Is This The End Of The Us Dollar And American Dominance | Asking Stanford’s Professor Strebulaev

hey guys welcome to Silicon Valley girl today we are at Stanford probably one of my favorite places in Silicon Valley we're going to talk to Stanford GSB Professor Ilyas turbo live we're going to talk to him about what's happening in the U.S is it that bad are we moving to New World where a dollar is no longer the reserve currency as an immigrant I came to the U.S thinking I want to live in the center of the world and it feels like it here but a lot of people started talking about even like leaving Silicon Valley going to other destinations going to other countries are we no longer in the center of the world let's find out let's talk to Ilya yeah thank you so much I am super excited you're the first Stanford professor and I am excited to ask you all types of questions about what we can expect in our current economy what's going on in the world uh can you talk about your background first of course absolutely I always was interested in how people make decisions that always fascinated me because I as I was growing up people around me were making a lot of decisions and I thought how they choose a and not b or how they choose B and not a and so I decided to to study this so I started mathematics and economics then finance and finance really is about making decisions so I did my PhD at the London Business School and then I came to to Stanford where I've been a professor of Finance at The Graduate School of Business for almost 20 years now and all this 20 years I've been studying how people make decisions how investors make decisions how entrepreneurs make decisions how large corporations make decisions and for the past 12 plus years I've been concentrating on innovation on startups on Venture Capital One Silicon Valley how all these kind of players around both here but also large global companies but also Regulators when I think about Innovation how all this make decisions and what is the impact of all those decisions and how to make those decisions better so the first question right away uh so what's going on in the economy now we have high interest rates and you know a typical CD at Chase would pay you like five or six percent which has been a typical return for the stock market for some funds operate I remember like even two percent being good for a startup fund what's what's going to happen to to the Venture industry have you seen the outflow of the funds are people investing less well there's always a short term a medium term and a long term year because venture capital is for patient people so if you are in for a short term Venture Capital right now is not in the best possible way when interest rates go up that means that the cash flows which are long in the future are now worth much less so that it's much better to get you know two dollars to more than 100 10 years down the road yeah but venture capital is all about future cash flows startups are all about promises of the bright future however great those startups are right now and so therefore the evaluations right now are lower it's inevitably okay so if you look at most venge capital-backed companies which are still private then I would expect for most of them the valuations would be lower just because interest rates are higher it's not the best time to raise right oh or for some stages so not the best time to have had invested in Venture Capital back in 2019-2020 yeah because what's happening is is that if you're an investor and you invest when interest rates are very low which means valuations are high then you're very adversely affected what interest interest rates go up but right now potentially it's very good time to invest and this is I'm going back to my short-term medium term long term from the long-term point of view right now the valuations are relatively low not as low as there were in let's say 2012 2013. definitely not as low as they were in 2001 2002 but they're lower and who knows they might even go lower the lower the valuations that means that the larger the ownership you can get for each dollar you can put on the startups [Music] so Ray dalio talked about you know change of the world change the US dollar would no longer be the world currency and we see crypto Rising we see China and Brazil abandoning dollar to trade and Yuan do you think it's really going to happen it might the future is very uncertain I think Ray dalio was so convincing and so persuading that I started fearing like I just moved to the U.S got my passport and I think this is the center of the world and suddenly somebody tells you you know maybe not maybe not in the next 20 years so I look from this from the long-term historical point of view if you go back in time there were so many very smart people who were convinced in something that that was absolutely would be certain to happen and then black and startups there's about 80 failure so radally might be convinced and he might be right exposed but uh is it 100 probability I don't think so are you worried I'm worried uh but I'm worried not because I think that it's definitely going to happen I'm worried because if it is going to happen it's going to be anything unfortunate because one of the reasons you moved to the US I guess is the same way I moved to the U.S yeah it's because I love the atmosphere yeah here when I moved about 20 years ago what about now now it's a little bit different I still love it but I think it's uh it's a little bit different would you still say it's the number one place to come if you want to do a startup I still think so especially if you would like your setup to grow if you just a young entrepreneur who would like to build a global startup you can start almost anywhere these days but as your startup is really becoming a large company then you might want to consider coming here [Music] people started talking about you know silicon Valley's dead U.S taxes Etc let's go to South Korea whatever have you noticed that that there's like the power shifting to other locations I notice that people talk about that and everybody's asking me questions about that yeah so a couple of thoughts and let me step back for a second because because I can tell you what the outcome is or at least what I believe is going to be but I think there is very important to understand some fundamental reasons behind that so here is the First Fundamental reason is that it is it became much simpler to start companies here's my own personal example when I came to Stanford almost 20 years ago and I started teaching my first students when they graduated till then decided to start a company and in the kind of online secondary secondary sales space the nature of business is irrelevant what is relevant is that to get going they needed to raise like three to five million dollars of venture capital why well they need to buy an expensive Oracle system they need to get about five to ten software developers why well because you couldn't Outsource them at the time there was no Cloud that was before iP