. So, for example, we go fishing at the bank, Google will see “we go, fish bank.” It skips the nouns and verbs built in the sentence. Now BERT allows Google to look at each word one by one to the word, from left or right of it. So, if we go fishing at the bank, Google looks at the word fishing. Look to the right of it bank and the left of it go. And so good, now Google understands sentences better. This is tied to the Google search engine on desktop and mobile. But the real purpose is for Voice Search. People talk on their phones. On computers we’ve learned to series of keywords. We don’t type in natural sentences we type: best fishing spot, San Francisco Bay, but we’ve hacked our phone with, “Hey, Google, which place is best to go fishing? BERT allows us to understand that better.
Andreas Ramos 22:05
Another issue is voice search for services. And Helen and I, my wife is Helen, we were fooling around with Google when I ask these silly questions, what will happen? And I asked Google, “Hey, Google, we need a plumber.” Google said, “Okay, I can help with that. What do you need help with it as a plumber, unclog a drain, fix the faucet, fix disposal unit?” So it gave you a choice of options. I clicked on unclog a drain. Google then said, “Is this for 4031 Park Boulevard?” which is my address. Google knew my address, because Google knew where my phone was, the Wi Fi is connected, so I have Google Maps. And I said, Yes. I think Google said would you like a call now? Or would you like to list up plumbers? I click on call now. And a few seconds later the phone rings, a plumber answer. Or rather a plumber calls and says, “Hi, we’re looking for plumbers to unclog a drain. Can you come over? Okay, that’s great.”
One click, I get a product. I can talk to Google, pick up my phone, and ask for a plumber. That’s really nice and convenient, however, there are 50 plumbers in Colorado, one plumber gets the call. What happened to the other 29 who do not get a call? And this is really bad for those 49 other plumbers, if they’re not part of the Google service, a voice search, they do not get a call. This is the Walmart effect. When Walmart comes to a town in the Midwest, when they open the store for 25 miles around addresses, all the stores die, wiped out. And this is what’s going to happen with this voice search. Last year we had a VP from Google at a conference in charge. She was working with Voice Search and we asked her how can we optimize our clients for voice search as we get listed to shop voice search? She said, “We don’t have information on that at this moment. We will let you know.” That was a year and a half ago. Google is not telling us how to optimize for voice search, or picking companies, choosing best customers and so on and optimizing for voice search, which means the little guys are not going to have this opportunity.
Shawn Flynn 24:17
Is there ever going to be a limit to how much it costs to put an ad on one of these search engines?
Andreas Ramos 24:26
Google used to have four digits, nine, nine, dot nine, nine, a maximum you could bid was $99.99 cents, basically $100. But people kept pushing for more and more and more. Google rates that now to five digits, $999.99. Basically $1,000. What happens to CEOs, a bunch of macho guys, want to get ahead of the other macho guys. So, they say bid to the max, so they bid $1,000. So, I’ve seen, work with clients where they are bidding $1,000 per click. I mean, when you go to your search engine, you click on one of those links, the company is paying $1,000 for that click, it really does happen. We work with airlines and hotels, global airlines, a hotel, where they were paying $4000-$500 per click, again, because they don’t really understand Google AdWords, who, of course, are perfectly happy to let them bid really high because they make so much money. But if you understand the algorithm behind Google AdWords, you could bid much lower, shop higher. I actually had a client where we bid as low 25 cents. We shop above everybody else, possibly through that.
Shawn Flynn 25:44
Andreas, another question for you: all the big tech companies here, they’re competing for the best talent. And the ones that get these engineers, I’m guessing in the future will have a pretty good chance of survival, of growth. Where are the best students, the Stanford Berkeley, the MIT, those top engineers? What companies are getting them?
