The Exchanges

Q And there's a lot of the opposite side out there right now. So maybe to start, could you tell us what the American dynamism thesis means to you and to Andreessen?

A Sure. So the most simple definition is it's companies that support the national interest. So it's everything from companies that sell directly to government, like aerospace and defense, these classic industrial sectors that have been supporting government since the, you know, mid-twentieth century, but then also things that every citizen cares about and takes part of. So education, housing, transportation, infrastructure, these really big categories that we, when we look back through kind of the history of technology, There's been so much technological innovation, but at the same time, the last 30 years of software really hasn't touched a lot of these physical spaces. And so what we noticed through our portfolio is that some of the most important companies, some of the largest companies actually fall into this category that's outside of consumer technology and it's outside of enterprise technology. It's outside of these categories that sort of venture capital has found themselves sort of creating, but these become big companies that affect most people in the country. So the kind of broadest definition is these are companies that support the national interest. Oftentimes they sell to government. Sometimes they compete with government. Other times they're just heavily regulated by government, but they touch everyone. And so we're excited to build a practice around this thesis, bu…

AI assessment note: “the most simple definition is it's companies that support the national interest.”

Q firm, these vertical practices now, which has been done in venture before, but not nearly to the degree that you all are doing it now. How did this vertical kind of originate? Did it start with Mark's, uh, time to build blog post, uh, you know, at the beginning of COVID, like, what does it look like within the firm of like, Hey, I think we should create a vertical.

A Yeah, it certainly starts with its time to build. I mean, that was, I think, the impetus for everyone realizing that the story of Silicon Valley pre-COVID is very different than the story that is about to come. But I think we all very much believe that, that the world fundamentally changed. Anyone who doesn't believe that from a historical context or a technology context isn't paying attention. The world fundamentally changed with COVID, and we'll be reaping those, both the positive aspects of it and the negative aspects of it for generations to come. So I think there was that understanding, but then I also think one of the observations that I had is that Silicon Valley is very good at understanding kind of consumer businesses. They're very good at understanding how to make businesses more efficient, but Silicon Valley has never touched government. The kind of narrative around how Silicon Valley works with government has always been like, try to stay as far away as possible.

AI assessment note: “Yeah, it certainly starts with its time to build.”

Q I love that. Well, Katherine, as we wind to a close here, any parting thoughts or anything you want to leave listeners with?

A Going back to your original question of like, as a venture firm, how do you create a new practice? I think if we do our jobs right and we invest in the companies that we're intending to invest in and we tell the story, right? I think every venture capital firm will have an American dynamism practice. And while like selfishly as an investor, like I don't necessarily want that, but as an American, I want that. I want every firm to say, actually, this is the best place to be investing. Can't believe we weren't looking at it and the just extraordinary opportunity. And it's not impact investing. It's not ESG. It's not just like, oh, well, we're going to see incremental returns. Like it is going to be the source of American innovation and it is a great place for the top venture firms to be investing. And so I think if we do our jobs right, we will see this new category and it'll be just like enterprise. It'll be just like consumer. And I'm excited for that to happen, truly. And I think that's sort of the story of the next 1020 years of Silicon Valley.

AI assessment note: “I think every venture capital firm will have an American dynamism practice.”

Q And nobody wanted to talk to you at that point because most people assumed video conferencing was either a settled frontier or a race to the bottom. Am I thinking about that right?

A Absolutely right. That's a thing. Everyone mentioned, Eric, you are crazy. The world does not need to have another video conference solution, and another VC friend, you know, even, is this great friend. He, he told me that, Eric, I have a check for you, as long as you do something else. The good news, I did not listen, and I was very stubborn. I should share your story, and once I was stopped by a big VC, I do not want to mention the name, for sure you guys do not like them, so, and he told me that, Eric, I do not think your strategy works. You know, look at Skype, look at Google Home, look at WebEx, it's dominating, right? And I, I debated with him a little bit, I failed, and I cannot convince him. On the way back, I told myself, I'm gonna change my Windows screen saver. Back then I used the Windows machine. I changed the Windows screen saver. You are wrong, so. For several years. Yeah.

AI assessment note: “Absolutely right. That's a thing. Everyone mentioned, Eric, you are crazy.”

