The Exchanges, every show

Q It's, it's interesting because as you're saying that I'm thinking like value investing and then you went into non-value investing in a way, right? Like how did that translate? How did what Buffett said translate into seed investing and sort of venture investing?

A I think having a firm understanding of the bedrock Is super valuable, and then when you recognize the need to innovate on top of it, it's just really good to have that foundation. I have an incredible peer in this guy, Mike Mobison. I don't know if you've heard of him, but he's a writer of financial books. We started at First Boston. He had probably been there a year or two ahead of me, so it's, you know, just super fortunate that I landed in the same place as him, and we've been lifelong friends since then. He introduced me to a gentleman named Bill Miller, who ran Leg Mason and had this, like, 15 year run of beating the S&P, one of the most famous investors of all time. And he claimed to be a value investor, and he was the largest shareholder of Amazon for a very long period of time. And what he would say, I'm getting back to your question, he would say that, you know, value just means that the asset is underpriced relative to what you think it will be worth in the future. I spent a lot of time talking with Bill about network effects, and if you believe in that, then Amazon might be able to grow at a unreasonable growth rate for a very long period of time, which he believed. And so that, that's how you get there. But yeah, I, I, I've often thought that many of the VCs in Silicon Valley would benefit from having a better understanding of finance. And one other answer to your q…

AI assessment note: “value just means that the asset is underpriced relative to what you think it will be”

Q You get asked a lot about how to educate yourself. If you're a parent of kids, So that you can put them on a path to launch and do well and chase their dreams? Do you have a good answer for that question?

A I mean, the, the second chapter of the book's all about lifetime learning, and it's kind of a requirement that you're following your fascination because the lifetime learning comes for free if you're fascinated with something. Like, you just constantly soak up and devour new information, and I, I do think that a lot of kids get exhausted because We've made high school and college such a grind that they think the learning ends the day they walk out with their diploma. And as we all know, the best and brightest in all of our fields are on a constant learning journey. And when something new comes out, they dive in and try and figure it out. Right. And so in every, every single, uh, person in the book that we profiled has that kind of attitude about their craft, you know, in every day. And so I, I think the real test is. If you're not proactively self-learning, then you're probably not tilting against something that you really adore and are fascinated by.

AI assessment note: “it's kind of a requirement that you're following your fascination”

Q Do you have a way of sensing if somebody is just going to stay in it until they either do it or they break them?

A There's a couple things you can look for. Like, did they fall into it, um, opportunistically? Because then they might not It might not be there, you know. Um, and some people, I remember, I remember when we did the first Uber investment, um, Travis, his, his first couple of companies, one of them I think ended up in bankruptcy, the other one they like got money back, but, um, It was pretty obvious he hadn't touched the brass ring and really, really, really wanted to, and he could sense that this thing was gonna work, like, way bigger than the first two he was on, and I could, I could just tell he wasn't, he wasn't gonna, you know, he wasn't gonna not lean in as hard as he possibly could. You could feel it.

AI assessment note: “There's a couple things you can look for. Like, did they fall into it”

Q Is venture capital eating the world? Or is venture capital scaling so much that it's eating into other asset classes? We're seeing mega funds. I'm interested to think about what's durable about your approach to investing. What's additional? What's substitutive? How is venture changing?

A I think from the minute I entered venture to, to today, venture has gotten nothing but more competitive. It's, uh, it, it, it, As an asset class, it's gotten more and more competitive, and people get more and more aggressive. Um, we're in a very interesting time where people have grown funds to the size of, of equivalent to the largest PE funds, and, um, they're moving money, um, especially, you know, you just had to call us on, you know, you look at the Stripe or the Databricks case, they're using those large funds to convince the companies to stay private longer, maybe forever, Uh, that's just a very different world than the one that I grew up in. Um, I think they turn around and the people that do those rounds turn around and tell the LPs, their, their investors, look, if you want exposure to these growth years in these companies, you need to come through us. And so you, they, if I were using cynical words, I'd say they've hijacked the, the, the, the growth years of these early IPO companies. You know, Amazon went public below a billion in market cap. Like, it's hard to fathom that, you know, today with, with what we have going on here.

