This is how you rule the world

The Gray Area with Sean Illing

Guest host Bryan Walsh interviews journalist Theo Baker about his investigation into the intersection of power, wealth, and education at Stan

Key takeaways

• Theo Baker's book, 'How to Rule the World', exposes a secret Stanford class that teaches students how to extract value from those around them.
• The investigation into former president Mark Tessier-Levine revealed failures in addressing scientific fraud and the refusal to retract flawed research.

Main topics

• Stanford University culture
• Silicon Valley influence

Notable quotes

It's easier to raise money for a startup than it is to get an internship.

Conclusion

The episode provides a sobering look at how extreme financial incentiv

Transcript preview

Speaker 2 (0:01) There's a saying going around the campus of Stanford University right now, that it's easier to raise money for a startup than it is to get an internship. What that means is that a 20-year-old can get a few hundred thousand dollars for a company that doesn't exist faster than they can get a summer job at one that does. That isn't really a story about ambitious kids, although ambitious definitely describes the students at Stanford. Speaker 2 (0:26) It's a story about an enormous amount of money moving very fast, with almost nobody checking where it lands. It's a game of musical chairs. Everybody dancing, everybody quietly wondering who's going to be left holding the bag when the music stops. Speaker 2 (0:45) But the money is only half of it. Some of these kids are going to end up running the technology that runs everything else. Whatever they're learning right now, in the middle of all of this, that's what they'll be applying to the rest of us for the next 40 years. So what are they learning? Who's teaching it? And what will happen when the music stops? I'm Brian Walsh, filling in for Shawn Elling on The Gray Area. Speaker 2 (1:21) My guest today is Theo Baker. He showed up at Stanford at 17, wanting to be a coder. He joined the student paper almost as an afterthought. And then he launched an investigation into scientific fraud that got Stanford's president removed by a unanimous vote of the university's own board just eight months later. At 18, Theo became the youngest ever George Polk Award winner and the first ever for a student newspaper. Not bad, as freshman years go. Speaker 2 (1:51) Theo's book is called How to Rule the World, and the title isn't a metaphor. There's a class at Stanford by that name. You have to be selected for it, 12 students a year, nothing about it in the course catalog. And this class teaches the kids who get in exactly how to extract value from the people around them. Theo interviewed for a seat, he didn't get one. And he spent the next three years finding out what goes on inside it. and watching what a very large amount of money does to people who aren't old enough to rent a car. Speaker 2 (2:44) Leo Baker, welcome to the Gray Area. Speaker 4 (2:46) Thank you for having me. Speaker 2 (2:48) So you write that you fell in love with Stanford when you were a kid. You know, the images we have of the palm trees, flip-flops, you know, really smart engineers making their self-driving cars. You get there, two months later, you find yourself at a mansion party at the hills, and it's being paid out of a slush fund that moves corporate money into teenagers' pockets. Pretty different picture. When did that picture that you brought with you? to Stanford as a freshman actually start to change and to fall apart maybe? Speaker 4 (3:14) Yeah, I mean, I think I had this really... idealized version of the school. You know, this sort of version of the Stanford mythology that has been sold, I think, very effectively over the last two decades. You know, this is the place where the renegade outsiders are building for the sake of it. You know, there's the guy who I got to know who made a motorized couch to get to his classes, you know, and the people who would build, you know, these sort of improvised rafts to get across Lake Lagunita, you know, when it fills a little bit with water in the wintertime since it's no longer kept. filled year round. You know, this is the image that Stanford has sold for itself. What I learned, though, is that this is a place that really. fetishizes youth, that these 17 and 18 year olds who are stepping on campus are the fresh, unadulterated product. And they have to be mined and exploited as early as possible. And the resource that people are looking to mine is talent. And so the earlier you get in on the ground floor of the next Google or Instagram, the more you've made your own career as one of these sort of hangers on. And so they are desperately hunting for these kids the second that they step foot on campus. Speaker 2 (4:23) Yeah, within that, I mean, there's one term that really jumped out at me, and that was something called pre-idea funding. Can you describe how that works? Because it goes beyond just regular VC. It goes beyond having a business. Really, what do you need for it, actually? Speaker 4 (4:38) Yeah, I mean, this was the newest new thing when I arrived. And it sounds like what it is, as absurd as that sounds. They say, hey, you know, here's a few hundred thousand dollars, maybe more than a million dollars, and a single page agreement called a safe check. And they say, hey, if you make a company with this, call us and we'll