Jeremy Giffon - The Billion Dollar PDF - [Invest Like the Best, EP.481]

My guest today is Jeremy Giffon.  Jeremy has been on the show before as one of our most popular guests, and this conversation is every bit as enjoyable as the first. Over the last 18 months, Jeremy has had hundreds of conversations with founders and with the capital behind their companies. I don't know many investors with such a high rep count in the most interesting corners of private markets, so I asked him what he has learned. We talk about what those lessons mean for founders and investors, why everyone has become subservient to the poster class, the hidden intellectual history behind Silicon Valley and much more. Please enjoy my conversation with my friend, Jeremy Giffon. For the full show notes, transcript, and links to mentioned content, check out the episode page ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠here⁠⁠⁠⁠⁠. ----- Become a Colossus member to get our quarterly print magazine and private audio experience, including exclusive profiles and early access to select episodes. Subscribe at ⁠colossus.com/subscribe⁠. ----- ⁠Ramp’s⁠ mission is to help companies manage their spend in a way that reduces expenses and frees up time for teams to work on more valuable projects. Go to⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ ⁠ramp.com/invest⁠⁠ to sign up for free and get a $250 welcome bonus. ----- Trusted by thousands of businesses, ⁠Vanta⁠ continuously monitors your security posture and streamlines audits so you can win enterprise deals and build customer trust without the traditional overhead. Invest Like the Best listeners get a special offer of $1,000 off Vanta when you go to ⁠vanta.com/invest⁠. ----- WorkOS⁠ is the infrastructure B2B and AI-native companies use to sell to enterprise. It covers everything enterprise security requires: SSO, SCIM, RBAC, Audit Logs, AI governance, and more. Trusted by 2,000+ fast-growing companies, including OpenAI, Anthropic, Cursor, and Vercel. ----- Rogo is the AI platform for finance. They're building agents for Wall Street that are trained to understand how bankers and investors actually do work: from diligence and modeling, to turning analysis into deliverables. To learn more, visit rogo.ai/invest. ----- ⁠Ridgeline⁠ has built a complete, real-time, modern operating system for investment managers. It handles trading, portfolio management, compliance, customer reporting, and much more through an all-in-one real-time cloud platform. Visit⁠ ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ridgeline.ai⁠. ----- Editing and post-production work for this episode was provided by The Podcast Consultant. Timestamps: (00:00:00) Welcome to Invest Like The Best (00:02:02) Jeremy Giffon (00:02:34) Lessons from 18 Months of Founder Conversations (00:07:01) The Billion-Dollar PDF (00:08:13) The Unifeed & Rise of the Timeline (00:17:02) Power Law & Breakout Content (00:18:48) AI Algorithms Driving Content (00:20:38) Timeline-Native White House (00:21:09) Traits of Great Posters (00:25:27) Peak Guy & the Billionaire Priest Class (00:32:13) Billionaires Now Defer to Posters (00:34:52) Freedom vs. Relevance (00:38:53) AI & White-Collar Job Displacement (00:40:53) Stewarding Your Gifts as Moral Duty (00:43:18) Next Wave of Finance: Equity-First Firms (00:53:26) East Coast vs. West Coast Finance (00:55:34) Beating the Market Is Not That Hard (01:00:40) SPV Feudalism & Allocation (01:02:10) Egregious SPV Fee Structures (01:04:50) Simplicity vs. Complexity in Investing (01:07:15) Hiring: Attracting Differentiated Talent (01:11:00) Silicon Valley's Hidden Intellectual Traditions

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

• 0:01Patrick O'Shaughnessy?

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• 0:42Patrick O'Shaughnessy?

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• 1:30Patrick O'Shaughnessy?

  Hello and welcome, everyone. I'm Patrick O'Neal, and this is Invest Like the Best. This show is an open-ended exploration of markets, ideas, stories, and strategies that will help you better invest both your time and your money. If you enjoy these conversations and want to go deeper, check out Colossus, our quarterly publication with in-depth profiles of the people shaping business and investing. You can find Colossus, along with all of our podcasts, at colossus.com.

• 1:54Speaker 01

  Patrick O'Neal is the CEO of Positive Sum. All opinions expressed by Patrick and podcast guests are solely their own opinions and do not reflect the opinion of Positive Sum. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions. Clients of Positive Sum may maintain positions in the securities discussed in this podcast. To learn more, visit psum.vc.

• 2:22Patrick O'Shaughnessy?

  My guest today is Jeremy Giffon. Jeremy has been on the show before as one of our most popular guests, and this conversation is every bit as enjoyable as the first. Over the last 18 months, Jeremy has had hundreds of conversations with founders and the capital behind those companies. I don't know many investors with such a high rep count in the most interesting corners of private markets, so I asked him about everything that he has learned. We talk about what those lessons mean for founders and investors, why everyone has become subservient to the poster class, the hidden intellectual history behind Silicon Valley, and much more. Please enjoy my conversation with my friend Jeremy Giffon.

• 2:53Patrick O'Shaughnessy?

  So we're going to have the chance to talk about, as we do on a daily basis, you and I, 57 different ideas. But I'm always interested, to begin with you, a couple questions about investing. I sit near you, we share an office, so I get to hear a lot of these stories every day. I think it would be really fun for you to turn your observations from all those god knows how many hundreds of conversations with founders of these companies and with the capital that has backed them in the past, to sort of share what you've learned from that frontier over the last 18 months, framed as advice for founders and advice for capital. I just don't know very many investors that are looking at situations like you are with such a high rep count. So what have you learned in the first 18 months of doing this?

• 3:37Speaker 02

  You really realize, in, let's say, long-term, private markets, that the great filter for funds is their storytelling ability fundamentally, because their product, which is realized cash returns, take a decade. The thing that you're selling in the interim, whether it's through a quarterly update, or your event, or just your one-on-one conversations with your LPs, is really just narrative. A particular situation that's very interesting that we've seen a lot of is companies where, twofold. One is that the business is kind of old, but has started to do well recently. That's an interesting scenario, because it's one of these instances where merely because the company, the story, again, the narrative

• 4:21Speaker 02

  of the company is that it's seven years old. Let's say the company has really started to inflect. Maybe it's because of AI, or maybe it's because of something else. But they're six or seven years into their life. It's very difficult for those companies to get funding, because the story is, well, okay, fine, you grew 200% last year. In absolute terms, you're only at 8 million of revenue, and you're seven years in. Whereas, I think literally, if you just changed the name, and told a different story, and just sort of arbitrarily started the clock two years ago, that company would actually be really hot. That's an interesting situation. The fix, I think, is just to be more flexible on narrative and story. A derivative of that problem is just the amount of businesses where they're in a spot where it's kind of working, things are starting to go well,

• 5:03Speaker 02

  but they're faced with three choices, which is basically, they're not going to raise a significant up round. Really, they're staring down a bridge round, strategic like M&A, aqua hire, or cutting to profitability. And those are just really hard situations. If you're in that situation, I think that's where you really want to get creative with the cap table. If you have some cash, buy back your investors, convert everyone to common, really start to spend more time on the cap table, because otherwise, I've been shocked at sort of how hostile insider bridge rounds really are. I think this is like an under-discussed part of venture.

• 5:33Patrick O'Shaughnessy?

  How so?

• 5:33Speaker 02

  Just they have three X liquidation preferences, or warrants, or ratchets, or other things. If you're extractive to the downside, everyone sort of boos you. But if you're extractive for the upside, where you say, I want the right to invest at the same price in two years from now. They're both similarly extractive, but because one is like an optimistic extractive, everyone loves that one.

• 5:54Patrick O'Shaughnessy?

  So what advice would you give to founders in thinking about their cap table from the start?

• 5:59Speaker 02

  We're obviously in a highly volatile, highly uncertain period right now. No one knows if it's the death of software. I think it's certainly the most unprecedented and uncertain time since the transition to the internet. What you want in that time is a lot of optionality, and the ability to be nimble, and the ability to really be able to do what is right for the business and not be constrained by the cap table. Maybe your business needs to become a services business. Maybe you need to acquire other companies. Maybe you need to run profitably for a while. Maybe you need to change your whole business model. If per-seat pricing goes away, you need to pivot to usage. In volatile times, it's always useful to have optionality. I guess the general piece of advice is, unless you're certain that you want to just try this one thing, and it's

• 6:44Speaker 02

  going to be huge or zero, you should think about optionality, which usually means raising less, raising from investors with a wider mandate, not getting stuck in all these weird problems where like, you need to continue to raise more money, and if you don't, it's bad for employees, it's bad for recruiting. People's options get underwater, they start to leave. All those things sort of reduce optionality. It's funny, because in general, I think commitment is a much better strategy than optionality. But I think in highly volatile times, where it's hard to tell the future, you basically just want to control for being able to be super nimble, turn on a dime, do what you want, not be constrained by our capital setup in such a way that we can really only do this one thing, which is also true for investors.