AI assessment note: “grown funds to the size of, of equivalent to the largest PE funds”

Q What, what, what about this class of technology you've lived through and invested through lots of these technology paradigm shifts, um, What about this one gets you the most excited, especially relative to the other ones that you've lived through?

A I, I, it, it's some, my answer to that question is, um, decidedly personal. Um, and it relates to what you just said. I'm probably doing 40 or 50 searches a day on, on a AI platform, which is more than I ever did Google searches. Um, it's almost all a form of very quick learning. Like super quick learning, um, about either particulars. I forgot things. I don't know about like, and it's, um, every day. And, and I think to myself, you know, for those people that are inherently self learners, the speed at which they'll be able to get things accomplished and, and move up the ladder is like breathtaking. Um, And then, and then I think outside of LLMs, you know, from Tesla FSD to other types of problems that are being solved with traditional AI, um, those are super interesting to me as well. Maybe more profound. I, I do, I do worry that LLMs have a limitation. It's potentially solvable, but they were created around language. Um, they're not great with numbers. And when people say, oh, the, the generalized AI is just gonna replace all compute, I, I, I don't see that. They're gonna have to fix some things or merge it. The way, the way when you ask an AI math now, it goes off and writes Python. That's, you know, you're gonna have to do more of that type of work, um, to get to that place. If you're espousing the, but isn't it real argument, I, I, I can't, um, I can't push back on that.

AI assessment note: “It's almost all a form of very quick learning. Like super quick learning”

Q Totally can. I hope that day doesn't come for a long time. I do have to ask, you mentioned different forms of liquidity that are secondaries going public. Bill, you've spoken very publicly before about SPACs, and, you know, they've had a challenging last 18 months. I guess my question is, like, will it recover when, how do you analyze it?

A Yeah, so I think that's a bit of a misnomer. I've been very outspoken as a huge proponent of direct listings, because I just think it's the only way you should price it publicly. Security by matching supply and demand, and I've been very negative on the traditional IPO process, which has devolved into something that's very, very disingenuous to Silicon Valley founders and startups. The process is broken, and the outcomes are broken, but it's really sad. SPACs came along, and I think offered something not nearly as good as a DL, but a little better than an IPO, in that it gave the founder and the CEO more control, and SPACs would have only had this moment in the sun because of the significant Can underpricing in the traditional IPO market? You know, everyone says SPACs are expensive, but when your stock pops 50 to 70% in the IPO, that's way more expensive than a SPAC, and so it created this window. I think there have been some, you know, very significant transactions. We just did one with Nextdoor. I think SoFi, you know, has done extremely well. I would expect Grab to do well. So there have been some people that have been able to use it as an IPO alternative, as has happened historically. A lot of people have also used it As a way to take companies public that are pre-revenue, which you would call highly speculative. Being public with no revenue is a Crazy, wild ride. If everyo…

AI assessment note: “SPACs came along, and I think offered something not nearly as good as a DL”

Q Bill, how do you feel on this point?

A Totally agree. It's all about comparative advantage. There is probably no chance we can make a 30 dollar microwave in the U.S., and we, but I'm a hundred percent sure we shouldn't make a 30 dollar microwave in the U.S. Making 30 dollar microwaves. And that raises the standard of living for all the U.S. citizens, because their purchasing power is so much more powerful. And, you know, we didn't make this up like Adam Smith did a long, long time ago. But it's bad, a lack of globalization. I would say one thing that flows more freely than goods is work. And so the fluidity of which jobs, especially these programming jobs that I've been talking about, can move around the globe is, is quite high. We're an investor in Upwork, which is a company that, that, you know, helps facilitate that type of thing, and that's super powerful. 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 globe.

AI assessment note: “Totally agree. It's all about comparative advantage.”

Q Bill, how do you feel on this point?

A Totally agree. It's all about comparative advantage. There is probably no chance we can make a 30 dollar microwave in the U.S., and we, but I'm a hundred percent sure we shouldn't make a 30 dollar microwave in the U.S. Making 30 dollar microwaves. And that raises the standard of living for all the U.S. citizens, because their purchasing power is so much more powerful. And, you know, we didn't make this up like Adam Smith did a long, long time ago. But it's bad, a lack of globalization. I would say one thing that flows more freely than goods is work. And so the fluidity of which jobs, especially these programming jobs that I've been talking about, can move around the globe is, is quite high. We're an investor in Upwork, which is a company that, that, you know, helps facilitate that type of thing, and that's super powerful. 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 globe.