Andreas Ramos 26:04
Okay for us to think about computer science, there is about what 200-300 people at computer science at Stanford. They are the same people from Berkeley and MIT and so on. That’s a few hundred students at each of the schools. Within Stanford for example, there are separate three categories. This is not official *this in not on their ID card, this is something the way people see them. There’s ABC. A people are the superstars, they are really the hot shots. The Bs are very good. They’re competent, very competent. The Cs, of course, are just average computer science people. They are average students. The Cs do basically what we call, copy paster. They copy, paste, edit the code, they are not original. They can handle code, they can look at code, they can edit the code, but they don’t create code. The Bs are better at that. The Bs, you can say, “Hey, I need a new process here to store things, a new way of looking at database to get information.” The Bs can do that. They can write regular code that can work with databases with information, and so on. The Ad, however, this is only a handful. There’s about maybe 10% of the students that are As. The As, they are highly original. They create new code, they write, they create entirely new languages, Python, Unix, that was created by A students. Those are the irregular people who go way out in the forest and build entirely new ideas and what they build what the Bs and Cs later work on.
Andreas Ramos 27:46
So these companies all want the As. However, they don’t want to work at large established companies. The As realized the value of building a new computer language, the value of creating a new process, that’s tremendous amounts of money. We’re talking about hundreds of millions, billions of dollars. No company could offer that. The worst part, if they go to work at a large company, they have to deal with bureaucracy, internal politics. So, when Google and Facebook and other companies come to Stanford, try to hire these students, they are waving, not just suitcases, waving truckloads of cash at the As. But the issue is that they will not go the Google or Facebook. It’s not challenging enough. What will you do at Google? Better advertising? Write better, code that could do more ads? An A doesn’t want to do that.
So As goes to companies like Palantir and you’re like what’s Palantir. You’ve never heard of Palantir. Very few I know, even heard of the name, we hear the name, they know the name. After that a follow up question, what do they do? And they don’t know. Very few know what Palantir does. They say mega big data company. They handle data on the scale. That’s honestly, they’re looking at possible personal data. All people on the planet, 7 billion people. They try to organize in gigantic database. So, they can search, find correlations, and trends, patterns in those 7 billion people. They look at data for all airlines, all aircraft worldwide. I think there’s something like 20,000 flights every day in the US, you add this up over a year and you have enormous amounts of data. So, ability to software, to handle all that, look for patterns and correlations to improve that. That’s what Palantir does that’s a real challenge. That’s an interesting challenge.
For the top-level students at Stanford, MIT, Berkeley, Northwestern and other schools and the salary there to follow up on that, are spectacular. You’re talking about really large work; your salaries have skyrocketed from there. These people will work in these companies for two or three years. And likely after the third or fourth year, getting bonuses on the… say six figures, seven figures, eight figure bonuses. Andy Ruben, for example, who worked on Android on self-driving cars over at Google. I think $90 million one year or something like that. Spectacular numbers. They build worth 100 billion dollars, worth billions of dollars that billionaires in plural, 5 billion, 10 billion, 20 billion. So, these people understand the value of what they are building and are paid accordingly.
Shawn Flynn 30:35
So then is there hope for the little guy in the future?
Andreas Ramos 30:39
Okay, folks, I really really like working with the little guys, the mom and pop stores. I teach at a French University, and one of my students heard me say mom and pop. He misunderstood that and he said, “These mumba papa stores.” I really like that. So now after using the mom and pop sites, I really like to work with mom and pop sites because there’s so much you could do there, and you can see real changes. But the problem is the little sites, and I’m talking about small sites under $5 million in revenue, they don’t have the time or the money, or the resources to do this kind of digital marketing. So they’re pretty much out of luck.
The optimal space for digital marketing is somewhere between 10-50 million, up to around 900 million, a billion dollars. There, the site’s small enough that they have products, the websites are smaller, a few hundred pages to track all of that traffic sales, they can track your advertising, and see what’s going on. Once you get beyond that into the several billion-dollar ratio up to 20-40 billion. And just I work with a site that I work with the organization that is I think 400 billion. Once you get into that range, it is so large, so many pages, so complex, constantly evolving. It’s impossible to track thing in one site, a 40 billion company. We had 5000 websites with over 500,000 pages, and they’re super shifty. So constantly every day, it was impossible to do conversion tracking. So, the low end at the high end of the market, very difficult to do. The mid-range, it worked really well, for the low end, Google storage solution a few years ago called Google by Business.