• 7:21Patrick O'Shaughnessy?

  Going back to the investors and the construction of an effective narrative for building an investing firm, before you've delivered the 10-year investment returns or whatever, you have this great idea called the billion-dollar PDF. Can you describe what you mean by that, and what the interesting components of a billion-dollar PDF tend to be?

• 7:36Speaker 02

  This is sort of an idea that you and I came up with in a joking way that turned out to be true, I think, the more we thought about it, which is, every once in a while, someone basically crystallizes a notion right at the right time, in the right way, that becomes the foundational viewpoint or opinion, uncertain era. And I think it's just this idea of, everyone's a little bit uncertain, they don't know what's going on, and someone just needs to set the story and set the narrative. And it doesn't even have to be right, but there's just a sort of confidence of, this is what's going on, this is happening. When those come together, they sort of just set a new narrative that everyone can kind of rest on for a period, really, until the next PDF comes along. And the billion-dollar PDF thing is this idea that you can form billions of dollars of capital, one way or

• 8:20Speaker 02

  another, around simply setting a new idea. And then, maybe you can think of capital as 10-year-olds playing soccer. They all sort of just follow the ball around. The capital just follows the billion-dollar PDF around the field.

• 8:33Patrick O'Shaughnessy?

  It's probably a good excuse to talk about this joint notion of posting. A billion dollar PDF is the ultimate form of that or something. And the furnace that is the timeline of predominantly X, that's where I get my timeline. There's other places as well, but it seems like these notions have taken over people's desires and attention. Everyone wants to ultimately have a spot on that timeline. It's a strange phenomenon. There's like five or six subcomponents of the timeline that I want to ask you about. But maybe to start, just how you're thinking about this strange, modern phenomenon.

• 9:08Speaker 02

  I think it's downstream of technological change. And I think the technological change is really the uni feed. What people don't appreciate about X is that everyone gets served the same 500 tweets per day. It's hundreds of millions of daily active users. And the thing that people who don't post, don't realize is just the poster to lurker ratio on these things is enormous. It's really hard to feel the impact unless you're actually getting onto the feed and seeing all the people that you didn't know were reading X all day, commenting on your thing. I'm always surprised, like when I post a good tweet, whoever texts me about it, it could be someone I know about. I had no idea that they read Twitter all day, but everyone reads Twitter all day. So the uni feed, I think, is sort of the technological catalyst for this phenomenon. It is X, by the way. It's interesting how X, it's sort of the Lindy social network.

• 9:53Speaker 02

  It probably is never going to reach the scale of the others, but it just fills this vital role. And it's interesting to me how it's however long in, probably almost 20 years now, and it's still more important than ever. Sort of the same source of truth almost for the whole world. And what that means is that everyone is reading the same thing. It's the global newspaper in the same way that people would talk about the latest article in the journal 30 years ago. Now it's the latest tweet or the latest essay on X. What that creates is that all the most important people in the world, at least when it comes to capital markets and politics and journalism, entrepreneurship, they're reading their daily paper every morning.

• 10:33Speaker 02

  These things really form opinion and they price securities and they dictate where capital flows and they certainly write policy. There's this idea that another great filter perhaps is that your institution will only survive if it's timeline native. And what that means is that it is both reactive to and reflexive to the timeline. Reactive, meaning that it's constantly monitoring the timeline and reflexive in that its actions then affect the timeline, which it then sort of reads and reacts to. And you can think of the White House is obviously like this. Venture capital is like this. Public equities are like this. There's this idea of what is the story?

• 11:12Speaker 02

  And what's interesting, one of the things I get emails about the most is a comment I made somewhere about how like posting is the last great meritocracy. I get emails about that because people are like, that really clicked in my head and I started posting and posting changes your life if you're good at it. That's still true today, maybe more true than ever. And it is sort of a meritocracy in a weird way. Now there's the algorithms and AI and all this stuff. In some ways, it's a lot more meritocratic than it used to be. Like everything, it's been lotteryified. In the old times, you had to grind away and build this huge following. And then by virtue of having a big following, you could post a really inane tweet and it would be very popular, but that doesn't happen anymore. Now you can literally be like a new account and just write a good post and then the algorithm selects you and it'll display you in front of 500 million people.

• 11:56Speaker 02

  You have the global newspaper that everyone reads, that everyone finds highly influential. There's also this meta thing where it's like the newspaper, if you could see all the influential people reacting to the articles in the newspaper. And then by virtue of reacting to it, making the thing more important and anyone can post to it. Gets dictated from the timeline, how much venture rounds are done on the timeline, how much businesses are built on the timeline. Increasingly, everything will just become timeline native. TPBN is a great example of this. When we're recording this, every other day, someone writes some sort of pornographic fanfic about AI and it moves the public markets dramatically. When there's uncertainty, people are just looking for what is the story?

• 12:41Speaker 02

  What is the most compelling story? And the way that it works on the timeline is it's not this well-considered book that comes out that everyone talks about for a year. It's what is the thing that sounds smart, feels good? It has to be entertaining. Maybe that's another change is a good post has to be very entertaining because people are on the timeline to be entertained. They can lie to themselves and say they're not for other reasons, but it's just to be entertained. And that's obviously what the algorithms are selecting for. There's this idea that the most entertaining novel, somewhat interesting, somewhat correct thing is going to set the actions and the consensus for everyone on a day-to-day basis. And this translates into their actions.

• 13:17Patrick O'Shaughnessy?

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• 13:58Patrick O'Shaughnessy?

  Firms are moving off legacy technology and onto RidgeLine because of how far ahead RidgeLine's AI features are compared to anything else in investment management software. I've been hearing from a lot of investment managers about AI and they fall roughly into two camps with some unsure where to even start and others convinced that they can build their own order management system over a weekend. The reality is that running an investment firm will always require governance, controls and a single source of truth for your data. And no amount of AI enthusiasm changes that requirement. RidgeLine is built on exactly that foundation, which is why I believe that the firms that come out ahead in the AI era will be the ones running on RidgeLine's unified platform.

• 14:37Patrick O'Shaughnessy?

  If you're serious about your firm's AI strategy, RidgeLine should be part of that conversation and you can request a demo at ridgeline.ai. Is this all just fueling the fire for the notion of power law in general? One of the things I've noticed in our show is it used to be that the variance was quite low. The very best one did a bit better, but not a crazy amount better than the worst one in terms of performance. And that has completely changed. And now there seems to be this threshold, we were just talking about this morning, that if you breach the containment, if you breach this threshold, it literally feels like you have taken over the world's brain and just shoved everyone's eyes at your thing for a short period of time.

• 15:20Patrick O'Shaughnessy?

  The impact of those handful of things are so much bigger than all the rest of them combined. So what you're playing for is really to be just one of these breakout things. Is that the right way to think about the timeline? Is that actually is all that matters is that you get one of those. So you should be living at the edge of the distribution as much as possible in what you're posting about, writing about.

• 15:41Speaker 02

  Everything is just downstream of technological change. So the reason podcasts followed a normal distribution was because the technology delivering it was an RSS feed. And now it's an algorithm and it's clips and I mean, even the method, I'm sure some obscene amount of your viewers are watching or listening on YouTube, which is new. Even if you subscribe to a podcast on YouTube, they're not going to show you every single episode in chronological order. So I think this stuff is all just new, just downstream of technology. I don't think something has changed in the content or in the listeners. It's just how it's delivered. In that sense, maybe one world where the podcast world sort of legs behind the YouTube world is that the podcast world is still highly naive to serving content to the algorithm.

• 16:26Speaker 02

  You know, if you get deep into the Twitter group chats, especially now that they've posted the algorithm, there are all these very specific things that you can do around replies and likes and length and all these numbers that the algorithm is selecting for. Streamers and people on YouTube and stuff certainly understand that. I think maybe the reason it feels a little bit random is because podcasts still like really aren't into the meat of understanding that we are recording this video for a LLM to review and decide what it wants to show people. And then people will decide if they like it or not. That first filter, we don't really think about, but that is the case.

• 17:00Patrick O'Shaughnessy?

