CNBC exclusive: CNBC Transcript: SoftBank CEO Masa Son speaks with CNBC‘s David Faber today
WHEN: Interview airing today, Friday, March 8, 2019
WHERE: Airing across CNBC’s business day programming
Q4 hedge fund letters, conference, scoops etc
The following is the unofficial transcript of a CNBC EXCLUSIVE interview with SoftBank CEO Masa Son and CNBC’s David Faber airing across CNBC’s business day programming today, Friday, March 8th. The following is a link to video from the interview on CNBC.com: https://www.cnbc.com/video/2019/03/08/softbanks-masa-son-weve-already-invested-70b-in-vision-fund.html.
SoftBank CEO Masa Son: We've invested around $65-$70 billion
DAVID FABER: Masa, thank you. It's a pleasure to see you.
MASA SON: Yes.
DAVID FABER: Been a long time. You look well.
MASA SON: Thank you, thank you.
DAVID FABER: You know, I did a lot of reading as you might expect of-- about many of the stories about you and Softbank of late and the Vision Fund. Somebody was quoted as saying there is no one on the planet in a better position to influence the next wave of technology than you. Not Bezos, not Musk, but you in part because of the risk you're willing to take, the money you have at your disposal, and a lot of other things. Do you agree with that?
MASA SON: Well, no, I'm just-- a small start-up.
DAVID FABER: Come on. With over $100 billion at your disposal, you're not a small start-up. You don't think that you have-- an ability to influence significantly sort of where technology is going?
MASA SON: Well, I'm excited-- to be part of it. Things are happening without me. But--still I would like to support entrepreneurs with-- who has a dream and passion. Technology is evolving very quickly. So if I can be-- a good-- facilitator or supporter, I will be very excited to do so.
DAVID FABER: You know, when you talk about technology evolving quickly, you've been at this for some time, since the early 1980s. Give me a sense as to how much or more quickly things are evolving than they had ten, 15, 20 years ago.
MASA SON: You know, last 30 years-- three things matter in our industry. The computing CPU power, the size of memory, and communication speed. Those three things has-- improved a million times, a million times each of them. So it's a huge-- impact in technology and lifestyle and society. But I say from here on, what will be the speed of-- improvements another million times? Another million times in computing power? Another million times in size of memory and communication speed? So it's not slowing down at all. I think that power of computing would make-- artificial intelligence-- really come to truth and-- you know, many of the-- forecasting-- prediction-- manipulation of-- robotics with-- smart intelligence, all those things are coming.
DAVID FABER: Right. And that's been a focus of yours I know in terms of where you're investing. I think you've said AI will be the biggest revolution in human history.
MASA SON: Yes.
DAVID FABER: Bigger than anything we've seen?
MASA SON: Much, much bigger.
DAVID FABER: And why?
MASA SON: Because, you know, under us there are many living beings. But mankind has been the best, most-- smart and powerful-- affect everything on the Earth-- with the premise that mankind has the smartest intelligence. But finally mankind has invented by ourself something could be smarter than ourself in many aspect. So, you know, mankind invented tools. The tools made cultivation for the farming and so on. But there was the premise that mankind brains always smarter than the tools that we control. That's why we were controlling them. Finally the tool maybe becoming smarter than ourselves. So that means whatever we have been using tool for industrial society-- paradigm-- a big paradigm shift is happening. And everything should be redefined. The way we have been using the tools, the way we have been living-- productivities, all those things. Every industry will be redefined.
DAVID FABER: So we're in the early stages still of that.
MASA SON: Beginning. Just the beginning.
DAVID FABER: But we're moving more quickly than we had. And to your point about a million times. So if AI is going to become a million times more powerful than it is right now-- I can only-- well, it's hard to imagine. How do you see? Or what do you see when you look forward 20 or 30 years? I know you have the 300 year vision. But even just 20 or 30 years from now when it comes to this view you have.
MASA SON: Well, within 30 years-- definitely-- things will be flying. Things will be running much faster without accident. We will be living-- much longer, much healthier. So the disease that we could not solve in the past will be-- cured.
DAVID FABER: And that will be thanks to AI?
MASA SON: Yes. Of course, definitely. So the disease-- there are many disease like cancer and so on-- which we could not help millions of people's life. The cancer would no longer become-- the disease that we should be afraid of. Because of the artificial intelligence, it will solve--the issues that we could not solve.
DAVID FABER: You believe that.
MASA SON: I believe totally.
DAVID FABER: And do you believe that's within our lifetime?
MASA SON: Yes. Yes. Definitely. I don't know who-- whose lifetime. But-- in the next 30 years, I definitely think that-- it's happening. The-- we have the mobility with-- automobiles and-- so on. But there were lots of accident. Millions of people die because of the accident. That would no longer be the case. Autonomous driving, autonomous flying-- distribution of the goods-- and food, all those things. Today we are-- driving ourselves. That would no longer be the case. So that-- AI would make the transportation-- to cause zero accident at the end.
DAVID FABER: All right. But-- so this world that we're-- that you think a great deal about where people are no longer getting sick and they're no longer dying in car accidents. So they're conceivably living far longer. But what are they doing all day? Are-- what is work going to be in this world if the machines are smarter than the people?
