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We know that psychedelics induce neuroplasticity, that's one of the things that helps them, helps you break the infinite loop that you're in and gives you a new perspective on life.
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It wasn't until I read Michael Pollan's book How to Change Your Mind.
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That I'm like, Holy Shit!
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I had no idea about all of the research that had been suppressed.
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A lot of the most popular psychedelic drugs that we have now, LSD, MDMA, ketamine, they were all invented by humans.
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If you're alive, you're gonna have problems.
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You're going to want to be able to solve those problems.
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There's also the pretty controversial idea of, can we eliminate the hallucination from psychedelics?
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The most popular psychedelic drugs we're created by humans.
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Ibogaine specifically seems to be super, super promising as a treatment for opioid addiction.
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Like the results are like miraculous in many cases.
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I don't think it's responsible to tell people to do psychedelics, but maybe I would say start reading.
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I'm gonna start reading about psychedelics today.
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There's a lot of great literature out there.
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And make up your own mind.
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Start listening to your gut a bit more.
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Jim O'Shaughnessy: Hi, I'm Jim O'Shaughnessy and welcome to Infinite Loops.
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Sometimes we get caught up in what feel like infinite loops when trying to figure things out.
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Markets go up and down, research is presented and then refuted, and we find ourselves right back where we started.
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The goal of this podcast is to learn how we can reset our thinking on issues that hopefully leaves us with a better understanding as to why we think the way we think and how we might be able to change that to avoid going in infinite loops of thought.
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We hope to offer our listeners a fresh perspective on a variety of issues and look at them through a multifaceted lens — including history, philosophy, art, science, linguistics, and yes, also through quantitative analysis.
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And through these discussions help you not only become a better investor, but also become a more nuanced thinker.
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With each episode we hope to bring you along with us as we learn together.
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Thanks for joining us, now please enjoy this episode of Infinite Loops.
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Disclaimer: Jim O'Shaughnessy is chairman and Co-Chief Investment Officer of O'Shaughnessy Asset Management, where Jamie Catherwood is an associate.
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All opinions expressed by Jim, Jamie and podcast guests are solely their own opinions and do not reflect the opinions of O'Shaughnessy Asset Management.
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This podcast is for informational purposes only, and should not be relied upon as a basis for investment decisions.
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Clients of O'Shaughnessy Asset Management may maintain positions in the securities discussed in this podcast.
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Jim O’Shaughnessy: Well, hello everyone.
1:34
It's Jim O’Shaughnessy with yet another Infinite Loops and you know how incredibly self-indulgent I am with this podcast, I tend to have things that fascinate me on because I suspect that there are going to be a lot of other people who are also fascinated in a similar fashion.
1:38
Today I am delighted to have as my guest Brom Rector, who is the founder of Empath Ventures, which is essentially a psychedelic venture capital or company.
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Also the host of, and I want to ask about this because this is very clever, the host of the Brom podcast in which you are allowed to talk about your venture.
1:57
And we had looked that up and it turns out there's a rule of 506(c) that lets you do that. First off, welcome.
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And before we get to that clever loophole, tell us a little bit about yourself and what drew you into specifically the psychedelic renaissance in terms of being an investor in it.
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Brom Rector: Yeah, well, it's a pleasure to be here, Jim.
2:26
Thank you so much for having me.
2:28
So my personal story, we can maybe get more in depth into it later, but I've been a consumer of psychedelics since my early twenties and I'm now in my early thirties, so about a decade.
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And they've been a pretty big part of my life in terms of spiritual exploration, mental health, et cetera, the same things that everyone else uses them for.
2:44
Professionally, I worked as a quantitative researcher and portfolio manager at a number of different hedge funds throughout my twenties.
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Most recently I was at a hedge fund out here in LA doing global macro portfolio management.
2:57
And I think a lot of people in the hedge fund space feel I liked my job and I found it interesting, but I didn't really love it.
3:04
And in 2020 I was in the middle of COVID sitting in my apartment doing this job that I liked but didn't love.
3:11
And I was coming up on my 30th birthday and I was like, man, I don't know if I want to enter the next decade of my life doing this thing that I'm not super passionate about and I don't know what I'm super passionate about, but I'm going to figure it out.
3:22
And I had saved up some money for my hedge fund job and I ended up just quitting really without a plan a few weeks before I turned 30.
3:28
The timing was good because it just so happened that 2020 happened to be the year that there were sort of the first signs of life of a legitimate for-profit industry starting to build around psychedelics.
3:40
Obviously, there was a long big underground industry, but if you wanted to work in psychedelics for most of history or recent history rather, you basically had to be a drug dealer.
3:48
That was your career option.
3:49
Jim O’Shaughnessy: High risk over there. Brom Rector: Yeah.
3:53
But in 2020, I think it was April or May, there was an RTO, a reverse takeover of a Canadian mining company.
4:01
It was taken over by a pharma company that was basically doing standard pharmaceutical research on psychedelics.
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And that happened in April.
4:09
And then over the next few months there were a ton of other things that happen with companies going public, whether through IPO or RTO, all these pharma companies doing research on psychedelics.
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And you can imagine me being a hedge fund guy who was also interested in psychedelics, seeing there's a psychedelic stock out there now.
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And I'm like, oh my god, what is this all about?
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My first thought honestly was this must be some sort of weird scam.
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These are all Canadian companies, like what's happening?
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But I wanted to understand what the business of psychedelics could look like because I had never even conceived of the idea that it could be a business, just thought it was going to be underground forever.
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So I start going down the rabbit hole, I'm just trying to understand this.
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I start a podcast where I first just started analyzing a lot of these psychedelic companies.
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I would read their 10Ks and 10Qs and just kind of comment on them and provide investment commentary.
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Eventually, I started interviewing a lot of the founders that were starting these companies and the investors that were backing them.
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And at the time, in early 2021, it was pretty much the only podcast that was actually talking about the business side of psychedelics.
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And so it got pretty popular in that sort of sub niche very quickly.
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And people started emailing me saying, "Hey man, I've got $100,000 I want to put into psychedelics, what do you think I should do with it?"
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And I also had companies reaching out to me saying, "Hey, we all love your podcast.
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Can you help us get promoted or raise money?"
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And I realized that without really intending to, I had created a source of potential LPs and also a source of deal flow from this podcast.
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And I was like, man, I need to figure out what my next career move is going to be.
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Maybe I should start a psychedelics fund.
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It seems like that's what the market is whispering in my ear.
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And so fast forward to the end of that of last year, I set up the infrastructure for a fund and have been raising and investing since then.
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Jim O’Shaughnessy: So that's amazing story, great timing.
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I am an investor in your fund, so get that out much out and disclosed.
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Brom Rector: Full disclosure.
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Jim O’Shaughnessy: I grew up during that era, I'm 62, so we were talking before we started the podcast about one of the best villains to ever occupy the White House and most insane, and I'm including a certain yellow haired man in this list, was Richard Nixon, who literally, in my opinion was bat shit crazy.
6:15
And he got involved in a bunch of political problems at that time and decided to launch the incredible failure that we call the war on drugs.
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And this is what blows me away.
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He took what are some of the least addicting drugs and made sure that anyone involved with them was going to get said to Fed Max prison. Again, insane.
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But as I was growing up, that was the propaganda.
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So I never took a psychedelic ever when I was a teenager, when most people are experimenting with those types of things because I bought it, right?
7:02
I bought that the people on LSD are jumping off buildings and things like that.
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And it wasn't until I read Michael Pollan's book ‘How to Change Your Mind’ that I'm like, holy shit, I had no idea about all of the research that had been suppressed and/or burned it turns out by FBI and other agents of authority.
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And it was international and the research was incredibly promising.
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Therapeutically speaking, that's where my main interest.
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So I got involved with MAPS and several other of the organizations who were coming at it from a therapeutic point of view.
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I think the fact that it took us this long is a disgrace honestly, because I'm sure you follow the trials that are being done with our vets with PTSD.
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Most of it's being done with MDMA, which is euphoric, not technically a psychedelic, but the results are miraculous in many cases.
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And then you start looking at depression, alcoholism, other forms of addiction, people who are terminal, all of these people can be made materially better without side effects in a very few treatments.
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And I'm like, this should be everywhere. What are your thoughts?
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Brom Rector: I think you said it better than I could have.