  Does that stress you out? Does that feel deeply dystopian?

• 17:03Speaker 02

  I hear a lot of lamentation over the death of books. People don't read anymore. And it's so interesting to me because I've read a lot of books. I like books. I've spent a good portion of my life reading books. I don't see the big crisis that everyone laments about with books. I mean, the attention span thing maybe is true. Like it's certainly way harder for me to read a book just on a pure focus. But I feel like the sum total of the interviews that I listen to and the things that I read and all this stuff are great. I don't think, I don't have an appetite for books just because they're harder to read. I think I'm like feeling nourished from the other sources. If you think about porn, it's like more obviously bad because people don't have sex and they watch porn and it's fairly straightforward.

• 17:46Speaker 02

  The sex is better than porn and that seems like an obvious thing. People will hold that up right next to books. And to me, the book thing feels a little bit like a swan song for a technology that there will still be a place for. It was the best way we had of delivering information and now there's new ways and they're more compelling and more interesting. You have to caveat that, of course, with, I'm very sensitive to language and the terms that we use, terminally online, brain rot. We recognize these are terms of death and rotting and destruction and very negative nihilistic terms. You do have to balance that with, we didn't pick neutral or positive terms for these activities. And I don't think anyone ever would self-conceive of reading a lot of books as being this like very negative thing.

• 18:29Speaker 02

  The counter argument would be that we have this deep sense that it is bad. Maybe like everything, it's just less forgiving. If you're highly disciplined and motivated, the way that you can use new media is better than ever. But if you're not, then it's just going to be worse than ever. It's just going to be really tough.

• 18:46Patrick O'Shaughnessy?

  You mentioned the White House. Certainly this is the first White House that feels completely timeline native and reactive.

• 18:52Speaker 02

  Yes, I think it's the first modern administration for better, for worse.

• 18:55Patrick O'Shaughnessy?

  What else does modern mean in that context other than timeline native?

• 18:58Speaker 02

  It's just highly reactive and reflective to the timeline. I think it's hyper aware, maybe in the same way that past administrations would be addicted to polling. I think it looks more at the timeline than polling. Polling is all about understanding the wants and desires of the median, the average person. But the timeline shifts back to a more Republican model, which is that you're caring about a few hundred thousand people who are influential. Ben Sasse, the former senator, has this great notion that Washington is now mostly people who want to be TikTok and YouTube stars is like mostly what congressmen and senators want to be. He condemns it, which is true from some very simple sense, which is you would hope that

• 19:42Speaker 02

  congressmen and senators primarily interested in governance, but they're not. On the other hand, I think maybe a shift of this that I'm only just putting together now is polling drives governance, whereas if you're only pulling the timeline, you can sort of think about it as this is why the people who do well in politics now are just optimized for content. They're basically content creators because the polling is the timeline. And that's interesting again, because who is on the timeline? The readers is probably more of an accurate sample of the median people in the country. But the posters who are dictating what the timeline thinks of something is a really, really small group. If the original vision for who voted was white male landowners, maybe the version of people who matter for policy now are the good posters.

• 20:27Speaker 02

  I don't know if that's a good or bad thing, but it's certainly a very different group that I don't think correlates super tightly to any particular demographic trait necessarily.

• 20:36Patrick O'Shaughnessy?

  You're friends with many or most of the great posters. What makes a great poster?

• 20:41Speaker 02

  It's not that dissimilar to writing, being a little bit tortured, having a bit of a messed up personal life, just in general.

• 20:48Patrick O'Shaughnessy?

  Like comics or something?

• 20:50Speaker 02

  Yeah. And maybe posting is a little bit like a writer mixed with a comedian or something like that. Certainly has the comedic element of you need to sort of have a riff that resonates and it's sort of this instant hit. It's phrased in an interesting way. There's sort of like a blend of like comedy, poetry and writing.

• 21:07Patrick O'Shaughnessy?

  You've used this funny phrase before that we're at peak guy. What does that mean?

• 21:12Speaker 02

  I think we are a peak guy. It's hard to say where to start this. There's a pagan understanding of God as being like in and around you everywhere. Everything is animated. Everything is controlled and dictated by the gods. And then in the Renaissance, you could say that God lives above the clouds, but there's like a guy up there that you can talk to. And then when we discover what's past the clouds, we go, okay, well, there's no guy up there. And then we discover space. And so basically you have to just keep going, well, okay, maybe he's beyond space. Maybe we don't know that it's a guy anymore that you could address and talk to. But it's this conceptual thing. God just sort of like moves farther and farther away and becomes more and more conceptual. But the idea is that ever since we've sort of become an atheist society, we've been looking for things to sort of look up to and worship.

• 21:54Speaker 02

  I think basically it's sort of trite now to say that like everyone has to worship or whatever. I think maybe like the more precise thing would be that there's always a role for a priest in society and we've been looking for new priests. I think we tried scientists as priests. The scientific project has fallen apart a little bit. This is widely discussed. The idea that we looked to physics as hopefully going to provide us meaning. It hasn't. Physics has largely stalled since the war. We've moved beyond science as a source of meaning. There's this billionaire class that we've sort of looked to as the new sources of meaning. On its surface, it doesn't make a lot of sense that we would spend so much time caring

• 22:33Speaker 02

  about what billionaires think about whatever physics or theology or health or topics unrelated to accruing a billion dollars. The reason we do, I think, is this is our new priestly class, which is we've said, okay, the values that are important in our society are being successful at business. And to be successful at business, you generally have to be smart and hardworking. These are the people that have ascended to the highest realm of piety in our value system. And so we're going to listen to them. We're willing to like take scientific and medical advice from people who are either in the billionaire class or are adjacent to the billionaire class, which is the poster class, which is the new class, I think. The peak guy thing is this idea that there's basically been a lot of billionaire worship.

• 23:16Speaker 02

  Part of it is that they've gotten way less scarce. Billionaires have probably grown 100x in the last 20 years, probably more. We sort of look to them to provide us these answers and it has not been satisfying. And so this notion that I want to catch every podcast with this billionaire and I'm going to study his routines and habits and care about what he thinks about these things has sort of come to its full saturation. Money, I think we've just seen as not as powerful as maybe it once was, or we think it is insofar as certainly our political landscape. We have not seen the donor class be nearly as successful as they maybe used to be, or we thought they were. If you're a billionaire, you're sort of quite limited on the things that you can do vis a vis like an African warlord or a robber baron.

• 24:01Speaker 02

  There's these sort of like three forces of inflation driving down what it means to be a billionaire at all. And then the evolution of power structures in society are also limiting. Andrew Carnegie could take up arms against his workers, but now if you post the wrong thing as a billionaire, you have to resign. There's a sense that this whole class has just become less important. And then I also think just the media and podcasts, it's just saturated. You get it. You understand this thing, but we don't want to take life advice. We don't want to hear about what's happening from the billionaire class anymore. And so that whole set just feels very saturated. It feels unlikely that there's a marginal billionaire that I'm going to learn something very interesting from on a podcast. And I don't think that was the case like six years ago. And so the logical question is what is the next class?

• 24:45Speaker 02

  As we sort of flail around looking for our next set of priests, I think it's the poster. I think you can see this because I think the billionaire class is a little bit deferential to the poster. One very clear way is the science class sort of inherited the priesthood after the actual priests. And then you can always look which class is subservient to the next to see who's next. The science class becomes subservient to the billionaire class. This is certainly the Epstein lesson, which is all the scientists are clamoring around the sort of money and glamour. Now I think the billionaire class has become subservient to the posting class. You can sort of see who society collectively chooses to be like, all right, this is the guy I want to listen to for two hours and base my life on.

• 25:25Patrick O'Shaughnessy?

  Subservient to the poster class evidenced how? Why do you say they're subservient to the posters?

• 25:31Speaker 02

  I was at this thing a while ago and it was a bunch of billionaire investors and they were all fighting over who could sit next to Tyler Cowen because he's the most interesting person there.

• 25:42Patrick O'Shaughnessy?

  Every room has a boss.

• 25:43Speaker 02

  Every room has a boss. Yeah, exactly. And I think there's very much something to that. It's sort of that simple. There's sort of this line of subservience.

• 25:51Patrick O'Shaughnessy?

