0:00
You can, you know, form billions of dollars of capital around simply setting a new idea.
Search this video
0:04
Every once in a while someone basically crystallizes a notion right at the right time in the right way that sort of becomes the foundational viewpoint or opinion on a certain era.
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[music] Everyone is a little panicked.
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They don't know what's going on, and someone just needs to sort of set the story and set the narrative.
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It doesn't even have to be right, but there's just a sort of confidence of like this is happening. Follow me.
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Capital just follows the billion-dollar PDF around the field.
0:44
>> So, we're going to have the chance to talk about, as we do on a daily basis, you and I, 57 different ideas.
0:48
But, I'm always interested to begin with you a couple questions about investing.
0:54
I sit near you, we share an office, so I get to hear a lot of these stories every day.
1:01
And I think it would be really fun for you to turn your observations from all those, God knows how many hundreds of conversations with founders of these companies and with the capital that has backed them in the past, to sort of share what you've learned from that frontier over the last 18 months, framed as advice for founders and advice for capital.
1:20
Because I I just don't know very many investors that are looking at situations like you are with such a high rep count.
1:25
So, what have you learned in the first 18 months of doing this? >> I've learned a lot.
1:30
You really realize in, let's say, long-term private markets that the great filter, so to speak, for funds is their storytelling ability, fundamentally.
1:41
Because, you know, their product, which is like realized cash returns, take a decade.
1:45
And so, the thing that you're selling in the interim, whether it's through, you know, a quarterly update or your event or just your one-on-one conversations with your LPs or whatever is really just narrative.
1:58
A A particular situation that's very interesting that we've seen a lot of is twofold.
2:02
One is that the business is kind of old, but has started to do well recently.
2:09
That's an interesting scenario because it's one of these instances where merely because the company the story again the narrative of the company is that it's 7 years old.
2:16
Let's say the company has really started to inflect.
2:19
Uh maybe it's because of AI or maybe it's because of something else, but they're 6 or 7 years into their life.
2:24
It's very difficult for those companies to get funding because the story is well, okay, fine you grew 200% last year, but you know, you're only on an absolute terms you're only at 8 million of revenue and you're 7 years in.
2:36
Whereas I think literally if you just change the name and told a different story and just, you know, are sort of arbitrarily started the clock 2 years ago, um you you that company would actually be like really hot.
2:46
And so like that's an interesting situation.
2:48
The fix I think is just to be more flexible on narrative and story.
2:54
A sort of derivative of that problem is just the amount of businesses where they're in a spot where it's kind of working, things are starting to go well, but they're faced with three choices, which is basically they're not going to raise a significant up round.
3:05
And so really they're staring down a bridge round, uh strategic like M&A acquire, or cutting to profitability.
3:12
And those are just really hard situations.
3:14
If you're in that situation, I think um that's where you really want to get creative with the cap table and if you have some cash, buy back your investors, convert everyone to common, really start to spend more time on the cap table because otherwise like I've been shocked at sort of how hostile insider bridge rounds really are.
3:31
I think this is like an under discussed part of venture. >> How so?
3:35
>> Just they have like, you know, 3x liquidation preferences or warrants or ratchets or other things.
3:39
Um there there's sort of this like interesting idea that if you're extractive to the downside, everyone sort of boos you, but if you're extractive to the upside, where you say, you know, I want the right to invest at the same price in 2 years from now.
3:54
Um, they're both like similarly extractive, but because one is like an optimistic extractive, everyone loves that one.
3:59
So, what advice would you give to founders in thinking about their cap table from the start?
4:04
Well, obviously in a highly volatile, highly uncertain period right now.
4:07
No one knows if it's the death of software.
4:08
I think it's, you know, certainly the most unprecedented and uncertain time since at least like the transition to the internet.
4:15
And so, I think what you want in that time is the is a lot of optionality and the ability to be nimble and the ability to really be able to do what is right for the business and not be constrained by the cap table.
4:28
And so, you know, maybe your business needs to become a service a services business.
4:32
Maybe you need to acquire other companies.
4:34
Maybe you need to run profitably for a while.
4:36
You know, maybe you need to change your whole business model.
4:40
Maybe like, you know, if per seat pricing uh goes away, you need to pivot to usage.
4:45
Maybe you need to fire a bunch of your customers.
4:47
And so, I think like, you know, in in in volatile times, it's always useful to have optionality.
4:50
always useful to have optionality. And so, I think like I guess the general piece of advice is just unless you're certain that you want to just like try this one thing and it's going to be huge or zero, you should think about optionality,
5:03
which usually means raising less, raising from investors with a wider mandate, um not getting stuck in all these weird problems where like you need to continue to raise more money and if you don't, it's bad for employees, it's bad for recruiting, uh people's options get underwater, they start to leave. Like all those things
5:18
Like all those things sort of reduce optionality.
5:19
It's funny cuz in general, I think like commitment is a much better strategy than optionality, but I think in high highly volatile times where it's hard to tell the future, you basically just want to control for being able to like be super nimble, turn on a dime, do what you want, not be constrained by like, "Oh, we're set up.
5:34
Our capital is set up in such a way that we can really only do this one thing."
5:37
Which is also true for investors, by the way. They're same problem.
5:40
Go go back to the investors and the construction of an effective narrative for building an investing firm before you delivered the 10-year investment returns or whatever.
5:46
You have this great idea called the billion-dollar PDF.
5:49
Can you describe what you mean by that and what the interesting components of a billion-dollar PDF tend to be?
5:55
>> This is sort of an idea that you and I came up with in a joking way that like kind of turned out to be true, I think the more we thought about it, which is every once in a while someone basically crystallizes a notion right at the right time in the right way that sort of becomes the foundational viewpoint or opinion on a certain era.
6:14
>> I think it's just this idea of everyone's a little bit uncertain, everyone is a little panicked, they don't know what's going on, and someone just needs to sort of set the story and set the narrative, and it doesn't even have to be right, but there's just this sort of confidence of like, this is what's going on, this is happening, follow me, almost.
6:30
When those come together, they just set a new narrative that everyone can kind of rest on for for a period, really until the the next PDF comes along, and and the billion-dollar PDF thing is this idea that really like you can, you know, form billions of dollars of capital in one way or another around simply setting a new idea.
6:48
And then, you know, maybe you can think of capital is like 10-year-olds playing soccer, you know, they all sort of just follow the ball around, and they're just the capital just follows the billion-dollar PDF around the field.
6:59
>> [laughter] >> It's probably a good excuse to talk about I don't know how long we'll talk about this topic, probably a long time.
7:03
This joint notion of posting, which I guess is a, you know, a billion-dollar PDF is just like the ultimate form of that or something.
7:11
And the furnace that is the timeline of predominantly X, that's that's where I get my timeline.
7:17
There's other places as well, but it seems like these notions have really taken over people's desires and attention.
7:25
Meaning, like everyone wants to ultimately have a spot on that timeline.
7:30
It's a strange phenomenon.
7:32
I'd love you to just riff on there's like five or six subcomponents of the timeline that I want to ask you about, but maybe just start just how you're thinking about this strange modern phenomenon.
7:42
>> I think it's downstream of technological change and I think the technological change is really the unifeed.
7:44
So, what people don't appreciate about X is that everyone gets served the same 500 tweets per day.
7:53
Yeah, and it has hundreds of millions of daily active users and you know, uh the thing that people who don't post don't realize is just how many, you know, whatever the the poster to lurker ratio on these things is enormous and so it's really hard to feel the impact unless you're actually like getting onto this feed and seeing all the people that you didn't know were reading X all day, uh commenting on your thing.
8:13
I'm always surprised like when I post uh a good tweet and you know, whoever texts me about it that I literally had no, you know, so it could be someone I know well, I had no idea that they read Twitter all day, but everyone reads Twitter all day.
8:24
And so the unifeed, I think, is sort of the technological catalyst for this phenomenon. It is X, by the way.
8:30
Like I I it's interesting how X is sort of like it's sort of the Lindy social network.
8:36
Like it's it's just going to it probably is never going to reach the scale of the others, but it just fills this like vital role and it's interesting to me how it's like, you know, however long in, I'm probably almost 20 years now, uh and it's still sort of more important than ever sort of just just like source of truth almost for the whole world.
8:53
And what that means is everyone is reading the same thing.
8:55
It's the it's the global newspaper, right?
8:59
And so in the same way that, you know, people would talk about the latest article in the journal 30 years ago, now it's the latest tweet or the latest essay on on on X.
9:06
And so I think what that creates is that all the sort of most important people in the world, at least when it comes to capital markets and politics and um I'm sure some other journalists >> entrepreneurship, man.
9:19
>> entrepreneurship >> technology >> they're reading their daily paper every morning and uh these things really form opinion and they price securities and they dictate where capital flows and they certainly write policy.
9:30
And so there's this idea that another great filter perhaps is that like whether you your institution will only survive if it's timeline native and what that means is that it is reactive to and reflexive to the timeline.
9:43
Reactive meaning that it, you know, is constantly monitoring the timeline and and and and reflexive in that its actions then affect the timeline which it it then sort of reads and reacts to and you can think of, you know, the White House is obviously like this, uh venture capital is like this, um certainly public equities are like this.
10:02
There's this idea of like what is the story.
10:05
And what's interesting, it's funny like one of the things I get emails about the most is uh a comment I made somewhere about how like posting is the last great meritocracy.
10:13
I get emails about that cuz people are like that really clicked in my head and I started posting and posting changes your life if you're good at it.