8:32
Yeah, I mean, one of the CEOs of one of my portfolio companies, he always likes to start his pitches by saying the statistics around mental health are very depressing.
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And I always kind of laugh at that, but it's totally true/ just by the numbers in the US about 20% of American adults are currently diagnosed with some sort of mental health issue, about one in six American adults.
8:52
So about 16, 17% are currently on some sort of psychiatric medication, most commonly SSRIs, which are the most popular type of antidepressants, but also anti-anxiety drugs and things like Adderall.
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And over the course of your life, there's a 50% chance that at some point you'll be diagnosed with some sort of mental health issue.
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So even if you're fine now, things may change later and these numbers are getting worse.
9:15
A lot of people like to talk about COVID as being kind of the driver of the mental health crisis, but the numbers were getting worse long before COVID even started, although COVID certainly exacerbated them.
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And it's like we spend all of this money on treatments that we have now that are not super effective.
9:32
So you look at things like SSRIs, which are the most common antidepressants, first of all.
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For one in three people, they don't even work at all.
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One in three people are non-responsive to SSRIs.
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And for the people that do respond to them, they sort of work, but oftentimes they have really negative side effects like weight gain and sexual dysfunction.
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And you have to keep taking them.
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You have to take the SSRI every day for an indefinite period of time and usually if you stop taking it, the symptoms come back.
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So you're kind of hooked on this thing.
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And it's like, I think in the US we spend about $40 billion a year on psychiatric drugs that oftentimes don't work that well.
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And we spend about 280 million billion a year on just mental health in general.
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And the metrics keep getting worse.
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One of the statistics that I track is this thing called deaths of despair, which is a catch all term the CDC uses.
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It includes things like suicide, drug overdoses, deaths from things like cirrhosis of the liver, which is related to alcohol abuse.
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And the rate of deaths of despair in the US has doubled since 1999 and it's like doesn't show any signs of slowing down.
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So it's like we're spending all this money on these treatments that are not that effective.
10:35
The numbers keep getting worse, there's got to be like a better way.
10:40
And as you suggested, there's this growing body of evidence that suggests that therapy and psychedelics by themselves sometimes can do a much better job at treating things like depression and anxiety with fewer side effect, oftentimes in just one, two, or three sessions rather than a pill that you have to take forever.
10:56
And we're now finally getting to a point where the stigma put in place by your friend Richard Nixon back in- Jim O’Shaughnessy: Not my friend.
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Brom Rector: That stigma's now being lifted and it's now socially acceptable for a respected scientist to study psychedelics and run a clinical trial.
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And it's acceptable for a serious venture capitalist to put money into a psychedelic company.
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And so we've kind of hit this inflection point where now things are accelerating and we can get into some of the timelines for the future later, but psychedelics I think are going to be integrated into the mainstream mental healthcare system sooner rather than later.
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It's a pretty exciting time to be alive just from a patient care perspective, but also from an impact investing and business standpoint as well.
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Jim O’Shaughnessy: I agree 100% obviously, or I wouldn't have invested with you.
11:46
I got to repeat that stat though, because for me listeners, viewers, did you hear what he said?
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Since 1999, deaths of despair in this country have doubled. Brom Rector: Yeah.
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Jim O’Shaughnessy: I did not know that.
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Brom Rector: I might be off whether it's 1999 or 1998.
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It's around that time, but if you Google deaths of despair, you can find the chart and it is increasing and it's about double where it was back then over the last 20 or so years. And which it's sad.
12:20
I think it speaks to there are probably a lot of underlying societal problems that speaks to, it's not necessarily just chemical issues in the brain, but yeah, it's sad.
12:29
And of course we talked about things like veterans with PTSD, that's also if that ends south that could be included in that.
12:35
But even for the veterans that do not end up dying, they still end up suffering a lot.
12:41
And MDMA for PTSD is a very promising treatment, but PTSD is not exclusive to veterans.
12:45
You think about women that have been sexually assaulted also have PTSD.
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In fact, there are more women that have PTSD from being sexually assaulted than veterans that have it from combat.
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So it's not just limited to that people that have been overseas in the military.
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Jim O’Shaughnessy: That's a really good point.
13:00
That's an excellent point.
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Brom Rector: I like to bring that up just not to diminish the veterans issue, but just sometimes people think of PTSD as like that's specific to soldiers.
13:08
It actually affects a lot of people.
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Jim O’Shaughnessy: Yeah, I did kind of a deep dive on PTSD when I was thinking about this and thinking about funding people like you.
13:19
And I was really surprised and I think it's really great that you bring it up because PTSD, as much as it helped move the ball forward because how is a congressman or woman going to say, nope, you can't try curing one of our veterans who is suicidal and offered the service to our country.
13:43
Nope, you can't use that.
13:45
So I thought it was clever to start there, but I think that's an incredibly important point.
13:54
It is not specific just to veterans.
13:56
Brom Rector: But to your point though, the veterans with PTSD story really does help kind of bridge the political divide.
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A lot of times when I'm pitching investors, people will say, well, what about pushback from if the government becomes more conservative, et cetera.
14:08
And because of this veterans with PTSD angle, there's like pretty strong bipartisan support for psychedelic research.
14:14
I was actually just at a non-profit fundraising gala in San Diego last Friday for this organization called VETS, VETS, which stands for Veterans Exploring Treatment Solutions.
14:25
And it was started by this guy Marcus Capone, ex-Navy Seal, who all of his friends were suffering from PTSD, many of them were killing themselves.
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And he found5-MeO-DMT and [inaudible] therapy down in Mexico to be very helpful.
14:38
So this whole non-profit basically exists to fund these special forces veterans to go down to Mexico and do this very intense psychedelic therapy to treat their PTSD.
14:46
And at this fundraising gala, the keynote speaker was Rick Perry, the former governor of Texas, and he started his speech by saying, if you had told me five years ago that the knuckle dragon conservative Rick Perry would be standing on stage talking about psychedelics, I would've told you you were crazy.
15:03
But I've talked to the guys, this stuff works and we need to support it no matter what your political beliefs might be. That was super cool.
15:10
Jim O’Shaughnessy: It is super cool, and it's actually something that I have some hope for in terms of finding things to root for as opposed to against.
15:19
This endless political divide that seems to be getting wider and wider and wider.
15:25
There are things like this that can cross that divide.
15:30
In fact, I'm involved in a very limited way in funding two movies right now that are being made, documentaries, about what we're talking about.
15:39
And one of the ones I'm funding, the filmmakers are wonderful and they're like you, they had this burst of inspiration, like what do we really care about? And it was this.
15:51
And one of the things that surprised me when I was watching some of the rough cuts is that they're protagonists and they follow five people in their journey.
16:01
And what surprised me the most was the people.
16:07
One is a very conservative religious woman in Texas.
16:13
And my head's exploding because it's kind of like, okay.
16:17
And then immediately I got incredibly excited because what they're responding to is we often politicize things that don't really need to be politicized.
16:28
If you are a conservative, then you have this group of beliefs.
16:32
I've always passionately believed that if by telling you one of my positions on a political issue, you can infer all of the rest of them, then I'm brain dead and I'm not thinking, I'm just going along. Brom Rector: Totally. Yeah.
16:49
Jim O’Shaughnessy: And so that's one of the things that I love about this.
16:52
What's been your response? I'm interested in that. In various pitches.
16:56
Is there kind of a certain personality type that is either drawn to or no way, man, I can't do that.
17:04
Brom Rector: The responses run the gamut.
17:07
I mean, what I've learned through this process of pitching is that I need to find people that are already sold on the idea of psychedelics.
17:15
That is the best target LP.
17:17
It is very, very difficult, almost impossible to...
17:20
And really just a waste of time to go after people that have no interest in psychedelics and then try to convince them that they should care.
17:27
It's much better to go after people that have already had some kind of experience, whether personally or seen how psychedelics have helped a friend or something.
17:35
And so when I look at the people that have actually invested in the fund, the vast majority of them were people that were already keen on psychedelics as a concept.
17:43
I just had to convince them that it was something they could invest into and that I was a person that they should invest in.
17:47
And I can tell you what's happened when I've tried to go outside of that rule and had tried to just approach people that are not already sold on the idea.
17:55
A lot of times what I'll get is, especially when talking to fund to funds for example, is they'll say, I maybe personally interested in this, but my LPs, they would be...