Q whole security and compliance process, SOC II, HIPAA, GDPR, and more. And today we've got CEO and co-founder Christina Cassioppo back with us to chat about Vanta. Um, ok so, Kristina, we've been talking about your product all season. What else is unique about Vanta the company? Do you personally have any strong beliefs about how to run a company, culture, how to, how to be successful in this ecosystem?

A One strong belief I've developed, uh, about the two parts of a company, go-to-market and, you know, end product and design, is that I think a lot of folks, right, somewhat naturally run the engineering side in particular, like, as if it were engineering, industrial engineering. I actually think that side is much more, like, art than science. You know, like, what is product development? Again, there's metrics you can put around it, but especially at the early stages, like, it's a lot of, you know, when you see it and you can go through Processes, but you can't really prescribe outcomes. I think in contrast, the go-to-market side, like marketing, sales, you know, customer success, especially for a SMB business or mid-market business, should be like run industrial engineering-wise, right? You just have processes, you have like inputs, you have transformations, you have, you know, conversions, you have outputs. The spreadsheet map there is actually really helpful, and that can be a lot more predictable. Whereas again, I think on the, especially new product development side, that if you try to, you know, go full industrial engineering on it, you will just not do anything interesting. So I think part of the magic at Vanta is we've been able to bring those two sides together and cross-pollinate across teams, and so give folks on the engineering team opportunities to, you know, see int…

AI assessment note: “One strong belief I've developed, uh, about the two parts of a company”

Q Alright, so my final question, why should anyone care about getting a SOC II? Like, I'm running a start-up, it might die, I'm just trying to survive and find product market fit, like, why should I go check this box?

A When you talk about compliance, what it really is is security, it's proof of security, and companies tend to invest in Security for one of two reasons. Number one, they just got breached and that's too late. The other reasons why companies invest in security for the first time is, is to get a compliance certificate. It's not just big companies trying to sell to big companies. A lot of our customers are two person startups that want to make their first business deal. The platform that we offer them is really the foundation of their security program around which they can build workflows and things like that. And, and, And enable themselves to keep their company and customer data secure beyond that first audit period.

AI assessment note: “A lot of our customers are two person startups that want to make their first business deal.”

Q a pyramid, but I didn't thought about that. Like back then, yeah, there were, I don't know, less than number of investors you could count on two hands that could, that were writing a hundred million dollar checks. And so if you're like, I can't go public. I need a hundred million dollars plus to finance this stage of growth in my company. You know, it's a supply-demand equation, right?

A So, it was primarily that, but I think YC's mission has always been how do we support our founders more? And right, YC was learning through its evolution. Remember, like, seven years ago was when Dropbox had raised a late-stage private run. So, YC itself was learning what are its companies going through. When, when do they get help versus when do they not? So we saw an opportunity. We saw that these companies still need help, and they, you know, and we are in a great place and an amazing platform that really kudos to PG and Jessica on how they built it. YC can play a significant role. And, you know, one of the things that people don't understand, and I didn't, I was at Andreessen Horowitz before, right, is the YC founder Never views YC as an investor. They view YC as the parent. So what does that mean? Anytime a company is going through any issue, five years after they've graduated, they will first come to their YC partner.

AI assessment note: “So, it was primarily that, but I think YC's mission has always been”

Q I love it. Ok, so can you walk us through how you've developed a framework for analyzing power of a platform?

A It's a very complex problem, and the reason for that is each platform we've tried to do a case study on, the industry economics is different. There are so many idiosyncratic characteristics that impact the equilibrium state. So for us, you know, instead of trying to give you a very abstract high-level framework that's not gonna, you know, relate to the actual situation, it's probably easier to raise a few questions that we think every operator, when they think through, will find some value in it. So I'll throw out the three questions, and we can go through them one by one. So Number one, how is economic value created on your platform, and how does that value change as your platform becomes larger, or has more participants attending it? The second question is, how does each group of your customer perceive their economic value from your platform, and how does that change as your platform gets larger? And the third question is, what is preventing your competitors from getting to equivalence in that value proposition? So that to us is sort of a comprehensive list of questions that you have to think very carefully about, and then after that you may be able to get some good insights about whether your platform may have power or not.

AI assessment note: “I'll throw out the three questions, and we can go through them one by one.”

