Investing for the AI Shift: Masters in Business with Songyee Yoon

Barry speaks with founder and managing partner of Principal Venture Partners. They discuss her venture firm's focus on AI-native companies, and understanding technological innovation. They also discuss the tech investment landscape and how she determines which companies are native to AI and which are chasing the boom. See omnystudio.com/listener https://omnystudio.com/listener for privacy information.

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

• 0:00Speaker 00

  At Brookfield, we believe you can own wealth that's measured in generations. Because true ownership looks beyond today and beyond cycles. For 125 years, we've built long-term wealth through expertise, discipline, and a clear vision for the future. Providing investors access to alternative strategies built for what's next. Brookfield. Own what's next. Learn more at Brookfield.com/own. This is not an offer to sell or investment advice. Investing involves risks, including loss of capital. Past performance is not indicative nor a guarantee of future results. Please review performance and offering materials before investing.

• 0:38Speaker 01

  This is the Bloomberg Tech Minute brought to you by ChatGPT. I'm Carol Muster. Getting hired at SpaceX requires exceptional ability and may include having Elon Musk review a candidate's resume. So writes Bloomberg Business Week's Lauren Grush. She reports that the company culture is defined by Musk and job candidates must understand that a commitment to SpaceX means adhering to this culture and exhibiting loyalty to Elon Musk. To get hired, candidates must demonstrate their achievements from past jobs and hands-on experience matters more to recruiters than advanced degrees, with the company looking for people with raw innate intelligence. A spokesperson for SpaceX didn't respond to a request for comment on its recruiting and hiring practices.

• 1:21Speaker 01

  But according to recruiters, advisors, and those who've interviewed for jobs there, it's the space exploration dream that draws people to the company and Musk invokes that dream regularly to remind workers why they're there. Prospective hires are told that the job will require stamina, including in job ads that candidates, quote, "must be willing to work extended hours and weekends as needed." One major perk for all that hard work? Employees' access to equity, either the right to buy shares or payment in the form of restricted stock units that vest over time. That's the Bloomberg Tech Minute brought to you by ChatGPT. Get started at ChatGPT.com.

• 2:03Speaker 02

  Bloomberg Audio Studios, podcasts, radio, news.

• 2:11Speaker 02

  This is Masters in Business with Barry Ritholtz on Bloomberg Radio.

• 2:17Barry Ritholtz?

  On the latest Masters in Business podcast, my conversation with Sanghee Yoon. She is founder and managing partner at Principal Ventures, an AI-focused venture capital investment firm. She has a fascinating, fascinating background, all sorts of MIT Corporation Advisory Board, 50 Women to Watch in Business from the Wall Street Journal, named to the Advisory Board of the Center for Asia-Pacific Policy, as well as the National Academy of Engineering of Korea. She has a fascinating background in gaming telecom and AI. I found this conversation to be fascinating, and I think you will also.

• 3:01Barry Ritholtz?

  With no further ado, my discussion with Principal Ventures, Sanghee Yoon. That is quite a CV I went through. Let's roll back, though, to where it all began. You get a bachelor's in science from Korea's Advanced Institute of Science and Technology, and then a PhD in computational neuroscience from MIT. That's such a fascinating area. What was the original career plan?

• 3:32Speaker 04

  That's a very good question. I mean, I think, growing up in South Korea, I didn't know what are the career options that I had. I just really enjoyed learning science and engineering subject. So when I was young, I realized for some people, like, singing is very natural. Some people, dancing is natural. I cannot sing, I cannot dance. But, like, speaking to computers and programming was very natural to me. So I started programming when I was nine, and that led me to major in electrical engineering as an undergrad at Keyst. And along the way, I realized I just wanted to become a better engineer

• 4:17Speaker 04

  because I was a student, as an engineering student. To be a better engineer, you need to understand how a human brain works. So, for example, I was studying signal processing algorithm. And those signal processing algorithms are, look best to your eyes when it's not necessarily mathematically the best, but take into consideration what frequency is most sensitive to human eyes. So, understanding human brain and human perception will enable you to become a better engineer. So, I was kind of exploring what would be the subject or kind of the major that I can pursue to have a better, good understanding of both engineering and human brain and perception.

• 5:01Speaker 04

  That was, that led me to study computational neuroscience at MIT.

• 5:04Barry Ritholtz?

  So, computational neuroscience isn't so much about using computers to understand people as opposed to understanding, as opposed to understanding neuroscience to create better software, better interfaces, better human interaction with technology. Is that fair?

• 5:21Speaker 04

  That's right. Exactly. Yeah, that's right.

• 5:22Barry Ritholtz?

  Huh. So, pretty fascinating. Early in your career, you're at McKinsey for a few years and then you eventually move into SK Telecom. Tell us your focus at both places.

• 5:33Speaker 04

  Yeah. So, I mean, I think after, after my PhD, I wanted to go into the, instead of staying in academia, I wanted to go into the business world. And going to McKinsey was the kind of best way to transition from being a PhD student to go into the real world. So, it was a really fascinating experience for me. Very fast-paced, able to work with big conglomerates and the leaders of the businesses and in the areas of strategy and corporate finance, et cetera. And SK was one of the firm's clients. And I don't want to like date myself.

• 6:18Speaker 04

  It was a time that everyone was rushing into 3G rollout, if you remember.

• 6:24Barry Ritholtz?

  Oh, sure.

• 6:25Speaker 04

  It was an interesting transition, just like we see today because in 2G...