10:19
That's still true today, maybe more true than ever.
10:21
And it is sort of a meritocracy in a weird way.
10:23
Now there's the algorithms and AI and all this stuff, but like it's still, you know, in some ways it's a lot more meritocratic than it used to be.
10:31
Like everything it's been a lottery-fied and so like you know, in the old times you had to like sort of grind away and build this huge following and then by virtue of having a big following you could post a really inane uh tweet and it would be very popular, but that doesn't happen anymore.
10:45
Now you just you can you can literally be like a new account and just write a good post and then the algorithm selects you and it'll display you in front of 500 million people.
10:53
It's sort of this like weird thing where you have the global newspaper that everyone reads, that everyone finds highly influential.
11:01
There's also this like this sort of um meta thing where it's like the newspaper if you could see all the influential people reacting to the articles in the newspaper and then by virtue of reacting to it making the thing more important.
11:13
And anyone can post to it.
11:16
People are still very much underestimating how much policy gets dictated from the timeline, how much uh venture rounds are done on the timeline, how much businesses are built on the timeline.
11:28
And I think increasingly everything will just become sort of timeline native.
11:32
I think TPBN is a great example of this. Um and certainly, right?
11:37
Like, you know, in this in in when we're recording this, every other day someone wrote writes some sort of, you know, pornographic fanfic about AI and it moves the public markets dramatically.
11:48
And so, I I I think again it sort of comes back to this billion-dollar PDF idea of when there's uncertainty people are just looking for what is the story, what is the most compelling story.
11:57
And the way that it works on the timeline is it's not, you know, um it's not this well-considered book that comes out that everyone talks about for a year.
12:06
It's sort of what is the thing that sounds smart, feels good, is it has to be entertaining.
12:11
Maybe that's another change is like a good post has to be very entertaining cuz people are on the timeline to be entertained.
12:16
Like, they they can lie to themselves and say they're on it for other reasons, but it's just to be entertained.
12:19
And that's obviously what the algorithms are selecting for.
12:22
And so, there's this idea that like the most entertaining novel, somewhat interesting, somewhat correct thing is going to set the actions and the consensus for everyone on a day-to-day basis.
12:36
Um and this translates into their actions.
12:38
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13:46
>> Is this all just jet fuel fuel on the fire for the notion of power law in general?
13:52
Like one of the things I've noticed in our show is it used to be that they all the variance was quite low.
13:57
The the very best one did a bit better, but not a crazy amount better than the worst one in terms of performance.
14:05
And that has completely changed.
14:07
And now there seems to be this threshold.
14:10
We were just talking about this morning.
14:11
That if you breach the containment, if you breach this threshold, it it literally feels like you have taken over the world's brain.
14:20
And just shoved everyone's eyes at your thing for a short period of time. >> Yeah.
14:24
>> And the impact of those handful of things mat are so much bigger than the all the rest of them combined.
14:30
And so what you're playing for is really to be just one of these breakout things.
14:34
And like that's probably Is that the right way to think about the timeline is like that actually is all that matters is that you get one of those.
14:41
So you should be You should be living at the edge of the distribution as much as possible in what you're posting about, writing about. >> I mean, I don't know.
14:49
Everything's Everything's just downstream of technological change.
14:52
So the reason, you know, podcast followed a normal distribution was because it was the technology delivering it was an RSS feed.
15:00
And now it's an algorithm.
15:02
And it's clips and and and I mean, even the method, right?
15:05
Like I'm sure some obscene amount of your [snorts] viewers are watching on watching or listening on YouTube. Um which is new.
15:10
And no one, you know, you even if you subscribe to a podcast on YouTube, they're not going to show you every single episode in chronological order.
15:19
So I think this stuff is all just new, just out-stream of technology.
15:23
I don't think it's like something that's changed in the content or in the listeners.
15:28
It's just how it's delivered.
15:30
Um And, you know, in that sense, maybe one world where the podcast world sort of lags behind the YouTube world is that the podcast world is still sort of highly naive to um serving content to the algorithm.
15:42
Like, you know, if you get deep into the like Twitter group chats, especially now that they've posted to the algorithm, like there are all these like very specific things that you can do around replies and likes and length and all these like ultimately numbers that the algorithm's selecting for.
16:00
And, um you know, I I would say like streamers and people on YouTube and stuff certainly understand that.
16:06
And and podcasts, I think maybe the reason it feels a little bit random is because podcasts still like really aren't into the meat of understanding that like we are recording this video for a LLM to review and decide what it wants to show people.
16:18
And then people will decide if they like it or not.
16:20
But like that first filter we don't really think about, but that is the case.
16:24
>> Does that stress you out?
16:24
Does that feel like deeply dystopian?
16:27
>> I hear a lot of lamentation over the death of books.
16:29
People don't read anymore.
16:31
And it's so interesting to me because I I I just you know, I've read a lot of books. I like books.
16:36
Um I spend a good portion of my life reading books.
16:40
But it doesn't I don't know.
16:42
I it doesn't really bother me that people I don't see the big crisis that everyone laments about with books.
16:47
I mean, the attention span thing maybe is is true.
16:48
Like it's certainly way harder for me to read a book just on a pure like focus.
16:52
But I feel like the sum total of the interviews that I listen to and the things that I read and all this stuff are great.
17:02
And like I I don't think I don't have an appetite for books just because they're harder to read.
17:06
I think I'm like feeling nourished from the other sources.
17:10
And it's interesting, right?
17:12
Cuz like, you know, if you think about uh like like porn, it's like more obviously bad because like people don't have sex and they watch porn and it's like fairly straightforward that sex is better than porn.
17:22
It's like that seems like an obvious thing.
17:24
But like the people will hold that up right next to books and I don't know.
17:28
Like to me the book thing feels a little bit like a swan song for you know a technology that um you know, there will still be a place for uh but like it was the best way we had of delivering information and now there's new ways and they're they're they're more compelling and more interesting.
17:44
You know, you have to caveat that of course with like I'm very sensitive to language and you know, the terms that we use like terminally online, brain rot.
17:51
Like we we recognize like these are terms of death and and and and and rotting and and like destruction and uh very negative nihilistic terms.
18:03
And so you know, you do have to balance that with like we didn't call it like uh we didn't pick neutral or positive terms for these activities.
18:12
Um and I don't think ever anyone ever like would you know, self-conceive of reading a lot of books as being this like very negative thing.
18:18
So the counterargument would be that no actually we have this deep sense that that it is bad.
18:22
Um and I think maybe like everything is it's just less forgiving.
18:26
So if you're highly disciplined and motivated um the way that you can use new media is better than ever.
18:32
But if you're not, then it's just going to be worse than ever.
18:35
You mentioned the White House as I'm certainly this is the first White House that feels completely timeline native and reactive.
18:42
>> Yes, I think it's the first modern administration for better for worse. >> Yeah.
18:45
What else does that mean?
18:45
What else does modern mean in that context other than timeline native?
18:49
>> It's just highly reactive and reflexive to the timeline.
18:51
Um I think it's hyper aware.
18:53
You know, maybe in the same way that past administrations would be sort of addicted to polling.
18:59
I think it looks more at the timeline than than polling which is all about understanding the wants and desires of the the median and the average person.
19:07
But the timeline is actually it sort of shifts back to a more Republican model, which is that you're caring about whatever it is, a few hundred thousand people who are influential and you know, Ben Sasse, the the former senator has this great notion that Washington is now mostly people who want to be like Tik Tok and YouTube stars is like mostly what congressmen and and senators want to be.
19:36
And he condemns it, which is true from some very simple sense, which is you would hope that like congressmen and senators primarily interested in governance. But they're not.
19:46
>> [laughter] >> But on the other hand, like I think maybe a shift of this that I'm only just putting together now is like governing maybe polling drives governance, whereas if you're really only polling the timeline you can sort of think about it as this is why, you know, we have the people who do well in politics now are just optimized for content.
20:06
They're basically content creators.
20:08
Because the polling is the timeline.
20:10
And that's interesting again because who is on the timeline?
20:15
I mean the readers is probably more of an like an accurate sample of the the median people in the country, but the posters who are dictating what the timeline thinks of something is a really really small group.
20:27
And it's so it's almost just like, you know, if the if the original sort of vision for who voted was you know, white male landowners maybe the vision the the version of people who matter for policy now are are just the good posters, which is like I don't know if that's a good or bad thing, but it's it's it's certainly a very different group that I don't think correlates super tightly to any particular demographic trait necessarily.
20:53
>> You're friends with many or most of the great posters.
20:55
What makes a great poster?
20:57
>> You know, I think it's not that dissimilar to writing and so I do think that like being a little bit tortured, having a bit of a like messed up personal life, just in general.
21:05
Yeah, I You can think of the idea of like >> Like comics or something.
21:11
>> Yeah, and maybe posting is a little bit like a writer mixed with a comedian or something like that.
21:16
Certainly has something like comedic element of you need to sort of have a riff that resonates and it's sort of this like instant hit.
21:23
It's phrased in an interesting way.
21:24
They're They're sort of like a blend of like comedy, poetry, and writing.
21:29
>> Do you think we're at You've used this funny phrase before, uh, that we're at peak guy? What does that mean?
21:34
>> I think we are at peak guy.
21:34
It's hard to say where to start this.
21:36
There's a pagan understanding of God as being like in and around you everywhere. Everything is animated.
21:41
Everything is controlled and dictated by the gods.
