The Venture Capitalist Who Can't Lose — With Zach Coelius

Zach Coelius is the managing partner of Coelius Capital. He's participating in an unprecedented moment where venture capitalists like him simply can't lose. There's so much money flooding the private markets that, as he put it, "any idiot with a checkbook looks like a genius right now." Coelius joins Big Technology Podcast to discuss why this is happening, where it will lead, and who gets hurt when the party ends. Stay tuned for the third segment where we read his tweets and mostly talk about San Francisco's many challenges. Learn more about your ad choices. Visit megaphone.fm/adchoices

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

• 0:00Alex Kantrowitz?

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• 0:43Alex Kantrowitz?

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• 1:17Alex Kantrowitz?

  Hello and welcome to the Big Technology Podcast, a show for cool-headed nuanced conversation of the tech world and beyond. All right, today, we're going to talk about a lot of things. But most importantly, we're going to talk about the red-hot market for investors right now. There is a sense among almost every investor that I speak with today that they just can't lose. And it tells us a lot about where the market is right now, whether that's healthy and what we might anticipate down the road as some of the bills come due. Joining us to speak with us about it today is Zach Kolias. Okay, he's one of my favorite people, period, in the tech world. I want to tell you why.

• 1:58Alex Kantrowitz?

  First of all, he's a managing partner at Kolias Capital, which is his own VC firm. But in my discussions with Zach, I've always found him to be straightforward, honest, and someone that doesn't pull any punches, which makes him the perfect podcast guest. Zach, welcome to the show.

• 2:14Speaker 01

  Yeah, this you told me this was going to be like a normal conversation and you said this is going to be like calm in the intro. Did you say it's calm?

• 2:24Alex Kantrowitz?

  Yeah, they're cool headed nuanced conversations.

• 2:27Speaker 01

  Yeah, I don't know if I'm always so calm, but

• 2:29Alex Kantrowitz?

  Well, you know, but this is good, though. We're gonna in the third segment, we're gonna read some of your tweets. And so, you know, I think that that the purpose of this is that we can sort of take some of your more fiery statements and unpack them a little bit and and add some nuance that is tough to add on.

• 2:46Speaker 01

  Yeah, that's true.

• 2:46Alex Kantrowitz?

  On Twitter. But honestly, like, we welcome the drama and conflict. So

• 2:51Speaker 01

  Yeah.

• 2:52Alex Kantrowitz?

  I promise I won't yell at you. But if you want to yell at me or throw some fireballs out there, I welcome them.

• 2:57Speaker 01

  All right. Well, good. I'm excited. It's good to see you guys. This is always

• 3:01Alex Kantrowitz?

  You too.

• 3:02Speaker 01

  Always fun to catch up.

• 3:03Alex Kantrowitz?

  Yeah, definitely. Likewise. So first of all, Zach, I think I'm going to title this episode, The Investor Who Can't Lose. And you know, it's a little bit cheeky, but I also think it's sort of is emblematic of everything that I'm hearing from investors today. So just for context for the listeners, you and I took a walk right before the pandemic set in in about January, February 2020 in San Francisco, on the top of Salesforce Park. And you had been making your transition from entrepreneur to venture capitalist. And you told me that you hadn't had a single company that you invested in lose. All of your investments marked up. Then we met again. The reason why we wanted to do this right

• 3:46Alex Kantrowitz?

  away was you and I met again last week at Web Summit in Lisbon. And I said, Zach, what's going on with all those companies? Are they? Are they all still up? And they're up even more so. So this is a great lead into what's going on right now, especially in the VC market, the private markets, where the entire system is kind of bananas. I mean, you should be losing in some of your bets. So so what's going on right now?

• 4:16Speaker 01

  Don't jinx me. Don't jinx me.

• 4:18Alex Kantrowitz?

  Well, look, that there might be like when people unsubscribe from the newsletter, I'm happy about it because it means like, okay, like it's getting into inboxes. And I know it's a little different. But like, don't you want to lose with some companies? Because otherwise, it means there's something fundamentally unhinged with the way things are going. I mean, I know you're going to pick well, but you can't pick that well, right?

• 4:40Speaker 01

  Well, first of all, we did have one company go bankrupt. So we've got, we've got about 60 in the portfolio right now and we had one go bankrupt.

• 4:50Alex Kantrowitz?

  It's a pretty good batting average.

• 4:51Speaker 01

  Yeah, yeah.

• 4:51Alex Kantrowitz?

  Fifty-nine out of sixty isn't bad, especially.

• 4:53Speaker 01

  Yeah, I like to say any idiot with a checkbook looks like a genius right now, including me. So I, I think it has a lot less to do with my individual sort of capability and talent.

• 5:08Speaker 01

  And just the general market. It's, it's just, we, what's the best way to articulate this?

• 5:18Speaker 01

  So for the last, call it 20 years in tech, since the bubble, the tech, the dot com bubble collapsed, you, you've had sort of these cyclical shifts of sort of, you know, new platform comes out, huge growth, and then something causes it to go down for a little while. A couple of times, so you had it after the 2000 crash and then you had it slightly after 2008. But, but generally it's just done nothing but go up. You know, the, the entire market in aggregate has just been growing like crazy. And in my opinion, and according to anyone who I think is at all rational, it has a long way to go.

• 6:01Speaker 01

  So if you look at e-commerce penetration, it's still sub 20% of the, the, the US retail market. That doesn't make any sense, like, you know, that, that will be double or triple what that is in the next decade. If you look at entertainment, you know, linear television is still a thing, which is idiotic, but it's still a thing. If you look at, you know, transportation, we still have people driving around in cars, crashing into each other and killing 40,000 people a year in the US, even though, you know, cruise just is starting to drive around with cars without any drivers. So we've got all of these big growth vectors that are clearly going to continue to grow in technology. And as a result of that.

• 6:43Speaker 01

  You know, the market is finally waking up to the fact that technology is not, you know, dot com bubble bullshit. It's not all this sort of hype that everyone loves to point fingers at. Technology is real and it's changing the world around us in dramatic ways. And the thing is, is that when you look at the growth of any industry, when it's growing as fast as this industry is growing, it means that a shit ton of capital has, it has to move into this market. And as a result, it's just when you're, when you sit at the very bottom, like I do as a seed investor, it just means just a fire hose of money is getting directed at, at my companies and every other company out there. And so it's, it really is hard to lose right now because there's just so much money coming

• 7:27Speaker 01

  into the market as a result of all that growth and of all the predicted growth that, that, you know, a lot of us are, are pretty confident it's going to continue to come for the next couple of decades.

• 7:36Alex Kantrowitz?

  So I want to pause and, and put a pin in something that you said, which is that when there's a market for tech that's growing and people are starting to see that tech is actually going to be a big part of the economy, there are all these other funds that have to come in and invest in it as well. So it, so just describe the flood of money and why that is exactly. So if I have it right, it's because there are all these investment firms that don't want to miss on the tech boom. And so have they just dedicated an inordinate amount of money to tech investments that's caused a, a environment where if you're investing in seed companies, it doesn't matter how bad your companies are, there's, they're going to get an A round or a B round, like

• 8:19Alex Kantrowitz?

  the first couple of follow-on venture rounds to keep them going?

• 8:23Speaker 01

  Well, just think about it as a function of growth. So you've got the tech market in the status quo comprises X trillions of dollars, whatever that number is. And in order to, to build that market cap, it requires in the beginning, the investment of, call it a third of that. So let's say, let's just, I don't, I don't, I don't play in these big macro numbers all that much. So like, I don't know off the top of my head, but let's call the, let's call the total US tech market $30 trillion in market cap. I don't know if that's right or not, but let's just guess at it. It's probably not right. But, and let's just say it took $10 trillion in order to, to, to derive that. So we invested $10 trillion and we got $30 trillion of outcome.

• 9:06Speaker 01

  And so we have a whole bunch of participants in the VC and sort of tech investor ecosystem that have from the very beginning, all the way up until the IPOs and then once the companies are public, that are deploying that $10 trillion in order to achieve that, that, that, that outcome. And that's what we've been doing for the last, you know, 20 years in tech investing is we've been, we've been deploying capital and building companies. Now let's grow at the rate that tech is growing and let's say that it's going to triple in the next 10 years. That's reasonable. I don't know what the macro guys think is reasonable, but I'm going to call that triple. So now we've gone from $30 trillion to $90 trillion and we've gone from $10 trillion of deployed capital to $30 trillion of deployed capital.

