Y Combinator sets its sights on D.C. with Luther Lowe | Equity Podcast

This episode is presented by invest Puerto Rico if you believe your business Can go anywhere Puerto Rico is the [Music] Place hello and welcome back to equity Techcrunch's Flagship podcast about the Business of startups I'm Maryann as and This is our Wednesday episode where we Hone in on a trend in the startup world And dive deep today we're bringing you a Conversation from Tech crunch's strictly VC event in DC earlier this month where Our editor-in chief and general manager Connie loo sat down with Luther low who Serves as why combinators head of public Policy Connie and Luther touched on Antitrust efforts to reign in big Tech Why combinators impact leadership and Access to talent and what competition Policy and regulation look like in AI Era it's a super interesting Conversation so let's take a [Music] Listen if you joining us a little bit Late and we're wondering about Humane AI Again I'm sorry big bummer they're not Coming but we have an amazing guest in Their stad I'm very excited Luther low Who joined the world's most powerful Accelerator program white combinator Last fall before joining YC Luther was Senior vice president of public policy At Yelp where over a 15-year career with The company he became a prominent voice

Pushing for antitrust action against Google even launching an email Newsletter called this week in Google Antitrust to track support against the Search giant I'm so happy to be sitting Down with you thank you so Much so I think some people in this room Are very familiar with you others are Not I was reading before I came here This story that I think I had read last Year but a longtime reporter Adel Machin Had profiled you last year and I just Wanted to share what he wrote which is That it is no understatement to say that Yelp's fingerprints and therefore Lowe's I have been on every major effort to Reign in big tech for more than a decade In Anti-Trust circles low has earned a Reputation for both marshalling Allegations of abuse by the biggest Tech Players and suggesting remedies to rein Them in this is great he was Instrumental for example in lobbying the Eu's then antitrust Chief Margaretta Vasta I'm I'm sure I'm mangling her name Uh to bring charges against Google 2015 Resulting in a guilty verdict two years Later you're on a firstname basis Adam Said with members of Congress behind Reform and legis in Washington and a Persistent thorn in the side of big Tech Accurate um Yeah I'm I'm Pro little Tech I feel like I'm slightly less costic and aggro than

I was in my wearing my last hat but Still care a lot about whether or not Little tech companies are fairly Represented in places like Washington And Brussels absolutely well obviously There are people in this audience who Have that same concern I did want to ask Really quickly the story talks about how American law has long favored improved Products overprotecting failed Competitors which we saw you know Lena Talking a little bit about I mean They've had to sort of come up with new Ways to decide whether or not something A monopoly so Google was improving its Offerings for a long time and the FDC Was sort of like okay well they're Offering great stuff so that's that you Started persuading people who matter That the problem is that Google's Growing Power harms consumers by Degrading their competitor products Which I thought was a pretty smart take Can you elaborate a little bit actually In that case the study that was done and I think what's interesting is that you Can see all kinds of examples across all The major Gatekeepers these days of this Is that when you have dominance Basically you get a monopoly Congratulations and now you are sort of Scanning the landscape and looking for Adjacent markets to enter and how can You sort of unfairly use some kind of

Edge to SN about competitors and so as You and Cher Khan spoke about the lens At least for the last 40 years before The Biden Administration kind of came in And brought some fresh thinking into it Was very oriented around consumer Pricing it turns out that with these Gatekeepers you can actually see very Often the U gatekeeper is degrading Quality and so that becomes the proxy For a price increase so even though the Product is quot quote free if they are Degrading the quality then you can kind Of swap that for a consumer price Increase in a consumer consum welfare Analysis and that was the basis of a Paper that Tim woo and Professor Michael Luca did in 2015 that really was kind of The Ling pin of a lot of yelp's Arguments basically was like look Ultimately when they put their thumb on The scale they're not just hurting Competitors it wasn't competitor Degradation it was actually they were Degrading their own product and hurting Consumers so in other words if you did a Search for pediatrician New York City Instead of seeing services like Zach do R MDS Health grades services that had Hundreds and hundreds of reviews for That type of query you would be getting A handful of reviews from Google and That kind of self-dealing again is just Pernicious across all these dominant

