E451: Peter Thiel's 27-Year Partner on the AI Bubble, the Venture Capital Crisis, and the PayPal Mafia

What if the best venture capital opportunities are hiding in the 47 states Silicon Valley largely ignores? In this episode, I sit down with Jack Selby, Managing Director at Thiel Capital and an early member of the PayPal Mafia, to explore why he believes venture capital has become dangerously concentrated in Silicon Valley and overpriced AI startups. After working alongside Peter Thiel for 27 years, Jack is pursuing a contrarian strategy through Copper Sky, investing in promising technology companies outside California, New York, and Massachusetts. Jack explains why he can invest at roughly one-tenth of Silicon Valley valuations, how the next Carvana could emerge from cities like Phoenix or Milwaukee, and why venture capital's obsession with trillion-dollar outcomes may be hurting LP returns. We also discuss the hiring culture behind PayPal's extraordinary alumni network, why struggling venture firms have become zombies, and Jack's conviction that today's AI investment boom is a bubble.

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00David Weisburd?

  You co-founded Clarium with Peter Thiel. You were one of the first 10 employees at PayPal. What are some lessons that you took away from there that's really driven you in your career?

• 0:09Speaker 01

  Work ethic more than anything else. You were just surrounded by people that were literally working 24/7. Like, you email Peter Elon at 2 o'clock in the morning. They respond to you within 90 seconds.

• 0:19David Weisburd?

  Let's talk about the state of venture capital today. Where's venture capital at in terms of an asset class?

• 0:24Speaker 01

  I was essentially on the road every single week for the first six months of this year. And I took a very significant sample set of meetings with LPs. Here's the distillation of what I found. The industry has done a poor job of returning capital to its investors over the last decade. And we can talk more about what that's the case. Two, the mega funds. So essentially, eight firms went out and raised, I think, an aggregate of $70 billion earlier this year for whatever capital that was still positively disposed towards this asset class. Three, any capital that is left over, that is, remains positively disposed towards private

• 1:03Speaker 01

  technology, that capital is infatuated with shiny toy, late-stage AI deals. That's the entire landscape today.

• 1:13David Weisburd?

  So 52% of top quartile funds end up being top quartile. I believe roughly 75% end up being in the top 50%, so above the median. Do you think that's going to continue to persist in this age of AI?

• 1:25Speaker 01

  It doesn't directly answer your question, but...

• 1:28David Weisburd?

  Jack, you were one of the first 10 employees at PayPal. You worked with Peter Thiel for more than 20 years. But I want to start in the PayPal days. PayPal Mafia has produced, it seems like every year, there's one more additional person that becomes impressive on the list. Elon Musk, Peter Thiel, Max Lechon, Reid Hoffman, David Sacks, Rolap Botha, Steve Chen, who founded YouTube, Luke Nosak, Keith Raboy, on and on. Do you think that's second-order effect of just being such a prolific project early on in Silicon Valley? Or were these people really that exceptional?

• 2:05Speaker 01

  I think it was a function of a couple of things. So we had a good outcome. We ended up selling the company to eBay for, I think, around $1.5 billion, which I know in today's times feels like...

• 2:17David Weisburd?

  That's a seed round.

• 2:18Speaker 01

  That's chump change. But back then, in 2002, that was seemingly a real number. But the majority of our time during PayPal was actually after the dot-com crash. And so it was a really difficult process. But at the same time, it was also relatively short. So from when we started the company to when the business sold to eBay, it was less than four years. So quite short, especially by today's standards. So I think for a lot of the folks, they kind of got a taste and they really enjoyed that success, but they wanted more. And then on top of that, the average age of our executive team, like when we went on the IPO roadshow, I think it was 26. So we got a taste. We were all still very young, but wanted more, I think would be the most succinct way I could put it.

• 3:04David Weisburd?

  A lot of people today, it's almost an overused term at this point, talent magnet. How did PayPal recruit this kind of gang of characters that ended up building some of the greatest companies in Silicon Valley?

• 3:16Speaker 01

  Peter's approach to hiring was very much kind of a best athlete approach. And so we weren't looking for someone who was necessarily, say, an expert in payments. Because we kind of stumbled into the ultimate product for PayPal, emailing payments. I mean, our original product was beaming money between Palm Pilots. And that's what we spent most of our entire Series A round that we raised from Nokia, because we were literally beaming money between Palm Pilots. And most importantly, trying to figure out how to encrypt that infrared beam between the two Palm Pilots. So it wasn't as if we were hiring for specific aspects of how the business looked at the time. We were just really looking for kind of the best athlete, smartest people we could bring onto the team. And I think Peter did a really good job of that.

• 3:56David Weisburd?

  And what was the trade-off there outside of the domain expertise? Was there also cultural trade-off in terms of if it's the best athlete, it doesn't necessarily have to be a culture fit?

• 4:05Speaker 01

  The culture just kind of coalesced naturally, organically. I ended up running the international operations. I was 25 years old. I mean, I didn't know anything about running international payments or international operations for a payments company. So like most of us on the team, on the executive team, we just kind of made it up as we went along. And so, and the culture just kind of coalesced. And if you fast forward today, like we did a 20-year post-IPO reunion party at Peter's house in LA a couple of years ago, and basically everyone showed up. It was really cool. We had like 400-plus people there. And so we're all still really friendly and get along quite well, which is pretty amazing.

• 4:37David Weisburd?

  There's a lot of turmoil around the company in terms of a lot of fraud and just these big issues that you had to solve. It was obviously a very stressful time. Did that help define your career in terms of that's where you started and there was like a second-order effect? I'm still trying to double-click on why everybody became so successful.

• 4:56Speaker 01

  There was always a lot of stress. I mean, the analogy I would give you, if you're working at a successful startup, it's like you get on the treadmill and it just goes faster and faster and faster. And if it starts slowing down, that's a problem. And so it was just a fire drill at all times. Like on the fraud side, you mentioned, like Max Lechon, world-class, and helping figure out how to prevent all of these attacks from these Russian mobster mafia types that were trying to infiltrate our system and steal money out of the PayPal overall network. And that was just one of many, many, many issues that we were dealing with nonstop. But that was just, that was the kind of the normal business affairs on a day-to-day basis. So I think that probably forged us to be, I don't know, maybe that left us stronger because of it, but it was a constant fire drill.

• 5:38David Weisburd?

  I oftentimes think about, there's this meme now that you want to find founders that have childhood trauma. So I wonder whether there's such a thing as an adulthood trauma that leads to success.

• 5:49Speaker 01

  I mean, we certainly had a lot of turnover. We had to, certainly had to let some of the senior staff go because they just ended up not being cultural fits, or they just were underperformers. But for the most part, the team that was with us from the earliest days, that was the team that we basically left with when we sold the company to eBay. So it was, again, to Peter's immense credit, he's a very, very, very skilled guy. And arguably, his best skill, for at least from the PayPal days, was as a hiring manager.

• 6:11David Weisburd?

  And you have the track record of being with Peter Thiel, I think, longer than any other human being in the world, close to 20 years. What did you learn from Peter Thiel that a lot of people don't know?

