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Billionaire Tim Draper's Mad Plan to Blow Up California


Billionaire Tim Draper's Mad Plan to Blow Up California

Photograph by Mathew Scott

Tim Draper is sitting. This is not his natural state. An entire half of his 6-foot-4-inch hulking body cannot express itself. But he’s willing to be immobilized at Los Angeles’s BLD restaurant for breakfast—vegan, and actually his second breakfast since he already had cereal because, come on, it’s 9 a.m.—to promote his big idea. It’s really just one of his many big ideas, but this one requires some serious salesmanship. Draper wants to divide California into six “startup” states that will compete for citizens and businesses. It’s early March, and he says he’s willing to spend millions to get the 807,615 signatures required so his initiative can be on the California ballot by fall. It’s not going to be easy since the interested parties, as of this morning, are roughly the two of us.

A billionaire Silicon Valley venture capitalist who hit it big funding Hotmail, Skype, Tesla Motors (TSLA), and Chinese search engine Baidu (BIDU), Draper has gone from Democrat to Republican to Libertarian to Draperist; the Draper party (of one) believes that government’s problem is that it lacks competition. “I’ve met every governor since Reagan and they’re all great people. And I’ve met lots of state employees and they’re all great people. So I came to the conclusion that California is ungovernable,” he says.

Accepting bad governance, Draper notes, is old thinking. “Egypt went down because of Facebook (FB) and Twitter (TWTR),” he says. “Tunisia went down because of Facebook and Twitter. Ukraine went down for the first time due to instant messaging. Bad government is not going to be tolerated.” So he plans to use social media, among other things, to found six states. He picked six for some population and economic specialty reasons (Hollywood and movies, Napa and wine), but he’ll tell you that he really did it because six are even better than two, and because 20 states—well, 20 states might make people think he’s crazy. Which many do anyway.

Draper, 56, might have missed his calling as a Tony Robbins-type self-improver. Even sitting down, he’s all energy and optimism in an oversize suit. He’s got an easy, nervous laugh that erupts after most of the things he says. He discovered long ago that a tie makes a perfect billboard; today’s is for Save the Children, a charity where his mother served on the board for more than a decade. He’s also wearing a friendship bracelet, made by kids he saw earlier at BizWorld.org, a nonprofit he created in 1997 that has taught nearly half a million children the fun of business. Unlike most people with enormous eyebrows, Draper’s don’t lend him Sam the Eagle gravitas. His turn up at the ends, as if he’s perpetually hearing something that surprises him. Probably something he said.

At Draper University, students are provided with movable desks and chairsPhotograph by Mathew ScottAt Draper University, students are provided with movable desks and chairs

Draper often starts his Six Californias spiel by saying that California’s public schools have gone from first to 47th, its prison situation is untenable, and its business climate the worst in the nation. Trying new tax codes, immigration rules, and regulations would spur on all six states, he says, from what would be the richest state in the country (San Francisco and environs) to the poorest (right next door). Exactly how the six would share resources or divide up the state university system is unclear. He calls two of the six states Jefferson and Silicon Valley. Jefferson is in the northernmost, conservative part of California. Its name comes from a movement dating to 1941. Silicon Valley is home. The others are North California, Central California, West California, and South California. “They can be named whatever. It can be crowdnamed,” he says. And, like an anti-Mason and Dixon, he is unconcerned about boundaries, which the states can also work out themselves.

Many assume that a man with such an improbable plan—even if the ballot passes in California, the 49 other states aren’t eager to endow what was California with 10 more senators—knows nothing about politics. But Draper isn’t without political experience. He served on the California State Board of Education, and he says it was there that he began to lose faith in the system. Nor is Six Californias Draper’s first state ballot initiative. In 2000 he spent $23.4 million to get school vouchers voted on. “After the teachers’ union was finished with it, it went from 80 percent approval to 30 percent. We got clobbered,” he says. “I had no idea what I was in for.” This time, he says, he does.
 
 
In immigrant-rich Silicon Valley, Tim Draper is a blue blood, a third-generation Bay Area venture capitalist who grew up riding his Sting-Ray bicycle down the dirt path that is now Sand Hill Road, where the most powerful VC firms are located. Whenever he has a meeting in Menlo Park, he bikes there so he can ride up and down the parking lot ramp he liked as a kid.