• 9:50Alex Kantrowitz?

  And deployed capital just means money that VCs have invested.

• 9:54Speaker 01

  Yeah, money that VCs and investors have invested in order to achieve that growth. The problem is, is when you make those giant leaps of capital that have to be deployed, that means the existing capital deployers, the VC funds, or the investors like me, or the later stage folks, they have to grow their books, they have to grow their check size, they have to grow their team, they have to grow. And new entrants have to enter the market because it just, in order to move that much capital, it's, it's, it's just like shoveling coal. It's like, it's, we're signing papers and we're doing Zoom calls and we're, we're going to conferences is our, you know, our version of a shovel, but at the end of the day, it's still a process and it still has a whole bunch of time and energy and labor disregarding

• 10:39Speaker 01

  the process. And so you've got all these new entrants that have to enter the market in order for the market to grow. And that's what we're seeing right now. So that's like a very like sort of esoteric, sort of crazy, like vague answer. Here's the real answer.

• 10:54Alex Kantrowitz?

  Yeah, let's get to the real answer with less jargon.

• 10:57Speaker 01

  Everybody in VC has been making so much fucking money for the last two decades that like all the wannabes who play on Wall Street are rushing to join our party. Like for instance, my fund, we've been running 50% IRRs for like six years.

• 11:09Alex Kantrowitz?

  Wait, hold on, we gotta de-jargon some of this stuff.

• 11:11Speaker 01

  Okay. So IRR means 50% internal rate of return for the last six years straight. So every year it goes up by 50% for my investors. So let's say they invested, we invested a million dollars on day one. The next year it's worth 1.5. The next year it's worth 2.25. The next year it's worth over $3 million. So three years later, we've already almost tripled effectively our money. That's crazy. Like anywhere that I can get that kind of return, I would be an idiot not to put my money into that. And so what's happening is, is that all these Wall Street folks are like, ooh, that looks good. I want some of that. And, and every outside investor, every sovereign wealth fund, every, everyone who's got money is like, ooh, I want some of that.

• 11:57Speaker 01

  And they're rushing to join the VC party. And as a result, a couple of things are happening. One, every company is getting funded. Two, all of the VC funds look really smart because these new entrants are pricing up all the assets that we've already invested in. And three, we're laying the groundwork for what will surely be the next downturn in the sort of normal cyclical process of, you know, technology financing and development.

• 12:26Alex Kantrowitz?

  Right. And so let me just put my like layman's hat on it. It seems like when so much money comes into the market, there's inevitably going to be bets, big bets on lots of companies that don't work out. Does that freak you out a little bit? Or like, what are you, so you're in the thick of it. You know, you see these companies' numbers. Do you think that this move to invest so heavily in tech companies is healthy? And what is the downside going to be? Because I imagine there has to be some.

• 12:54Speaker 01

  Yeah, there's going to be huge downsides. Yeah, it's, at the end of the day, it's kind of like taking steroids. It means that you're going to be able to run faster and jump higher, but some of your athletes are going to die from heart failure. And you're going to have a bunch of long-term sort of consequences as a result of, you know, your muscle getting too big, too fast in bad ways. And it's, there's going to be deleterious effects. So. Yeah, there's, I mean, if you think about it.

• 13:26Alex Kantrowitz?

  What does that look like in practice? Yeah, go ahead.

• 13:28Speaker 01

  In practice, it means you have really young companies that don't yet have their business model worked out yet. They don't yet have their team worked out yet. They don't yet really know what they're doing, who suddenly have access to tens or hundreds of millions of dollars. And they're going to fire hose that money into doing stupid shit and burn it. Cause like whenever you give a company money, they burn it. That's what they do. And, and if they're lucky, when they have to come back to the trough, the free money market will still be there. And they'll be able to get even more money at a higher valuation. And if they're unlucky, when they come back in two or three years, it's going to be too late because the Fed had to jack interest rates in order to deal with inflation and the multiples in the public markets came down as a result.

• 14:12Speaker 01

  And suddenly the well is dry and then they're going to die. And so then their companies are going to go bankrupt or they're going to be consolidated or something bad will happen that nobody enjoys a down round or whatever, and it's going to be ugly and messy. You know, so as a practitioner in that market, it's, you know, that's my job. And so my job is to be able to be here when the tourists are overpricing all the garbage and pick out what's the good stuff and avoid the overpriced stuff. And my job is to be here when the market does a downturn. I'm the, whenever a company is about to go bankrupt, I'm usually the first person they call. And I get to hold the hand of the CEO as we navigate through that process. And, you know, when they need to deal with the down round, I'm there. So at the end of the day, I, I get paid for that.

• 14:56Speaker 01

  That's my job, but it's going to be painful. It's going to happen. It's just a question of when and how.

• 15:02Alex Kantrowitz?

  Yeah, so I want to get to ugly and messy, but I, I think that it's important to illustrate what, what this looks like on the ground for you. So I imagine rounds for startups. So people have this idea of startups, you know, pitching all these VCs and struggling to get funding. My understanding right now is that rounds are just getting put together like, you know, pretty quickly. And then startups are just going with, with the money they have. I think you've mentioned this in the past, are just going pedal to the metal. So talk about what it looks like on the ground.

• 15:32Speaker 01

  Well, so let's just talk about like a normal financing right now.

• 15:35Alex Kantrowitz?

  Yeah.

• 15:37Speaker 01

  There's so much FOMO amongst every investor in the market. That if you see something that's good, you have to move very, very rapidly. You're like, in the old days, it would not be unusual for a seed round to take, you know, a few weeks to put together and due diligence and sort of figure out is this company good? And maybe talk to some experts in the market and like, you know, really kind of like turn over all the stones and do a lot of references. Now it's not unusual for me to talk to a company and somebody to offer them a term sheet within a few hours. And so that means for me, you know, I have to have a much tighter filter.

• 16:21Speaker 01

  I can't like, when I see a deal that, you know, a couple of years ago was super interesting, but I don't really know very much about. I'll give an example. A couple of years ago, I was introduced to a company that built this new technology for preventing fires. And so the way it works is it was a, it's a spray on cellulose product. And you spray it on the grasses and timber and anywhere like underneath power lines or next to roads or outside of houses. And it was a fire retardant, but it sprayed on and dried like paint. So it stayed there for like six months. So you could spray it underneath your power lines. And then if a spark fell from the power lines, it would just hit this cellulose product, which would basically retard the fire. The fire wouldn't spread. And I, so I saw this company and I was like, oh my God, I don't know anything about chemistry.

• 17:05Speaker 01

  I don't know anything about like how they do this, but this is cool. I really like this and I want to learn about this. So I reached out to my syndicate members on Angel List and I was like, who knows about fires? And so like a couple dozen people raised their hand and together we basically did a lot of work over like almost a month to really dig in on this problem and learn about it, learn about the market and learn about the monopoly that FastCheck, which is the existing sort of player in the market has and like, and then I got it by the end of that process, I was able to get to the point of actually writing a term sheet. If that deal came to me-

• 17:37Alex Kantrowitz?

  And the term sheet is the investment, basically saying we'll invest in you.

• 17:40Speaker 01

  A term sheet is me saying I'm willing to commit X millions of dollars at this price to buy, call it 15% of your company, and here are the terms of that investment. And then if I sign it, and then if they sign it, then we will-

• 17:56Alex Kantrowitz?

  The investment goes through.

• 17:57Speaker 01

  The investment goes through, I'll own a piece of their company, and together we will be alone for the ride. Now unfortunately for me, another company showed up and made an offer that was four times higher and bought the company. So I lost out, but at the end of the day, that's really cool, right? That's the sort of investment that I get excited about because it's a complicated problem, it's a big problem, it's an interesting space, and I get to learn new things. So now, fast forward to today. If that company showed up, I wouldn't be able to do that. Because tomorrow, someone would write them a term sheet, and the person who wrote them that term sheet may or may not know anything about any of those things. They could just be just looking to get involved in anything they can possibly grab onto. And that happens a lot.