Q the seven powers framework. But today, if I'm operating a platform business, as many, many tech businesses are, especially the most valuable ones, as you pointed out, I kind of have to perform a seven powers analysis on each of the Transactors on my platform, whether they're the supply side or the demand side, I need to understand what gives my business power given that specific segment. Is that right?

A I actually echo with Ben's observation. Interestingly, we've been trying to mathematize all we talked about today for a long time. And every two weeks we come across one of those edge cases be like, Ouch. That one is not included in this framework. And the exact reason of that is, Ben, what you said, the participants in this transaction is going to have a different economic structure. They have a different industry structure that alternates how they behave and what they optimize for. So this is exactly what makes platforms so complex, but so interesting. It is, you have to look very carefully at those, and every platform is going to come out a little bit different. You know, it's working progress for us. We hope we'll one day have a, Very abstracted and generalized framework that can describe all of those, but for every operator you have to focus on, the one that you own and, and how that's different from others.

AI assessment note: “I actually echo with Ben's observation. Interestingly, we've been trying to mathematize all we talked about”

Q In a typical acquired episode, or a typical tech story, it's like, this is the hero's journey, and, like, he wins, right? And, like, you grow up in this, like, amazing, you know, entrepreneurial journey, and you're like, this is awesome. I'm gonna go do the same for that.

A That's not what happens, right? I wish, I wish the story ended that way, um, you know, for his sake. I mean, he borrowed money from the bank, mortgaged the house, mortgaged the car, and the punchline is there are moments in time where the deck is so stacked against you, notwithstanding all your best effort, notwithstanding all the extraordinary sacrifice of the team, or maybe even the brilliance of the idea, it's not meant to be at that moment. And, um, in venture capital, if you fail, the risk is largely on the venture capitalist. I mean, in Silicon Valley, failure is on the part of the founder, so long as you conduct yourself in a way that's honorable, it's a badge of courage that you gave it a go. And we have an institutional structure where the venture capitalists can withstand that loss because they have a portfolio that they can, you know, cushion that with. So I often, you know, young founders will come in and say, well, I just don't know if I can take the risk. You know, they just graduated from Stanford. They have no student debt.

AI assessment note: “That's not what happens, right? I wish, I wish the story ended that way”

Q as you know from the TSWIFT episode, we are huge fans of Vanta and their approach to the whole compliance process. SOC II, HIPAA, GDPR, and more. And we've got CEO and co-founder Christina Cassioppo back with us today. Well, Christina, you've shared with us how SOC II came to be. What is the traditional way that people go about getting a SOC II certification, and how is Vanta different?

A Pre-Vanta, step one was, again, go read the SOC to a standard. See the, like, we solemnly swear we protect data in a good way. Figure out what that means for your company. Go and do that. Try to make sure that you've really done that. Call in an auditor who's going to come in and ask and say, hey, you said you solemnly swore this. Now prove it to me. And you might say, how do you prove this? And you're like, ah, well, you know, show me that you've Encrypted all your, you know, data at rest in AWS, that you use SSL on your websites, and it's up to date, you know, this, that, and the other. Show me that by logging into these systems and taking screenshots. Mail them to me. You know, you'll mail this person hundreds of screenshots. They will say, thank you so much, uh, you know, go back to their office or their home office, look at all the screenshots, and, you know, write this up into like a seventy-page report that roughly says, you know, We went to the company and saw that they have these practices and confirmed they're in place, and so you can trust them. That's really how it works, which is always surprising when you explain that to people in software. These are not things that, you know, founders enjoy doing or honestly can, can justify prioritizing. Um, I think this is just part of why startups didn't get SOC twos until a few years ago. So we looked at that as kind of engin…

AI assessment note: “Pre-Vanta, step one was, again, go read the SOC to a standard.”

Q And Joe, how does that manifest for you as the sort of lead actor? Do you also interface with Mike or does Mike sort of work through, you know, David and Brian and how does that work?

