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BONUS: Bill Gurley on Investing Early in Tech Disruptors & 'Runnin' Down a Dream' · Masters in Business

• 0:02
  Speaker 1: Bloomberg Audio Studios, podcasts, radio news. This is Masters in
• 0:11
  Speaker 1: Business with Barry Ritholts on Bloomberg Radio this week on.
• 0:16
  Speaker 2: The podcast what Can I Say? Another banger? Bill Gurley
• 0:21
  Speaker 2: of Benchmark Capital, Legendary VC, early investor in uber, Zillow,
• 0:27
  Speaker 2: Open Table, Rubhub, next Door, the List, Instagram, just Twitter,
• 0:34
  Speaker 2: The list just goes on and on and on. What
• 0:36
  Speaker 2: a fascinating career filled with insights not only about venture investing,
• 0:42
  Speaker 2: but about building a career that you love. I thought
• 0:47
  Speaker 2: this conversation was fascinating, and I think you will also
• 0:49
  Speaker 2: with no further ado my conversation with Benchmarks Bill Girley.
• 0:55
  Speaker 2: Before we get into the book, which I found very interesting,
• 0:59
  Speaker 2: and your whole career, Let's start with your background. You
• 1:03
  Speaker 2: get a bachelor's in computer science from the University of
• 1:06
  Speaker 2: Florida and then an MBA from UT Austin. What was
• 1:11
  Speaker 2: the original career plan?
• 1:12
  Speaker 3: So I fell in love with computers at a young age,
• 1:15
  Speaker 3: and many people that get to Silicon Valley you hear
• 1:17
  Speaker 3: that common refrain. I had a Commodore VIC twenty that
• 1:20
  Speaker 3: would plug into your television and it didn't have solid
• 1:24
  Speaker 3: state memory, so you type programs in but when you
• 1:27
  Speaker 3: turned it off, done it done? Yes, to start over anyway.
• 1:31
  Speaker 3: I fell in love with programming, as many people do,
• 1:34
  Speaker 3: and just amazed that you could create things, you know,
• 1:38
  Speaker 3: And so that was my undergrad degree. I worked for
• 1:43
  Speaker 3: two years in change at Compact Computer Corporation using those
• 1:47
  Speaker 3: skills and discovered that that wasn't going to be my
• 1:51
  Speaker 3: long term path.
• 1:53
  Speaker 2: You said you were exceedingly bored at what looked like
• 1:57
  Speaker 2: on paper a dream job.
• 1:59
  Speaker 3: Explain, Well, back then, Compact was a leader in the
• 2:06
  Speaker 3: personal computer business, and we would release one PC and
• 2:09
  Speaker 3: then usually around an Intel generation, you would reach the
• 2:14
  Speaker 3: next PC.
• 2:15
  Speaker 2: See kids today don't remember three six forty six all DM.
• 2:19
  Speaker 3: It was like a big deal. H Yeah. And so
• 2:22
  Speaker 3: we started on the third project that was a lot
• 2:26
  Speaker 3: like the second and a lot like the first. And
• 2:29
  Speaker 3: I asked myself a question, and I don't know if
• 2:31
  Speaker 3: I realized I was doing it as much now as
• 2:35
  Speaker 3: as much then as I do now. I asked myself
• 2:38
  Speaker 3: the question, is this what I want to be doing
• 2:40
  Speaker 3: thirty years from now? And in any organization there's someone
• 2:44
  Speaker 3: that's a lifer that you can like ask yourself, is
• 2:48
  Speaker 3: that what I want? AND's with no judgment towards people
• 2:51
  Speaker 3: that do that. But it became very clear that that
• 2:53
  Speaker 3: wasn't for me. And this would be particularly interesting for
• 2:56
  Speaker 3: your audience because it's an investment crowd at home at night.
• 3:00
  Speaker 3: I had read One Up on Wall Street by Peter
• 3:03
  Speaker 3: and I had opened a Prodigy account, which was this
• 3:06
  Speaker 3: precursor to AOL, and I was starting to get really
• 3:11
  Speaker 3: interested in stocks. I had bought the Value Line. Remember,
• 3:14
  Speaker 3: this thing became a big notebook with the one pagers.
• 3:18
  Speaker 2: Updates, the three ring binders, and like a whole shelf
• 3:22
  Speaker 2: of a malphabetical.
• 3:23
  Speaker 3: And one thing I'd really encourage people to think about
• 3:26
  Speaker 3: is what are you doing in your free time? And
• 3:29
  Speaker 3: maybe you should Is there a clue that that should
• 3:31
  Speaker 3: actually be what you do full time? And so this
• 3:34
  Speaker 3: thing was itching at me.
• 3:36
  Speaker 2: So first gig in finance was that Deutsche Bank.
• 3:40
  Speaker 3: No, It's credit sweets first Boston. So I while I
• 3:43
  Speaker 3: was at the University of Texas NBA program, I thought
• 3:47
  Speaker 3: about venture but it seemed very hard to get towards.
• 3:51
  Speaker 3: I like technology, I like disruption, I liked programming, and
• 3:56
  Speaker 3: it seemed hard to get at But at that time,
• 3:59
  Speaker 3: when you get to business school, some young adults like
• 4:02
  Speaker 3: to pretend their financiers, and so they read Fortune, Forbes,
• 4:06
  Speaker 3: the Wall Street Journal, and the Atrium, you know, as
• 4:08
  Speaker 3: if and I would read the tech articles. And there
• 4:12
  Speaker 3: was a team at Goldman Sachs on the cell side,
• 4:15
  Speaker 3: and the cell side I think was more kind of
• 4:18
  Speaker 3: held in higher regards then show. And this team with
• 4:23
  Speaker 3: Dan Benton and Rick Sherlin and Goldman got quoted all
• 4:25
  Speaker 3: the time. And I said to myself, you know, I
• 4:27
  Speaker 3: really love my corporate strategy class. I love technology. These
• 4:32
  Speaker 3: people get to opine on it and are treated as experts.
• 4:37
  Speaker 3: So I went to I came here to New York
• 4:39
  Speaker 3: and I knocked on doors cold. I asked those that
• 4:43
  Speaker 3: particular team for a meeting. They let me in. I'm
• 4:46
  Speaker 3: a freshman, our first year at the URSYECH. They let
• 4:50
  Speaker 3: me in, and I told all the other research directors,
• 4:53
  Speaker 3: I'll be in town meeting with those guys. And I
• 4:57
  Speaker 3: got like ten meetings doing that. And one of those
• 5:01
  Speaker 3: individuals was Al Jackson, and he gave me a shot.
• 5:04
  Speaker 3: And I can remember the first day of orientation there
• 5:08
  Speaker 3: were like forty new people from NBA programs and we
• 5:11
  Speaker 3: had to go around and say our name in school
• 5:13
  Speaker 3: and it was what you'd expect Columbia, Wharton, Harvard, but
• 5:18
  Speaker 3: I was a University of I was, but I'm so
• 5:24
  Speaker 3: grateful to Al for giving me that shot. The cell
• 5:27
  Speaker 3: side analyst job has one trait that is remarkable, which
• 5:31
  Speaker 3: is you immediately get to start talking to CEOs and
• 5:34
  Speaker 3: CFOs and I don't know of any other job where
• 5:38
  Speaker 3: that just happens right away, right out of school. Yeah,
• 5:41
  Speaker 3: so the access was amazing. I ended up getting to
• 5:44
  Speaker 3: cover the industry. I worked in the computer industry. I
• 5:47
  Speaker 3: got to know the team at Dell. We I very force.
• 5:52
  Speaker 3: This story involves our mutual friend Mike Mobison, sure, but
• 5:57
  Speaker 3: because of something Mike taught me, I got very bullish
• 6:01
  Speaker 3: on Dell, and it was trading it six times earnings
• 6:04
  Speaker 3: because they had had some issues, and.
• 6:07
  Speaker 2: I recall the big I think that a CFO that
• 6:10
  Speaker 2: was doing some dumb swap they had.
• 6:12
  Speaker 3: They had an options future currency thing that went wrong,
• 6:16
  Speaker 3: and their laptop caught on fire, and both those things
• 6:20
  Speaker 3: happened at the same time. And so mister Mobison had
• 6:24
  Speaker 3: really gotten into ROC analysis at that time, one of
• 6:27
  Speaker 3: the first people to really get behind it, and he
• 6:30
  Speaker 3: had me read this book valuation from McKenzie and the
• 6:33
  Speaker 3: stern Stewart book. And when I ran those ro i
• 6:37
  Speaker 3: C calculations on all the players, Dell was like, it's
• 6:41
  Speaker 3: way of everybody, way above everybody because they were building
• 6:44
  Speaker 3: to individual order. They weren't building to him Andry. The
• 6:47
  Speaker 3: balance sheet was not tied up at all. They had
• 6:49
  Speaker 3: a positive cash conversion cycle. It was unbelievable.
• 6:53
  Speaker 2: You just had a weather the storm and on the
• 6:55
  Speaker 2: other side, but that means you're buying something.
• 6:58
  Speaker 3: Well, we went, we went strong by but because of
• 7:00
  Speaker 3: this ri C differential that no one was talking about.
• 7:03
  Speaker 3: Michael kindly tweeted about my book the other day and
• 7:06
  Speaker 3: said he taught us some things we didn't know ourselves
• 7:10
  Speaker 3: about our business. And it was a great run. I
• 7:12
  Speaker 3: mean that really launched my career because that stock went
• 7:15
  Speaker 3: up one hundred x.
• 7:16
  Speaker 2: Yeah, that was a that's a home run. That's a
• 7:19
  Speaker 2: venture like return. Yes, from a public company. How did
• 7:22
  Speaker 2: you end up at Deutsche Bank from CSFB.
• 7:27
  Speaker 3: I had the same thing happen one night. I was
• 7:29
  Speaker 3: at Parker Avenue Plaza on the thirty sixth floor and
• 7:33
  Speaker 3: I was there at like ten pm, as the young
• 7:35
  Speaker 3: people do, and I walked around and the lifers were
• 7:37
  Speaker 3: in the corner offices, and I stopped in front of
• 7:40
  Speaker 3: each of their offices and I said, is this what
• 7:43
  Speaker 3: I want to do the rest of my life? And
• 7:46
  Speaker 3: that night when I walked home, I knew it wasn't
• 7:50
  Speaker 3: to sellside. But I loved theel side. I had a
• 7:52
  Speaker 3: great run getting access to all those people being here
• 7:56
  Speaker 3: in New York, working like on Wall Street. As a
• 7:59
  Speaker 3: young person, it gave me so much energy and excitement,
• 8:04
  Speaker 3: like it's just it's a different deal if you're in it,
• 8:07
  Speaker 3: It's just a different deal. But but I knew it
• 8:11
  Speaker 3: was it was time, and I started looking around. I
• 8:14
  Speaker 3: almost took a job with Capital Group in la who
• 8:19
  Speaker 3: I still hold in a mintary guard as an investment organization.