• 18:39Speaker 01

  And so what you're seeing is that these sort of like, everybody is pushing against the sort of front end of the market, and it's leading to really fast investments, and some of them will be really bad. You know, 99% of the deals that I see are total garbage and are gonna go bankrupt within a couple of years, but a lot of them are getting funded, and that's okay. But it's going to create a lot of garbage that's funded. And at the end of the day, in a normal, that's normal, right? We've been running these crazy IRRs for the last five years, and like, what is gonna cause that to come down? Well, a whole bunch of market sloshing into the market, jacking up prices, shortening lead times, you can't do as much diligence, so you end up with higher failure rates,

• 19:24Speaker 01

  and forcing the market to return to a normal equilibrium, which is a much lower performance. That's a normal economic process, and that's kind of what we're going through right now.

• 19:35Alex Kantrowitz?

  Right, and there are a couple of whales in this. System, call it. So from my understanding, Fidelity is a big player. Tiger Global, I'd like to hear your thoughts on them.

• 19:47Speaker 01

  Yeah, sure.

• 19:48Alex Kantrowitz?

  South Bank. So what happens? So from my understanding, these are massive investment operations that just are plowing billions and billions of dollars into the market and sending the whole thing irrational. So how do they play into this?

• 20:03Speaker 01

  Irrational is a tricky word. No, it is a tricky word because it's a binary word, which implies that it's true. And the proper answer is, we don't know. Because if you think about it, you know, when, you know, only a few years ago, I invested in this company called Cruise Automation. So they build self-driving cars and we, GM bought them for a billion dollars. And we were all high-fiving. We were so excited. We were like, we had a billion-dollar outcome. Yay, us. We are so happy. And fast forward a few years later, that company is worth over $50 billion right now and maybe more. It's hard to know.

• 20:42Speaker 01

  And the companies that are going public right now are going public for 10, 20, 30, 40, 50, 100 billion dollars. So the total outcomes in the venture ecosystem have grown as you would expect. If the market is growing, the outcomes are going to grow and they've gotten really, really, really big, really big. And it looks like, if you believe the sort of long-term tech trend that I laid out at the beginning, that like, we've got another couple of decades of tech grabbing more and more of the market. The outcomes will be even bigger 10, 20 years from now. And when you invest in technology companies, especially early-stage private technology companies, you are betting today that the company is going to work. And that in 10 years, the market's going to have a certain price on those assets.

• 21:26Speaker 01

  And those prices, if we believe that they're going to grow as much as they could grow, then the tigers of the world are not being irrational at all. They're being the most rational actors. They're coming in saying,

• 21:38Alex Kantrowitz?

  We gotta explain, yeah, can we explain what Tiger, so what is Tiger?

• 21:41Speaker 01

  Okay.

• 21:41Alex Kantrowitz?

  And how do they change everything?

• 21:44Speaker 01

  So Chase, the founder of Tiger, he's Tiger is basically what's called a Tiger Cub. So he came out of a hedge fund that was run by a guy named Julian Robertson. And it was Tiger, that was the name of the fund. It was an early-stage hedge fund and he's, he's famous, famous, famous, famous hedge fund investor. Made billions and billions of dollars, really, really good. But one thing he's super famous for is he has all these really young kids who he brought in and trained and then set up in their own shops. And they went out and basically became very successful hedge funds themselves. They're called the Tiger Cubs. And one of those is called Tiger Global, which is the fund that Chase started. And they were originally a technology-focused sort of hedge fund.

• 22:29Speaker 01

  And not too many years ago, they basically started saying, hey, all these private companies are really interesting. Let's go invest in those private companies as opposed to just playing in the public markets. And so they basically started to go out and invest in these early-stage private companies. And they did really, really well. They made, they made it like, the guy who ran that was a guy named Lee Fixel. He now runs his own fund called Edition, super, super smart guy. He, he literally became famous as one of the best investors of all time. Just like one great bet after another. And just, he brought a sort of a hedge fund-type discipline into the private markets that enabled him to really differentiate outcomes, and they did very well.

• 23:14Speaker 01

  So Tiger, not many years ago, said, hold on a second. All these VCs are getting fat and happy and they're going really slow. Like generally VCs historically have been very slow to get things done. And they're, they're demanding that these companies give up a lot of things. Give up board seats and give up control. What if we went in there and made the process as simple as a public market investment, as fast as a public market investment, and did it really, really, really aggressively? Could we go grab market share from these late-stage VC firms? And so they did that and they're just crushing the market right now. I mean, they are literally and the thing is that VCs historically

• 23:54Alex Kantrowitz?

  With big checks.

• 23:55Speaker 01

  What's that?

• 23:56Alex Kantrowitz?

  They bring big, big checks.

• 23:58Speaker 01

  Yeah, Tiger, Tiger is writing fifty, hundred, two hundred plus million dollar checks. So late stage, pre-IPO. Well, they come all the way down to like a series B, but that, but, but once the company is established and growing and has a lot of revenue and is really starting to move and looks like you can basically chart the path to eventually becoming an IPO. That's where Tiger is coming down to play. And the VCs historically have been, like I said, kind of slow and kind of lazy and they're kind of an old boys' club. And Tiger came in and said, we're going to go faster. We're going to basically give really clean terms. And the entrepreneurs are like, me, me, me, me, me, I'll take that. And they've been able to grab just a tremendous amount of market share

• 24:38Speaker 01

  from sort of the traditional historical sort of later stage VCs. And, and then as they did that, a whole bunch of other hedge funds are called crossover funds, did the same thing. They're like, oh, we'll do that too. Which is where the Fidelities of the world, D1, Dragon Ear, um, Edition does it. There's a whole bunch of these sort of crossover funds that play both in the public markets and in the private markets that are coming in and aggressively trying to grab market share in the late-stage VC fund market.

• 25:09Alex Kantrowitz?

  And so that of course makes things even more frothy than they were before.

• 25:13Speaker 01

  Yeah, exactly. Cause they're, they're, they literally will write a term sheet in 24 hours. I mean, they will, they will look at the company, look at the financials and say, here's a term sheet. And that causes everybody to have to go faster because in this game, you either get the investment or you get nothing. And so the winner's curse, the traditional winner's curse in an auction is the, the person who bids the highest price oftentimes overbids and ends up basically potentially losing. And so when you have an auction type ecosystem around these sort of financings, and there's only one winner, then it creates the potential for huge amounts of FOMO. And FOMO always creates a huge amount of inefficiency and loss and potentially, you know,

• 25:55Speaker 01

  the market downturn that will eventually happen in the next, we'll call it, I don't know how many months, years, whatever. At some point, there will be a market downturn and the, the water will go out and we'll see who's naked and who's not.

• 26:09Alex Kantrowitz?

  Zach Koleas is with us here on Big Technology Podcast. We're talking about the frothy private stage of investment and where it's going to go. And we mentioned ugly and messy, so I want to get back to ugly and messy and what that's going to look like when we come back after the break. And then we'll also talk about how crypto fits in with all this. So stick around for just a couple of minutes. We'll be back here on the Big Technology Podcast. This episode is brought to you by AVPoint. Everyone's racing to roll out AI right now. Co-pilots, chatbots, agents doing real work. But here's the part nobody loves talking about. All that AI runs on your data and most teams have no single way to see it, secure it, and prove it's under control.

• 26:52Alex Kantrowitz?

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• 27:35Alex Kantrowitz?

  And we're back for another segment of the Big Technology Podcast with Zach Koleas. He is managing partner, Koleas Capital, named after him. So you can tell the guy's doing well in this space. So, and so I guess so is everyone, if we were to believe in that, what we heard in the beginning. So let's talk quickly about ugly and messy. How does this get ugly and messy, Zach? You know, you've mentioned the inevitable market downturn. I would imagine if we have all these companies, some of them whose fundamentals are weak, getting so much money that eventually there's going to come a point in time where that dries up and a lot of companies might crumble. Maybe I'm wrong. So what is that point in time?

• 28:20Alex Kantrowitz?

  And if there is one? And then what happens if there is a drawback in investment?