MASA SON: There will be always-- new jobs, new excitement people can still come up. People would be having, you know, art-- music, entertainment-- creative jobs, talking like we are doing right now, you know, communicating among the people. We are helping each other. We discuss each other. We--get-- curation by other people saying, "Hey, this is nice food to have. Let's go eat," you know. All those things-- would be-- exciting, more human-like, more human-like jobs. That-- will always come up.
DAVID FABER: You believe that.
MASA SON: I totally believe.
DAVID FABER: Because you know of course that there's a debate about AI.
MASA SON: I know.
DAVID FABER: I mean, Elon Musk for example-- is very concerned that it will be used not for good but for perhaps evil. Or that we'll get to a point where the machines control us, our robot overlords. You don't think that?
MASA SON: I'm optimist, okay. There will be always be an issue. There always have been an issue. But we-- mankind is smart enough. We always try to adapt to the new situation. You know, only 100 years ago, just 100 years ago, the occupation, the jobs, 90% of the workers' job was farming. And today in advanced countries like U.S., Japan right, it's only 5%. Only 5% of the people's job is-- farming today. But just 100 years ago, 90% of the job of the human was farming. And even as of today, I was amazed that-- just last year I was talking-- chatting with the Indian people. And in India, as of today still, 90% of the job of the people are worker, I mean, they-- farmers. So today 90% of the job in some country is-- still farmer. 100 years ago-- 90% of job in U.S.-- Japan-- some of the countries in Europe were still farmers. 90% now became 5%. Now when it become 5%, what happened to the job? People still have many other exciting job, creative job. So I think-- there will-- would be always--
DAVID FABER: You do.
MASA SON: Yes.
DAVID FABER: But--the world you're describing is one in which as you said earlier, the human brain was still superior. The world that you're seeing in the not too distant future, that no longer would be the case. So how can we know?
MASA SON: Well, we can still, you know, create things. We can still enjoy. We can still-- try to sell something, try to design something. Try to communicate-- with other people. Just a certain job, you know, that-- people do not that much enjoy. But we have to do it just to live, just to earn the income to eat food and-- live in the house and wear the clothes. We have to have some income-- just to live. And for that purpose-- many of the people were doing the jobs, not necessary enjoying it. They had to work to live. And those have to work to live would be-- many of them would be replaced by more efficient solution which is a smart robot, robot with intelligence. Okay. So-- that we can shift to more, you know, exciting things. You know, in you-- Roman empire, Roman citizens, they were so rich, so rich that they didn't have to do—primitive jobs. Because they had servants. They had many other-- you know, people to support the Roman citizens. What did the Roman citizens do? Did the Roman citizens became all sad that they lost job and they lost things? And-- did they have a sad life? No, they enjoyed. Because they got the free wine, free bread-
DAVID FABER: You forgot about the bath salts.
MASA SON: --free bread. And-- free entertainment in coliseum, you know, free music, and free bath, and water. So-- the society-- became so rich that they provide those basic income things that they needed. And what did they do? They still discussed. They still debate. They talk about politics. They talk-- do the education, entertainment. You know, they - talk about what next, you know-- a new frontier that they should go after. So they understood. They were still enjoying. They were still excited. And they were still increasing their success.
DAVID FABER: So when AI is ascendant and its intelligence exceeds our own, and robots are all over the place, you and I are gonna be relaxing and havin' a good time.
MASA SON: Good time. Great time. And-- still discussing many things.
DAVID FABER: We will?
MASA SON: Yes. And--
DAVID FABER: Hopefully doing an interview still. Who knows?
MASA SON: Yeah, yes, definitely. Definitely. And these are important jobs. That --
DAVID FABER: They are.
MASA SON: That you are doing.
DAVID FABER: Do these people ever merge with machines?
MASA SON: Merge with--
DAVID FABER: The singularity, the idea that--
MASA SON: Yes.
DAVID FABER: --you sort of will become-- will kind of our consciousness will merge with a robot in a sense? And AI will almost sort of be part of our brain.
MASA SON: Definitely, I think so.
DAVID FABER: You do.
MASA SON: I think so. So even today, you know, we don't have to memorize so many things because you can Google it. So it is like a part of-- extension of your brain. So that we don't have to do some primitive stuff. We can use our brain for more thinking. You know, more thinking creative things. You know, even part-- use of the brain is no longer the memorizing, you know, what number of the year or-- what has happened. Where is-- you know, what is this shape and this-- look of this plant and root? Because we can very quickly Google it, right. So-- but-- our brain's still functioning in many ways. Part of thing, it become easier. But the other side of the brain is still being very active and thinking, communicating and so on. It's the same thing. The extension of brain becomes-- seamless between the virtual-- reality and the reality. It's--extension of life.
DAVID FABER: What-- is that something you would want to do?
MASA SON: Yeah.
DAVID FABER: You'd be happy to merge with sort of--
MASA SON: Sort of, yes.
DAVID FABER: --a non-human entity?
MASA SON: Yes, I will-- happy to have robot companion in the family. And that we created paper, we can talk to them. We can have fun together.