21:43
And then the Renaissance, you could say that God lives above the clouds, but there's like a guy up there that you can talk to.
21:48
And then when we discover what's past the clouds, we go, "Okay, well, there's no guy up there."
21:53
And then we discover space.
21:55
And so basically you have to just keep going, "Well, okay, like maybe he's beyond space."
21:58
And, uh, maybe we don't know that it's a guy anymore, uh, or like a distinct person or something, uh, that you could address and talk to.
22:06
But it's this conceptual thing.
22:08
God just sort of like moves farther and farther away and becomes more and more conceptual.
22:12
But the idea is that like ever since we've sort of become an atheist society, we've been looking for things to sort of look up to and worship.
22:19
It's sort of trite now to say that like everyone has to worship or whatever.
22:22
I think maybe like the more precise thing would be that um, the There's always a role for a priest in society.
22:29
And we've been looking for new priests.
22:31
And I think we tried scientists as priests.
22:33
The sort of the scientific pro- project has fallen apart a little bit.
22:36
Um, this is widely discussed.
22:36
We looked to physics as hopefully going to provide us meaning. It hasn't.
22:42
Physics has largely stalled since the war.
22:44
And so I think we've moved beyond science as as a source of meaning.
22:49
And so I think like that There's this billionaire class that we've sort of looked to as the new sources of meaning.
22:54
Like like on its surface, it doesn't make a lot of sense that we would spend so much time caring about what billionaires think about whatever physics or theology or health or topics unrelated to occurring a billion dollars.
23:06
But the reason we do, I think, is this is our new priestly class, which is we've said, "Okay, you know, the with the values that are important in our society are being successful at business.
23:14
And to be successful business, you generally have to be smart and hardworking.
23:18
And so, these are the people that have ascended to the highest realm of piety in our value system.
23:25
And so, we're going to listen to them.
23:27
We we're willing to like take scientific and medical advice from I would say people who are either in the billionaire class or are adjacent to the billionaire class, which is the poster class, which is like the the new class, I think.
23:37
And so, the the peak guy thing is like this idea that I think we've had enough of the billionaire.
23:44
There's basically been a lot of billionaire worship.
23:45
Part of it is that they've gotten way less scarce.
23:48
I think billionaires, at least like sort of state-of-mind billionaires, have probably grown 100x in the last 20 years, probably more.
23:53
We sort of look to them to provide us these answers and um it has not been satisfying.
23:58
And so, you know, I think this notion that like I want to catch [snorts] every podcast with this billionaire and I'm going to study his routines and habits and care about what he thinks about these things has come to its like full saturation.
24:09
I think there's also this like secondary idea, which is that money, I think we've just seen is not as powerful as we maybe maybe it once was or we or we think it is insofar as um you know, certainly our political landscape, we have not seen uh the donor class be nearly as successful as they maybe used to be or we thought they were.
24:32
If you're a billionaire, you're sort of quite limited on the things that you can do vis-a-vis like an African warlord or even, you know, uh certainly a upper baron, right?
24:41
And so, maybe there's these sort of like three forces of inflation is sort of driving down what it means to be a billionaire at all.
24:46
And then the evolution of like power structures in society are also limiting.
24:52
Like Andrew Carnegie could take up arms against his workers, but like now if you if you like post the wrong thing as a as like a billionaire, you have to resign.
25:03
Like there's a sense that this whole class has just become less important.
25:06
And then I also think like like just the media and podcast, it's just saturated.
25:10
There's just you you you get it.
25:10
You you understand this thing.
25:11
But we but we don't want to take life advice.
25:14
We don't want to hear about what's happening from from the billionaire class anymore.
25:20
And so I would say that like that whole set just feels very saturated.
25:24
It feels unlikely that there's a marginal billionaire that I'm going to learn something very interesting from on a podcast.
25:29
And I don't think that was the case like 6 years ago.
25:32
And so the logical question is like, what is the next class as we sort of flail around looking for our next set of priests?
25:37
And I look I think it I think it's the poster.
25:39
And uh And I think you can see this because I think the billionaire class is a little bit deferential to the poster.
25:46
And so like one very clear way is the science class sort of inherited the priests the priesthood after the actual priests.
25:54
And then you can always look which class is subservient to the next to see who's next.
25:58
And like the science class becomes subservient to the billionaire class.
26:02
This is certainly the the Epstein lesson, right?
26:04
Which is all the scientists are clamoring around the sort of money and glamour.
26:06
And that now I think the billionaire class has become subservient to the posting class.
26:10
And so so I think you can sort of see who society collectively chooses to be like, all right, this is the guy I want to listen to for 2 hours and you know, base my life on.
26:20
>> Subservient to the poster class evidenced how?
26:22
Why do you say they're subservient to the posters?
26:25
>> I was at this thing a while ago.
26:28
And it was a bunch of billionaire investors.
26:30
And they were all fighting over who could sit next to Tyler Cowen because he's the most interesting person there.
26:37
>> Yeah, every room has a boss.
26:38
>> Every room has a boss. Yeah, exactly.
26:40
And I think um I think there's there's very much something to that.
26:44
It's sort of that simple.
26:45
And uh there's sort of this line of subservience.
26:49
>> There's also this interesting point about it's just scarcity like always.
26:52
And the billionaire inflation thing is the seed of their demise.
26:56
That if there's so many billionaires, if, you know, Grant Cardone is a billionaire and so is Elon Musk or something, it just makes it so stupid.
27:05
And so we either need a new class at the top.
27:08
And it's not deca or centa-billionaire, like that doesn't Who cares?
27:10
It's It's like something else that distinguishes We need to like reclassify the top 100 or something, robber barons.
27:19
Yeah, it's it it just seems like there's too many of them, so no one So no one care anymore.
27:23
And it's it seems much easier to get a billion dollars than it does to gain the real estate in people's minds or on the timeline that like the top couple of posters can do.
27:35
>> If I could just have it by decree, it would be who is a liquid inflation-adjusted billionaire.
27:38
I think that number is probably hasn't changed a whole lot.
27:42
But again, I think if I I always find it so useful to take the sort of like retrospective uh historic frame.
27:46
Net worth is like this new idea.
27:49
It's like a really new idea.
27:50
If you read like Pride and Prejudice, Mr.
27:52
Darcy, like what you know, they're talking about how wealthy all the men are. Mr.
27:55
Darcy is discussed as getting 10,000 lb a year from his estate. That's his wealth. It's his cash flow.
28:02
And it's funny, like no one There's not like a scene >> a DC effort to show that.
28:06
>> Yeah, there's there's not there's not like a scene in Pride and Prejudice where they're like, "Does he have a lot of margin loan against his estate?"
28:10
And there's also not this idea of, "Well, okay, his estate's worth, you know, whatever, 200,000."
28:17
Because he would never sell his estate.
28:18
It's like, "Why would you He is It's It's not viewed as his assets."
28:20
So it's just like wholly conceptual, just points on a leaderboard, like truly, cuz you can't spend it.
28:26
I really think it's kind of crass to say, but billionaire's like a state of mind between like private markets and uh net worth as a concept, >> Yeah.
28:36
>> uh and then inflation, billionaire's now sort of like something you can just be dubbed.
28:40
I think you'll come to see billionaire as sort of this like sort of political label that's only tangentially related.
28:47
I mean, you see this on the timeline a lot, which is people get referred to as billionaire who are, you know, not rich at all, but they sort of have these traits and associations.
28:57
And so, I think this term sort of millionaire, right?
29:00
Like millionaire >> No one says that anymore.
29:03
>> Yeah, and it used to be um it used to it sort of carry the same weight as billionaire, but now millionaire is sort of just this like it's a it's yeah, it's a it's both irrelevant, but it also like what it when you say someone's a millionaire, you're sort of just saying they're like a, you know, whatever upper middle class well-to-do person with a house. >> Yeah.
29:24
>> But it doesn't matter if they have $5 million or $800,000.
29:26
It's like this looser class thing as maybe currency gets devalued both in terms of in in the literal sense and also in the sort of what you can do with it sense.
29:34
I mean, time is fixed, right?
29:36
And so, then the new scarcity is just like attention you can draw on the on the screen.
29:42
>> If you think about the most interesting posters today, I'm not asking you to endorse them one way or the other, but just the people that you think are the most interesting. >> Yeah.
29:51
>> Who Who comes to mind?
29:52
>> The distinction to draw is there are um there are the the people that I want to get tweet notifications for because I actually think each one of their posts is a really good, and that's like a vanishingly small number.
30:04
And then there are good posters who have really made something of themselves because of their prolificness.
30:08
I mean, the the other sort of problem with posting is like it still does reward prolificness, which I am still sternly against.
30:14
I always think Twitter should be dictated by followers divided by posts, but that's not how it works.
30:18
It just rewards prolificness.
30:20
I think there's this idea that like the most important media property won't be watched, the most important author isn't read, the most important philosopher's not understood, the the most important stock has no fundamentals.
30:31
Like everything I think like in a world of fiat currency everything sort of becomes this like weird fiat thing.
30:40
Certainly it's true about philosophers, authors.
30:43
Like, does anyone really read the books these authors write? I don't think so.
30:47
I think a small amount of tastemakers read the books and then other people look at books as titles and if they're like sort of blessed by the right people, then they're sort of this like mimetic um celebration of the thing.
30:58
And even podcasts, like you said, right?
31:00
Like clips do a lot better than the podcast episode.
31:03
Like I I I think I pride myself like I can tell if a podcast or a blog essay or a book or something is good or not without having read it just by like sort of triangulating it.