• 28:26Speaker 01

  Yeah, so I mean, if you look at any stock on the public stock market, you can watch over time, the stock goes up, stock maybe goes down, stock goes up. And it really depends on sort of what the market thinks about the potential of that company. Some companies go to the moon, some companies go to zero, everything in between. The private market is very different from that in that we don't trade every day. We trade at one moment and then we wait a couple of years and then we trade again. So, or maybe we wait a couple of months. These days, things are happening very rapidly, but, but we basically, you don't get that day to day movement of the stock of the company. You get sort of a moment and then another moment.

• 29:07Speaker 01

  And so when the companies are doing really well, let's say I invested a $10 million valuation. Great. And the company grows 300%, not unusual for an early stage company. The next investor might come in and be like, okay, I want to pay, I'll pay $100 million for that same share of stock or same, same, same equity. So they're $100 million valuation for the company. Everybody's happy. But let's say the company gets screwed over by Apple and their business goes south. So instead of growing at 300%, they shrink, they get 50% bigger in revenue. Well, now the next investor comes along and they say, oh, that company is not worth $100 million. Company is shrinking.

• 29:51Speaker 01

  It's not even worth, it's worth $5 million. And so now this is where the messiness comes in because unfortunately, unlike the public markets where basically people can buy and sell every day, in the private markets, when someone comes in and changes the valuation, the valuation is down, that's what we call it down round. The existing investors and the employees and the leadership of the company and the new investors have to negotiate how to basically share the equity in that, that company going forward. And it's not just sort of a market movement of buying and selling. It's literally a yelling and screaming, threatening to quit.

• 30:32Speaker 01

  Threatening lawsuits type experience when that down round occurs. And that's super messy, as you can imagine. And it can become very, very time consuming. And so investors don't like doing it. It's a if you're coming in as a new investor and you want, you want to basically look at this new asset. But you're like, oh, it's not worth as much as you guys think it is. That's going to be time consuming. And unlike the go go days where all we do is write checks and then watch our net worth go up. This becomes the opposite. And so either your existing companies or your new investments become incredibly time consuming and painful. And emotional, very emotional. And so what ends up happening in a lot of instances is the companies don't even get funded at all. They just go bankrupt.

• 31:16Speaker 01

  And so you, you see a very normal process when, when the valuations start coming down. When the market pulls back of a whole bunch of bankruptcies and a whole bunch of companies shut down. And now we haven't had one of those in quite some time, but it will happen again and it'll be messy.

• 31:34Alex Kantrowitz?

  What's going to cause it?

• 31:36Speaker 01

  I mean, no one knows, right? If I knew, I would just go trade that.

• 31:40Speaker 01

  I mean,

• 31:41Alex Kantrowitz?

  Okay, but you've hinted at some stuff over the course of the conversation. You said maybe the Fed raises rates, so.

• 31:47Speaker 01

  Sure.

• 31:47Alex Kantrowitz?

  Or it can't, yeah.

• 31:48Speaker 01

  Well, here's, here's things that could cause it.

• 31:51Alex Kantrowitz?

  Yeah, yeah, let's do that.

• 31:52Speaker 01

  So the Fed could raise rates. Um, this Evergrande Chinese, uh, real estate bubble, I think is a very real thing.

• 32:00Alex Kantrowitz?

  Yeah. And one of the tweets we're going to read in the third part, so.

• 32:04Speaker 01

  Well, yeah, that I think that could be, to be very, very consequential. And yeah, I'm, I'm, I, I look at that like, you know, it could be a Lehman moment for, for the world's economy. Um, because as far as I'm concerned, the Chinese economy has clearly been propped up for quite some time by their, their real estate investments. And when that reverts, which they always do, it could get messy. Um, you know, we could have, uh, some sort of terrorist attack. Uh, we could have war, you know, the Chi, if the Chinese basically continue to go in the direction they're going. You could imagine them wanting to basically create a distraction and create a war. Um, maybe, I mean, God, there's so many ways.

• 32:45Alex Kantrowitz?

  Yeah.

• 32:45Speaker 01

  Who knows how it goes down, but it will go down at some point, some way.

• 32:49Alex Kantrowitz?

  Yeah, it's so wild to think about because you would imagine that, uh, terrible pandemic that kills millions of people would be on the list. But we've been through that and things.

• 32:58Speaker 01

  Actually, no, that I think that's the wrong way to think about it. The pandemic isn't actually

• 33:05Speaker 01

  what the real risk was. It was the lack of the Fed's response. Imagine instead of having Chairman Powell, instead we had some old conservative foggy white guy who was like, no, I'm not gonna, I'm not gonna print money because that will cause inflation. We just need to, we need to let everything liquidate. Like they had under, I think it was Harding. Was it Wilson? I think it was Wilson. I think the, the, the head of the, the, the bank, the, the basically the treasury. I think it was the Treasury Secretary, Wilson was like, ah, just liquidate. Force everything to liquidate. It's good for the economy. So imagine we had that sort of head of the Fed, they wouldn't have printed all the money that they printed.

• 33:47Speaker 01

  And we would have gone through a incredibly nasty recession during this last two years. But instead they printed a bunch of money and look how rich we all are. We'll see how it all works out.

• 33:58Alex Kantrowitz?

  Do you think that?

• 34:01Alex Kantrowitz?

  Do you think that the system we're living in now is better for innovation? Than a system where all these companies would be growing sustainably at rounds that were priced reasonably?

• 34:15Speaker 01

  But so both of those words sustainably and reasonably are, I disagree with those words because they, they imply that there is a right answer. And the short answer is, I don't know. I, I think

• 34:31Speaker 01

  I, I think at the end of the day,

• 34:34Speaker 01

  technology is a process of, it's kind of like, have you ever seen the movie There Would Be Blood?

• 34:39Alex Kantrowitz?

  Yeah.

• 34:40Speaker 01

  Okay, so in the movie, you can kind of break the, the movie into three parts. In the beginning, you have the sort of the prospecting, which is like you wander around with a pickaxe on your shoulder and a backpack on your back. And you try to find oil. And with startups, it's kind of in the beginning, it's a small team of people who are trying to figure out how to build something really cool that the world wants. So Travis and Garrett are like, oh, what if we made it so you could push a button on your phone and you'd get a car? And it changed the world, right? That little idea was them prospecting. They were just like, yeah, let's try some things and let's build it. Let's see what happens. And so in, in the oil analogy, you wander around, you find some oil and then poof, you gotta gush. So they found Uber. You gotta gusher. Everybody wants it. Everybody wants to push a button and get a car because that would be awesome. Because it is. Then you gotta build a company.

• 35:24Speaker 01

  And building a company is really, really hard. Because you've got effectively in the beginning, before you find that oil, you revenue, traction, customers, super duper hard. Everything else is easy because there's really nothing there. Suddenly revenue and traction, really easy. Business starts growing really fast. And now you gotta build the oil derricks. You gotta build the pipelines. You gotta build the manufacturing, the refineries. You gotta like, you got like, you gotta go from five people to 5,000 people. As we saw at Uber, that was incredibly hard. Lots of bad things happened because they were growing as fast as they were growing. Bad people got hired who did bad things. It's a really hard thing to do to build a company as fast as these technology companies are built.

• 36:07Speaker 01

  And then, once you get really big, the world comes after you. The government comes after you. All the advocates come after you. The journalists come after you. The whole world comes after you. It's like, let's burn this thing down. And so then you have to basically protect it. So I mean, there will be blood. Once you got the oil, then everyone wanted to come steal it from them. And so it's, it's a really interesting process when you think about that in terms of building technology companies. Because if you say to me, more money to go fund more people to come up with more great ideas like Uber, that's awesome, right? Because the more people who come up with great ideas, they're going to cure cancer. They're going to create fusion that works. They're going to invent cars that drive themselves, that save people from being killed by careless drivers, idiot drivers. Like, there's a long list of things that we can solve with technology.

• 36:51Speaker 01

  So that money, super duper good. But let's just say we take the money instead, we build more bigger, taller oil derricks on existing, you know, finds that we already have. Is that better for the world? Eh, I don't know. Maybe, maybe not. Probably not. Like, it's good to scale them, but it's not necessarily good to overscale them. And so what you're seeing now is there's certainly a lot of companies that are getting over scaled. They're, they're doing stuff that they don't need to do. And then the third thing, the third stage is let's say we, let's say we take that money and we use it to go just try to steal market share from other people. You know, not necessarily adding to value, but you know, makes investors rich. Is that good for the world? Yeah, probably not.