18:04
I don't want to have to explain to my LPs why I invested in a psychedelics fund.
18:08
They just don't want that career risk.
18:09
It's the no one gets fired for buying a IBM type thing. Right?
18:13
One of the funniest examples, I won't say who it was, but their website, if you read the first page, it was like, we strongly believe that real alpha comes from thinking outside of the box, disregarding social norms and doing things that everyone else is afraid to do.
18:28
And so I was like, oh, these guys sound cool.
18:29
And I emailed them, the dude responds like five minutes later and says, sorry, my LPs would shit a purple brick sideways if I invested in this psychedelics fund.
18:37
And I really was tempted to screenshot the little statement on their website and say, I thought you guys were all about these renegade concepts, man, what the hell? Yeah.
18:46
And then once you get to the people that are already open minded to psychedelics, there are all sorts of different perspectives that people come with.
18:54
Sometimes it's like a guy who's maybe more conservative and hasn't really done psychedelics himself, but maybe someone in his family was addicted to opiates and they saw that they were able to end their opiate dependency on using psychedelics.
19:07
And so they believe in it from that perspective.
19:10
One guy that invested had actually never personally used psychedelics, but one of his kids had autism and he had read some studies about how psychedelics might help autism.
19:21
So that was kind of his ankle.
19:22
And then there are a couple of guys that have invested who are tech guys that have gone to Burning Man every year for the last decade and have done a ton of LSD there, and they just think the whole thing is really cool, and so they want to put money in.
19:33
It's from all walks of life, but everyone kind of believes that there's a reason that you should be excited about psychedelics, and usually it's a reason that's supported by some kind of personal experience. Jim O’Shaughnessy: Yeah.
19:44
Tell me a little bit about your business model, because obviously you're a fund and you want to make money.
19:51
And tell me about what are the main drivers of building a profitable enterprise based on an association with psychedelics? Brom Rector: Yes.
20:02
So you're kind of talking about what are the business models that we might invest in, that sort of thing? Yeah, absolutely.
20:07
This is the meat of the discussion right here.
20:09
So we're a generalist fund that focuses on the psychedelic.
20:13
Anything that is related to psychedelics, we're open to potentially investing in.
20:16
So that could be anything from pharmaceutical companies doing drug development to a clinic in Mexico that is administering psychedelics today to help people get over their addiction or something.
20:25
Just breaking down kind of the verticals that we've invested in so far, there's drug development and the best way to think about drug development is what MAPS is doing.
20:33
So they're taking a drug that already exists, MDMA, and they're trying to get it approved by the FDA to treat posttraumatic stress disorder.
20:41
There are other examples of companies that are taking other drugs that already exist and trying to get them approved by the FDA.
20:46
There is also drug discovery, which is the process of trying to invent a new psychedelic drug, and that is maybe better than the currently existing ones in some way.
20:57
And we can get into what the problems with the current set of psychedelic drugs might be and why you might want to tweak some things on them.
21:05
This is obviously a much more complicated business model.
21:08
It takes a long time to create a new drug and get it approved by the FDA.
21:12
So this is certainly not the main focus, but we've invested in a few companies doing that.
21:16
We've invested in companies that are focused on delivering psychedelic care to patients now.
21:23
The two examples of that are we invested in one of these ketamine telehealth plays.
21:27
So ketamine is kind of the one psychedelic substance, even though it's not technically a psychedelic that doctors can currently prescribe.
21:34
And it turns out that you can prescribe it over telehealth.
21:37
And so we invested in a company that basically has an app.
21:40
You talk to a doctor, they prescribe ketamine, they mail a single dose, so not like a whole bottle of pills so that you can use them whenever you want, but they mail like a single dose, and you have a telehealth supervised ketamine experience in the comfort of your own home.
21:54
They've facilitated over 50,000 ketamine experiences to date and are making pretty substantial revenue from that and growing.
22:00
We also invested in a clinic in Mexico that is using a psychedelic drug called ibogaine to help people get off of opiates, which I think is pretty important from an impact perspective.
22:10
The opiate crisis is out of control and responsible for a lot of those deaths of despair we were talking about earlier.
22:17
And then the last sort of vertical is just kind of the infrastructure and accessories and other ancillary products and services.
22:24
So one example of that is we invested in a company called Wavepaths that is a software platform that, and you'll love this because of your fascination with generative technologies, it actually generates music to be used in psychedelic therapy sessions.
22:37
Jim O’Shaughnessy: Oh, very cool. Brom Rector: Yeah.
22:41
It's a whole spectrum of different business models all united under the umbrella of psychedelics. Jim O’Shaughnessy: Yeah.
22:48
So some follow ups on that.
22:50
I don't hold negative views about people trying to improve the underlying chemical composition of these drugs, but I have seen a ton of people who are really critical of it for reasons that I'm trying to graph and I kind of graph.
23:07
But I would love it if you explained it to me so that I could understand it better. Brom Rector: Totally. Okay.
23:14
First of all, I want to start out by stating that it's important to remember that a lot of the most popular psychedelic drugs that we have now, LSD, MDMA, ketamine, they were all invented by humans.
23:25
There is no naturally occurring LSD, ketamine, or MDMA. Okay.
23:29
So this idea of creating a new psychedelic drug is not some new thing.
23:32
And there's no reason to believe that we shouldn't continue this exploration, right.
23:38
It's like now all those drugs that I just mentioned were invented before we had the internet, before we had computers, before we had the modern understanding of the brain.
23:45
They're basically the best drugs from almost a hundred years ago.
23:48
They're like the Ford Model T of psychedelics.
23:50
I kind of want to see what the Tesla Model S of psychedelics is going to be like.
23:53
And now we live in an era where it's actually socially acceptable to apply your computerated drug design skills to new psychedelic drugs.
23:59
So yeah, just kind of want to point that out because oftentimes people act like we're doing something crazy by trying to invent a new drug.
24:05
And it's like, "Dude, the most popular psychedelic drugs were created by humans."
24:10
So that out of the way, here are some of the issues with some of the current crop of psychedelic drugs.
24:15
And I'm not saying these issues are bad enough that people should not use them. I mean, I've used them.
24:20
Many people have used them, it's fine.
24:22
But here are a couple issues.
24:23
So one, they oftentimes hit, so there's this receptor in the body called 5-HT2A, which is the...
24:31
It's a subtype of serotonin receptor. LSD, psilocybin, DMT.
24:35
They all function by agonizing this serotonin receptor.
24:39
There's another serotonin receptor called 5-HT2B, that these drugs also agonize.
24:39
5-HT2B, there's a big concentration of 5-HT2B receptors in the heart valves.
24:51
And there it's a history of the FDA having to pull drugs from the shelf because they agonized 5-HT2B receptors and caused problems with heart valves.
25:01
There is some concern that if you use psychedelics, a lot of the classic psychedelics enough, you could potentially cause heart valve damage.
25:10
That's not to say that if you do psilocybin two or three times a year that you're hurting yourself, but it's a concern.
25:17
And for this reason, when the FDA has authorized a lot of these clinical trials on things like psilocybin, they have excluded people that have heart conditions because just the risk.
25:27
It's not that the risk is for sure, but there's like enough there to make us cautious and we just don't want to do any damage.
25:33
So can we invent a psychedelic that has the same therapeutic effect as a psilocybin or LSD, but that just doesn't hit that 5-HT2B receptor that we think might have cause some heart problems. That's one angle.
25:47
Another angle is, can we get the same therapeutic result as psilocybin in two hours instead of six hours?
25:53
Not everyone has the luxury to take a whole six hours off.
25:57
Imagine a busy working mom with four kids.
26:00
Can she take half the day?
26:02
Can we get a similar therapeutic outcome in a shorter amount of time?
26:06
So that's another area of interest.
26:08
There's also the pretty controversial idea of can we eliminate the hallucination from psychedelics?
26:16
And this is probably what I think you were referring to when you were saying people are critical of this idea.
26:19
I think it's an open question.
26:20
We don't know how strongly the mystical experience correlates with the therapeutic outcome.
26:26
My personal suspicion is that the mystical experience or the hallucination or trip is pretty critical to the self-analysis that contributes to the therapeutic outcome when you're dealing with something like trauma or depression.
26:38
But here's where I think non-hallucinogenic psychedelics could play a big role.
26:42
We know that psychedelics induced neuroplasticity, that's one of the things that helps them break the infinite loop that you're in and gives you a new perspective on life.