31:13
Like I I know which one of your episodes do well without listening to them because I can sort of like feel from the reception.
31:20
And and like to some extent that is the thing.
31:22
Like you can imagine a world where there's a few clips from a podcast, but no one ever listens to the podcast, but like I don't actually think that would diminish the value of the property.
31:32
>> It's like everything is being um processed and packaged for uh catching attention but taking the least amount of that person's time. >> Yeah.
31:43
>> I heard [snorts] this interesting story about a publication that has X millions of followers or whatever readers however they describe it.
31:49
And the [snorts] person behind it told me like something like 95% of the readers are people that scroll through like the quote highlights on Instagram or something.
31:56
And whatever they're still a reader and it's just a fascinating it it's to me it's all quite depressing that we're all the world of posters and content has reoriented around this this monolithic timeline and they're all just feeding it what it wants.
32:12
But that's the game you sort of have to play.
32:15
And I'm curious I know you went I don't know 6 months or something completely off of it.
32:18
Like you just you just disappeared.
32:20
What was that like and is that uh a path that you would encourage people to give a try opting out?
32:27
>> I think my takeaway from that would simply be that one should not fool themselves that they are looking for anything other than entertainment in all the media that they consume because it is produced to be entertaining, it's selected to be entertaining, it's edited to be entertaining.
32:42
The job to be done of what is on the screen is to entertain you.
32:47
And so, I think that is the big lesson, which is like like like I'm not going to tell people how much entertainment they should have in their life, but that is what it is fundamentally.
32:57
Rolex or Nike can convince you that their thing is an investment or an asset versus a liability.
33:02
And so, then you'll spend way more money on it.
33:04
Podcasts and posts and essays can convince you that what you're reading is useful for you and like productive and and and anything other than watching TV all day.
33:16
Whether I want to spend an hour day on the timeline or 8 hours day on the timeline is just about like how much do I want to be entertained.
33:22
And, you know, any anything else that I would say about it, I think is is is really really milk-toast in the sense that like yeah, it doesn't you don't really miss anything.
33:33
Uh if you're like a relative if you're not like a complete hermit, like you hear about what's important, it gets filtered through you.
33:38
Probably the most like enlightened way to consume this media is to not read it yourself and just sort of get the filtered takes from people around you at dinners and lunches and stuff, and you just sort of let them, you know, first of all expose themselves to the radiation and then like kind of come back and tell you what's what's interesting or not on there.
33:57
>> Our friend Jesse thinks about it this way.
33:59
He refuses any algorithm in his life.
34:01
And we're like, "Well, how do you know it's including news which is just an algorithm.
34:05
It's like, "How do you know what's going on?"
34:06
He said, "Well, people tell you."
34:08
>> Yeah, that would be my takeaway.
34:08
The freedom versus impact question.
34:14
>> Do you believe that trade-off's real? >> I think it's real.
34:15
One of the questions I'm interested in is there seems to be I'm I'm always interested in this in in various classes of classes of guys, archetypes, genres, whatever.
34:25
And um there seems to have been this type of person that's largely gone extinct, which is And again, I I I unfortunately I think this is probably all just explained away by technology, which is sort of a boring but maybe accurate explanation.
34:38
But like the Theodore Roosevelts or the Andrew Carnegies of the world who are able to uh spend a lot of their time in leisure, a lot of time away from their business, and um you know, what's so interesting like for Carnegie for example is, you know, he he he he's he's arguably still the richest person or very close to the richest person uh that's ever lived.
35:00
But I'm fascinated by this idea of like is that necessarily true?
35:06
Like does the idea that you have to be working, you know, 22 hours a day to get these sort of world-changing outcomes?
35:15
Is that necessarily true?
35:15
Like I I I think it's interesting of like a I think Larry Ellison is like the contemporary figure who sort of bucks this trend.
35:23
And you know, he he he he he claims to have started Oracle very much with the intention of being able to disappear for 2 weeks to say hello or whatever and still by all accounts sort of like drops in and drops out.
35:31
And can you still be a player and not be like jacked in 24/7?
35:35
It's unfathomable that the president of the United States could be off the grid for a month.
35:40
But is that true in business? I don't know.
35:42
Is is is a lot of hard work performative? Maybe.
35:47
In the case of Carnegie it's interesting because he was self-conscious his whole life about joining the sort of society, maybe at the posturers of his day.
35:53
Like he he he he he knew that for him money wasn't going to be enough and he wanted to be accepted into society and be well-read and be a man of letters and and do writing and stuff.
36:00
And you know, in that sense like there's nothing new under the sun.
36:04
You know, the I I I I I firmly believe this to be true that like the end state uh is just posting.
36:09
Like the amount of billionaires and founders who turn to Twitter after they accrue their wealth or start a podcast or start a business.
36:19
>> Start a yeah, start a YouTube channel.
36:21
>> Yeah, is just like it it sort of is the end state.
36:23
And I think um you know, the way that you could look at that is just that, uh uh, once you accrue, uh, wealth, you want to accrue fame.
36:32
The other way of looking at it would be that, you know, again, like wealth is less valuable, and you actually realize that the scarce asset is attention and influence.
36:38
And so, you know, you're almost hedging against the sort of, you know, rapidly devaluing, uh, nature of your money, and and trying to switch to what is actually scarce.
36:49
>> I I find it very interesting that call it the seven or eight people that you and I are know that we're most interested in are not posters.
36:56
They're sort of some interesting opposite.
37:01
And, um, like they've resisted the temptation or something like that.
37:04
And that that makes me wonder if it's almost like a trap.
37:08
Um, but it's such an interesting concept that it's hard work is performative is the is the phrase you used.
37:12
It actually makes me wonder that hard work being performative thing, how you're thinking about this AI and job displacement question, which you and I have talked about a bunch about.
37:21
I'm I'm super personally interested in.
37:23
It seems to be the like the issue around which people are rallying for the anti-AI fears is that it's going to destroy jobs in a way that prior technology changes didn't because it's it's so ubiquitous, it's intelligence, and it's moving so fast that even if you compare it to prior tech changes, which all displaced jobs or changed jobs or whatever, it happened more slowly.
37:47
And that's why this one's so scary.
37:49
But it it gets at questions about what is work really in the modern sense, especially white-collar work.
37:55
I'm curious what you think is going to how you're thinking about like AI and and job displacement.
38:01
>> The short-to-medium term prognosis is is hard to speculate on, um, and could very well be bad.
38:08
Uh, you know, a friend of mine told me that, um, you know, he he he has kids in college, and he has a 10-year-old, and he's very worried about the kids in college, but not the 10-year-old, and I think that is directionally correct.
38:24
Um so from, you know, maybe from the 10-year-old's perspective, look, I think it's great.
38:28
I think first of all, anything that can be automated should be automated.
38:32
I think it's really hard to argue against that uh when you when you really really think about it.
38:39
Um and so, you know, the the the notion to me that uh I might I might be in the last years of my life where I ever have to sit down in front of a computer and like do things with it is like tremendously liberating.
38:49
I don't really understand this idea of like we're at peak jobs or we're going to run out of jobs.
38:56
To me, it's like very obvious that every certainly every white-collar job is like totally fake and made up in the sense that like these are not contingent for largely, you know, obviously there's exceptions to this, but they are not contingent for shelter and food and uh medicine and other necessities.
39:18
Like I'm not talking about those.
39:20
But most jobs do not touch those, or if they do, they touch it in a very very derivative way.
39:26
Um and so, you know, most jobs like like you know, what what what is your job as an allocator?
39:33
It's like, well, because capital is inherently inflationary, you have to you can't just leave it alone.
39:39
Like this is one like the great sort of um I don't know, uh maybe evils of money is that like once you get it, you can't just leave it alone cuz then it goes away.
39:48
And so you have to do something with it.
39:49
And this like creates this entire whole thing.
39:51
And so like my job is like when you have money and you don't want it to go away, you have to give it to someone.
39:58
And so you you give it to a bunch of people, and then I take it and I put it into things that are productive, and then hopefully you don't lose your money, you get more money. And like is this useful? Is this good? Yeah, sure.
40:09
But like it's not real, and it's like fun and useful, but not in a direct way.
40:15
Um and to me, there's like unlimited amounts of jobs that you can create in those sorts of scenarios.
40:20
We're going to have unlimited wants and desires.
40:21
And and and our economy is solely driven by our like unquenchable desire to consume things.
40:27
And so we're going to come up with new things to to consume.
40:29
And now again, in the short term and medium term, that might be volatile and there might be a lot of job loss and etc.
40:33
And you know, that's not good and you know, there could be a lot of despair.
40:38
But in in the long run, like we're just going to invent new things to do.
40:43
Like we've already solved all of our problems.
40:44
Um, you know, and and so to me like the worry about oh, we're not going to have more jobs.
40:51
Um, it just doesn't really resonate cuz I feel like we just make up stuff for us to do.
40:57
And that's sort of the whole point of it. Um, and that's good.
40:59
Like we you know, it's better than being being idle.
41:03
And and maybe maybe more people should be idle.
41:08
But I think like there's all sorts of ways that this like shows through the cracks, right?
41:11
Which is like um, you know, the the the the work from home thing I think is like a a strong indication of well, actually like most people don't have 40 hours of work to be done.
41:21
Like they they maybe have 40 hours of like meetings to sit in or they have 40 hours that they have to be on standby.