• 37:32Speaker 01

  Um, and so the, the answer is, is it's super complicated. And like, if we fund more people to go find cool ideas and to save the world, we're good. But when we do that, we will, as a result, fund more of the building of the, of the stuff that we don't maybe need. And we will end up funding more people who are just there to steal market share from other people. And so the end net is really hard for me to, to say what's best, but I generally am like a techno optimist. More tech, more money we put in, the more people will discover cures to cancer, back RNA vaccines, drive with cars, stuff.

• 38:08Alex Kantrowitz?

  Yeah, we were just at, at Web Summit in Lisbon and I will say that I saw a, a shocking amount of health and biotech companies that are working towards curing diseases and, uh, you know, better diagnostics that we definitely need. So that's good.

• 38:21Speaker 01

  I mean, Moderna, yeah, and this RNA stuff is purely based on investments in technology and

• 38:27Alex Kantrowitz?

  Yeah.

• 38:27Speaker 01

  I mean, if we didn't have that, we would be in a really rough place right now. We wouldn't have gone to Web Summit, that's for sure.

• 38:32Alex Kantrowitz?

  I agree. Yeah. Thanks. Thank goodness for those vaccines to be able to go to that event with so many thousands of people and come back and not catch COVID was, I think, a small miracle. Big miracle, maybe. Oh, I tested negative already. You had to test to get back also.

• 38:46Speaker 01

  I know.

• 38:48Alex Kantrowitz?

  Yeah, we're good. Uh, but, but I do need to fight with you a little bit on this because the word reasonable is a reasonable word to use here. Let me, let me make my case, make my case. Okay. If, if all these companies, if all these funders are putting all this money into the tech world where you can't lose, where you've marked up 59 of 60 investments. So A, like, there's no reasonable world where all those companies are going to be worth the amount of money they are. And then B, um, don't you put unrealistic expectations of growth on founders that are taking that much money? I mean, you just mentioned that Uber, like the rush to scale was part of the problem for them.

• 39:30Speaker 01

  Yeah.

• 39:31Alex Kantrowitz?

  There's a whole list of other companies. Take a look at Zenefits, for instance, for instance, they had to cut some corners. So isn't reasonable, reasonable?

• 39:40Speaker 01

  I the the complaint I have with the word reasonable is the people who like to use that word very rarely are the people that are in the middle of the maelstrom. They're they're because once you get in the middle of the maelstrom, you realize that it's just truly crazy. So like take Uber, for instance, everyone's really mad about Uber. And how what happened with Uber and the companies sort of like all the all the issues. But like, you know, if you were inside there watching what was happening, a lot of that growth was driven not as much by the desire to like shove something down people's throats. But instead, by the desire of people like me, when I showed up in a city and it didn't have Uber,

• 40:26Speaker 01

  I emailed Travis. I was like, Travis, where the hell is Uber? Why is it not in the city? And they're like, because Uber changes people's lives. There are people who literally aren't able to get to their jobs because there's no bus that runs in front of their house. Who now can basically push a button and get in an Uber, an Uber share. And for like a couple bucks, get to their job. There's people who can their people's lives are better as a result of Uber. And the taxi monopoly that constrained the movement of people is was, I think, effectively evil. Much, much more evil than than than what some of the things that Uber did.

• 41:01Speaker 01

  And so I think you can like you could there's there's it's like life is a duality. There's a yin and yang to all things. And like, yes, there is reasonable in the world. But reasonable in and of itself is just incredibly difficult to ascertain. What is exactly reasonable in this moment? Because there is this growth that we need to fund. And on the other hand, there is this unreasonable wasting of money that we don't want to fund. But how do we disentangle those things is very difficult.

• 41:27Alex Kantrowitz?

  Okay, good point. Look, I think you and I have have different perspectives on this.

• 41:32Speaker 01

  Of course.

• 41:32Alex Kantrowitz?

  But you know, there there we go. We had a fight, but

• 41:36Speaker 01

  Ah, it's boring. Come on.

• 41:37Alex Kantrowitz?

  We didn't yell.

• 41:38Speaker 01

  So I've called you a fucking idiot. Like, we haven't had any fun.

• 41:41Alex Kantrowitz?

  Oh, just wait till we start talking about San Francisco.

• 41:45Alex Kantrowitz?

  We'll do that. We'll do that next.

• 41:47Speaker 01

  I'm ranting about this shithole.

• 41:49Alex Kantrowitz?

  Quickly, crypto, are you invested in crypto? And do you think what's happening there is reasonable?

• 41:56Speaker 01

  Yeah, so I'm a infamous idiot crypto bear. All of my crypto friends who've made, you know, billions think I'm an idiot. And I, considering that I didn't make billions on crypto, I'm an idiot too. But yeah, no, I looked at Bitcoin as like 50 cents. And I was like, there's nothing here. They're like, there's like, I just, there's just like, this is not going to work. And so now, a thousand, a hundred thousand X later, I'm like, yeah, I'm an idiot. I should have just, you know, done what my richer friends, smarter friends did and buy a bunch of crypto then. But no, the core bear case that I, that I have continued to enunciate is kind of comes in three parts.

• 42:38Speaker 01

  One, there's still no use cases other than money laundering and dealing drugs and software, and that's software, software hacking, ransoms. There's nobody who's using crypto at any scale, significant scale, that, that I've seen yet. Like, people can point all they want at like, you know, NFTs and, oh, they use it in Venezuela. And, but like, it's still like the actual utilization of crypto, for the intentional purpose of crypto, continues to not exist. And so 10 years after, basically, more than 10 years after it was invented, the fact that it's still not there yet, to me is indicative of something highly problematic.

• 43:21Speaker 01

  So that's part one, and we can argue that one to death. Part two is, everybody basically looks at crypto and they're like, oh, this is the future of all monetary currencies. And I'm like, that's bullshit. No government is excited about basically losing control over currencies. Currencies enable governments to manipulate their economies, and that is an incredibly powerful lever. And so I look at the Western world and say, okay, like, They are happy to let crypto innovate and come up with new ideas and to push the banks to basically start doing things that aren't stupid. That's great. Innovation is good. Let's let crypto push innovation. But the Western governments are going to definitely do what Microsoft used to do,

• 44:03Speaker 01

  which is basically embrace, embrace a new idea, extend your own capabilities. So therefore, take the ideas that were in crypto and move them into basically a government-controlled financial system and then extinguish, which is like start shutting that shit down and turn it off. And I, I continue to believe that that's what governments will do. And the third thing that, that, that I, I think is really important that nobody talks about is China. So if you look at what China is doing with the digital yuan, yuan, yuan, is they are going after the dollar as a global reserve currency. And the way they're doing that is they're counter positioning against the dollar. And they're saying, okay, the dollar, and especially basically the US-controlled banking

• 44:45Speaker 01

  monopoly of wires and moving money across dollars across basically the global banking system is very inflexible. It doesn't have the ability for money to move quickly and rapidly in digital manners. It's highly controlled for certain types of transactions and it is really, really, really vulnerable to the Chinese coming in and saying, hey, guess what? You want digital currency? We have one. It's here. Push a button, you can move money wherever you want. Comes through our database, which is basically the Chinese central bank. Instead of a decentralized database, it's one database. We've embraced all of the innovations of crypto and you don't have to worry about it moving up and down. It's still, it's our currency, we'll control it. You don't have to worry about any of the things that you have to worry about in crypto.

• 45:29Speaker 01

  And you want to basically live in Rwanda and move money to Sri Lanka? Or if you want to deal drugs or you want to buy arms? You can do whatever you want with it. Like, we're going to basically not, basically restrain the movement of money the way that the US government does. And by counter positioning that against the dollar, I think basically it's their ability to chase down the dollar as a global reserve currency. And so I think that's probably going to be one of the biggest trends that we see in the next 20 years is the Chinese are going to, and then crypto becomes.

• 46:01Speaker 01

  Crypto dies in that world, as far as I'm concerned.

• 46:04Alex Kantrowitz?

  Fascinating. Yeah, I don't think that gets talked about anywhere close to enough. So I'm glad you brought it up. Do you do you own Bitcoin?