A I had a couple of conversations with Mike, but no, mostly I just read his book and beyond that, I wanted to talk to a bunch of people that worked closely with Travis, uh, because I wanted to know not just what happened, but How it felt to have a conversation with him, or be in the room with him, what it was actually like personally, because that's my job. I'm not a journalist. I'm the actor, so it's my job to, like, make it feel human. So I talked with quite a number of people that worked closely with him, and did learn a lot of different things that were different from what you might read in the press about him personally, about his personality. Uh, cause a lot of what you read is, and justifiably so, is questionable decisions he made, arguably unethical behavior, and I think this show does not at all shy away from showing those things. But I also wanted to show not just those things. I can't reduce this person to these headlines. I want to show a whole human. That's what makes, I think, a gripping performance. And hearing from people about A lot of positive things, actually. A lot of people said how much they liked, how inspiring he was, how compelling he was, how much energy he would bring to a room. And that was really fascinating because that's not always evident when you read articles about him or even when you read Mike's book. And so finding that balance of like, I want…

AI assessment note: “I had a couple of conversations with Mike, but no, mostly I just read his book”

Q talk with folks of your talent and doing what you do on this show, and I think listeners don't live in your world, so this is probably the first time that someone would get to hear, like, what is it like to act in a green screened, you know, white tape laptop? Like, how do you invoke the level of imagination that you need to? Do you have any tactics?

A You know, I never studied acting in an academic setting. I don't have names for all the things that I probably do do, but when you're in a green screen setting and you don't have any reality to play against, it's just like playing pretend. You know, I have a four-year-old and a six-year-old. They're somewhere else half the day, just, you know, playing pretend, just imagining what's going on, and, and, uh, I remember doing that when I was their age, and now I still do that. I do it on command. At five in the morning when I have to, and the challenge of acting isn't, for me, is not making things up or playing pretend. It's actually having to do that while straddling a hornet's nest of logistical nightmares all day long, because a movie set is just a mess. Even the most well-run sets, and this was a well-run set, But even the most well run, by nature, there's a million things all going on all at once. It's noisy. It's cluttered. There's someone close to you. The hard part is kind of keeping your focus and your concentration and maintaining that more childlike spirit of imagination while having to contend with all this morass of logistical crap. That's the hard part.

AI assessment note: “when you're in a green screen setting... it's just like playing pretend”

Q And when you went to CoinMarketCap way back when and looked, was your intention, hey, is there an arbitrage here? Does there, is there a large spread?

A Yeah, it's basically what I was looking for. Um, and, and basically, like, there's just an incredibly simple calculation you can do to get some sense of maybe kind of, sort of, What one could maybe do if for some reason everything was easy and all the data was right. And it's sweeping a lot under the rug, but, but it gives you an upper bound on how much you could make doing arbitrage. Right. And, and what is that bound? Well, you take the, the difference in pricing between major exchanges, right? That's like the amount maybe you could make on each trade. Um, you multiply by the daily trading volume across those exchanges. And then you say, I don't know, maybe it'll be a percent of volume, you know, I don't know, sort of making that up. Again, this isn't meant to be precise. It's just meant to be like, you know, let's like ballpark what we could be looking at here. And back then, their daily trading volume was only like a few billion dollars, I think.

AI assessment note: “Yeah, it's basically what I was looking for.”

Q And are you thinking you guys are going to build a crypto quantitative trading firm at this point, or are you not even thinking you're just like, I want to take advantage of this opportunity?

A We were thinking that. And, you know, while doing that trade, we were doing a lot of other trades much smaller. And our vision was, look, this probably won't be the last good trade ever. We should build, you know, a firm here, right? Whatever that means, right? We want to be scaling up so that we can continue to take, uh, you know, basically continue to like, like what was fundamentally happening here? Incredible amounts of customer excitement about crypto, right? Huge, huge buying and selling pressure, usually buying pressure, but some of each in, in different exchanges and jurisdictions and tokens all over the place. And Very little liquidity. None of the institutional liquidifiers were in the space. So like, yeah, when Japan was buying four hundred million dollars a day of crypto, there was no firm set up to like be able to provide that liquidity. And it's just like giant mismatch of liquidity demanded liquidity supply that was creating gigantic spreads. Um, customers were getting terrible prices and there was a pretty big opportunity to come in and provide on both sides of that. And this, you know, the Japan Arab was just one example of that.

AI assessment note: “We were thinking that. And, you know, while doing that trade, we were doing”

Q like cut down on something that, that is sort of at an inflection point right now? Or do you want to stay the course and hope that what you're building now has way more risk, but what you're building can Eclipse even what the greatest upside would be from becoming a general partner at a big firm. Am I thinking about that sort of right in the set of trade-offs?