DAVID FABER: Just so-- I--want to move on. But-- this world, do you see people having a uniform income? You know, there's been some discussion about that in this country. That we're going to have to pay people who no longer have the jobs that are taken by AI and robotics.
MASA SON: I think basic income concept could be interesting. So-- there will be a basic income that people can have to make living. But then on top of that, there would be-- still be-- competition to get more, richer life. Competition to get-- more excitement-- and so on which will be a driving engine for innovation and evolutions. But-- you know, simple stuff like-- creating the meat and creating the vegetables-- you know-- catching fish, all those simple stuff would be done by-- smart robots.
DAVID FABER: By machines.
MASA SON: By machine. Smart robots, okay, they would be helping us so that basic income stuff-- will be provided. You know, because there will be renewable energy. Cost of electricity become almost nothing, almost as cheap as the air or, you know, sunshine.
DAVID FABER: Hopeful then we've conquered climate change too if we're all renewables. But we're running out of-- time there.
MASA SON: We should do that. We should definitely do that. Our company is becoming, like-- the second largest or largest renewable energy provider. So I am seeing-- a decline of cost of electricity dramatically-- exponentially. And it will almost become like the cost of water. You know, it will become so accessible. When the electricity cost be-- energy cost becomes so cheap, and that will provide the power-- to do-- to function the smart robots. Then harvesting things-- would be almost costless. So the foods that we have to eat become almost costless, okay. And the house-- houses would-- become much, much lower cost, affordable for anyone to have nice living house, very, very low cost. And those construction, again, would be done by smart robots, okay. So the basic stuff that we need become so lower cost of anybody-- only us can have basic, you know--
DAVID FABER: Much better standard of living--
MASA SON: Yes, much, much better standard of living.
DAVID FABER: --for many people.
MASA SON: Yes, for most people.
DAVID FABER: So this world that you've described and your ideas about how we're going to get there, what of your investments whether at Softbank or within the Vision Fund best encompasses sort of this view? What-- of the many names-- companies that you own a piece of or all of do you feel sort of best reflects and benefits from the world that you seek?
MASA SON: All of-- the 70 companies that we have invested in in the last year and a half with the Vision Fund-- they are all AI-centric, okay. They're all using the power of AI-- for the evolution. And they're fantastic companies. Uber is having-- you know, a IPO maybe soon. And--
DAVID FABER: Pretty exciting, am I right? By summer most likely it sounds like.
MASA SON: I wouldn't say when. But-- very soon-- it seems to be. And-- the Guardant Health already had an IPO a few months ago. Many-- companies-- are going to have IPO in the next-- two, three years.
DAVID FABER: But what links the companies across the Vision Fund is AI.
MASA SON: Yes.
DAVID FABER: It was focus--
MASA SON: That's the only--
DAVID FABER: --they're developing under, are going to benefit from, or--
MASA SON: That's the only one thing. That's the only one thing I'm focused now. So we are investing $100 billion just on one thing, AI.
DAVID FABER: Even though it's across many different industries.
MASA SON: Right, yeah.
DAVID FABER: So it may be autonomous driving.
MASA SON: Yes. And-- construction with A-- power of AI, hotel with the power of AI. Medicals with the power of AI. You know, communication with the power of AI.
DAVID FABER: How does WeWork-- how does WeWork fit into that with the power of AI?
MASA SON: So many people still think it's just-- realistic-- one of the sharing office.
DAVID FABER: Yeah, but they buy--
MASA SON: That's--
DAVID FABER: They buy real estate. They lease it out. And that's good--
MASA SON: That's not-- my view, okay. My view, it's a working-- community, okay. So Facebook-- when Facebook came, people did-- still did not understand the power of Facebook. People thought it's just a bunch of photo and text that introducing people. That's not the case. It is a community. It's a graph. The relationship of-- friends and families-- and-- additional friends that you have never met, okay, become friends through the power of internet. But now-- in the office space, there were not that kind of-- the graph of the workers in the office, if you are different company people. But now with the-- WeWork-- with-- almost half a million-- members right now, they have the community graph. So if you are-- a start-up company for example and have-- wish to provide a new product, you need the designing of the product. You need the packaging. And pack-- also packaging need the designing. And-- you need an accountant. When you start shipping product-- you need lawyer for patent application. So you need many things. That's outside of your own employees’ expertise that you want to get. But throughout-- WeWork membership, they can help each other. They can come in the same office, share from New York, from Boston, and meet and help each other among WeWork members. And-- with the power of AI-- can recommend, "Hey, by the way, you have-- if you're looking for design of the package, there's another member in the WeWork office next building. And you may want to have a meeting-- at the next beer party on Friday night." So that kind of recommendation can be done. Like-- Amazon is giving you recommendation, next product to do as shopping, with your shopping history-- and with your interest-- it gives the recommendation with the power of AI. So if the recommendation of the product can be done with the power of AI, the recommendation of meeting the other people within the-- WeWork membership can be done. So it will be much more productive, much more enjoyable. So even the beer party become more productive and fun.
DAVID FABER: So it's-- about the community and the growth of that community--
MASA SON: Yes.