Draper’s father, William Henry Draper III, has been friends with George Herbert Walker Bush since they were in Skull and Bones at Yale, was chief of the United Nations Development Programme (third-highest-ranking job at the United Nations), and ran the Export-Import Bank for five years under Ronald Reagan. His grandfather, William Henry Draper Jr., was undersecretary of war, the first ambassador to NATO, and founded, upon President Eisenhower’s request, the Draper Committee, which annoyed Republicans and Democrats alike by recommending more foreign aid, most of it military. He then moved west and started Silicon Valley’s first venture capital firm, hiring Bill, who later started his own firm. Now 86, Bill still goes to an office, running a fund that provides $100,000 a year to nonprofit startups, many working on green energy.

“My grandfather has the right to brag so much, and he never says anything. My dad … doesn’t brag—but he shares more,” says Tim’s daughter Jesse, 30, who interviews business leaders on The Valley Girl Show, an online program that starts airing on Fox affiliate KTVU on Aug. 3.

Bill Draper is skeptical about the Six Californias plan but has learned not to doubt his son. “He got hit three times by automobiles on his bicycle. He’s kind of a lucky guy as well as a risk-taker,” he says, going on to recount a time when, in China, Tim at midnight walked up to a street vendor who was selling what he claimed was snake blood that would improve one’s brain. Tim downed a cup and was fine. “Tim has a way of getting away with murder, almost,” Bill says.

Tim doesn’t turn down much, either in business or in life. When his sister, Polly, an actress who was nominated for an Emmy Award for her role on Thirtysomething, shot a movie about her sons in a rock band, Draper funded it as long as he could have a part. It did so well, Nickelodeon (VIAB) turned it into a sitcom, The Naked Brothers Band. That’s how Draper became Principal Joe Schmoke for three seasons.

Draper leads his students in a morning pledge to heroismPhotograph by Mathew ScottDraper leads his students in a morning pledge to heroism

He owns an island, of course. Well, part of one. He owns it with another couple. It’s off Tanzania, and it’s got a hotel on it. He writes poetry, paints, and at Christmas insists everyone in the family make homemade gifts and encourages them to put on sketches. He’s gone to parties dressed in a spacesuit or a superhero outfit even though they weren’t costume parties. If he hasn’t worked out in a week or he’s missed his twice-weekly 5 a.m. basketball game, he’ll just start running. Sometimes he’ll run so far, he has to call a family member or friend to pick him up, and his legs will be sore for days.

There’s a song about Draper, called The Riskmaster. It’s a song he wrote and sings in public. On YouTube you can see him sing it at a conference, in front of a huge image of him arriving at a party on an elephant. He acts out the best parts and has created a dance for it that sadly hasn’t caught on. The chorus goes:

He’s the riskmaster.
Lives fast, and drives faster.
Skates on the edge of disaster.
He is the riskmaster.

You can also see him sing it on a video he shot in which he’s accepting, in absentia, an Astia award for funding female startups. He removes a piece of clothing for every woman-founded startup he’s backed. Upon removing his shirt for Anjula Acharia-Bath from DesiHits, a Bollywood fan site (“Anjula, I really like you”), he changes the lyrics to “she,” since the song is specifically about an entrepreneur, not Draper himself. Draper’s blog is also called The Riskmaster, and it links to his second, less catchy song, a hard-core antitax anthem called Take My Money. “So many laws/ Nothing is legal/ But Congress and the president are all looking regal … Take my money/ Never say thanks … Take my money/ Piss it away.”

Surprisingly, Draper has had alcohol exactly once in his life, a half of a bottle of Champagne on his 21st birthday. Like his father before him and his sons after, Draper took “the deal,” a family promise not to drink or smoke before 21 in exchange for an incentive (for Tim, it was a trip to Europe). Draper was the only one who decided not to imbibe again. “Oh, we all drink, that’s for sure,” says Bill. “He makes up his mind about something, and he goes for it.”

The pre-2014, elephant-riding, hanging-from-Cirque-du-Soleil-trapeze-during-his-50th-birthday-party Draper was the conservative Draper. But in November 2013, he took a leave (he calls it a “research binger”) from Draper Fisher Jurvetson, the VC firm he founded in 1985. Now he’s completely unfettered, since his longtime partner, John Fisher, whom he met during his two-year stint at investment bank Alex. Brown & Sons, was the serious, analytical one who kept him aware of reality. These days, through his Draper fund and personal fortune, he operates like the world is Burning Man for startups. (Yes, he’s been to Burning Man, and yes, he loved it.)

Draper, who majored in electrical engineering at Stanford, had wanted to start his own company after Harvard B-school, but couldn’t decide between four ideas: personal submarines, holograms, digital music, or a new global stock market. So he started his own firm in 1985 with $2 million of family money and a $6 million loan from the U.S. Small Business Administration and nearly lost it all before a $270,000 investment in Parametric Technology, a design software company now known as PTC (PTC), paid off 500-fold.

