Jan 4, 2021 · 41m · 20vc
20VC: Bill Gurley and Howard Marks: What Happened In 2020? What Can We Expect Looking Forward to 2021?
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gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions
On The 20VC podcast, host Harry Stebbings brings together investors Howard Marks and Bill Gurley to review 2020's unprecedented economic environment and project market trends for 2021. The discussion explores macroeconomic liquidity, venture capital dynamics, tech stock valuations, public market IPO structures, and long-term societal shifts.
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 24% of the talking time here. How this is scored →
Harry as informed peer 2.3 Guest teaching 4.3 Guest disagreement 1.9 Harry pushing back 0.9
speaking balance: gold is Harry, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 25:05 Howard pushes back on 'invincibility'
Howard openly winces at Harry using the word 'invincibility' to describe tech giants and forcefully refutes the premise using bubble psychology.
Hardest push from Harry ▶ 8:09 Harry challenges Bill with Reid Hoffman's adviceHarry directly confronts Bill's stance on capital supply by contrasting Reid Hoffman's 'take money when it's there' rule against structural overcapitalization risks.
Biggest teaching moment ▶ 11:36 Howard dismantles classical economic assumptionsHoward systematically corrects standard textbook economics by showing how post-GFC debt and 3.5% unemployment failed to trigger inflation, invalidating the Phillips curve.
Harry holds his own ▶ 19:28 Harry presents specific valuation dataHarry demonstrates sector knowledge by pressing Howard on specific tech IPO figures, citing Airbnb's $100B market cap and DoorDash's surge against macro weakness.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Harry as informed peer | Guest teaching | Guest disagreement | Harry pushing back | Why |
|---|---|---|---|---|---|---|
| 2020 Macroeconomic Overview & Global Depression Predictions | 2 | 5 | 2 | 1 | Harry opens by quoting Ray Dalio's prediction of a global depression. Howard gently dismisses macro forecasting while explaining why a depression was averted by Fed intervention, and Bill shares an anecdote where Howard previously schooled him on the cyclical flaws of the venture capital model. | |
| Venture Capital Dynamics and 'Spend to Win' Mindsets | 3 | 3 | 1 | 2 | Harry asks about capital oversupply and challenges Bill with Reid Hoffman's 'take money when it's there' philosophy versus overcapitalization issues. Bill explains the forced 'spend to win' market dynamic created by high revenue multiples and Wall Street's demand for growth. | |
| Interest Rate Dynamics and Inflation Uncertainty | 3 | 6 | 2 | 2 | Harry queries what could trigger interest rate changes and follow up on government stimulus. Howard educates the host on how empirical reality post-GFC and near 3.5% unemployment broke classical economic models like the Phillips curve. | |
| Post-Pandemic Economic Recovery and Tech's Impact on Labor | 2 | 4 | 3 | 1 | Howard expresses concern about automation displacing manual workers. Bill pushes back against the premise that technology simply destroys jobs, citing bank teller statistics and criticizing US cultural attitudes toward engineering education. | |
| Distressed Debt Investing and Market Liquidity | 2 | 5 | 1 | 0 | Harry asks how distressed debt investing survives in an era of abundant market liquidity. Howard walks through the mechanics of crisis buying and how the Fed's rapid intervention in March 2020 eliminated panic and bargain opportunities. | |
| Public Market Valuations, Tech Stocks, and Recent IPOs | 3 | 4 | 1 | 2 | Harry points out the disconnect between macroeconomic distress and massive public tech valuations like Airbnb and DoorDash. Howard reframes this by explaining how record-low interest rates mathematically justify historically high P/E ratios. | |
| Market Speculation, IPO Flaws, and Earnings Realities | 2 | 4 | 3 | 1 | Bill interjects to criticize the traditional IPO mechanism and speculative market behavior, warning that companies will eventually have to justify their valuations against realistic earnings multiples. | |
| Historical Parallels: Nifty 50 and the Limits of Invincibility | 2 | 6 | 3 | 1 | Harry asks if incumbent tech companies possess 'invincibility' similar to historical markets. Howard visibly winces at the term and schooled the host by listing Nifty 50 giants like Kodak, Polaroid, and Xerox that subsequently failed. | |
| Globalization Retreat vs. Comparative Advantage and Global Talent | 2 | 3 | 1 | 0 | Harry asks about the macroeconomic consequences of retreating globalization. Both guests cooperatively explain classical comparative advantage and how digital platforms allow global labor matching. | |
| Rise of China, Capital Allocation, and Regulatory Capture | 2 | 4 | 2 | 0 | Harry asks whether China is prepared for global leadership. Bill highlights the friction caused by US regulatory capture compared to China's efficient central direction before transitioning into book recommendations. | |
| Quickfire: SPACs, Venture Capital, and Market Speculation | 2 | 3 | 2 | 0 | In a quickfire sequence, Harry asks about SPACs, risk preparation, and key societal worries. Bill critiques SPAC-driven speculation and political lobbying, while Howard emphasizes political polarization concerns. |
Statements from this episode (40)
Howard Marks: Macro predictions shouldn't drive investment decisions
“Macro predictions are very hard to make, and I don't think either of us bases our investment decisions on macro forecasts. That's not a way to have a good batting average.”