DAVID FABER: --that is going to be the key to their revenue growth I guess. Because they'll somehow participate or take a piece of those transactions, I would assume.
MASA SON: Yes. And while you are increasing productivity and excitement, at the same time, cost of the office expense goes down on the average, like, 40%. So, from CFO point of view, and CEO point of view-- it's great to have 40% reduction in cost. And at the same time, employee’s satisfaction of the work place increased dramatically, like, 30% increase in-- happiness of working place. It's beauty on both sides.
DAVID FABER: But right now, they're losing money.
MASA SON: Accounting wise. Okay, because they are growing so quickly and they're investing into the CapEx, right.
DAVID FABER: Yep.
MASA SON: But-- it's a recurring revenue. It's an ongoing recurring revenue. It's like a subscription. You know the subscription of-- magazines or a newspaper and now Netflix. Netflix is still losing money, but the value of the company is tremendous compared to other media companies.
DAVID FABER: It is based on the ability to continue to attract subscribers. That's their value at this point.
MASA SON: Yes. Subscriber growing and you know, recurring.
DAVID FABER Right.
MASA SON: And so the initial investment is just an initial investment. And Facebook was losing money even post IPO for a while. Once they start making money, it's dramatical. Because the basic cost of the-- customer acquisition or innovation is-- not that growing exponentially. It's almost flat. So initial cost is high and almost flat. But the revenue from the recurring subscription grows exponentially.
DAVID FABER: Well beyond what it costs to lease all that space?
MASA SON: Of course, of course.
DAVID FABER: I mean, they're already the largest, I think, tenant in London, New York, and Washington DC.
MASA SON: Yes. So, we also started the WeWork in Japan. And in Japan, in just one year already profitable. Already profitable. It's amazing.
DAVID FABER: Right. Did you want to invest more in WeWork?
MASA SON: Of course. Of course.
DAVID FABER: Were you disappointed you were not able to or that some of your investors, this has been reported, tried or succeeded perhaps in saying, ‘Don't invest as much as you want’?
MASA SON: Well, I still want to invest more. And I want to increase. Some of my investors said, ‘Masa, are you sure? You get too excited and too much concentration into one company. Don't go too far too much.’ But I-- I still-- you know, I'm so excited. And, if I could increase, I would like to increase.
DAVID FABER: You would. Even--
MASA SON: Yes. Of course.
DAVID FABER: I mean, I think you're over $8 billion that you have invested.
MASA SON: Yes.
DAVID FABER: How important is the relationship between, and the conversation that goes on between you-- and your largest investors in the Vision Fund? PIF in Saudi Arabia, I think it’s Abu Dhabi. Do they have influence over you in terms of what you choose or your team chooses to invest in?
MASA SON: Well, basically we make the investment decision, okay. We are the 100% of the investment committee members. So, we have the contractual rights, and we are exercising that. But of course, they-- they were the believer of my first vision and the dream. We have to respect that, okay. So, we communicate with them quite often. They support us very well. We are very happy and satisfied with the relationship. I would like to honor that. But-- actual investment decisions, and the activities with the companies, are by ourselves.
DAVID FABER: But in the case of WeWork-- and this has been reported-- you seem to indicate, they did have a voice in saying, ‘Slow down.’
MASA SON: To some extent. There's a contractual limit that beyond $3 billion per-- portfolio company-- there is consent that we have to get.
DAVID FABER: I see.
MASA SON: Okay.
DAVID FABER: So--
MASA SON: But after $3 billion, okay, we have 100% rights to have sole decision making between our investment committee which is 100% Softbank members.
DAVID FABER: Now you've spoken about starting another Vision Fund.
MASA SON: Well, it's too early. We still have money-- a lot of money that--
DAVID FABER: Yeah, where are you in terms of the investment of the-- I think you're at $100 billion or $98.6 billion. How much has been invested?
MASA SON: We've invested probably $70 billion or so, $65 billion, $70 billion, around that range. But we have-- the banks who are wishing to support us for extending, you know, leverage, because the value of our asset has grown. And many of them are-- are having IPO-- with a mature of the value. So that-- the banks are willing to-- support us.
DAVID FABER: So you'll have even m-- conceivably you'll have access to even more capital beyond $100 billion—
MASA SON: Yes. Exactly.
DAVID FABER: --with that kind of financing based on the asset increase.
MASA SON: Yes. Exactly. Exactly.
DAVID FABER: When do you see being done? I mean, do you have a sense as to when you sort of will have finished investing from whatever capital is available?
MASA SON: Well, we have to see, you know. We have to see how many more exciting opportunities come at what pace. But whenever-- the fund one investment is-- done, there are lots of interest that I am receiving that they would like to invest into our next investment.
DAVID FABER: You think you could do it again?
MASA SON: Of course.
DAVID FABER: Raise another $100 billion fund?
MASA SON: I wouldn't say what is the size. But-- I'm-- I'm getting a lot of-- inbound calls that they-- they would like to come into our -- new investor into us.
DAVID FABER: And-- and what about those who way, ‘Well, what really, you've-- you've inflated the value of a lot of companies’? That has been one of the key sort of-- things that's occurred as a result of having this enormous pool of capital. What do you say to those who argue that?