invest some more. And otherwise, you know, safe check never actually has to be repaid. And it's, you know, it's sort of the ultimate expression of how things have gone at this point, right? To the venture capitalists who are throwing around a few. hundred thousand dollars. That is very little to them, right? To an 18 year old, you know, who's just arriving on campus and they're saying, hey, here's his money, go do something with it. That is obviously, you know, a very different position to be in. And these kids are told to make very, very big promises. And then they are shown time and again that there's not going to be any follow up. Right. That the things that they say won't be interrogated too closely, that when there's deception, it won't be, you know, held to account. Speaker 2 (5:38) Yeah. What are they actually getting? I mean, like with the VCs, I mean, yeah, this money is pocket change to them. Obviously, a big deal to an 18 year old. But what what are they buying when they when they're trying to get these students? Is it actual ideas? Is it a sense that they are on the cutting edge? You know, I mean, what can they offer? What can they get? Speaker 4 (5:55) Yeah. Well, it's all about talent, right? It's about getting in with the teenagers you think will become billionaires in the future, right? And if you were there from the start, you get all the credit, you get all the money. From the perspective of these venture capitalists who are really sort of early stage investors, you know, they are putting out a lot of different feelers and they actually don't really care if you, the individual, succeed. They don't have a lot of faith in these teenagers whom they are puffing up as the greatest thing since sliced bread. It's just that If they can get one of them, just one of them who is an overnight meteoric success, you know, it will change everything, right? Because look at the image that Stanford students are coming to the university with now. They know about the frat guy who wanted to send disappearing nudes to a girl, and by doing so became the world's youngest self-made billionaire. He created Snapchat. They know about the two guys who got food delivered to their dorm, and by doing so became billionaires. They created DoorDash. They understand that this is the path that you're supposed to replicate, and the investors are all too keen to get in on the game as soon as they possibly can. Speaker 2 (6:56) Is this available to all Stanford students? Because if you've gotten into Stanford, you're already passing through one of the most narrow gates for an 18-year-old in America. So is everyone at Stanford, you know, are they all sort of up for sale in this kind of way? Or is there like a Stanford inside of Stanford? And you have to get into that to really be privy to these kind of offers, I suppose. Speaker 4 (7:16) Well, exactly. So the Stanford inside Stanford is a lot of what I write about in this book. It's sort of the ultimate manifestation of the no boundaries relationship. that Stanford has cultivated with Silicon Valley over the decades. And it's absolutely true. You know, as one investor told me, his job, he sees, is to sort out the builders, you know, the kids who really have what it takes from the quote-unquote want-upreneurs who are just doing it because they think they can do what everyone else is doing. And, you know, sorting the wheat from the chaff here actually has huge financial incentives attached to it. And so there's this whole integrated system where those special few who are tapped on the shoulder and identify. as the future trillion-dollar startup founders. They live a completely different life, right? Most of Stanford is like any other elite school. You know, you have kids who are cramming, you know, for their midterms and falling in love in coffee shops and, you know, really vying for internships and all that. And then there's this sort of subculture, right, which is where things have gotten pretty off the rails and as a direct consequence of what Stanford has encouraged over the last few decades, right? Stanford... Like no other institution of higher education has had this meteoric ascent. He's gone from what was once a regional institution into this international juggernaut. And all of that is only possible because of this no boundaries relationship with Silicon Valley. We talk, I think, a lot in the media about the sort of privileges and pressures of the Ivy League, you know, and the pipeline there to Washington and Wall Street. absolutely fair, absolutely something to critique. But Stanford is so much more entangled with Silicon Valley, it's not even a comparison. If you just take the companies that have offices on campus, they're worth north of $6 trillion. And the school literally operates its own venture capital fund to fund students as new companies. So they too can set up shop, hire more Stanford students and kick back the proceeds to the university. It's all a completely integrated system. Speaker 2 (9:10) How do you get into this Stanford inside the Stanford? I mean, is it? I mean, again, you've already done so well to even get to this point. It's so hard to get into the school. So what do you think? Is it an engineering town? Is it coding? Is it something like that? Like what actually gets you in there? Speaker 4 (9:22) Well, it's one of two options. One is that you end up knowing the right people. You get tapped on the shoulder