26:50
What if we're trying to apply that neuroplasticity to not a mental health issue, but recovering from a stroke or fighting against dementia or something like that.
26:59
Is there a way that you could create a non- hallucinogen psychedelic that could be taken daily over the course of months to stimulate neural growth and help prevent something like that?
27:11
That is what I am most excited about when it comes to non-hallucinogen psychedelics.
27:16
I think if you read Twitter too much that you see these people that kind of fear monger, the VCs want to take the trip out of psychedelics.
27:23
And that's certainly not what I want to do.
27:24
I want people to have their psychedelic experiences.
27:27
I just think it's interesting to explore, can we create a non-hallucinogenic psychedelic that stimulates neural growth and can maybe be used for purposes treating brain injuries, recovering from stroke, preventing dementia, et cetera.
27:40
So that's the angle there.
27:41
Jim O’Shaughnessy: And I have similar thoughts to yours, especially with the idea about all psychedelics are natural.
27:49
No, they're actually not. Really not.
27:53
And all you have to do- Brom Rector: LSD tree.
27:56
Jim O’Shaughnessy: No, and Hofmann who invented it, like his experience when he took the overdose of it, I still think kind of required reading, especially though if you put him back in his time, imagine what they thought was going on.
28:13
They probably had no clue.
28:15
And so I'm an adherent to the David Deutsch school of we can't possibly know what our future knowledge is going to be.
28:25
And so I'm very much in favor of these explorations.
28:31
I'm sure that many of them will fail, and that's just common fact.
28:34
That's very much part of the business cycle.
28:37
But if you can succeed in your point about neuroplasticity alone.
28:44
Good lord, I mean that one of the drug companies call the massive drugs.
28:49
They have a nickname for them. Brom Rector: Big Pharma.
28:51
Jim O’Shaughnessy: Yeah, but they have a name for the... I'm forgetting it.
28:55
Brom Rector: I don't know either.
28:56
Jim O’Shaughnessy: But imagine if that was possible.
28:58
Yeah, I think that that's incredible.
29:00
If you could get somebody who's entering early dementia or in fact, we are looking at a company that is non-invasive technology using sounds that is showing really interesting results from helping stroke victims that previously were put in cannot help category.
29:20
In other words, those that had the stroke and it was a big one, and they've lost the control of one side of their body, the classic.
29:30
And if you can solve these problems, why would you even hesitate?
29:35
As long as the potential side effects are reasonable.
29:40
I think a more cynical view is, "Well, yeah, of course the pharma companies want something you got to take every day."
29:49
Well, what some things you do have to take every day.
29:52
I take vitamin D every day.
29:53
It doesn't mean I have to, but I'm convinced that the research is reasonable.
29:58
Do you think that there still is that kind of undercurrent...
30:02
I guess we call it, and I'm really dating myself, but kind of a hippie culture here? Brom Rector: Yeah.
30:09
I mean, within the psychedelic space, there's certainly a big divide. Many divides rather.
30:16
Actually, there's kind of the people that, there are many people that think that psychedelics shouldn't be part of for profit business models at all, right.
30:23
And there's certainly people that think that, "Okay, maybe they're fine with for profit."
30:27
But they think that it should only be natural psychedelics like mushrooms in Ayahuasca.
30:30
We shouldn't be bothering with these synthetic things.
30:33
There are a lot of people that do not believe that the FDA should be involved with psychedelics at all.
30:38
But it's like the FDA is kind of the one making this all possible now.
30:41
They, I guess, would rather see things like what happened in Oregon and Colorado the last election where state, similar to what happened in cannabis, where each state kind of decided on their own little laws, but everything was still illegal federally, which is kind of interesting.
30:55
Man, there's tons of a hippies culture.
30:57
There's tons of all sorts of views on the types of ethical business models that you could possibly have in the space.
31:02
But the industry is moving forward, whether those people like it or not, I guess it is happening.
31:08
It's not really a question.
31:09
So my hope is that everyone will be happy in some way.
31:14
And what I'm hoping is that we'll end up in a world where, yes, there are FDA approved psychedelics, but it will also be legal to grow mushrooms in your house if you want to do that.
31:23
That's kind of my perfect outcome.
31:25
So that way everyone can have ben...
31:28
Everyone can benefit from psychedelics as they see fit. Jim O’Shaughnessy: Yeah.
31:31
Brom Rector: I also do just want to comment on, if it's okay, your comment about big...
31:35
The narrative that Big Pharma wants to hold psychedelics back because they want everyone to be addicted to their once daily SSRI.
31:42
That is a very, very common narrative that you hear people saying.
31:44
And honestly, I haven't really seen any evidence that Big Pharma is anti-psychedelic.
31:50
They actually don't make that much money from antidepressants.
31:52
Most antidepressants were invented more than 20 years ago, which means that their patent exclusivity is gone.
31:57
And that most people take generic SSRIs.
31:59
So the Big Pharma companies are not even getting paid off of the stuff.
32:02
In fact, I think Big Pharma is very excited about the possibility of maybe owning some kind of proprietary psychedelic therapy that insurance companies will pay for.
32:12
And it's like instead of maybe taking a daily SSRI, maybe you twice a year go to a supervised medical psychedelic therapy session that insurances builds 5000 for or something.
32:24
It still ends up being a recurring revenue model.
32:26
It's just on a buy yearly basis instead of a once daily basis, I would say. Jim O’Shaughnessy: Yeah.
32:32
Brom Rector: I think contrary to a lot of the memes out there, it's not one dose of psychedelics and you're perfect forever.
32:38
Life still nags at you and your trauma and depression, et cetera will come back because we live in the world or acted on by the forces of the world.
32:49
And even in the studies that people have done, it's like the depressive symptoms last or the cessation of depression usually lasts like 3, 6, 9, 12-ish months.
32:59
But it does come back at a point.
33:01
Jim O’Shaughnessy: So yeah, that's an excellent point.
33:05
Even if you were so-called purest, which I am not, and you felt that it should be natural, again, I am not one of those people, you have to concede that this is, and actually that has been one of the things that I've been cautious about because you do see this meme, "Only one, you only have to go one time and that's it.
33:28
You're done with your opioid addiction, you're done with your alcoholism or your depression."
33:33
That isn't the way it really works.
33:36
And so- Brom Rector: By the way, if you talk to those people, all these people that are psychedelic enthusiasts that go around saying at me, ask them how many times they've personally done psychedelics, I can promise you it's not once.
33:46
Jim O’Shaughnessy: Yeah, it's interesting.
33:51
It's really interesting to me how the various memes develop and how the story takes over and the narrative and everything.
33:58
What do you have the most hope for in your fund in terms of actually seeing a company or a center?
34:06
If you're investing in these psychedelic type centers, what do you think is going to end up as the most sustainable business model?
34:13
Brom Rector: A couple different things there.
34:17
So in terms of companies we've invested in right now, there's one in particular that I'm pretty excited about.
34:21
It's called Pangea Botanica.
34:24
They're not in stealth mode or anything.
34:25
You can look them up online.
34:27
And their whole thing is they are kind of combing through the catalog of psychedelic plants that are kind of less commonly known.
34:36
So they're kind of ignoring psilocybin and going for more.
34:41
Turns out there's like a ton of psychedelic plants out there that are not super commonly known.
34:44
Most people just know about ayahuasca and mushrooms, but they're sort of combing the ethnobotanical literature going for these less known compounds and trying to figure out how they can be turned into drugs for all sorts of certain issues.
34:57
Not just mental health, but other things.
34:59
And their leadership team is incredibly strong.
35:01
They were involved in some of the publicly traded psychedelic companies that are leading the pack and getting psilocybin FDA approved. I've been FDA approved.
35:08
I'm very excited about that idea of just one looking at psychedelic compounds that are often ignored, and two, applying them to non-mental health conditions because I think there's a lot of potential there.
35:20
I'm also very excited about the treatment of opiate addiction.
35:25
This is something that is, in the US unfortunately, a lot of people have a personal connection to it, but there are people in my family who have personally struggled and died from opiate addiction.
35:35
And so it's like it's a thing that I care about a lot, and it's a thing that really doesn't have any good solutions.
35:41
Like right now, you go to a rehab and they hold you in there for 90 days and maybe you make it through, maybe don't.
35:47
The recidivism rate is super high.