MASA SON: Well, at least our return on the investment is very, very good. I'm very excited with the very successful return on the investment. So, some people may say, ‘Well, Masa, you paid too much.’ But, still our company's value is growing very quickly after our investment.
DAVID FABER: Well, you've already realized some returns. I mean, the Nvidia trade was a very good one. It was a trade though, not really an investment. You didn't own it very long. FlipKart got sold to Walmart.
MASA SON: Yes. We have to sell some to harvest when they get mature. But then we reinvest to the new opportunities. That's how the investment-- any investment company has to function.
DAVID FABER: And what are you seeing out there? I mean, you-- we're in California now. You're nearby in Woodside. I know you have a lotta companies that come through and present to you. Are you seeing a lot of opportunities right now?
MASA SON: Very, very exciting opportunity. Every day, new opportunity is coming to us.
DAVID FABER: And management teams, you feel like could get it done? I mean, what's the most important thing for you when you make a decision about a business? Is it-- is the person running the business, the founder? Or is it the business plan itself?
MASA SON: It's a mixture of total, okay. So, the business model have to be exciting model. You know, disruptive new models. Make people say, ‘Wow, that's definitely important.’ And the-- total accessible market-- for that product or service has to be big enough. The track record of growing the customer base, the user base, has to be growing exponentially. We're not investing into the early stage. Vision Fund is investing only a size above $100 million.
DAVID FABER: So, it's typically later stage given--
MASA SON: Yes, later stage.
DAVID FABER: --the value is large.
MASA SON: So, most of the venture capitals-- prepare for us. And-- they-- they invest ahead of us at the early stage, mid stage. We are focused on later stage. That we-- we support that to their growth, right. So, at our stage, we already have enough data of the actual customer-- I mean, the customers increasing and our business model is getting proved that it is a successful model. And they're growing to absolute number ones. So those are the ones that we are focused to-- put –
DAVID FABER: Around the world of course, I've asked you about a couple of what are U.S. companies at this point. But, in China you've been very active.
MASA SON: Yeah, China--
DAVID FABER: DiDi and a number of others. You just did a deal this week with Grab, I think it was--
MASA SON: Yes, yes.
DAVID FABER: I mean, these are enormous numbers you're putting out there.
MASA SON: Yeah. Even the DiDi. alone, we-- we're investing $1.6 billion or something as the additional investment to our earlier round. So, we've put -- maybe twice and this is maybe the third round that we are investing. And-- it's just for additional, you know-- injection of capital, ourself. One ticket is $1.6 billion or something.
DAVID FABER: But they're consuming a lot of capital, these companies--
MASA SON: Yes.
DAVID FABER: They're not making money yet. I mean, the ride-hailing industry--
MASA SON: No.
DAVID FABER: --is not profitable.
MASA SON: No, but they are growing so quickly. So, there, the margin, pay grade, is 20% or more. So, it's actually very reasonable, very profitable business. It's just that they're growing so rapidly that a customer-- initial customer acquisition cost, the creating infrastructure, those are the initial investment. But--
DAVID FABER: Right.
MASA SON: --the-- the margin pay grade has proven very, very healthy.
DAVID FABER: On Uber-- do you think that the rise of autonomous is going to make the business even more profitable? I'm talking obviously many years from now. But I'm still curious as to your thoughts, gives our earlier conversation. Does Uber become a more profitable company when it no longer has a driver, even though somebody's going to have to own the car?
MASA SON: Yeah, yeah. I definitely think so. The-- as I said, autonomous driving is coming, no matter what. Okay? That's a technology. That's a destiny of where technology is going to drive us. When the autonomous driving comes, the cost of providing the service dramatically gets-- you know, more efficient. So, it will provide the network of service which people would have much lower cost and no accident, or tremendously reduced accident. I shouldn’t say zero accidents for a while. But it will dramatically reduce the rate of accident compared to human driving accident. I think that will be definitely coming very, very soon. And-- so, lower rate of accident and lower cost and more reliable, you know, timing of coming and arriving. All those things will be coming. And the network effect, that you have a scale of cars, so that the cars comes to pick you up as quickly as possible. When you have so many cars in the network, that reaching to yourself becomes so quicker, right. So, that kind of network effect is needed. That means you have to have a scale. You have to have a big market share. And that's why we have, number-one market share company in every country around the world.
DAVID FABER: And do you see yourself wanting to be a long-term shareholder of Uber? I mean, you mentioned an I.P.O. is coming. There will be an opportunity there for you to monetize some of your stake in the public markets. Will the Vision Fund do that?
MASA SON: I would like to own as long as possible. Of course, it all depends on the share price. Sometimes share prices go too high, too quickly. Then we have to harvest a little bit. But it all depends on the market conditions. But, do I believe the company is going to grow exponentially? I definitely believe so.
DAVID FABER: And you're happy with the management now, I would assume?
MASA SON: I am very respectful to Dara, for his new management. Very, very smart. Very well-balanced.
DAVID FABER: What do you mean by well-balanced?