• 6:30Speaker 04

  Telecommunication is all about voice communication. In 3G, what was promised was data transmission, including videos and like images and high fidelity audios.

• 6:42Barry Ritholtz?

  If I'm remembering correctly, it was voice and text, and then it was image and some video. And then eventually, what was it, 4G or 5G was full internet?

• 6:52Speaker 04

  Right, right, yeah, that's right. So as telcos are one of the big CapEx investors in making that transition, and we're thinking about how we can do the content delivery in the most personalized content delivery was one of the challenges that requires artificial intelligence and like a data-driven delivery system. So I thought that was an interesting challenge to take on. So I moved to SK Telecom to lead that effort.

• 7:27Barry Ritholtz?

  And then you end up at NCSoft, where you're president and chief strategy officer. I'm curious what those experiences taught you, not just about corporate governance and culture, but just these big institutions that tend to have legacy technology. You know, there tends to be some group that really wants to move forward rapidly and adapt all the latest, greatest tech. And then another group that, hey, this is expensive. What's the ROI in this? How did you find yourself navigating a big telecom like SK or a smaller, more nimble gaming company like NCSoft?

• 8:10Speaker 04

  Yeah, I mean, that's a really great question. And I think it's to learn to be persistent and resilient and patient. In both places, I was criticized for like...

• 8:22Speaker 04

  As suggesting something that was not the norm at the time. So for example, when I was in at N C Soft, one of the things that I it was very obvious to me was it was full of data in gaming, the businesses and like all in offered in a digitized form. You have transaction data, you have a behavior data of the gamers and everything. So it was possible to do a lot of things uh on a data driven way, which is very um kind of not. Today, it's it's it's a lot of the companies are doing it, but back then it was uh it was not very common to have a understanding in both gaming business and as well as um kind of A I and and kind of data driven uh business business process modeling.

• 9:07Speaker 04

  So when I suggested things like, oh, like it's let's do a small thing like like churn prediction of because you can you can see the customer player behavior within the game and see how much they're engaged and you can predict if that player is about to churn out or continue with a with a game. And some kind of interventions could help them stay engaged with the game. So that was a one uh application areas that I I I didn't identified which could be very straightforward. But then I was told like there was a strong pushback from the developers and even the business people. They said, oh, you're saying it because you don't understand the gaming business. You're you're you're saying you're a kind of a you're not a heavy gamer enough or whatever.

• 9:49Barry Ritholtz?

  But but you understand, hey, it costs us this much to acquire a client or a gamer.

• 9:55Speaker 04

  Exactly.

• 9:55Barry Ritholtz?

  And if we see this behavior, a high percentage of those folks are tapping out. What can we do to keep them in and paying monthly fees?

• 10:02Speaker 04

  Right, right, exactly, yeah. So even with a very clear data and um the case presented, it was not an easy uh task to have uh get everyone's buy in. But I think it gradually just the reason I kind of mentioned that tangible example was a small, very tangible area that we can apply to technology. And once you show the success, I think there is a gradually one by one, we're able to uh. Adopt, integrate that into our business process to end up having a large AI lab that does like all of those things in a more centralized way.

• 10:38Barry Ritholtz?

  So what I'm hearing from you is a very systems oriented framework, both for gaming and telecom.

• 10:43Speaker 04

  Right.

• 10:44Barry Ritholtz?

  I know the big mobile companies in the US are constantly fighting their own churn rate. So having a top-down systems approach, sounds like you could be really proactive in terms of maintaining clients. You would think there's buy-in from everybody, but it sounds like there's a little salesmanship involved to get everybody behind that, that approach.

• 11:10Speaker 04

  Right, yeah, right, yeah.

• 11:12Barry Ritholtz?

  So, so let's talk a little bit about what's going on in the world of AI. I've heard you discuss various things that are just short-term hype. How do you figure out when you're evaluating an AI system, either for an investment or just to use the technology in a company? How do you figure out what's valuable and what's just hype? What are you looking at?

• 11:39Speaker 04

  I mean, I think we talk a lot about hype cycle and kind of bubble being built up in this, in this kind of AI era, but I think it's not unheard of. In every platform shift, there was overcapacity built, not just in AI infrastructure, but it happened with internet, like fiber optics.

• 12:02Barry Ritholtz?

  Railroad, telegram, wherever you go.

• 12:05Speaker 04

  So like, there is always a kind of excess capacity that's built, and I think that's when people, what people are pointing to is that, is that area, that there is some kind of bubble built up and, but on the other hand, if you talk about application of the technology, if you find the application and real business problems that you can

• 12:26Speaker 04

  Apply this technology to solve to be more efficient or bring out some insights that like humans were not able to do it. And I think there is a great area to apply the technology. And I think there are so many of them out there. So that's why we are so excited about the development technology and the prospect of it going forward.

• 12:48Barry Ritholtz?

  So I've heard you discuss various priorities, whether it's a corporate entity pursuing upgrading their AI infrastructure or, you know, a just totally AI native startup. You talk about durability, defensibility, real world impact. Explain what those three things mean.

• 13:11Speaker 04

  So in making, in kind of making that adoption of the technology, there are, there are two ways to think about it. One is adopting the technology without really changing the current work process. Right? So you can, for example, there are a lot of talk about copilot or like augmenting what we do, make it faster, like a search. And if those things are not necessarily changing our current established workflow, but you are fully embracing what the technology can do to make you more productive and efficient. So that's a kind of one way of applying it. And I think there will be some, some amount of the ROI that will be realized from such approaches.