• 6:21Speaker 01

  I've actually, I met Peter 28 years ago and have been working with him for 27 years. So it's been truly an incredible ride. I mean, my bad joke on this is that I met Peter when I was 24 and then we merged with Elon's company when I was 25. And so if you had to replicate that in a laboratory of meeting two luminary types at such an early age, I mean, replicating that experiment would be basically impossible. So I feel very blessed, very lucky. And just fast forward to today, still as a managing director at Thiel Capital and having a kind of a foot in his world and the people I get to meet and the companies I get exposed to, it's really special. I feel very blessed.

• 6:58David Weisburd?

  So let's talk a little bit about your thesis. So you're on your second fund, and it's quite contrarian, which doesn't come as a surprise to me. Today, roughly 90% of capital goes to three states, California, New York, and Massachusetts. And in many ways, that's actually becoming more lopsided. It's getting closer to 100% than it is to 80%.

• 7:19Speaker 01

  That's right.

• 7:20David Weisburd?

  Why do you think that that's inefficient? This episode is presented by Juniper Square, the operations partner for private markets.

• 7:29Speaker 01

  As the AI euphoria continues to hit new highs, venture capital continues to chase these AI shiny toy deals. And those deals are predominantly based in the three coastal states, so New York, California, Massachusetts. And that's just the reality of the market that we live in. And so the good news, though, if you will, glass half-full with this dynamic, is that if you get away from those three states, if you go to the other 47 states, which is where 290-plus people live and where more than three-quarters of our GDP economically come from, you can find deals that are much more reasonably priced. And essentially, it's a bet that there are some smart, investable entrepreneurs that live in these other places. And that's the bet that we're taking at Copper Sky.

• 8:06David Weisburd?

  What's an example of a company that's outside of these three states that you felt was mispriced?

• 8:13Speaker 01

  An example that I often give, coming from Arizona, which is where I moved after PayPal to get out of the, get out of the onerous tax regime of California. So I've been a proud Arizona resident for almost 25 years. But an example that I give, probably the most prominent example of a tech company coming out of Arizona, is Carvana. And so Ernie Garcia Jr. was the same year at Stanford as my younger brother. So I've known Ernie for a long time and his executive team. And so when Ernie was trying to start Carvana back in the day, he and his dad went up and down Sand Hill Road and tried to raise money from all the prominent VC firms. And they had no success because the VC perspective at the time, that an online used car marketplace was not sufficiently tech for the Silicon Valley, Sand Hill crowd to get involved.

• 8:54Speaker 01

  So Ernie and his dad had to go back to Arizona and essentially fund the business from their own family. And fast forward today, Carvana is a $65 billion market cap company. And so I give you all this because as a frame, I think I can find the next Carvana. And the next Carvana should come out of a place like Phoenix, or Milwaukee, or Cincinnati, or one of these non-coastal places. And in fact, with emphasis, the next Carvana should absolutely not be built in Palo Alto. That would be a very illogical place to build a company like Carvana.

• 9:24David Weisburd?

  Why?

• 9:25Speaker 01

  Because the cost of living is higher, the quality of life is lower, the cost of human capital is higher. Carvana is a tech-enabled, AI-enabled business, but it doesn't need to be in Palo Alto. Now, to give it balance, if you're building the next Anthropic, you should probably be based in Palo Alto. But if you're building almost any other type of technology company, AI-enabled company, you can build that elsewhere. Because AI is not geofenced to just work in Palo Alto.

• 9:51David Weisburd?

  Going back to where we started, this concept of talent magnet. The best argument that I have for starting in San Francisco, and also New York and Massachusetts...

• 10:04David Weisburd?

  Is that you could amalgamate the very top talent much faster in a world where you could have companies with 20 employees making 100 million plus revenue, location becomes even more important. Why is that wrong?

• 10:18Speaker 01

  I completely respectfully disagree with that premise. And so people will often allude to this network effect that exists in Silicon Valley, and I think it's a false narrative. Here's why. So it is a network effect, but it's a different type of network effect. It is not a human capital network effect. There are plenty of smart people that live in these other places. What is a network effect is a financial network effect because that's where the money is.

• 10:41David Weisburd?

  Fundraising.

• 10:42Speaker 01

  Yes, that's where the capital formation is taking place. And then the argument becomes circular. So if there's no money in Milwaukee and you want to build the next Carvana, you feel as if you have to move to Palo Alto, not because there are other smart people there that will help you build that Carvana. There are plenty of those types back in Milwaukee. You moved to Palo Alto because that's where the money is. So you get stuck in this circular argument that's impossible to get out of.

• 11:01David Weisburd?

  It's similar to the Thiel Fellowship, which the Thiel Fellowship, their whole thesis was, well, the reason all the smart people come from Ivy League schools and graduate from there is because there's this signaling effect where you must go from that big, from those schools in order to build something great. And the Thiel Fellowship, their thesis was that we could posit that we'll give you that same signaling effect and you don't actually have to go to the university. So the education is not the necessary condition. It's the branding and the social proof that you need in order to become successful.

• 11:33Speaker 01

  I think that's right. And so this is actually part of my pitch when I meet an entrepreneur in one of these non-coastal places. And so to be precise, what I say to him or hers, I say, listen, I can give you the advantage as if you were living in Palo Alto as you build your company without actually having to live in Palo Alto. So what do I mean? So for example, if you wanted to hire a C-suite level person, I could help you do that. I could dip into my rolodex from Silicon Valley and help you find that person. If you wanted to sell into one of the big public or private companies, Amired Network knows most of these people, we could help you do that. If you wanted to go open the doors with one of the Sand Hill Road firms, which otherwise is very hard to do, even if you've lived in Palo Alto, much less if you lived in Milwaukee, I can help you do that. So the list goes on and on. So I bring the optionality, the bridge back to Silicon Valley, but again, without actually having to live there.

• 12:18David Weisburd?

  Just to push a little bit more on this. So you mentioned Milwaukee. Let's just double click on that. How many Anthropic or OpenAI level engineers, let's just call it S-tier, they used to be called the 10x engineers, how many even live in a metropolitan area like that?

• 12:35Speaker 01

  I don't know. And not to be flippant, but I don't care because I'm not trying to find you the next Anthropic, the next OpenAI.

• 12:40David Weisburd?

  So you think unless you're doing fundamental research lab type, type businesses, you don't need that level of talent?

• 12:48Speaker 01

  I am trying to find the next Carvana-esque type company. And that's the vast majority of technology startups. Anthropic and OpenAI are in the vast minority. And again, I would concede those types of businesses should be built in Palo Alto, but that is less than 1% of the startup universe. So I am not focused on that. Investing in those types of companies is a sandbox that is all about access. I don't have that access. I have no edge in that. And that is also an extremely expensive sandbox. So that is the polar opposite of what I try to do with Copper Scott.

• 13:17David Weisburd?

  So maybe we could define these Carvana-type businesses. What exactly are you looking for?