AI assessment note: “Totally agree. It's all about comparative advantage.”

Q Absolutely. Penultimate one, when you look back at benchmark in the decade, what are you most proud of?

A I think what I would say is the founding partner's Put together this crazy idea of this equal partnership, and also we're structured in a very artisan way. We don't have analysts or associates running around. The partners do all the due diligence themselves. We don't have huge teams of PR people or marketing departments or anything like that, because we just like to maximize the time we spend out on the field, and they put together this structure with this equal partnership, and I don't think any of them, I don't know if they knew at the time, it's amazingly helpful for generational Because it gives you the opportunity to go out and get the very best candidate you possibly can because people, and this happened to me when they approached me, like the overwhelming sense of welcome you get when someone's willing to say, hey, you deserve as much as we do is super powerful. And so I would say the thing I'm most proud of is that we're moving towards our third generation of partners and they're all wonderful. You've had several on your show. And I just love that the model endures. It's also one where team stands out way above the individual, and for the people that come on here, that, that's something that's, that's super meaningful to them as well.

AI assessment note: “the thing I'm most proud of is that we're moving towards our third generation”

Q granola.ai slash Shane and get three months free with the code Shane. That's granola.ai slash Shane. If AI is really going to change everything or, you know, have such a big impact, how does it change how you invest? When you look at a company, are you looking like this is a wrapper on AI? You're effectively like a calculator app on the iPhone or like, how do you think?

A I, I, I think that question is up for grabs and it's a hot discussion between everyone. So, you know, if, if you believe that these models become near sentient, Then there will be no need for a vertical model, because this one model will just do everything. I'd probably come down on the other side of that. I think that there are workflows and data moats that if you get, and also just understanding, like, there's three or four legal startups in the AI space. They're just spending so much more time making sure they ingest all the case law and And really understand, you know, the processes and principles there, and, and then you implement with them, and they're writing stuff on your behalf, and you're building new databases out of there. I just don't know that you then switch that to ChatGPT as they climb up the stack, but, and I'll take, I'll flip back to the other side, you know, they have talked about in their product groups, You know, going after verticals. So it's, I think it's a TBD. People point to Microsoft, you know, starting with the OS, and then, you know, there were, there was Lotus one, two, three, and there was, I forget, I can't even, oh, there was a WordPerfect. Like, I can't remember the specific apps, but, you know, they eventually moved up the stack. That could happen. We're going to see how it goes.

AI assessment note: “I think that there are workflows and data moats that if you get”

Q ingredients, just a real dose of sodium, potassium, and magnesium. I know you're all thinking electrolytes are for athletes, but you don't have to be an athlete to benefit from it. And it tastes great. Stay sharp in the afternoon and grab a free eight-count sample pack with any purchase at drinkelement.com slash TKP. That's drinkelement.com slash TKP. How do you think about the competitive mode of Visa and MasterCard?

A I think they will be heavily threatened by this, and historically what they've done, and, and by the way, those two companies have two of the highest operating margins in the history of business. They have, like, 60% operating margins, and they're, they're duopolies, and, and they were created by the banks, so, and the banks have a stake in it, so it's like the, the whole industry is It's kind of stuck in this world where they make a lot of money because it is this way, but there's zero reason why it should cost two or three percent, just zero, and it will change. In China, because they had this digital immediate transfer, um, Alibaba and Tencent were able to very quickly build digital wallets that people carry around, and so if you walk around China, If you want to buy a hat from a street vendor or, or a car, you know, in a Huawei store, you, you use WeChat Pay and Alipay for everything. You scan a QR code, like edit, you check out of a restaurant, like you can just pay at your table. There's a QR code on the table. You just take your WeChat Pay or Alipay and scan it and you're done like one click. Like, so they've, they've innovated their entire payment system Way further than we have, because, because of this The decision by the government to make money transfer easy.

AI assessment note: “I think they will be heavily threatened by this”

Q Are there, do you think we're overfunding this build-out? How do you think about that? I saw that smile on your face.