• 13:56Speaker 04

  And the other is completely redesign of the workflow. And I think that's a, that's a, that's kind of, we are a very early stage of like kind of witnessing that. But I think that will be a more interesting area to look out for and could be more tremendous transformation and the value created from such effort.

• 14:16Barry Ritholtz?

  So, so tell us what you did at NC Soft, because a lot of, of the work you put in there was about transforming them to use AI. Was it, hey, we're just going to make all our developers and gamers and everybody else a little more efficient, a little more productive? Or did this require a clean sheet rethink of everything that, that the company was doing?

• 14:38Speaker 04

  Yeah, I mean, I think it was like 15 years ago. And I think it's back then, I think technology was not ready to fully redesign the game development work. Workflow, but I think back then it was more of augmenting the existing process. So for example, like we did things like the marketing and term prediction and more efficiently. We had NLP that's designed for gamer, specialized for gamer language. Like we had an augmenting animation tool that helps animators to animate not just bipedal creatures, but like four-legged monsters in a way that's as efficient as you're doing bipedal creatures, et cetera.

• 15:20Speaker 04

  So I think it's a more focused on augmenting existing process back then. But I think it's a technology has advanced and matured today that I think that there are more opportunities to kind of completely redesign and come up with a new type of AI-native companies. So I see like an AI-native entertainment firms. They're rethinking about what do you mean by new type of entertainment, new type of engagement? That's different from polishing and like making higher fidelity graphics in games, but like completely new form of entertainment using, fully embracing the technology that we have today.

• 15:57Barry Ritholtz?

  So I keep reading that Claude is writing its own code and updating its own code. If you were at a gaming shop today, I'm assuming, do you replace coders? Do you have copilot work with coders? There was a Wall Street Journal article last week, I think it was Wall Street Journal or could have been Wired, about coders in Silicon Valley are just kind of sitting around watching Claude rewrite their code.

• 16:28Barry Ritholtz?

  What is going on in the world of software development now that Claude is capable of updating itself?

• 16:35Speaker 04

  Yeah, I think it's a really fascinating. I think a lot of the coding is done using tools like a Claude. And it certainly makes it more efficient and like productive, which means that we need a lot less people in the loop to do the job in certain areas such as like reviewing, like kind of like detecting errors and just kind of, I think there are certain areas that AI coders can do better, but there are other areas that need more kind of heavy hand, like more involvement of like a kind of a. Uh redesigning that the schema and then the structure and how things are going to

• 17:16Speaker 04

  work and how it it it kind of is going to be uh implemented in providing then the kind of engaging experience as a as uh for gamers.

• 17:27Barry Ritholtz?

  So so my bias is that the humans are very creative and very innovative and you know, I I'm thinking in the sort of storylines we see um on all the streaming shows and some of the interesting novel gaming, I don't know what to call it, I guess it's a narrative storyline, i- is that what people are going to focus on and just the blocking and tackling, just the daily grind of putting code into place we're going to let AI use? Um is that a today thing or is that a next, you know, is that going to change over the next couple of decades or years?

• 18:06Speaker 04

  I think that's a really good question. I think it's a, if you look at today, I mean, I think a lot of the jobs like like YouTubers, a podcast, is there the type of job that didn't exist 10 years ago? I don't know what other jobs are going to be created in the world where like uh the things that needed needed like 100 people attention can be done with like a fraction of those people.

• 18:29Barry Ritholtz?

  Right.

• 18:29Speaker 04

  There could be other type of jobs, other type of roles, but I think uh that's a that's an evolution that we'll have to see how it uh how it roll out then then I can I uh and kind of predicting exactly what type of jobs we're going to exist in 10 years from now.

• 18:43Barry Ritholtz?

  Huh, really, really interesting. Coming up, we continue our conversation with Sung Yee Yun, uh managing partner at Principal Ventures, discussing AI and the modern economy. I'm Barry Ritholtz, you're listening to Masters in Business on Bloomberg Radio.

• 19:08Speaker 00

  At Brookfield, we believe you can own wealth that's measured in generations. Because true ownership looks beyond today and beyond cycles. For 125 years, we've built long-term wealth through expertise, discipline, and a clear vision for the future. Providing investors access to alternative strategies built for what's next. Brookfield. Own what's next. Learn more at Brookfield.com/own. This is not an offer to sell or investment advice. Investing involves risks, including loss of capital. Past performance is not indicative nor a guarantee of future results. Please review performance and offering materials before investing.

• 19:46Speaker 01

  This is the Bloomberg Tech Minute brought to you by ChatGPT. I'm Carol Muster. Getting hired at SpaceX requires exceptional ability and may include having Elon Musk review a candidate's resume. So writes Bloomberg Businessweek's Lauren Grush. She reports that the company culture is defined by Musk and job candidates must understand that a commitment to SpaceX means adhering to this culture and exhibiting loyalty to Elon Musk. To get hired, candidates must demonstrate their achievements from past jobs and hands-on experience matters more to recruiters than advanced degrees, with the company looking for people with raw innate intelligence. A spokesperson for SpaceX didn't respond to a request for comment on its recruiting and hiring practices.