by a talent scout. You know, there are these venture capital funds who pay these Stanford students, usually upperclassmen, to identify the most promising freshmen the second they arrive on campus. Right. And so these guys. It is their job to go and take you out for coffee at the Coupa Cafe. I describe in the book this whole Coupa circuit of all these investors and professors and students who are hanging around all day at the totally unassuming Coupa Cafe doing huge volumes and deals. So that's one option is you know the right people. And once you know the right person, you're introduced to another and suddenly you're just in. The other way is you find a sort of secret access point. Right. So Stanford, you know, the Stanford inside Stanford is very conscious now that there are a lot of pretenders, a lot of entrepreneurs and whatnot. And so the obvious routes to entering entrepreneurship are actually not necessarily a high signal status signifier, right? High signal, meaning that you stand out signal to noise ratio being something that these these techies are obsessed with, of course. And so just joining, you know, the two big entrepreneurship clubs, Aces and Bases, is considered actually an anti-signal by some. Instead, there are these pockets of campus which investors have designated as high-signal areas. So one of those, and this was the way that I got introduced to my first sort of glimpse of the Stanford inside Stanford, is the campus hackathon called TreeHacks. And on its surface, right, TreeHacks is a sort of unassuming. The job is to host a weekend in which students come together from around the country, actually around the world, and make interesting new tech goodies and get judged on them. And there are prizes. In actuality, TreeHacks is vested with hundreds of thousands of dollars from big corporate sponsors and most of the time, not even contracts that are being signed. They just hand over the money. There are venture capital firms who will take out the whole team to dinner repeatedly and say, hey, we want to fund you guys. If you come up with a company, come to us, we will pay you. And again, that's not the normal experience for most people in Silicon Valley. Getting funding isn't easy unless you fit into the sort of status signifiers. And so TreeHacks was one. of my sort of early glimpses into that. But basically, to get into the Stanford Inside Stanford, it has very little to do with your technical ability. Now, many people in the Stanford Inside Stanford are very talented when it comes to technical skills. But the real qualification is who you know and how you can segue that into this sort of insider cloistered world. Speaker 2 (11:57) Well, let's talk about maybe the most insider part of the entire book, which is the how to rule the world class, which is where your book title comes from. Honestly, like reading this, it seems like something out of like some kind of left wing nightmare of how power actually works in America. Tell me actually how this works. Tell us about how, you know, this class is actually put together and what it actually does. Speaker 4 (12:17) Well, this is where it's fun to write nonfiction instead of fiction, because I think if you told someone, right, there's a secret class at Stanford University taught by Silicon Valley CEO for 12 students a year called How to Rule the World. You know, I'm not sure I would find that sort of reasonable. It's a little on the nose, right? And yet it totally exists. And by the way, even knowing that it existed when I arrived at Stanford was so, it was so exclusive. It was so secretive. Even knowing it existed was a status signifier among the most insider of insider crowds. You were quote unquote rule adjacent just to know that the secret class existed. And in it, Justin, the Silicon Valley CEO who has fashioned himself as a professor, teaches students to extract value from people, right? That is the central lesson, to exceed the limits of your conceivable ambition and extract value. And of course, you know, much of this ends up being a very ends justify the means philosophy. You know, there was one girl I interviewed over the course of the book I'd gotten to know right when I arrived at Stanford. And she came in, I really think, sort of, genuinely brilliant and committed to technology and idealistic and all these things. But in her own words, you're taught how to play the game. She says she was taught how to lie to VCs to raise money, which is what she ends up doing. She raises millions of dollars and drops out of Stanford, even though she'd already been caught cheating in a computer science class. And lo and behold, a few months later, she puts out this glossy launch video for the new technology that she's developed. The technology didn't exist, right? So she was feted by all of Silicon Valley. She was put up in a mansion. She was invited to speak back at Stanford University for all of her great success. The success didn't exist. You know, she told me in sort of this candid moment, she said, yeah, my parents say they can't recognize me anymore, that my priorities have totally changed at Stanford. I just can't talk to them anymore. And I thought that was so on the nose, right? This is how people are trained to behave in order to get ahead. And another recent example, by the way, of a How to Rule the World alumni out in the world is none other than Phoebe Gates, the daughter of Bill Gates and Melinda