#5 Chris Dixon: The State of Venture Capital

In this episode, a16z partner Chris Dixon and I discuss the history of venture capital, artificial intelligence, what makes a great entrepreneur, and why companies fail. *** Go Premium: Members get early access, ad-free episodes, hand-edited transcripts, searchable transcripts, member-only episodes, and more. Sign up at: https://fs.blog/membership/ Every Sunday our newsletter shares timeless insights and ideas that you can use at work and home. Add it to your inbox: https://fs.blog/newsletter/ Follow Shane on Twitter at: https://twitter.com/ShaneAParrish 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.

• 0:08Shane Parrish?

  Bienvenidos al Knowledge Project. Soy el host Shane Parrish. Soy el autor del Farnham Street Blog, un sitio web con más de 70,000 lectores que es dedicado a ayudarnos a aprender al dominar lo mejor de lo que otras personas ya han descubierto. En el Knowledge Project entrevisto a personas increíbles de todo el mundo para que todos podamos aprender de ellos, expandir nuestras mentes y desafiar nuestro pensamiento.

• 0:30Shane Parrish?

  En este episodio tengo a Chris Dixon. Chris es un socio de la empresa de venture capital quizás la empresa más famosa del mundo, Andreessen Horowitz, o comúnmente conocido como A16Z. Hablamos de la historia de la venture capital, por qué las empresas fracasan, el futuro de la inteligencia artificial y la idea de maze. Espero que les guste este entrevista tanto como yo. Me encantaría escuchar su feedback. Soy @FarnhamStreet en Twitter. Es @F A R N A M S T R E E T en Twitter.

• 1:07Shane Parrish?

  Chris, muchas gracias por venir.

• 1:09Speaker 01

  Gracias por invitarme.

• 1:11Shane Parrish?

  Estoy preguntando, ¿qué es un día típico para ti?

• 1:14Speaker 01

  Para un VC? Sí, es una buena pregunta. Es un trabajo interesante. Creo que dividiría mi calendario entre, supongo, dos categorías de cosas. Una sería reunirse con empresarios que están comenzando empresas y poniendo dinero y viendo a nosotros para hablar de la posibilidad de invertir. Y la otra mitad del tiempo trabajando con inversiones existentes para tratar de ayudarles, ya sabes, desde, tal vez, que están poniendo más dinero o que están tratando de reclutar a alguien o cerrar una venta o algo así. Así que, aproximadamente, diría medio y medio. Buscando cosas nuevas.

• 1:57Speaker 01

  Y lo que eso significa es básicamente muchas reuniones. Así que es un gran cambio. Para algunas personas, como yo, tenía un background en programación de computadoras. There's a great Paul Graham blog post, it's called like Maker Schedule and Manager Schedule, I think, where he can contrast kind of the schedule of somebody who builds things. So like a computer programmer or a carpenter or what have you versus sort of a manager. And VC is very much manager, so it's sort of one hour scheduled meetings as opposed to kind of, you know, eight hours of getting into a flow state and thinking about a topic. So the good, the bad part is it's sort of a lot of state switching and kind of jumping

• 2:37Speaker 01

  around. The good thing is it's very, it's a fascinating job. You get to meet with incredibly smart and passionate people who are doing interesting things and they tell you all about what they're doing. So, you know, if you're kind of like intellectually curious, it's a pretty amazing job because it's sort of, you know, one minute someone's telling you about some breakthrough in biotech and the next minute you're talking about data center infrastructure and the next minute you're talking about computer security, the next minute you're talking about, you know, I don't know what, the transportation industry, you know, you name it. So it's a fun job.

• 3:08Shane Parrish?

  Sounds amazing. Can we just back up for one second just so I don't make any assumptions here? So you work for like a venture capital firm, A16Z. I'm an outsider. Can you explain, like, what does that mean?