Howard Marks: Central bank interventions prevented a 2020 global depression
“With that disclaimer out of the way, first of all, nine months ago, a global depression was absolutely a possibility. With the, most of the developed countries Certainly outside of Asia, shutting down their whole economies in order to limit contacts and bend t…”
Gurley: There is no such thing as conservative venture capital
“And so there's no such thing as conservative venture. You don't take your cards off the table and maximize return. It never works, and so you're forced to, you know, I've used this phrase before, but play the game on the field.”
Gurley: Near-zero interest rates break DCF models and drive market speculation
“Clearly the one thing that's different from the past 102 hundred years are near zero interest rates, maybe below zero real rates across the globe, and, you know, technically your DCF model just Blows up. It doesn't work, right? It doesn't solve. And at the ver…”
Gurley: SaaS valuation multiples of 20-40x revenue match 1999 bubble
“And we're seeing, you know, not since oh one, we're seeing unprecedented valuations, you know, these SAS companies, 20, 30, 40 times revenue, which hasn't happened since, since 99, 2000.”
Gurley: Top Benchmark companies get funding offers two months post-investment
“Our best companies will be approached two months after we put money in with people trying to put more money in.”
Gurley: Conservative founders will be left behind by aggressive competitors
“Well, unfortunately, you are forced to play the game on the field. So if you act conservatively, and your two competitors act aggressively, you will be left behind.”
Gurley: Markets favoring growth over profits create massive company wrecks
“When the world is rewarding, aggressive growth, don't care about profitability, you're going to have a mix of end results. You're going to have some of the snowflakes in Amazons, and you're going to end up with a lot of wrecks on the, you know, massive wrecks.”
Marks: Fed will not raise rates until inflation exceeds 2%
“Until we get, you know, growth above two and a half or three, and until, certainly until we get inflation above two percent, I don't think you'll be seeing any increases in Fed funds rate coming from the central bank.”
Marks: Rising inflation forces markets to demand positive real interest rates
“If you get inflation at three percent a year, nobody wants to lend money out at one percent a year, because what they're doing is locking in a two percent a year loss of purchasing power. And the market would demand positive real rates.”
Marks: Japan and Europe have spent years failing to hit 2% inflation
“Japan and Europe, for example, have been trying to accomplish two percent inflation for years, and they can't make it happen.”
Howard Marks: Post-2008 recovery was slowest in post-war history
“But our government's been running deficits since the global financial crisis, And this was the slowest recovery in post-war history, and it didn't kindle any inflation.”
Howard Marks: US unemployment hit 50-year low without driving inflation
“And, you know, as of January, the unemployment rate in this country was three and a half percent, the lowest in 50 years, and still no inflation.”
Howard Marks: Economists are now disregarding the Phillips Curve
“So now I think the Phillips curve is being disregarded.”
Howard Marks: Strong economic recovery will follow COVID-19 herd immunity
“I personally believe that when we get to herd immunity, And when the number of cases falls, you know, radically, by which I mean, I guess, you know, a few hundred a day or so, I think that we'll have a very good recovery in the economy and in employment.”
Howard Marks: Tech automation threatens long-term employment for manual laborers
“Longer term, I worry about employment, mainly because of the stuff Bill does. You know, his companies are replacing labor with computing power, to over-exaggerate. I worry about where people whose main asset is a strong back are going to get jobs in the longer…”
Gurley: Autonomous driving won't eliminate all Uber drivers within 30 years
“Oh, autonomous driving is going to get rid of every Uber driver. You know, if that happens within 30 years, I'll be shocked.”