• 13:22Speaker 01

  So we're sector agnostic. So we are looking for truly rock star entrepreneurs. So if I can wrap my liberal arts, classics, economics major around whatever an entrepreneur is doing, then we'll take a look. The job is almost as if you're a talent scout, like you work for CAA or WME, and you do enough of the kind of the 10,000 hours of sitting across the table from aspiring actresses, musicians, whatever it may be, you get a sense of who has that kind of sparkle in their eye or that spring in their step. That's what I'm looking for. And what that actual person does is a secondary conversation if you can find that sparkle in the eye.

• 13:55David Weisburd?

  Speaking of 10,000 hours, how does somebody become this world-class entrepreneur in a non-coastal context? And I guess the distinction is obviously they are very high IQ, very smart people, but the premise is that they're not, they're LLMs, their personal LLMs have not been trained on what greatness looks like. That's the premise.

• 14:14Speaker 01

  There's greatness in all these places. And so again, there are plenty of talented entrepreneurs amongst this 290 subset population. So they're everywhere. And so the idea that they're getting less than 10% of the early-stage risk capital is preposterous. So the opportunity set, I mean, I, I refuse to believe that the opportunity set is not sufficient for more venture capital. And we could debate how much more that is, but it is so outrageously imbalanced, that's what we're trying to alleviate with Copper Scott.

• 14:43David Weisburd?

  Just to kind of agree with you for a second, I think that certainly one, one metric that you could go off of is top engineering talent in terms of undergrads. And certainly those three states do not have 90% of the top engineering students graduating from colleges and graduating from these places. So certainly from an engineering standpoint, my concern is just on the training, is that you need that training in order to, to become world-class.

• 15:10Speaker 01

  Sure. You have universities like Carnegie Mellon. I was in Pittsburgh last week. And you have University of Illinois where I think half of our founding engineering team at PayPal came from.

• 15:18David Weisburd?

  And Marc Andreessen from University of Illinois.

• 15:20Speaker 01

  The list goes on and on and on. And so again, there are tons and tons of world-class universities in these non-coastal places. But if there was more capital there, like one of my, I have an investor in Cleveland, for example, I won't mention his name, but he's very involved in the community. So the Cleveland Clinic, Cleveland Foundation, Case Western is alma mater. And so I pitched him and said, okay, if you participate as an LP in my fund, what percentage of your beloved alma mater, Case Western, what percentage of that graduating class can we keep in Cleveland? I'm not saying it's 100%, but it's definitely not 0%.

• 15:50David Weisburd?

  You're trying to prove the counterfactual, which is if there's a lot of brain drain going on in the area, what would happen?

• 15:56Speaker 01

  And this is the problem, because otherwise we can go back and forth and it becomes a circular discussion. It's very difficult to disprove, which I would concede. So I'm not trying to be argumentative, but I guarantee you the number is not zero in terms of the number of the Case Western graduating class that I could keep in Cleveland if there was more venture capital in Cleveland.

• 16:10David Weisburd?

  I'll give you a case study. So very first company, I was inadvertently did the entire pre-seed round before pre-seed exists. And actually, they were backed by Founders Fund for their seed round. And it was two guys, John Ramey and Zach Hasenin. I connected the two co-founders. They're both from Indiana. One went to Indiana University, one went to Purdue University. And they tried to raise money in Indiana. They tried to raise money in Chicago. And then they moved to San Francisco out of desperation, to Burlingame, actually, to the peninsula. And then they raised from, you know, the best of the best, Founders Fund, DFJ, Brad Feld, all these people. So this is a very specific case study where they clearly were talented, clearly were ambitious, but they couldn't raise in their

• 16:53David Weisburd?

  homegrown talent. Perhaps a much better example of that is Mark Zuckerberg. Mark Zuckerberg wanted to stay in Boston. He actually had an affinity towards Boston. He went to Harvard. And venture capitalists in Boston, which Peter Thiel has opined on, for whatever reason, would not fund them. And he had to move to Palo Alto and the rest of the history, as they say. There are quite a few of counterfactuals of what would happen if those entrepreneurs had stayed.

• 17:18Speaker 01

  Yeah. I mean, your example of the entrepreneurs that had to move out to Burlingame is spot on. And I see that all the time. And this goes back to my point earlier, that it's not a human capital network effect. It's a financial network effect that is drawing. It is the magnet that is bringing all these people to Silicon Valley.

• 17:33David Weisburd?

  So this strategy has been around in different forms for probably 12, 13 years, I think. Originally Steve Case from Rise of the Rest, I believe, 2014, tried to solve this problem. What did he get wrong?

• 17:46Speaker 01

  So I don't want to speak negatively about anyone. Steve's a friend. He's another luminary fellow.

• 17:54David Weisburd?

  Or what was the, what was wrong with the concept as it was?

• 17:57Speaker 01

  What I would have done differently is I think having connectivity back to Silicon Valley is really important. And so to put it differently, if you're trying to operate on an island in one of these non-coastal places without that connectivity, I think it makes the probability of success really, really low, if not impossible. So having that bridge, and I'm talking my own book, but I believe this to be true, and this is why we have the strategy the way that we do, you have to have that connectivity. It's like I sit down with an entrepreneur and I give them a blank piece of paper that is effectively like an a la carte menu. And I'm like, here are the different options that I can bring to bear for you to help you with your company. You can choose however many items you like off the a la carte menu. You can choose zero, choose your own adventure. But I want to help you with your business. And oftentimes it would require bridging

• 18:39Speaker 01

  back to Silicon Valley. And I think in the early days of a lot of the non-coastal venture capital activities, that bridge was not sufficiently established.

• 18:48David Weisburd?

  Empirically, in terms of valuations, do you have any data in terms of different geographies within the United States and what the valuations are today?

• 18:58Speaker 01

  What we saw with our first fund is that we could usually invest at about between, let's see, about 1/10 of the average Series A valuation of what you would see in Silicon Valley. 1/10.

• 19:11David Weisburd?

  1/10.

• 19:12Speaker 01

  Yes. So yeah, essentially 10 cents on the dollar.

• 19:15David Weisburd?

  And how does that translate into portfolio strategy and how you think about portfolio construction?

• 19:20Speaker 01

  So this is the core of it. And so I don't care about what, what type of investing you do, but entry price matters. And if you can invest at 10 cents on the dollar versus what's going on in Palo Alto today, that makes a huge difference. Versus, you know, if you're investing in thinking machines in a pre-Series A round at a $14 billion valuation, how does that work? How does that math work? Is Thinking Machines going to be the next SpaceX? I don't know, maybe. But it has to be for the venture math to work. Full stop. And people don't talk about this. So my math is very, very, very different because my entry point is so much less expensive. I can usually buy between 10 and 20% equity in a non-coastal Series A deal for an average ticket of $3 million. Those are the brass

• 20:04Speaker 01

  tacks. I think that is something I can do with relatively good probability compared to Silicon Valley VC today. And very importantly, because I was lucky enough to be a Series A investor in SpaceX, which by the way, was almost 19 years ago. So, so much of Silicon Valley, the pitch today is like, I'm going to go find you the next Elon Musk at age 24. That is a terrible pitch because the probability of that is basically zero. Peter can find the next Elon, Marc Andreessen can go find the next Elon, but the handful of folks that can do that in terms of true access is very, very, very limited. That's one. Two, you pair that with an outrageously long extended duration. That's a poor parent. So what I think I can do is I have better odds because my minimum bar that I need to

• 20:48Speaker 01

  cross, that $500 million threshold is easier, it's more realistic, and importantly, I can get there more quickly than telling you, I'm going to find you the next Elon. And by the way, that's going to take two, two decades from a gestation perspective.