35:50
Ibogaine specifically seems to be super, super promising as a treatment for opiate addiction.
35:54
I don't know if you ever looked at Ibogaine before.
35:56
Are you familiar with it or not?
35:58
Jim O’Shaughnessy: No, actually I'm not. Brom Rector: Man.
36:01
It's interesting to me how many people are not given its potential for opiate addiction.
36:04
So Ibogaine as a naturally occurring psychedelic, it comes from the root of the Iboga tree, which is native to Gabon in West Africa.
36:12
And it's a super intense psychedelic.
36:14
If you actually look at it pharmacologically, not only is it a 5-HT2A agonist like psilocybin, but it's also a KAPPA opioid receptor agonist like salvia, which is another hallucinogenic plant, and it's an NMDA antagonist, which is what ketamine is.
36:28
So it's almost like a combination of psilocybin, ketamine and salvia.
36:31
It's like the craziest pharmacological properties that you could imagine.
36:35
And it lasts for 36 hours.
36:39
It's part of the reason why I think a lot of people haven't heard of it is because pretty much no one does it recreationally.
36:43
It's not the kind of thing, it's not the kind of thing you would want to do to have a good time, but for whatever reason, it seems to just stop opiate cravings and its tracks.
36:54
If you're addicted to heroin or oxy and you do a single Ibogaine session, your withdrawal symptoms are just eliminated overnight.
37:02
And there have been clinical trials on this.
37:05
There have also been thousands of anecdotal reports of people using it.
37:08
And it turns out that it's not scheduled in Mexico.
37:12
So you can legally open a facility where you give people Ibogaine and help them come off of opiates.
37:17
The downside is that unlike things like psilocybin and MDMA, which are extremely safe, Ibogaine people have died from taking Ibogaine.
37:27
It has caused people to have cardiac arrest.
37:30
It's a pretty small percentage, somewhere between one and 3% of people that take it will have some sort of cardiac problem if they take it.
37:37
You can reduce that risk tremendously by doing a pre-screen, having a physician actually give you an EKG and look at your heart condition and make sure you're not at risk for it.
37:46
But the risk is still there.
37:48
However, if you are severely addicted to opiates, the health outcomes there are not good.
37:52
And so many people feel that the risk reward is still favorable if you're a real opiate addict.
37:58
So anyway, long story short, if you can actually eliminate someone's opiate withdrawals over the course of a few days rather than a 90 day rehab, you're saving time.
38:10
You are saving money because you don't have to pay to stay in rehab for 90 days.
38:15
And I just think there's a lot of potential in that.
38:18
Jim O’Shaughnessy: And well, I would add the most important thing, you're potentially saving hundreds, thousands of additional lives.
38:24
Brom Rector: Totally saving lots of lives.
38:27
Jim O’Shaughnessy: So I have a hard time with fixed mindsets because I've talked to some people who are surprised by my being so pro-psychedelics, but I kind of also view them in as part of a process.
38:44
I'm very interested in mind-body syndrome issues as popularized by Dr. John Sarno.
38:49
In fact, I did a podcast on it not too long ago.
38:53
I have suffered from them.
38:54
I know many, many people who have suffered from them. And Dr.
38:56
Sarno himself got to a cure rate, which was super high.
39:03
But he did that by essentially limiting the participants in his study to those who, as he put it, were open to the idea that simply learning about a topic could cure your mind-body issue. He wrote several books. He was normally...
39:24
And by the way, classic conservative doctor, he was the head of rehabilitative medicine at NYU, and he was ridiculed, frankly, for most of his career by other doctors and clinicians and whatnot.
39:42
But when you look at his cure rate modified, of course, by those being open-minded to it's still something that I was absolutely gobsmacked, didn't attract much more attention from people interested in making people better.
40:00
And so one of my little things as one of the things that I want to do before I shuffle off this mortal coil is come up with a A to Z way of curing people, even those who don't believe that it could be a mind-body disorder.
40:18
And so as I build out my research around this, obviously it won't be me doing it would be more me funding it, but psychedelics just kept popping up.
40:28
They just kept popping up as something that is probably going to end up as part of this process.
40:35
Other things are virtual reality, other things are non-invasive sound therapies.
40:40
There are a lot of modalities that you can use that I think if you combine, you could actually come up with a really neat process that could help.
40:51
And by the way, millions of people when you read about the losses to these conditions, just economic losses alone, not even considering the personal problem and trauma and the trauma within the family and all of these things, because these are real people.
41:09
One of the things Sarno points out really well is everyone says the minute they say, "Oh, wait a minute, mind-body, that means it's all in my head, right?"
41:18
Well, actually, Sarno and Candace Pert, who's was a biologist, who's had died, had identified neuropeptides as what she called molecules of emotion.
41:32
And what's interesting is the idea that people have this hard set in their brains that, "I don't have any mental health problems.
41:43
Why would I ever have a mental health problem?"
41:46
And of course, that's very unreasonable, and I don't understand the disposition to be opposed to it.
41:56
Nevertheless, psychedelics are definitely on the menu over there. Brom Rector: A 100%. Yeah.
42:02
I grew up in a pretty conservative kind of religious environment.
42:06
My dad was an army officer, et cetera, and we didn't really have a link. We didn't even...
42:10
The phrase mental health wasn't even something that was ever, I think, uttered when I was growing up.
42:17
And so my draw to psychedelics was more from a spiritual exploration sense rather than a mental health sense.
42:26
I was raised in this religious environment, rebelled against, it became very atheist in my teens and college years.
42:31
And then after college, I was like, "The atheism thing is great, but maybe there, is there a way that I can engage in the spiritual realm without having to believe in a God or a religion?"
42:39
And of course, when you start Googling that, you find psychedelics.
42:41
And that's what made me want to try psychedelics in the first place.
42:45
But once I had, then I started reading more, and I remember reading about the mental health issues that psychedelic can treat.
42:54
And I was thinking about that first psychedelic experience that I had where I was thinking about all these childhood things and family and interpersonal relationship things.
43:01
And I was like, "Oh, there are a lot of things that are not right and should be addressed."
43:05
So they can definitely help wake people up on the mind-body thing.
43:08
It is funny that there's still pushback on that.
43:11
Psychedelics, specifically, a lot of them function by agonizing serotonin receptors.
43:15
There's more serotonin receptors in our body than in our brain.
43:18
Jim O’Shaughnessy: I know.
43:20
Brom Rector: That's a simple, purely scientific way to look at it.
43:24
It's not like all of those feel good chemical receptors are just in our brain.
43:28
They're in our gut, they're in our heart valves, as I talked about before. They're everywhere.
43:31
There is no mind-body separation. It's all one.
43:35
Jim O’Shaughnessy: Exactly.
43:36
And I am delighted to say that that is getting traction, finally.
43:39
Brom Rector: Actually, one of our companies has looked at psychedelics as a potential treatment for irritable bowel syndrome.
43:46
Jim O’Shaughnessy: Oh wow.
43:48
Brom Rector: Because of that serotonin, the concentration of serotonin receptors in the gut.
43:52
And if you just go on Reddit, there's like lots of posts about people saying that psychedelics help treat IBS, which is, at first glance sounds kind of crazy.
44:01
It's like, why would psychedelics help treat digestive issues?
44:04
But it seems like it would be for a lot of people. I don't know. Jim O’Shaughnessy: Yeah.
44:09
Well, one of the things that I'm very excited about just being lucky enough to be alive during this era is that we are on the cusp, I think.
44:21
And I think that, of course, will there be problems?
44:25
Of course there will be problems.
44:26
There's problems, if you're alive, you're going to have problems. Brom Rector: Yes.
44:30
Jim O’Shaughnessy: And you're going to want to be able to solve those problems.
44:36
And the only way to do that is to keep learning and to keep understanding and to keep pushing further into the idea of, "Hey, as far as I know, we are the only universal explainers and connectors, at least in our little quadrant of the universe."
44:54
And everything that you look at, even if you're in the most primeval forest, generally speaking, has been touched by the mind of humans.
45:05
And a current quip that people really liked that I make is, "We didn't leave the stone age because we ran out of stones.
45:14
We like the stone age because we learned new things."
45:19
And so it seems to me, though, that we should be doing everything we can to learn new things and to improve society, which improves outcomes, which improves people getting along with each other.
45:35
And I just think that right now there is a confluence.