Platforms are any of those Brands still In business zok I believe is zoc's Headquartered in New York I haven't Really kept up with the medical local Search space but just names I haven't Heard in a long time well I I will say And I hope this doesn't sound offensive But I I am amazed that you stayed so Long with Yelp which is no shrinking Violet but not a power player and has Sort of credibility issues of its own And I'm sure that the big tech companies Were trying to pull you in as a lobbyist For them why stay so long you know I'm Really proud of what in my old head Again just here with my new head on but We're really proud of what yelp's Mission was and what we did there in Terms of helping I think Adam lensky's Piece is accurate that there are Inflection points along the way over the Last decade plus looking at the kind of Anti-big tech backlash you know we were Part of it along the way and I think Helping shift the conversation it made It feel like I'm not just showing up to Work to do this you know help improve Local search results it's like Shifting The conversation about economic Justice Concentration in our economy and so it Ended up being much bigger Mission and I Really relish that and there were very Few things that I would even consider Leaving for which is why I'm like so

Thrilled to have upgraded from a Speedboat to an armada yeah absolutely So I was going to ask if you thought You'd find or you are finding a bigger Audience for why combinator I mean in Silicon Valley it is the 800 lb gorilla On the startup scene how is it perceived Here the same way I mean I was actually Going to kind of take a step back and Explain that you know what white Combinator is because a lot of folks in In Washington DC part of my role is About kind of YC 101 because so many Folks in DC don't actually know what it Is essentially it started in is the Original accelerator started back in 2005 Paul Graham who had successfully Sold a company in the 90s and was sort Of helping Founders by writing essays And you know avoiding HF Falls for People who were thinking about doing Technology startups created this program He had a call for applications 12 people Got in moved to Cambridge Mass for the Summer of that class Reddit and twitch Were born and it just kept going and Growing and now basically the way it Works is if you and I had a cool idea we Could apply there's about a 1% Acceptance rate you give up about 10% Roughly Equity you get a half a million In funding you move to San Francisco now Is where it's anchored and for about 12 12 weeks just get intensive mentoring

And you're getting that kind of zero to One product Market fit and the most Surprising thing with the new role is How many in Washington don't even know It exists and you think about we've now Seated 5,000 companies have 11,000 Founders in our Network like that is Just an insane impact for the US Technology economy and so trying to Educate policy makers about that impact And how we touch virtually every Congressional district in the United States that's been a big part of my kind Of early work you could wear like a T-shirt every time you shop with Somebody Airbnb coinbase Dropbox [Music] Exactly what's next in Tech that's not The right question it's where PTO Rico Where an entrepreneurial ecosystem Pulses with connectivity capability and Possibility where the most competitive Tax incentives in the US FastTrack Success and hard work is rewarded with Sunsets and turquoise water If you believe your business can go Anywhere Puerto Rico is the place invest Pr.org [Music] TechCrunch well I was going to ask then What people make of Gary tan who is the President so Gary is a long time he was Partner with YC he's been an Entrepreneur he's back at YC as the

President the most courteous even killed Guy in the world to talk with but very Combative on social media and so I just Was wondering what people think of him Because I think people in San Francisco Are like what's what's going on it's I Mean Gary I really love Gary because I Met Gary back in 2022 and he was the only venture Capitalist at the time that was putting His neck out for this legislation called The American innovation Choice online Act it was introduced by cloar and Grassley and basically the bill would Have curbed the most egregious forms of Self- preferencing by the largest Gatekeeping companies you know I think There's a lot of reasons the investors Kind of that Community will sit on its Hands for those questions sometimes it's Almost like a social capture sometimes It's like folks are libertarian or you Know they have different political views About like the role of the government And stuff but I was really impressed With his leadership on that we sort of Hit it off and stayed in touch and then When he came into the YC role got coffee And basically within 6 months or so he Invited me to come be part of the team And so I I love Gary you're not going to Get me to say anything you know but he He's mench and is I agree with what You've said he is interpersonally he's

Like so warm and is just uh he was out In Washington a few weeks ago and like Off of a red eyee was just like going Non-stop until about 11: p.m. yeah it Sometimes has some spicy tweets yeah no No I guess I just wondered if it's a Strategy I mean you know attention is Good and he's been getting a lot of Attention and it seems just like I guess Unlike him historically so I thought it Was sort of an interesting path he's Been taking anyway we'll move on Um so so my understanding is that you Have a three-pronged approach here to Helping startups find more breathing Room and that is access to Talent access To markets and access to AI which the Latter part means you like for AI to be Open- sourced so that again like we've Been talking about all night it's not Just the big companies that are Controlling and benefiting from this Tech on the talent piece the FTC just Adopted this non-compete rule for us in California it has less impact because We've had this sort of regulation in Place but everywhere else it seems like A very big deal are you happy with the Look of that it protects everybody Except for senior Executives in a policy Role that make over $150,000 right I I Think that the non-competes rule was Great we thought it was a good move by The FTC look we would be happy if