  There's also this interesting point about it's just scarcity, like always. The billionaire inflation thing is the seed of their demise. That if there's so many billionaires, if Grant Cardone is a billionaire and so is Elon Musk or something, it just makes it so stupid. So we either need a new class at the top and it's not deco or sent a billionaire. Who cares? We need to like reclassify the top 100 or something robber barons. It just seems like there's too many of them, so no one care anymore. It seems much easier to get a billion dollars than it does to gain the real estate in people's minds or on the timeline that the top couple of posters can do.

• 26:29Speaker 02

  If I could just have it by decree, it would be who is a liquid inflation adjusted billionaire? I think that number probably hasn't changed a whole lot. I always find it so useful to take this retrospective historic frame. Net worth is like this new idea. If you read like Pride and Prejudice, they're talking about how wealthy all the men are. Mr. Darcy is discussed as getting 10,000 pounds a year from his estate. That's his wealth. It's his cash flow. There's not like a scene in Pride and Prejudice where they're like, does he have a lot of margin loan against his estate or whatever? And there's also not this idea of, well, okay, his estate's worth whatever, 200,000 because he would never sell his estate. It's not viewed as this asset. So it's just like wholly conceptual points on a leaderboard, truly, because you can't spend it. I really think it's kind of crass to say, but I think billionaire is like a state of mind.

• 27:14Speaker 02

  Between like private markets and net worth as a concept and then inflation, billionaire is now something you can just be dubbed. I think you'll come to see billionaire as sort of this political label that's only tangentially related. You see this on the timeline a lot, which is people get referred to as billionaire who are not rich at all, but they have these traits and associations. And so I think this term, sort of millionaire.

• 27:42Patrick O'Shaughnessy?

  No one says that anymore.

• 27:43Speaker 02

  Yeah. And it used to carry the same weight as billionaire, but now millionaires both irrelevant. When you say someone's a millionaire, you're sort of just saying they're like a upper middle class, well-to-do person with a house. It doesn't matter if they have $5 million or $800,000. It's this loser class thing. As currency gets devalued, both in terms of the literal sense and also in the sort of what you can do with it sense, time is fixed. The new scarcity is just like a tension you can draw on the screen.

• 28:12Patrick O'Shaughnessy?

  If you think about the most interesting posters today, I'm not asking you to endorse them one way or the other, but just the people that you think are the most interesting, who comes to mind?

• 28:22Speaker 02

  The distinction to draw is the people that I want to get tweet notifications for, because I actually think each one of their posts is really good. And that's like a vanishingly small number. And then there are good posters who are just people who have really made something of themselves because of their prolificness. The other sort of problem with posting is like, it still does reward prolificness, which I am still sternly against. I always think Twitter should be dictated by followers divided by posts, followers per post. But that's not how it works. It just rewards prolificness. I think there's this idea that the most important media property won't be watched. The most important author isn't read. The most important philosopher is not understood. The most important stock has no fundamentals.

• 29:02Speaker 02

  In a world of fiat currency, everything sort of becomes this weird fiat thing. Certainly, it's true about philosophers, authors. Does anyone really read the books these authors write? I don't think so. I think a small amount of tastemakers read the books and then other people look at books as sort of idols. And if they're blessed by the right people, then there's sort of this like memetic celebration of the thing. And even podcast clips do a lot better than the podcast episode. I pride myself, I can tell if a podcast or a blog essay or a book or something is good or not without having read it, just by triangulating it. I know which one of your episodes do well without listening to them, because I can sort of feel from the reception. To some extent, that is the thing.

• 29:44Speaker 02

  You can imagine a world where there's a few clips from a podcast, but no one ever listens to the podcast. I don't actually think that would diminish the value of the property.

• 29:52Patrick O'Shaughnessy?

  It's like everything is being processed and packaged for catching attention, but taking the least amount of that person's time. I heard this interesting story about a publication that has X millions of followers or whatever, readers, however they describe it. And the person behind it told me like, something like 95% of the readers are people that scroll through like the quote highlights on Instagram or something. And whatever, they're still a reader. To me, it's all quite depressing that the world of posters and content has reoriented around this monolithic timeline. And they're all just feeding it what it wants. But that's the game you sort of have to play. And I'm curious, I know you went six months or something completely off of it. Like you just disappeared. What was that like?

• 30:36Patrick O'Shaughnessy?

  And is that a path that you would encourage people to give a try? This is my way of asking the freedom versus relevancy question.

• 30:42Speaker 02

  I think my takeaway from that would simply be that one should not fool themselves that they are looking for anything other than entertainment in all the media that they consume. It is produced to be entertaining. It's selected to be entertaining. It's edited to be entertaining. The job to be done of what is on the screen is to entertain you. I think that is the big lesson. I'm not going to tell people how much entertainment they should have in their life, but that is what it is fundamentally. Rolex or Nike can convince you that their thing is an investment or an asset versus a liability, then you'll spend way more money on it. Podcasts and posts and essays can convince you that what you're reading is useful for

• 31:26Speaker 02

  you and productive and anything other than watching TV all day. Whether I want to spend an hour a day on the timeline or eight hours a day on the timeline, it's just about like, how much do I want to be entertained? You don't really miss anything. If you're not like a complete hermit, you hear about what's important. Probably the most like enlightened way to consume this media is to not read it yourself. Get the filtered takes from people around you at dinners and lunches and stuff. And you just let them, first of all, expose themselves to the radiation and then come back and tell you what's interesting or not on there.

• 31:57Patrick O'Shaughnessy?

  Our friend Jesse thinks about it this way. He refuses any algorithm in his life, including news, which is just an algorithm. It's like, how do you know what's going on? He said, well, people tell you.

• 32:05Speaker 02

  Yeah, that would be my takeaway. The freedom versus impact question.

• 32:11Patrick O'Shaughnessy?

  Do you believe that trade off's real?

• 32:12Speaker 02

  Yeah, I think it's real. One of the questions I'm interested in is classes of guys, archetypes, genres, whatever. There seems to have been this type of person that's largely gone extinct. Unfortunately, I think this is probably all just explained away by technology, which is sort of a boring, but maybe accurate explanation. The Theodore Roosevelts or the Andrew Carnegie's of the world who are able to spend a lot of their time in leisure, a lot of time away from their business. Carnegie, for example, is arguably still the richest person or very close to the richest person that's ever lived. That's probably a technological thing, but I'm fascinated by this idea of, is that necessarily true?

• 32:52Speaker 02

  Does the idea that you have to be working 22 hours a day to get these sort of world changing outcomes, is that necessarily true? I think Larry Ellison is like the contemporary figure who sort of bucks this trend. And he claims to have started Oracle very much with the intention of being able to disappear for two weeks to say, and still by all accounts, sort of like drops in and drops out. And can you still be a player and not be jacked in 24/7? I don't know the answer. It's unfathomable that the president of the United States could be off the grid for a month, probably impossible because of technology. But is that true in business? Is a lot of hard work performative? Maybe. In the case of Carnegie, it's interesting because he was self-conscious his whole life

• 33:34Speaker 02

  about joining this sort of society, maybe at the posters of his day. He knew that for him, money wasn't going to be enough. And he wanted to be accepted into society and be well-read and be a man of letters and do writing and stuff. And in that sense, there's nothing new under the sun. I firmly believe this to be true, that the end state is just posting. The amount of billionaires and founders who turn to Twitter after they accrue their wealth or start a podcast.

• 33:57Patrick O'Shaughnessy?

  Or buy a media business.

• 33:59Speaker 02

  Yeah, start a YouTube channel. It sort of is the end state. And I think one way that you could look at that is just that, once you accrue wealth, you want to accrue fame. The other way of looking at it would be that wealth is less valuable and you actually realize that the scarce asset is tension and influence. And so you're almost hedging against the sort of rapidly devaluing nature of your money and then trying to switch to what is actually scarce.

• 34:22Patrick O'Shaughnessy?

  I find it very interesting that, call it the seven or eight people that you and I know that we're most interested in are not posters. There's sort of some interesting opposite. They've resisted the temptation. That makes me wonder if it's almost like a trap. But it's such an interesting concept that hard work is performative is the phrase you used. It actually makes me wonder, the hard work being performative thing, how you're thinking about this AI and job displacement question, which you and I've talked a bunch about, I'm super personally interested in. It seems to be the issue around which people are rallying for the anti-AI fears, is that it's going to destroy jobs in a way that prior technology changes didn't, because it's

• 35:02Patrick O'Shaughnessy?

  so ubiquitous, it's intelligence, and it's moving so fast that even if you compare it to prior tech changes, which all displaced jobs or changed jobs or whatever, it happened more slowly. And that's why this one's so scary. It gets at questions about what is work really in the modern sense, especially white collar work? I'm curious how you're thinking about like AI and job displacement.