45:37
And if you looked at my portfolio, you would see that I'm putting my money where my mouth is of things like psychedelic therapy, like artificial intelligence, a whole new set of tools that allow people to not be captive of where they happen to live.
45:54
And so I think that there's always cultural lag, always.
45:59
And Bucky Fuller always said for...
46:02
And the way he put it seemed much more charitable to me.
46:05
He's like, "It's really a difference between people who are tuned in and people who are not yet tuned in."
46:13
And he used the example of the microscopic world.
46:17
So before we had microscopes, we had no idea that there was another world down there.
46:24
And then the first people who tuned into that were like, "Holy shit, look at this." But it took a long time.
46:31
The cultural lag was long, and hand washing for example, Semmelweis in Vienna got this crazy notion that male surgeons, who during the time it was seen as very effeminate for a man to wash his hands.
46:47
As crazy as that is, that's what people used to believe.
46:51
And so Semmelweis went into a very hostile room when he got the bright idea that male doctors who have just been doing a dissection of a corpse, might want to clean their hands before giving birth to a baby.
47:08
Because the death rate, from what they call child bed fever was through the roof.
47:14
And they came up with all sorts of explanations for why that wasn't true. No, no, no.
47:18
It was the priest ringing the death bell that made the Lord call the other women to heaven.
47:27
And so Semmelweis being mostly rational, said, "Okay, had the priest stop ringing the bell. No change."
47:34
So we finally convinced these male doctors against their will to clean their hands before attending a woman giving birth and wonder of wonders the death rate from women dying of child bed fever, plummeted. Plunges.
47:53
Well, Semmelweis, unfortunately was in other areas also interested.
47:59
And so he was in political movements, which at the time could be very dangerous for your career.
48:05
It was dangerous for his.
48:06
He was removed from his being the head of the woman's hospital.
48:11
And the poor guy died alone in some sort of prison mental institution, because that's the way authoritarians like, "Oh no, you have a..." It's like the old USSR.
48:22
Oh no, comrade does not believe in communism. He has mental problem.
48:28
But anyway, the guy who replaced him, one of his first things that he does when he comes in, he goes, "What the hell is with all this hand washing nonsense?" He stops it.
48:43
Women's death rates go back up for 70 years. Brom Rector: Jesus.
48:47
Jim O’Shaughnessy: Talk about a cultural lag.
48:50
So this kind of societal stupidity tied around these things that cause-effect, cause-effect.
48:57
Now, I'm not saying everything is cause-effect, of course it isn't.
49:01
But when you can tie them to things like this, let's experiment. What do you think is...
49:08
I want your view on people lumping.
49:11
So cannabis became legal in many states.
49:14
I don't think it is yet legal at the federal level.
49:18
Brom Rector: That is correct.
49:19
Jim O’Shaughnessy: Which means they can't use banks. Right? So it's crazy. It's insane to me.
49:25
But what do you think about the people who lump cannabis in with psychedelics?
49:30
Brom Rector: Yeah, great question.
49:32
And I just want to say that story about the hand washing, it's such a funny parallel because it's like there was this glimpse of a time where people started washing their hands, then someone comes in and shuts it all down for 70 years.
49:42
I mean, it's the exact same thing that happened with psychedelics, right? Jim O’Shaughnessy: Yes. Exactly.
49:47
Brom Rector: Yeah, it's crazy.
49:48
So with the cannabis and psychedelic comparison, I mean, I see why people do that.
49:52
It's like this was a drug that was illegal and now it's starting to become less illegal, right?
49:56
Jim O’Shaughnessy: Right.
49:57
Brom Rector: Kind of obvious.
49:58
But there are some big differences.
50:00
So before we get to the sort of regulatory changes that are happening, just from a medical standpoint, if you want to get the medicinal benefits of cannabis, which are largely pain relief and that sort of thing, all you really have to do is just smoke some weed.
50:15
It's not a very complicated process.
50:17
You sit on the couch, you smoke the weed, and the pain goes away.
50:20
If you really want lasting mental health changes from psychedelic use, it's a little bit more involved than that.
50:28
A therapeutic component usually helps quite a bit, both before, during, and after the psychedelic experience.
50:34
You usually want to do it in an environment that is nice and conducive to having a good experience.
50:40
And having that integration therapy afterwards usually helps a lot.
50:43
So all of those touchpoints are kind of business opportunities that cannabis doesn't have.
50:48
So right there, there's a whole bunch of new businesses that can be built around psychedelics.
50:53
Second, cannabis is really just referring to the cannabis plant.
50:57
And I guess there's CBD as well, but psychedelics on the other hand, is this whole universe of molecules.
51:03
We've got LSD [inaudible] in ayahuasca, psilocybin, there's like hundreds of them, if you go out there and read some of the research chemical literature.
51:10
So we're talking about, to use the finance analogy, psychedelics is kind of a portfolio, whereas cannabis is a single asset.
51:17
Jim O’Shaughnessy: Single stock. Brom Rector: Basically.
51:20
And then when you look at what's actually happening on the FDA side, there has never been an FDA-approved cannabis therapy.
51:29
There is an FDA-approved CBD product for seizures called Epidiolex that did, I think it got sold for seven billion to Jazz Pharmaceuticals.
51:37
But outside of that, there aren't even really any clinical trials of smoking cannabis or anything like that. It just isn't a thing.
51:45
Pretty much all the cannabis industry has been this state by state legislative changes and it's remained illegal at the federal level.
51:51
Psychedelics, on the other hand, we already have multiple trials in phase three.
51:57
Actually Maps just announced today, like an hour before we started recording this, that they had completed their second phase three trial and that the data was going to get read out in Q1 of '23.
52:06
So there are already clinical trials that have reached phase three that have been granted breakthrough therapy designation by the FDA.
52:13
So it's really looking almost a sure thing that there will be at least a few different psychedelic therapies approved by the FDA, which did not happen on the cannabis side.
52:23
So it's a much more pharmaceutical type strategy than cannabis, which is much more recreational, I guess.
52:30
That said, we can't ignore the fact that states are starting to pass legislative action that allows for adults to use psychedelics in certain circumstances.
52:39
So I'm sure you've paid attention to what's happening in Oregon.
52:42
They passed that measure 109 in 2020.
52:45
It actually goes into effect January 1st, 2023.
52:48
And so now in Oregon, starting in January, adults will be able to go to these psilocybin service centers and use psychedelics as part of a therapeutic process under the supervision of what they call a therapist, although they're kind of using that as a term of art rather than in a technical sense.
53:03
And yeah, that's kind of going to be the first legal psychedelic consumption in the US, which is pretty exciting.
53:09
Jim O’Shaughnessy: Yeah, very exciting.
53:11
And I am woefully uneducated about cannabis in terms of the uses that one might or might not be able to put it towards in a medical sense or a mental health sense or any of those.
53:26
But I was pitched by a company that essentially delineated that the first cannabis companies were, as the founder of that company, told me, basically he said they were founded by hardcore stoners.
53:42
And so they were maximizing the objective function, to use an AI term for THC that was like, you got so stoned that- Brom Rector: The strongest weed possible.
53:55
Jim O’Shaughnessy: The strongest weed possible.
53:58
And I've been pitched by more than one, I'm thinking of one in specific, specifically, but they're trying to move that down market to whole food moms.
54:09
And obviously that becomes a much less potent form of cannabis.
54:13
I've learned that there are very helpful gummies that are THC, can be very helpful for people who are insomniacs.
54:21
So it does seem to me that there are some use cases that people would want to educate themselves on.
54:28
But I agree with you about, I think the chunking happened because drug that was illegal is no longer illegal. Brom Rector: Right.
54:36
Jim O’Shaughnessy: Right?
54:37
Brom Rector: One thing I will say about the medical use of cannabis is that it is much more similar to the old SSRI model where you have to use it continuously to get the benefits, which makes it very different than psychedelics.
54:52
You don't smoke one joint and your anxiety goes away.
54:55
It's like the anxiety's gone while you're smoking the joint, the pain is gone while you're smoking the joint.
55:00
It comes back within a few hours, which is not really what people report with psychedelics.
55:04
So it's a bit different personally, just on a consumption front, I don't really like cannabis. It makes me anxious.
55:10
And we do not invest in any companies that are doing anything with cannabis.
55:14
We're psychedelics specifically.
