Role of SoftBank in Technology:

Masayoshi Son, the primary speaker, denies the notion that he or SoftBank is in a unique position to shape the future of technology, despite having over $100 billion at their disposal. Instead, he expresses excitement about being a “facilitator” for passionate entrepreneurs in the fast-evolving tech industry.

Technological Growth:

Son describes three factors that have revolutionized technology over the last 30 years: computing CPU power, memory size, and communication speed. Each of these factors has improved by a million times, and Son predicts they will continue to improve at the same rate.

Impact on Society:

Son believes that technology, particularly AI, will drastically redefine every industry and aspect of human life. He argues that AI could outperform human intelligence in certain aspects, which will require a rethinking of society’s fundamentals.

The Power of AI:

AI is at the heart of Son’s vision for the future. He states that diseases like cancer will be curable, and AI will make transportation safer through autonomous driving and flying. He envisions a future where people will live much longer and healthier lives, thanks to advancements facilitated by AI.

Future of Work:

Son argues that even though AI and automation might replace many traditional jobs, new forms of employment will emerge. These new jobs will likely focus on more human aspects like creativity, art, and communication. He insists that the job landscape will adapt, just as it has in the past.

Optimism Vs. Concerns:

Son acknowledges the ongoing debate about the potential negative impacts of AI but maintains an optimistic viewpoint. He believes humanity will adapt to new challenges and opportunities, drawing parallels with the shift from agriculture-based jobs to more diversified roles in the past century.

The Long-Term View:

Son holds a 300-year vision but specifies that substantial changes will occur in the next 20 to 30 years, ranging from healthcare advancements to zero-accident transportation systems. His outlook is fundamentally optimistic, envisioning a future where technology elevates the quality of human life.

Merging with Machines:

Masayoshi Son predicts a future where humans merge their consciousness with AI and robots. He believes that this merging process is already underway, with people using search engines as extensions of their memory. The concept is akin to a modern form of “singularity,” where the boundary between human intelligence and machine learning blurs.

The Role of the Brain:

Son argues that while some functions of the human brain, like memorization, are becoming less important due to AI, other cognitive functions remain active. The brain is still engaged in thinking and communicating, and will likely continue to be so as AI advances. He foresees a seamless integration between human cognition and technological aids.

Robot Companions:

Son sees no issue with integrating AI into our daily lives, even on a personal level. He mentions the example of Pepper, a robot developed by his company, which can interact and communicate with humans. He envisions a future where having a robot companion is normal and adds value to the family unit.

Basic Income:

Addressing economic concerns of AI replacing human jobs, Son suggests that a basic income could serve as a foundation for people’s livelihoods. However, he believes that competition will still exist to drive innovation and enrich lives. Basic income could provide a stable base, but the desire for a “richer life” and “more excitement” will continue to motivate human innovation.

Future Scenarios:

Masayoshi Son seems optimistic about the integration of AI and human life, both economically and socially. He sees the potential for a more equitable future where machines do the labor-intensive work, freeing humans to engage in creative thinking and interpersonal interactions.

Automation of Basic Tasks:

Masayoshi Son envisions a future where smart robots handle the “simple stuff” like creating meat, vegetables, and catching fish. He argues that these technological advancements could ensure that basic needs are met for all people, thus supporting the concept of basic income.

Renewable Energy and Costs:

Son emphasizes the transformative role of renewable energy in making electricity almost as cheap as air or sunshine. He notes that his company is becoming one of the largest providers of renewable energy, contributing to the dramatic decline in electricity costs. This cheap energy would power the smart robots, making other essential services almost costless.

Climate Change:

In the context of renewable energy, Son agrees that conquering climate change is essential and possible. While the focus of the segment is not primarily on environmental concerns, he indicates that the adoption of renewable energy is a step in the right direction.

Affordable Housing:

Another benefit of automation, according to Son, is that housing could become far more affordable. Smart robots would take on the tasks of construction, drastically reducing costs and making housing accessible to more people.

Improved Standard of Living:

Son concludes that the cumulative effect of these advancements will significantly improve the standard of living globally. With the basic needs of food and shelter being met at a much lower cost, a better standard of living could be accessible to most people.

AI-Centric Portfolio:

Masayoshi Son emphasizes that all 70 companies in which SoftBank’s Vision Fund invested over the past 18 months are focused on artificial intelligence (AI). The goal is to leverage AI for the evolution of these companies. Son reveals that they have invested $100 billion solely in AI-focused ventures, spanning across industries like autonomous driving, construction, hospitality, and healthcare.

WeWork’s AI Integration:

Masayoshi Son provides an in-depth explanation of WeWork’s business model, emphasizing that it’s more than just a real estate company. According to Son, WeWork is a community where members can assist each other in various tasks such as design, accounting, and legal matters. He describes how AI can facilitate these interactions, offering targeted recommendations for networking and collaboration among WeWork members.

Recurring Revenue and Cost Efficiency:

Son argues that despite WeWork losing money at the moment, the business has a subscription-like, recurring revenue model. This mirrors the early stages of other successful companies like Netflix and Facebook, which also initially operated at a loss. He claims that as the company scales, costs will not rise proportionately, creating room for high profits in the future.