41:30
But, you know, I think the reason work from home I think wouldn't be that important if you like let's imagine a version where you work on a factory line and you can set up the microcosm of the factory in your backyard.
41:42
But you still got to be on the line 10 hours a day.
41:46
Um, yeah, I guess work from home like maybe you can have lunch at home and your commute, you don't have a commute anymore.
41:51
And that's but it's not like this huge improvement.
41:52
The people the reason people are so attached to work from home is cuz they actually have like two or three hours of work to do per day.
41:57
And so work from home Fridays is like a is a soft launch of the four hour four day work week.
42:01
And I think this is all fine.
42:03
Like to me, the fact that we can continue paying people to work from home or do four days a week or whatever is just a sign that like actually we need a less time, less labor time out of people than we used to and we're still able to be just as productive.
42:17
>> Some of these jobs maybe are made up and actually people will be happier not assuring bits from one place to another on a screen or something.
42:26
I'm curious how you think about searching for one's vocation.
42:29
You texted me one time something that stuck in my head, which is that we all have some sort of moral duty to steward our gifts.
42:42
And that if you think about if you agree that that's true, curious for you to expand on that.
42:48
But that that then reframes success and failure in a cool way that maybe cuts through this, you know, priestly class thing of like looking to others to tell us what to do versus looking internally. Can you expand on that?
43:01
>> there's something um even just aesthetically bad about waste.
43:08
And I think uh the the the one of the worst things that you can waste is your gifts, your um skills, attributes, things that you're uniquely good at, things that you can do for others that you might be able to do that others can't.
43:19
For me, one of the great challenges has been trying to understand how to best use those skills.
43:25
First of all, figure out what they are, which is easier said than done.
43:30
And then figure out how you can use them, you know, there's kind of two modes, I guess.
43:34
One is that you uh use them in a very pure and unadulterated way, and you don't try to integrate um your work with your how you use your gifts.
43:47
And this would be sort of, you know, the person who has a day job in order to support their their craft or something.
43:56
And then the other, perhaps more ambitious, version is trying to integrate uh commerce uh and their work with their gifts.
44:03
And, you know, I think um this gets into the like should you pursue your passion thing and and I think it's really difficult.
44:10
But you said something to me which is like the thing that you are spending most of your time on really ought to like spark and utilize your sort of genius and gift.
44:18
And if you're not doing that, like it's obviously not the thing that you should be spending most of your time on.
44:25
And so, I think like, you know, there's proxies for this.
44:29
Like are you having I think people who are having having a lot of fun at their job or like it's a very strong indicator that you've combined the two well.
44:37
>> What do you think the future of finance looks like?
44:38
In the '80s and the last era was built by those people from KKR and mostly doing leveraged buyouts.
44:42
Whereas that's those firms are obviously really important and really big, but they were started a long time ago and in many cases they're still run by people that that were the founder or close to the founder getting up there in age.
44:58
What do you think the next wave of finance look like?
45:00
>> The founder's incredibly important and sort of the the founding act is incredibly important in in any business or country or organization really.
45:07
Um and so, I I do think that it's notable that like the current paradigm in which we live, the largest and most important finance firms come out of a culture of leveraged buyout, which first of all it's it's a debt-driven idea.
45:23
It's financial engineering.
45:25
It's um it's extractive in so far as the primary goal is to make a thing more profitable and I'm not trying to disparage leveraged buyouts.
45:38
I don't think they're like as evil as people say, but the idea is like kind of the core idea behind it is like using debt and financial engineering to make a lot of money in a way that the quality of the business itself is maybe ancillary to to to the to the core trade.
45:52
Um and those are the founding, you know, what the founders and the founding acts of these large firms today are.
46:01
And so, you know, now that the Apollos and Blackstones and KKR's of the world, um you know, I think in a lot of cases the leverage buyout is a very small part of what they do today, but I do think it's still like in the core culture.
46:14
And one thing that, you know, we've pondered about before is like what what does the next 20 or 30 years look like when the those firm the the largest financial firms in the world their founding action was seed investing.
46:29
It's equity driven, it's power law, it's hugely optimistic, it's largely qualitative.
46:35
Um you know, what is it what what would a Blackstone or an Apollo look like if that was the core seed at the at the start of the you know, the inception of the firm?
46:48
Um and I don't have a great answer.
46:48
I just think that it is like it's notable, you know, in the same way that sort of equity financing is a far newer idea than debt financing and and um you know, equity financing is obviously a far more optimistic idea.
47:03
optimistic idea. It's um it's uncapped to the upside and so there's all these sort of philosophical ideas around equity versus debt and debt is far more ancient and and and you know, debt obviously has a very controversial past about whether it's morally good at all and um and so I you know, I I do think
47:20
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49:22
>> What other differences are interesting to you between East Coast and West Coast finance?
49:25
The people doing it, the optimism versus not pessimism, but realism or dollar orientation.
49:32
>> There's truth to the caricature, which is East Coast is um extractive, pessimistic, uh downside oriented, um West Coast is naive, stupid, uh unsophisticated.
49:50
Uh you know, I think like this is that is true to some obvious extent.
49:55
Um, and I think they're merging now.
49:58
Uh, and I think look, it's no coincidence that uh, that the West Coast is definitely eating the East Coast.
50:05
Venture capital has created the biggest businesses in the world and private equity has a not.
50:08
Um, and where private equity has, it's largely been through uh, through sort of acquisition and again financial engineering.
50:14
And so it's sort of inarguable that venture capital is this sort of much better force for the world.
50:20
It's a, you know, it it's this tiny little asset class that has produced all the most important things in the world.
50:25
Um, it's also this sort of uh, civilizational technology, which is you're willing to give young people millions of dollars to try a very speculative idea with like basically no retribution or downside if if it doesn't work.
50:38
Um, so it's clearly this amazing force.
50:40
I think it's been a very interesting like flip in uh, in compensation between East and West.
50:46
When I was growing up, my understanding was that uh, you know, Wall Street is where you would get paid huge amounts of cash on a yearly basis.
50:52
Um, you would have no enduring equity value, but you would get paid a lot of liquid cash on a fairly regular basis.
51:00
And the West Coast was this idea where you would, you know, be rich on paper.
51:03
You would have um, equity that would be this maybe be this enormous payoff in some distant future.
51:08
Um, and I think what's sort of interesting is I you could argue uh, and I would argue that those have started to flip now where it's like Wall Street because all these businesses have gone public.
51:17
Uh, you know, on Wall Street you're comped on RSUs and you're you're thinking like a firm and you're, you know, maybe it's especially at the top the top end of the firm.
51:26
You're you're you're less worried about carrying any one fund and you're more worried about the stock price and performance of the firm as a whole.
51:31
And and then on and uh, interestingly it's like in Valley it's almost moved towards a uh, like an annual cash basis.
51:36
But given how these markets, you know, companies staying private creates these sort of mature secondary markets.
51:44
Um, and there's these, you know, that sort of de facto yearly tender is becoming almost a almost a parallel liquid marketplace.
51:50
And so, you're actually paid huge amounts of cash in Silicon Valley, and I think we've seen that with with certainly with the AI stuff, and even, you know, venture capital firms getting acquired, and GPs leaving their firms, and and all this sort of stuff where it actually is becoming more money driven, more liquid, more more Well, maybe not more money driven, but certainly more liquid, more mercenary.
52:09
And I think like I'm always interested in these structural shifts and how that starts to change things where, um, you know, the Valley is a place where you're liquid and you're getting cash out yearly and you're jumping from firm to firm, and and and Wall Street is a place where you have a bunch of RSUs and and and and you're sort of, you know, thinking more about the long term and and the enterprise value of the firm.
52:34
>> If you add all this up, where are you looking for opportunity?
52:36
Like you you have such an interesting mandate because you can kind of you could do a venture style growth equity deal, you could do a special situations private equity style deal.
52:47
You've historically across your career invested in dozens of effectively software companies.
52:54
Um, you've I think so far wisely avoided companies that could get railroaded by cloud code or something like this.
53:02
And but nonetheless, like I think you're still curious about where there might be value in software.
53:07
How are you approaching just as a pure investor, how are you approaching this very strange high vol high uncertainty landscape?
53:17
>> We've largely sat on the sidelines.
53:17
Um, we're very fortunate to have such a such a wide mandate in sort of what we can do and look at.
53:24
Maybe the only consensus view is like the niche sort of apocalyptic vision at some of the core the core cells at the labs.
53:32
Um, but outside of that, I think it's really sort of a jump ball.
53:33
And so, it's it's hard to say.
53:36
I think the one thing that maybe I could say in general is that markets lack a lot of nuance.
53:39
I think, you know, SaaS is a business model, it's not um it's it's literally just a business model of this idea that you pay usually per person per month or per year for access to a tool that helps you use your computer.
53:58
Um I think in that sense SaaS is in a lot of trouble, uh but I don't think for a lot of these businesses that are, you know, being really sold off today out of fear that that is actually what is important to the business at all.
54:09
It is actually interesting to me, I would wrote a post recently about the idea that like um a public manager being long uh the Mag 7 is, you know, without taking up specific view on the trade, is probably like good capital allocation cuz sometimes you just got to do the really obvious thing and just follow the consensus cuz consensus is, you know, usually right.
54:31
Um and, you know, one of the pushbacks that I got to that is, well, these things, you know, they're the biggest companies in the world, they're priced to perfection.
54:40
But like I think it's underrated the fact that the 52-week variance on these things is like nearly 100% for the biggest companies in the world, and so they're not priced well at all, and the market lacks extreme nuance.