• 20:30Speaker 01

  But according to recruiters, advisors, and those who've interviewed for jobs there, it's the space exploration dream that draws people to the company and Musk invokes that dream regularly to remind workers why they're there. Prospective hires are told that the job will require stamina, including in job ads that candidates, quote, "must be willing to work extended hours and weekends as needed." One major perk for all that hard work? Employees' access to equity, either the right to buy shares or payment in the form of restricted stock units that vest over time. That's the Bloomberg Tech Minute brought to you by ChatGPT. Get started at ChatGPT.com.

• 21:12Barry Ritholtz?

  I'm Barry Ritholtz. You're listening to Masters in Business on Bloomberg Radio. My extra special guest today is Sangyeon Yun. She is the founder and managing partner at Principal Venture Partners, an AI-focused venture capital firm. Previously, she was president and chief strategy officer at gaming company NCSoft. So before we start talking about AI in more depth, I just have to mention your book, Push Play: Gaming for a Better World. I love the concept that, hey, let's not forget about play. It's really significant in terms of innovation and just being an engine of change.

• 21:54Barry Ritholtz?

  Tell us a little bit about what motivated Push Play.

• 21:58Speaker 04

  Right. I mean, I think it's, as you just mentioned, I think we have a tendency of not appreciating the role of the play in our everyday life. My motive is that we don't live to work. We live to play. We live to explore. When you have like extra time, are you gonna do like one more line of work or are you gonna play? I think it's a play is our kind of natural tendency. Or homologous as opposed to homo sapiens. So I think a play is a very important. And I think it's not only about like, we're not only talking about computer games,

• 22:43Speaker 04

  but in general, I think play has played a very significant role in human evolution. Whenever there is a new artifact that was introduced in our culture, we start with the playing with it. We create, we kind of figure out how to make a play out of it, how to kind of create something out of it. And when we have a good understanding of the material and kind of utility in it, then you kind of turn that into utility. I think gaming has been playing that role very diligently in the, over the last couple of decades. For example, if you look at some type of technology that has been, uh, when it was

• 23:26Speaker 04

  fully, uh, tested and, and, and baked out, gaming has been always the platform that was brave enough to incorporate in our, um, in our offering and have our players, uh, test, uh, kind of, uh, try out. For example, we had a VP of AI since early 2000. We, AI technology has been not, uh, mature enough to, uh, kind of apply to applications like driverless cars.

• 23:56Barry Ritholtz?

  Right.

• 23:56Speaker 04

  Twenty years ago, uh, but it was okay in gaming because gaming is a very low-risk environment. And at the same time, gamers are inherently early adopters. They want to try out new technology. So I think it's a combination of those things make it possible and almost inevitable for game, uh, gaming companies to try new technologies. So not just the AI, but like, um, uh, Kubernetes, uh, discussions, uh, or like, uh, uh, cloud, or even like, uh, uh, free-to-play, uh, fre- freemium business models, all tried out in gaming first before they were adopted in other, uh, other businesses.

• 24:35Barry Ritholtz?

  Let me, let me throw you a little bit of a curve ball about gaming. So when I was growing up, play was totally unstructured. You go down to the schoolyard, the computer games like Pong and Space Invaders, very rudimentary. Now it seems kids, their lives are much more scheduled, their play is more structured. How does that affect the sort of experience you want to provide from a gaming company?

• 25:04Speaker 04

  That's a very good question. And I, I think it's a, there are many aspects to your question. One is about what is a gaming, uh, for today. And I think the reason why... There's so much opportunity to play game and kind of as a novelty is because computer happens to be the most sophisticated and advanced device that we have today. I think we're still trying to figure out what is kind of its limitations and what it can do and in kind of a in awe with the kind of experience that it can it can provide. So I think there are a lot of online digital games out there and the the kind of the size

• 25:47Speaker 04

  of the catalog makes kids and who are trying to go through what kind of play options are there end up choosing a game or two from from that.

• 25:57Barry Ritholtz?

  So they have agency, they can select what they want to do.

• 26:00Speaker 04

  Right, exactly, but but there are but but also like if you think of a game, game is not just a one thing, there are like sandbox games, there are like a building game, there are a lot like a quiz game, the story based games, there are different type of games that you can choose from, that depending on your preference and what you find the most engagement, you you can choose different games.

• 26:19Barry Ritholtz?

  So let's let's stay with kids, with children and in particular students, it's been a lot of concern about the impact of AI on education, on learning, on training people to to get jobs in the real world. There's a quote of yours I was kind of intrigued with, rather than competing with AI, students should be prepared to leverage uniquely human capabilities. Explain what that means in terms of the real world.

• 26:47Speaker 04

  I think it's an if you think about education, our education has been over the last couple of hundred years, it has been optimized for delivering knowledge. And I think we are witnessing that the knowledge delivery and memorization is rapidly being commoditized.

• 27:08Barry Ritholtz?

  Mm hmm.

• 27:09Speaker 04

  And is that what students have to spend all their time sitting in a classroom to To kind of to to kind of polish, I I think it's a what we what our next generation needs is more of the creativity and the problem solving skills and I have to we have to think about if we can redesign the classroom to really enhance those skills instead of helping them acquire one one more knowledge.

• 27:33Barry Ritholtz?

  So there's a very different set of targets, acquiring skills or just learning things or memorizing things. I'm I'm a big fan of teaching children how to problem solve.

• 27:46Speaker 04

  Right.

• 27:47Barry Ritholtz?

  When you say skills, let's think of that from an institutional level. How should schools be using AI to teach children new skills, developing an expertise, developing problem solving? What's the proper role of AI for educational institutions?