• 35:24Speaker 02

  The short to medium term prognosis is hard to speculate on and could very well be bad. A friend of mine, he has kids in college and he has a 10 year old and he's very worried about the kids in college, but not the 10 year old. And I think that is directionally correct. Maybe from the 10 year old's perspective, look, I think it's great. I think first of all, anything that can be automated should be automated. I think it's really hard to argue against that when you really, really think about it. The notion to me that I might be in the last years of my life where I ever have to sit down in front of a computer and like do things with it is tremendously liberating. On the jobs thing, I don't really understand this idea of we're at peak jobs or we're going to run out of jobs.

• 36:08Speaker 02

  To me, it's very obvious that every white collar job is like totally fake and made up in the sense that these are not contingent for shelter and food and medicine and other necessities. Like, I'm not talking about those. But most jobs do not touch those. Or if they do, they touch it in a very, very derivative way. What is your job as an allocator? Well, because capital is inherently inflationary, you can't just leave it alone. This is one of like the great maybe evils of money is that once you get it, you can't just leave it alone, because then it goes away. So you have to do something with it. And this creates this entire whole thing. My job is when you have money and you don't want it to go away, you have to give it to someone. You give it to a bunch of people.

• 36:52Speaker 02

  I take it and I put it into things that are productive and then hopefully you don't lose your money, you get more money. Is this useful? Is this good? Yeah, sure. It's not real and it's like fun and useful, but not in a direct way. To me, there's like unlimited amounts of jobs that you can create in those sorts of scenarios. We're going to have unlimited wants and desires and our economy is solely driven by our unquenchable desire to consume things. So we're going to come up with new things to consume. And now, again, in the short term and medium term, that might be volatile and there might be a lot of job loss and that's not good. And there could be a lot of despair. In the long run, we're just going to invent new things to do. We've already solved all of our problems. The worry about, oh, we're not going to have more jobs.

• 37:36Speaker 02

  It just doesn't really resonate. We just make up stuff for us to do. And that's sort of the whole point of it. And that's good. It's better than being idle. Maybe more people should be idle. There's all sorts of ways that this shows through the cracks. The work from home thing, I think, is like a strong indication of, most people don't have 40 hours of work to be done. They maybe have 40 hours of meetings to sit in, or they have 40 hours that they have to be on standby. Work from home, I think, wouldn't be that important. Let's imagine a version where you work on a factory line and you can set up the microcosm of the factory in your backyard, but you've still got to be on the line 10 hours a day. Yeah, I guess work from home, maybe you can have lunch at home.

• 38:19Speaker 02

  You don't have a commute anymore, but it's not like this huge improvement. The reason people are so attached to work from home is because they actually have like two or three hours of work to do per day. And there's a lot of your time at the office where you're just sort of like killing time. Yeah. And so work from home Fridays is a soft launch of the four day work week. And I think this is all fine. The fact that we can continue paying people to work from home and work four days a week is just a sign that we need less labor time out of people than we used to, and we're still able to be just as productive.

• 38:46Patrick O'Shaughnessy?

  If in some sense, some of these jobs maybe are made up and actually people will be happier not ushering bits from one place to another on a screen or something. I'm curious how you think about searching for one's vocation. You texted me one time something that stuck in my head, which is that we all have some sort of moral duty to steward our gifts. If you agree that that's true, curious for you to expand on that, but that that then reframes success and failure in a cool way, that maybe cuts through this priestly class thing of like looking to others to tell us what to do versus looking internally? Can you expand on that?

• 39:28Speaker 02

  I think there's something even just aesthetically bad about waste. One of the worst things that you can waste is your gifts, your skills, attributes, things that you're uniquely good at, things that you can do for others that you might be able to do that others can't. For me, one of the great challenges has been trying to understand how to best, first of all, figure out what they are, which is easier said than done, and then figure out how you can use them. There's kind of two modes, I guess. One is that you use them in a very pure and unadulterated way, and you don't try to integrate your work with how you use your gifts. And this

• 40:08Speaker 02

  would be the person who has a day job in order to support their craft or something. And then the other, perhaps more ambitious version, is trying to integrate commerce and their work with their gifts. This gets into the like, should you pursue your passion thing? And it's really difficult, but you said something to me, which is, the thing that you are spending most of your time on really ought to spark and utilize your sort of genius and gift. And if you're not doing that, like, it's obviously not the thing that you should be spending most of your time on. There's proxies for this. People who are having a lot of fun at their job are like, it's a very strong indicator that you've combined the two well.

• 40:50Patrick O'Shaughnessy?

  What do you think the future of finance looks like? The 80s and the last era was built by those people from KKR and leveraged buyouts, whereas those firms are obviously really important and really big, but they were started a long time ago. And in many cases, they're still run by people that were the founder or close to the founder, getting up there in age. What do you think the next wave of finance look like?

• 41:14Speaker 02

  The founder is incredibly important. The founding act is incredibly important in any business or country or organization, really. I do think that it's notable that the current paradigm in which we live, the largest and most important finance firms come out of a culture of leveraged buyout, which first of all, it's a debt-driven idea. It's financial engineering. It's extractive insofar as the primary goal is to make a thing more profitable. And I'm not trying to disparage leveraged buyouts. I don't think they're like as evil as people say, but the core idea behind it is like using debt and financial engineering to make a lot of money in a way that the quality of the business itself is maybe ancillary to the core trade. And those are what the founders and the founding

• 41:59Speaker 02

  acts of these large firms today are. Now that the Apollos and Blackstones and KKR's of the world, I think in a lot of cases, the leveraged buyout is a very small part of what they do today, but I do think it's still in the core culture. One thing that we've pondered about before is what does the next 20 or 30 years look like when the largest financial firms in the world, their founding action was seed investing. It's equity-driven, it's power law, it's hugely optimistic, it's largely qualitative. What would a Blackstone and Apollo look like if that was the core seed at the start of the inception of the firm? It's notable. In the same way that equity financing is a far newer

• 42:43Speaker 02

  idea than debt financing, and equity financing is obviously a far more optimistic idea. It's uncapped to the upside. And so there's all these sort of philosophical ideas around equity versus debt, and debt is far more ancient, and debt obviously has a very controversial past about whether it's morally good at all. And there's this idea of like, what if the crux of finance is with these kind of wildly optimistic people versus people who might be more conservative, more concerned about the downside, more concerned about, maybe one way of looking at it is a shift from the quantitative to the qualitative.

• 43:16Patrick O'Shaughnessy?

  What other differences are interesting to you between East Coast and West Coast finance? The people doing it, the optimism versus not pessimism, but realism or dollar orientation. You straddle these two in an interesting way.

• 43:29Speaker 02

  I don't think one's better than the other. There's truth to the caricature, which is East Coast is extractive, pessimistic, downside-oriented. West Coast is naive, unsophisticated. That is true to some obvious extent. And I think they're merging now. It's no coincidence that the West Coast is definitely eating the East Coast. Venture capital has created the biggest businesses in the world and private equity has not. And where private equity has, it's largely been through acquisition and financial engineering. And so it's sort of inarguable that venture capital is this sort of much better force for the world. It's a tiny little asset class that has produced all the most important things in the world.

• 44:13Speaker 02

  It's also this civilizational technology, which is you're willing to give young people millions of dollars to try a very speculative idea with basically no retribution or downside if it doesn't work. So it's clearly this amazing force. I think there's been a very interesting like flip in compensation between East and West. And so when I was growing up, my understanding was that Wall Street is where you would get paid huge amounts of cash on a yearly basis. You would have no enduring equity value, but you would get paid a lot of liquid cash. And the West Coast was this idea where you would be rich on paper, you would have equity that would maybe be this enormous payoff in some distant future. And I would argue that those have started to flip now, whereas like Wall Street, because all these businesses have gone public, you know, on Wall Street, you're comped

• 44:56Speaker 02

  on RSUs and you're thinking like a firm and you're less worried about the carry in any one fund and you're more worried about the stock price and performance of the firm as a whole. And interestingly, in Silicon Valley, it's almost moved towards a annual cash basis, but given how these markets, you know, companies staying private creates these sort of mature secondary markets that sort of de facto yearly tenders, becoming almost a parallel liquid marketplace, you're actually paid huge amounts of cash in Silicon Valley. And I think we've seen that with the AI stuff and even, you know, venture capital firms getting acquired and GPs leaving their firms and all that sort of stuff where it actually is becoming more liquid, more mercenary. I'm always interested in these structural shifts and how that starts to change things where the valley is a place where you're liquid

• 45:39Speaker 02

  and you're getting cash out yearly and you're jumping from firm to firm. And Wall Street is a place where you have a bunch of RSUs and you're sort of thinking more about the long term and the enterprise value of the firm.