• 8:25
  Speaker 3: And Frank Quatrone called me out of the blue. And
• 8:28
  Speaker 3: Frank was leaving Morgan Stanley. He is the most notable
• 8:33
  Speaker 3: high tech investment banker of all time. And he sat
• 8:37
  Speaker 3: down with me and we had a very candid conversation.
• 8:40
  Speaker 3: He asked me what I wanted to do long term,
• 8:43
  Speaker 3: and I told him, I said, I've come to this conclusion.
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  Speaker 3: I don't want to be a seal sidnas anymore. He said,
• 8:48
  Speaker 3: what do you want to do? And I said, I
• 8:50
  Speaker 3: think I want to be a venture capitalist. And he said,
• 8:53
  Speaker 3: this almost sounds too good to be true. He says,
• 8:56
  Speaker 3: come to work for me for a while, be a
• 8:58
  Speaker 3: sales side as a little bit longer, I will move
• 9:01
  Speaker 3: you to Silicon Valley. I'll put you in the epicenter,
• 9:04
  Speaker 3: and I'll introduce you to every venture capitalist that I know.
• 9:07
  Speaker 3: And he knew them all. Wow, and yeah he was.
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  Speaker 2: He was probably the acts on tech IPOs, certainly one
• 9:15
  Speaker 2: of the top three.
• 9:17
  Speaker 3: Yeah, and so I took that trade. He did everything,
• 9:20
  Speaker 3: he said. I only worked for him for thirteen months,
• 9:23
  Speaker 3: so it all. And in that window we secured the
• 9:28
  Speaker 3: mandate for the lead left position on the Amazon IPO.
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  Speaker 2: Which turned out to work out.
• 9:34
  Speaker 3: Are you okay? And that's such a great piece of
• 9:38
  Speaker 3: kind of IPO tech history. If no one could name
• 9:43
  Speaker 3: whose lead left on the Amazon IPO, and you can
• 9:46
  Speaker 3: go find I do this frequently. Go look at the
• 9:49
  Speaker 3: S one and it's Deutsche Morgan grunt Fell lead left. Wow.
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  Speaker 2: So how did you transition from working with Quatron at
• 9:59
  Speaker 2: Deutsche Bank to Benchmark? If you're right in the heart
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  Speaker 2: of Silicon Valley?
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  Speaker 3: He did what he said, he introduced me to every
• 10:05
  Speaker 3: VC I was taking so out of that list. Yeah,
• 10:08
  Speaker 3: we're taking quarterly meetings with Benchmark, where they're inviting me
• 10:12
  Speaker 3: into their Monday meeting and we're just chatting about where
• 10:14
  Speaker 3: the industry's going. Yeah, he really did what he said.
• 10:17
  Speaker 2: And but why Benchmark as opposed to Sequoia.
• 10:25
  Speaker 3: Actually, my first offering Adventure came from Anne Windblad, and
• 10:29
  Speaker 3: I was so eager to get into venture. When the
• 10:33
  Speaker 3: offer came at Hummer Windblad, I said yes, and I
• 10:37
  Speaker 3: didn't know what I didn't know. I got involved in
• 10:40
  Speaker 3: the organization. It was structured like a very traditional firm
• 10:43
  Speaker 3: where the founders made more equity than the young people,
• 10:46
  Speaker 3: and there was also a bit of a power differential
• 10:49
  Speaker 3: where you know, the person that got to dictate how
• 10:52
  Speaker 3: things went, where the elder states.
• 10:55
  Speaker 2: Old school lawyer account structure.
• 10:58
  Speaker 3: Yeah, and the guys had lived within those frameworks and
• 11:04
  Speaker 3: decided to do something crazy, which was to create an
• 11:06
  Speaker 3: equal partnership where everyone makes the exact same amount of
• 11:10
  Speaker 3: money and everyone has the exact same power within the
• 11:14
  Speaker 3: organization for decision making, and there's no leader. And I
• 11:18
  Speaker 3: can't tell you what it's like to have someone from
• 11:23
  Speaker 3: an organization like that reach out to a young person
• 11:26
  Speaker 3: and say, come on and be a part of this
• 11:29
  Speaker 3: versus the traditional one.
• 11:31
  Speaker 2: Be a partner, although I would imagine the whole eat
• 11:34
  Speaker 2: what you kill ethos could be a little intimidating.
• 11:38
  Speaker 3: Well, but here's the thing. I think at those hierarchical firms,
• 11:42
  Speaker 3: there's an upper out mentality, so the people at the
• 11:45
  Speaker 3: bottom live in constant fear of what you're talking about,
• 11:48
  Speaker 3: and they also get sharp elbows to the side. At Benchmark,
• 11:52
  Speaker 3: these founders were going to split equally whatever I did,
• 11:56
  Speaker 3: and so what I found was the cultural zeitgeist that
• 12:02
  Speaker 3: came out of that structure is one of immense help
• 12:05
  Speaker 3: and support. And so I immediately had four mentors who
• 12:09
  Speaker 3: had been doing this a lot longer than I did,
• 12:11
  Speaker 3: who were in my corner every single day, and then
• 12:15
  Speaker 3: I got to live through bringing other people in. It's
• 12:18
  Speaker 3: a wonderful recruiting tool to tell someone you're going to
• 12:21
  Speaker 3: be equal, but then you win when they win. And
• 12:24
  Speaker 3: you know, those original Benchmark founders who did very well
• 12:28
  Speaker 3: with their eBay and a REBA investment in fun one,
• 12:32
  Speaker 3: they all participated in uber investment that I brought in
• 12:35
  Speaker 3: the table and today you know, Eric Visher has got
• 12:38
  Speaker 3: cerebraus and I'm going to benefit from that. And it's
• 12:42
  Speaker 3: it is a culture that I think is really great
• 12:47
  Speaker 3: for generational change. And when I talked to LPs about
• 12:53
  Speaker 3: what I mean, the LP doesn't have much they can control,
• 12:56
  Speaker 3: right they're trying to decide, and the window for how
• 13:00
  Speaker 3: successful a fund is moving from seven years to fifteen
• 13:03
  Speaker 3: like you're getting past I mean, like the time you're
• 13:06
  Speaker 3: going to turn around and analyze whether investors any good
• 13:10
  Speaker 3: or not, you're going to be retiring. And so what
• 13:14
  Speaker 3: you can study is do you think the organization has
• 13:19
  Speaker 3: elements that will cause it to be able to succeed
• 13:22
  Speaker 3: with generational change? And I think one of the proudest
• 13:25
  Speaker 3: things of just me serving as part of it is
• 13:28
  Speaker 3: that we were able to move from a place where
• 13:30
  Speaker 3: the founders were the ones behind all the winners to
• 13:33
  Speaker 3: where the next generation was.
• 13:35
  Speaker 2: So when you joined Benchmark, I think you were relatively
• 13:41
  Speaker 2: I don't want to say a unicorn, but there weren't
• 13:43
  Speaker 2: a whole lot of public market research folks in the
• 13:50
  Speaker 2: VC world then Now it seems that it's a little
• 13:52
  Speaker 2: more common. But were you a little bit of a
• 13:55
  Speaker 2: one off one you join.
• 13:56
  Speaker 3: I know a piece of history that's probably not well known.
• 14:00
  Speaker 3: But Ben Rosen of seven Rosen, who's not a brand
• 14:04
  Speaker 3: you hear much of anymore. And and we're involved in Compact.
• 14:08
  Speaker 3: He was actually the chairman of Compact. He was a
• 14:12
  Speaker 3: he was a semiconductor analyst in the seventies, so he
• 14:15
  Speaker 3: was the first one, and then yeah, and then after
• 14:18
  Speaker 3: me and kind of it was kind of at the
• 14:20
  Speaker 3: same time. Danny Rymer was was a sell side analyst.
• 14:24
  Speaker 3: Mary Meeker was a self science so it was there
• 14:26
  Speaker 3: there were It was. The weird thing about venture is
• 14:30
  Speaker 3: if you like pulled people on their background prior to venture,
• 14:33
  Speaker 3: is is real diversity. There's like a whole bunch of
• 14:36
  Speaker 3: different pathways. Mike Meritch was a writer. But but right
• 14:41
  Speaker 3: I recall that there's a handful of us that came
• 14:43
  Speaker 3: that path. Huh.
• 14:44
  Speaker 2: Really interesting. Coming up, we continue our conversation with Benchmark's
• 14:48
  Speaker 2: Bill Gurley discussing his new book Running Down a Dream,
• 14:53
  Speaker 2: How to Thrive in a career you actually love. I'm
• 14:57
  Speaker 2: Barry Ritolts. You're listening to Masters and Business on Bloomberg Radio.
• 15:15
  Speaker 2: I'm Barry Ridolts. You're listening to Masters in Business on
• 15:17
  Speaker 2: Bloomberg Radio. My extra special guest today is Bill Gurley
• 15:22
  Speaker 2: of Benchmark Capital. He has a new book, Running Down
• 15:25
  Speaker 2: a Dream, How to Thrive in a Career you actually love.
• 15:30
  Speaker 2: I love the Tom Petty title What led you to
• 15:33
  Speaker 2: start with that I.
• 15:35
  Speaker 3: Put together back when I was super active writing blog posts.
• 15:40
  Speaker 3: I would keep these notes in digital form, but I
• 15:44
  Speaker 3: would start. I'd probably start three or four times as
• 15:48
  Speaker 3: many or blog posts as I finished, and so if
• 15:52
  Speaker 3: an idea popped in my head, I'd just write notes
• 15:54
  Speaker 3: down and see if I went back to it.
• 15:56
  Speaker 2: And that was a note.
• 15:58
  Speaker 3: Yeah. I had read these three biour fees of people
• 16:00
  Speaker 3: that were from very different fields, that all started on
• 16:03
  Speaker 3: the bottom rung and became remarkably successful in their field,
• 16:08
  Speaker 3: and I noticed a through line between them, and I
• 16:11
  Speaker 3: just wrote it down the same way I would figure
• 16:13
  Speaker 3: out how an internet marketplace company might thrive, Like, oh,
• 16:17
  Speaker 3: do this, this and this. And I got invited one
• 16:21
  Speaker 3: day back to my alma man to do a speech
• 16:23
  Speaker 3: and at Texas Business School, and I asked if I
• 16:26
  Speaker 3: could do this one and and so then I developed
• 16:29
  Speaker 3: it a little more and I put it out there.
• 16:31
  Speaker 3: They put it on YouTube and a few people noticed,
• 16:34
  Speaker 3: and one of those was James Clear, who wrote Atomic Cabage.
• 16:39
  Speaker 3: And I want to make this sound too mushy, but
• 16:44
  Speaker 3: like at some point I decided that it was time
• 16:49
  Speaker 3: to declare victory and hang up my boots and venture.
• 16:52
  Speaker 3: And it was a decision. It wasn't like the other decisions.