Gurley: 35% of Chinese college graduates are engineers versus 5% in US
“And they have like, what, 35% of the college graduates and China are engineers. That number in the U.S. Is like five”
Marks: Outsized returns come from doing what other investors refuse to do
“You make the big money when you do the things that other people are unwilling to do.”
Marks: Oaktree found asset bargains during two-week window in March 2020
“In March, the middle two weeks of March, the ninth to the 23rd, were very productive for us in terms of producing bargains.”
Marks: Oaktree's distressed debt returns won't match past crisis levels
“We think our returns will be very attractive relative to the low overall level of interest rates, but nothing like in the past.”
Marks: Record-low interest rates justify historical peak stock P/E ratios
“The lower the interest rates, the higher the asset price is justified. We have the lowest interest rates in history. That justifies, for example, the highest P.E. Ratios in history.”
Marks: Historical average P/E is 16 versus 26-27 in 2021
“So when you look and you see that the average P.E. Ratio in the post-war period has been 16, and today we're in the 26 or seven region.”
Gurley: Benchmark bought three public stocks during March 2020 market crash
“We actually invested in three public stocks in that Those two weeks, which is something we don't even do normally for the same reason.”
Gurley: Ignore Airbnb and DoorDash valuations until post-lockup expiration
“I wouldn't put too much on an Airbnb or DoorDash valuation. I'd wait until you get, you know, three to six months past the lockup release when you have full of”
Gurley: Tech valuations imply impossible 100% annual growth for 10 years
“You're going to have implied taggers of a hundred percent for 10 years just to be able to earn your way into the valuation.”
Marks: Market trouble occurs when investors believe no price too high
“When people start saying no price too high, then the world tends to get in trouble, as they have several times in my life.”
Marks: Supposedly invincible Nifty 50 giants eventually collapsed or lost dominance
“Kodak and Polaroid lost their market. IBM and Xerox got killed by competitors. AIG went bankrupt in the global financial crisis.”
Marks: Economic growth will slow down due to deglobalization
“Well, I think, number one, that economic growth slows down.”
Gurley: Benchmark portfolio companies with 100+ employees move engineering offshore
“Almost every company we back that gets over a hundred employees is looking to move some of their engineering talent pools somewhere else, and so that's pretty powerful that that can happen, and good for the globe. Maybe not good for the U.S., but good for the …”
Gurley: China is already a major capital lender in South America
“They've already started being a lender of capital across the globe, heavily in South America, so it's not like they're just beginning the journey outside of their borders.”
Gurley: Capitalist benevolent dictatorships operate more efficiently than the US
“If you have a benevolent dictatorship attached to capitalism, you can actually fix problems faster and cause capitalism to, I think, achieve what it's meant to achieve in a much more efficient way than where we are in the US.”
Gurley: Free trade and capitalism drive massive gains in living standards
“I think that there is a real truth to the fact that capitalism, free trade, globalization unlocks, you know, massive increases in standard of living.”
Gurley: Policy restricting innovation will catastrophically hurt standard of living
“And I fear that some of the policy reactions to some of the hardships of our time are people that want to Take the exact opposite approach rather than enable innovation. They want to lock it down and prevent it from happening, which I think will have catastrop…”
Gurley: SPAC companies are more speculative with some EV firms showing zero revenue
“To date, a lot of the companies that have gone out via SPAC are more speculative than ones that would take a traditional IPO route, and you could measure that by their level of profitability or their level of immaturity from a revenue standpoint, some of which…”
Gurley: The boom in SPACs is enabled by flaws in traditional IPOs
“I believe a large part of why it's Possible is because of the problems with the IPO market.”
Howard Marks: Investors cannot predict direction, but must know cycle positioning
“We don't know where we're going, but we should know where we are.”
Howard Marks: 2019 market conditions left economy vulnerable to pandemic shock
“And I think that the market conditions in 19, twenty-nineteen and the prior years made us vulnerable to an economic shock like the pandemic produced.”
Gurley: India failed to meet economic potential due to tribal democracy
“By the way, it's one of the reasons why India has failed to, like, live up To expectation from a population standpoint, because they've had a tribal democracy for a very long time that causes a lot of the same problems.”
Gurley: Technology will massively expand global talent and opportunity matching
“And so I think in the future, we're going to have this massive ability to match whatever your comparative advantage is as an individual with way more financial opportunities and way more ways of means of making money than you had in the past. It's almost like …”