• 3:19Speaker 01

  Yeah, so, so, yeah, I work for Andreessen Horowitz, which is the shorthand is A16Z. It was a firm founded in 2009 by Marc Andreessen and Ben Horowitz. Marc and Ben both, you know, prior to that had, Marc had co-founded Netscape, which, you know, was the first kind of commercial, popular internet browser. And then they went on to do a bunch of other interesting startups. So, and maybe if you want, I can kind of back up and tell you what venture capital is more generally and a little about the history of it. Would that be helpful?

• 3:51Shane Parrish?

  Yeah, that'd be awesome.

• 3:51Speaker 01

  Great. So basically venture capital, I mean, as an industry started in the, I don't know, what, the 40s and 50s or something? I mean, the kind of the practice goes back further. If you go back and look at kind of wealthy, you know, entrepreneurs, even in the, you know, whatever, 200 years ago, a lot of them after they made money would then invest in new, you know, in other entrepreneurs who didn't, who maybe had a good idea and some good new technology, but not enough money to run it. So actually I just, I read a great book recently about It was how the world was won. It was about the laying of the first transatlantic cables in the 1840s. You know, which they actually laid the tables onto the ground. And you know, if you read about all those things, they were always funded by, you know,

• 4:36Speaker 01

  some cases governments, but a lot of times some crazy, you know, entrepreneur who'd made money and then was investing in some other new thing, right? So, so there was always this practice going way back. But then what happened is in like the really, I guess, really the 1960s, it became kind of formalized as an industry called venture capital. And there were firms kind of around, it was, it all happened in Silicon Valley around, you know, the rise of firms like Intel,

• 5:01Shane Parrish?

  Right.

• 5:01Speaker 01

  Apple, you know, those kinds of things, and Microsoft. And there were firms like Sequoia and Kleiner Perkins and other firms, basically, started off as people investing their own money in, in new technology companies. And then at some point, kind of became formalized and the way it were in became the way it works today, which is today, we don't really invest our own money. We invest other people's money. Specifically, we invest, you know, a lot of our money comes from places like universities.

• 5:30Shane Parrish?

  But you're not investing your own money?

• 5:31Speaker 01

  No, no, we, no. So most VCs, I mean, we do invest our own money in the, so the way it works is we have a fund and we raise money for a fund. Some of that money does actually come from us personally. But, but a lot of it doesn't. A lot of it comes from like, for example, large, large universities. A lot of this is pioneered by places like Yale, for example, very famously. Started doing this in the 60s. We're basically, they have, you know, they have their endowment. You might read about it, you know, Yale has a large endowment and they basically, you know, they put some portion of that in bonds, some portion in stocks, and they want to put some portion in to, you know, other asset classes, as they call them, that have long-term horizons. So basically what's nice about those,

• 6:12Speaker 01

  about those, those pools of capital is that they, you know, they kind of plan things out in a 10-year, even 30-year horizon, which, which matches kind of our time horizon. So. So basically, that's what this industry is. It's actually, you know, it gets a lot of attention in the press venture capital, but it's actually a very small industry. So, you know, there probably, there are a few dozen kind of firms that most people, you know, that constitute the majority of the industry. Maybe a few thousand people work in the industry.

• 6:39Shane Parrish?

  Right.

• 6:39Speaker 01

  At the most, the amount of money invested is on the order of like 10 to 20 billion per year, which sounds like a lot, but is actually smaller than, you know, the R and D budget for a lot of, you know, for Apple and Google, for example. So they tie, you know, so as much as it gets a lot of press, it's actually a very, it's actually what most people consider kind of a cottage industry.

• 6:59Shane Parrish?

  The tech world, I mean, it seems pretty clubby from the outside. To what extent is that true?

• 7:04Speaker 01

  Yeah, I guess it depends who you ask. The cynics would say it is clubby and kind of, you know, insiderish or something. I think my, you know, I would argue, my feeling is it's actually, it's small and people know each other, but it's, but it's, there's a, there's an ethos of kind of inclusion. Anyone who's worked in the tech industry for more than a few years has seen people rise media like, like, you know, incredibly quickly. So, you know, I knew, you know, take people like Mark Zuckerberg or all these kinds of entrepreneurs like this, like, anyone who's worked in the industry for 10 years has met these people, has met, you know, people like that who are now incredibly prominent back when they weren't.