• 21:02David Weisburd?

  Yeah, there's a joke, 3X over 20 years is not a good return.

• 21:06Speaker 01

  Well said.

• 21:06David Weisburd?

  Certainly, it's not controversial, what you're saying, in terms of valuations are low outside the coast and apparently 90% lower, which is a bit surprising to me, but believable. At which point does the arbitrage actually take place? In other words, at which stage for a company, revenue or fundraising milestones, does a Carvana start to be treated like a truly Silicon Valley company? One thing I've learned from talking to hundreds of investors is that great investment firms aren't built on investment returns alone. The firms under are great at the things most people don't see, their operations, their relationship with LPs, and the quality of information they use to make decisions. And here's what AI has changed.

• 21:50David Weisburd?

  Every firm now has access to the very same models, so the intelligence isn't the edge anymore. The edge is what you could feed it. A firm with its fund operations and data in one connected record can actually put AI to work. A firm running on disconnected systems simply can't. That's why thousands of GPs run their funds on Juniper Square. Juniper Square puts your fund operations, data, and administration together in one connected record. That means less time managing disconnected systems and more time investing, working with LPs, and building your firm. This episode is brought to you by Juniper Square, the operations partner for private market GPs. Learn more at junipersquare.com/HowIInvest. That's junipersquare.com/HowIInvest.

• 22:33Speaker 01

  Yeah, it's a good question. And I think if it was a KPI for what we're doing at Copper Sky, if you fast-forwarded, say, five or 10 years, and you saw more coastal firms coming to the interior, to the middle market, to quote unquote, "compete with us," I would view that as a successful outcome for what we're trying to do. Because the reality is, right now, essentially, a venture capitalist has two core jobs, in my opinion. You're sourcing deals and you're competing for deals.

• 22:58David Weisburd?

  Do you know this joke about the farther a VC is from their board, the better the company does?

• 23:03Speaker 01

  I'm very well aware of this joke. Yes, it's an excellent joke.

• 23:06David Weisburd?

  It's an excellent joke, because it's actually empirical. And the reason it's empirical, there's different theories about it, right? You could debate the causation, but the official, I think, academic interpretation is that VCs, once they get to a certain level of success, they become lazy at the margin. And if you could go in your coffee shop in Palo Alto and meet a company versus go to Milwaukee, Wisconsin, and then have to go to Milwaukee, Wisconsin, the next 14 years, two, three times a year, then you're going to be more likely to stay in Palo Alto. And because of that, you're willing to pay up a little bit for lifestyle reasons.

• 23:40Speaker 01

  Let me be fair. There is so much talent in the Bay Area that the top-tier Sand Hill Road guys do not need to leave Santa Clara or San Mateo County to find amazing deal flow, in fairness. And so, they don't need to get on a plane and fly to Milwaukee, or Phoenix, or Cincinnati. They just don't need to. And so, and they get, like I think you said, there's a degree to which they get a bit lazy, and they like to ride their bikes, or at most-

• 24:05David Weisburd?

  Some could argue efficiently lazy.

• 24:07Speaker 01

  Sure. And there's a degree of efficiency, I think, in the approach, but they prefer to ride their bikes, or at most, drive their cars to their board meetings, and not have to get on their G5 and fly to Milwaukee. And that's fine, but therein lies the opportunity.

• 24:18David Weisburd?

  You're obviously Jack Shelby, and you have this reputation. You work with Peter for all these years, and still, I feel like you still have to have these arguments, day in and day out. What's the best counterargument to your thesis?

• 24:31Speaker 01

  The best counterargument is that no one has done this successfully in putting up solid, top-decile numbers, yet. And that's what I'm trying to do. So, it's difficult to disprove that.

• 24:43David Weisburd?

  In other words, interesting theory, but show me the proof.

• 24:46Speaker 01

  That's right. And so, no one has done it. This is hard. Raising money for a non-coastal venture fund is hard. There's a phrase called "the flyover states." It's pejorative. It exists. I'm acknowledging it. It is what it is. And I'm not saying all investment sentiment is dictated by the coast, but I would be naive to say that it's not, to some extent. And so, when I sit down in a fancy boardroom here in Manhattan, and I look across at the CIO, and I try to convince him that there's some smart people that actually live in Milwaukee, I often get looked at as if I have three heads. That's the reality. But I acknowledge it, and it's just part of the job.

• 25:23David Weisburd?

  Speaking of tropes, one of the biggest tropes today is, in a post-AI world, everything changes, and funding changes, strategy changes, hiring changes. How does a strategy change or evolve in a post-AI world?

• 25:40Speaker 01

  AI has become so ubiquitous, so pervasive, so even in the non-coastal geographies where I invest, I see it as an ingredient in the recipe of basically every single company I look at. And I'm pleasantly surprised by that. And it's happened more quickly than I would have probably originally appreciated. But I think at some point, we're going to stop talking about AI as an independent dynamic or component. It's going to, I think, very similar to what the internet was in 2001. It was just so pervasive at that point. Everyone just assumed the internet was involved in almost every aspect of business. And in this case, to your question, venture capital. So I think, if we're not there yet, I think we're very close.

• 26:16David Weisburd?

  But in terms of team construction, so you could argue from both sides of it. You could say, well, because of AI, now the 10x engineers are 100x, and now you have to be in San Francisco for the network density. Or you could argue the exact opposite, which is, now because you could build a $10 billion company with 15 people, there's certainly 15 great engineers in Milwaukee, and you don't even need anyone to move.

• 26:44Speaker 01

  I'm certainly in the latter camp, right? And so, I think you can build companies with more efficient rosters, smaller teams, to be precise, and you can get to outcomes that still generate very good venture returns. I'll give you an example. So I was speaking at some MIT event earlier this year, and the guy next to me, not to name his name, but he made a preposterous statement on stage. He said, "Venture is going to evolve to finding the next trillion-dollar company." And so, there were gasps in the audience, like, "Oh, wow, that's such a bold idea." It's a terrible idea, because it is so self-unaware about what has been going on in the venture capital industry. So to be precise there, what has been going on is that the industry has done an exceptionally

• 27:26Speaker 01

  poor job of generating returns, of actually getting money back to the pockets of their investors, DPI. And so, when you sit on stage at MIT and say, "Well, no problem. These billion-dollar companies that we've been trying to build and get money back to, good news, we're going to go find trillion-dollar companies." And so, is that more probable? No, that's even less probable. So this, again, goes back to the analogy of finding Elon Musk at age 24, and you think that makes the duration longer? You bet it does. So investors are going to tolerate, again, the improbability of you finding the next Elon at age 24, and what, wait 30 years to get money back?