• 45:50Patrick O'Shaughnessy?

  If you add all this up, where are you looking for opportunity? You have such an interesting mandate because you could do a venture-style growth equity deal, you could do a special situations, private equity-style deal. You've historically, across your career, invested in dozens of software companies. You've, I think, so far wisely avoided companies that could get railroaded by Claude Code. But nonetheless, I think you're still curious about where there might be value in software. Just as a pure investor, how are you approaching this very strange, highball, high uncertainty landscape?

• 46:26Speaker 02

  We're very fortunate to have such a wide mandate and sort of what we can do and look at. Maybe the only consensus view is the niche sort of apocalyptic vision at some of the core zealots at the labs. But outside of that, I think it's really sort of a jump ball. Markets lack a lot of nuance. SaaS is a business model of this idea that you pay usually per person, per month or per year for access to a tool that helps you use your computer. I think in that sense, SaaS is in a lot of trouble, but I don't think for a lot of these businesses that are being really sold off today out of fear that that is actually what is important to the business at all. It is actually interesting to me, I wrote a post recently about the idea that a public manager being along the

• 47:11Speaker 02

  MAG7 is, without taking a specific view on the trade, probably like good capital allocation, because sometimes you've just got to do the really obvious thing and just follow consensus, because consensus is usually right. One of the pushbacks that I got to that is, well, these things, you know, they're the biggest companies in the world, they're priced to perfection. I think it's underrated, the fact that the 52-week variance on these things is like nearly 100% for the biggest companies in the world. And so they're not priced well at all, and the market lacks extreme nuance. I think it goes back to what we were talking about, which is probably someone smarter than me could draw out a much clearer picture, but there's something to do with passive flows and the marginal price of security. And what's informing the marginal price of securities is the posts in the group chats that the random people are writing, that the algorithm's chosen. In this way, the

• 47:56Speaker 02

  algorithm, the AI, frankly, my understanding is that's what's driving most of the algorithms now on Twitter and YouTube, is pricing the market in some very real sense, because it's choosing the narrative that it wants to show to people, and then those people are pricing off that. It's another lesson, which is markets are not efficient, there's no nuance. That would be the big thing that we're seeing today. I think there's a lot of delusion in either direction. The most honest thing for a lot of managers to do would be to sit it out, but they're structurally unable or unwilling to do that. And so you just sort of, you know, hope for the best and put capital out the door, and it's sort of a problem for tomorrow. A lot of things are still getting priced irrationally in the private markets in ways that are totally unrelated to the quality of the business, but are more of a function of just the incentive structures of the funds.

• 48:40Patrick O'Shaughnessy?

  You mentioned the SaaS is just a model, and there's good and there's bad. What do you think about this trend of super capex-heavy, token-heavy, real-world asset? There's this new genre of company that seems to have emerged as really dominant. I was looking the other day, I was curious in our portfolio, what percent was not pure bits? And it's like 60-something percent is not just software, based on the market value of our investments. I was surprised by that, like, it's a really high percentage, whereas VCs have mostly historically been all software for the last 10 or 15 years. What do you make of this trend, this class of business, lower gross margins, things like this?

• 49:18Speaker 02

  One way that you can look at this is we were really in the late innings in, let's call it 2016, 2017 on of, okay, returns in venture capital have been very high. And now we've seen whatever 20 years of venture returns being very good. And so logically, capital is going to flow into the asset class. The problem is that the venture market is largely constrained in that the amount of great businesses that are started is relatively fixed, probably, I believe, downstream of how many great founders there are. I think there's just a finite amount. More and more capital flows into venture. There's basically a finite amount of companies. So you have to put more money into the same amount of companies.

• 50:01Speaker 02

  This was becoming a real problem before AI and COVID, which was that there's only so much money that you can cram into a B to B software business. And especially when annoyingly, the companies are getting cheaper and cheaper to start. Functionally, what you saw and what you still see to some extent, but what you really saw was that all this capital was just flowing to landowners and to compensation packages, basically. Capital hates getting blocked. It's like water wants to find the most efficient path. And it was getting blocked because it wanted to flow into venture because there was backward looking higher returns. It was just constrained. You can only cram so much money into these companies. And it was a lot of what inspired me to start my fund was seeing this problem, which was just that the amount of money these companies are raising is unrelated to the amount of money they need.

• 50:46Speaker 02

  Almost as if Deus ex machina, all of a sudden, there was two great categories that could just soak up this capital. And I really do believe in some sense that the like businesses and assets are sponges for capital and that the excess in an era of back then, we had negative interest rates and stuff, the capital has to go somewhere. And if it has nowhere to go, it will create somewhere for it to go. And I think that there's a very fortuitous arising of these high capex businesses of AI, the ultimate high capex project, obviously, all the hardware stuff. And so I think in some sense, like you could say that the capital markets were desperately looking for a place to go to put the capital and there was no place. And so these companies almost got created downstream of capital, which I think is a little bit different of the narrative than most people would look at.

• 51:30Speaker 02

  So that's sort of the philosophical view. The economic view, part of the reason SaaS is getting punished so much today in the market is because it was this idea of you're selling a copy of a string fundamentally. That's what a software product is. And the marginal copy of a string is very close to zero. And so with zero marginal cost, the thing that you're selling should be highly profitable. The vision of that was that you will have high upfront costs and then you will have very high gross margins and hopefully one day, very high net margins, although the net margins seem to never sort of materialize until private equity gets their hands on things and sort of forces that net margin out. That era is largely just a downstream coincidence of this like selling strings. And now I think we're in an era where we're selling compute and selling compute, you

• 52:13Speaker 02

  can't write the prompt once and then sell copies of the output. You have to do the compute every single time. And so the marginal cost obviously is not zero. And I think this is like a fundamental huge change to the software business. And I think it means that this era of high gross margins being the norm is just going to go away. And what's going to make up for it, I think, is lower gross margins, much thinner net margins and much more scale. And I think that's sort of what you're seeing, which is that the capital is flowing to the top end provider of the scale. It would have been unthinkable that we talk about companies in three to $4 trillion market caps 10 years ago. Big part of that is inflation, I believe. Another part of that is just the scale dynamic, which I think it's uncontroversial to say

• 52:58Speaker 02

  we're going to have $10 trillion companies and so on and so forth. Because margins are going to drop, all the returns are going to accrue to scale because obviously low marginal, low scale is not a very good business. It's but crudely a bit of a Walmart effect in software, which is that the future looks like low gross margins, razor thin net margins, huge scale. And this is probably a problem if the SaaS provider is the mom and pop shop like Walmart's coming to town.

• 53:24Patrick O'Shaughnessy?

  You have this funny view that the whole myth of how difficult it is to beat the market, however you wanted to find the market, is wrong. I'm curious to expound on that. That seems to have become post-Jack Bogle, one of the deeply held truths of the market is that it's extraordinarily difficult to beat the market. So you shouldn't even try, you should just opt out of the battle. I think you have a very different view on this.

• 53:45Speaker 02

  Buffett and Munger were my kind of main teachers on investing. Buffett says that he wants his estate outside of Berkshire to be put in the S and P. That's his advice to the general public. People take that to say that Buffett's saying you can't beat the market. I don't think that's what he's saying. I think he's saying for the average person, you shouldn't try and beat the market. Implicit in that statement is leaving out any sort of active investor. Maybe the anecdotal side would be Buffett saying you should put all your money into the S and P. That's the most rational thing you should do. On the other side is the sort of empirical argument, which is, look, most professionals don't even beat the market after fees. This is this one-two punch of the godfather of investing says, don't try.

• 54:29Speaker 02

  Seemingly the smartest people with the best incentives in the world can't do it. And then the other thing is, I just think that for a professional money manager, and this is sort of the paradox with the Buffett thing, is that for a professional money manager, it is really hard to beat the market because you have all these other factors that the average person doesn't have. And this is the Peter Lynch argument. I increasingly think Peter Lynch was kind of a genius about this, which is that like, yeah, when you're a professional manager, by and large, you have all these mandates, you're running a business, you have customers that you need to keep happy. It's more difficult for the professional money manager to beat the market than like the average amateur. How many people you know who like bought Bitcoin and did really well, or bought a Tesla and then they bought the Tesla stock, or they bought an Apple computer and they bought the Apple stock?