• 28:06Speaker 04

  I mean, I think what what I what I would like to say is that we have to educate and prepare our students to thrive in the world where AI is more it's going to be more prevalent. AI is not but but the solution to that is not just AI. It's a many different kind of it could be redesigning the curriculum. It could be redesigning the kind of school system, the kind of thinking about how we evaluate their achievement and how retrain our teachers. AI could be a tool for doing that, but it's not the solution for everything. So I think there is a huge difference there.

• 28:50Barry Ritholtz?

  All right, so let's bring this now out to the world of the economy and and business. The probably the the biggest narrative I've been following about AI outside of it's a bubble or we're all going to lose our jobs, and I kind of ignore both of those extremes, is that successful companies have wide moats and we're starting to see AI compress those moats over time. Think about industries like lawyers, tax preparers, accountants, there's a lot of

• 29:24Barry Ritholtz?

  Stuff AI can do in a fraction of the time and with a greater accuracy level. Everybody knows about reading x-rays and MRIs. So if we know our moats are going to get compressed, how should companies be using AI either to protect and expand those moats or somehow use AI to expand their competitive advantages while they last?

• 29:51Speaker 04

  I mean, I think that's a very interesting because I think there are some of the industries and profession that will be, they'll become much more productive and probably need a lot less profession to solve certain well-defined problems. But that doesn't mean that humanity as a society is left with no problem to solve. I think we have like so many other problems to solve that AI cannot address. For example, how, I mean, I think there are like very old problem of like the politics is how we are gonna redistribute the resources.

• 30:36Speaker 04

  What is our societal priority in solving, in enhancing the agency of everyone and kind of helping them to achieve their full potential? I think those are the things that we don't have a good solution for. While AI can take care of some of the things of a well-defined workforce, providing that's expertise to make it more efficient way, we'll have time to work on other problems to progress humanity forward. And I think that's, we have been prepared to accept new type of roles and new type of a kind of professions that will exist and enabled by this technology advancement.

• 31:14Barry Ritholtz?

  So I think we're all in agreement. It's going to be a very disruptive technology. Am I hearing you say essentially, hey, it's up to everybody to learn how to use these tools and adapt, but the change is coming, you have to be prepared?

• 31:30Speaker 04

  Yes, right, exactly, yeah.

• 31:32Barry Ritholtz?

  So, so you've operated at the intersection of artificial intelligence, gaming, telecommunication and social platforms. That's a great conversion of a lot of different technologies. How is that evolving? And how are both consumers and institutions really adapting to that sort of AI-driven economy?

• 31:58Speaker 04

  I mean, I think it's a lot of people recognize that this is one of the greatest platform shift in our, in our lifetime, and there's a lot of excitement. And, but as, as many people say, I mean, the camp of seeing it as a kind of, we are at the very early inning of how it kind of, how it's gonna fully pan out. We don't even know what's gonna, what is coming in, in the next three to five years. And I'm really excited to see all this kind of the use case and application of technology, fully using, based on the creativity of this AI-native generation.

• 32:42Speaker 04

  And I think the people who think with AI as part of their tool and at their fingertip, will come up with the different ideas and, and kind of apply their creativity. And I think that that's what I'm really excited about.

• 32:56Barry Ritholtz?

  So you founded Chameleon as a corporate venture arm, and, and now you run a fully independent, early-stage venture funds. I'm curious, what are the differences between being part of a corporate venture fund or an independent? What are the strengths and blind spots that you end up with in, in each?

• 33:20Speaker 04

  I think we work with a strategic investors, LP. Then I think it's, there is a certain

• 33:29Speaker 04

  I think the objective is different. I mean, as a GP, we work for our LPs and the kind of who is providing the capital and like what is the objective with the firm. And I think it's those are very different. So at PVP, I think we focus more on a type of investors who'd like to be at the forefront of the innovation and then capture the value being created. I mean, regardless of the kind of the area, it doesn't have to be confined in like entertainment and consumer space. We were able to kind of look more broadly.

• 34:02Barry Ritholtz?

  So corporate is pure, strategic and independent is strictly ROI. So let's talk about some of the companies you've backed. Together.ai, Cartesian, Sesame. These all seem to be pretty core infrastructure plays. Tell us a little bit about those. What was it about each of those that made them so appealing?

• 34:23Speaker 04

  I mean, I think it's a really tricky time to make an investment because I mean, as we say, I think there is a lot of like kind of excitement about this technology. There is a kind of the rushing mentality. So I try to invest in companies that that's going to be durable in the coming decades. So I really like companies that are building infrastructure, technology that's that has multipurpose as this platform and technology evolves. So I think Together and Cartesian are both of them have a great founders, have a vision of building infrastructure and a foundational technology that's going to be used in many different AI platform companies that are going to be building.

• 35:08Speaker 04

  And I think Sesame was an interesting case because it's building the voice applications that I know from my gaming experiences, the importance of it and importance of focusing on certain features that that will provide certain experiences to the users. And I think the founders got what was important and I think their capabilities and talent was singularly focused on making that technology push. So I really like what they were doing and that's one of the reasons, one of the reasons I ended up investing in Sesame as a company. But I think there are other type of companies as well that we're excited about in this

• 35:51Speaker 04

  very, in this kind of like standing on this kind of shifting grounds.