54:50
I think it goes back to what we were talking about, which is, you know, probably someone smarter than me could could draw out a much clearer picture, but there's something to do with passive flows and the marginal price of security, and what's informing the marginal price of securities is the posts in the group chats that the random people are writing that the algorithm's chosen.
55:09
I mean, in this way, I've actually never thought of it before, but like in this way the algorithm, the AI, frankly, cuz that's what my understanding is that's what's driving um most of the algorithms uh now on Twitter and uh YouTube and stuff, is pricing the market in some very real sense cuz it's choosing the narrative that it wants to show to people, and then those people are pricing off that.
55:30
And so, you know, I I just think it it's another lesson, which is like markets are not efficient, there's no nuance.
55:34
Um so, you know, that would be the big thing that we're seeing today.
55:39
I think I think there's a lot of delusion either direction.
55:41
The most honest thing for a lot of managers to do would be to sit it out, but they're structurally unable or unwilling to do that.
55:47
And so, you just sort of, you know, hope for the best and put capital out the door, and it's sort of a problem for tomorrow.
55:53
Um and so, I think a lot of things are still getting priced irrationally in the private markets in ways that are um totally unrelated to the quality of the business, but are more of a function of just the the the incentive structure of the funds.
56:06
>> You mentioned the SaaS is just a model, and there's there's good and there's bad.
56:12
What do you think about this trend of super CapEx heavy, uh token heavy, real-world asset, like there's this new genre of company that seems to have emerged as really dominant?
56:22
I was looking the other day, I was curious in our portfolio what percent was not pure bits, and it's like 60-something percent is is not just software by my you know, bit based on the market value of of our investments. I was surprised by that.
56:36
Like, it's a really high percentage.
56:38
Whereas VCs have mostly historically been like all software for the last 10 or 15 years.
56:41
What do you make of this class of this trend, this class of business, lower gross margins, you know, things like this?
56:49
>> One way that you can look at this um is, you know, we were really in the late innings in, let's call it 2016, 2017 on of Okay, returns in venture capital have been very high.
57:03
And so, and now we've seen whatever 20 years of venture returns being very good.
57:08
And so, logically, capital is going to flow into the asset class.
57:13
The problem is [snorts] that the venture market is largely constrained in that the amount of uh great businesses that are started is relatively fixed, probably I believe downstream of um of how many great founders there are.
57:24
I think there's just a finite amount.
57:25
More and more capital flows into venture, there's basically a finite amount of companies.
57:32
So, a bit more money into the same amount of companies.
57:34
And um this was becoming a real problem uh right before AI and COVID, which was that there's only so much money that you can cram into a B2B software business.
57:48
And especially when annoyingly the companies are getting um cheaper and cheaper to start.
57:53
And so, you know, functionally what you saw and what you still see to some extent, but but what you really saw was that all this capital was just flowing to landowners and to uh compensation packages, basically.
58:04
Um and so it was like this real problem, which is that like, you know, capital hates getting blocked. It's like water.
58:12
It wants to find the most efficient path.
58:15
And it was getting blocked because it wanted to flow into venture because there was backward-looking higher returns.
58:19
But like, it was just constrained.
58:22
You got to kind of cram so much money into these companies.
58:23
And you know, it was a lot of what inspired me to start my fund was seeing this problem, which was just that like the amount of money these companies are raising is unrelated to the amount of money they need.
58:34
And then, you know, almost as if like uh you know, deus ex machina, uh all the sudden there was two great categories that could just soak up this capital.
58:43
And and I and I really do believe in some sense that the like businesses and assets are sponges for capital.
58:48
And that the excess if the, you know, in an era of back then we had negative interest rates and stuff, the capital has to go somewhere.
58:54
And if it has nowhere to go, it will create somewhere for it to go.
58:57
And I think that there's a very sort of fortuitous uh arising of these high CAPEX businesses of of AI, the ultimate high CAPEX projects, and uh obviously all the hardware stuff.
59:10
Um and so I think in some sense like you could say that the capital markets were desperately looking for a place to go to to to to put the capital and there was no place.
59:19
And so these companies almost got created downstream of capital, which I think is a little bit different of the narrative than than than most people would look at.
59:25
So that's sort of the philosophical view.
59:27
The economic view, I think part of the reason SaaS is getting punished so much today in the market is because it was this idea of you're selling a copy of a string fundamentally.
59:36
That's what a software product is.
59:38
And the marginal copy of a string is very close to zero.
59:40
And so, with zero marginal cost, the thing that you're selling should be highly profitable.
59:46
The vision of that was that you will have high upfront costs and then you will have very high gross margins and hopefully one day very high net margins, although the net margins seem to never sort of materialize until private equity gets their hands on things.
1:00:00
Um and sort of forces that net margin out.
1:00:02
That era is largely just a downstream coincidence of this like selling strings.
1:00:06
And now I think we're in an era where we're selling compute.
1:00:10
And selling compute, you can't you can't write the prompt once and then sell copies of the output.
1:00:17
You have to do the compute every single time.
1:00:19
And so, the marginal cost obviously is not zero.
1:00:20
And I think this is like a fundamental huge change to the software business.
1:00:24
And I think it means that this era of high gross margins being the norm is just going to go away.
1:00:32
And what's going to make up for it, I think, is lower gross margins, much thinner net margins, and just much more scale.
1:00:41
And I think that's sort of what you're seeing, which is that the capital is flowing to the the top end provider of the scale.
1:00:46
I think, you know, it would have been unthinkable that we talked about companies in three to four trillion dollar market caps 10 years ago.
1:00:53
Part of a big part of that is inflation, I believe.
1:00:57
But, you know, another part of that is just the scale dynamic, which I think it's uncontroversial to say we're going to have 10 trillion dollar companies and so on and so forth.
1:01:03
So, there's just going to be because margins are going to drop, you're just going to all the returns are going to accrue to scale because obviously low margin low scale is not a very good business.
1:01:15
And so, there maybe it's a bit of a it's a bit of a crudely a bit of a Walmart effect in software, which is that Uh, you know, I think the future looks like low gross margins, razor thin net margins, huge scale, and this is probably a problem for the sort of um you know, if the SaaS provider is the mom and pop shop, like Walmart's coming to town.
1:01:36
>> You have this funny view that uh the whole myth of how difficult it is to beat the market, so just whatever however you want to define the market, uh is wrong.
1:01:44
I'm I'm curious for you to expound on that.
1:01:45
Like that that that seems to be have become cuz sort of post Jack Bogle one of the deeply held truths of the market is that it's extraordinarily difficult to beat the market, so you shouldn't even try.
1:01:56
You should just opt out of the opt out of the battle.
1:01:58
I think you have a very different view on this.
1:02:02
>> Yeah, I would take I would take two different kind of cuts at this.
1:02:04
Um, one would be that I think Buffett and Munger were my kind of main teachers on investing.
1:02:12
Buffett says that he he wants his estate outside of Berkshire to be put in the S&P.
1:02:17
That's his advice to the general public.
1:02:19
And so I think people would take that to say that Buffett's saying you can't beat the market.
1:02:22
I don't think that's what he's saying.
1:02:24
I think he is saying for the average person you shouldn't try and beat the market.
1:02:29
Implicit in that statement is leaving out any sort of active investor.
1:02:30
Maybe the anecdotal side would be Buffett saying, you know, you should put all your money into the S&P.
1:02:35
That's the most rational thing you should do.
1:02:38
On the other side is the sort of empirical argument, which is look, most professionals don't even beat the market after fees.
1:02:45
Uh, and this is sort of this great This is this one-two punch of um you know, the godfather of investing says uh don't try, and then the the seemingly the smartest people the most with the best incentives in the world can't do it.
1:03:00
And then the other thing is I just think that um I think I think for a professional money manager uh and this is sort of the paradox with the Buffett thing is that for a professional money manager, it is really hard to beat the market because you have all these other factors um that the average person doesn't have.
1:03:15
And this is sort of like the Peter Lynch argument.
1:03:17
I increasingly think Peter Lynch was just like kind of a genius about this.
1:03:19
Um uh which is that like yeah, when you're a professional manager, uh by and large, you have all these mandates, you're running a business, you have customers that you need to keep happy.
1:03:29
It's actually I think it's more difficult for the professional money manager to beat the market than like the average amateur.
1:03:34
Like how many people do you know who like bought Bitcoin and and and did really well or bought They bought a Tesla and then they bought the Tesla stock or they bought an Apple computer and they bought the Apple stock.
1:03:44
And you can't run a hedge fund that way, but they've outperformed, um you know, just doing that.
1:03:49
And so I think there's a little bit of this like weird thing where in isolation none of the advice is wrong, but like it's not as difficult as people think to to I think outperform um or do better than the average.
1:04:02
Uh and and there's this notion that gets caught up in all sorts of other things that I think sort of sullies that view.
1:04:09
>> I wanted to ask a LP's perspective and like what basically like what you would do if you were an LP, what you'd be looking for.
1:04:16
>> I get asked a lot um by LPs where they should put their money or like what managers are good or should they invest in this fund.
1:04:24
And one thing that struck me is like I think you have to take a somewhat cynical view of these things as and I maybe it's not actually cynical, just maybe a more realistic view of these are businesses first and and you know, their product is returns, but like they're a business.
1:04:37
And so you have to recognize what sort of customer you are.
1:04:40
Like the you know, the question of where should I put my 500 grand check?