A I mean, it's such a hard question to note. If you told me five years ago that the, that these, uh, mag seven would become worth three trillion dollars and then turn around and take their free cash flow from 50 to a hundred billion a year down near zero because they were going to spend it all on CapEx. I'd have been like, no way. Like I wouldn't have believed it. So from a certain standpoint, I'm shocked that the money's this big. I will tell you that the venture capital community, you know, I mean, we talked earlier about increasing returns and, and that concept and other people call it power laws. Like when startups have become important In an ecosystem, and then they've been able to prove that they can grow, and that that growth might be a function of their size already, or their footprint, or their users, and that would include everyone from Google to Amazon to Meta, that they end up being worth way more than anyone thought, and I think the investor community writ large has slowly become Aware of and believes it strongly in increasing returns and power loss. And so over time, if they all believe that they're going to be more willing to invest on the come and take risks. Right. That makes sense. That follows. And so, you know, someone forwarded me a chart this morning of the losses of the leading company in the field prior to going cashflow positive. And you look at, you know…

AI assessment note: “So from a certain standpoint, I'm shocked that the money's this big.”

Q Fascinating. So what do we do about that?

A Well, I, here's what I fear we're going to do about it is, uh, this is really off the subject, but what I fear we're going to do is the two leading players will recognize the threat and weaponize regulation, which is what they're, they've, they started doing three years ago, but, um, no one's funding more lobbyists, um, begging for AI regulation than Anthropic themselves. And, um, And they'll use that to try and deal with the threat. What's really going to be interesting is the rest of the world. So in, for the past hundred years, I think the U.S. has considered rest of the world their, their market. Like, and that's true in industrial type products, but it's certainly true in technology. And if you look at the internet, um, you know, China kind of had a fence around it. And the rest of the world use the U S products. They use Google and Amazon and Uber and, you know, all these things. And if we pull up this huge regulatory, um, wall, you know, it may be the U S that has the fence around at this time. It's going to be really interesting. Copyright's a super fascinating thing. Like, like if the Chinese models don't, um, protect copyright and the U S ones are forced to, what is, The rest of the world do. You know, do we go to the EU and say, you can't use Chinese models. They don't respect copyright. And how will the EU respond? I don't know.

AI assessment note: “what I fear we're going to do is the two leading players will recognize the threat”

Q original set of realities that you explored from the LP side and just like the capital markets, you know, systems level stuff. What do you think is going to happen? Like you've laid out the, The realities on the field and the various incentives and or lack thereof, uh, for change. What, what do you think is going to happen in the next, let's say five years across the domain?

A My, my gut is that we have a problem. Um, Patrick and I, you know, and I'm, I'm, I've always been more of an analyst than an optimist, even though I, you know, I was successful in ventures, so I had to be somewhat optimistic, but I started as a security analyst and I've just, I'm born with more of a critical thinking hat. So my bias would be that way. And, and someone could certainly take the other side and say, oh, Gurley's always Predicting the next downturn or whatever, but, but my gut is we have a problem. You know, the system as it exists today promotes less liquidity, less traditional high quality company building and way higher burn rates. And that's just not a great combination from my perspective and it's all self-reinforcing. So all of the components that I listed, unless Something happens at the LP level. I don't see a corrective mechanism. I think we're getting sucked more and more into that loop. There's a great video you may have seen where Josh Koppelman just walks through some simple GP math, you know, from his perspective, you know, Jack Altman.

AI assessment note: “I don't see a corrective mechanism. I think we're getting sucked more into that loop.”

Q Well, when you, when you look back on your career, unpack it for a minute, um, what, what do you think the things you got right were or the things, you know, you might change in terms of your career and, and being happy and finding your passion?

A Yeah, I do feel super fortunate that I was able to do, you know, my, my dream job for over two decades, and I love innovation. I love betting and gambling, and I love the combination of being able to think through markets and disruptions and, and to be able to place bets and all those things are super exciting. Things I got right. Um, studying history, which is something I talk a lot about, and we'll be talking about in the, in the book, like knowing who the, the patriarchs were of your industry and knowing what they thought I think is super powerful in any endeavor. And then networking, you know, just like crazy. Which I think is actually easier today. So those are a couple of the themes that we developed.