A I think that you're thinking about it right in the set of trade-offs. I think the tricky part is that, and Schrodinger's cat is not right here, but maybe you'll understand the right version of what I'm saying is that as soon as I go in-house somewhere, Like I lose half of my value or, you know, X percent of my value as soon as I go in-house somewhere. Um, and that is kind of one, even though, you know, I do do sponsored posts and all of that, there is like this independent voice that I have that obviously goes away. Everything that I write would go through a legal team and a compliance team and all of those types of things. Probably wouldn't be able to even do it at the cadence or, you know, even the schedule that I do now where it's like, I'm making my last kind of edit, or writing my last sentence, 30 minutes before the piece goes out, or even a minute before the piece goes out, so I think it would lose a little bit of that flavor. Uh, and so I think probably, you know, you need to add, like, a time dimension on this, which is, when does it make sense to do this? And there's probably, like, when I'm deeply in that S-curve, if I've, like, gotten big enough that, like, somehow, just because I'm backing McCormick, people, like, now think that I'm smart, where, like, now I kind of need to prove that That I can add value every week. Like, maybe at some point in the future when the…

AI assessment note: “I think that you're thinking about it right in the set of trade-offs.”

Q This is the NYC debate club, right? Which you can go read about in the per my last email archive.

A Yes, you can. Um, but it was, I mean, like all of this stuff is a blast and I think it all comes from the same spot is, you know, the name not boring comes from, which is I had dinner with my mom and her business partner one night in New York while I was still at breather and her business partner asked me what I like to do outside of work. And I like just did not have an answer. Like, you know, other than I like traveling and I like hanging out with my friends. Like I had no passions, which is crazy because in college, like that was All I did. I spent a lot more time doing other things than, than I did actually probably studying. Uh, and so, you know, I think that kind of just like put a, put a bug in my head that I wanted to figure out how to get some of that back. And then I talked to a bunch of other people and they realized that they had kind of the same thing going on that once you kind of got out of school, it was work. And then it was your tight group of friends and whoever became your significant other, and then your family, but you didn't have those like kind of small Groups that were bonded around a particular kind of passion or hobby. So I was like, oh, cool. Like that plus Soho house. That sounds like the coolest thing in the world. Let me go start that.

AI assessment note: “Yes, you can. Um, but it was, I mean, like all of this stuff”

Q What, what would you have put the percentage chance at when you sent that tweet?

A I would have put the percentage chance that we got to a million dollar run rate pretty high. I thought probably, given that I kind of like knew what my sponsorship calendar was for the next couple months at that point, and that wasn't the, the right run rate to get me there, I probably would have put it at like 20% that I actually hit a million this year. But it is, I mean, like you really, it's, it is the power of compounding kind of happening where like it just keeps getting like The numbers just keep getting bigger to the point where it's like, you know, what would have taken me 10 sponsored deep dives I can now do in one sponsored deep dive. And so that, like, just kind of all grows and, and compounds, I guess. But it's still absolutely crazy.

AI assessment note: “I probably would have put it at like 20% that I actually hit a million”

Q I mean, you are, obviously there's some things you're, you're, That the companies don't want you sharing. But other than that, it's a pretty, it's a remarkably transparent way of going about venture investing. And it's also super different than, you know, classic venture capital. Like, did you lead a single round? Did you write any term sheets? Were you the biggest check in any one of those 91 investments?

A Never. And that's, that's all part of the strategy, right? Like, I mean, we all love talking about strategy and, and strategy isn't doing Everything. Well, it's picking what things you want to do well and taking advantage of those things. And so even like, you know, figuring out how to price the round and figuring out what should go into the term sheet and spending time negotiating that and then being on a board, God forbid, like it actually just doesn't work with my strategy because like it is a house of cards already where you move one thing and like the whole thing breaks. And so if I'm doing kind of the more deeply time consuming parts of a venture, It, at least as I'm currently constructed, doesn't work, but it really works very well when, you know, I can talk to a founder and we have the specific area, either kind of internally or externally where I can be helpful.

AI assessment note: “Never. And that's, that's all part of the strategy, right?”

Q not ones to judge whether it is or isn't. But if it is, and continues to be, Do you need all the other stuff? Do you need more shows? Do you need more content or on the internet? Can it just get big? And then when you add the capital piece too, then that is very scalable and directly related to, uh, to the content as well. So it's interesting.