• 16:56
  Speaker 3: I spent twenty five years in Venture capita. I loved
• 16:59
  Speaker 3: every minute of it. It was my dream job. But
• 17:02
  Speaker 3: I wanted to start doing other things. And there's a
• 17:05
  Speaker 3: great book by Arthur Brooks, Strength The Strength, that talks
• 17:08
  Speaker 3: about people that reached that stage in life, and it
• 17:11
  Speaker 3: really spoke to me. And I decided to push this
• 17:15
  Speaker 3: book out. And two people had really gotten behind me
• 17:18
  Speaker 3: and pushed me to do that. One of them was
• 17:20
  Speaker 3: Tony Fidel, who invented the iPod and was head of
• 17:23
  Speaker 3: engineering on the iPhone.
• 17:24
  Speaker 2: I know I recognized that name.
• 17:26
  Speaker 3: He had a book called Build. He also started Nest
• 17:29
  Speaker 3: and he told me that it was the best thing
• 17:32
  Speaker 3: they had ever done, and that's kind of hard to believe.
• 17:35
  Speaker 3: And then I was talking to Danny Meyer last night,
• 17:38
  Speaker 3: the famous New York restaurant tour and founder of Shakesheck
• 17:41
  Speaker 3: and he said the same thing. He said. He said
• 17:44
  Speaker 3: the book Setting the Table was more rewarding for him
• 17:47
  Speaker 3: than anything he had done. And I asked him why
• 17:49
  Speaker 3: is that? And he told a story. This is a
• 17:51
  Speaker 3: very long answer. I'm sorry. He told his story about
• 17:54
  Speaker 3: being in Africa at a hotel and one of the
• 17:58
  Speaker 3: local workers in this restaurant were in. He was in
• 18:03
  Speaker 3: told him, look at how I'm doing the eggs and
• 18:05
  Speaker 3: it was a technique out of his book setting the table.
• 18:09
  Speaker 3: Oh really. And the reach, his argument was the reach
• 18:13
  Speaker 3: that he could get in sharing what he knew via
• 18:16
  Speaker 3: a book, you know, was exponential compared to what he
• 18:19
  Speaker 3: could do just opening another restaurant. And that was powerful. Anyway.
• 18:23
  Speaker 3: Once again, it sounds maybe a little too mushi or
• 18:26
  Speaker 3: sound not at all, But if I'd have written a
• 18:28
  Speaker 3: book about being a VC or an investor, there's only
• 18:31
  Speaker 3: a handful of people it might have touched. And I
• 18:35
  Speaker 3: felt very compelled to share this because I thought it
• 18:39
  Speaker 3: could have a bigger, much bigger reach, because it's not
• 18:41
  Speaker 3: just about a career. It could be applied to a
• 18:44
  Speaker 3: career in investing, but it's it's a much broader book
• 18:47
  Speaker 3: about doing what you love.
• 18:49
  Speaker 2: So let's talk about some of the items from the book,
• 18:53
  Speaker 2: starting with there's a stat I think it's in the introduction,
• 18:57
  Speaker 2: it's not even in the first chapter six ten people
• 19:00
  Speaker 2: say they do something differently if they could start over.
• 19:04
  Speaker 2: That's a horrifying statistical.
• 19:06
  Speaker 3: Well, we were studying this Gallup poll that said like
• 19:08
  Speaker 3: fifty three percent of people are quite quitting at work,
• 19:12
  Speaker 3: they're not engaged or don't consider themselves engaged at work.
• 19:16
  Speaker 3: And I think other people have echoed those types of thoughts.
• 19:20
  Speaker 3: And on a whim we I was working with a
• 19:24
  Speaker 3: co writer and researcher. We did a survey Monkey survey
• 19:27
  Speaker 3: and asked this question, if you could start over again,
• 19:30
  Speaker 3: would you do something different? That one came out seven
• 19:32
  Speaker 3: and ten. We hired we hired Wharton to do an
• 19:35
  Speaker 3: official academic review, and that one came out six and ten.
• 19:40
  Speaker 3: There's a book by Daniel Pink about regrets called The
• 19:43
  Speaker 3: Power of Regrets. He says that the regrets of inaction,
• 19:47
  Speaker 3: the stone unturned, the path not taken way in our brain.
• 19:51
  Speaker 3: We ruminate far more on those than regrets of action.
• 19:54
  Speaker 3: So we let ourselves off the hook for making mistakes.
• 19:58
  Speaker 3: We're pretty good getting passed them. And moving on. But
• 20:01
  Speaker 3: the thing we never tried, it really eats at us.
• 20:05
  Speaker 2: I forget the name of the book. They interviewed a
• 20:07
  Speaker 2: bunch of ninety year old people talking about their life regrets.
• 20:11
  Speaker 2: And it's never the comissions or errors. It's always the
• 20:15
  Speaker 2: things they never did because in your mind you imagine
• 20:19
  Speaker 2: an entire different pathway, and that's the that's the regret.
• 20:24
  Speaker 3: And one of the catchphrases we use in the book,
• 20:27
  Speaker 3: which came from my partner Kevin Harvey's life, is a
• 20:30
  Speaker 3: use it or lose it proposition.
• 20:31
  Speaker 2: For sure, Absolutely for sure. So the idea of career regret,
• 20:36
  Speaker 2: you lay out a variety of principles to avoid it,
• 20:41
  Speaker 2: starting with obsessive curiosity. Dive into that tell us about
• 20:46
  Speaker 2: obsessive curiosity.
• 20:47
  Speaker 3: All of the people that we studied and what we
• 20:50
  Speaker 3: expanded it from the presentation. I gave it to school
• 20:53
  Speaker 3: and probably read one hundred biographies. But every single one
• 20:57
  Speaker 3: of these people are obsessive learners in their field. And
• 21:01
  Speaker 3: you and I are both I already mentioned, but you
• 21:03
  Speaker 3: and I are both both a friends and a fan
• 21:07
  Speaker 3: of Michael Mobison. And and I don't think there's a
• 21:10
  Speaker 3: human that reads more books on finance than Mike.
• 21:13
  Speaker 2: It's a race between him and Larren Buffett.
• 21:16
  Speaker 3: Yes, and and he fully synthesizes him. When you know
• 21:20
  Speaker 3: one cheat code if you want to chase a dream
• 21:23
  Speaker 3: job and investing is you could just start by reading
• 21:25
  Speaker 3: Michael's books, because he's read all the other books, and
• 21:29
  Speaker 3: it'd be a great place to start.
• 21:31
  Speaker 2: But I literally have a couple of chapters in here
• 21:34
  Speaker 2: based on his work. Yes, yes, that because it's he's
• 21:38
  Speaker 2: just so seminal in so many ways.
• 21:40
  Speaker 3: And and and and in the book, you'll you'll see
• 21:42
  Speaker 3: examples of of Danny Meyer, the restaurant tour, Bob Bob Dylan,
• 21:48
  Speaker 3: you know, the folk singer. There's this part we uncovered,
• 21:51
  Speaker 3: you know most I'm sorry that the new movie missed this,
• 21:55
  Speaker 3: but you get more of it if you go back
• 21:57
  Speaker 3: to the Scorsese documentary. Some people called him a music expeditionary,
• 22:04
  Speaker 3: so he studied music at a level no one would
• 22:08
  Speaker 3: know this, like if they just listened to Dylan. But
• 22:10
  Speaker 3: he is obsessive about learning about the art. And early
• 22:16
  Speaker 3: on they called him a mimic because he was able
• 22:19
  Speaker 3: to kind of parrot every other artist that he studied.
• 22:23
  Speaker 3: And even today, you know, he did a podcast for
• 22:25
  Speaker 3: a while where he went through like histories of music.
• 22:28
  Speaker 3: His his newer book goes through fifty songs that he
• 22:32
  Speaker 3: thinks changed the world. Like this, This study element is
• 22:37
  Speaker 3: just inherent in so many of these people. And what
• 22:40
  Speaker 3: I love about first of all, I think it is
• 22:43
  Speaker 3: a defining factor of success. Are you does continuous learning
• 22:48
  Speaker 3: in your field come easy to you? And it's a
• 22:51
  Speaker 3: great test of whether you're pointing in the right direction
• 22:54
  Speaker 3: or not, because if it feels grindy to do that,
• 22:57
  Speaker 3: you're not in the right place. You need to try things.
• 23:00
  Speaker 4: You're gonna laugh.
• 23:01
  Speaker 2: I every morning I take a quick look at a
• 23:04
  Speaker 2: bunch of headlines and run through. And I saw something
• 23:07
  Speaker 2: this morning that said there's a high correlation between people
• 23:12
  Speaker 2: who read books and longevity. So all these folks chasing down,
• 23:18
  Speaker 2: you know, blood treatments and all these longevity things, it
• 23:21
  Speaker 2: turns out just read a couple of books a month,
• 23:23
  Speaker 2: you'll extend your lifespan.
• 23:25
  Speaker 3: How about that?
• 23:25
  Speaker 2: Yeah, really really interesting. So you mentioned Danny Meyer, you
• 23:29
  Speaker 2: mentioned Bob Dylan, Sam Hinky the Coach is another one.
• 23:34
  Speaker 2: What when I first got the book, I'm always a
• 23:37
  Speaker 2: little nervous when I get a book, and I'm like, oh,
• 23:40
  Speaker 2: this is gonna be preachy and tedious, but it wasn't.
• 23:43
  Speaker 2: It's interesting and narrative driven. What led you to the
• 23:48
  Speaker 2: storytelling format of all these people's life experiences as opposed
• 23:53
  Speaker 2: to the more traditional.
• 23:55
  Speaker 3: Your listeners can't tell because we're not on video, but
• 23:57
  Speaker 3: I'm smiling, grinning ear to ear, and I'm so glad
• 24:00
  Speaker 3: you noticed that.
• 24:01
  Speaker 2: Oh very it's it leaps off the page.
• 24:03
  Speaker 3: So there was there was quite a bit of intention
• 24:06
  Speaker 3: in that. So just as when I was when I
• 24:12
  Speaker 3: was a computer scientist, I was at home trading stocks
• 24:15
  Speaker 3: as a as an investor, I developed on the side somehow,
• 24:19
  Speaker 3: I guess through this act of reading, just a super
• 24:22
  Speaker 3: appreciation for really well written non fiction. And there's actually there's.
• 24:27
  Speaker 2: Two packs of the book. You have chapters on all
• 24:30
  Speaker 2: your favorite books.
• 24:31
  Speaker 3: There's a there's a book called The New Journalism and
• 24:33
  Speaker 3: a follow up called The New New Journalism, and the
• 24:36
  Speaker 3: Tom Wolf put together the first one. The second one
• 24:39
  Speaker 3: is writers people would know more today that studied the
• 24:44
  Speaker 3: craft of great nonfiction writing. Like that's what that book's about.