AI assessment note: “Things I got right. Um, studying history, which is something I talk a lot about”

Q old that we all know, and then I also flip to other people who say, Harry, you've got to move to the new normal, you've got to pay up. The best deals are the most expensive, pay up. How do you think about your own price discipline in a world of capital supply like we have today and competition like we have today? And what would you advise me actually?

A Well, part of why I was smiling so much when I said, okay, boomer Harry is like, we can sit here and complain or be worried about a reset or a bubble. And it has absolutely no impact on what's happening out there day to day. And the problem is it's a highly distributed field of players. There are thousands and thousands of VCs and way more of that of entrepreneurs, and we don't get to decide. The market does that via supply and demand, and so you have to play the game on the field. I think I told you this on a previous call, but I had this amazing meeting with Howard Marks where he asked me to explain the venture industry to him, and he, afterwards, he told me, well, that sucks. I said, what do you mean? What's wrong with it? He goes, you're gonna have resets all the time. There's no way to invest across the And I had seen similar or supporting data out of Horsley Bridge, I believe, who's one of the largest fund of funds, where if you looked at, like, a twenty-year window that included the dot-com boom, if you took out 96 to 99, like, you took out the majority of the return. And so, I think you have to invest as a venture capitalist over the cycle, like, over a 20 or thirty-year period, and the biggest mistake you could possibly make is trying to call the top. And so, unfortunately, I think You know, have a little, I call it the Thelma and Louise attitude, where you just push t…

AI assessment note: “you just push the gas pedal and run it to the end.”

Q Bill, how do you feel being on the slightly earlier stage of the spectrum and on that end of the market? How do you feel with that quote in mind?

A Well, Harry, when you told us you were going to ask macro questions, I was thrilled to know that Howard would be on the call because he's obviously way more, has way more expertise in these areas. Funny story, about two or three years ago, when interest rates We're heading into unprecedented territory. I told my partners I needed to talk to some macro experts, and I did everything I could to find my way to Howard and Stan Druckenmiller, who I talked to for a while, and I was thrilled to get to meet both of them. I remember Howard asked me a lot about the venture industry, and, and for about 20 minutes, and then he said, oh, that's a really bad business, and I said, why? And he said, he said, it'll be inherently cyclical due to the way the fund flows work, and it struck me. It really landed at four Saying in venture capital that the way to protect yourself against the downside is to enjoy every last bit of the upside, and to Howard's point about adjusting your game, if you were a LP that had been exposed to venture capital for the past 30 years, it'd be interesting, you would notice that some of your biggest gains were the years right prior to the resets in like, oh, one and oh, nine, 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, b…

AI assessment note: “there's no such thing as conservative venture. You don't Take your cards off”

Q private markets away from AI where the pricing and supply demand story is extremely different. Like, you know, if you just go to a, a more run of the mill company, The capital markets are not super excited to fund them, and they're evaluating them in very strict calculator terms to a degree that's nothing like what they're doing in AI. Is that a place to go spend more time?

A I even think some of the names I've already mentioned that are considered to be, you know, these late stage, uh, investors are thinking this way. They're thinking, what if I can find a traditional company that may not understand that AI would enhance it, but where we can go Do that ourselves, and maybe that is a disruptive way of looking at things. The, that, that non-consensus accurate quadrant, the first time I read it was Howard Marks, you know, who I read everything I can that Howard writes. Um, There is a, I think an incongruence between that point of view and these platform shifts, because these platform shifts, um, have, have now become, um, consensus and, you know, you'd have to not invest in AI, which sounds outlandish, right? And so I just, I don't know that you can apply those two things simultaneously. One thing that's super interesting about AI to your point, and maybe You know, is the big companies seem to have moved very quickly. I mean, if you go on, you know, ServiceNow's website, it just drips of AI. You know, the Microsoft earnings transcript had 67 occurrences of AI, you know, and Satya just talked for two hours about AI. Um, it's a, it's a weird thing. A lot, I think a lot of what we read, you know, in, And crossing the chasm or, or the innovators dilemma, you know, the big companies are supposed to be slow to mobile, slow to the internet, slow. And that's …

AI assessment note: “what if I can find a traditional company that may not understand that AI would enhance it”

Q That seems supremely strange. Can I ask, how does that reveal itself?