• 7:47Speaker 01

  And is very used to kind of new, very successful people coming out of nowhere. And as a result, the industry is very, I think it's very sort of inclusive and people just sort of expect, you know, new things to pop up. And people are very responsive, I think, to, you know, I don't know, new people kind of coming. It's, it's a, everyone there in Silicon Valley, and by the way, Silicon Valley, people say Silicon Valley, but I think it's also that kind of spirit is now happening in places like New York and LA and.

• 8:11Shane Parrish?

  Right.

• 8:12Speaker 01

  Canada, in Europe and Asia.

• 8:14Shane Parrish?

  Do you think that's a byproduct? Or do you think that's something conscious? Like people are trying to develop the same culture? Or do you think it's just happening naturally?

• 8:21Speaker 01

  Why is it, why is it spreading?

• 8:23Shane Parrish?

  Yeah.

• 8:23Speaker 01

  I think part of it is people, people see the success of Silicon Valley and want to emulate it. I think part of it is, you know, I see a lot of people who, who moved to California to join the tech industry and then decide they, you know, it's too much of an industry town and then they want to move to New York, for example.

• 8:39Shane Parrish?

  Right.

• 8:40Speaker 01

  Have more diversity. And to have, you know, what's great about places like New York and LA as an example, I spent time in both places is, you know, you're surrounded with people that are in the arts and media and all sorts of other kinds of industries and that kind of creates a different creative dynamic. And so I think it's just the natural kind of maturation of an industry and as it spreads out, you have it kind of propagating to more places. Yeah, I mean, you know, China, there's other specific things like China is its own story probably where they're really, you know, it's a country that sort of decided that tech is strategic and has invested heavily in it. So there's, it's a multifaceted kind of story there, I think.

• 9:19Shane Parrish?

  So the firm that you're a partner at, A16Z, has a stellar reputation. I mean, how did that come about? What do you guys do differently?

• 9:27Speaker 01

  Yeah, well, so, you know, the, the, the kind of philosophy of the firm is, is, is a little different than, I think, than, than the traditional philosophy in the industry. So traditionally in the industry, there were, basically, there were very few venture capitalists. And so what happened was if you were an entrepreneur, you had to go and you had to, you know, basically go to one of these 10 or so firms and, and pitch them your idea. And, you know, I think these firms, they kind of thought of themselves like the little bit of the way that maybe a hedge fund thinks of itself as their job is to come up with theories about where the, you know, the future's going and, you know, pick the best entrepreneurs. And then once they invest, they kind of hang back and kind of monitor their investment in the same way that a hedge fund or someone like. With our firm, we've kind of, we think we've kind

• 10:12Speaker 01

  of flipped the model where, where we think of ourselves primarily as a, as a service firm. So we think of ourselves a way of maybe a law firm or a talent, talent agency or someone would, where our first job is to serve, is to provide services for the entrepreneur. And so we, you know, and our secondary job is to, is to sort of pick the right company. So the services we provide for entrepreneurs, we basically have, we're staffed very differently and structured very differently than most VC firms. We have over 100 employees who are not investors at our firm, who's sole job it is to help companies do things like recruit employees, you know, build their, you know, their customers base.

• 10:51Shane Parrish?

  So now that people are seeing success with that, are your competitors copying that model? Or?

• 10:56Speaker 01

  I think to some extent it's also it's a very different financial structure. So it's hard to copy because we basically the traditional structure is basically that VC funds charge fees and then and then most of those fees go to the partner salaries. We don't instead we put our fees towards these operating teams. So for our competitors to copy us, they'd have to kind of dramatically change their own compensation and pay structure.

• 11:24Shane Parrish?

  Which isn't likely, right?

• 11:25Speaker 01

  Well, I mean, I think what it ends up, I mean, I think we are seeing probably, I think you will see more and more of our kind of style. I think it'll probably come from newer firms. And, you know, like, I mean, my broader view would be, I think it would be great if more firms did what we did. I mean, yes, it would be competition on the one hand. On the other hand, I think it would be good for entrepreneurs and good for the.