He was known for choosing companies by instinct and personal relationships instead of doing a lot of research and number crunching; in 2001, eCompany Now named him the second-dumbest VC in Silicon Valley. (As he sings in the darkest part of The Riskmaster’s tale of entrepreneurship, “Bankers demanding blood refund/ Company’s looking moribund/ Even Draper will not fund!”)

Draper’s smartest bet was in Steve Jurvetson, another electrical engineer who applied to his firm in 1994 while still at Stanford Graduate School of Business. Jurvetson as much as anyone made DFJ a big global firm, although it has since closed overseas offices and does far fewer deals.

“His world seems to be Atherton, Redwood City, Palo Alto, with occasional trips to China”

At his first interview with Draper, Jurvetson mentioned that he played Ultimate Frisbee. Draper hadn’t heard of it, so he showed up at the next Stanford Business School game and joined. He had to be told not to tackle. For a later interview, Draper took Jurvetson to watch a pro tennis match. Draper showed up, as he often did back then, with his tie backside-front. “We’re coming out of the match, and there’s this two-story barricade with an aluminum handrail, and he jumps up on it and slides down like a kid,” Jurvetson recalls. “I said, ‘Wow, this is the place for me.’ ” He says in all their years working together, he’s never seen Draper unhappy. “I’ve never heard him say ‘Damn it’ or [have] a burst of frustration or a down day. I don’t know how he does it.”

Draper says his own greatest accomplishment at DFJ was the invention of viral marketing. He says he’s the one who first persuaded Hotmail to put a link at the bottom of everyone’s e-mail telling recipients about the free e-mail service, although he’d fought hard, and lost, in his attempt for the message to read: “P.S. I love you. Get your free e-mail at Hotmail.”

Now, detached from the firm, Draper is free to break up states and start universities. He bought an old, vacant hotel in downtown San Mateo, put a photo of Steve Jobs and Elon Musk on either side of the front doors, and opened the fully unaccredited Draper University of Heroes in June 2012, offering a six-week course for $9,600. Each morning, students—mostly undergrads from abroad as well as Stanford and the University of California at Berkeley—put their hands over their hearts and recite the Superhero Oath, which is also carved into a wall. It includes:

I will pursue fairness, openness, health, and fun with all that I encounter. Mostly fun.

I will try my best to make reparations for my digressions.

My brand, my network, and my reputation are paramount.

I will keep my word.

For educational models, Draper says he chose Hogwarts and the X-Men’s academy for mutants. Students compete throughout the session in teams with names such as Wonders, Angels, and Magic, and get points for winning events as well as really big failures. When someone pointed out the initials of Draper University of Heroes, he added “D.U.H.” T-shirts to the tiny school store. Students who show up late are thrown into the small hotel pool, fully clothed. A graffiti artist has spray-painted one of the oaths on an outside wall: “I will promote freedom at all costs.” When he built the school, Draper bought all the whiteboard paint in California, running out just before he could cover every surface of the building. In the dorm rooms upstairs, students have to write down 101 things they want to do before they die on the whiteboard walls. Sure, there’s a “hook up with a girl in each country,” but there’s a whole lot of “create something that betters lives” and “disrupt education.” When they graduate, the students put on a cape and jump off a springboard into the air. “Having spoken there for all of 90 minutes, I got a Ph.D. at graduation,” says Bill Draper.

Tim Draper says his school teaches more in six weeks than Stanford does in four years. “When I was at school, it was nothing, nothing, nothing—midterms—nothing, nothing, nothing—finals. I realized I was capable of a lot more during that nothing period. So for these guys it’s 10 to 10, all day,” he says. D.U.H. is less like a university and more like a reality show. There’s a class on giving a TED talk, another about brainstorming ways to make six new states work. Instead of desks and chairs and teachers, students sit on giant, colorful beanbags in the hotel lobby and listen to guest speakers. One assignment has them walk around San Francisco and get a job in four hours. They also do a lot of public speaking. “Sometimes they’re pitching, sometimes introducing, sometimes it’s mime, sometimes it’s karaoke, sometimes it’s just dance,” Draper says. Each session, he goes with the students for their survival day in Tomales Bay, a rugged part of Marin County. He rolls up his suit leg to reveal a huge poison oak rash from the last outing. “I thought I was immune, again,” he says.