• 35:57Speaker 04

  And I think those are the companies who are in a position of building this data flywheel because one of the non-deniable characteristics of the companies that will be durable in this environment are the ones who have appropriate access to data, the data, understanding customers and consumers and the business, and build a technology, unique technology on top of that. So we also are investing companies that are building this data flywheel that's over time building very defensible mode.

• 36:29Barry Ritholtz?

  Really, really interesting. Coming up, we continue our conversation with Songyeon Yun, co-founder and managing partner at Principal Ventures, discussing the state of venture investing into artificial intelligence today. I'm Barry Ritholtz. You're listening to Masters in Business on Bloomberg Radio.

• 37:00Speaker 01

  This is the Bloomberg Tech Minute brought to you by ChatGPT. I'm Carol Muster. Getting hired at SpaceX requires exceptional ability and may include having Elon Musk review a candidate's resume. So writes Bloomberg Businessweek's Lauren Grush. She reports that the company culture is defined by Musk and job candidates must understand that a commitment to SpaceX means adhering to this culture and exhibiting loyalty to Elon Musk. To get hired, candidates must demonstrate their achievements from past jobs and hands-on experience matters more to recruiters than advanced degrees, with the company looking for people with raw innate intelligence. A spokesperson for SpaceX didn't respond to a request for comment on its recruiting and hiring practices, but according to recruiters,

• 37:45Speaker 01

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• 38:26Barry Ritholtz?

  I'm Barry Ritholtz. You're listening to Masters in Business on Bloomberg Radio. My extra special guest today is Songye Yun. She is the founder and managing partner at Principal Venture Partners, an AI-focused VC. So that's a fascinating phrase. You don't really hear a lot of that up until recently. What is the key problem Principal Venture Partners is trying to solve in the world of AI today?

• 38:55Speaker 04

  So we started to back AI-native companies. And I think when we started, when we first talked about AI-native companies, that was not a very common phrase. People asked me, like, what do you mean by AI-native companies? And I had to explain what it meant. And I think it's these days, I think it's a, it's more widely used term. And we would like to build, we'd like to back companies who are fully embracing the technology of today and tomorrow, led by founders who understand the technology and limitations of it, and able to come up with org design that reflect the importance of this. So I think that in terms of the size of the department,

• 39:40Speaker 04

  I think it will be very different from companies built upon last-generation technology tech stack. And I think a type of leaders and talents who are going to lead all those departments are going to be different in terms of the use of technology and their vision. And solving the problems that are relevant in the AI-native era are the companies that really excite us. And then those are the companies that we're focused on investing in.

• 40:06Barry Ritholtz?

  So every time there's a new technology, everybody just kind of sprinkles a little bit on it to catch the little bit of the buzz. We had it with the dot-coms, we had it with the metaverse, we had it with crypto. And now everybody's claiming they're an AI company, or at least a lot of companies. How do you distinguish between what is truly AI-native? And what is just, let's put a little dash of AI salt on this?

• 40:33Speaker 04

  That's a good, that's a very good question. I think I have unfair advantage by like working in a gaming company. And I think gaming company actually gave me uh in experience in gaming industry is like having a lens into the future, right? Because um a lot of the technology and innovation happens in gaming first. And um it gives us kind of sense of like, is this type of technology ad- uh adoptable and will the consumers accept this type of application? So like in terms of application and platform, I think that that's a, that's really a um interesting um guiding north star for me.

• 41:13Speaker 04

  And then in addition to that, I think that companies that are fully AI native are built around that tech stack, whereas um if you are trying to splinkling AI, I think you you kind of ask question like, can you do the same thing without AI? Uh like, why do you need it? Why is it indispensable? I think there are, there are kind of uh the businesses and business operations uh that uh they're using, for example, like agent technology. But like a lot of the applications and you don't need the agent, you just need some kind of good, good data analytics. Uh so I think it's, there are many ways that uh we, we try to understand how businesses are operating and see their kind of full potential and like um and their strategy.

• 41:57Barry Ritholtz?

  So, so on the one hand, I know AI has been around a long time. There was, you know, when Deep Blue beat Kasparov, that was a big deal. And then I forgot what the name of the AI um app that ended up winning Jeopardy. Uh these are like ten and twenty years ago, so it's not a brand new technology. However, it feels like we took another level jump um with ChatGPT and and go down the list. Claude, um Notebook, uh Perplexity, whatever.

• 42:33Barry Ritholtz?

  How do you think about this moment in time? Is this similar to early broadband, early smartphones, early cloud use? Like for someone who's a tech investor, they want to know, hey, is it early? Is it late? Is it so early that nine out of ten of the startups we're gonna see are gonna go belly? Like, how do you think about this moment where we are today?

• 42:56Speaker 04

  That's, that's great. Uh actually, it's, it's older than that. Do you remember like? In sixties, there is a like application called Eliza.

• 43:06Barry Ritholtz?

  Uh huh, that sounds very familiar.

• 43:08Speaker 04

  Right.

• 43:08Barry Ritholtz?

  Telephone or?

• 43:10Speaker 04

  Eliza was uh was like was a kind of um very early incarnation of chatbot.

• 43:18Barry Ritholtz?

  Mm hmm.

• 43:18Speaker 04

  And I think there was even a newspaper headline at the end of psychotherapist. Because it was doing so well in terms of like uh rephrasing what we are asking and kind of giving them comfort when you are asking about very personal questions. And they say, oh, we don't need the psychotherapist anymore because it's doing good enough. And I think since then, there was a lot of kind of AI winters and summers, ups and downs. And I think there is a lot of hype. In terms of like comparing where we are in terms of the um the kind of platform shift. And I think we are, I think we're what's surprising to many people about this time and moment

• 44:03Speaker 04

  is that the uh the AI shift is closer to the introduction of the railroad than the introduction of the the PC or internet.