• 24:48
  Speaker 3: And it covers Lewis and Krackauur and Gladwell and all
• 24:51
  Speaker 3: the books that have done extremely well, and there is
• 24:55
  Speaker 3: a through line in there that storytelling is something that
• 25:00
  Speaker 3: people really loved to read. Morgan Housel was on this
• 25:05
  Speaker 3: podcast called Why We Write, and he went on and
• 25:07
  Speaker 3: on about that technique and I had discovered it as well.
• 25:10
  Speaker 3: And so my co writer actually does most of his
• 25:14
  Speaker 3: work for The Atlantic. And so the books divided into
• 25:18
  Speaker 3: two halves. There's a profiles and there's principles and if
• 25:24
  Speaker 3: you look at the table of contents, all we interleave them,
• 25:27
  Speaker 3: which was a technique I borrowed actually from Michael Dell's
• 25:32
  Speaker 3: book where he interleaved two stories in the same book.
• 25:36
  Speaker 3: And the idea there was two things behind that. One,
• 25:41
  Speaker 3: I thought the book would be more readable if it
• 25:43
  Speaker 3: did that. A lot of the books that are the
• 25:47
  Speaker 3: cornerstones of the career category, like Designing Your Life and
• 25:51
  Speaker 3: What Colors Your Parachute are structured more like a textbook,
• 25:54
  Speaker 3: and I just felt that the if it were more readable,
• 25:58
  Speaker 3: it would be more approachable and more consumable for more people.
• 26:02
  Speaker 3: And then I also, and this goes back to what
• 26:04
  Speaker 3: Morgan House was pushing. Reading the stories is I think
• 26:09
  Speaker 3: puts it in your memory a little bit better than
• 26:11
  Speaker 3: just reading a principle alone.
• 26:13
  Speaker 2: Oh, we are geared to remember narratives as opposed to
• 26:16
  Speaker 2: data or you know, dry principles, and you know, the
• 26:22
  Speaker 2: intentionality behind telling stories makes it very readable as opposed
• 26:29
  Speaker 2: to let's be honest, you know what color is your pasture?
• 26:31
  Speaker 2: It's been in print for I don't know.
• 26:33
  Speaker 3: Fifty seven years, yeah, forever in the category.
• 26:36
  Speaker 2: But it's kind of a slog to ply through. It's
• 26:39
  Speaker 2: like reading a textbook and when when is the test?
• 26:42
  Speaker 2: So so I have a couple more questions about the book.
• 26:45
  Speaker 2: I got to to bring up. The book seems to
• 26:51
  Speaker 2: be very much a bit of a pushback to modern
• 26:55
  Speaker 2: hustle culture. Was that on purpose or was it really Hey,
• 27:00
  Speaker 2: you know, it's not a grind if you're really enjoying it,
• 27:03
  Speaker 2: and you should listen to your own body's signals that
• 27:08
  Speaker 2: I'm really hating this, but I'm grinding it out.
• 27:10
  Speaker 3: One fortunate thing in putting this book together is, and
• 27:16
  Speaker 3: I think this is really just easier in the modern world.
• 27:19
  Speaker 3: We were able to connect with some true amazing leaders
• 27:25
  Speaker 3: in this field. So we ended up talking to Adam
• 27:28
  Speaker 3: Grant and Daniel Pink and Angela Duckworth and people that
• 27:33
  Speaker 3: have really made it a name for themselves in this field.
• 27:36
  Speaker 3: We stumbled across a podcast Angela Duckworth had done recently
• 27:40
  Speaker 3: where she was looking back ten years after on Grit,
• 27:43
  Speaker 3: the book, and the original thesis of Grit was you
• 27:46
  Speaker 3: need passion and perseverance. And she said if she were
• 27:50
  Speaker 3: going to rewrite it, she would maybe instead of fifty
• 27:53
  Speaker 3: to fifty, say two thirds one third passion. And her
• 27:56
  Speaker 3: fear was that we've taught young adults how to grind.
• 28:01
  Speaker 3: And I feel that the evolution of the college matriculation
• 28:07
  Speaker 3: conveyor belt has been negative. I feel like it's become
• 28:11
  Speaker 3: an arms race that to get these kids into the
• 28:14
  Speaker 3: hardest schools. The schools aren't expanding capacity, so they just
• 28:18
  Speaker 3: keep getting harder and harder to get into. And the
• 28:21
  Speaker 3: kids get taught to fill their schedule with programming so
• 28:27
  Speaker 3: that that resume can be perfect, and they're not given
• 28:31
  Speaker 3: the time to really explore and find and many people
• 28:35
  Speaker 3: don't really know what their dream job is, and some
• 28:37
  Speaker 3: of them might not find it till they're thirty or forty,
• 28:39
  Speaker 3: and that's okay too. But we've pushed and pushed and pushed,
• 28:44
  Speaker 3: and many of them have risen to the occasion of
• 28:48
  Speaker 3: doing all that work, but they graduate from college exhausted.
• 28:52
  Speaker 2: You describe as all sections step off the conveyor belts.
• 28:57
  Speaker 2: I was just watching something about Norway. Is this tiny
• 29:01
  Speaker 2: little country, yet it dominates the Winter Olympics despite lots
• 29:05
  Speaker 2: of other cold weather countries. And their secret is all
• 29:10
  Speaker 2: these kids are encouraged to join sports as kids, but
• 29:14
  Speaker 2: unlike here, there's no trophies, there's no competition. It's due
• 29:20
  Speaker 2: you want for as long as you want, as long
• 29:22
  Speaker 2: as it's interesting. And every one of their medalists say, yeah,
• 29:27
  Speaker 2: I was a slalom skier till I was fourteen, and
• 29:31
  Speaker 2: then I switched to whatever. But I had the background
• 29:34
  Speaker 2: and it was great. There was no pressure. You could
• 29:37
  Speaker 2: do you want. It turns out letting kids play is
• 29:40
  Speaker 2: a great strategy.
• 29:41
  Speaker 3: And I'm not the first one to make that point.
• 29:44
  Speaker 3: There's a chapter in Coddling of the American Mind titled
• 29:48
  Speaker 3: the Decline of Play. And I do wonder if it's
• 29:52
  Speaker 3: harder to find your obsession and find this thing that
• 29:55
  Speaker 3: you're totally fascinated with, if you're stuck in this game
• 30:00
  Speaker 3: that not one of your own making.
• 30:03
  Speaker 2: And you know, it's funny the phone, which is always
• 30:06
  Speaker 2: within reach, means that you're never bored. But boredom is
• 30:10
  Speaker 2: what leads to creative output. And I'm wondering what this
• 30:13
  Speaker 2: generation is going to look like down the road.
• 30:16
  Speaker 3: Well, hopefully some of them will be able to get
• 30:19
  Speaker 3: a hold of this book and find their way to
• 30:22
  Speaker 3: a better place.
• 30:23
  Speaker 2: Coming up, we continue our conversation with Benchmark's Bill Gurley,
• 30:27
  Speaker 2: talking about the state of venture capital today. I'm Barry Ridults.
• 30:32
  Speaker 2: You're listening to Masters in Business. I'm Burry Redults. You're
• 30:51
  Speaker 2: listening to Masters in Business on Bloomberg Radio. My extra
• 30:55
  Speaker 2: special guest this week is Bill Gurley. His new book
• 30:58
  Speaker 2: Running Down a Dream, How to Throw in a career
• 31:00
  Speaker 2: you Actually love, is out today. He's also a member
• 31:06
  Speaker 2: of Benchmark Capital, a legendary venture firm. Let's talk a
• 31:10
  Speaker 2: little bit about some of my favorite Benchmark investments that
• 31:15
  Speaker 2: I seem to use constantly. I think it's ironic we're
• 31:19
  Speaker 2: recording this the day after this giant blizzard hit New York.
• 31:23
  Speaker 2: The trains aren't running, the buses aren't running. I took
• 31:27
  Speaker 2: an Uber here, so kind of full circle. You're the
• 31:29
  Speaker 2: guy who brought Uber to the public attention, funded it
• 31:35
  Speaker 2: and walked it through the ibo Zillow I use all
• 31:38
  Speaker 2: the time, open table I have to use a few
• 31:41
  Speaker 2: times a week tell us about these giant consumer facing
• 31:47
  Speaker 2: companies that became wildly successful.
• 31:50
  Speaker 3: So I stumbled upon and this actually will involved Mike
• 31:56
  Speaker 3: Mobison again. Him and I were working together in the
• 32:00
  Speaker 3: research department at CSFB and we became enamored. We became
• 32:04
  Speaker 3: book shares, and that's been true for thirty years. But
• 32:08
  Speaker 3: we became enamored with this book Complexity by Mitchell Waldrip
• 32:12
  Speaker 3: about the rise of the Santa Fe Institute, which.
• 32:15
  Speaker 4: I know he's involved.
• 32:16
  Speaker 3: Yeah, I am as well. So we're both on the board.
• 32:20
  Speaker 3: Bill Miller of leg Mason's a long time involvement. More
• 32:23
  Speaker 3: Carl Kowadi from Capitol Group just joined the board. So
• 32:26
  Speaker 3: there's a there's a handful of investors that get a
• 32:29
  Speaker 3: lot out of it. But there was the original book
• 32:33
  Speaker 3: highlighted this guy named Brian Arthur, and Brian had done
• 32:37
  Speaker 3: work on what he called increasing returns and they published
• 32:41
  Speaker 3: his one of his pieces in Harvard Business Review. It
• 32:46
  Speaker 3: was ironically co written by Cormick McCarthy, but no one
• 32:51
  Speaker 3: knew it at the time, and that's come out since
• 32:54
  Speaker 3: then anyway, increasing returns was this argument that if you
• 32:58
  Speaker 3: have the right pieces in place, your company will accelerate
• 33:03
  Speaker 3: towards winner take all. And when I read that and
• 33:09
  Speaker 3: I started looking at what was capable with the Internet
• 33:12
  Speaker 3: and possible, this notion really was prominent in my mind,
• 33:17
  Speaker 3: and I can remember I think the first one of
• 33:19
  Speaker 3: those that we invested in was Open Table, and I
• 33:22
  Speaker 3: remember my partners pushing back and saying, selling computer hardware
• 33:27
  Speaker 3: to a restaurant is a crappy business, and you know,
• 33:31
  Speaker 3: SMB's how we ever scale it. And the idea was, well,
• 33:36
  Speaker 3: if you've got more, if you got all the restaurants on,
• 33:40
  Speaker 3: the consumers would only want to go there, and if
• 33:42
  Speaker 3: you got all the consumers on, the restaurants would feel
• 33:46
  Speaker 3: obligated to be in that place. So you know, there's
• 33:49
  Speaker 3: no reason to have multiple of these things. And that
• 33:53
  Speaker 3: was the thesis when we made the original bet. It
• 33:56
  Speaker 3: wasn't straight up. We lived through the dot com burst,
• 34:00
  Speaker 3: had to grow after that, but it did play out
• 34:03
  Speaker 3: that way and the network effects were present. And then
• 34:07
  Speaker 3: from there I started thinking about what other industries would
• 34:10
  Speaker 3: that apply to, and that's what led to all these
• 34:12
  Speaker 3: other things.