1:04:46
You probably shouldn't put it into like, you know, marginal $5 billion growth fund.
1:04:50
But I actually get asked that a lot.
1:04:51
Like should I put some, you know, one or two million dollars into this fund?
1:04:56
And the answer there is like, well, you know, it's probably going to be a good fund, but like you it's could you find something much better to do with that million dollars? Probably.
1:05:05
Um and it sounds obvious, but like in in reality it's it's not.
1:05:09
And I think what people don't understand is that basically if you're a principal let's say if you're a principal that can't write like sovereign or institution size checks you're a totally different customer and the businesses are not designed to serve you as a customer.
1:05:24
Like the growth fund is probably a great place if you have to park a hundred million dollars somewhere.
1:05:30
It's probably a very very good place but it's not a good place to park like a five hundred grand check.
1:05:33
park like a five hundred grand check. If your business is set up to service sovereigns and and large endowments and stuff you just like your product is just so different from what you're going to serve for someone smaller and this gets into the like well okay if you have a
1:05:47
small check what do you do and I think this is where the emerging manager stuff is really underrated um uh and and looking for you know looking basically looking for places where the manager is actually most tightly aligned to returns either because returns are critical to future funds or that's actually how they're going to make all their money. >> Are there features of the emerging
1:06:07
>> Are there features of the emerging managers situation that you find interesting or attractive one way or the other?
1:06:15
>> It's probably similar to how I look at everything but I think you know especially for an emerging manager when you're truly just sort of underwriting the person I think people still fail they probably overweight the in my view they they overweight the investing thesis and track record and stuff and underweight just the like
1:06:34
facts about the person you know I think you and I are both big believers in the idea of like how you do one thing is how you do everything and so I think the more that you can probe you know like I think like the personal financial situation of a manager is an incredibly underrated thing to ask about right? Like um
1:06:49
Like um if you have a couple hundred million dollars in the bank account in your bank account and you're raising a thirty million dollar fund that's very different than someone who has a million dollars in the bank who's raising a hundred million dollars to go you know do a thing that they're trying to make make the most money from.
1:07:08
There's like two very different places to start from underwriting.
1:07:12
One sort of like notion I have about this is whether whether someone is looking up or looking down at something, and the idea is sort of like you know, you take the same again, take the same let's say $250 million funds.
1:07:25
One is from someone who has 500 grand in the bank, and one is from someone who has $500 million in the bank.
1:07:29
These are just like obviously going to be treated very very differently.
1:07:33
For the latter, for for the $500 million person, the $50 million fund is going to be like this like >> plaything. >> Plaything, yeah.
1:07:39
And again, like toy isn't meant to be pejorative.
1:07:41
Like the toy might very might very well do better because it's held with a looser grip. It's less on the line.
1:07:46
You're you're going to be less paralyzed by the sheer like quantities of dollars.
1:07:50
I feel like that that is generally not not super super recognized.
1:07:54
And um and you see it all the time, like in new ventures.
1:07:59
If you're helming something that is, you know, let's say two or three zeros more than you have, there's just a sort of like monumentalness to it that is a bit intimidating.
1:08:08
And and you know, you can scale this all the way up.
1:08:11
You have someone who's worth a hundred million, worth a ten billion dollar fund.
1:08:13
Like it's just a big sort of scary thing.
1:08:16
And I don't care who you are, when you're taking when you're taking bets that are, you know, an order of magnitude larger than uh the any amount of money you've ever had, there's just a psychological factor there versus when you're taking bets um that is, you know, uh that that are maybe sort of negligible to you.
1:08:33
to you. And I think this also gets back to the like part of the reason I think it's easier for people to outperform individuals is like it's easy to, you know, sort of take a flyer on a stock with a, you know, very marginal fraction of your net worth that you don't feel you need to explain
1:08:51
and doesn't you're not going to be judged on later than it is to do with maybe a dollar amount that's more money than you have and it you you're going to affect your track record and you're going to have to explain it and all these other factors that are not related to like do you think this is a good investment or not? >> You and me are also interested in the
1:09:03
>> You and me are also interested in the sort of what I'll call the underbelly of finance and you have this funny idea around the sort of feudal like system that is emerging in the world of SPVs and the big private companies. Can you share that idea?
1:09:15
>> There is this funny notion.
1:09:15
I mean it's sort of specific to the labs but it's a broader a broader thing as well I suppose.
1:09:20
We're sort of recreating the feudal system from first principles where there are the lords, Elon, Zuckerberg, Dario, Sam and they're sort of they can sort of make landed gentry by giving out allocations because these allocations are sort of these sort of like the best general best example of generational wealth.
1:09:40
You know, you sort of you get this allocation in SpaceX or in Waymo or whatever and you get to charge huge fees on it and it's sort of this like wholly synthetic product which is someone gives you a sort of arbitrary number.
1:09:55
Again, like they know you don't have the money so they know you're going to go fill it and then you get to go out and basically say I have been given like a deed on on on literally like the king has given me 500 acres on on on in his
1:10:06
country and you know, Elon has given me a 100 million dollars to allocate in SpaceX and you get to go out and charge fees and make a bunch of money from it and there's this sort of this thing of like do you have allocation? And I guess I'm
1:10:15
And I guess I'm interested in it because it's sort of this like purely relational wholly synthetic thing that I'm not sure has ever existed before or certainly not at the scale and magnitude where like you can go due to your relationship basically get this like landed estate and then take it to a sovereign or a foundation and they will pay you for that access.
1:10:35
Like a pure sort of unpaid for access but maybe where it's different is like, you know, you could say that's just brokering but the difference is obviously that, you know, brokering is sort of like a one-time transaction but these allocations sort of, you know, they live on forever.
1:10:48
>> What's the most egregious fee set up you've seen in one of these?
1:10:51
>> No GP commit 10% one-time upfront fee with some carry structure generally where you're just like demanding basically that you get paid like life-changing amounts of money with zero risk and then you also get a huge amount of upside.
1:11:09
The other thing is like they often don't have um I've seen a few that have don't have a term limit.
1:11:14
I know there was like famously some a lot of SpaceX ones.
1:11:17
I think people were doing that 10 years ago.
1:11:19
And uh I know there's certainly some some that just have just collect the fee forever.
1:11:23
But I mean to So to his credit you're very happy to be paying that 2% on the SpaceX thing that you did 15 years ago.
1:11:29
Um uh and so it's sort of a win-win.
1:11:32
It's not to say these are all bad.
1:11:33
It's just It's sort of funny cuz it's not investing.
1:11:34
It's not strictly brokering.
1:11:36
It's this very like different thing that is like a wholly insider access game.
1:11:40
Then of course all there's there's all the fraud and bad behavior that I think comes with all the bubble and stuff.
1:11:44
>> How do you think about your own productivity for lack of a better word?
1:11:49
We talked before about how content is really just entertainment, not learning.
1:11:54
We shouldn't kid ourselves about that.
1:11:56
So therefore it is largely unproductive, which is fine. It's entertainment.
1:12:01
How do you think about to the extent you care about yourself personally being a lot more productive with all this insane tool?
1:12:10
>> I certainly care about productivity.
1:12:10
For me by far the most generative thing is uh are conversations, which I guess are downstream of relationships.
1:12:19
And so I don't feel I think part of the reason my book reading has gone down is I'm friends with a lot of people who read a lot of books.
1:12:27
Uh and so I I think like if I could only keep one thing, it would be conversations with people that I find interesting.
1:12:32
And um but I also think like I'm uniquely tolerant of uh sort of distasteful and weird people.
1:12:42
Like I do think part of the reason I get asked for a lot like what's your media diet and conversations are my answer and I it always feels like the answer sort of falls flat with people.
1:12:51
And think it's because they're not friends with like weirdos.
1:12:52
Like I like a lot of my friends I think are sort of um people would largely like find strange at best, distasteful at worst.
1:13:00
If I can't predict what the person's going to say after knowing them for a while. I like them a lot.
1:13:05
And that's obviously like a very high variance thing. >> Old books are good.
1:13:09
I've read a lot of old books in my life, but I think YouTube remains underrated.
1:13:12
Like there's a lot of really obscure things on YouTube.
1:13:16
YouTube sort of remains the Library of Alexandria of of our time, maybe of ever.
1:13:21
But yeah, YouTube doesn't feel generative.
1:13:23
I think the only thing that's generative is conversations.
1:13:26
And you know, so far in early 2026 I would say chatbots can lull you into feeling generative, but if I actually look at like the actions that I've taken like you can feel really productive after like a good 2-hour session on a chatbot.
1:13:41
But I actually don't think they're that ultimately that generative.
1:13:45
>> If you think about great investing ideas, what is the right balance between simplicity and complexity?
1:13:50
If you think of both in the ones that you've done yourself, but also studied.
1:13:57
>> I really do think people value complexity for the sake of complexity a lot.
1:14:00
I think a lot of investors are in the like feel clever, look smart game more than the money game.
1:14:07
And so, you know, personally I think this has been a big area of like self-development for me, which is the clever thing is not always the thing that makes money, obviously.
1:14:18
Um and so I think like you either have to say I am looking for investment ideas that are so complex that no one is going to do them, or it should actually be quite simple.
1:14:32
I I'm a bigger and bigger believer in the in the simplicity, which is like you probably want to be long Elon Musk, you know, or like like that level of idea.
1:14:40
I actually think like the the gift is being able to sell that idea.
1:14:45
I think a lot of the investing media actually serves for the people who are really good to dress up those ideas in a way that makes them feel differentiated and smart enough to what is actually sort of just long Elon or long Bitcoin.