• 27:58David Weisburd?

  There is a level of absurdity here I had, sitting where you are sitting, Matt Harris from Bain Capital Ventures. And they've had, I think they're on their 11th fund, and they're almost always top quartile, but they haven't had a fund returner. They haven't had a power law outcomes. And several of their LPs are upset about this, versus realizing, kind of, on a sharp ratio, it's a much better strategy than if you were relying on these kind of power law returns to drive the portfolio.

• 28:25Speaker 01

  Yes, I'd be very happy, speaking from my college endowment perspective, we'd be very happy with Matt's returns.

• 28:30David Weisburd?

  I want to go back to the early PayPal days. I mentioned just the unbelievable people that are in the PayPal mafia. Sometimes, when we work with somebody day to day, we just learn these lessons much more viscerally than you would from a podcast, or from a clip, or from a tweet. What are some lessons that you took away from there that's really driven you in your career?

• 28:53Speaker 01

  Work ethic, I would say, more than anything else. You were just surrounded by people that were literally working 24/7. And it started at the top with Elon-

• 29:01David Weisburd?

  What does that mean, like, 19 hours a day?

• 29:03Speaker 01

  No, like, you email Peter Elon at 2 o'clock in the morning, and they respond to you within 90 seconds. And so-

• 29:09David Weisburd?

  Does that mean that they just slept with their phone by their-

• 29:13Speaker 01

  It means they're working almost around the clock, no matter what. And so, I would do that, because I was managing the international operations, so I was often in our offices, or Tokyo, or in Singapore, London, and so forth. And so, I'd be emailing them at all different, kind of, crazy hours of the night, depending on where they were, usually back in California. And so, it just, it enforced a mentality or a work ethic to just be-

• 29:37Speaker 01

  On, so to speak, 24/7 through 65. And so that might sound basic, but that was shared by essentially the entire management team. And so, and this goes back to what we talked about earlier, like we were just dealing with different fire drills at all times. And so having that kind of manic energy of this is just, this is the default of how we have to do that if we're going to be successful, because there's a near death crisis at, at every given moment. I think that has probably served me well over the years.

• 30:03David Weisburd?

  What else?

• 30:04Speaker 01

  One of the management traits that Peter brought to bear is that if you find someone who's not a fit, you have to just rip the Band-Aid off and move on. And so, and that's something I have not always been good at, but having seen that with Peter and it's reinforced over the years, I think that's a very important lesson.

• 30:21David Weisburd?

  How quickly, immediately?

• 30:23Speaker 01

  Almost as soon as you know that it's not a fit, because you usually cannot reboot.

• 30:27David Weisburd?

  What happens when it's within a couple of weeks of hiring a person?

• 30:29Speaker 01

  Then it's unfortunate, you made a bad decision. And so when you do kind of the Monday morning quarterback about how you got to that hiring decision in the first place, then maybe you can learn something from it. But you just rip the Band-Aid off and you can't rip it off too quickly because otherwise it's kind of a cancer. It impacts and in a negative way, culture, and you just have to do it immediately. But it's hard and it's hard and it's not, not my personality because I'm not a naturally confrontational person. So it's something I've had to learn. I think I've gotten better at it, but it's definitely something I've learned from Peter.

• 31:00David Weisburd?

  What about recruiting? I've had some top CEOs that both publicly and privately will confess that they have about a 50% success rate in, in great hires. And it seems like, at least from the outside, PayPal was close to 100%. What are some lessons that you took from PayPal in terms of recruiting?

• 31:17Speaker 01

  So Peter leaned very much on kind of the organic network that he could bring to bear. So Stanford in particular, and then with Max and Luke coming from University of Illinois, they, they relied on their alma mater as well. And so just hired amongst your friend group.

• 31:33David Weisburd?

  People that you have worked with before.

• 31:35Speaker 01

  Yeah, I run Copper Sky with a guy named Jason Pressman. Like, he's literally my best friend and I, he was the first guy that I met when I moved out to Palo Alto in 1999. Like Jason's son is named Jack, not by coincidence, just to give you context. And so oftentimes, you know, adults will tell younger people not to work with your friends. And I think that's literally terrible advice, literally terrible advice, because like in any relationship, you set up guardrails, of course. But then, once you have that relationship within the guardrails, like Jason and I can cover topics, subject matter in 20 minutes that would take other people two hours. It's not because we're smarter than other people, it's just we know each other so well.

• 32:11David Weisburd?

  Yeah, the context.

• 32:12Speaker 01

  And yes, and even more importantly, what is our most valuable resource? It's our time. And I'm basically multiplying my time with Jason because he and I know each other so well. So if you have the ability to work with people that you know so well, i.e. your friends, you should take that opportunity to do that all the time because it multiplies your time.

• 32:29David Weisburd?

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• 33:55David Weisburd?

  Whether you're selling lattes, cutting hair, running a boutique, or managing a service business, Square helps you run your business without running yourself into the ground. I was actually thinking about this the other day when I stopped by a local cafe here. They use Square and everything just works. Checkout is fast, receipts are instant, and sometimes they even get loyalty rewards automatically. There's something about businesses that use Square. They just feel more put together. The experience is smoother for them and it's smoother for me as a customer. Square makes it easy to sell wherever your customers are, in store, online, on your phone, or even at pop-ups, and everything stays synced in real time. You could track sales, manage inventory, book appointments, answer your reports instantly, whether you're in your shop or on the go. And when you make a sale, you don't have to wait days to get paid. Square gives you fast access to your earnings through Square Checking.

• 34:40David Weisburd?

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• 35:24David Weisburd?

  payments into one place, so owners could spend less time on admin and more time growing their businesses. On average, businesses using Housecall Pro saves more than eight hours per week. Ready to save time and win more jobs? For a limited time only, our listeners get 50% off base plans for their first three months when you head to housecallpro.com/HH. That's housecallpro.com/HH for 50% off. After signing up, let them know How I Invest sent you. The state of venture capital today, I'm guessing you have some strong opinions on that. I think last quarter, there's like $500 billion raised to date. Where's venture capital at in terms of an asset class?

• 36:05Speaker 01

  I was essentially on the road every single week for the first six months of this year. And I took a very significant sample set of meetings with LPs. So I feel like I have a reasonably well-informed opinion on this topic. So here's the distillation of what I found. So one, the industry has done a poor job of returning capital to its investors over the last decade. And we can talk more about why that's the case, but that's just the fact. So that's number one. Two, the mega funds, so essentially eight firms went out and raised, I think, an aggregate of $70 billion earlier this year for whatever capital that was still positively disposed towards this asset class. That's two.

• 36:46Speaker 01

  Three, any capital that is left over, that is, remains positively disposed towards private technology, that capital is infatuated with shiny toy, late-stage AI deals. That's the entire landscape today. Full stop.

• 37:05David Weisburd?

  And you think that's wrong?