A I think it can scale with this one thing pretty well. And like everything also kind of continues to feed off each other where if I have a bigger portfolio of companies, but each time I mentioned a company in a newsletter, it has a bigger impact because the audience has gotten bigger. It all kind of scales with each other, which I think is, is really nice. And yeah, I don't know. I mean, if this ends up being a thing where I do, you know, one sponsored post a month instead of two and get a little bit more time to like, you know, take a weekend off every once in a while, like that would be great. But you know, there's a path to this being a million person newsletter at some point in the next five years. And that's like, I'd be very psyched about that.

AI assessment note: “I think it can scale with this one thing pretty well.”

Q I'm curious how you would describe the most powerful aspect of the flywheel. Like, what is the thing where you are like, oh, these mutually reinforcing aspects are, are, are strongly tied?

A That's a really good question. Um, cause I mean, I think as we talked about a little bit before, like audience at the center of the flywheel is maybe not exactly the thing. Like if I had a million person audience of people who didn't care about startups or whatever, like it wouldn't be kind of as powerful. I think it's really just kind of the alignment between the content, the particular people who are in the audience, uh, and then the investing and like those three just, I think really work well together because they all kind of feed each other. So that's a cop-out answer where I think I pretty much just named the whole flywheel, but I don't think there's any one particularly strong link. I really think that it is that the con the content has attracted a certain type of audience member who's both more valuable. Two companies, uh, and who also include people who are starting companies and running companies and all of that, and it all just kind of feeds back into each other. But I think maybe the, the core part is that the content itself is so aligned with the venture business. I think that's, that's the magic.

AI assessment note: “the core part is that the content itself is so aligned with the venture business”

Q That's amazing. Do you look to folks in China like Meituan or like Grab in Southeast Asia as inspiration, or was this a vision that came homegrown in Brazil?

A Yes. I would say that we don't have these guys as a benchmark for us, but we started to say, look, let's build the digital banking units. And to say, yes, what else can we add? So let's add investments. Okay. And what else? Let's add insurance. And what else? Let's add shopping. What else? Let's add effects. And so we start just to keep evolving the business. But I mean, we're really trying to see what else can we put in order to help our clients? How can we make their lives easier? And we like to say that everything Ends up with banking, which stands for payment and credit. Everything you do in your life. If you want to travel, if you want to give a call to your girlfriend, whatever, it's always about banking.

AI assessment note: “we don't have these guys as a benchmark for us”

Q the Zooms, you know, and the like, I'm thinking Zoom, uh, you know, Zoom went from, I don't know what, 70, 80 dollars a share to, To 600 dollars a share and then back down to, you know, that I think it's at like two 80 right now. Uh, so you've kind of seen this happen, right? Like the optionality played out. That was correct. But then returns pulled back.

A We're always looking at like what's happening to the range of outcomes. Is it widening? Is it getting broader? Is the prediction becoming safer or is it getting there or is it remaining narrow? And so with a company like Zoom, which we never owned because, you know, I don't know, this bad call. Um, uh, it, it, it looks a lot to us like a feature, and, and then, so now the question is, can it become a product and eventually maybe a platform? Can it develop an ecosystem around it? We don't know. Um, but let's say, to take your example, let's say in the middle of the pandemic, it was a sort of a cool feature, it was better than everything else on the market, still is, and, uh, and then this big ecosystem came around it, and it became a full-blown platform. Well, then the range of predictions, actually, Would know that the range of outcomes would narrow and the prediction would get safer, right? And so then that would warrant that becoming a bigger portion of the portfolio. Valuation is a key piece. And this is the piece that we get every day as public investors and valuations, expensive valuations force predictions. I have to believe a lot more at 10 times sales than I do at 10 times earnings, right? So we're seeing, okay, what is the prediction of the company and what is prediction the market is forcing us into? And are we comfortable with that?

AI assessment note: “with a company like Zoom, which we never owned because... it looks a lot to us like a feature”

Q analysis. So, so Michael, you published the awesome measuring the moat paper a few years back that has become basically the Bible for how to do this. Uh, and we thought maybe the right way to dissect this, uh, I think you teach Ben Graham's legendary security analysis course at Columbia Business School. So like, how do you think about this concept in the course and how's the course structured?