• 46:10Speaker 01

  I do. I had a gambling debt that was paid and it's

• 46:15Alex Kantrowitz?

  Okay.

• 46:15Speaker 01

  I've done very well with it, but not a significant amount.

• 46:19Alex Kantrowitz?

  Okay. What can you share your personal mix? You can decline, but.

• 46:24Speaker 01

  I don't have a mix. I don't trade. I don't. It's I don't spend time on it because it's not.

• 46:31Alex Kantrowitz?

  Oh, no, like just overall, like is Bitcoin? Anyway, I mean,

• 46:34Speaker 01

  Oh, it's literally in terms of my my net worth is 99% illiquid startup equities. And a bunch of dollars and some Bitcoin is a is a literally like a fraction of nothing. And some Ethereum, I guess, but not much.

• 46:51Alex Kantrowitz?

  Yeah. Zach Coelius is with us. He's the managing partner of Coelius Capital. He owns a little bit of Bitcoin, but mostly startup equity. He also tweets is actually one of my favorite Twitter accounts. You can catch him at it's at Zach Coelius. C O E L I U S. We are going to read his tweets. One of the favorite segments we have here on Big Technology Podcast. Right after the break, there's some firebombs in there. So stay tuned. We'll be back right after this.

• 47:21Speaker 02

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• 47:52Alex Kantrowitz?

  And we're back here for one final segment with Zach Coelius. He's the managing partner at Coelius Capital. Zach, I've picked out eight tweets of yours.

• 48:00Speaker 01

  I'm excited.

• 48:01Alex Kantrowitz?

  We have 10, 15 minutes left, so why don't I just read them and you can react to them rapidly? Just give a little context about what you were thinking when you fired them off and we'll see how many we can get through. How's that sound?

• 48:14Speaker 01

  Go for it. Ready?

• 48:16Alex Kantrowitz?

  Number one, you just tweeted this yesterday. "One of the most bizarre feelings of being a VC is when I make a stupidly obscene amount of money for having done virtually nothing." By the way, hilarious way to put it. I don't know if I will ever get used to it.

• 48:30Speaker 01

  Yeah, so it's it's actually just crazy, right? So in in the VC world, there's some companies where you spend a lot of time and energy. You work your ass off. You're you're constantly there, helping them through every fire. And you are, you're not a, you're not a founder, but you you you're you're working. And you you you earned that money. And then there's other companies that I've invested in where they don't call me. They don't talk to me. And they just send me a giant check at the end of like, a very short period of time. And I'm like, the fuck? I didn't do anything. And I mean, it's crazy how that works. And it's it's it's a weird feeling. Because I'm, you know, I grew up in Minnesota. I'm a, I'm a Midwestern kid. I'm used to working for my money.

• 49:13Speaker 01

  And I'm, it's a weird feeling to make money for doing nothing.

• 49:19Alex Kantrowitz?

  Yeah, I do. I did want to bring this up earlier, but you're like entirely self-made. I mean, I remember you starting an ad tech company based off of Facebook. And then you'd made some successful investments. And now you have your own company. It's pretty impressive.

• 49:35Speaker 01

  Well, I mean, I, I don't think it's, I, I, I look around and literally every person that I know who's honest and works hard, who's is in technology, has done extraordinarily well. And I just think that the the market and the growth, I mean, any idiot who shows up in Silicon Valley is going to do just fine in this market. Like, you gotta be a liar or a cheater or really dumb. And even those people usually work out just fine not to succeed in this market.

• 50:04Alex Kantrowitz?

  Maybe this should be the title of the episode. Okay, we have tweets to read. The biggest problem, here we go. This might just take us till the end. The biggest problem with SF politics. The tech bull market is so lucrative. It's the only, it's only the ideologues who want to do the thankless and hard work of governing. So we get idiots who break our city.

• 50:24Speaker 01

  Oh yeah, I mean, look, you don't have to look at like you walk through Silicon, you walk through San Francisco right now. I mean, I've been here for seventeen years. And it's literally junkies and untreated mental illness like on our streets, breaking into people's houses, into their cars. I got punched in the face on my own block in front of my house by a clearly mentally ill woman. And that's, those are problems that don't have to be there. They're there because the people who are running our city are ideological, like they are literally like Marxists, they're communists. Like literally, they are avowed Marxists and communists. And they are bringing stupid ideas and they're breaking our city as a result of that.

• 51:06Speaker 01

  And anyone who's like any good, who would want to like go make virtually nothing in a city that costs as much as it costs to live in San Francisco? And to basically work with the people that you have to work with who are idiots.

• 51:20Alex Kantrowitz?

  Yeah.

• 51:20Speaker 01

  It's a mess.

• 51:21Alex Kantrowitz?

  Oh, why don't you get involved? I mean, it's

• 51:23Speaker 01

  Cause I'm, I'm, I'm enjoying what I'm doing. I'm having fun. Yeah.

• 51:27Alex Kantrowitz?

  But it's easier to write tweets about what's going on with government than tax.

• 51:30Speaker 01

  I am involved. I, I am involved.

• 51:33Alex Kantrowitz?

  Yeah.

• 51:33Speaker 01

  But at the end of the day, like that, that would be, that would be the thing I do before I'm ready to go die. Because it would be so thankless and so painful. And the problem is, if you look at San Francisco voters, they have continued to vote these people into office.

• 51:48Alex Kantrowitz?

  Yeah.

• 51:48Speaker 01

  And so it's not just literally the, the people who are in office, it's also the people who are voting for them. And it's, it's kind of hard to say like, okay, I'm going to go get in the middle of this mess when this mess has a cause and the cause is ideological. There's a set of ideas

• 52:06Alex Kantrowitz?

  Yeah.

• 52:07Speaker 01

  that people here believe, even when those ideas are demonstrably wrong. And they continue to believe them and they continue to put them into policies. And we are dealing with the consequences of that right now. Like if I, if I was literally running for, as a Republican office holder, I would literally show up with a camera crew and I would walk through the tenderloin.

• 52:26Alex Kantrowitz?

  You're getting the next tweet. Yeah.

• 52:27Speaker 01

  The piles, piles of trash and the junkies who are literally hang, dying, literally dying on those streets. And the break-ins and the assaults and the people with weapons and all the shit that is in there. And I would be like, this is what I'm here to fight. This is not okay. And there are, there are answers to these problems, but like this city ideologically is incapable of, of, of, of solving these problems.

• 52:53Alex Kantrowitz?

  All right, I'm just gonna, I have follow-ups. I'm gonna read the next one and we can go to them. This is sort of what you were saying. This is your next tweet. Imagine Republicans contesting the midterms using what is happening in liberal cities. The shop pans over a squalid tent. Cities, meth addicts, huge piles of trash needles. They interview residents who tell of the crime, the fear, the government complicity repeats city after city. So I kind of have two questions for you on that. First of all, are you conservative or are you liberal?

• 53:25Speaker 01

  No, I mean, if you read the rest of my Twitter, I hate Donald Trump with a passion. I find the modern Republican Party to be equally disgusting. I'm a capitalist. I believe in capitalism. I am a libertarian in terms of allowing individuals to do what they want to do, what's best for them, as long as they don't hurt other people. But I'm a humanist. I believe in taking care of people. I believe that we should have healthcare in this country that basically supports people, like if someone, this is the thing that drives me nuts. So if somebody shows up at your front door, somebody knocks on the door and they're bleeding, what do you do? You're like, oh, let me help you. And they're like, here, let me, let me stop the bleeding, right? And they show up in their door and they're hungry. They're like, this little kid shows up and he's starving.

• 54:08Speaker 01

  And he's like, I'm hungry. What do you do? You feed the kid. You're like, okay, I'm gonna feed you. Same kid, little five-year-old kid shows up at the door. He's like, I have cancer. What do we do in this country? Oh, bummer. Fuck you. Like, that's crazy to me. It's crazy to me that we have like the richest country in the world and we can't care for people who have clearly treatable illnesses because of this stupidity of the way our healthcare system is built.

• 54:34Speaker 01

  But I'm an environmentalist. I believe the externalities of capitalism need to be solved for. So, you know, I'm unfortunately like a whole bunch of other losers. I'm stuck in the middle, looking at both sides, being like, oh, my God, they're both. Stupid.