Andreas Ramos 32:22
So, some friends of mine, my wife is Chinese, and her friends are Chinese who have Chinese restaurants here in California, Texas, and so on. And they talk with Helen and they said their restaurant doesn’t show up in Google. She said, “Talk to him. He knows Google. He knows SEO.” So, I look and of course, they don’t show up in Google. The thing you do for them is set up with Google My Business. So, you type in your restaurant name, your business name, so I’ll type after that. Google My Business. And then it shows up, you can build an information box about your business, and it shows up on the right side of the page. So, we look for many restaurants, especially large popular restaurants. On the right side of page, you see a big box with pictures of the restaurants, map of the restaurant, phone numbers, websites, menus, time of day, all sorts of information about the restaurant. That’s all Google My Business, it is free from Google. No cost, easy release. No code, no HTML, you can do it yourself. But of course, the people out there who tell companies they will set up for $1,000 and maintain it for $500. No need to pay any of that. You can set up yourself for the little guys, the mom and pop sites, there’s really a great solution called Google My Business.
Shawn Flynn 32:45
So then, what companies or sectors are you very bullish on in the future?
Andreas Ramos 33:45
The ties into what I was doing here the last few days, Thursday and Friday, I was in China, speaking at a conference on AI and IoT, among all the other things I do, writing books and teaching at several schools here. I’m also the CMO for startup, and we’re building an IoT device that uses AI, language translation tools. The IoT market gigantic on a scale that people don’t imagine, they don’t really see it. We see the web, we see pages, we use our phones, we don’t see much of IoT, because it’s all embedded chips in devices. IoT devices are in your car, in your things, in your house, you don’t see that.
You see the chip that’s in your dog’s collar? Yes. You don’t see the dozens and dozens of IoT chips in your refrigerator and your car. So, in the sense of the scale, the IP address numbers was recently upgraded. For a long time, we had IP version four, IP four, and that allowed to route 4 billion IP addresses. And back in 95, we thought we had more than enough, but now we ran out of IP addresses. So now we have IP six. That is the number freetype 10 to the 38. It is a gigantic number that’s greater than all the stars in the universe. To give you a better sense of that, pendulous 18 is a number of sand grains on the planet Earth. University of Hawaii researchers a few years ago laid on the beach of Hawaii, of course, drinking beer, whatever. They were talking about how much sand there is on Earth. So, they picked up a cheap sand, counted the sand grains in it, and then extrapolated to the planet Earth, and they found it to be ten to the 18th. Double that is a number of IP addresses. We could have an IP address for every grain of sand on the planet Earth and another planet just as well. As for me, IoT devices, IoT devices are coming. It’s a gigantic market, look at the total revenues of the web, the last 20 years, somewhere around $2 trillion, Google and all the websites put together brought in about $2 trillion of revenue. IoT this year alone is $9 trillion. Far bigger market than the web. But we don’t see that because it’s just real technical. It’s all the background infrastructure stuff. Shawn’s looking at me totally astonished at the numbers.
Shawn Flynn 36:15
I want you to go into more detail. I don’t want you to stop, keep going.
Andreas Ramos 36:19
Then there’s AI. And by AI, we don’t mean artificial intelligence. We mean machine learning, ML. Talk to anybody doing AI, but what they really do is ML. At the conference we spent two days looking at all sorts of presentations by companies that develop both ML and IoT. Going back to what I said earlier, our engineers optimizing better, cheaper, faster. If you embed IoT devices in each of everything will everything, for traffic, for example, or distribution of products. Now if you track everything, for example, every water bottle to have its own chip, its own IoT chip, and you can track every water bottle coming out of a company, every stage of production, when it’s made, when it is shipped to stores it goes into, it is recycled. All of that is trackable. You’re thinking, “Well, that’s a lot of water bottles.” Like I said, we can handle every grain of sand on the planet and still have many, many more IP. IP addresses leftover. So, we start tracking all of that, then you add machinery to it, start looking at patterns, big data, start realizing where it is optimal to move your products. You start to see maybe stop selling water bottles in Nebraska, maybe this whole area doesn’t sell very well. And there’s other areas where it sells better for us as a product. And then you start optimizing your entire supply chain: all the way from production, shipping, stores, use in the house, and so on. That means fewer people, better, cheaper, and faster. The production cycles get faster, and faster, and faster.