Surbhi Sarna, a Berkeley grad and founder of nVision Medical, which produces technology for women’s health issues, was confused by all the painting and go-kart racing she did as part of the first class of Draper University. But when she pitched to Draper—the main reason she attended—she was surprised. “It was one of my more challenging pitches. He asked tough questions. Even hardware-related stuff. … He was giving us design ideas.” He funded her company. About 25 percent of Draper University graduates get investment from him along with a desk for three months across the street at Hero City, a huge space that used to be a furniture store. At the front, a receptionist sits at the Deskla—a workspace made from a Tesla, with working headlights. Nearby is one of the world’s only Bitcoin ATMs. It exchanges greenbacks for Bitcoin, which can be used to pay D.U.H. tuition. In June, U.S. Marshals auctioned off Bitcoins seized from Silk Road, the online market for illegal goods and services. Draper bought the lot for $20 million, beating out 44 other bidders.

Downstairs in Hero City, on the stage of a small theater, a guy in a tuxedo-print T-shirt works with a woman wearing an Oculus Rift virtual reality headset. Most of the desks are filled with young guys working at Boost, an incubator founded by Draper’s son Adam, 28, that focuses on Bitcoin startups. Draper has four children in all, two boys and two girls. (Jesse and her sister did not take “the deal,” either smoking or drinking before their 21st birthday.)

The whole reason Draper University exists, Adam says, is because someone told his dad that you can’t teach entrepreneurship. He keeps a 3D-printout of his father on his desk and seems to have nothing but admiration for his dad, despite Draper’s admittedly kooky ideas, like Six Californias. “If you hear my dad talk about it in his dreamer way, you sort of believe it could happen. He’s got a way of convincing people there’s a way,” Adam says. And even when his dad fails big, he succeeds. “This is making people talk about what is wrong with California.”
 
 
On July 15, Draper shows up at a Sacramento strip mall, in front of the County of Sacramento Voter Registration and Elections Department. He’s wearing his Six Californias tie and standing with two young employees holding Six California signs. Political consultant Michael Arno plops four small boxes in front of Draper; they contain 83,000 signatures for Sacramento County, part of the 1.3 million Arno collected for a fee of $3 each, which is very high for signatures (50¢ is more common), but pretty reasonable given how many people think the proposal is dumb.

About a dozen reporters have gathered, and Draper shakes everyone’s hand. When he greets one, the guy responds, “Steve Maviglio, your nemesis. How are you?” Draper looks confused, and moves on. Maviglio, a powerful Democratic consultant who was press secretary for former Governor Gray Davis, has teamed up with Joseph Rodota, a top Republican operative and former deputy chief of staff to Pete Wilson, to form OneCalifornia, to fight Draper’s ballot initiative. They’ve registered a political committee, are raising money, and decided on a logo of the California bear being butchered into six pieces, like a cow.

“He completely lacks any practical sense of how things work. He has no sense that there’s a status quo that will be impacted. He acts like there’s an open field for him to stroll through,” Rodota says. “His world seems to be Atherton, Redwood City, Palo Alto, with occasional trips to China.”

Even though Draper spent $5 million and amassed enough signatures, he missed the deadline for 2014. Instead, his Six Californias initiative is on the 2016 ballot. The delay does not depress him. One of Draper’s beliefs is that failures are just minor setbacks, and giant spectacular failures are actually successes, and he can use the extra time to win over voters.

When Draper goes inside to drop off the boxes, the woman behind the desk asks for his driver’s license, which is when he realizes he left his bag and his wallet outside on the sidewalk. He runs to get it and then signs his name as he stands next to an elderly man signing a form to run for a local election. Afterward, Draper looks around the fluorescent-lit office. “They live in the 1980s. It looks like my office did 30 years ago,” he says. “Digital signatures would have helped me a lot. It would have saved me a fortune.”

Of all the insane things Draper’s gotten involved in—school vouchers, Schwarzenegger for governor—this one’s sparked the most backlash. “I’ve read a lot about my dad over the years, but this is the first time I’ve gotten upset,” says his daughter Jesse. “I was looking at his Facebook page the other day, and I saw some of the comments. It’s just horribly mean people writing horribly mean things.” Then she adds the most Draperesque interpretation possible: “Which makes me thinks he’s onto something.”

If California doesn’t get broken up or if government doesn’t make some radical changes soon, Draper fears for the future. “The 99 vs. 1 is just the beginning. No one feels they’re being well served by their government. The government is just able to distract them,” he says. Then he peels out from this hint of rare dystopianism and returns to his role as the evangelist of fun, vowing that each new California will get to pick its own state bird. Looking around this sad office full of sad bureaucrats doing their sad paperwork, Draper stops his momentary complaining and smiles. This, after all, is where superheroes are called to go.

Stein is a Bloomberg Businessweek contributor.

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