Investor Dynamics:

Son discusses his relationship with investors in the Vision Fund. He states that the investment committee, composed entirely of SoftBank members, holds the contractual rights to make investment decisions. However, they do communicate frequently with their investors. For investments exceeding $3 billion in a single company, consent is required from these investors.

Future Investment Plans:

Regarding the fund’s remaining capital, which is around $30-$35 billion, Son suggests that they could potentially have access to even more capital through leveraging as the asset value of their portfolio has grown. He mentions the prospect of starting another Vision Fund but emphasizes that it’s too early to discuss its size. There is, however, significant interest from potential new investors.

Critical Questions:

The interviewer raises concerns about WeWork’s current losses and questions whether SoftBank’s investments have inflated the value of companies. Son counters that rapid growth and capital investment are factors behind the losses, and recurring revenue will soon tip the scale. However, the aspect of potentially inflating company values is left largely unaddressed.

Investment Focus:

Masayoshi Son emphasizes the importance of a mix of factors when deciding to invest in a business. The business model must be disruptive and innovative, eliciting a “wow” factor. Additionally, the total accessible market for the product or service has to be significantly large. The Vision Fund, under Son, is particularly focused on companies that are already in a later stage, with investment sizes above $100 million.

Criteria for Decision Making:

Masayoshi Son stresses the need for a business to have a track record of growing its customer or user base exponentially. By the time the Vision Fund invests, they expect to see sufficient data proving the business model is successful and growing towards becoming an industry leader. The Vision Fund’s strategy is not early-stage investment but rather to turbocharge businesses that are already showing significant promise.

International Scope:

Son’s Vision Fund is active globally, including in the United States and China. In terms of specific investments, the Vision Fund invested an additional $1.6 billion in DiDi, indicating that it is their third round of investing in the company.

Profitability and Rapid Growth:

Although many of the companies they invest in, like ride-hailing services, are not yet profitable, they are growing quickly. Son sees this fast growth rate, coupled with a healthy margin take rate of 20% or more, as indicators of a business model that is actually very profitable in the long term.

Outlook on Autonomous Driving:

Masayoshi Son is optimistic about the future of autonomous driving. He believes that autonomous technology is inevitable and will make the cost of providing ride-hailing services more efficient. This will lead to fewer accidents, more reliability, and reduced costs. As a result, companies with a larger scale and market share will benefit more from these network effects.

Long-term Shareholding:

Son intends to be a long-term shareholder of companies like Uber, depending on market conditions. He is bullish on the company’s exponential growth prospects and speaks highly of its current management.

The transcript captures Masayoshi Son’s investment philosophy, emphasis on disruptive models and scalability, and his bullish outlook on technology trends like autonomous driving.

Respect for Entrepreneurs:

Masayoshi Son speaks highly of entrepreneurs he respects, such as Dara and Travis. He appreciates their pioneering spirit, energy, passion, and out-of-the-box thinking. He states that he would consider supporting Travis in future ventures, depending on the financial terms.

SoftBank’s Focus Shift:

Son explains that until about a year and a half ago, he was largely focused on operational aspects of SoftBank, dedicating 97% of his time to running the telecom operating company. Now, the tables have turned, with 97% of his time being devoted to managing investments, particularly for SoftBank’s Vision Fund.

SoftBank’s Financial Health:

Addressing questions about SoftBank’s complex financial situation, Son clarifies that the firm is not as risky as perceived. He distinguishes between the debt carried by portfolio companies and the parent company, stating that SoftBank Group only has around $4 billion in debt against an asset base of $25 billion, making it financially healthy in his view.

Market Perception and Strategy:

Son is not frustrated by what he sees as a market undervaluation of SoftBank. Rather, he views it as an opportunity for share buybacks at an attractive price. He indicates that he’s a happy buyer and appreciates being able to increase his ownership stake at lower costs.

Outlook on Risk:

Regarding the perception that he is a risk-taker and concerns about SoftBank’s debt levels, Son acknowledges the worries but expresses confidence in the company’s balance sheet and financial strategies. He assures that each of the portfolio companies has independent accounting and an ability to repay their debt.

Overall, the discussion provides valuable insights into Son’s leadership philosophy, SoftBank’s transformation from an operational to an investment-centric firm, and his perspective on the company’s financial health and market valuation.

SoftBank’s Evolution:

Masayoshi Son discusses the shift in his role at SoftBank, from being primarily focused on operational aspects of running a telecom company to now focusing 97% of his time on investments, particularly through the Vision Fund. The company has transitioned from a mobile telecom company into an investment powerhouse.

Vision Fund Structure:

Masayoshi elaborates on the fee structure and capital allocation in the Vision Fund. SoftBank Group owns approximately 49% of the equity in the Vision Fund. He mentions that the fund is performing well, achieving returns much higher than the 7% required for the $40 billion in preferred capital.

Market Perception and Stock Buybacks:

Masayoshi addresses the market’s valuation of SoftBank and its assets, stating he isn’t frustrated by what he considers a low valuation. He sees it as an opportunity to buy back shares at a cheaper price, emphasizing SoftBank’s strong asset-to-debt ratio ($25 billion in assets and $4 billion in debt).