Andreas Ramos 38:04
The companies that right now are building hardware products, any kind of product that doesn’t have IoT built into it. These are companies that are going to shut down. They are going to die. Out there, there are engineers trying to figure out how to put IoT devices to those products. They’re going after, basically, every possible market you can imagine, every possible product in the supermarket, at Home Depot, everywhere, all that will be tracked. And those products function better than the old products. It means a new company will rise up and take over your company…disappear.
Shawn Flynn 38:38
It does make a lot of sense that if you can track the product, you can monitor it and you have all this more data that you could analyze to improve on the product. With that being said though, the data and the security of the data, would people be concerned about it because if I bought a water bottle, the company is going to know I bought the water bottle even though if I paid cash for it, it’s tracking me?
Andreas Ramos 39:01
Think about what do you pay cash for? In China, folks… I came back from China on Sunday, all right. This is what, Wednesday, Thursday. Nobody cares about cash. Everything is digital payments. Happy, small fruit stands, you buy a pound of apples, the vendor puts up a cardboard piece with a QR code on it.
You pick up your phone, you wave it at the QR code, you make a transaction. Everywhere I went to, restaurants and stores, the metro, on the trains, everything was done with QR codes and digital payment. So right now, you may be paid with cash, coins, but pretty soon you will be paying in digital. But again, there’s no reason why we cannot embed IoT into cash itself, into dollar bills, into coins as well. So, you can start tracking every piece of finance, every transaction will be trackable in no time. In a few years, we’ll be talking about security. The problem is so many of these companies, they move really fast, they build things. They don’t pay much attention to security. Many of you have seen, they’ll use the same password on everything. Many routers, for example, in homes all use the same default password. That’s a really big problem, because that means these IoT devices are hackable. Imagine, hundreds of thousands of refrigerators could be hacked. And all sorts of things could be done with those. That’s a big problem. Say, eventually, a company will realize, after they improved their security, either better passwords, or different systems, different ways of handling passwords… Another issue is users themselves; the user should be changing passwords. But as I’ve seen, a bad majority of users do not change passwords. I don’t know how so many times I go to people’s homes with routers that still have the default router name. I’m sure these are the default passwords. It’s a huge problem.
Shawn Flynn 40:57
Andreas, you travel the world, giving talks on many different topics. Do you see any continents or regions that are falling behind or really accelerating, and that you’re excited or bullish about in the next five years?
Andreas Ramos 41:12
It’s a very big bag now. In some place, things are moving forward very quickly. Other places are standing still in different industries. A very good friend of mine was here in Silicon Valley, built a startup and then went to England, in London to run a large accelerator. And she said that, I asked her about it, she said, “London is pretty much five years behind Silicon Valley.” You go to Denmark, Scandinavia, they are five years ahead in digital payments. So, Denmark, for example, has a digital account for every citizen. They no longer send postal mail to people in Denmark. It’s all digital online. Whereas you pay for the metro in Paris, all digital with your cellphone. We don’t have that here in Silicon Valley.
Andreas Ramos 41:58
In Africa, which is astonishing, every quarter, so every three months, I leave in person seminars for MBAs from Africa. We’re talking Ghana, Mali, Côte d’Ivoire, Nigeria, and so on. West Africa, from Nigeria up to Tunisia, Algeria. People do not realize this. There are 10,000 startups in Africa now. There are over 100 AI startups in Africa. Now. They’re leapfrogging ahead so quickly, because most people do not have a desktop computer. They go straight to mobile. Those who don’t have banks, or credit cards go straight to digital payments on mobile. Kenya, for example, they developed a digital payment solution that works extremely well. I think something like 70% of the population uses digital banking on their cell phone. Their cell phone number is their bank account number.