• 44:13Barry Ritholtz?

  Huh.

• 44:14Speaker 04

  Because the biggest breakthrough that that allowed us to come here was actually the scale. So it's not just a new, it's not new algorithm, it's not new software, kind of new way of doing things. But it was a scale, let's do it like kind of pouring a lot of resources to make it really big. And that's that, that's where we saw the tremendous jump in term, jump in terms of the capability of AI. So with that, I think that kind of uh rolling out that uh that as an infrastructure has been the focus of the last uh two, three years.

• 44:56Speaker 04

  And and on on this exciting new railroad that's built out, I think there will be interesting new businesses that will emerge out of it. So yes, I think we are very early in terms of kind of fully. Appreciating what's possible on top of this.

• 45:13Barry Ritholtz?

  So I I love the idea of interesting new businesses. And I'm always fascinated with what do the public markets know? You know, it's they're more or less kind of eventually efficient. And very often, though, when a new technology comes along, they very much underestimate where it can go. So what's a sort of use case that the public markets might be underestimating? Where might this go? You look at dozens and dozens of new companies. What what direction is just mind blowing that nobody is really anticipating?

• 45:51Speaker 04

  So there are, I think it's a, there are a lot of things happening. One is that one, one interesting thing about this technology is that while it has been

• 46:06Speaker 04

  kind it it beat many people's expectations about what it can do. However, I think there is a lot more innovation is coming along. Because in terms of this architecture design and fundamental design of the the framework, there is a lot more innovation coming along. So we're not done with what is the most efficient railroad design. I think there could be other type of railroad that can come along online that will allow faster and more kind of more comfortable ride experience. And once there is a railroad, I think there was an interesting business that emerged. Like, for example, like mail order.

• 46:48Speaker 04

  Or like it will people, it's it's really hard to make a connection. But that type of new businesses was made possible because railroad was in place.

• 46:57Barry Ritholtz?

  Right.

• 46:58Speaker 04

  But when I don't think I don't think it was the kind of first thing that came in mind. We're kind of rolling out the railroad as as a kind of across across different states.

• 47:07Barry Ritholtz?

  Well, well, broadband and fiber optic led to so many different, everything from YouTube.

• 47:12Speaker 04

  Exactly.

• 47:12Barry Ritholtz?

  To really to build out of Amazon Web Services and.

• 47:15Speaker 04

  Right, online games, right, online games, right, exactly. Though I think so like so that's why I'm really excited about AI native generations and creativity, what they're going to build on top of this. So I think there will be new type of businesses that we don't. We don't comprehend today that will be enabled by this infrastructure.

• 47:33Barry Ritholtz?

  So when you're sitting with a founder of a company that's looking for financing, what sort of questions do you ask? What are you trying to figure out about their model, about their direction, about their team? It's so, so unique and cutting edge.

• 47:50Speaker 04

  I mean, I think that there, it depends, depending on what they're building. I think it's a, the set of questions that I ask when they're building more of the infrastructure technology versus kind of business applications are different. But especially when they're building business applications or vertical applications, I always try to ask what is the real value that they're, that, that is going to bring to, to the end users. Instead, not, we are not investing in companies that are building amazing kind of tech demonstrations and, and the features. We're trying to find the companies who are build, a kind of solving real business, real world business problems and do it in a way that's sustainable and more efficient than,

• 48:35Speaker 04

  and using any other type of technology.

• 48:37Barry Ritholtz?

  So you're looking at infrastructure type companies. What other type of AI applications are you looking at?

• 48:45Speaker 04

  We're, we're looking at the companies that they're building vertical applications by developing data kind of flywheel and data mode.

• 48:54Barry Ritholtz?

  So, so there's been a little bit of a lightning rod from a regulatory standpoint. There's, you know, all the L L Ms have copyright complaints and issues. You sit in a really interesting intersection. When, when you look at a, a term sheet today, how do you think about the regulatory risks, the litigation risks? I mean, that, when L L Ms first came out, I didn't for a moment think, oh no, all that was stolen content in there that, that they were crawling over and using as their training tools. How, how do you think about regulatory framework and geopolitics? It seems like there's a lot of novel moving parts.

• 49:37Speaker 04

  Yeah, I think that's a really great question. And I think that more than ever, understanding how the regulatory body thinks and the policies gonna, gonna evolve over time is important at making this decisions, especially in, in the venture space. We are making. A bet, we're making investment that should last over a decade, right? So I think it comes from the kind of the belief and understanding that the innovation and the research is really kind of is very precious for all of us as a humanity.

• 50:22Speaker 04

  And the kind of the this kind of peer review, the kind of the tradition of the peer review and the open forum has really propelled us to where we are today and it's going to continue. And I think the collaboration and openness will better serve our end customers. So transparency is important. And I think with all of those beliefs, I mean, I think we don't have we don't have the crystal ball to say like what's going to what the policy framework is going to be like, what is the kind of geopolitical tension is going to be like in the next one or two years. But we have the belief that human kind of

• 51:08Speaker 04

  our collective work will converge in a direction that serves our humanity in a positive direction. And I think that's kind of where I'd like to see that that's ultimately that's going to what's going to be implemented and incorporated and under under that type of the world, whether these companies and founders can test a pressure test to sustain. And I think that's how I see and when I evaluate the companies, how it's going to sustain those kind of policy changes.