• 55:12Speaker 02

  You can't run a hedge fund that way, but they've outperformed just doing that. And so I think there's a little bit of this like weird thing where in isolation, none of the advice is wrong. It's not as difficult as people think to, I think, outperform or do better than the average. And there's this notion that gets caught up in all sorts of other things that I think sort of sulries that view.

• 55:32Patrick O'Shaughnessy?

  I wanted to ask the LP's perspective, what you would do if you were an LP, what you'd be looking for?

• 55:38Speaker 02

  I get asked a lot by LPs where they should put their money, what managers are good, or should they invest in this fund? You have to take a somewhat cynical view of these things as, and I maybe it's not actually cynical, just maybe the more realist view of these are businesses first and, and you know, their product is returns, but like their business, you have to recognize what sort of customer you are. The question of where should I put my 500 grand check? You probably shouldn't put it into like marginal $5 billion growth fund, but I actually get asked that a lot. Should I put some one or $2 million into this fund? It's probably going to be a good fund, but could you find something much better to do with that $1 million? Probably. It sounds obvious, but in reality, it's not. And I think what people don't understand is that basically if you're a principal,

• 56:23Speaker 02

  let's say if you're a principal that can't write like sovereign or institution sized checks, you're a totally different customer and the businesses are not designed to serve you as a customer. The growth fund is probably a great place if you have to park $100 million somewhere. It's probably a very, very good place, but it's not a good place to park like a 500 grand check. If your business is set up to service sovereigns and large endowments and stuff, your product is just so different from what you're going to serve for someone smaller. And this gets into the like, well, okay, if you have a small check, what do you do? And I think this is where the emerging manager stuff is really underrated and looking for places where the manager is actually most tightly aligned to returns, either because

• 57:05Speaker 02

  returns are critical to future funds, or that's actually how they're going to make all their money.

• 57:10Patrick O'Shaughnessy?

  Are there features of the emerging managers' situation that you find interesting or attractive one way or the other?

• 57:18Speaker 02

  It's probably similar to how I look at everything, but I think especially for an emerging manager, when you're truly just sort of underwriting the person, people still fail. They probably overweight the investing thesis and track record and stuff and underweight facts about the person. I think you and I are both big believers in the idea of how you do one thing is how you do everything. And so the personal financial situation of a manager is an incredibly underrated thing to ask about. If you have a couple hundred million dollars in the bank account and you're raising a $30 million fund, that's very different than someone who has a million dollars in the bank, who's raising $100 million to go do a thing that they're trying to make the most money from.

• 58:02Speaker 02

  There's like two very different places to start from underwriting. One notion I have about this is whether someone is looking up or looking down at something. And the idea is take the same two $50 million funds. One is from someone who has 500 grand in the bank and one is from someone who has $500 million in the bank. Those are just like, obviously going to be treated very, very differently. For the latter, for the $500 million person, the $50 million fund might very well do better because it's held with a looser grip. It's less on the line. You're going to be less paralyzed by the sheer like quantities of dollars. That is generally not super recognized and you see it all the time, like in new ventures. If you're helming something that is two or three zeros more than you have, there's just

• 58:46Speaker 02

  a sort of monumentality to it that is a bit intimidating. You can scale this all the way up, be the husband who's worth 100 million with a $10 billion fund. It's just a big scary thing. And I don't care who you are, when you're taking bets that are an order of magnitude larger than any amount of money you've ever had, there's just a psychological factor there versus when you're taking bets that are maybe sort of negligible to you. Part of the reason I think it's easier for people to outperform individuals is it's easy to take a flyer on a stock with a marginal fraction of your net worth that you don't feel you need to explain and you're not going to be judged on later than it is to do with maybe a dollar amount that's more money than you have. It can affect your track record and you're going to have to explain it and all these

• 59:29Speaker 02

  other factors that are not related to like, do you think this is a good investment or not?

• 59:33Patrick O'Shaughnessy?

  You and me are always so interested in this sort of what I'll call the underbelly of finance. And you have this funny idea around. The sort of feudal-like system that is emerging in the world of SPVs and the big private companies, can you share that idea?

• 59:44Speaker 02

  There is this funny notion, it's sort of specific to the labs, but it's a broader thing as well, I suppose. We're sort of recreating the feudal system from First Principles, where there are the lords, Elon, Zuckerberg, Dario, Sam, they can sort of make landed gentry by giving out allocations, because these allocations are sort of these best example of generational wealth. You get this allocation in SpaceX, or in Waymo, or whatever, you get to charge huge fees on it. And it's sort of this like wholly synthetic product, which is someone gives you a sort of arbitrary number. They know you don't have the money, so they know you're gonna go fill it. And then you get to go out and basically say, I've been given, indeed, the king has given me 500 acres in his country, and Elon has

• 1:00:28Speaker 02

  given me $100 million to allocate in SpaceX. Then you get to go out and charge fees and make a bunch of money from it. Do you have allocation? And I guess I'm interested in it, because it's sort of this purely relational, wholly synthetic thing that I'm not sure has ever existed before. Certainly not at the scale and magnitude. You can go, due to your relationship, basically get this like landed estate, and then take it to a sovereign or a foundation, and they will pay you for that access. Like a pure paid for access. But maybe where it's different is that's just brokering. But the difference is obviously that brokering is sort of like a one-time transaction, but these allocations sort of, you know, they live on forever.

• 1:01:03Patrick O'Shaughnessy?

  What's the most egregious fee setup you've seen in one of these?

• 1:01:06Speaker 02

  No GP commit, 10%, one-time upfront fee with some carry structure generally, where you're just demanding, basically, that you get paid life-changing amounts of money with zero risk. And then you also get a huge amount of upside. The other thing is, I've seen a few that don't have a term limit. I know there was like famously some, a lot of SpaceX ones. I think people were doing that 10 years ago. I know there's certainly some that just collect the fee forever. To Capital's credit, you're very happy to be paying that 2% on the SpaceX thing that you did 15 years ago. It's sort of a win-win. It's not to say these are all bad. It's just, it's sort of funny, because it's not investing, it's not strictly brokering. It's this very different thing that is like a wholly insider

• 1:01:50Speaker 02

  access game. And then, of course, there's all the fraud and bad behavior that I think comes with all the bubble and stuff.

• 1:01:54Patrick O'Shaughnessy?

  How do you think about your own productivity, for lack of a better word? We talked before about how content is really just entertainment, not learning. We shouldn't kid ourselves about that. Therefore, it is largely unproductive, which is fine. It's entertainment. How do you think about, to the extent you care, about yourself personally being a lot more productive with all this insane tool?

• 1:02:19Speaker 02

  I certainly care about productivity. For me, by far, the most generative thing is conversations, which I guess are downstream of relationships. Part of the reason my book reading has gone down is in terms of a lot of people read a lot of books. If I could only keep one thing, it would be conversations with people that I find interesting. But I also think like, I'm uniquely tolerant of distasteful and weird people. I get asked a fair amount, like, what's your media diet? And conversations are my answer. And it always feels like the answer falls flat with people. And I think it's because they're not friends of like weirdos. A lot of my friends, I think, are sort of, people would largely find strange at best, distasteful at worst. If I can't predict what the person's gonna say after

• 1:03:03Speaker 02

  knowing them for a while, I like them a lot. And that's a very high variance thing. Old books are good. I think YouTube remains underrated. There's a lot of really obscure things on YouTube that I really enjoy listening to. YouTube sort of remains the Library of Alexandria of our time, maybe of ever. But yeah, YouTube doesn't feel generative. I think the only thing that's generative is conversations. So far, in early 2026, I would say chatbots can lull you into feeling generative. But if I actually look at like the actions that I've taken, you can feel really productive after like a good two-hour session on a chatbot. But I actually don't think they're that generative.

• 1:03:43Patrick O'Shaughnessy?

  If you think about great investing ideas, what is the right balance between simplicity and complexity? Both in the ones that you've done yourself, but also studied?