• 34:13
  Speaker 2: So Open Table leads to Uber, leads to Zillow.
• 34:15
  Speaker 3: Is that the progression.
• 34:17
  Speaker 2: Absolutely hucause you know, it's hard to argue that those
• 34:21
  Speaker 2: three are pretty indispensable. Yeah, what about others that stand out?
• 34:26
  Speaker 2: Next door, grub Hub, what else is in that group?
• 34:29
  Speaker 3: Yeah, and stitch Fixed, you know did really well. I
• 34:35
  Speaker 3: and then the you know, also the firm you know,
• 34:38
  Speaker 3: while I was there, invested in Twitter and Snapchat and
• 34:43
  Speaker 3: so many different companies that in the in the social space, Instagram.
• 34:48
  Speaker 3: I don't know how we did them all.
• 34:51
  Speaker 2: Well and did into them all you have. First of all,
• 34:54
  Speaker 2: vcs in general do something that I'm very much enthralled with.
• 34:58
  Speaker 2: They're kind of proud of their failures. Yes, which the
• 35:02
  Speaker 2: rest of finance is sort of terrified the idea that, hey,
• 35:06
  Speaker 2: we invested in this, it went to zero, we skip this,
• 35:10
  Speaker 2: we miss this. A lot of vcs on their websites
• 35:12
  Speaker 2: have hey, here's what we blew, here's what didn't work out,
• 35:15
  Speaker 2: and you very famously missed Google. Yes, what were the
• 35:20
  Speaker 2: lessons from that experience?
• 35:21
  Speaker 3: Well, I think the biggest takeaway, which leads to what
• 35:26
  Speaker 3: you just described, Erry, is that when you miss a
• 35:29
  Speaker 3: big winner, it's very asymmetric. To the counterfactual. Right, if
• 35:37
  Speaker 3: we invest twelve million dollars and it goes to zero,
• 35:40
  Speaker 3: you lose one time your money. If you failed to
• 35:43
  Speaker 3: invest twelve million dollars in Google, you miss out on
• 35:47
  Speaker 3: a thousand x one thousand x. And so over the
• 35:52
  Speaker 3: years at Benchmark, I would tell you that I don't
• 35:55
  Speaker 3: recall very many discussions at all about, oh that one
• 35:59
  Speaker 3: went to zero. Your you know, let's study why that happened.
• 36:03
  Speaker 3: You orient My partner Bruce came up with this phrase,
• 36:06
  Speaker 3: what could go right? You orient yourself towards the failure
• 36:10
  Speaker 3: being missing out on a huge winner, And so we
• 36:14
  Speaker 3: changed how we how the kind of things that we
• 36:18
  Speaker 3: studied as failure that you want to correct.
• 36:21
  Speaker 2: How different is that an experience and a process from
• 36:25
  Speaker 2: making investments in existing legacy public companies.
• 36:29
  Speaker 3: Well, I don't think you have the potential for the
• 36:32
  Speaker 3: thousand xs often, and so you're not gonna and the
• 36:36
  Speaker 3: thousand X can can can make up for you know,
• 36:40
  Speaker 3: eight losses that you never heard of, And so it
• 36:43
  Speaker 3: just forces you, if you're in that big game hunting mindset,
• 36:49
  Speaker 3: to really really focus on could this work, as opposed
• 36:53
  Speaker 3: to could it fail and only be obsessed about that part.
• 36:58
  Speaker 2: You mentioned it makes it.
• 36:59
  Speaker 3: I think it's different. I think because we are oriented
• 37:03
  Speaker 3: to absorb failure at a level that you can't do
• 37:07
  Speaker 3: in the public arts.
• 37:09
  Speaker 2: So you mentioned it's one in ten. Is it that
• 37:11
  Speaker 2: much or is it closer to one or two and
• 37:13
  Speaker 2: one hundred?
• 37:15
  Speaker 3: I mean for the big, big outliers, of course it's
• 37:19
  Speaker 3: what you're saying. But one in one hundred could return
• 37:23
  Speaker 3: the fund, you know, but you got to find that one.
• 37:26
  Speaker 3: I mean, think about that. That's a really weird dynamic
• 37:30
  Speaker 3: to be out there doing.
• 37:32
  Speaker 2: So I'm legally obligated to ask you about AI and
• 37:35
  Speaker 2: artificial intelligence. How do you look at this sector? What
• 37:39
  Speaker 2: do you think is going to be.
• 37:40
  Speaker 3: One last thing before? I think that the venture industry
• 37:45
  Speaker 3: is constantly evolving, and today's venture industry looks nothing like
• 37:50
  Speaker 3: what I practice, which looks nothing like what the generation
• 37:54
  Speaker 3: before me. So it's gotten in way more competitive, and
• 37:59
  Speaker 3: the best in vesters have become aware of power lass
• 38:02
  Speaker 3: where these big winners go on forever and they become
• 38:06
  Speaker 3: these these trillion dollar companies and as a result, they're
• 38:10
  Speaker 3: very comfortable now betting it forward. And so we have,
• 38:15
  Speaker 3: you know, firms like Thrive and co two and Altimeter
• 38:20
  Speaker 3: are willing to put big, big checks into private companies
• 38:25
  Speaker 3: in a way they never would have in the past,
• 38:27
  Speaker 3: making the bet that that compounding low is going to
• 38:30
  Speaker 3: keep playing out. So everything's changed.
• 38:33
  Speaker 2: So that raised a really interesting issue. Benchmark has stayed
• 38:37
  Speaker 2: kind of small, early nimble, while a lot of other
• 38:41
  Speaker 2: vcs really beefed up. What is it about avoiding becoming
• 38:48
  Speaker 2: a megafund chasing late stage growth? That was so a
• 38:52
  Speaker 2: feeling to you guys.
• 38:53
  Speaker 3: So one, I do think we've reached the point of
• 38:56
  Speaker 3: kind of the industrialization of the venture capital world, and
• 39:00
  Speaker 3: these funds are and these assets under management are starting
• 39:04
  Speaker 3: to parallel large pe firms. And I think one, it's
• 39:10
  Speaker 3: very hard to stay focused on the artisan craft of
• 39:13
  Speaker 3: identifying early opportunities if you're running this thing that has
• 39:17
  Speaker 3: to look after. It's hard to It's hard to get
• 39:20
  Speaker 3: excited about a seven million dollar investment if you're managing
• 39:23
  Speaker 3: billions in writing five hundred million dollar checks and you're earning,
• 39:28
  Speaker 3: by the way, a management fee and a venture carry
• 39:30
  Speaker 3: on the five hundred why would you let you just
• 39:33
  Speaker 3: get oriented differently? And and second, I think it would
• 39:38
  Speaker 3: be very difficult for those firms that get that big
• 39:41
  Speaker 3: to have IRR that is anything other than industry at best.
• 39:47
  Speaker 2: So you've been pretty loud about valuation discipline and the
• 39:52
  Speaker 2: risk of having a high burn rate. Is that a
• 39:55
  Speaker 2: function of looking at earlier stage companies or is it
• 39:59
  Speaker 2: just simply an analyst discipline of.
• 40:03
  Speaker 3: Of like I think it's I think it's reading all
• 40:06
  Speaker 3: those books, like studying Buffet, Graham and Dodd like like
• 40:10
  Speaker 3: I brought to the venture capital industry a study of
• 40:15
  Speaker 3: investing history that most vcs never have, and I think
• 40:20
  Speaker 3: it was differentiating for me. Some people call me like
• 40:24
  Speaker 3: the VC cynic, but that's okay.
• 40:26
  Speaker 2: So you're I would think, I think of you as
• 40:29
  Speaker 2: an elder statesman in the VC community. But you're hinting
• 40:33
  Speaker 2: at something. I'm going to ask explicitly, what rules have
• 40:38
  Speaker 2: too many venture capitalists not learned that you think would
• 40:42
  Speaker 2: behoove them in their firm to go back to some
• 40:45
  Speaker 2: basics and and you know, focus in on that will
• 40:49
  Speaker 2: help both their returns, their LPs and their funded companies.
• 40:54
  Speaker 3: The thing I would say to answer that, Barry, is
• 40:56
  Speaker 3: that the it's always going to Howard Marx wrote this
• 41:02
  Speaker 3: great piece a long time ago, who highlighted it. The
• 41:05
  Speaker 3: way you make really good money is to have contrarian,
• 41:08
  Speaker 3: non consensus predictions that are right versus wrong and right
• 41:14
  Speaker 3: now and AI. You know, these big waves create so
• 41:18
  Speaker 3: much wealth that I think for a moment, when the
• 41:21
  Speaker 3: waves happen, you have to move past that and realize
• 41:25
  Speaker 3: that the wave could be so big that you can
• 41:29
  Speaker 3: just plow in. But eventually Howard's going to be right,
• 41:32
  Speaker 3: and eventually the market is going to become oversaturated. There's
• 41:37
  Speaker 3: this great book by Carlotta Perez where she says that
• 41:41
  Speaker 3: bubbles always follow real waves because you attract speculators and
• 41:47
  Speaker 3: Charlatan's and all that. And people would want you to
• 41:50
  Speaker 3: say if you're, if you're, if you use the word bubble,
• 41:53
  Speaker 3: you don't believe in AI. But it's the opposite. I
• 41:56
  Speaker 3: believe that it's real, and that's why it's attracting the Charlotte.
• 42:00
  Speaker 3: And eventually we'll go over the top. We always do.
• 42:03
  Speaker 2: Every new technology comes with this void of people that
• 42:09
  Speaker 2: are deeply enmeshed in it, knowledgeable and articulate, and so
• 42:15
  Speaker 2: there's just a rush to fill that bait.
• 42:17
  Speaker 3: They get rich quick. And when people are getting rich quick,
• 42:21
  Speaker 3: fools rush in.
• 42:22
  Speaker 2: I love the Bill Bernstein quote. We use the word
• 42:25
  Speaker 2: guru because it's too difficult to spell Charlottean and it's
• 42:29
  Speaker 2: really very much true. So let's stick with the concept
• 42:33
  Speaker 2: of variant perspective. Another phrase I really like and part
• 42:37
  Speaker 2: of the job of being both contrarian and right. What
• 42:41
  Speaker 2: do you think is a non consensus view you're willing
• 42:45
  Speaker 2: to articulate today That's going to look obvious ten years
• 42:49
  Speaker 2: from now, but right now very non consensus.
• 42:53
  Speaker 3: I would the thing that pops in my head just
• 42:56
  Speaker 3: because people have been talking about it the past few days.
• 42:58
  Speaker 3: I think this, this paper that came out yesterday is
• 43:03
  Speaker 3: just completely over the top. And the notion that every
• 43:07
  Speaker 3: tech company in the world needs to have their terminal
• 43:10
  Speaker 3: value set to zero is probably not true.