• 37:07Speaker 01

  Well, to step back as to why venture got into this position in the first place, after the great financial crisis, when the printing presses at the Federal Reserve and other central banks was on full tilt for 13-plus years and interest rates were zero, it caused a real problem for the venture capital industry in the following way. So yields were zero, investors were reaching for yield, they associated tech with growth with yield, so they stuck way too much money into the venture capital asset class, which by the way, is tiny, especially compared to its big brother, private equity. So venture is probably, I don't know what the numbers are.

• 37:43David Weisburd?

  Three and a half, three and a half trillion.

• 37:45Speaker 01

  Right. It's a tiny asset class and good venture, top quartile was the only place you really want to be or higher, it's even smaller. And so essentially way, way, way, way too much capital got stuffed into this otherwise tiny asset class. That then spawned way too many managers that have turned out to be B minus or worse. And here we are. And because of these private capital structures, the Darwinian cathartic culling of the herd takes forever. So.

• 38:13David Weisburd?

  Because they're 10-year vehicles.

• 38:15Speaker 01

  They're 10-year vehicles and these venture firms that turn out to be B minus or worse just play the game of management fee ventures. And they just ride it out and they milk the fees and they're zombies. And so in 2021 hit, and so, so many venture managers rode the wave up, top of the cycle, crystallized no gains, which is their fiduciary responsibility. I'm not saying you need to be a macro manager and no win to top ticket, but they crystallized no gains and rode the wave down. So those paper gains just went poof. And that's a real problem. So you have a vintage of venture managers that are ostensibly still in business today, but they're walking zombies because they screwed up by not returning capital to investors at the last cycle peak, which was back in 2021. So that's a problem.

• 38:58Speaker 01

  And now so many of those folks have reinvented their portfolios as all being AI companies. So if you had a Wayback Machine and looked at their portfolios from five years ago, you would not see nary a mention of AI. And if you fast forward today, all of them are AI-enabled companies doing something or another. And they're doing that because that is their only chance of potentially staying in business because if they can throw a hail Mary and have one of those companies potentially get acquired, go public, whatever sort of liquidity outcome you could have, then they can stay in business. But otherwise, they're zombies. And probably, I mean, Peter wrote an amazing editorial in Barron's about the hedge fund industry back, I think in 2006. So, but how does that cleansing, that Darwinian culling of the herd, it just takes forever?

• 39:42Speaker 01

  And I've been wrong about this because I've been pounding the table about this dynamic. And I would have thought if it was a baseball analogy, we would be in the fifth or the sixth or maybe even the seventh inning of this process. And the reality is, we might be in the second inning at best. It's a very, very slow process.

• 39:56David Weisburd?

  In terms of realizing the losses.

• 39:58Speaker 01

  In terms of these firms just going the way of the dodo and going out of business. And so they're all out there and they're, they're trying to get in front of the same LPs, the guys that I were seeing nonstop for the first six months of the year. And the LP community is like, listen, you haven't given me money back in over a decade. You haven't raised a fund in three or four years. You need to go do something else for a job. And that's a very difficult conversation. And so these firms in the meantime, just kind of hang on for dear life, reinvent themselves as AI companies, throw a hail mary, see if they land the pass.

• 40:27David Weisburd?

  The way that I would explain this from the psychological lens is a lot of these people also have this identity as a venture capitalist. And once you're a venture capitalist, you really could only be two things. You could be a founder or a venture capitalist. That's the perception, whether real or imagined. And then if you really humble yourself, you could be a CXO at some startup. But essentially, a lot of managers have this identity of being venture capitalist and the pain is not painful enough for them to have to kind of decouple from this identity.

• 40:53Speaker 01

  I couldn't go very deep on this. So if you're one of these B minus or worse managers that got spawned during the easy money period after the great financial crisis, what do you do? Because in venture, it's an existential crisis. It's not as if, like, if you're an investment banker and you start your career Goldman Sachs and you hit a bump in the road, you can go work at Citibank. And then you hit a bump in the road and you go work at Jefferies. And you go hit a bump in the road and no offense to any of those firms, but there's a natural kind of cascade you could potentially go through to kind of land the plane and remain employable. There's no equivalent to that in venture. If your venture firm goes south, you're done. And that means you've got to pull your kids out of private school and maybe you can't pay the mortgage and maybe you get divorced. It's an existential crisis for your life and you have no other choice.

• 41:35Speaker 01

  So you have to hold on for dear life and ride down with the ship. And it's very hard. And because of that dynamic, it makes this catharsis process that much slower to play out.

• 41:46David Weisburd?

  So that's on the bottom of the stack. At the top of the stack, you have this famous study, Professor Steve Kaplan, previous guest. And he did this study on the persistence of venture capital. So 52% of top quartile funds end up being top quartile. I believe roughly 75% end up being in the top 50%. So above, above the median. Do you think that's going to continue to persist in this age of AI? Or do you think it'll increase or decrease?

• 42:15Speaker 01

  So it doesn't directly answer your question, but let me ask you a question that I think helps get to an aspect of this that I think is arguably more interesting. So as the mega funds get larger and larger and larger and have to write minimum tickets that are commensurally very large themselves, who fills that gap below that? So they're sucking up, they're hoovering up all the capital. Who's left to write those tickets that are less than $20 million? Are these the little micro funds that are going to do that? It's a real gap that's being left. So I think that has to be examined. And then if you're an allocator, do you put a fund like mine or Benchmark, relatively small funds, in the same bucket as Mark Andreessen, who manages, I don't know, $60 billion?

• 42:58Speaker 01

  Are those the same investment type managers? Like, if you have a Yellen-Doumatt model, what buckets do you put those two firms in? Do you put them in the same bucket?

• 43:06David Weisburd?

  Empirically, it seems like no. I had Eric Swartzum from Angelist. And Angelist is very interesting because they have one of the biggest data sets in the world. I think arguably the biggest when it comes to startups. I think 25,000 companies or so. And especially today, they use AI, they use the latest machine learning. And they figured out an interesting thing, which is they couldn't run the same mathematical models on all of venture. In other words, it was essentially two completely different and idiosyncratic asset classes, AKA the early stage and the late stage. So even mathematically, it doesn't compute to just focus on venture capital as one asset class, meaning to assess pre-seed the same way as you would a pre-IPO company.

• 43:48Speaker 01

  Totally agree. Yeah, I think the mega funds are a different asset class. I'm not saying they're better or worse, they're just in a different bucket. And earlier stage guys, like with what I do, I think we're in a different bucket. There's almost an analogy with what we do as being akin to middle market private equity in the sense that there's a difference, important difference in the sense that I'm investing in businesses that are, businesses that are in these middle market geographies. I'm not taking control stakes, but I only want to work with entrepreneurs that want my help. So it's like synthetic control. And because it is venture, I do have more of a chance of going to zero than a typical, you know, private equity type business. But hopefully that is compensated by the fact that my company should have better growth rates, they should have better margins, so therefore they should have a better multiple. Other than that, you could put me in the middle market private equity bucket if you so chose, because I think there is a high degree of similarity.

• 44:35David Weisburd?