MASA SON: No, no. He can-- he can be very offensive to-- to increase the-- the business, and he can also be very, you know, cost-efficient. The employees-- you know, more hours, and so on. So, I respect Dara. But at the same time, I also have to-- you know, mention I respect-- Travis tremendously. He's one of the best-- you know, entrepreneurs. He's a pioneer, you know. When you have to pioneer a new-- new frontier, you have to have an energy, the passion, and out-of-the-box thinking. He's an aggressive-- he's one of the best, okay--
DAVID FABER: Would you see supporting him in-- in some of his potential new ventures?
MASA SON: I would love to. It all depends on the price. But I-- I tremendously respect him also.
DAVID FABER: I want to talk a bit about SoftBank itself, which we haven't really gotten to. How much time are you spending, running SoftBank versus thinking just about the investments for the Vision Fund, or even for-- for SoftBank itself?
MASA SON: Well, so what is SoftBank, okay? Until just a year and a half ago, I-- I have been a CEO of running operating company. Operating company, main operating company, was telecom. Okay? Mobile telecom company selling iPhones andAndroid phones, connecting network, servicing customers. So, I was a CEO-- direct CEO of operating company. So, I spent 97% of my mind and time into running operations. 3%, I kept investing. But now, I am opposite; 97% just purely running investments and 3% taking care of the rest of the operations. So--
DAVID FABER: So, hardly any? Well, you made the point at your last-- your last investor call, or video, that SoftBank is not as complex as people seem to think--
MASA SON: Right.
DAVID FABER: --or as it might once have been. You kept talking about--
MASA SON: Yes.
DAVID FABER: You showed that big board of equations but then you came back to E = mc squared.
MASA SON: Yes.
DAVID FABER: And you also kept talking about 25 minus four--
MASA SON: Yes.
DAVID FABER: --shouldn't equal nine; it should equal 21. Are you frustrated with the way the market has been valuing SoftBank and the underlying assets?
MASA SON: No, I'm not frustrated. People need some time to digest what the true value of SoftBank. I'm-- I'm not the seller of our share. In fact, we are buyers of our own share.
DAVID FABER: You bought-- you announced the--
MASA SON: Yeah, yes.
DAVID FABER: --buyback that was well-received in the marketplace.
MASA SON: Yeah, so I'm not frustrated. It's a opportunity for me, as I have a big smile when we-- when I can buy back shares at the price attractive in my view.
DAVID FABER: Right. But-- but-- but you also made a point of going through the debt level. Because a lot of people look at SoftBank it seems, and say, ‘Masa is the biggest risk-taker. He always has been. He almost went belly-up in 2000 when the dot-com exploded. And it could happen again because of how much debt you have on your balance sheet.’ What do you say when you hear that?
MASA SON: Well, I say, ‘Thank you for worrying about me, worrying about our company.’ I have a confidence in running in balance. That's why I-- I explained in my last quarterly result announcement-- people get confused when we-- consolidated accounting. The debt of our portfolio family companies is considered the debt of the parent. It's actually not. Each of the company has independent accounting and independent balance sheet and independent ability to pay back their own debt. And if you are a 50% owner or 51% owner of that company, the debt in accounting get consolidated into the parents. But parent’s debt, SoftBank Group's debt is actually roughly $4 billion. Our asset is $25 billion. So, $25 billion asset minus $4 billion debt; that's a healthy, healthy situation and lots of excess value that we have.
DAVID FABER: Right. But you're not frustrated that the market doesn't seem to see that?
MASA SON: Oh, I'm-- I'm-- I'm smiling bec--
DAVID FABER: Yes, you are.
MASA SON: Because I am a buyer. If I'm buyer, I want to buy cheap. So, that's-- that's great news for me.
DAVID FABER: Were you-- were you happy--
MASA SON: I-- I am-- I, myself, am the biggest shareholder of SoftBank--
DAVID FABER: Of SoftBank, right.
MASA SON: --so that, you know--
DAVID FABER: Reducing the—
MASA SON: --I can-- I can increase my ownership at the lower price than-- the actual underlying value. So, I'm-- I'm a hap-- happy buyer.
DAVID FABER: At what-- will you keep doing that? Is there a level at which-- when 25 minus four no longer equals nine, if it equals 15 or 16, so to speak, when the asset value is more recognized, I guess, by the market where you wouldn't buy back stock?
MASA SON: No. We-- we-- we already announced our buyback program. We would fulfill-- our capacity-- sometime soon. And-- it's progressing very well. But underlying value of the asset, I still think is growing very rapidly with the rate of success that we are doing on the Vision Fund. So, I'm extremely--
DAVID FABER: The Vision Fund is-- is what? Is it, like, a hedge fund? One in 20? Or is that-- is it 1% management fee and 20% of the profits? How does-- what's the fee structure?
MASA SON: Yes, something like that. Similar.
DAVID FABER: Similar.
MASA SON: Similar.
DAVID FABER: Although, you have 40% of it, or $40 billion, roughly, is paying a 7% preferred return.
MASA SON: Yes.
DAVID FABER: And the $60 billion in equity of which you guys, SoftBank itself, contributed, what, $28 billion or something--
MASA SON: Yes. Yes. So, SoftBank Group owns close to 49% and-- of the equity.