• 43:13
  Speaker 2: I love the bar bell. Either AI is a bubble
• 43:18
  Speaker 2: that is not going to do anything for us, or
• 43:20
  Speaker 2: it's going to be so effective everybody's going to lose
• 43:23
  Speaker 2: their job. Isn't there anything in the middle? Hey maybe
• 43:26
  Speaker 2: this isn't you looked there?
• 43:27
  Speaker 3: Buffet's the one that said be fearful when others ingreedy,
• 43:30
  Speaker 3: and greedy when others are fearful. So if AI fear
• 43:34
  Speaker 3: is the topic of the day, the contrarian thing to
• 43:36
  Speaker 3: do would be to try and figure out where what
• 43:39
  Speaker 3: price points you believe represent true value. And I'm not
• 43:43
  Speaker 3: saying we're there yet, but hey, we stocks since the
• 43:48
  Speaker 3: Zert period, high tech stocks have been rather expensive from
• 43:52
  Speaker 3: a PE standpoint for what seven years. Now they're on
• 43:55
  Speaker 3: sale all of a sudden. Buffett says, you want to
• 43:58
  Speaker 3: be a net buyer, So this we should all be excited.
• 44:01
  Speaker 2: You know, people don't. I heard last year that the
• 44:05
  Speaker 2: Magnificent Seven all this market concentration is going to kill us,
• 44:09
  Speaker 2: and yet last year only two of the seven beat
• 44:12
  Speaker 2: the S and P five hundred. So this sale process
• 44:16
  Speaker 2: started a year ago, and then so far this year,
• 44:19
  Speaker 2: it's pretty clear the rally is broadening out. It's going
• 44:22
  Speaker 2: to other stocks. We continue to see sort of a
• 44:26
  Speaker 2: rotating sell off as these AI fears hit different companies.
• 44:30
  Speaker 2: It's going to be really interesting to see what's going
• 44:33
  Speaker 2: to get cheap and attractive and fear driven going forward.
• 44:37
  Speaker 3: Yes, I agree, that's where you should be looking.
• 44:39
  Speaker 2: Before I get to my favorite questions, I have one
• 44:43
  Speaker 2: other sort of non consensus question to ask you. What
• 44:46
  Speaker 2: do you think people are either not talking about or
• 44:49
  Speaker 2: thinking about that they really should be what topic is
• 44:54
  Speaker 2: getting overlooked, but should really be much more front and
• 44:57
  Speaker 2: center than it is.
• 44:59
  Speaker 3: Everything but AI. I mean, I've never been in a
• 45:03
  Speaker 3: scenario where everyone's so all in on this one thing,
• 45:08
  Speaker 3: and it is important. I think the best way to
• 45:12
  Speaker 3: protect yourself against AI disruption is to run at it
• 45:16
  Speaker 3: and be the person in your field that knows the
• 45:18
  Speaker 3: most about it. But boy, everything else is just not
• 45:22
  Speaker 3: being discussed. Everything.
• 45:24
  Speaker 2: So let's jump to our speed round, our favorite questions.
• 45:27
  Speaker 2: We'll plow through this. Tell us about your early mentors
• 45:30
  Speaker 2: who helped shape your career.
• 45:32
  Speaker 3: Well, I already mentioned Mobison. It was kind of more
• 45:35
  Speaker 3: of a peer, but still I was so lucky Al
• 45:38
  Speaker 3: Jackson gave me that first job on Wall Street. When
• 45:42
  Speaker 3: I showed up there, there was a gentleman named Charlie Wolf.
• 45:45
  Speaker 3: I don't know if you ever met.
• 45:46
  Speaker 2: Of course, Charlie Wolf was one of the few guys
• 45:50
  Speaker 2: bullish on Apple when the first IMAX came out in
• 45:53
  Speaker 2: the iPod and the street did not understand Apple, and
• 45:57
  Speaker 2: he's the only guy who did.
• 45:58
  Speaker 3: And Charlie as a force of nature. People loved him.
• 46:02
  Speaker 3: He was a professor simultaneous professor at Columbia and celside
• 46:06
  Speaker 3: analyst on the street and I got to hang out
• 46:08
  Speaker 3: with him.
• 46:09
  Speaker 2: That's a name I haven't heard. Yeah, Unfortunately, you mentioned
• 46:14
  Speaker 2: a lot of books as a whole chapter of the
• 46:15
  Speaker 2: back about various books you and other people recommend.
• 46:19
  Speaker 4: What are you reading currently? What's in I'm reading an unrelease?
• 46:22
  Speaker 4: I have an early unreleased copy of David Epstein's new
• 46:25
  Speaker 4: book called Inside the Box. He did Range, He did Range,
• 46:29
  Speaker 4: which I adored. I adored Range, and anyway Inside the
• 46:33
  Speaker 4: Box where he's talking about how constraints drive creativity, and
• 46:37
  Speaker 4: it's really been. What I love is when a book
• 46:40
  Speaker 4: makes me think differently and about other things. And I've
• 46:43
  Speaker 4: already he and I have already started to have a
• 46:46
  Speaker 4: texture at about taking it even further beyond what his
• 46:49
  Speaker 4: intention was, which is awesome.
• 46:51
  Speaker 2: That description immediately makes me think of the scene from
• 46:55
  Speaker 2: north By Northwest. I don't know if you mentioned this
• 46:58
  Speaker 2: in the book having Yeah, the Hollywood MPAA code did
• 47:04
  Speaker 2: not allow movies to show a man and a woman
• 47:09
  Speaker 2: getting into bed. So it's carry Grant and I forgot
• 47:13
  Speaker 2: which leading lady is a woman, and they're on a
• 47:16
  Speaker 2: train and they're not allowed to both be seen in
• 47:18
  Speaker 2: bed and then cut to the image of the long
• 47:22
  Speaker 2: train driving into a tunnel, all the subtlety of a sledgehammer.
• 47:27
  Speaker 2: That was fine, But the two of them sitting on Yeah,
• 47:32
  Speaker 2: that's the constraint that force Hitchcock to say, Oh, you're
• 47:35
  Speaker 2: not gonna let me do this, hold my b it.
• 47:37
  Speaker 3: And I mentioned earlier Tony Fiddel. He would tell me
• 47:39
  Speaker 3: that Steve jobs for the iPhone. He didn't come in
• 47:42
  Speaker 3: and dictate every little thing, but he would say I
• 47:44
  Speaker 3: wanted this then, And by just saying that rather than
• 47:48
  Speaker 3: how then can you make it right? It forces people
• 47:51
  Speaker 3: to think creatively about and you come up. You come
• 47:55
  Speaker 3: up with more ideation and innovation than without the constraint.
• 47:58
  Speaker 2: Huh, really really interesting thing. What are you streaming these days?
• 48:02
  Speaker 2: What what's keeping you in? I just watch Pluribus and
• 48:05
  Speaker 2: my wife just started it without me.
• 48:07
  Speaker 3: How'd you like it? I loved it? Really, I really did.
• 48:10
  Speaker 3: That's mean she she she was so good on Better
• 48:14
  Speaker 3: Call so and but this is her shining. She already
• 48:18
  Speaker 3: won the Emmy for it. But but the the implication,
• 48:22
  Speaker 3: there's some implications from AI or for AI that are
• 48:25
  Speaker 3: really clever.
• 48:27
  Speaker 2: It's definitely on my list to check out so so
• 48:30
  Speaker 2: my next two questions are kind of answered in the book,
• 48:33
  Speaker 2: so that I ask everybody. So essentially it'll be a summation.
• 48:38
  Speaker 2: What sort of advice would you give to a recent
• 48:41
  Speaker 2: college grad interest in the career and either venture capital
• 48:45
  Speaker 2: or finance.
• 48:46
  Speaker 3: Well, in finance, this is going to be so redundant,
• 48:49
  Speaker 3: and I apologize. I would tell him to go read
• 48:51
  Speaker 3: Michael Mobison's five books, because Mike has read every single
• 48:56
  Speaker 3: Mike's the most read financial mind that I know of,
• 49:00
  Speaker 3: and he synthesized everything he read in those books. And
• 49:04
  Speaker 3: so it would be like starting on first base, I
• 49:07
  Speaker 3: mean on second base. I talk about in the book
• 49:11
  Speaker 3: that you should study the history of your field, and
• 49:15
  Speaker 3: if studying the history of your field's uninteresting, once again,
• 49:20
  Speaker 3: I think you're not in the fil place. So that
• 49:23
  Speaker 3: would be it like start with the masters Graham and
• 49:26
  Speaker 3: Dodd and read the Buffett letters like it's all out there.
• 49:29
  Speaker 3: It's so wonderful. There's never been a better time to
• 49:33
  Speaker 3: learn in the history of the world because it's all available.
• 49:36
  Speaker 2: I'm so surprised more people don't talk about the success
• 49:42
  Speaker 2: equation because the idea of the impact of luck, and
• 49:46
  Speaker 2: he talks about investing business, in sports, we underestimate luck tremendously,
• 49:52
  Speaker 2: and it's such a great book.
• 49:53
  Speaker 3: But you can't. But you can improve your luck, and
• 49:56
  Speaker 3: we have a increase.
• 49:57
  Speaker 2: The surface area of luck is the that always sticks out.
• 50:01
  Speaker 3: And there's a principle in a book called Go to
• 50:04
  Speaker 3: the Epicenter where we recommend, if you can at all,
• 50:08
  Speaker 3: go practice where everyone else is practicing, precisely to impact
• 50:13
  Speaker 3: that equation.
• 50:13
  Speaker 2: And our final question, what do you know about the
• 50:16
  Speaker 2: world of venture investing today might have been useful twenty
• 50:19
  Speaker 2: five years ago when you were first started.
• 50:21
  Speaker 3: It probably goes into the thing we already drilled into.
• 50:24
  Speaker 3: Like had I had I been more open minded to
• 50:29
  Speaker 3: the question what could go right and pursued the Google investment,
• 50:33
  Speaker 3: maybe I retire earlier. Maybe we're not talking about the book.
• 50:36
  Speaker 2: I have a feeling you would not have retired early.
• 50:38
  Speaker 2: You would have kept going because you seem to really
• 50:41
  Speaker 2: love what you did. I did no doubt, So Bill,
• 50:44
  Speaker 2: thank you so much for doing this one last year.
• 50:47
  Speaker 1: Yeah.
• 50:48
  Speaker 3: Absolutely, the book was written for the hero that would
• 50:53
  Speaker 3: make this journey. But there are people in every hero's
• 50:57
  Speaker 3: lives that act as advisors and counts. So there's just
• 51:00
  Speaker 3: parents and there's a whole bunch of people that shape
• 51:03
  Speaker 3: your career process. I think they're going to get a
• 51:06
  Speaker 3: lot out of this book, even though it's not written
• 51:09
  Speaker 3: to them, because I think there is this overwhelming, well
• 51:15
  Speaker 3: intentioned instinct to put the economic stability of a child's
• 51:20
  Speaker 3: life at the front. Sure, and I'm not sure it's
• 51:23
  Speaker 3: the right answer they coming up.