• 11:46Shane Parrish?

  Better for the system in a way.

• 11:48Speaker 01

  Yeah, it's better for the system just to have kind of it's just more alignment between the investors and the entrepreneurs and investors acting themselves more like entrepreneurs who are taking risks.

• 11:56Shane Parrish?

  Right.

• 11:57Speaker 01

  And our sort of compensation is aligned with the entrepreneurs. Like, we basically, you know, most of the money, if we make money on this, will be because our company is successful, not because we collect fees.

• 12:07Shane Parrish?

  Right.

• 12:08Speaker 01

  So, yeah, and, you know, so we've worked very hard to help entrepreneurs, which we think is primarily where hopefully, you know, our positive reputation comes from.

• 12:18Shane Parrish?

  It seems like from an outsider's perspective that companies are staying private longer than longer in the funding cycle than they ever have before. And the valuations for some of these companies, I mean, before they the rumored valuations before they become public, like Uber at 50 billion or something. What do you see as the implications and second order effects of this? This seems like an unprecedented kind of scale.

• 12:41Speaker 01

  That's a great question. So, I mean, you know, part of the answer is why are they doing it? Because they're able to do it. Because basically, what you're basically seeing is that if you read the press, they kind of confuse this issue a lot. They say that VCs are investing in companies like Uber at later stages. Actually, I mean, we don't, like, we don't do those kinds of investments for the most part. It's actually what is happening is firms that are that historically had been public investors. So, for example, Fidelity. T-Roy Price, like a whole Wellington, all of these kind of well-known public market investors have now moved to invest in private companies. And so they're a lot, they're sort of the firms that are leading a lot of these late-stage

• 13:23Speaker 01

  investments and basically for a variety of reasons, I mean, so it's a, it's a complicated story. One reason that companies are staying private longer is the perception among the technology community that the public markets are somewhat short-term focused. So, you know, if you look at, if you just go read whatever the, you know, Barron's or the Wall Street Journal and things, there's an extreme focus on kind of what happens next quarter. Do they make their, you know, their numbers that quarter as opposed to are they investing for the next, you know, five to 10 years?

• 13:57Shane Parrish?

  I just push back a little on that. Like, aren't Fidelity and like the T-Roy prices of the world who control, you know, hundreds of millions, billions of dollars in shares in a company, aren't they the ones that could be setting that in the public market to drive the expectations to be longer term?

• 14:12Speaker 01

  They, yeah, no, that's, that's a good point. And I think that that would be the, that would be a good counterargument. And this is a, and I'm not saying this is a subtle question. I think this is, it's sort of two sides of the debate. So one side of the debate would say that public market investors are shortsighted. The other side would say what you said exactly, which is, you know, there are these very long-term investors and like, and to your point, look at Amazon as an example where, you know, it seems as though the investors have accepted the idea that they'll be investing for the long-term and forego profits for a very long time. So, you know, but there is on the flip side, you know, Facebook and Google, most prominently, they have dual-class stock, which is, which means that they basically, when, before they

• 14:53Speaker 01

  went public, the founders, you know, structured it so that they could never, basically never get fired by Wall Street.

• 15:00Shane Parrish?

  Right. What do you think of that?

• 15:02Speaker 01

  I, I think it's great. You know, it's, it's a, if you just look at what's happening, I, I just don't think, I don't think you can plan technology investment on a, anything shorter, like just the way technology products and life cycles work. I think it works on a minimum of, let's say, a three to five-year cycle.

• 15:20Shane Parrish?

  Okay.

• 15:21Speaker 01

  And I just think it's very, very hard to have that kind of managed by a committee. So I'm not saying that. Those founders, you know, it's less, it's less that they have sort of superpowers and more just simply that you really need sort of a small group of people or one person who's managing for a very long-term horizon.

• 15:43Speaker 01

  And it seems to be, I mean, if you just look at, I don't know, I just look at what Facebook and Google are doing right now. I mean, I also have specific experience with some of these companies where it's just, you know, I don't want to name the specific companies, but

• 15:59Shane Parrish?