A Oh, they might just tell us. And that changed over time. I think, like I said, I think 20 years ago, if anyone had an opportunity to join a top tier firm, they'd jump at it. But I think today, there are people that just have other desires or passions. I will tell you, there's another piece to it that I should mention. I think people on the outside may not realize how much selling goes into venture capital. It's probably the one thing that I didn't realize when I joined that I know innately now. But I could argue you're spending 85 or 90% of your time selling, and so if you don't like selling, it's a bad career choice.

AI assessment note: “Oh, they might just tell us.”

Q What's your take on all of this doomerism? Like if you're a young person, And you're in college or you're in high school. Is this, is this much ado about nothing or how do you run down a dream in the face of something like that?

A Yeah. Well, I, you know, I started the book before this happened and I've been asked the question a lot and it, it came up in the Ted talk. I, I fear that the, a lot of people are in jobs. They actually don't care about that much. And, um, there's a Gallup poll that backs this up. They came up with that word quiet quitters. They're like, 59% of the people they surveyed. Are kind of ambivalent about their job. And when you're ambivalent about your job, you're not high agency. And so you don't lean in, you know, if you, if you look at how Jason talks about how they implemented AI and all of his, his different working groups. You hear that enthusiasm and that high agency, and then you want to go try these things. And I think the best way to protect yourself from AI is to be the most AI enabled version of yourself you can be. But if you're ambivalent about your job, you're probably not doing that. And you could be, you know, a sitting duck. So I think it's the mindset that's the problem.

AI assessment note: “the best way to protect yourself from AI is to be the most AI enabled”

Q Final one before the grapevine. Sorry, I just have to. Is now a good time to be investing in venture as an LP? I speak to a lot of LPs who are entering venture for the first time investing in funds. Is now a good time?

A I think most of the endowments That have radically outperformed have larger venture portfolios, and I think the asset class in the past 18 to 24 months is, as we all know, has done much, much better than anything else they could be in, and it creates a quandary. You know, they're sitting there looking at an asset allocation table, and the thing that's worked is now twice as big than their model wants it to be, and there's plenty of demand for more. I'll call it tiger chase, and so I've seen some signs that Would suggest they're full, actually, partially because of the returns and partially because of, you know, how far do you want to take the risk on morphing your asset allocation model?

AI assessment note: “I've seen some signs that Would suggest they're full, actually”

Q Super interesting. Bill, you, I mean, you're, you're like the software Guru. I mean, like, do you feel the same way? I mean, yeah, we'll call it. Yeah.

A Actually, I want to make a quick comment on, especially with this slide on SAS multiples. So obviously it's a price to revenue multiple slide and, and price to revenue is like this really crude evaluation tool. It's like the crudest you could possibly have. Um, I published a blog post once where I took all the internet stocks and laid them beginning to end on the price to revenue multiple. And it was like just a massive diversion. There is no such thing. Um, And so what really values companies, you know, it's typically a discounted cash flows. And so now all of a sudden the buy side's asking SaaS companies about net dollar retention, about long-term operating margin, about whether their free cash flow is greater or less than their net income, about SBC as a percentage of free cash flow.

AI assessment note: “Actually, I want to make a quick comment on, especially with this slide”

Q United States driving cabs and trucks and doing that as a job right now, how many of those do you think will lose their jobs To self-driving in the next decade or two based on just being in there. And I'm not trying to lead the witness here in any way. Obviously some people prefer a human driver, but what's your take on, on that specific part of the economy?

A I think it's impossible to go with a hundred percent automated, uh, solution because the economics don't work well. And so I think like some of the other examples that were given ATMs and whatnot, I think the, the use of non-ownership Cars is going to go way up, so it's going to keep growing through this, and humans are going to be used for, like, 50% of it instead of a hundred, and so I might not be surprised if the number actually stays the same or grows, and re, let's remember, these jobs didn't exist before because regulation had limited what the taxi market was capable of, and, and getting around that actually led to job creation, and so I, I'm not a big fan of the doomerism because around jobs, you know, there's a word Luddite that kind of is used to, to talk about it. And I don't have high confidence in any government program for skills retraining. So it's not clear to me what, okay, yes, it's happened. What do we do now? It's not clear to me. I think the thing you can do the most, one, we already talked about, use the new tools, know what it's capable of in your field. Like, get out there. And then two, if your job is going to go away, and maybe it's a job you don't care about, start thinking about where there are opportunities. Everyone's talking about it. The skilled trades are, like, we're, we're, we're short of people everywhere.