  Perhaps not surprisingly to listeners, I'm very optimistic on venture capital. I'll tell you why. So venture capital is known as this access class where the founders choose the VCs and the top VCs at least choose the top LPs. And my thesis is that the reason that Anthropic, SpaceX, OpenAI, the reason all these startups essentially had to go public was not because they just suddenly decided, well, it's time to bring back liquidity. SpaceX had tender offers, OpenAI had tender offers. Anthropic, I'm sure the, the early employees are not too worried about, about their liquidity. So I actually think the reason it goes back to this kind of consensus and venture capital,

• 45:20David Weisburd?

  75% of Q1 2026 of the entire venture capital funding was put into five companies. Said another way, they wouldn't have room to do another round. If they did another round, they'd be approaching 100% and now over 100%. So I actually think if there was more capital, let's say it went from three and a half trillion to seven trillion, now you would actually have the Anthropics, OpenAI's and SpaceX doing one or two more rounds, staying private, because as we know, there's a preference for top founders to stay private. And that would be much more advantageous to both the startups, to the founders, to even early stage VCs, they have higher multiples. What do you think about that?

• 46:01Speaker 01

  The AI boom that is happening right now and has been going on for many years, it's very different, say, than the internet period when we were putting together PayPal in the sense that the current market is very capex intensive.

• 46:16Speaker 01

  So you have energy needs, you have chip needs, you have data center needs, the list goes on and on and on. You basically had none of that during the PayPal days, the dot, the dot com days. And so because of the capex intensivity, you have a tremendous off the charts amount of storytelling to essentially fuel the fundraising. And so when this kind of cycle corrects and like Cliff Asness, who was on your show not too long ago, he said it perfectly, like it's, it's never different this time. Like this will correct. And when it corrects, there's going to be tens, if not hundreds of billions of dollars that are going to get zeroed. It's just a fact.

• 47:01Speaker 01

  It's an absolute fact. And I would actually, I would challenge in saying that anyone who doesn't believe that there's an AI bubble is an absolute contrarian today. Like, that just seems like a ludicrous proposition. Like, it is such a clear consensus.

• 47:13David Weisburd?

  How do you define that?

• 47:14Speaker 01

  Whether it's the circular trading or the valuations, the multiples, I mean, the list goes on and on.

• 47:19David Weisburd?

  Because two things could be true at once. One is 90% of companies could be overvalued and also the expected value of the vintage could still be high. I think that's what a lot of investors are trying to grapple with, what they get that all these pre-revenue companies can't be worth $100 million or a billion dollars. But they also are unclear, I think, whether there's going to be another one, two, three trillion dollar company in the batch. And I think probabilistically, it's, it's probably very pessimistic to assume that the first three years of AI produced two, arguably three trillion dollar companies. And now we're not, now it's game over, no more trillion dollar companies.

• 47:57Speaker 01

  I respectfully disagree because I think there is an angle where AI enables companies to be built much more cheaply, achieve revenue much more quickly, get to good outcomes much more quickly and generate good, if not great, venture capital returns without the fixation of, oh, I have to go build an extra trillion dollar company. Because I think people are so caught up in the zeitgeist of SpaceX and Anthropic. These are once in a generation, if not once in a lifetime type companies. And the idea that they come around with any sort of regularity, I think is ludicrous. And we have to move away from that because if that's what you're pitching, you're again pitching something that's outrageously improbable that you're going to find at an early stage.

• 48:42Speaker 01

  And then the duration is going to be very extended. And that's a poor combination. And so that's why I fundamentally disagree with that kind of perspective. AI, again, those two things being equal, is an amazing tool, but what about building great companies that don't have to be trillion dollar outcomes? And that is a mentality that is totally lost in Silicon Valley. And again, I, I love Silicon Valley with its audaciousness. And it's actually, to give, to give fairness, it's the one aspect of my geography where I invest non-coastal, that I'm the most envious of Silicon Valley. This is probably my biggest challenge. Like, when I meet that entrepreneur in Milwaukee, is he or she, are they going to be able to work their tail off and get me to one of those minimum 500 million dollar type outcomes?

• 49:25Speaker 01

  Because oftentimes, he or she will take my money because they think venture capital is special or sexy or whatever it may be. And they're going to work their tail off, go through blood, sweat and tears, all these near death experiences, like, okay, Jack, we're going to sell this widget for $100 million, five or 17 years out. And I say, no, no, no.

• 49:40David Weisburd?

  And that's because on a relative basis, they'll be one of the richest people in Milwaukee.

• 49:43Speaker 01

  And God bless them for being the wealthiest person in Milwaukee, but that's not what my money's for. Like, I have to have that minimum 500 million dollar type outcome with my first fund in order for my math to work. I don't have to find a trillion dollar company, but I have to have that minimum 500 million dollar outcome. And too often I have found, and this is going back to the analogy of me being a talent scout, I have to make sure that my entrepreneurs are sufficiently grandiose when they take my money. Like a buddy at Greylock coined this phrase that I've stolen, you have to have equal bits grit and grandiosity. Grit, I've got all day long in Milwaukee and Cincinnati and Phoenix. What I often have to be much more on the lookout for is the grandiosity piece.

• 50:22David Weisburd?

  Reminds me of a Jason Lemkin tweet, which I think it was during COVID where he said, in San Francisco, I'm unhappy but productive. Outside of San Francisco, I'm happier but less productive. Therefore, I will stay in San Francisco. So I think there's something to that. There, there's this memetic copying where, sure, you might have $20 million, but if your neighbor has $100 million, now you're suddenly unhappy. And people generally look at this as a negative in terms of happiness, but in terms of productivity, it's a very positive kind of capitalistic type drive that, that leads a lot of these submarkets like a San Francisco.

• 50:54Speaker 01

  In an ideal world, like, I would love it when young entrepreneurs go to the Bay Area, right out of school, from one of these non-coastal places, then move back. And so they've been infected.

• 51:03David Weisburd?

  They could see what greatness looks like.

• 51:04Speaker 01

  They've been infected by the grandiosity in Palo Alto. But they didn't, they didn't stick for whatever reason. And they moved back to Phoenix or Milwaukee or Cincinnati or Houston.

• 51:12David Weisburd?

  Do you think that's the best model?

• 51:13Speaker 01

  With our first fund, we saw kind of an equal split between folks that had done some version of that and then just homegrown entrepreneurs. But I certainly look for it. And because if you've been in Palo Alto and you've seen that work ethic and you have that grandiosity and you just kind of learned how things work and you can then come back to one of my geographies at a more reasonable price for me as an investor, you bet, that's a great combination.

• 51:34David Weisburd?

  Yeah, that was, and you see this across all of finance. Philadelphia is famous for bringing New York, New York City transplants. And it's a model that works. So that, seeing what greatness looks like, it's one of those things that you lock in. It's one of my theses around the PayPal mafia, around your friends, is that just seeing that early on, seeing what hard work looks like, seeing what intelligence looks like. There's so many different degrees to all these things. You have to lock that in to see the gap. Even with podcasting, I had Jason Galacan, it's like episode 10 or so. And I immediately just saw the skill gap between us. I'm like, holy crap. This is both incredibly humbling in that he's like 10x better than me and also incredibly motivating because I see like, I see, I see the, the path to that.