A Yeah. So the core structure and we can dwell on the competitive strategy piece, but I, I usually like to think about it in four parts. The first is just thinking about markets and, you know, the fundamental question is, are markets efficient? Are they inefficient? If I'm a, whether I'm a venture capitalist or public market investor, if I have hopes to generate sort of attractive returns, how do I go about that? So how do I differentiate myself to do that? So that's a whole thing on markets and that ties a lot of back to the Santa Fe Institute stuff. So we'll come back. We'll, we'll put that to the side for just a moment. A lot of work on valuation. So we've talked a bit about that. And then the third module is competitive strategy. So, so Ben, that's what we'll dive into in just a second. And then the last piece, which by the way is the most, the newest part of the course is on decision-making. And what I came to realize, you know, probably 15 or 20 years ago was what differentiates good to great investors has little to do with their sort of technical skills, like their ability to build spreadsheets or whatever, and much more about their temperament. And in particular, their ability to make decisions under some sort of stress or tension. So we'll come back to decision-making real quick.

AI assessment note: “I usually like to think about it in four parts.”

Q And what, what inspired you to write the book, by the way? It's so good.

A It's funny. I love this day when you ask, like, where did these ideas come from? Because the, um, I, I was not a big, I I'm a big huge sports fan. I played lacrosse in college actually, but I was kind of an anti-baseball guy. So I didn't, I didn't mind baseball, but I didn't really like baseball that much. But then I read Moneyball and I was like, this is awesome. This is like so interesting. Right. And I think I was the first person on wall street to write about Moneyball. So I wrote a, I wrote a piece about it, like within a week or two of the book coming out. Cause I was so fired up and, and, um, you know, part of what they're trying to do is figure out, Like forget about what the person looks like, whatever, let's figure out what wins. And so these are things that are skill contribution. So that got me thinking a lot about this in terms of, and then it got me focused on the analytics community where this thing is really important. And then, um, I wrote a book called think twice in 2009 and think twice is about decision-making. It's really an homage to Kahneman actually. So like the kinds of stuff that Ben just read about. And I had, I had a chapter on luck and skill and I'm like, this is the coolest thing ever.

AI assessment note: “then I read Moneyball and I was like, this is awesome.”

Q You said a minute ago that the difference that you've found between great investors and average investors is the quality and, uh, temperament of their decision-making. How should people think about that?

A This has been an area I've been fascinated by, and I think that as a, as a world, we avail ourselves of these tools too infrequently, right? We should be doing more of this. Um, you know, Ben brought up a point early on, which I just want to reiterate, which is sort of thinking about different scenarios for how the world might unfold. And I think that one of the biggest mistakes we tend to make is that we tend to think we know the future better than we actually do, right? So the idea is to maintain sort of an open-ended understanding of how things might unfold. Um, so there are a number of tools and I'll, I'll rattle them off very quickly. Um, most of them are about opening up your mind and one of them is about feedback. So the first one on opening up your mind is this idea of base rates. And, and for those that are not familiar with this, you know, when we, when we are faced with problems, the typical way we solve a problem is to gather a bunch of information, right? Combine it with your own analysis and your, in your experience and your own input, and then you project into the future, right? And it feels very natural because you've gathered the information and you're, you're obviously, Using your own devices to figure things out. Base rates are actually a very different exercise, which is, it says, hey, let's think about this problem as an instance of a larger reference class…

AI assessment note: “So the first one on opening up your mind is this idea of base rates.”

Q Do you have any inklings about, uh, and it's okay if you don't right now, but I think everyone listening can sort of muse for themselves. Where do I feel like, uh, there's not enough smart people running and I can go be king of the hill over here. Do you have any inklings about where that, that might exist in the world?

A No, I mean, investing, I don't like, I would just try to stick to investing where I, I think it's the most clear. Um, there are a couple of things that are interesting. One, certainly I would just, I would go geographically, right? So are there markets where, I can land on the ground, you know, whether they're frontier markets or what we would call smaller emerging markets where we're really the due diligence and shoe leather will get you ahead of the game. In the U S it might be, uh, for example, in private equity, a lot of people talk about this, but if you're doing buyouts, are there other segments of the markets or geography of the country, for example, where you think you could do something that's interesting. Um, the other thing in public markets, one of the interesting ideas is that most public companies are now in index funds or ETFs or something like that. And so they're, they're fairly well trafficked and studied. The question is, can you develop a list of companies that are not followed by analysts, that are not in indexes, that are not in ETFs, right? That might be a little bit neglected. Um, so that might be an area where again, you show up and you're the only person playing at that poker table, something like that. So, so there might be some creative ways to think about that. And, um, The, the other area of course, which is now very much in its infancy is decentra…

AI assessment note: “frontier markets or what we would call smaller emerging markets”

Q That's so cool. Technically, how did you make that happen? You guys adapted. You've been on TOK, the, um, reservation and ticketing system for a while. How did you, did you work with TOK to make this happen?