Congress did something as well but I you Know we'll see part of the issue is in Washington you have such just pernicious Influence by the most powerful largest Companies and really there's been a Vacuum for the voice of these smaller Companies and that's really what we're Trying to fill I would love for Congress To tackle non-competes as a federal Legislation but I just frankly don't see It happening just because of that Pernicious influence open source AI is So critically important making sure that People can build on these models without Fear that they're going to have to you Know register with some kind of uh Safety commission like we are still in Very very nent stages of these tools and And we want to make sure that ultimately This field is very competitive and we Don't want just a handful of companies To control the entire kind of llm Innovations and so access to markets has To do with basically ensuring that we Have robust competition in the United States supporting strong enforcement Against companies that are egregiously Self- preferencing access to Talent has Everything to do with immigration making Sure that talented people can get into The United States and and that's Actually an example of how you know you Asked about like am I still in big Tech Side I mean that's a great example of

How you know we cooperate with the Larger tech companies cuz the entire Technology industry is affected so those Are kind of the big themes I've noticed It's the job has also involved a lot of Kind of white glove Federal bureaucracy Navigation there's some tax issues like Uh section 174 basically we've abruptly Sort of pulled the rug on on Founders Who are trying to deduct their r& Expenses they can no longer do that that Has to be amortized over many years it's Somewhat esoteric but it's really really Important for these tiny companies I was Going to say I need to learn more about That so we talked about you talked Fleetingly about immigration it seems Like such an intractable problem because Congress really doesn't want to Disentangle high-skilled immigration From illegal immigration meaning you Know as it relates to the border and That's obviously a political grenade are There other things that could be done Other than non-competes and high-skilled Immigration you know another issue that We're seeing all the time in Silicon Valley with regard to access to Talent Is how much these companies are paying These college graduates and you know People working at startups I mean it's Very hard for a startup to compete if Google says here's $3 million to start With plus Equity I mean has anybody ever

Talked about capping these salary Packages or is that just completely Bananas would never happen I think you Have to look at why this is such an Exciting time to build something that People want the reason that Google or Open a or whoever is throwing these Seven figure salaries at these young People is because they know that's the Competition that they can walk and with Either by themselves or with a Co-founder go build something that has a Strong likelihood of being worth a whole Lot more you know that's the market I Don't know if like throttling salaries Is going to solve it I think it's Ultimately a good signal because it Means they are fearful that people are Going to go off and build on this new Wave of Technology can I ask quickly What is YC's relationship with open AI Because in some ways it was kind partly Incubated at YC the former president Sam Alman was at YC when he was Transitioning over to open aai he's Still running open AI is it Contentious what's you know you have a Stake in the Company I came uh I started at YC in in October so I don't I've never met uh Sam But like I my my read is that you know Folks are still friends and whatnot There's a you know he led the Organization for Sam like the

Organization for for many years and it Was sort of in some ways sort of spun Out of white com inator and Paul Graham Has tweeted a decent amount about this To dispel some of the myths you know Many of our companies are like about Half of our so every year now we're Doing about 250 companies per batch so Every six months 250 companies so every Year 500 companies and half of those Companies are Ai and a lot of those Companies are building on open AI so I Think that's you know I think that Reflects There is a strong relationship there's a Lot of former YC folks that are in open AI we we you know every once every Couple weeks I'm you know exchanging Emails with them and and corresponding With them on an issue so there there Might be issues where we don't totally See eye to eye maybe on when it comes to These open source debates but frankly I Think all this stuff is so early that It's it's hard to like diagnose I think The relationship is is is fine well I Guess I I was just thinking it makes Your position sort of hard to articulate Because you do have these companies that Are building on open AI open AI says Look we're only keeping it closed Because of safety concerns we just want To make sure we're building this Responsibly and on the other side you're

You're telling people it's got to be Open source or these companies startups Can't Thrive so it's a little bit hard To square I think we just want maximum Options for Founders you don't want a System where look if if open AI is Providing you know I use open aai almost On a daily basis I think that people Founders if they find that GPT 4 and and Later iterations are the right tool to Build on that's that's great we Encourage that we also think that Founders need to have the option to be Able to build on mrol llama all the Other open source tools because that Perhaps can provide maybe cost savings It maybe provides some more flexibility In terms of the type of tinkering that They can do so I think the more Competition the better is ultimately our Position it's not like absolute one or The other sure and spread your bets a a Little bit it's never great to have you Know be completely dependent on some Other company for your business well you And I were talking about this backstage A little bit sometimes I worry that We're late and I don't know H and I Would have loved to talk to you about This as well but you know five years ago Sam actually came to one of these events And he was talking and we were all sort Of laughing and he said I think IID Asked him are you going to license this