Andreas Ramos 42:53
Other areas see that and trying to develop that. In Mexico, people began developing that and the credit company * got became afraid that, well, if that catches on, we’ll never be able to sell credit cards in Mexico. So, Visa six months ago, announced a free credit card to everyone in Mexico. What they are trying to do is head off this kind of mobile payment system. In other areas of South America, Chile, Argentina, lots of startup activity going on.
Shawn Flynn 43:23
These companies that are starting in Africa, South America, they may not have the resources as here in Silicon Valley. What are their chances of surviving and growing and going global?
Andreas Ramos 43:34
So it sounds unbelievable. But I think there’s two or three unicorns in Africa now. Startup there are over a billion dollars and more and more. The situation for them is very challenging, to use that word. They cannot copy Silicon Valley, a group of VCs in India several years ago. They thought, okay, we’ll build possibly build Silicon Valley in India. They took all the methods from Silicon Valley, from venture capital and set up shop in India.
Maybe three years later, the whole thing shut down. It didn’t work. You can’t take Silicon Valley and duplicate it in India or Africa or China or France. There is a local condition. There’s difficulties. For example, in Cote d’Ivoire, which America call the Ivory Coast, in Cote d’Ivoire, they don’t have street addresses, houses in villages don’t have streets, don’t have names, houses don’t have numbers. Instead, the post carrier or each village, he knows every person in that village. So, if you want to do shipping to these villages, you need to be aware there are people in the village that will carry your pack to the house. So, you want to set up your own distribution, you cannot rely on heavy packages with street numbers and addresses. Maybe if you set up your own person in each village with a motorcycle delivery package. Silicon Valley companies do not understand that.
Andreas Ramos 44:55
If you live in Paris, you know house numbers in Paris are pretty young, pretty chaotic, and not… They don’t follow the American system. You have to know that and understand how it works on the streets. And with India, I wrote a book about startups. And in the book, I interviewed people in startups around the world, not just in Silicon Valley, I interviewed people in France, Colombia, Mexico, Denmark, Africa, China, India, and so on. And they talked about that, that they started small and very carefully. They adjusted things. They slowly discovered what works here doesn’t work there, and so on. So they are seeing a very pragmatic, very practical hands-on way of solving startup issues. The cool thing is they come here to Silicon Valley, earn from here, see what’s going on, learning about new models and so on, and then they go back and see how they can apply that, how they can develop that ideals for their markets, and so on. Many of the startups in China and Europe are actually ideals that were started first here in Silicon Valley, but then were adopted to conditions in those countries.
Shawn Flynn 46:08
Do you have any advice out there for investors that might be looking at Silicon Valley companies and tech in the future? Maybe how to analyze companies or things to think about before they make that trade?
Andreas Ramos 46:20
Yes, you have to be really careful. There are maybe startups which are not really startups, they’re there to raise a great deal of money, take your money, have a lot of fun for two or three years and then disappear. There are a lot of investors who make your ventures round up money from other investors without their own money, and then crash the company. We see that with We Work for example. We Work should definitely not be worth $40 billion or whatever it was worth several weeks ago. They are not really a tech company. They’re just an office rental company. But they managed to convince people that it was a Silicon Valley thing. And these naive investors came and put up a great deal of money. A number of these companies were very, we call sophisticated, other people call as scrupulous. Large investors know that they can bring in a great deal of money from naive investors. Be very careful about that.