DAVID FABER: Right.
MASA SON: And the partners and the management own the rest. So-- we-- we are extremely happy with the structure that we created.
DAVID FABER: You are?
MASA SON: Yes.
DAVID FABER: But you have to come up with 7% on $40 billion every year, right?
MASA SON: We are doing much better than 7% in return on the investment. So, our return on equity is tremendously good, you know. Much better than simple-- teens of the-- you know, returns.
DAVID FABER: Of the S&P even. But I mean, you've said, I believe, that you've had a 44% I.R.R. since 2000. Is that accurate?
MASA SON: Yeah, something like that. Yes.
DAVID FABER: You think you can maintain that kind of rate of return with the Vision Fund?
MASA SON: So far, so good. So far, so good. I am competing with my own track record. So, so far the Vision Fund return is within that range.
DAVID FABER: Why are you so willing to take so much risk, and have been, even though you had what people would describe as a near-death experience, so to speak, 19 years ago?
MASA SON: Because I'm a believer. I am definitely a believer of-- the technology. Some people don't like technology as an investment thesis. I love, I believe in the technology.
DAVID FABER: I mean, you've said that you want SoftBank to be the company that makes the most contribution to human evolution.
MASA SON: Yes.
DAVID FABER: That's a pretty big statement.
MASA SON: Yes.
DAVID FABER: Do you believe you can actually fulfill that?
MASA SON: I would like to make it happen.
DAVID FABER: How?
MASA SON: By empowering the new forces coming, you know. These new, young entrepreneurs, in my view, they are Jedi. Okay? The young Jedi coming out of school and they start, you know, learning how to fly. And some of them already jumping to fly. I enjoy having them create-- you know, new lifestyles for -- and saving a lot of difficulties that mankind still facing, like incurable disease, that people are still dying today-- as of today, or accident. They're still suffering as of today. Our young Jedi will save people from those things, or unnecessary hard work, sweating work. Those would be, you know, no longer needed. That kind of thing is coming with our family members that's joining into our--
DAVID FABER: I mean, I like the way you describe the future. Although, I mean, you are optimistic, you admit, yourself.
MASA SON: Yes. Yes.
DAVID FABER: Before we sort of wrap things up, Masa, back to-- to SoftBank itself; just a couple of questions there. There's been some criticism that-- you buy things at SoftBank and then transfer them to the Vision Fund at an inflated valuation. How do you respond to people who say that?
MASA SON: That is not totally-- that is totally not the case. That is a fact that-- that the group of the companies that we have incubated, because the Vision Fund was-- took some, you know, eight months, nine months, to prepare. During that time, I warehouse and invest out of SoftBank balance sheet, and then transferred, when the timing became ready. The group of assets that we transferred, after we transferred, the value appreciation is tremendous. So, there may be one or two assets that-- we reduce the value of the fair market value of the company. But the vast majority, and as a total package, it is big return on investment. And you ask to our investors, they are extremely happy with the return on the investment.
DAVID FABER: Something like Arm, I guess, you still-- the Vision Fund owns some of it and SoftBank still owns, as well. Correct? But you own 100% of it overall?
MASA SON: Yes, yes. SoftBank did 100% acquisition of Arm and our-- L.P. partners, investment partners. They strongly insisted that they want to have at least 25%. They--
DAVID FABER: Why?
MASA SON: Because they believe that ‘Masa, you have such a great-looking company. Share some.’ I said, no, no. This is asset we bought 100% ourself. And that was already before Vision Fund. I want to keep it. And they said, no, no, let us have some. So-- they said they want to own 50%. I said, no, no, no, I cannot do that. So, I shared 25% of Arm and-- it was a public company. And paid--
DAVID FABER: Right. You-- you paid a 43% premium, I believe--
MASA SON: Yeah, I paid, yeah, over 40% premium, which I am very happy that I still got-- was able to acquire at that price. So, it's preparing I.P.O. again-- in maybe next five years-- within next five years. By--
DAVID FABER: You take Arm public again?
MASA SON: Yes, yes.
DAVID FABER: That's the plan?
MASA SON: Yes. By that time, I think the appreciation in value will be very substantial. So-- if, you know-- if there was an opportunity that I could get 100% back, I am-- I am a happy buyer.
DAVID FABER: You love that company? You see-- because it fits your vision, that everything will have a chip in-- or chips in it and be interconnected?
MASA SON: Yes.
DAVID FABER: We haven't even gotten to Sprint. I was thinking then of 5G and Sprint.
MASA SON: Yes.
DAVID FABER: In the brief time we have-- you confident you're going to get approval in the U.S. for the T-Mobile deal?
MASA SON: It is U.S. government who decides. Not me.
DAVID FABER: Of course not. I know, if you could decide, it would be done. But--
MASA SON: Yes.
DAVID FABER: --you've faced it before and it hasn't succeeded.