• 51:25
  Speaker 2: We continue our conversation with Benchmark's Bill Gurley.
• 51:28
  Speaker 3: I'm Barry Riddults.
• 51:30
  Speaker 2: You're listening to Masters in Business on Bloomberg Radio. I'm
• 51:48
  Speaker 2: Bury Ridults. You're listening to Masters in Business on Bloomberg Radio.
• 51:51
  Speaker 2: Mike Petro special guest today is Bill Gurley of Benchmark Capital.
• 51:56
  Speaker 2: So Benchmark has really put together an extraordinary track record, Uber,
• 52:00
  Speaker 2: Open Tables, Zillow, Stitch Fixed, go down the list. What
• 52:05
  Speaker 2: is it about Benchmark's model that was so unique and
• 52:09
  Speaker 2: really produced better outcomes than so many vcs have over
• 52:13
  Speaker 2: the years.
• 52:14
  Speaker 3: Yeah, I really And I have to give the credit
• 52:16
  Speaker 3: to the founders because they're the ones that put this
• 52:19
  Speaker 3: structure together. But this equal partnership structure has a cultural
• 52:25
  Speaker 3: dynamic that encourages immense amount of support from the partnership
• 52:32
  Speaker 3: without I certainly didn't have a fear of failure or
• 52:36
  Speaker 3: anything like that, and also an element of peer pressure.
• 52:42
  Speaker 3: So the pressure's not a pressure of do this or
• 52:46
  Speaker 3: you're out. It's a pressure of my partner's putting up
• 52:50
  Speaker 3: these wins and I'm sharing equally I need to do
• 52:54
  Speaker 3: that myself. And so it's more the way maybe someone
• 52:59
  Speaker 3: on a sports team might do well and encourage other
• 53:02
  Speaker 3: people on the team to do well as well. For me,
• 53:05
  Speaker 3: and I won't say that this is necessarily true for
• 53:08
  Speaker 3: everybody else. For me, that culture was a perfect fit.
• 53:11
  Speaker 3: I enjoy having the camaraderie and the support of other people.
• 53:17
  Speaker 3: Don't I wouldn't enjoy being a solo GP and making
• 53:21
  Speaker 3: decisions on my own. There's some great work that's been
• 53:24
  Speaker 3: done on group dynamics and group analysis, and one of
• 53:29
  Speaker 3: the really clever things is the group tends to know
• 53:32
  Speaker 3: the weaknesses of the individual better than the individual themselves,
• 53:36
  Speaker 3: and if you're aware of that, you can use that
• 53:39
  Speaker 3: to help your group decision making. So I just adored
• 53:43
  Speaker 3: every bit of it. I love that there the firm
• 53:47
  Speaker 3: is tilted towards thinking about the work as a craft
• 53:53
  Speaker 3: or an artisan, and I find that to be true
• 53:55
  Speaker 3: of almost everyone I profile in the book. If you
• 53:59
  Speaker 3: care about nuance and detail, it's typically because you're treating
• 54:04
  Speaker 3: the art of what you do in a craft like
• 54:08
  Speaker 3: fashion and really really interesting. And yeah, and I think
• 54:12
  Speaker 3: that that that's what what what Benchmark does.
• 54:15
  Speaker 2: Venture capital is a team sport. Do you do you
• 54:17
  Speaker 2: want to draw any parallels to playing ball? Anything that
• 54:22
  Speaker 2: comes into.
• 54:23
  Speaker 3: That, well, I just I mean, I think it could
• 54:26
  Speaker 3: go beyond, you know, playing ball, But do you create
• 54:29
  Speaker 3: a team culture that where greatness is going to be
• 54:34
  Speaker 3: expected in an output?
• 54:35
  Speaker 2: And I bring that up because you mentioned Sam Hankey
• 54:38
  Speaker 2: in the book. Yeah, I think that's the best coaches
• 54:43
  Speaker 2: try and foster that it's not just about your individual performance.
• 54:48
  Speaker 3: Yeah, and it's hard. But and people I think should
• 54:53
  Speaker 3: be more fascinated with what Bezos did at Amazon and
• 54:57
  Speaker 3: Elon has done across multiple companies because the individual everyone
• 55:02
  Speaker 3: knows that Bezos and Elon are innovative and independent thinkers
• 55:08
  Speaker 3: and contrarians. But how do they scale a company to
• 55:12
  Speaker 3: hundreds of thousands of people? How do you take that
• 55:17
  Speaker 3: mindset and put systems in place where it's propagated all
• 55:22
  Speaker 3: the way down? And I don't think enough work is
• 55:25
  Speaker 3: going to into figuring out what they do. I'll give
• 55:28
  Speaker 3: you another interesting example. Sure, Sacha n Adela probably led
• 55:32
  Speaker 3: the the either the first probably from a market cap
• 55:36
  Speaker 3: creation standpoint, the best turnaround of.
• 55:38
  Speaker 2: All, no doubt about that. Absolutely true. I mean maybe
• 55:42
  Speaker 2: Steve Jobs twenty years early.
• 55:44
  Speaker 3: Yeah, yeah, okay, those two, but they ask that one
• 55:48
  Speaker 3: almost went down to the to the to the to
• 55:51
  Speaker 3: the studs if you will, in the region.
• 55:53
  Speaker 2: If Gates didn't save Apple, that would would have been it.
• 55:57
  Speaker 3: They would have been done. So Steve was starting with
• 56:00
  Speaker 3: or bear metal. Tatya had to turn this bigger shift. Yes,
• 56:03
  Speaker 3: and he claims what he did is he told everyone
• 56:06
  Speaker 3: we're going to go from being a know it all
• 56:09
  Speaker 3: to a to a learn it all culture. And man
• 56:13
  Speaker 3: if if that one heuristic is what was the key
• 56:17
  Speaker 3: to this? Like, kudos to him, I mean, and what
• 56:21
  Speaker 3: a miraculously simple insight. And and then you know, kudos
• 56:26
  Speaker 3: to him. I'm making it effective, like like pushing it
• 56:29
  Speaker 3: through the organ I bet they had to push a
• 56:30
  Speaker 3: lot of people out too.
• 56:32
  Speaker 2: Well. If you look at the culture between him and
• 56:35
  Speaker 2: Bill Gates, the gap ballmer, very different personality, very different approach.
• 56:44
  Speaker 2: You can make the case that Nadella was the anti Bollmer,
• 56:47
  Speaker 2: and you know, during during Steve's reign, it wasn't great returns,
• 56:53
  Speaker 2: although a lot of people didn't have great returns in
• 56:55
  Speaker 2: the two thousands, so it's a little little bit of both.
• 57:00
  Speaker 2: I have another question I've I kind of suspect I
• 57:02
  Speaker 2: know the answer. Okay, so you've spent decades not only
• 57:06
  Speaker 2: picking business models but founders boards addressable markets. What's the
• 57:13
  Speaker 2: single hardest question you wrestle with, aside from what could
• 57:18
  Speaker 2: go right?
• 57:20
  Speaker 3: I'd say the thing that pops in my mind Berry
• 57:22
  Speaker 3: is this notion of TAM total addressable market and the
• 57:26
  Speaker 3: I think the investor community gets really stuck on that
• 57:30
  Speaker 3: one and are not open minded enough about what's possible,
• 57:34
  Speaker 3: especially if the technology becomes disruptive. There's a there's a
• 57:39
  Speaker 3: famous interplay between me and this professor at NYU around Uber.
• 57:45
  Speaker 3: He published this piece that said Uber would never be
• 57:48
  Speaker 3: worth more than four billion dollars, and I wrote one
• 57:52
  Speaker 3: of my favorite blog posts ever titled how to Miss
• 57:55
  Speaker 3: by a mile, where I took apart his analysis and
• 58:00
  Speaker 3: tried to well, I had a little I had an
• 58:02
  Speaker 3: unfair advantage. He said that the market Uber was attacking
• 58:07
  Speaker 3: was a taxi market, and he used that as the
• 58:09
  Speaker 3: thesis for his analysis. I already knew in San Francisco
• 58:13
  Speaker 3: that Uber was twenty x bigger than the taxi market.
• 58:16
  Speaker 3: He didn't know that. So once you have that piece
• 58:19
  Speaker 3: of knowledge, it's kind of an unfair game. But it
• 58:25
  Speaker 3: gets that like the product became so much better than
• 58:30
  Speaker 3: what the taxi market offered you, and it immediately became
• 58:35
  Speaker 3: you know, and I think, in the long run, will
• 58:38
  Speaker 3: be a replacement for car ownership, which could allow for many,
• 58:42
  Speaker 3: many years of.
• 58:43
  Speaker 2: Growth, especially if self driving taxis become a thing. But
• 58:48
  Speaker 2: by the way, huge disadvantage analyzing Uber in New York
• 58:52
  Speaker 2: City in the early twenty tens because it was monopoly tax.
• 58:57
  Speaker 3: Not only that. In the report of his which a
• 59:00
  Speaker 3: summary version got public, but I found the background version,
• 59:03
  Speaker 3: he admits that he had never written Uber and only
• 59:06
  Speaker 3: taken taxi. So I think being in New York gave
• 59:09
  Speaker 3: you the exact wrong mindset that the first time you.
• 59:12
  Speaker 2: Get into an Uber, you're like damn. And I wish
• 59:14
  Speaker 2: I was an early investor. I remember I remember being
• 59:18
  Speaker 2: a beta tester of Google and sending an email and saying, Hey,
• 59:21
  Speaker 2: can I invest in this company?
• 59:23
  Speaker 3: You're like, we are good.
• 59:25
  Speaker 2: And then the first time I got into an uber,
• 59:27
  Speaker 2: it's like, oh this makes perfect. Yeah, on your phone,
• 59:30
  Speaker 2: it's mobile, it knows where you are, it knows where
• 59:33
  Speaker 2: It was so obvious after the fact.
• 59:35
  Speaker 3: And credit to Darr for taking it from forty billion
• 59:39
  Speaker 3: to he touched two hundred. So that's two hundred billion
• 59:42
  Speaker 3: versus four is a that's what that's what like a
• 59:47
  Speaker 3: closed minded tam analysis to get you, you get your
• 59:51
  Speaker 3: way off.
• 59:52
  Speaker 2: So I'm legally obligated to ask you about artificial intelligence.
• 59:56
  Speaker 2: How are you looking at the opportunities in the space.
• 1:00:01
  Speaker 2: I kind of think we address that. Do I really
• 1:00:02
  Speaker 2: need to ask that?