55:15
Sometimes I still get a lot of pitch decks in my email for cannabis products, but it's just not something that we do.
55:21
Jim O’Shaughnessy: So yeah.
55:23
The funny thing with me in cannabis was like, I have a ridiculous tolerance to THC. Brom Rector: Wow.
55:30
Jim O’Shaughnessy: And so when I was a kid, everybody smoked weed, but the weed we were smoking back then was way less potent than the weed of today.
55:39
So like any other teenager, I tried it and it had no effect on me.
55:45
And so I'm like, well, okay, at least for me, this is not doing anything.
55:51
And then later on the family did a trial on me using gummies from a legal state.
55:57
And we were in a legal state when we tried this.
56:00
So let me be very clear about that.
56:02
And they really loaded me up on this THC.
56:06
And by the end of it, they're all like, "You weren't kidding it. That has no effect."
56:11
And that kind of leads me to a question.
56:14
Is there a subset that we've found yet in people who are showing no reaction to psychedelics?
56:21
Brom Rector: Good question.
56:23
I have met some people that have said they've tried psychedelics and it has not had any effect on them.
56:29
One thing that we do know is that if you're taking SSRIs, they can certainly blunt the effect of psychedelics.
56:35
So I wonder how many of those people were maybe also taking Prozac or something at a similar time.
56:42
That said, mean, there are certainly tolerance differences.
56:45
Some people metabolize these things at much different rates.
56:49
We do know that there's a gene that regulates ketamine metabolism.
56:52
In fact, there was a company out there a while ago that was doing genetic tests and basically saying we'd customize your ketamine dose based on your genetic profile here.
57:00
Jim O’Shaughnessy: Epigenetics.
57:01
Isn't that the term that they use, epigenetics? Brom Rector: Yeah.
57:04
I don't know if it's genetics or, I know there is a term epigenetics.
57:06
I don't know if in this case it was epi or regular, but yeah, one of the two for sure.
57:10
There's also, this is kind of getting into the weeds, but with chemicals, there's different isomers which are kind of mirror images of chemicals.
57:18
And certain isomers can bind to the receptors at different affinities.
57:22
So the left isomer of the exact same molecule, the mirror image of the molecule might bind to the receptor side of interest at a much higher affinity than the other mirror image of it.
57:32
And in the body, sometimes your body's natural biological processes will flip the chemical from one isomer to another through this process called epimerization.
57:44
And it turns out that with LSD, one of the isomers is 90 times as potent as the other isomer.
57:52
And most natural LSD that you get is a blend of both.
57:54
But there's actually a gene that regulates the body epimerization of the left isomer to the right isomer.
58:01
And if you have that gene, your body will epimerization it either faster or slower.
58:04
And so there's like this thought that based on that genetic expression, some people are going to be much more sensitive to LSD than others, which is something we do know happens.
58:13
Some people can handle tons of acid, some people do one hit and that's enough.
58:16
So there are all sorts of reasons why someone might be more or less responsive to psychedelics. Jim O’Shaughnessy: Yeah.
58:22
I wanted to ask you too about your thoughts on micro dosing.
58:27
I don't have a position on micro dosing. I've never done it.
58:31
I know a ton of people, especially in technology who swear by it.
58:37
I know a lot of creatives who swear by it. What are your thoughts?
58:43
Brom Rector: I have a lot of different thoughts, some of which are in conflict with each other.
58:47
So first of all, what I would say is that in terms of clinical data, there is not a lot of support for micro dosing.
58:54
But there also not been a lot of quality studies done on it.
58:58
If you can imagine, the FDA doesn't really like the idea of just giving someone a bottle, like 30 LSD pills and saying, "Go home and take these every day."
59:07
It's something that has not really happened yet in the US honestly.
59:10
So contrast that with the macro dosing.
59:13
The FDA's fine with you doing a single dose in a clinical environment, right? Jim O’Shaughnessy: Sure.
59:17
Brom Rector: So we have a lot stronger data on macro dosing.
59:20
We know that it works in many cases.
59:22
The data we do have on micro dosing is largely anecdotal.
59:25
There are lots of observational studies where they do surveys of people, but there's no way to know.
59:30
These people are not using pharmaceutical grade psychedelics.
59:33
They're not double blind placebo controlled studies.
59:36
So the data is the jury is still out.
59:38
There are lots of people that do swear by it.
59:42
There are lots of people that swear by a lot of things.
59:44
And the placebo effect is real.
59:46
The placebo effect is a real thing.
59:49
Jim O’Shaughnessy: Absolutely is.
59:50
Brom Rector: And the other thing is, what is the definition of micro dosing?
59:53
Is it truly sub perceptual?
59:55
I think that's what the James Fadiman's original idea was.
59:58
If you take a sub perceptual dose, meaning it's a low enough dose that you don't actually feel it, you will actually be better at certain things, more creative, quicker reaction time, better focusing.
1:00:07
A lot of people micro dose at the level where they are feeling it a little bit.
1:00:11
And if you're using a substance mushrooms, even one, this gram of mushroom over here might have a different concentration of psylocibin than this gram mushroom over here.
1:00:21
So it's super hard to get the dosing right.
1:00:24
I've experimented with it a few times and what I've found is that when it's truly sub perceptual, meaning I don't feel anything, I literally don't feel anything and don't feel like anything's different.
1:00:33
And when it is slightly perceptual, if I'm even tripping just a little bit, I certainly don't want to do work anymore.
1:00:40
I want to go for a walk or go outside.
1:00:42
So it's not very good from a productivity standpoint.
1:00:45
So I'm kind of waiting for more data to come in.
1:00:47
I'm sure at some point someone will prove that some form of micro dosing is good for something, but we just don't know.
1:00:53
Jim O’Shaughnessy: Spoken like a true quant. I love it.
1:00:56
Brom Rector: We do not have enough evidence to reject an old hypothesis.
1:01:00
Jim O’Shaughnessy: Exactly. Yeah.
1:01:03
I had, in reading about it, I was kind of fascinated by it.
1:01:06
And then I just started thinking like you.
1:01:09
I went right to, I wonder how much of a placebo effect is actually happening here, but I'm open to new information.
1:01:17
If they ever end up being able to conduct a true study that is double blind and has a control group and all of that, I'm all for it. That could be great. Wonderful.
1:01:30
But I'm kind of in your camp that it's at least what I've seen and people I've spoken to, I've spoken to proselytizers, especially creatives, and they get upset with me when I start asking, when I go all quant on them and say- Brom Rector: Saying, "Hey, if it works for me, then-" Jim O’Shaughnessy: Exactly.
1:01:51
Brom Rector: Who cares what the data says. And it's like, well.
1:01:54
Jim O’Shaughnessy: Yeah, I don't know about that. Brom Rector: Yeah. Well.
1:02:02
Jim O’Shaughnessy: So what have you been most surprised about, not only just in psychedelics, but in being a founder of your own, you went from working as an analyst and a quant, pretty traditional role to not only being a founder, but also being a founder in an emerging space that still has some controversy attached to it.
1:02:23
Brom Rector: Yeah, definitely. Quite a few things.
1:02:27
It's a dramatic shift from what I was doing at the hedge fund.
1:02:30
I was writing Python, code building machine learning models for 12 hours a day.
1:02:35
I would talk to my coworkers over coffee, but I certainly didn't have back to back Zoom calls.
1:02:41
95% of my day was listening to music writing code.
1:02:44
And now it's like 95% of my day is talking to people, which is a big shift from what I was used to.
1:02:49
I also had never done fundraising before at the funds I worked at.
1:02:54
There were people that did that, and I was just over there writing algorithms.
1:02:57
And so I think my expectations of what fundraising would be like versus what it's actually were very, very different.
1:03:03
I feel like I've learned a ton over the past year of just figuring this out on my own.
1:03:08
Luckily I've made I think pretty decent progress, so I'm picking it up, but I didn't realize how much of a time commitment and how much effort fundraising really took.
1:03:19
That's been a good learning experience too.
1:03:22
In terms of operating in an industry that people are not sure about.
1:03:27
It's interesting, 'cause on the one hand it's totally blue ocean.
1:03:33
There's infinite opportunity, but it is just as hard to convince people of that opportunity.
1:03:39
But at the same time, when you operate in a sector that is totally new, it's pretty easy to become a thought leader, for lack of a better word.