  Of course.

• 16:00Speaker 01

  But some of these public companies, which where the, where I think the CEOs felt like they were, you know, completely handcuffed or something, just couldn't, just simply couldn't make the kinds of investments they want to make.

• 16:13Shane Parrish?

  Right.

• 16:13Speaker 01

  So, I don't know, I generally think things need to be, in technology, things need to be planned on a longer-term horizon. There are a variety of different ways you could accomplish that. One of them is dual-class stock. I mean, there are other proposals out there, for example, to increase, you know, short-term capital gains to disincentivize short-term trading. I think that's another good idea. You know, there's a variety of kind of proposals out there. I do think, though, that in general, that, you know, long-term planning, long-term thinking is very good for us as a

• 16:46Shane Parrish?

  Right.

• 16:47Speaker 01

  industry, country, you know, world.

• 16:50Shane Parrish?

  Yeah, I'm a proponent of long-term thinking.

• 16:52Speaker 01

  So, and I think dual-class stock is one of the, one mechanism to get there. I don't know if it's the best mechanism, but I think it's one of them.

• 16:57Shane Parrish?

  So I have a question, but maybe you can explain funding right before that. But my question is, like, to what extent is the first round of funding really about preserving optionality for the future, so you can double and triple down on success? Or is it more about funding the idea fully? Or like, maybe you can walk me through some of the thinking.

• 17:16Speaker 01

  From the investor, from the venture capitalist perspective?

• 17:19Shane Parrish?

  From your perspective, yeah. I mean, I don't even have a, what are the stages and why would you invest at a particular stage? And what are you looking for?

• 17:27Speaker 01

  Sure.

• 17:27Shane Parrish?

  Just briefly, yeah.

• 17:28Speaker 01

  Yeah, so basically, there's, I mean, they're just Just some quick nomenclature. There's generally like what's called seed investing, which is, you know, one or two entrepreneurs, you know, maybe a couple and an idea. And that's also called angel investing sometimes.

• 17:42Shane Parrish?

  Right.

• 17:43Speaker 01

  And usually it's people writing, you know, individuals writing checks or small firms. And maybe they'll raise something like a million or $2 million. And that kind of gives them enough money to build a small software team that can build a first product. Okay. And that's, that's something I used to do. At, you know, at A16Z, it's, we do, we don't do much of that anymore. We do some of that, but not, not as much because we have a bigger fund. And we tend to focus on what's called Series A and Series B. And so Series A is after a company has, usually after a company has built like an initial version of a product and is now ready to, you know, build, build a, build, kind of build out the product more and start selling it or taking it to market. Series B is usually a little later when they've, you know, got some initial results

• 18:27Speaker 01

  and now are trying to accelerate those results. And those will typically be in Series A, let's say, you know, $10 million might be an average investment size and Series B, $20 million or something like this. And so.

• 18:39Shane Parrish?

  And your Series A deal usually includes the right, first right of refusal, I would guess, on further funding or?

• 18:46Speaker 01

  Yeah. Yeah. It's, it usually lets us have what we call pro rata rights, which means we're allowed to invest a certain portion in the next round of funding. And mathematically, it's like enough that we can preserve our kind of ownership percentage.

• 19:00Shane Parrish?

  So your equity.

• 19:00Speaker 01

  Yeah. Yeah. So basically it's like a, yeah, it just lets us kind of keep investing some, not, not a whole, not the whole round. It's kind of technical, but basically the idea is just that we have the right to kind of keep investing some amount. Yeah. So that's, that's usually, it's, the industry's changed a lot. Like in the past, maybe 10 plus years ago, VCs would actually take control of a company and in many different respects, including the board of directors.

• 19:28Shane Parrish?

  Like a hands-on kind of?

• 19:29Speaker 01

  Yeah. And well, it actually could like, there's all these horror stories of like them firing the founders and things.

• 19:34Shane Parrish?

  Oh, wow.

• 19:35Speaker 01

  That, that's not something that we. Do, uh, we really just don't even take control for the most part.