• 52:16David Weisburd?

  Another friend of ours, Eric Anderson from Alloy, he's been my mentor for 17 years. I met him at Dartmouth. And when I met him, I'm like, holy crap, there's a gap between us. And like, I need to figure out like what he does. And he's one of these other people that wakes up at 4:30 AM and, and just, just grinds. And now he's started four billion dollar plus companies. But just seeing that gap is such, I think, not only powerful, but such a necessary component to greatness.

• 52:43Speaker 01

  Totally agree. I totally agree. And that's, again, to give it fairness and balance and having spent a lot of time in Silicon Valley, just the, the grandiosity, it's just, it's inspiring. And I think honestly, it's what makes, not to be corny about this, but what, it's truly the superpower of the United States. Like, we are such a risk on culture and Silicon Valley takes it to the nth degree, which is a great thing. And then it inspires the rest of us. And again, I just want my non-cosal entrepreneurs to have a little bit more of it at times.

• 53:11David Weisburd?

  Going back to the beginning of the conversation when we talked about, I followed this company, iSockit, into San Francisco. And I was 22 years old at the time and I, I slept on John Ramey's couch and I was in the office and just seeing people create stuff. But also just in San Francisco proper and you're just standing around, you're talking to people even at a coffee shop. And they're like, yeah, I started this company, I raised $5 million. And you see that enough, your brain starts to believe that it's not some crazy thing. It's almost like inevitable. Of course you go out and raise a pre-seed based on some crazy idea. Of course you raised $5 million on, you know, $500,000 in revenue. Of course then you have to raise a series. It becomes almost this, sort of this preposterous dream everywhere but San Francisco.

• 53:53David Weisburd?

  This was the early 2000s, so Silicon Valley culture was not yet as pervasive across the entire country. But there's something just powerful about just being there and literally like touching people that, that are raised money. It's, it's hard to put in words, but it is, it is something.

• 54:07Speaker 01

  It's inspirational. It's, uh, it's truly a national superpower. Our risk on culture is better than anywhere else in the world. It's amazing and we should embrace it.

• 54:18David Weisburd?

  You also co-founded Clarium with Peter Thiel, uh, which is a macro hedge fund.

• 54:24David Weisburd?

  I don't oftentimes have macro investors on the podcast, you and Cliff Asness and a few others. What's your view on the macro climate today?

• 54:33Speaker 01

  I think macro is back. I think volatility is back. You know, 13 plus years after the GFC and interest rates were bolted to the floor. We live in a very different world now, I think, whether it's geopolitical volatility across the board. So it doesn't mean it's easier, that's for sure. But if you're smart and you can come up with some good theses in the macro world, I think this is a great opportunity to potentially make money. So I think this is a, I think macro has a, finally has an opportunity to be back and be more in vogue.

• 55:03David Weisburd?

  And kind of the pendulum, you believe, will swing from more passive to more active?

• 55:08Speaker 01

  I think so. And again, with emphasis, it doesn't mean it's easier. But I think the opportunity set is, is better now than what it had been for so long. Because after the financial crisis, you know, macro is basically trying to read the tea leaves in so many respects of, you know, what is the Fed going to do? Or what is, you know, some aspect of government going to do? And that's just impossible. Like, there's no amount of fundamental research you can do to kind of come to any sort of informed conclusion. But now volatility is back. We live in a very different geopolitical world. Traditional trading relationships seem to be breaking down. Geopolitical global order seems to be shifting. So if you can put together informed perspective on that, that might give you a trading edge.

• 55:45David Weisburd?

  What do you think about these pod shops that have hundreds of billions of dollars leverage? And some, some people believe they're almost like policymakers. You know, they're, they're bailing out funds like situational awareness with what Ken Griffin did. What's their role in the market and how do other investors compete with these pod shops and their resources?

• 56:04Speaker 01

  Talent rules everything, kind of going back to my venture capital analogy. And so I think a pod shop perhaps is a great place to kind of get a career started. But if you're a world-class, you know, Ken Griffin aspirant and you put in your time at a pod shop, you should spin out and go run your own fund. And why would you stick around? And so, um, so I think they serve a purpose, but I think there's also a degree of kind of adverse selection and that's a tricky balance.

• 56:28David Weisburd?

  You've had one of the most fascinating careers spanning PayPal, Clarium, now Copper Sky. If you give yourself one piece of advice, and going back to starting at PayPal and the day before you started PayPal, and you could give yourself one piece of advice for the rest of your career, what would that be?

• 56:43Speaker 01

  I was talking to my, my business partner, Jason Pressman at Copper Sky about this a couple of days ago, is that I have not done a good job of playing into momentum orientated markets. And so when the momentum market is going, it's a great way to make money. But I think I've been too boy scout, maybe even too cynical to participate. And looking back, I think that left money on the table. And I'm fine with that and losing sleep on it, but it's annoying all the same.

• 57:15David Weisburd?

  What's an example of that?

• 57:16Speaker 01

  Coming back to the venture industry and all the crazy growth rounds that have been going on and, you know, just basically fake markups.

• 57:26Speaker 01

  And it's a hot potato game and, but you make a lot of money playing it. And as long as the hot potato doesn't land in your, your lap or to mix metaphors, the music stop and you don't have a chair to sit in, it's a great way to make money. And I just have, it's just my, my personality to, to just fight that and not play in that type of momentum market. And that has probably been a costly mistake, but it is what it is.

• 57:51David Weisburd?

  So another way you want to play investing games, not narrative games?

• 57:54Speaker 01

  I'm an investor, I'm not a trader. The market and venture for the last several years has been a trading market. Like, you can't underwrite Anthropic at $2 trillion. There's no way you can do that. There's no way anyone can do that. It's a trading market. So I'm an investor. And so I need to be able to get out my pencil and make the assumptions and underwrite the deal. That's what I do. And so that serves me well with what I do. And, you know, when this market currently corrects, which it will happen, it'll be, you know, when, not if, I will be relatively fine. And when our trader friends who are investing in these crazy valuations, they will not. But in the meantime, they've made a ton of money.

• 58:35David Weisburd?

  Just to go contrarian on your mistake, I study the compounding of things. I'm obsessed with this concept of different things compounding. I think much more things compound than people realize. Is there not a compounding to being more of a fundamental investor that could compound through your career?

• 58:52Speaker 01

  I think so. I mean, when the current market corrects, the only impact that it'll have on what I do with my Copper Sky strategy is it will make the multiples that when I take my companies to Sand Hill Road, the multiples undoubtedly will contract. And that, that will have an impact on what I do. But because my entry point as an investor, as a value investor are so inexpensive, it will impact me far less than my peers in Silicon Valley. And that's why I can sleep well at night. But at the same time, you know, the guys that are out peddling SPVs in Anthropic at $2 trillion when, you know, they just traded at 1.5 or one, or they're making a ton of money and God bless them. But that is the antithesis of what I do.

• 59:34David Weisburd?

  Well, Jack, this has been absolute masterclass. Thanks so much for jumping on.

• 59:37Speaker 01

  Thanks for having me.