1:03:49
If I quit my quant job and said, "I'm going to start a VC fund that does enterprise software."
1:03:53
I wouldn't even have a chance.
1:03:54
'Cause that feels just saturated.
1:03:56
So it's a lot better to, my advice to people is pick a niche and particularly a niche that doesn't have a lot of strong players in it yet, and just try to build something there.
1:04:05
Of course, the challenge is now you got to go out and convince people that the niche is something worth investing in.
1:04:11
Luckily with psychedelics, they seem to kind of have this built in viral component.
1:04:15
Once someone has done psychedelics, it's only a matter of time before their friends do it.
1:04:18
And then people get excited about it, which you can't necessarily say about other sectors.
1:04:23
But yeah, being at the right time is very important to, I don't know, if I had tried to do this three years ago, I think it certainly wouldn't have worked, right?
1:04:32
And if you decide that you wanted to start a psychedelics fund five years from now, this ship might have already sailed.
1:04:37
So timing is very, very important.
1:04:39
Whether you're trading public markets or whether you're starting a VC fund in an emerging space.
1:04:43
And in fact, that's a big part of the pitch.
1:04:46
And there's a whole slide in our pitch deck dedicated to why is now the time to get involved.
1:04:52
And the answer is because we're at this point where the FDA is on the cusp of approving trials, but they haven't yet.
1:04:59
And it's like the door has closed behind us.
1:05:01
We can't really go backwards.
1:05:02
We're not going back, but the door's starting to open in front of us and it's really kind of a one off.
1:05:07
I kind of view this whole fund as a macro trade, like a global macro trade.
1:05:11
It's not a trade that you're going to be able to make again 10 years from now.
1:05:14
I think it's like- Jim O’Shaughnessy: Yeah, I think that's a really great point and that I was doing a review of the things that we're considering investing in and things that we have invested in.
1:05:25
And that underlying theme was very strong.
1:05:29
In other words, right time, in things like AI, in things like psychedelics.
1:05:34
And there's a host of others as well.
1:05:37
But timing can be of great importance when you're in one of these new fields.
1:05:43
And that leads me to the next question.
1:05:46
We kind of started with it, but we got onto more interesting things.
1:05:50
So you get to talk about your fund.
1:05:53
And that's because of a arcane rule, rule 506(c), which lets you talk about your venture.
1:06:00
Tell me about what led you to elect for rule 506(c)as opposed to the more common one where you're not allowed. Brom Rector: Yeah.
1:06:10
506(b) where you're not allowed.
1:06:11
The reason that I chose rule 506(c) is because, like I kind of said in my origin story, I started off this whole journey by doing a podcast about the business of psychedelics.
1:06:20
And I kind of realized from there that maybe I should make the jump into running a fund.
1:06:26
So I was already publicly talking about investing in psychedelics, and I had people reach out to me asking for investment advice, saying they had six figure sums they wanted to invest.
1:06:36
And I was like, "Man, it seems like if I'm going to get investors at all, they're going to come through this podcast platform.
1:06:42
So maybe I should make sure to be able sure that I can actually talk about it on the platform."
1:06:47
Turns out, I don't know that in the long run it's really been ...
1:06:47
It's been helpful in some ways, I don't know if it's been as helpful as one might expect.
1:06:56
The funny thing is that there aren't really a lot of downsides to doing rule 506(c).
1:06:59
The biggest downside is that you have to verify that the investors are accredited, which you don't actually have to do under 506(b).
1:07:05
You just have to ask them to sign a thing that says, "I promise I am accredited."
1:07:09
With rule 506(c), they have to actually provide some proof that they are.
1:07:12
That hasn't really proven to be a problem for too many people.
1:07:15
If people are actually accredited, it's usually not a problem for them to prove it.
1:07:19
So I don't really see what the big downside is, honestly, at least for a firm of this size. Jim O’Shaughnessy: Yeah.
1:07:25
Well, and as well, I think that just the election in something, in a new space like this, you're much better off electing rule 506(c) because you've got a lot of convincing to do.
1:07:36
And people of good will are going to be willing to listen.
1:07:39
But if they can't say anything to them, that's going to cause a little communication problem right there. Brom Rector: Totally.
1:07:46
Jim O’Shaughnessy: Listen- Brom Rector: And I've definitely had people just DM me out of the blue saying, "Hey, I heard you talking about your fund on your podcast. I'd like to learn more."
1:07:52
And that wouldn't happen without rule 506(c). Jim O’Shaughnessy: Yeah.
1:07:54
Well, Brom, this has been amazing.
1:07:56
The depth of knowledge, particularly on the science side, I think was one of the things that actually drew me to make an investment with you.
1:08:06
You obviously do your homework and know what you're talking about.
1:08:09
And a lot of people who get into a space sometimes get into it just because they're enthusiastic about it.
1:08:17
The reason why you passed the hurdle was because of your deep domain knowledge in this subject, which, so congratulations on that.
1:08:24
So we ask everyone at the end of this podcast that we're going to make you the emperor of the world for a day.
1:08:31
Can't kill anyone, you can't indoctrinate in any way except you can incept them.
1:08:38
We're going to give you a magical microphone and you're going to say two things into it.
1:08:44
And whenever morning comes for the rest of the now eight billion people on the planet, they're going to get out of bed.
1:08:54
If they're not in a crib, they're going to get out of their bed and they're going to think your two things.
1:09:01
They're going to think it was their idea and they're going to start doing it. What you got? What got for me? Brom Rector: Oh my gosh.
1:09:08
I just want to say thank you for the kudos on the scientific domain knowledge.
1:09:12
I actually recently brought on a partner to the fund who has even more domain knowledge than I do.
1:09:17
She actually has a background in psychedelic pharmaceutical sciences and has worked at some of these companies before.
1:09:22
So our domain knowledge is getting even stronger by the day.
1:09:24
Jim O’Shaughnessy: Fantastic.
1:09:25
Brom Rector: But in terms of the answer to your question, so I get to incept people.
1:09:29
I don't think it's responsible to tell people to do psychedelics, but maybe I would say start reading.
1:09:35
I'm going to start reading about psychedelics today.
1:09:37
I'm going to start reading some of the literature in the books out there.
1:09:40
And the last one, this, I get two.
1:09:43
This is very interesting.
1:09:45
I would say the second one would be that people ...
1:09:45
I'm kind of speaking to myself here.
1:09:53
I used to be a lot more rational in quantity.
1:09:55
I would say start listening to your gut a bit more.
1:09:58
Jim O’Shaughnessy: Both good ones.
1:10:01
And I also like the way you introduce the psychedelic. I think you're right.
1:10:05
I don't think you should go out and tell people you should do psychedelics.
1:10:08
Whereas I think you should go tell people, you should read like Michael's book at least. Brom Rector: Sure. Read a book.
1:10:15
Jim O’Shaughnessy: Watch the Netflix.
1:10:17
I had a guest, Brian Muraresku, who wrote a book about ancient use of psychedelics.
1:10:23
There's a lot of great literature out there and make up your own mind.
1:10:27
I think that the weight of the evidence is clearly in their favor, but it's something that you should choose.
1:10:34
So I love the fact that you only suggested just learning about it a bit and trust your gut.
1:10:40
It's like I have been a quant for 40 years and I'm forever building algorithms in my head.
1:10:47
Not only of companies, but of people.
1:10:50
But one of the things that I have found is that when you see the same pattern time and time and time again, you do develop a bit of a saturated intuition and you would be foolish not to pay attention to it. Brom Rector: Totally.
1:11:08
Jim O’Shaughnessy: And so the only thing I do that is kind of quanty about it is, anytime I do this, I document it because our brains are designed to erase all the times that the intuition was wrong and reinforce all the times that the intuition was right.
1:11:26
And so I thought, well, okay, let's at least create a base rate here to see on going with your gut.
1:11:33
Tell us where everyone can find you.
1:11:34
Brom Rector: Yes, you can check out Empath Ventures at empath.
1:11:38
vc on the internet, and you can follow me on Twitter @TheRealBrom, B-R-O-M.
1:11:43
Jim O’Shaughnessy: Well, this has been great.
1:11:46
I have an invested interest in you doing well, so let's continue to disclaim that.
1:11:50
I think you're in the right place, the right time, and wish you all the best.
1:11:55
Brom Rector: Thank you so much, Jim.
1:11:57
Appreciate your support and it's been great to be on the show.