AI assessment note: “I might not be surprised if the number actually stays the same or grows”

Q So, I'm, I'm just curious, how do you manage that? How do you manage being so, you know, trying to be founder friendly, and trying to tell these young people, go for the, the moon, You know, hit the stars while talking to you, Timco about the fact that you're going to fiduciary their capital.

A I think it's really hard. Like, um, I used to use this metaphor, which I don't think makes sense to anybody, but I'll use it anyway. When I was young and I'm almost 60, um, sometimes a friend of yours had a bicycle that, that was a little old and rickety and not all together. And the The handlebars weren't in perfect connection with the front wheel. There was slop in it, and so you, you would, you, you kind of thought you were steering, but you, you just had to oversteer a lot, and you kind of went down the road in a janky way, and it's a lot like that. You don't have the steering wheel, and your ability to influence is limited, um, and so, You do everything you can to earn the respect of the founder, and, and respect is a different word than affection, I think, and it's hard. Like, it's super hard, and the great ones have figured out how to do it. Um, and by the way, it's even harder with sycophants living in the later stage investment rounds, because they come in and say, Everything the founder wants to hear, and that makes it even harder, because here's somebody with a lot of money showing up who's not doing what you're doing, you know, and so it's a craft for sure.

AI assessment note: “You do everything you can to earn the respect of the founder”

Q It was a long walk in the desert. I mean, a lot of great companies were started, but a lot of founders gave up at that time, right?

A Yeah. And, and, and look, I mean, I think to the, if you're an early stage investor, or if you're an early stage founder, that's just getting going, or even an early stage company, because if you haven't scaled out yet, this probably hasn't affected you. It could be, it could be wonderful. Like your access to talent is going to be a lot easier. People are going to be more pragmatic and rational, but it's a lot, it's usually a long window on the other side. The other, the other challenge you have here is, In 20, I mean, we basically had a mini pullback in March of 2020, but then the Fed hit so hard that things just blasted off again, and now, and now, you guys have talked about this, but that tool's not in the toolbox anymore.

AI assessment note: “it's usually a long window on the other side”

Q on these models, roughly produce the same thing, which theoretically says that these things are getting commoditized way too quickly, and then you'd say, well, what's the ROI on all this incremental spend, which is a very interesting economic and investment question. So, I don't know, like Gurley, what do you think happens if these evals continue to asymptote, and we need more and more and more money for training?

A Some of the smarter people in the open source community have suggested to me that we need more open source connectors of types. So, MCP is actually run by the Linux Foundation, and if you think about any surface area where a model might interact with other software, the more of those connectors that can be open sourced and commoditized, it would lower, this is what Google did with Kubernetes, uh, to, to try and commoditize where workflows live off of AWS and to make it easy to migrate. And so the more you can create systems that make that type of exchange you just described super easy so that you can plug and play the model and you have to worry about things like context and how does context come in and, and data and, you know, stuff that like Glean and, and Databricks do, but how, Anyway, if you can do that, if you can create more of those connectors like that, then the models become swappable. And certainly with the, with the model companies trying to move up the stack, you have massive desire from the app layer players to try and figure this out. And we already, you know, watched what cursor's doing and playing with their own model and being forced to kind of reckon with the fact that they're coming up the stack fast. So I think that's a really good insight that this gentleman shared with me. And I think We, the founders and developers that are out there should work on more …

AI assessment note: “if you can create more of those connectors like that, then the models become swappable.”

Q I do. I want to answer. What direction are you going to go in?