• 1:00:04
  Speaker 3: I can? You want me to? Yeah? Okay, yeah. So look,
• 1:00:08
  Speaker 3: I think there are people in the venture community that
• 1:00:11
  Speaker 3: would tell you this is the biggest disruption wave they've
• 1:00:13
  Speaker 3: ever seen. And there's no doubt that venture does extremely
• 1:00:18
  Speaker 3: well around these dislocations. And there's great books like The
• 1:00:22
  Speaker 3: Innovator's Dilemma that talk about why. But the mobile wave,
• 1:00:25
  Speaker 3: the PC wave, the client server wave, all these things
• 1:00:28
  Speaker 3: birth really big companies, some of them doing the exact
• 1:00:32
  Speaker 3: same thing. So there were there were four companies in
• 1:00:34
  Speaker 3: the CRM space before Salesforce came along, but the SaaS
• 1:00:37
  Speaker 3: wave allowed them to steal all that that market cap
• 1:00:41
  Speaker 3: that was in those companies.
• 1:00:43
  Speaker 2: Is that a case of second maskets the cheese.
• 1:00:46
  Speaker 3: No, I just think it's that these waves are are
• 1:00:50
  Speaker 3: It's very hard for an incumbent to be at the
• 1:00:52
  Speaker 3: front of the wave. It's kind of different here with
• 1:00:54
  Speaker 3: AI because there's certainly an obsession within the MAC seven
• 1:00:59
  Speaker 3: about and what it might do to them. But anyway,
• 1:01:02
  Speaker 3: vcs tend to do extremely well when these waves come,
• 1:01:06
  Speaker 3: and so everyone's all in and look, it's very disruptive.
• 1:01:11
  Speaker 3: It's very different than anything we've seen before. I would
• 1:01:14
  Speaker 3: encourage people once again to really dive in and ask yourself,
• 1:01:19
  Speaker 3: no matter what field you're in, what is AI capable
• 1:01:23
  Speaker 3: of here? And to be that person in your organization
• 1:01:28
  Speaker 3: that has the answer to that question.
• 1:01:30
  Speaker 2: You know, it's fascinating that all of the big hyperscalers
• 1:01:33
  Speaker 2: are spending tens of billions, hundreds of billions building out
• 1:01:38
  Speaker 2: these systems. Apple's running a check to Google to put
• 1:01:42
  Speaker 2: Gemini into SyRI, which was early and terrible now it's
• 1:01:46
  Speaker 2: late and terrible. I'm hoping Gemini, which has been really good,
• 1:01:50
  Speaker 2: turns SyRI into something useful. How do you think of
• 1:01:54
  Speaker 2: that sort of approach of saying it's cheaper to buy
• 1:01:57
  Speaker 2: them Bill, I.
• 1:01:58
  Speaker 3: Will tell you I have a couple of diferent answers
• 1:02:00
  Speaker 3: to this, which I think are quite interesting. The first
• 1:02:03
  Speaker 3: of all, the mag seven formerly we're creating I don't know,
• 1:02:08
  Speaker 3: three four hundred billion in cash flow.
• 1:02:11
  Speaker 2: And two trillion in revenues, almost four hundred billion in profits.
• 1:02:16
  Speaker 3: But now almost all of that has been exhausted into Capex,
• 1:02:20
  Speaker 3: and Mike Mosen and I would have long arguments about
• 1:02:24
  Speaker 3: like what that meant from evaluation perspective. He slows it
• 1:02:28
  Speaker 3: off and says they can stop tomorrow, so and then
• 1:02:31
  Speaker 3: the cash flow will come back. I'm there. I argue,
• 1:02:34
  Speaker 3: if you're trying to build a DCF now all of
• 1:02:37
  Speaker 3: a sudden, you have to make a decision about whether
• 1:02:39
  Speaker 3: that would happen or not, and whether there's a return
• 1:02:42
  Speaker 3: on this Capex investment. But the second thing I wanted
• 1:02:45
  Speaker 3: to say is I have found over the years, maybe
• 1:02:48
  Speaker 3: this is another contrarian thing that not enough that big
• 1:02:52
  Speaker 3: companies think there's some kind of safety net in making
• 1:02:56
  Speaker 3: an investor in a new disruptor. And so here we
• 1:03:01
  Speaker 3: have Microsoft and Google, you know, doing and Amazon making
• 1:03:08
  Speaker 3: investments in these foundational model companies. And it's not clear
• 1:03:13
  Speaker 3: to me that that is actually a good hedge because
• 1:03:18
  Speaker 3: I think both of those companies open up anthropic now
• 1:03:21
  Speaker 3: have escape velocity. I don't think they're dependent on the
• 1:03:24
  Speaker 3: partner anymore. And it harkens back in my brain to
• 1:03:28
  Speaker 3: IBM letting Microsoft put the OS inside your PC.
• 1:03:32
  Speaker 2: And we sell hardware. What good is software going to be?
• 1:03:36
  Speaker 3: All Right?
• 1:03:36
  Speaker 2: One last quote, you said there's a mess coming from
• 1:03:40
  Speaker 2: zombie unicorns that all have stale marks and private portfolios.
• 1:03:46
  Speaker 2: I'm a huge fan of cliff astness is volatility laundering
• 1:03:50
  Speaker 2: or the private ownership that doesn't get updated or marked
• 1:03:54
  Speaker 2: to market? What does that reckoning look like when these
• 1:03:59
  Speaker 2: marks fund show up in the real essam?
• 1:04:01
  Speaker 3: So this is probably a three hour conversation that I
• 1:04:05
  Speaker 3: will try and do in a very short form. There
• 1:04:09
  Speaker 3: is a very famous investor or, or i'd call him
• 1:04:14
  Speaker 3: an endowment manager named David Swinson. Of course, Yale model,
• 1:04:18
  Speaker 3: that is the Yale model, and David said that everyone
• 1:04:22
  Speaker 3: should be more invested in private and famously had returns
• 1:04:28
  Speaker 3: that were spectacular.
• 1:04:30
  Speaker 2: But as someone who's a historian in my space. That
• 1:04:33
  Speaker 2: was forty years ago, when no one was thirty five,
• 1:04:37
  Speaker 2: no one was doing it was a white space.
• 1:04:39
  Speaker 3: So I absolutely I think.
• 1:04:40
  Speaker 2: Great valuation, great opportunities.
• 1:04:42
  Speaker 3: I think the Swinson mimic effect has now played out,
• 1:04:47
  Speaker 3: and I think personally that most of the endowments and
• 1:04:51
  Speaker 3: foundations in the US are over invested in private both
• 1:04:54
  Speaker 3: PE Adventure and I think that the way the industry
• 1:04:58
  Speaker 3: structured in this would require longer conversation. There's no incentive
• 1:05:04
  Speaker 3: for the operators inside of the endowments or foundations to
• 1:05:08
  Speaker 3: get the paper marks right, and there's no incentive for
• 1:05:11
  Speaker 3: the gps to get to paper marks right. And based
• 1:05:13
  Speaker 3: on talking to people that do this for a living
• 1:05:16
  Speaker 3: every day, I suspect both the venture paper marks and
• 1:05:20
  Speaker 3: the PE paper marks and the real estate paper marks
• 1:05:23
  Speaker 3: are all too high. Non if we had had a
• 1:05:26
  Speaker 3: liquidity run like of an endowment tax it happened, you
• 1:05:30
  Speaker 3: might get to that sooner. I think we're going to
• 1:05:33
  Speaker 3: it's going to take forever to online. You asked kind
• 1:05:35
  Speaker 3: of like, when's the day of reckoning? I don't even know.
• 1:05:38
  Speaker 2: So I read over the past few months Harvard and
• 1:05:41
  Speaker 2: Yelle are both trying.
• 1:05:43
  Speaker 3: To sell some secondary right.
• 1:05:44
  Speaker 2: So they're doing some selling right, And now you see
• 1:05:48
  Speaker 2: the whole issue with Blue Owl with some marks and
• 1:05:54
  Speaker 2: Boas Weinstein making an offer to buy assets at a
• 1:05:59
  Speaker 2: substand actually discounted price. Are these one offs or is this?
• 1:06:04
  Speaker 3: I think that's maybe the first signs of this correcting,
• 1:06:08
  Speaker 3: But once again, there's no The only thing that could
• 1:06:12
  Speaker 3: really lead to a faster correction if there was a
• 1:06:15
  Speaker 3: liquidity crisis within the endowment and we.
• 1:06:17
  Speaker 2: Briefly saw a thread of that when the President threatened
• 1:06:21
  Speaker 2: to start taxing endowments and other things.
• 1:06:25
  Speaker 3: There's other articles you can find about debt products inside
• 1:06:28
  Speaker 3: of foundations which hint at the fact that you're not
• 1:06:31
  Speaker 3: getting liquidity from your privates and you don't want to
• 1:06:34
  Speaker 3: get over allocated in them, so you have to borrow money.
• 1:06:37
  Speaker 2: So yeah, well, all crises, financial crises, at the underlying
• 1:06:44
  Speaker 2: is leveraging debt. The other thing that to me was
• 1:06:48
  Speaker 2: a big warning sign. I'm curious as to your thoughts
• 1:06:51
  Speaker 2: the whole democratization and hey, we're going to move private
• 1:06:55
  Speaker 2: credit and private equity to people's four one case, that
• 1:06:59
  Speaker 2: to me smells like someone rang a bell.
• 1:07:01
  Speaker 3: I'm so with you on that. Berryer, and I think
• 1:07:04
  Speaker 3: you're gonna watch the same thing happen with venture because
• 1:07:08
  Speaker 3: is what I talked about earlier, where they're trying to
• 1:07:11
  Speaker 3: keep these companies private forever. They're gonna have the same
• 1:07:15
  Speaker 3: liquidity problem. And I think they're going to run out
• 1:07:17
  Speaker 3: of money because they've gotten these things so big. So
• 1:07:19
  Speaker 3: watch for someone to lobby to put their four one
• 1:07:22
  Speaker 3: k into a start venture firms.
• 1:07:25
  Speaker 2: Early already began, and you know it's gonna be an issue.
• 1:07:30
  Speaker 3: I fear this Swinson thing is gonna have this. Like
• 1:07:35
  Speaker 3: you said, when he did it, he was the only
• 1:07:37
  Speaker 3: one doing it, and it was contrariant back to the
• 1:07:39
  Speaker 3: Howard Marks thing. The fact that everyone followed him and
• 1:07:44
  Speaker 3: the time it's going to take for that to play
• 1:07:47
  Speaker 3: out and get fixed is forever.
• 1:07:50
  Speaker 2: Thank you, Bill for being so generous with your time.
• 1:07:53
  Speaker 2: I've been speaking with Bill Gurley of Benchmark Capital and
• 1:07:56
  Speaker 2: author of the book Running Down a Dream, How to
• 1:07:59
  Speaker 2: Thrive and Career you actually love. If you enjoy this conversation, well,
• 1:08:04
  Speaker 2: be sure and check out any of the six hundred
• 1:08:06
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• 1:08:09
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• 1:08:15
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• 1:08:18
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• 1:08:22
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• 1:08:26
  Speaker 2: is my podcast