Risk-taking Philosophy:

Despite past near-collapses, like the dot-com bust, Masayoshi maintains a high-risk, high-reward approach. He attributes this to his strong belief in the potential of technology to change the world.

Contribution to Humanity:

Finally, he speaks ambitiously about SoftBank’s aim to make a significant contribution to human evolution. He believes that by supporting and empowering new, young entrepreneurs—whom he refers to as “Jedis”—SoftBank can help solve many of the world’s pressing issues.

Performance Metrics:

Son mentions that the Vision Fund’s return is competitive, even with his own past track record. He cites a 44% internal rate of return (IRR) since 2000 and believes the Vision Fund is in that range.

Future Aspirations:

Masayoshi closes by reiterating his optimism about the future, stating that the new generation of entrepreneurs will bring about significant changes in lifestyle, eradicate diseases, and eliminate hard, manual labor.

Asset Transfer Criticism:

Masayoshi Son responds to criticism suggesting that SoftBank buys assets and then transfers them to the Vision Fund at inflated valuations. He denies this and explains that these transfers occurred because the Vision Fund took time to set up. He emphasizes that the majority of transferred assets have appreciated in value and have yielded high returns, which has left investors pleased.

Ownership of ARM:

Son talks about SoftBank’s 100% acquisition of ARM Holdings. After the acquisition, Limited Partners (LPs) in the Vision Fund expressed a strong desire to own at least 25% of ARM. Son says he relented and gave them a 25% stake, even though he initially intended to keep ARM wholly within SoftBank.

ARM’s Value and Future:

Masayoshi Son expresses satisfaction at having acquired ARM, even at a 43% premium. He mentions that ARM is preparing for an Initial Public Offering (IPO) within the next five years. By then, he expects the company’s value to have appreciated substantially and would be interested in buying back the 25% stake if given the opportunity.

Interconnected Vision:

Son shares his broader vision, indicating that ARM fits perfectly into it. He envisions a future where everything will have a chip or multiple chips and be interconnected. ARM, being a leading semiconductor and software design company, aligns well with this interconnected future he anticipates.

Investor Relations:

Throughout the conversation, Son emphasizes that investors in SoftBank and the Vision Fund are generally satisfied with the return on investment. He suggests that the value appreciation of transferred and owned assets has been significant, justifying the strategies employed.

T-Mobile Deal and U.S. Approval:

Masayoshi Son discusses the uncertainty surrounding the U.S. government’s approval for the Sprint and T-Mobile merger. While he can’t predict the outcome, he expresses hopefulness and argues that the merger would break what is essentially a duopoly in the telecommunications market. He contends that creating a third force in the market would intensify competition, ultimately benefitting consumers.

Impact of 5G:

Son strongly believes that 5G technology will dramatically transform multiple industries. He emphasizes that 5G will offer speeds and capacities up to 100 times more than 4G. This advancement will facilitate faster access to media and enable seamless machine-to-machine communications, crucial for IoT (Internet of Things).

Importance of 5G for the U.S.:

Son argues that 5G technology is not just globally essential but particularly vital for the United States. He insists that the U.S. should not lag in 5G network penetration as it holds key strategic importance.

Future of Sprint Without Merger:

When asked about Sprint’s future if the merger doesn’t go through, Son concedes that it would be a tough situation for Sprint. He believes that the merger would improve Sprint’s market position and offer better services to U.S. consumers.

Busy Schedule and Future Plans:

Son acknowledges his busy schedule with potential deals and IPOs of portfolio companies like Uber and Slack. Despite the hectic nature of his work, he expresses excitement and a desire to continue doing what he does, indicating that the pace and impact of his work are “too good to stop.”

SoftBank Leadership and Team Dynamics:

Masayoshi Son addresses reports of internal disagreements among his team members, Marcello and Rajiv. He notes that while there may be differences in opinion, a little healthy competition or tension can be beneficial for an organization. Son expresses satisfaction with his current team, calling them good partners.

Alibaba Investment:

Son discusses his investment in Alibaba, describing it as perhaps the greatest investment ever made. He indicates a desire to continue holding Alibaba shares, citing its continued growth in revenue and profit. When questioned about the impact of Jack Ma’s departure from active management at Alibaba, Son asserts that Ma will still be a guiding influence.

Jack Ma’s Influence and Partnership:

Son provides insights into his relationship with Jack Ma, calling him a fantastic partner and friend. He mentions that they meet face-to-face almost every month and that Ma’s philosophical and educational approach is similar to his own. Son believes that Ma’s mentorship style will continue to guide Alibaba’s direction.

AI and Future Vision:

In closing, Son assures that the future of artificial intelligence, as he sees it, will be positive and humans won’t become slaves to robots. He alludes to regular interactions with Jack Ma, suggesting they both share optimistic visions for the future.

This segment touches on several key topics including the internal dynamics within SoftBank, the enduring strength of their Alibaba investment, and optimistic perspectives on the future of technology.