A So it relates to where you started this conversation, which is if you have a traditional investor mindset, and you study finance and financial history, and you've read all the Buffett stuff, and you have a conservative analytical approach, Approach to the process of venture investing. I think, you know, some of these moves by some of these companies, some of the types of companies that have worked are outside of your minimum. And so if this continues, like for 10 more years, my mindset is probably not optimized for execution in that world because I would say you might need to modify yours because the world's playing at a different pace. With a different game on the field, and there's all these great stories over the years in on Wall Street where the value investor, you know, is getting his head handed through a boom cycle and then switches to be a growth investor right as everything goes down, and then they lose in both directions, which is always the risk of that, but I'm constantly trying, you know, that great phrase, uh, strong opinions loosely held. I'm constantly asking You know, why did you miss this? Why did that happen? You know, what is your mental model that's preventing you from seeing these types of things? And that, for me, the biggest challenge when you have a boom that lasts this long is precisely that.

AI assessment note: “my mindset is probably not optimized for execution in that world”

Q I do. I want to answer. What direction are you going to go in?

A So it relates to where you started this conversation, which is if you have a traditional investor mindset, and you study finance and financial history, and you've read all the Buffett stuff, and you have a conservative analytical approach, Approach to the process of venture investing. I think, you know, some of these moves by some of these companies, some of the types of companies that have worked are outside of your minimum. And so if this continues, like for 10 more years, my mindset is probably not optimized for execution in that world because I would say you might need to modify yours because the world's playing at a different pace. With a different game on the field, and there's all these great stories over the years in on Wall Street where the value investor, you know, is getting his head handed through a boom cycle and then switches to be a growth investor right as everything goes down, and then they lose in both directions, which is always the risk of that, but I'm constantly trying, you know, that great phrase, uh, strong opinions loosely held. I'm constantly asking You know, why did you miss this? Why did that happen? You know, what is your mental model that's preventing you from seeing these types of things? And that, for me, the biggest challenge when you have a boom that lasts this long is precisely that.

AI assessment note: “I'm constantly trying, you know, that great phrase, uh, strong opinions loosely held.”

Q know, if I'm young and upcoming, I'm on that edge and I'm going to dive into it. But if I'm an incumbent, it's much harder to dive into that because it might mean it's the innovator's dilemma in a way, but it might mean giving up a Previous decision I've made or saying that I've been wrong and going backwards. How do you think about that in terms of competition?

A I mean, I think that anybody in any field should want to be on, like, curious about the bleeding edge and what happens. And, you know, as a venture capitalist, you know, we're always definitely afraid that some new app's gonna pop in the app store that we haven't seen. And so everything that comes up I play with, I roll around. Right now, I have, like, five premium AI accounts because I just don't want to miss something, and you get trained that way. I think everyone should operate that way. I mean, it's kind of an interesting contrast. I'm suggesting you should understand the really old stuff, the history, because it's differentiating and shows a passion, and it gives you a great frame of mind, but you also want to really understand the new edge. If you do both of those things, like, you're, I think you're a power player in your field. You know, and the second one is a great way for young people. That's another thing that could really differentiate you in an interview. If you're applying for that marketing job, and you understand all the legends and the history, but you also really get TikTok, like, that's super, like, that's going to be a very differentiated skill going into those companies, and it matters. Like, it really matters. It gives you a chance to shine.

AI assessment note: “anybody in any field should want to be on, like, curious about the bleeding edge”

Q Yep. But that's probably where most of their tokens are being processed anyways at this point, Bill, right? Like transcribing YouTube videos and, you know, all you can Google meet, you can turn it on and all those searches.

A I was just inferring in your question, maybe I shouldn't have been that, that they'll have an advantage for Google cloud. And in, in order for that to be true, they need to, to have this crossover moment. One quick thing Brad on, on open AI, you know, I'm, I've, I've been writing a book which I've talked about frequently, and I've been quite, ah, although I guess there's some privacy things now you need to be worried about, but I've been quite open with OpenAI about the book and doing research, you know, along the way. It knows a tremendous amount about my book right now, and I can ask follow-up questions without having to put the whole book back in the prompt again. Um, because of that. And so, I can, I would, I would continue to believe that OpenAI's, um, most likely chance to long-term, um, success comes from switching cost and lock-in more than it will come from staying on the edge of the, of the model race. Because I think.

AI assessment note: “One quick thing Brad on, on open AI”