• 1:03:54Speaker 02

  I really do think people value complexity for the sake of complexity a lot. I think a lot of investors are in the like, feel clever, look smart game more than the money game. Personally, I think this has been a big area of self-development for me, which is, the clever thing is not always the thing that makes money, obviously. You either have to say, I am looking for investment ideas that are so complex that no one is going to do them. Or it should actually be quite simple. I'm a bigger and bigger believer in the simplicity, which is, you probably want to be long Elon Musk. That level of idea, I actually think the gift is being able to sell that idea, and maybe even dress

• 1:04:37Speaker 02

  up this. I think a lot of the investing media actually serves for the people who are really good, to dress up those ideas in a way that makes them feel differentiated and smart enough to what is actually sort of long Elon or long Bitcoin. I think of a guy that I know who exclusively does bankruptcies, and he makes a lot of money. That's very complex and very difficult, but it's a tremendous amount of work. It's grimy, it's difficult. There's a lot of risk and personal stuff. And that, to me, is like an example of getting paid for complexity. Whereas a good example of simplicity is, you should just buy big companies when they're at their 200-week moving average. I love that idea, because it's just so simple. But it's right. One story that I absolutely love, cutting through

• 1:05:22Speaker 02

  the mess and getting to like complete clarity on how to evaluate an investment, is from Richard Rainwater, which is, there's these stories about him, that you would basically come into his office with a yellow legal pad, and you would write out your thesis on one page, and then you would tell him what percentage of your net worth you're gonna put in the deal. And based on your one-page thesis and the percentage of the net worth that was gonna put in, he would say yes or no. And I think that's genius. People don't do that because that's really hard. It makes things way harder. First of all, it's hard to write a compelling thesis in a page. It's much easier to do it in a 400-page slide deck. And second of all, no one wants to say, well, I'm only putting 3% of my net worth in this. To me, that's one of the most simple, clear examples of really cutting to, is this a

• 1:06:06Speaker 02

  good investment or not, that I've ever heard.

• 1:06:08Patrick O'Shaughnessy?

  One of the, I think, natural points of leverage now is the ability to hire extraordinarily well, which means two things. Attract an amazing differentiated talent pool, and then select from that group effectively. That's something that you thought a ton about in building your business. And it seems like a skill that, if you got good at it, would be unbelievably valuable in this era specifically, where the returns to like outlier talent seem to be going up and up and up. What did you learn about the two stages of that process? I'm especially interested in attracting a unique pool of talent in the first place.

• 1:06:45Speaker 02

  Maybe the most practical thing is, that I think is very low-hanging fruit, is just a job description. I think job descriptions are one of these things where they are written for nobody to be read by nobody. And they're sort of this like token document. It's more about, does the job description exist, is more the question versus like, what's written in the job description? I tried to write one that followed a very simple rule, which was, A, obviously, I was gonna post it on Twitter and LinkedIn. Anything you post has to be a good standalone post. It can't be something that you wouldn't share if you didn't know me. I think what's so important in any sales pitch, which is what a job description should be, is disqualifying who you don't want. And the nice thing about a divisive

• 1:07:29Speaker 02

  statement is that, when it resonates, it deeply resonates with the person. And so, I just tried to think of, okay, like, what are all the traits that I would want someone to have? And try and make them, again, to go back to the like, how you do one thing is how you do everything, that would make them the type of person that I was interested. Obviously, the skills and the experience was gonna be table stakes. I tried to write out traits and ideas that would really be inspiring, and for the right person to be like, whoa, like, this person really gets me, understands me, and would make people mad. One of the things that I posted the funniest was, or got the most reaction, was, you're an ideological minority at a top 10 school. And what I love about that is that

• 1:08:12Speaker 02

  it's entirely open for interpretation. I would get people who would be many different things, who'd be angry that I only want a top 10 school. The nice thing about top 10 schools, it's a fully ambiguous statement. What I love about it is, A, there's some schools that I think uncontroversially are top 10, and so I get those people. You can also just sort of assert that your school is a top 10. And I had a few people from schools that I would not say were anywhere close, just sort of assert that. And I thought that was great. I had people select out, because they were sort of like, oh, I don't know if my school is, I'm not gonna apply. That's great, because I don't want those people. And then ideological minority was really interesting. I had a certain idea in mind, but people gave me all kinds of answers about ideological, because, you know,

• 1:08:54Speaker 02

  I didn't necessarily political. There was all kind of answers around how that person stood out at their school. And so, those statements are great, because they're like highly ambiguous. There's a bit of an inherent test of confidence. I would even get a few posts that were like, I think this is bullshit. You should hire me. I didn't go to a top 10 school. You're an idiot. And I love that person, too. The more you can do statements like that, where they like, get this sort of reaction, is great. Imagine what you would have to do in an interview to like, get at all of those various traits. Statements like that, I think, are underutilized in these job descriptions.

• 1:09:29Patrick O'Shaughnessy?

  It's a cool idea, baking the interview into the job post itself. It seems to me like an underrated area of inquiry today, that I know you're interested in, is the cultural and intellectual traditions behind major movements. I think that that has certainly been true in this wave of technology. And it's not something I see talked about, written about very much. And I'd love you to just riff on your interpretation of the key sets of beliefs behind the people and the institutions that are ushering in the biggest wave of technology change that we've probably ever seen.

• 1:10:06Speaker 02

  I'm interested in mispricings in qualities and attributes about things and people and places. I don't know if this has always been true, but it's true today. I think there's some qualities and attributes that are widely recognized and priced efficiently, let's say, height, IQ, resume. And then there's other traits and characteristics that we have just decided collectively not to price. For Silicon Valley, people sort of underrate the philosophers and thinkers and memetic ideas that underpin the whole thing. I think there is a real philosophy that some sort of like neo-Buddhist utilitarianism that underlies the technological

• 1:10:49Speaker 02

  developments in Silicon Valley. It's interesting because you see it, like Will McCastle gets involved with SBF and FTX. There's these sort of thinkers like Nick Land. There's sort of ideas percolate underneath the surface in the valley and are influential in everyone, but are not necessarily named. I mean, now they have been. You could say the same thing about Curtis Yarvin. I thought it was remarkable for years how you could sort of hear Curtis' ideas coming out of the mouth of the big tech leaders without being named. There's things like leveraged research and all these intellectual characters that I think people's religious beliefs are generally underrated by secular people in terms of how important that is as a guiding light. In the valley and the development of these technologies,

• 1:11:30Speaker 02

  these sorts of cultural and philosophical ideas are underrated. Like it or not, the models are highly utilitarian. They have this weird mix of religious ideas from Judaism, from Buddhism, this sort of like utilitarian bent that turns into effective altruism. And people sort of think this is just culture or whatever, but these things matter. And it just feels to me that this whole cultural epicenter has been highly underrated in general and informing why these things get built and what the worldviews inherent in them are and what the inherent worldviews are in the people who build them. It almost feels to me that Wall Street in the 80s was sort of this vain, almost pagan, the strong and

• 1:12:15Speaker 02

  the beautiful are what's most important. There's a hedonistic aspect to it. There's an openness that it's a little bit nihilist because it's all just about getting money. There's not the same notion. And I think at the crux of that is that technology views itself as totally self-righteous, which is that the thing that they are building, it's not nakedly sin-driven or driven out of greed or ambition. It's driven out of this nominally altruistic idea of no, we're building this thing, this product that the whole world uses. It's positive sum, which is true on the surface, but I do think that it's almost pathological to the point where there's no recognition, all the other factors. It's almost sort of shadow-esque. And there's none of this notion of like, wow, if you work in finance, you sort of need to translate the gains from finance into something worthy, into art,

• 1:12:59Speaker 02

  into architecture, into philanthropy, into just culture in general, or into the place that you live. None of that exists because I think tech views itself as the ultimate philanthropy is the business that you're building. I don't think Silicon Valley today has the same sort of reflexive need to justify or document, or even launder what they're doing through going to book parties and arts and all this stuff. And I think it's like this interesting difference. And I wish that more people would try and document this stuff because it's all there. All the crazy, all the sex, drugs and rock and roll is there in its own nerdy autistic way. Again, I think culture is just like vastly underrated and

• 1:13:40Speaker 02

  religious beliefs, whether literally religious or pseudo-religious, but filling that void.

• 1:13:45Patrick O'Shaughnessy?

  As always, when we talk, I wish we had three more hours. Thanks for doing this to me again. Thanks for your time.

• 1:13:50Speaker 02

  Thanks for having me.

• 1:13:53Patrick O'Shaughnessy?

  If you enjoyed this episode, visit colossus.com. You'll find every episode of this podcast complete with hand-edited transcripts. You can also subscribe to Colossus, our quarterly print, digital and private audio publication, featuring in-depth profiles of the founders, investors and companies that we admire most. Learn more at colossus.com/subscribe.

• 1:14:32Patrick O'Shaughnessy?

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