• 51:41Barry Ritholtz?

  All right, so before we get to our speed round, let me ask you one last question, which is, what do you think investors in the AI space are either not thinking about or not talking about, but is important and perhaps they really should be paying attention to?

• 51:58Speaker 04

  I I think that the the saying that says we are very at the very early inning means a lot. I I hear someone even saying that we are still in the car getting to the stadium. Like it's not even in the first inning.

• 52:14Barry Ritholtz?

  Right.

• 52:15Speaker 04

  That means uh all this kind of the the models, models and structures can change significantly, can evolve over time. And uh nothing cannot be seen as uh kind of uh engraved in a stone. So with that, I think the lot of the investment decisions uh has to be reflecting the fact that there it it kind of has to remain like a nimble and flexible because we should be able to uh adjust to when those changes and and new breakthroughs come around.

• 52:52Barry Ritholtz?

  All right, so I only have you for a few minutes. So we'll click through these really quickly, our speed round. Starting with, who are your early mentors who helped to shape your career?

• 53:04Speaker 04

  I would say, I mean, I think I I was fortunate enough to have a lot of mentors. Um when I was a student, but uh one person that stand out is Dominic Barton, who was who was the global managing partner at McKinsey. When I first started out as an associate at McKinsey, he had a, his office was right next to mine. So uh he was literally my mentor and I think I I learned a lot from him as a as a leader and um and and as a as a mentor and and I think it's uh still today I reach out to him if I have to make tough decisions and I think he has been always very generous with his time. So I really appreciate.

• 53:48Barry Ritholtz?

  Let's talk about books. What are some of your favorites? What are you reading right now?

• 53:52Speaker 04

  Oh, so I read a lot of books, uh uh but I think I I kind of read many book. I'm I'm of the type that read many books that kind of simultaneously. I read like one chapter here and then I go to get jumped to another book. But the book they recommend to everyone these days is, are two, but one is The Empire of AI.

• 54:10Barry Ritholtz?

  Uh huh.

• 54:11Speaker 04

  And the other is Power and Progress. And I think that those books kind of help us understand the dynamics of what's happening and what we need to think about as a society.

• 54:23Barry Ritholtz?

  So let's talk about streaming. What are you either listening to or watching these days?

• 54:28Speaker 04

  So, um, I, I mean, I listen to, I listen to music through like Spotify a lot.

• 54:35Barry Ritholtz?

  Mm hmm.

• 54:36Speaker 04

  Um, my son is a big fan of Taylor Swift.

• 54:39Barry Ritholtz?

  Uh huh.

• 54:40Speaker 04

  I have to listen to Taylor Swift, like, like when I'm in a car, like driving a lot. Um, also I watch K-drama on Netflix.

• 54:49Barry Ritholtz?

  Uh huh. Really, really interesting. Our, our final two questions. What sort of advice would you give to a recent college graduate interested in a career in either artificial intelligence investing or gaming?

• 55:05Speaker 04

  I mean, I think kids just graduating today, um, I mean, I think it's a the one thing that's not gonna change is it's gonna be very bumpy and it's gonna be like disruptive and the world they're gonna be, uh, working in is not gonna look like the world today. Like that's, that's the constant, right? And, um, I mean, I think what I would like to remind them is like, don't try to find, like, kind of follow the, the, um, the trend. Really have to stick to what you're, I mean, it sounds like a cliche, but like what you're passionate about.

• 55:42Barry Ritholtz?

  Mm hmm.

• 55:43Speaker 04

  I mean, you remember in the seventies, the most popular major to go in was, what was that? It was like kind of material science and then like chemical engineering and then like electric engineering and computer, like, just to see that those, those, uh, the popularity of those, uh, major kind of plummeting, like we have witnesses, like so many of those cases. So it, it doesn't really, uh, it, it, I don't think it serves well to find what, try to kind of follow that, that kind of fashion or trend. We really have to-

• 56:13Barry Ritholtz?

  So be a generalist and be flexible?

• 56:17Speaker 04

  Could be, yeah, right, yeah.

• 56:18Barry Ritholtz?

  All right. And our final question. What do you know about the world of venture investing and artificial intelligence today? Might have been useful to know 20 years ago.

• 56:30Speaker 04

  I mean, I think the patience, so I mean, it's also the power of compounding is not just in finance, but also in like, uh, human capital and our understanding in technology and, um, and also the relations too, like, it, it seems very slow, uh, today, but like, if it, you're persistent and for 20 years, I think that, uh, what you can achieve is really tremendous.

• 56:55Barry Ritholtz?

  Well, thank you, Sunghee, for being so generous with your time. We have been speaking with Sunghee Yun, uh, founder and managing partner at Principal Venture Partners. If you enjoyed this conversation, well, check out any of the 600-plus interviews we've done over the past 12 years. You can find those at iTunes Podcasts, Spotify, YouTube, Bloomberg, wherever you find your favorite podcasts. I would be remiss if I didn't thank the crack team that helps us put these conversations together each week. Alexis Noriega is my video producer. Anna Luke is my podcast producer. Sean Russo is my head of research. I'm Barry Ritholtz.

• 57:40Barry Ritholtz?

  You've been listening to Masters in Business on Bloomberg Radio.

• 58:35Speaker 05

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