MASA SON: So, I am hopeful and I am a believer that it will be approved, and it should be approved. Because the merit to American consumers, to the American society, is so large that there has been only two-- giant-- companies and almost a duopoly. And, the other companies were barely, you know, making money. So, not big enough, good enough threat or competitor to the two big giants. But having the third force -- which will be almost as equal rivalry would make a real-- real match. Right? And so, that the price competition will emerge. The real price competition would make-- consumers accessible to much lower cost, much stronger service, 5G.
DAVID FABER: Right. You think 5G's going to transform a lot of industries?
MASA SON: Dramatically. Dramatically. The average speed to the access-- sometimes we all face-- sometimes, ‘Oh, the windmill spinning—spinning—'
DAVID FABER: Five years ago, that's what you and I were talking about.
MASA SON: Yeah, yeah. But--
DAVID FABER: No latency anymore, right?
MASA SON: 5G will make effectively 100-- 100 times the speed and the capacity that we are facing on 4G. Against 4G, it will be up to-- up to 100 times more speed, and capacity. That means we can access a beautiful video or pictures very quickly, without waiting. So, that would be-- and-- machine-to-machine communication with IoT will be very fast, seamless. And all those things, 5G becomes so essential to-- to the-- to the power of United States. Okay?
DAVID FABER: And the world?
MASA SON: Yes, of course. Of course. But the U.S.--
DAVID FABER: What--
MASA SON: --shouldn't be-- lag behind. 5G network-- you know, penetration.
DAVID FABER: Right. If Sprint is not allowed to merge with T-Mobile, will it still be able to forge its own way, or does it become a lot more difficult?
MASA SON: It's tough. It's tough. It has been tough. So, I think this consolidation with the merger would make Sprint better positioned and make the U.S. citizens-- better-- better service access.
DAVID FABER: You're going to have a very busy summer, conceivably, Masa, between that deal, finding out Uber, if it goes public, any number of other-- I guess Slack also is another one in your portfolio. You don't lack for having very busy days.
MASA SON: Well, I'm-- I'm having fun.
DAVID FABER: And you want to keep doing this, I assume--
MASA SON: Yes, yes.
DAVID FABER: --for-- for years to come?
MASA SON: Yes. It is the excitement. It is excitement. I would-- I would-- I would love to continue. It's too good to stop.
DAVID FABER: And within Softbank itself, just in terms of the leadership--
MASA SON: Yes?
DAVID FABER: --how do you see it? You know, there's been some reporting of clashes of personality between Marcelo, Rajeev. Is that true? And--
MASA SON: No, no.
DAVID FABER: --do you welcome that? Is that a positive thing in some way or--
MASA SON: No, no. They-- they-- they-- they are good guys, they are good friends, and good partners. Of course-- once in a while, the-- there's a difference in opinion. But-- but me and them-- between them or other management. But, you know, always good to have a little bit of healthy competition or tension because that way, we work harder, you know, for any organization, any family members. But they are both very good partners and, you know, happy family. Happy family.
DAVID FABER: So, you're happy with the team that you have in place right now?
MASA SON: Of course, of course.
DAVID FABER: And finally, let's end on-- the greatest investment maybe that was ever made. You know what that is. Alibaba.
MASA SON: Oh, yeah, yeah, Alibaba, fantastic.
DAVID FABER: You've-- you've-- you're going to monetize any more of that?
MASA SON: I would like to own as-- as long as possible. It's still growing 40% a year in revenue. And the profit will continue to you know, skyrocket. So--
DAVID FABER: You believe that? You believe the growth potential for Alibaba just continues unabated for years to come?
MASA SON: I-- I am totally a believer.
DAVID FABER: And Jack, no longer being sort of at the helm— does that matter? Does Jack Ma's kind of departure, I mean, from the company make a difference?
MASA SON: No. Jack is-- will still remain as the-- the largest individual shareholder. SoftBank still remains the largest company holder. And we are good partners, good friends. Jack still, you know, guide the-- Daniel and the management, the direction. And Jack has been, you know, tutoring or mentoring the team. So, I think that Jack will continue to be important visionary to help management whenever they need advice. He'll always be there. But Jack, for a long time, he was telling me-- that, you know, his-- his style is to let the people under them, young people-- rise and grow-- as quickly as possible so that he would not have to do day-to-day. And he can still think philosophical, the direction--
DAVID FABER: Right. He was-- he was an educator.
MASA SON: Yes.
DAVID FABER: And he kind of likes that idea. The two of you seem to have similar vision; optimistic visions of where the world is going.
MASA SON: Yes.
DAVID FABER: Don't you? I mean--
MASA SON: Yes.
DAVID FABER: --I would assume you have some interesting conversations.
MASA SON: Yes. He's a fantastic guy, a fantastic friend, fantastic partner. I see him face to face almost every month, even now.
DAVID FABER: You do? You see him as much--
MASA SON: Yes, yes.
DAVID FABER: --as once a month?
MASA SON: Yes. Once a month, at least, once a two months. We chat all the time, not just business. We're great friends.
DAVID FABER: And you can assure me that the A.I. future you see, Masa, is going to be a good one? We're not going to just become slaves to the robots?
MASA SON: No, no. Good ones.
DAVID FABER: Well, listen, I appreciate you taking time. Thank you.
MASA SON: Thank you very much.