Technology how how you going to make Money and he said someday I'm going to Ask this generally intelligent system How we make money for our investors and Everybody in the audience laughed and he Was like I know it sounds like an Episode of Silicon Valley but I'm not Kidding I really believe that's going to Happen but he was saying back then like We have to regulate things we got to Regulate things and there was a lot Happening but people outside of the Industry didn't have visibility into That now it feels like the chips have Fallen to some extent why are you Thinking about things I mean the way That I think about AI policy perhaps Unsurprisingly I see it as something That you really cannot decouple from Competition policy that we really kind Of need to get the competition policy Sorted out first so you look at Europe And the digital markets act not perfect But at least they're taking a stab at Figuring out how do we curb the most Egregious forms of self- preferencing by These large firms and if we don't do That then it's pretty easy to see how This plays out I mean I looked with some Concern at the the Apple announcements Yesterday and there are a lot of kind of Actually this was just talked about with Cher con the the memes and the Tweet Threads about look at all the startups

That have been killed by this and There's an alternate universe we're Embracing interoperability where we're Compelling these firms to stop self- Preferencing and it's better for Everybody it restores so the answer is Like it's not too late I think if we Compel the largest Gatekeepers to be More interoperable to stop self- Preferencing then we can move toward More pluralism which is what the web Used to be and that you know was a Pretty cool time you know 15 plus years Ago when I when I originally moved out To San Francisco it felt like there was Promise and potential in lots of little Companies Gary was here a couple weeks Ago in Washington and he said I'd much Rather see a th000 unicorns than another Trillion dollar company and I think That's possible but we have to do all we Can to nurture Founders to compel the Largest Gatekeepers to interoperate and Stop self- preferencing once we do that I think it's really incredible potential For and protect open source Ai and the Ability for people to Tinker and build On open source tools it's going to Unleash a ton of innovation You know the problem though again not to Be too negative but you are going up Against these companies now are trillion Dollar companies they are spending Hundreds of millions of dollars here and

Then there's you and some VCS who are Coming in slowly so how do you fight Against this and and and and who I guess Who is part of this like loose Coalition That you're hopefully forming to fight Back against all of that money you know There was a great story over the weekend In the Wall Street Journal about Google And this guy named Joshua Wright who was At Geor Mason University and you know The tldr of the story is that you know He was doing kind of Harvey Weinstein Stuff at the law school at George Mason Which is very disturbing but all the While he's just getting he was before During and after he was served as an FTC Commissioner he was uh being paid to Essentially use GMU to launder these Ideas from the companies that were Defending their abuses of dominance as Like legit academic things and and it Just talked about this pernicious Corruption and and ultimately you know Amazon Facebook Google were you know Paying him millions of dollars a year There are lots of characters not the Wein steiny stuff but there are lots of Characters in Washington that this type Of corruption is quite pernicious what I'm excited about what's I think whyc Brings to the table is the ability to Tell the authentic stories of of these Founders and I'm not kidding when I say You know 11,000 Founders were connected

To virtually every congressional District in the United States if you can Tell an authentic story that means a Whole lot more than some you know astr Turf front group that is purporting to Represent the interest of small Businesses or or startups and they're Tons of groups that exist basically that Are propped up by the large companies to Push that and sometimes you know they're Pushing things that everybody agrees With like the immigration thing I was Mentioning but a lot of times it's sort Of the they're trying to get the Chickens to vote for Colonel Sanders and I think that if we can be that authentic Voice you actually don't need to spend a Lot of money the authenticity is just Like this incredible coefficient I found In Washington for moving the needle and We're not not going to spend money we're Going to definitely invest resources Here we're going to be heavily engaged We don't need to spend the $300 million That big Tech spent to kill ioa and the Last Congress I think we can win with a Lot less and your network effects are so Considerable yeah you'll definitely be Hearing much more about YC combinator Soon if not already Luther thank you so Much for joining us you are Rockstar for Doing this and uh thank you all for Sitting here and spending your night With us

Equity is produced by Teresa Lo conso With editing by Kell Bryce Durban is our Illustrator and we'd like to give a big Thanks to our audience development team And Henry pet who manages TechCrunch Audio products thanks so much for Listening and we'll talk to you next Time

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