• 19:40Shane Parrish?

  Right.

• 19:41Speaker 01

  Do now, we don't, we couldn't fire the founders if we wanted to, not that we do want to, but we couldn't.

• 19:45Shane Parrish?

  And if you got a reputation for that, you'd probably stop seeing deals, right?

• 19:48Speaker 01

  You'd have a very short.

• 19:49Shane Parrish?

  Yeah.

• 19:50Speaker 01

  Career, basically. So, not that we want to, but even if we did, it's just, it's just not the norm to, to have those kinds of provisions. So basically, for the most part, it's a very simple transaction. It's actually in all the areas of finance, it's, it's relative, it's probably the simplest, which is we give somebody, let's say $10 million in an exchange. Let's say we buy 15 to 20% of the company, which means if the company sells for, you know, whatever, N million dollars, we get 15 to 20% of that.

• 20:15Shane Parrish?

  Right.

• 20:16Speaker 01

  It's for the most part, that's kind of what it is. There's a, there's a little bit more structure. There's things called preferences, which basically means that we get, uh, paid, paid disproportionately more on the downs, on certain downside cases and things like this. But it's relatively simple.

• 20:29Shane Parrish?

  To what extent in the, this, you say you do more Series A than angel investing? And if I understood what you were saying correctly, you're more investing on people in the angel stage? I mean, to what extent in the, the Series A are you investing in people versus investing in the idea?

• 20:44Speaker 01

  Great question. I think it's, I think it's Series A, it's definitely, certainly people is 90% of it. And the idea is also important. Um, with the proviso that the idea will, at that point, we know it will change. Um, so it's kind of more like you're investing in the general direction of the idea.

• 21:02Shane Parrish?

  Okay.

• 21:02Speaker 01

  Because just the world changes. I'll just give you something like, you know, I remember when Dropbox or I'll just give, just take an example, raised their Series A. I think it was like 2008, you know, and at the time, um, it was, you know, it was, it was really pretty mobile. I mean, the, the iPhone had come out, but it was, it was, you know, much less, um, widespread than it is today.

• 21:23Shane Parrish?

  Right.

• 21:24Speaker 01

  And so, you know, if you look back at the original pitch deck for that company, or let's say for Facebook for that matter. Or LinkedIn or all these companies today, Pinterest, none of them really had mobile as a big part of their business plan because mobile just didn't, just wasn't, you know, it was still feature phones, right? It was still like those little Motorola phones where you type the, you know, you have the little keyboards and stuff. And so the world, the computing world dramatically changed in the, you know, in the last seven years. And so all of those companies, so, you know, so if you invested in those companies early on, like a Facebook, you knew you were investing in a social network, you didn't know you're investing in a mobile apps company that eventually would buy Messenger and buy Instagram and all sorts of things, right? So, so you see, I would say you kind of directionally, you're investing in an idea and you're investing in people, but you also know the world will

• 22:08Speaker 01

  change dramatically in unexpected ways. And so, you know, what you really are kind of looking for, it's kind of like, you know, the, these kind of black swan, anti-fragile ideas of, of, you're really looking for, um, kind of, you know, what some people call, you know, optionality, meaning things which you know, you know, you don't, you can't predict the future, but you can see that there are certain scenarios where, you know, this, these people.

• 22:32Shane Parrish?

  You're disproportionately rewarded.

• 22:33Speaker 01

  Exactly. I mean, so like the, that's the thing you have to understand, it's hard to understand about the model of VC is, it's very hard to internalize, I should say, which is that the best VC funds, um, lose money at least half the time, which means half of our, if we're doing a good job, half of our investments will fail.

• 22:48Shane Parrish?

  Right.

• 22:49Speaker 01

  Um, and then some small portion will be huge hits and some, and some other portion will be modest hits or something.

• 22:54Shane Parrish?

  I wonder if most people even get that in the stock market.

• 22:57Speaker 01

  Yeah, no, it's very, it's very, um, it's, it's very skewed in that way. And in fact, it's interesting, I wrote a blog post about it, if, if anyone's interested, it's on my website, c dixon.org, um, called the Babe Ruth Effect. And it actually, we have data, um.