A The guys at TOK were awesome. We called them early on, and we're like, we have this crazy idea, and we're actually trying to, like, hack the system. It's, so TOK is a reservation system for those that don't know, and those guys are awesome. Um, and we were trying to morph the reservation system into a delivery system, And we just about figured out, and they, they called, like, you guys, stop it. Hold on a second. We can, we can do this. Give us five minutes. Five minutes later, they called back, and they said, we stood our company down. We're turning it back on. We just called everybody in. They're in Chicago, and we're just gonna work on this so you have the platform, and they cranked it out, working around the clock for a couple of days, and, um, and we were able to launch, and so that is a mechanism that any restaurant in the country, look, not everybody can do drive-through, I mean, it's just the physicality of it. The location's gonna work for them. But any restaurant in the company could do delivery, and now that we've got the software for it, it's just, it's, it's not, You know, overtly tricky.

AI assessment note: “we were trying to morph the reservation system into a delivery system”

Q want to ask you what you were thinking going into the IPO with Facebook on mobile being HTML five and what happened you IPO at a hundred billion dollar market cap over the next three months. You have a 50% drawdown. Probably because of that. Um, but I, I guess the related question to what we're talking about now is how much is that informing your approach here with AI?

A It was a pretty different, different technical issue. So, I mean, our legacy was building on web for websites, and we were very used to building one thing and being able to continuously deploy it, and it fits with our iteration style and all that, so now all of a sudden this, like, app model comes along, and it's like, we have to build, like, different ones for each phone, and, like, you have to go through approval to get it shipped, and we have to wait, like, weeks before it can ship. It's like, this sucks. So, we're like, alright, we have an idea. Let's build this platform where we can get a web-based platform, so you basically build a native shell, and you build this web-based platform in it, and we'll be able to just update our apps every day, and we'll ship one thing once, and we'll update our apps across Android, and iPhone, and Blackberry, and Windows Mobile, and all the stuff that existed at the time, because it hadn't gotten consolidated yet, and, um, like, that's gonna be, that's, we're like, basically, whatever downside we Are gonna have, from not having the most native thing, we're gonna make up for in velocity, and by having, like, way more of our energy focused on one platform. Well, we were wrong. It turned out that, you know, having the native integration was actually critical for having the interactions feel good, and And that, so we basically went through this…

AI assessment note: “whatever downside we Are gonna have... we're gonna make up for in velocity”

Q You've transitioned from being the CEO to someone else three different times. If you could go back, let's even just say the first time, if you could go back years, 1999 or 1997, so you can start working on some talent development. Um, what would you do differently to make sure that succession?

A I would have believed Oren when he said, I only want to do this for a couple of years. And I convinced myself I could just get Oren to do this for Five years, maybe 10 years. And so when he kept saying, you know, I, I want, I don't want to do this anymore. I just, so I was stuck because I was not prepared. To look around the room and say, God, I think he could do it. And if I would have spent maybe a year or two in, but I didn't, I was very, I believe that I could convince Norton to stay longer. And so I think, and also Jim Donald's a great guy, but I, I think the immersion of an outsider at that time, given we were moving into a crisis, not a Starbucks crisis, but the financial financial crisis, very difficult. So it's on me. I think when I look back and I just did not do a very good job of recognizing the internal talent and cultivating it. But I want to, I want to say one more thing about Starbucks and it's the complexity of it. We're in multiple businesses. So we're in the agricultural business. We are buying coffee from 30 producing countries around the world. We are subject to weather and the agricultural issues, some of which are, many of which are not in our control. Political, all kinds of stuff. Second, we are manufacturing a commodity that is very, very challenging because it's coming from 30 producing countries, and each coffee, each coffee from every country has it…

AI assessment note: “I would have believed Oren when he said, I only want to do this”