• 54:47Alex Kantrowitz?

  What are the policies? I mean, you you spoke about a specific set of policies that you think are wrong for these these cities. And are they, I mean, are they specifically democratic policies? Or are the national policies gone wrong? Because the thing that you just mentioned, that I have cancer is national. We don't have nationalized healthcare.

• 55:04Speaker 01

  Sure.

• 55:05Alex Kantrowitz?

  It's something that a lot of business people are happy about. So what are

• 55:08Speaker 01

  I don't think that's true. I don't think a lot of business people are happy about not having

• 55:12Alex Kantrowitz?

  Let's put it aside. Yeah, okay, let's just focus on the core of the thing.

• 55:15Speaker 01

  I'm disagreeing with that. But anyway.

• 55:17Alex Kantrowitz?

  Yeah.

• 55:17Speaker 01

  So the policies, the policies that were that are that were that in San Francisco, we have particular problems with is the the left has decided that having a bunch of people in jail is not okay. Which I think is a good thing, right? Like, having a bunch of people in jail is is problematic. And so the answer to that is, okay, let's stop putting people in jail, which is like, hmm, okay, then what happens? So in San Francisco, there was a guy over New Year's, he he literally stole a car and he ran over two young women and killed them. After he had been, he was running away from somebody or whatever. That guy had been arrested for seventy three felonies.

• 55:57Speaker 01

  Seventy three. And he was on the streets, seventy three felonies. And that so the answer that the left came up with is like, okay, let's not put people in jail. And so you have these habitual offenders who are habitually offending, and they are killing people. They are breaking into people's homes. They're like, every office that I know has been broken into multiple times because there's no consequences. And so like, we we've got hundreds of years, thousands of years of human history that shows that when people break laws, there need to be material consequences that cause them to stop breaking laws. And the left has decided, ah, it's okay, we're gonna just stop putting people in jail.

• 56:38Speaker 01

  And as a result, people are literally running wild through the city of San Francisco because there are no consequences. They're shutting down the stores in the city because you can literally go steal anything you want and nothing happens. Like, literally, you walk into my Safeway down the street, and there's better security in there than in the bank. There's guys literally wearing body armor because they have to go fight with people who show up with trash bags and fill them up full of things and walk out the door. And so they're like, every every single store in San Francisco is dealing with this. And that's not okay. Like if you look at basically the the the drug addiction on the streets that we have, we have a large number of addicts who are clearly, clearly in a bad place. And the answer that we have in San Francisco is, oh, they're addicts.

• 57:22Speaker 01

  So when they defecate on our streets, instead of building bathrooms, we're just gonna let them defecate on our streets. Uh, instead of, uh, uh, like actually dealing with the fact when they break into our cars, we're gonna let them keep doing that because they're gonna go buy some meth, but they're addicts. Like, instead of basically coming up with a solution, we just let them rot on our streets until they die. Like, over 800 people died of drug overdoses in the city last year.

• 57:46Alex Kantrowitz?

  More than COVID.

• 57:46Speaker 01

  That's fucked up. Like, come on.

• 57:49Alex Kantrowitz?

  Okay, the criticism I hear from folks i- is that, okay, anyway, I'm just gonna say it.

• 57:56Speaker 01

  Go for it.

• 57:57Alex Kantrowitz?

  A lot of tech folks have moved into the city from outside.

• 58:01Alex Kantrowitz?

  And criticize and throw stones from, you know, where they are.

• 58:07Speaker 01

  Twitter.

• 58:07Alex Kantrowitz?

  Twitter, they have lucrative jobs. And don't pitch in, don't, don't attend, you know, meetings, don't run for office. And it seems unfair, uh, you know, that there's, because it does seem sort of like, uh, you know, well, the city's, there's, I mean, no one will argue, I mean, maybe people will.

• 58:27Speaker 01

  This is whataboutism, and it's the most, the most problematic whataboutism I've ever.

• 58:31Alex Kantrowitz?

  Okay, cool.

• 58:32Speaker 01

  Because, because what you're, what you're saying is, okay.

• 58:34Alex Kantrowitz?

  No, no, I'm bringing up the argument, okay? So, so let's just at least, let's, let's address it, okay?

• 58:39Speaker 01

  I'm gonna put them under my. What you're saying is, what you're saying, what, what they're saying, is they're saying, okay, the city has these policies which are really, really, really bad. So not jailing people who commit crimes, not building more housing, not dealing with like all of the things that I've been ranting about.

• 58:56Alex Kantrowitz?

  Yeah.

• 58:56Speaker 01

  But instead of changing those policies, because we have officials who have a job, their job is to do, to change policies, we can all have a conversation about the right policies, and the officials can put in place the right policies. Instead, we're gonna say, oh, no, let's point the finger at the tech people who are complaining about these things and say, oh, no, no, they're, they're tech people, and they just moved here, so therefore, we're not gonna change our policies. That's the stupidest thing I've ever heard. Like, they're two separate things. There's, there's, there's the policies which need to be changed, and then there's who controls the city, which is effectively what tech is about to do. So like, the thing that, the, the funny thing about what you just, what you just said was, oh, people are like, the tech people aren't involved. I can tell you for a fact, there are tech people who are deeply involved.

• 59:39Alex Kantrowitz?

  Yeah.

• 59:39Speaker 01

  Gary Tan is doing some really cool stuff.

• 59:41Alex Kantrowitz?

  Right.

• 59:41Speaker 01

  The Grow SF people are doing some stuff. Bilal is running for basically the state assembly. He's, he's clearly a tech person and he's gonna win. And, and in a couple of years, people are gonna look back and they're gonna be like, oh shit, the tech people all run San Francisco now. And who's gonna, who's gonna be in power? It's gonna be tech people. And then you're gonna start to see change. Because tech people are fed up with the fact that the people who were here before, who've been running our city for the last 50 years, are doing shit job.

• 1:00:11Alex Kantrowitz?

  Okay, that was a good answer.

• 1:00:13Speaker 01

  Firing.

• 1:00:14Alex Kantrowitz?

  Oh yeah, I mean.

• 1:00:16Speaker 01

  I love it. Get me fired up on San Francisco.

• 1:00:18Alex Kantrowitz?

  It was, it was a promise. It was a promise. I don't know. I mean, how do we end after that? Jesus Christ.

• 1:00:24Speaker 01

  We can end on that if you want.

• 1:00:26Alex Kantrowitz?

  We could end on that.

• 1:00:27Speaker 01

  Are you, are you on to do one more tweet? We could do more tweets. I, I got seven minutes.

• 1:00:33Alex Kantrowitz?

  I kind of feel like we need to keep talking about the San Francisco thing.

• 1:00:36Speaker 01

  Go ahead. Bring it back. Let's go.

• 1:00:39Alex Kantrowitz?

  Well, let's just, I, I guess like I want to ask one more question about it. The, the set of policies.

• 1:00:44Speaker 01

  Sure.

• 1:00:46Alex Kantrowitz?

  Do you, are they, would you say that they're, that they're left policies? I mean, is, or is there some stuff on the national level that can be done as well?

• 1:00:56Speaker 01

  Oh, absolutely. Look, I, I'm, I'm, I'm, I am a person who believes in dualities to everything. And I believe that there are, there, a lot of the things that the left basically wants are right things. I agree with them. So for instance, take environmentalism. Like I'm, I'm an environmentalist. And the, the left wants to figure out how to deal with global warming. But. The policies that the left wants to put in place, as far as I'm concerned, are idiotic. They're just stupid. So for instance, the left fighting against nuclear power is like literally the dumbest thing I've ever heard in my entire life.

• 1:01:36Speaker 01

  Like, we have this amazing carbon, carbon-free way to generate electricity that if we had been investing in it over the last thirty years, we could have, we could be so much better, we could have so much more of it, we would be in a much better place, but the left has decided that it's scared of it and like refuses to do it. Or, let's talk about a carbon tax. Like, the right answer for global warming is we have this externality, like when you drive your street, your car down the street, you release carbon out of the back of your car and you pay nothing for that. You, you, you release your shit into the air and you, you can do it for free. If that same car drove down the street and instead shat out poop onto the ground, I guarantee you wouldn't just be able to leave it there, you'd have to go pick it up off the ground and clean the streets, or you have to pay someone to do it for you.

