The Ledger
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Chamath: Mega-Scale Investment Firms Must Maximize Fees Over Carried Interest
“But if you really want to get to mega scale and run hundreds of billions of dollars and make it a business, you have to over-orient and over-index on fees and not really focus that much on carried interest.”
Chamath: Venture Capital Now Yields Worse Beta Than S&P 500
“That as the number of entrepreneurs have gone up, the amount of capital has gone up, and the returns have come down, where now you're signing up for 10 to 12 years of illiquidity, and a market beta that's worse than owning an S&P index fund.”
Chamath: Social Capital delivered 5x-6x fund returns and 40% IRRs
“And now looking back, we have six X funds, we have five X funds, we've generated 40% IRRs, we've generated billions and billions of dollars of returns.”
Chamath: Building a 21st-century Berkshire has always been my ambition
“I wanted to build Berkshire And that was always my ambition.”
Chamath: Western charitable foundations are largely driven by guilt and greenwashing
“I think foundations and charitable investing is largely an outcropping of Western guilt.
And the reason is because everything here has to have a name.
Everything is branded.
Every dollar that's given by rich people has to come with a label attached to it.
…”
Chamath: Solving major problems over next 50 years requires for-profit businesses
“Most of the true innovation that's going to happen over the next 50 years will be technological in nature.
And so at a very practical, pragmatic lens, you're going to need to hire product managers and engineers and designers, material scientists, chemists, bi…”
Palihapitiya: Manager concentration consistently decays returns over time
“Manager concentration always drives decaying returns. And the problem is either the surface area of their skill becomes very rigid and fixed, and so you force them to go out of their sweet spot. Or even worse, they become risk averse because they have not refi…”
Social Capital allows emerging managers a 30% drawdown before intervening
“We give you a 30% drawdown before we really get involved so that you can learn the business of managing losses.”
Chamath admits his viral anti-social media Stanford speech was a mistake
“One of the biggest ones was probably my speech at Stanford. You know, I gave a speech, and it's gotten pretty famous, and I kind of threw all of social media under the bus in 2016, and a lot of what I said came to pass. But it was a huge mistake, not because I…”
Chamath Palihapitiya generated over $1B in personal compensation from carry
“And that has been a net delta to me of at least a billion or a billion and a half dollars of compensation.”
Chamath Palihapitiya aimed to take Social Capital public by 2022 or 2023
“And I do think that it's very important for TopCo to go public as soon as we can. And just to be very honest with you, I'm very focused on trying to find a way to do this in the next two or three years”
Social Capital emerging managers receive 30% carry with no hurdle under $50M
“The way that we have structured the compensation, all the way up to about fifty million, basically you take 30% of the profits, and there's no hurdle. Over fifty million, we start to impose this logic of a hurdle, and the reason is because at that point, the q…”
Palihapitiya: Social Capital's 2020 returns will be 30% to 40% on billions
“In fact, the reality is, you know, this year, actually, I'm not going to front run my returns, but they're going to be somewhere between 30 and 40% on many, many billions.”
Chamath: Zero-Rate Regimes Force Investors to Understand Tech Compounding
“I think that incredible opportunities abound in a world of zero rates because it forces you to have a very, very unique viewpoint on future returns. It is somewhat of a much easier job when the risk free rate is between six and 10% to just check out. You can b…”
Chamath: Hardware solar and batteries are 'meh' businesses; software infrastructure is key
“Now, do I want to own the battery storage technology? Not really. Do I want to own Resi Solar? Not really. Those are kind of meh businesses. But do I want to own infrastructure that is the software layer? Absolutely.”
Palihapitiya: Left Facebook after Zuckerberg resisted capital for Facebook phone project
“I was working on a project to build a Facebook phone, kind of like a competitor to Android and iOS, but instead of really just building the product, I had kind of wrapped that whole project up in my own ego, and when I got pushback from Zuck, About the capital…”
Chamath: Social Capital 1 used budget-based fees and 30% carry
“And so I ran a budget-based fund, but with 30% carry. I had a very favorable LPA, a limited partner agreement, and all of those because I negotiated them on the behalf of myself as an LP, and so I was able to go to the other LPs and say, guys, I went from a fi…”
Chamath: Repetition compulsion causes investors to reiterate psychological blind spots
“There's a theme in psychology, which is called repetitive compulsion. And that psychological trait actually has incredible insights in business as well, particularly in investing. And what it really means is that you have a tendency, you are compelled to repea…”
Chamath: Buffett used capital allocation to accelerate his worldview on America
“What Buffett was able to do, and this is me imposing my own narrative now looking backwards, but he was able to use capital to accelerate his worldview. And a lot of his worldview was around American exceptionalism and American GDP and the belief in the Americ…”
Palihapitiya: Social Capital aims to expand manager platform to crypto and collectibles
“Debt is another area where I think we could do some stuff soon, but my commitment is to try to get into crypto and cards and art and cars and all kinds of other things.”
Chamath: CAR-T and CRISPR are setting up a biotech renaissance
“We are seeing now improvements in delivery mechanisms like Carti, in implementation mechanisms like CRISPR, and all of these things set us up, I think, for a renaissance in biotech”
Palihapitiya: Leaving profit on the table builds loyal partner alignment
“Creating non-zero-sum outcomes is really healthy. You can come to a place in your life where you can say, I'm going to capture every single last dollar of profit here. Or you could say, you know, I'm going to be a little inefficient. And in that inefficiency, …”
Chamath: Embarcadero Venture Partners returned ~3x with mid-teens IRR
“I think that fund today is probably like a three X fund, so it's like a low to mid-teens IRR.”
Chamath: Social Capital targets acquiring or building 1-2 companies annually
“Every year, I'm going to try to build slash buy one or two companies in the 50 to a hundred million dollar kind of range.
Maybe more, but for right now, that's a good quantum of capital that makes sense.”
Chamath: Social Capital is exploring biotech SPACs and thematic ETFs
“I have an ambition to launch an equivalent platform focused on biotech. And we're exploring the idea of launching a whole suite of ETFs.”