May 10, 2017 · 29m · 20vc
20VC: The 3 Forms Of Edge A Founder Can Have, Lessons From Being on A Board With Bill Gates & Why There Are A Lot Of Tourist VCs Who Are Going To Lose A Lot Of Money, with Josh Wolfe, Co-Founder @ Lux Capital
0:00 / 0:00
gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions
Josh Wolfe, co-founder of Lux Capital, joins Harry Stebbings on The 20VC to discuss Lux's investment thesis in deep science and hard technology, the strategic importance of time arbitrage, and lessons learned from working with visionary leaders like Bill Gates.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Harry holds 29.6% of the talking time here. How this is scored →
Harry as informed peer 2.7 Guest teaching 6.2 Guest disagreement 3.0 Harry pushing back 2.0
speaking balance: gold is Harry, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 23:09 Calling out VC performative failure culture
Josh forcefully dismisses industry norms, calling the culture of prizing failure disingenuous, fake, and a thin line from a con game.
Hardest push from Harry ▶ 16:17 Challenging hard tech exit caps and acqui-hiresHarry refuses to accept hard science as an ideal venture category without pointing out that high IP complexity often leads to early acquisitions that cap fund returns.
Biggest teaching moment ▶ 17:45 The three sources of edge frameworkJosh educates Harry on the fundamental sources of venture edge, explaining why time arbitrage is the only durable behavioral advantage over short-term public and private investors.
Harry holds his own ▶ 16:17 Framing the acqui-hire paradoxHarry demonstrates strong market knowledge by challenging Josh on whether corporate consolidation in tech prevents hard science companies from reaching full venture outcomes.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Harry as informed peer | Guest teaching | Guest disagreement | Harry pushing back | Why |
|---|---|---|---|---|---|---|
| Josh Wolfe's Origin Story: Combining Science and Finance | 2 | 5 | 2 | 1 | Harry asks a basic question about whether modern breakthrough tech is unique or cyclical. Josh reframes the question through historical examples like Ben Franklin and concepts of combinatorial technological advances. | |
| Venture Capital Specialization and the Risk of "Tourist VCs" | 2 | 6 | 4 | 1 | Harry asks about vertical specialization in VC. Josh explains VC cycle dynamics and aggressively critiques tourist VCs who jump into frontier domains without deep commitment, predicting they will lose money. | |
| Navigating Market Creation and Unprecedented Companies | 1 | 8 | 2 | 1 | Harry explicitly puts himself in student mode asking Josh to teach him about market creation. Josh delivers an extensive masterclass on Lux Capital's investment methodology and connected chain-reaction investments from metamaterials to autonomous vehicle GPUs. | |
| Exit Dynamics, M&A Targets, and Time Arbitrage as an Edge | 5 | 7 | 3 | 5 | Harry pushes back on hard tech investing, questioning if early acqui-hires cap upside potential. Josh counters by framing quick exits as downside protection and breaks down the three sources of venture edge: informational, analytical, and behavioral time arbitrage. | |
| Milestone Discipline and Assessing Technical Risk | 4 | 6 | 2 | 3 | Harry asks operational questions about inflection points and evaluating unproven technical risk. Josh outlines a systematic milestone framework around three core questions: Does it work? Can it scale? Will people buy it? | |
| Quick Fire Round: Book Recommendations, Bill Gates Lessons, and Authenticity | 2 | 5 | 5 | 1 | In the quick fire round, Josh takes a strongly contrarian stance on tech ecosystem culture, calling the narrative around celebrating failure disingenuous and bordering on a con game. |
Statements from this episode (18)
Veolia Acquired Kurion for $400M, Yielding >40x Return for Lux Capital
“In February 2016, Veolia acquired Curion for nearly four hundred million, more than 40 times Lux's total investment.”
Josh Wolfe: Big Breakthroughs Come From Renaissance-Style Interdisciplinary Founders
“And so I think the same thing is sort of happening in the entrepreneurial community on the one hand, where to make that incremental advance, you have to be really specialized, but because people are so specialized in all these different fields, the people that…”
Josh Wolfe: Tourist VCs investing in frontier tech will lose a lot of money
“I think that there are a lot of tourist VCs who are in these domains that are going to lose a lot of money”
Wolfe: Next generation of industrial titans will be scientists and inventors
“The next generation of industrial titans are going to be scientists, technologists, inventors”
Josh Wolfe: Lux Capital is willing to take market and tech risk
“You have some firms that will say, we don't take market risk, and you have other firms that say, we don't take technology risk, and we'll actually take both.”
Josh Wolfe: Best VC returns come from novel technology in new markets
“Some of the greatest inventions, some of the greatest technology, some of the greatest companies, and some of the greatest venture investments came when you had that combination of a novel technology into a new market.”
Wolfe: Kymeta is the only board Bill Gates joined besides Berkshire and Microsoft
“It's the only company that Bill Was on the board of besides Berkshire Hathaway and Microsoft.”
Wolfe: Planet operates history's largest Earth-imaging satellite constellation
“They would end up buying Google satellite imagery, which was something Google acquired called Skybox, and they now have the largest constellation of Earth imaging satellites in history up in space.”
Wolfe: The future of AI and machine learning is in GPUs
“The future of AI and machine learning is going to be in GPUs.”
Wolfe: Intel acquired Lux-backed Nervana Systems for $400M within a year
“And it leads us to a company called Nirvana Systems, and we fund those guys, and within a year, they're bought by Intel for four hundred million dollars.”
Wolfe: Cognitive diversity is the form of diversity that matters most
“My whole view is that the diversity that matters most is cognitive diversity.”
Lux Capital Missed a $4B Exit by Selling Nervana to Intel Early
“In that case, I think we would have loved, collectively, amongst the other syndicate investors as well, that maybe we waited for You know, a year or two, because we probably, instead of selling for four hundred million to Intel, could have sold for four billio…”
Wolfe: The three sources of investment edge are informational, analytical, and behavioral
“I've got a rule of thumb that there's basically three sources of edge. You've got informational edge, analytical edge, and a behavioral edge.”
Wolfe: Investing with a 3-10 year horizon creates time arbitrage advantage
“If the public markets are thinking one or two years out and discounting back, and VCs are thinking one or two years out, then if you are thinking three, four, five, or let alone 10 years out, then you've got a time arbitrage advantage.”
Wolfe: Lux Capital avoids early-stage fundamental science risk
“We're not funding true science risk, right? Those are things that are coming Maybe five, 10, 15 years incubated, often publicly funded government science out of universities, but there reaches a point where you can see that they're starting to do something in …”
Wolfe: Tech's Praise of Failure Is Disingenuous and Founders Are Faking It
“I think that there is a culture that talks about praising and prizing failure, but I think it's disingenuous. I think people pretend to wear failure on, you know, as this badge, and every time you ever see an entrepreneur and you ask, oh, how are things going,…”
Wolfe: Bill Gates Focuses on the 10% of Subject Matter Worth 90%
“He would listen and sit And think, and then it would be the ninety-ten of it, meaning he would get to the 10% of the subject matter that had 90% of the value. He was exceptionally tuned in to supporting founder, CEO, very astute on the economics of product, of…”