• 1:02:21Speaker 01

  And so this externality that is carbon is currently free and we need to start charging for it. So when you release carbon in the atmosphere, you have to pay for it. And that's a very, very, very effective way to get people to change their behaviors and to incentivize other people to solve the problem. So if we had a carbon tax, we could pay people to remove carbon from the air. That would be awesome. You put carbon into the air, you pay money. You take carbon out of the air, we pay you money. That would be really good, except the left, because it's so stupid about basically capitalism, has decided it doesn't believe in that shit. And that's just like, it's just moronic. And so like, I, I think all of these things are complicated. I can do the same thing, arguing about the Republicans, I mean, they're just as stupid.

• 1:03:04Speaker 01

  But like, the, the same problem is there, which is like, we have to solve these problems and we have to come up with answers that aren't ideological, they're not driven by partisanship, they're just driven by what works. And I don't have a lot of faith, because people are stupid.

• 1:03:19Alex Kantrowitz?

  There's a dearth in that. Yeah. Okay.

• 1:03:23Alex Kantrowitz?

  Next time you come, we have to have you back and just do an episode on the tweets.

• 1:03:28Speaker 01

  Sure, I mean, I keep going. They seem to work. All of a sudden, like, people have discovered in the last couple of years, people have been like, just like mashing the like button on my tweets.

• 1:03:38Alex Kantrowitz?

  Yeah.

• 1:03:39Speaker 01

  I, I, I think my, my theory is, is that like, once I became an investor, they became this group of people who wanted to get me to invest in their companies. So they started liking my tweets. And then the algorithm got tricked by that to think that my tweets were actually good. And then it started distributing my tweets. And next thing you know.

• 1:03:57Alex Kantrowitz?

  No, look, I, I like what you have to say, because you take risks, you're not beholden to any form of ideology. And you say what you mean. And while like we've shown in the last hour that I'm not on board with every single thing you've said.

• 1:04:15Alex Kantrowitz?

  I think we need more people like that, you know, who will express their, their views and, and just stick the neck out there. And that's the only way to learn. And that's what the show is, is all about. So I wish I would have come in with some more data to, I didn't realize we would go 10 minutes on, on San Francisco, 15 minutes on San Francisco at the end. So I wish I would have come in with some more data on that. Maybe we do it in a follow up. But the, the problems are real, no doubt.

• 1:04:41Speaker 01

  And don't, just don't come back with the like, crime is down in San Francisco bullshit.

• 1:04:45Alex Kantrowitz?

  No, no, no, no. I've, I've, I've watched the debates and, and city leadership does not acquit, acquit itself well.

• 1:04:53Speaker 01

  I mean, look, it, it, the simple fact is, job sucks. It's really hard, really hard to basically run a city. It doesn't pay very much and everyone else is getting fucking rich doing like what we're doing. And like, any rational human is going to be like, uh, do I want to get rich and care for my family? Or do I want to go deal with a bunch of ideological morons and get paid nothing?

• 1:05:13Alex Kantrowitz?

  So is the solution just to pay people more in, in government?

• 1:05:16Speaker 01

  That'd be a good start.

• 1:05:18Alex Kantrowitz?

  Yeah. I mean, we taught, we talked about, I've talked about in the past and had it on the newsletter in the past. How the Federal Trade Commission, which is tasked with checking Facebook, is just paying its people peanuts. And what's happening is, is that Facebook's just hiring all these people.

• 1:05:31Speaker 01

  Yeah, yeah, that's what I do. If I was, if I was basically engaged with a regulator and I'd be like, and they were smart and capable and scary, I'd be like, how about I give you a better job for me?

• 1:05:43Alex Kantrowitz?

  Yeah. Amazing. Yeah. Well, unfortunate, actually, is the probably a better word. Well, this has been fun.

• 1:05:51Alex Kantrowitz?

  People want to reach you, pitch you. Is there a good way to do it?

• 1:05:55Speaker 01

  Twitter is the best. On there, I have my, um, my user manual. It's in my bio.

• 1:06:00Alex Kantrowitz?

  Yeah.

• 1:06:01Speaker 01

  There you can see all the ways to reach me and, and all the, all the stuff you need to know about dealing with me.

• 1:06:08Alex Kantrowitz?

  Yeah, you've actually written a user man manual for folks trying to pitch you. So that's good.

• 1:06:13Speaker 01

  Seems to work. People seem to like it.

• 1:06:14Alex Kantrowitz?

  They follow the rules?

• 1:06:16Speaker 01

  Hmm, sometimes. The worst are my friends who haven't read the manual and then they like, like for instance, in the manual, I very explicitly say, don't text me, don't call me, just email me. And like my friends are like, hey, I'm raising money. And they text me and I'm like, ah, God.

• 1:06:29Alex Kantrowitz?

  Read the, read the man.

• 1:06:30Speaker 01

  Read the manual.

• 1:06:31Alex Kantrowitz?

  By a hundred and forty thousand people on LinkedIn. How did you do that?

• 1:06:35Speaker 01

  Uh.

• 1:06:36Alex Kantrowitz?

  Rants about San Francisco?

• 1:06:37Speaker 01

  I was early in the, um, the influencer program.

• 1:06:40Alex Kantrowitz?

  Uh, I see.

• 1:06:42Speaker 01

  And they, uh, they spammed me out there across the, across the network. And so I got a bunch of followers from that.

• 1:06:48Alex Kantrowitz?

  Sweet. I gotta figure that one out. I've been posting on LinkedIn like a maniac, but, uh, slow going over there.

• 1:06:54Speaker 01

  It's, it's gotten for me, it's like literally slowed to a trickle. Like it was, it went to one twenty like right away and then it like just, and now I, you know, it grows, but not like in the beginning.

• 1:07:06Alex Kantrowitz?

  Yeah.

• 1:07:06Speaker 01

  It's all network effects.

• 1:07:08Alex Kantrowitz?

  Zach Coelius, thank you for joining us. What a pleasure. I had a pleasure to speak with you about this stuff. All right. Well, just title, we'll title the, the episode, The Investor Who Can't Lose. And, uh, I'm doing it.

• 1:07:21Speaker 01

  Uh, you're, you're, you're in charge. You do whatever you want.

• 1:07:24Alex Kantrowitz?

  Thank you.

• 1:07:24Speaker 01

  I, I, I had a guy once, uh, write an article about me. He called me the unicorn whisperer.

• 1:07:29Alex Kantrowitz?

  Ah.

• 1:07:29Speaker 01

  And this was like early in my career. I was like, ooh, that's awkward. Definitely don't deserve that. And then now everyone just repeats it all the time. And I'm like, okay, well.

• 1:07:38Alex Kantrowitz?

  All right. We'll take it. Okay, cool. That'll, that'll be, that'll be a wrap for us. I can't wait to see the feedback on this one. Yeah, I'm not, don't, don't rate the podcast based off of this episode, folks, but give it five stars.

• 1:07:52Speaker 01

  Yeah, definitely five stars. You can go to my Twitter and like leave a, leave a review on me on my Twitter. Zach Coelius, zero stars, huge asshole.

• 1:08:03Alex Kantrowitz?

  I appreciate that. I don't think you're going to get many of those. And yeah, let's just say a quick thank you to Nate Guatney for the quick turnaround of the episode. We're recording on a Tuesday, publishing on a Wednesday. Try not to do that to you Nate, but unfortunately, we have to today. So I appreciate the quick turnaround. You're a good man. Thanks to Red Circle for hosting and selling the ads. Thanks to Zach for joining us and being his usual unfiltered self. I hope you learned some stuff, folks. I know I did. And thanks most of all to you, the listeners. Appreciate you joining us here each and every Wednesday. If this is your first time and you've made it all the way to the end and you want to subscribe, I think that'd be a great idea. If you're

• 1:08:44Alex Kantrowitz?

  a repeat listener and you haven't rated us on Apple Podcast yet, those five stars would go a long way. Appreciate that. And that will do it for us here on the Big Technology Podcast. We'll be back next Wednesday with a new interview with a tech insider or outside agitator. We hope to see you then.

• 1:09:15Speaker 02

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