1:14:57
I think of a guy that I know who exclusively does bankruptcies.
1:15:01
He makes a lot of money, but like that's very complex and very difficult, but you know, it's a tremendous amount of work.
1:15:09
It's grimy, it's difficult, it's there's a lot of risk and interpersonal stuff and and like that to me is like an example of getting paid for complexity.
1:15:16
Whereas a good example of simplicity is like you should just buy like big companies when they're at their 200 200-week moving average.
1:15:27
And it like I love that idea cuz it's just so simple. Um but it's right.
1:15:31
Um but it's right. One story that I absolutely love cutting through the mass and getting to like complete clarity on how to evaluate an investment is from Richard Rainwater, which is you know, um he there there was these stories about him that he you would basically come
1:15:46
into his office with a yellow legal pad uh and you would write out your thesis on one page and then you would tell him what percentage of your net worth you're going to put in the deal and based on your one-page thesis and the percentage of the net worth that was going to put in he would say yes or no. And I think
1:15:58
And I think that's genius.
1:16:00
Like I I really um know people don't do that because uh that's really hard.
1:16:06
It makes things way hard.
1:16:07
First of all, it's hard to write a compelling thesis in a page, much easier to do it in a 400-page slide deck.
1:16:10
And second of all, no one wants to say well, I'm only putting 3% of my net worth in this, you know.
1:16:18
Uh and to me that's one of the most simple, clear examples of really cutting to is this a good investment or not that I've ever heard.
1:16:26
>> One of the I think natural points of leverage now is the ability to hire extraordinarily well, which means two things, attract an amazing differentiated talent pool and then select from that group effectively. >> Yeah.
1:16:41
>> That's something that you thought a ton about in building your business.
1:16:45
And it seems like a skill that if you got good at it would be unbelievably valuable in this era specifically where the returns to like outlier talent seem to be going up and up and up.
1:16:54
What did you learn about the the two stages of that process?
1:16:58
Like And I'm especially interested in attracting a unique pool of talent in the first place.
1:17:05
>> Maybe the most practical thing is that I think is very low-hanging fruit is just the the job description.
1:17:10
Um I think job descriptions are one of these things where they are written for nobody to be to be read by nobody and they're sort of this like token document.
1:17:19
Like it more about the does the job description exist?
1:17:26
Uh it is more the question versus like what's written in the job description.
1:17:29
And so I tried to write one that followed a very simple rule which was A, uh you know, I was going to obviously I was going to post it on on Twitter and LinkedIn.
1:17:38
And so I think anything you post has to be a good standalone post.
1:17:43
It you know, it can't just can't be something that you but it can't be something that you wouldn't share if you didn't know me.
1:17:50
Um Uh and so that's the first and then the second I think was really that I think I think what's so important in any sales pitch, which is what a job description should be, is to disqualify who you don't want.
1:18:03
And the nice thing about a divisive statement is that [snorts] it when it resonates, it deeply resonates with the person.
1:18:11
And so I just try to think of okay, like what are all the traits that I would want someone to have and try and make them again to go back to the like uh how you do one thing is how you do everything that would make them the type of person that I was interested.
1:18:24
Obviously the skills and the experience was going to be table stakes.
1:18:27
I tried to write out um traits and ideas that would really be inspiring and for the right person be like, "Whoa, like this person really gets me, understands me."
1:18:37
And would make people mad.
1:18:39
One of the things that I posted uh the one that kind of was was the funniest was uh or or got the most reaction was um you're an ideological minority at a top 10 school.
1:18:51
And what I love about that is that it's entirely open for interpretation.
1:18:53
So, you know, um uh I would get people who would be many different things, right?
1:19:01
Who'd be angry that I only want a top 10 school.
1:19:03
The nice thing about top 10 schools it's a fully ambiguous statement.
1:19:07
And so, you know, what what I love about it is um oh I love about it that I mean A, there's there's some schools that I think uncontroversially are top 10 and so I just get those people.
1:19:19
Uh but you can also just sort of assert that your school is a top 10 and I had a few people from schools that I wouldn't not say were anywhere close just sort of assert that and I thought that was great.
1:19:29
I had people select out because they were sort of like, you know, oh I don't know if my school was.
1:19:34
I'm not going to apply that's great cuz I don't want those people.
1:19:36
And then ideological minority was really interesting.
1:19:38
I had a certain idea in mind, but people gave me all kinds of answers about ideological because, you know, I didn't necessarily political.
1:19:46
There was all kind of answers around um you know, how that person stood out at the at their school.
1:19:52
And so, I think like those statements are great because they're like highly ambiguous.
1:19:56
They can be um there's a bit of a inherent test of confidence.
1:20:04
And uh and then, you know, I I would even get a few posts that were like, "Hey, you know, I I I think this is You should hire me.
1:20:10
I didn't go to a top 10 school. You're an idiot."
1:20:13
And I love that person, too, right?
1:20:13
And so, like I think the more you can do statements like that where they like get this sort of reaction is great.
1:20:19
Uh and you sort of like do all like imagine what you would have to do in an interview to like get at all of those various traits.
1:20:28
Um and so, yeah, statements like that I think are are very much underutilized in these job descriptions.
1:20:33
>> It's a cool idea baking the interview into the job post itself.
1:20:36
>> It seems to me like an underrated area of inquiry today that I know you're interested in is the cultural and intellectual traditions behind major movements.
1:20:46
And I think that that is certainly been true in this wave of technology.
1:20:52
And it's not something I see talked about, written about very much.
1:20:57
And I'd love you to just riff on your interpretation of the key uh sets of beliefs behind the people and the institutions that are ushering in the biggest wave of technology change that we've probably ever seen.
1:21:11
>> I'm interested in mispricings in qualities and attributes uh about things and people and places.
1:21:16
I don't know if this has always been true, but it's true today.
1:21:19
I think there's some uh qualities and attributes that are you know, widely recognized and priced efficiently, let's say.
1:21:27
Um height, IQ, resume, etc.
1:21:31
And then there's other traits and characteristics that um we have just decided collectively not to price.
1:21:37
For Silicon Valley, people sort of underrate the philosophers and thinkers and um sort of like memetic ideas that underpin the whole thing.
1:21:51
I think there is a real philosophy that's some sort of like neo-Buddhist utilitarianism uh that underlies the like technological developments in Silicon Valley.
1:22:03
And it's interesting because you see it like Will MacAskill uh gets involved with SBF and FTX.
1:22:08
There's these sort of thinkers like Nick Land um that are their sort of ideas percolate underneath the surface in the Valley and are influential on everyone, but are not necessarily named.
1:22:19
I mean, now they have been.
1:22:21
Um you could say the same thing about Curtis Yarvin.
1:22:23
I thought it was remarkable for years how you could sort of hear Curtis's ideas coming out of the mouth of a mouth of the the big tech leaders without being named.
1:22:30
There's things like leverage research and all these intellectual characters that I think, you know, in the same way that I think um uh people's religious beliefs are generally underrated by secular people in terms of how important that is as a guiding light.
1:22:44
I think uh in the valley in the development of these technologies, these sorts of cultural and philosophical ideas are underrated.
1:22:53
Like the, you know, like it or not, the models are highly utilitarian.
1:22:55
They have this weird mix of religious ideas from from Judaism, from Buddhism, um and this sort of like utilitarian bent that turns into effective altruism and and, you know, people sort of think like okay, like, you know, this is just cultural, whatever, but it it these things matter.
1:23:16
And it just feels to me that this whole cultural epicenter has been highly underrated in general and informing um why these things get built and what the worldviews inherent in them are and what the inherent worldviews are in the people who build them.
1:23:30
And it almost feels to me that um that was Wall Street in the '80s was sort of vain, uh almost pagan, the strong and the beautiful are what's most important.
1:23:40
There's a hedonistic aspect to it.
1:23:42
There's an openness that it's a little bit nihilist because it's all just about getting money.
1:23:46
getting money. It's not the same notion and I think at the crux of that is that technology views itself as totally self-righteous, which is that like the thing that they are building, it's not nakedly sin driven or driven out of a greed or ambition, it's driven out of
1:24:00
this, you know, a nominally altruistic idea of no, we're building this thing, this product that the whole world uses, it's it's positive sum, um which is true on the surface, but I do think that it's almost it's almost pathological to the point where there's no recognition of all the other factors. It's it's almost
1:24:15
It's it's almost sort of shadow-esque.
1:24:17
Um and there's none of this notion of like, well, if you work in finance, you sort of need to try you need to translate the gains from finance into something worthy into into art into architecture into philanthropy into just culture in general or into the place that you live.
1:24:32
None of that exists because I think the tech views itself as you know, that the ultimate philanthropy is is the business that you're building.
1:24:40
I don't think Silicon Valley today has the same sort of reflexive need to justify or document or even launder sort of what they're doing through you know, through going to book parties and and and arts and and all all this sort of stuff.
1:24:53
Um, and I think it's like this interesting this interesting difference and I I wish that more people would um, try and document this stuff because it's all there.
1:25:03
All the crazy all the sex, drugs, and rock and roll is there in its own sort of like nerdy autistic way and the culture again, I think culture is just like vastly underrated and and religious beliefs whether literally religious or sort of pseudo-religious but but but filling that void.
1:25:21
>> As always when we talk, I wish we had three more hours.
1:25:23
Thanks for doing this for me again. Thanks for your time. >> Thanks for having me.
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