Andreas Ramos 47:23
I and people who’ve been here a long time, people who can trust… people who were considered part of the Silicon Valley community, who are respected and trusted by other people in Silicon Valley and then work with them. If they are investing their own money in your company, then you could do a partial investment along with them. Receive and put up for several hundred thousand dollars to a startup, you can put it maybe 25,000-50,000 along with them. They are taking the lead, doing the due diligence. They understand what’s going on, and then you don’t have to follow so closely. Due diligence is difficult to do because this complex, especially because of there so many complexities, really hard to understand. You’re not deeply involved in the technology and what’s going on in that field, you have no idea if something that’s growing, plateaued, or is collapsing. So, you need to be working with people who understand the field.
Shawn Flynn 48:23
What about for publicly traded companies? Is there any type of research or mindset or advice you can give to people that are trying to catch that company right before it figures out actually how to make a profit, or they’re making a profit now that might not be there tomorrow?
Andreas Ramos 48:40
It’s hard for me to answer because I’ll be really honest here. I become very skeptical, very cynical about companies. Because I’ve been here so long, I see so much fraud and scandals in companies, what you see in public, in the Wall Street Journal, in Fortune Magazine, and then what reality inside the company is totally different. My friends who work with companies and they tell me, “Oh my god, the whole thing is about to crash.” But in public, they’re on the page of Fortune, Money Magazine, on the cover. Everything is a great company, very best except what’s here with us is Elizabeth Holmes. For three or four years, they were the superstar. People really thought. I’m talking about the Wall Street Journal, Fortune Magazine and other people. They really thought that Elizabeth Holmes was the next Steve Jobs. At one point she was worth I think $6 billion. Her company was bringing in major investors from all over the world, a board of directors with a spectacular array of people. And it turned out the whole thing was basically fake. Probably never, not worked, never worked. Actually, in theory cannot work. Professors at Stanford from the very beginning told Elizabeth Holmes and Theranos, it will never work. It simply cannot work the way you think it should. But they ignored those professors and went ahead and brought in money.
Andreas Ramos 50:01
A lot of people lost a great deal of money there. Why does that happen? The venture capitalists and the large venture capital companies have found that they can bring in a great deal of money from other people. We call it OPM. They are basically working on OPM By that means OPM, “other people’s money.” They’re not risking their own money. They’re putting in at most, by law, they’re obligated to put in 1% of the funds. Just keep it modest, but 1% is nothing to them. So, the other 99% is other people’s money. Whether a company succeeds or collapses, that’s not really their problem. The VCs make 2% either way, success or collapse. The VCs are making money anyway, no matter what happened. That explains why you see things like Juicero, a $70 billion startup that makes a machine that you push a button, squirts out a glass of juice. Okay, you could buy a $2 glass juicer and squeeze your own oranges by have, it works just as well. And maybe even better. They raise $70 billion selling a $700 huge machine. Of course, a year later the whole thing collapsed. But that time, a bunch of people made a lot of money.
Shawn Flynn 51:16
Andreas, great information. Thank you for your time today on Silicon Valley. If anyone wants to get a hold of you or learn more about what you’re doing, what is the best way to reach you and go about doing that?
Andreas Ramos 51:26
I could point out the first I’ll share the very beginning. And way back when a bunch of us, we set up our own websites. Of course, I registered my name https://www.andreas.com/ my website. And my email address is andreas@andreas.com. If you want to send me an email via Gmail, also have a Gmail address, gmail@andreas.com, and folks, you’re welcome to email me, ask any questions you want about Silicon Valley, or whatever. I always answer all emails. I’m happy to reply back and also, I’d like to thank Shawn for the opportunity to be here. There’s a lot to talk about Silicon Valley, the things that are going on here.
Shawn Flynn 52:05
Once again, thank you for your time, everyone at home, all of Andreas’ information will be in the show notes. So go to The Investor’s Podcast and check out Silicon Valley, and the information will be there. Thank you for listening. And next week we’ll have another great episode.
Outro 26:01
Thank you for listening to The Silicon Valley Podcast. To access our resources, visit us at TheSiliconValleyPodcast.com and follow our host on Twitter, Facebook, and LinkedIn @ShawnFlynnSV. This show is for entertainment purposes only and is licensed by The Investors Podcast Network. Before making any decisions, consult a professional.