• 23:11Shane Parrish?

  I remember reading that, yeah.

• 23:13Speaker 01

  Yeah, there's a lot of data in the VC industry that actually, interestingly enough, the best firms actually have a higher loss rate, meaning they lose money more frequently than the, than the less.

• 23:23Shane Parrish?

  But when they win, the magnitude is so much greater.

• 23:26Speaker 01

  Exactly. So it's like, I don't actually, I'm not a big sports guy, but in baseball, you know, it's what you call slugging percentage, which is sort of runs you hit, um, even if you have more strikeouts. Uh, the two tend to be correlated. So. It takes it's sort of an unnatural way to think in some ways because when you meet entrepreneurs, you're not you're sort of thinking somewhat like will they succeed? But you're also thinking probably more about if they succeed, how big could it get?

• 23:52Shane Parrish?

  Right.

• 23:53Speaker 01

  And so you have to kind of train yourself to think that way and frankly, train yourself to be accepting that a lot of what you do will will fail. And you know, it's a little bit, it's just it's one thing to realize that in the abstract and to read, you know, write a blog post about it like I did. It's very different to actually experience it because these entrepreneurs are your friends and

• 24:11Shane Parrish?

  Yeah.

• 24:11Speaker 01

  You know, and you're rooting for them and to, you know, and and the reality of this job is you spend a lot of time kind of helping people in tough situations.

• 24:19Shane Parrish?

  So if you had to to group the failures into kind of three buckets between leadership, execution, and idea, how would you, what percentiles would you kind of put on those?

• 24:28Speaker 01

  Um, I think that's a good question. I guess it depends on the stage. It's it's very different at different stages, but um, there's some reasonable percentage of the time where the entrepreneur kind of does everything right and just the market, you know, whatever some, you know, it it gets, you know, bundled into, you know, Google releases the same product and gives it away for free or something.

• 24:50Shane Parrish?

  Right.

• 24:51Speaker 01

  Whatever it might be that that, you know, just sort of like things happen that are beyond your control that that just make it, you know, or regulators just decide it's, you know, you have you create a new kind of drug and the FDA decides it's, you know, not to not to approve it or something, you know, like there's there's certain things are just external factors and that's probably some, you know, it's like, I don't know, I'm just making up a number 25% of the time, there's some external factor that that is completely beyond your control. You know, and then I think some portion of the time you're just sort of the hypothesis is wrong about about the product and the market and that's that's a pretty high percentage of the time, I think. Then the question becomes, you know, I think with really good entrepreneurs, they're able

• 25:32Speaker 01

  to kind of adapt then and, you know, as some people call it a pivot or something where you change what you're doing. And so, you know, that's always an interesting kind of scenario. But I would say that my overall learning, having done this for, I don't know, eight or nine years now. As a, I've only been a VC for two and a half years, but I was investing personally before that for whatever, six and a half years.

• 25:58Shane Parrish?

  Successfully too, am I done?

• 26:00Speaker 01

  Yeah, it was pretty good. The, I would say my biggest learning is it's probably more people than I ever. Like, I probably thought originally it was seventy percent people, and now I think it's ninety-eight percent people or something like that. Like, it's a lot of people.

• 26:14Shane Parrish?

  That kind of begs the question, like, what's the difference then between a bad founder and a good founder, so to speak, not to categorize them, but?

• 26:20Speaker 01

  Yeah, I think, I think a lot of it is not necessarily that they're good or bad, but it's how, it's what we have a concept we call product market, I'm sorry, founder market fit. So the kind of fit between the founder and the market, meaning, you know, kind of, are they uniquely suited to do, to do something in that market? And so, a lot of times in our business, that means they have a strong technical background. So maybe, you know, they have a PhD from Stanford and MIT in computer science. And that's probably, frankly, I don't know, a third, if not half of our investments are like that, are people just with very, very strong technical backgrounds who, you know, worked, I worked in a lab, it's very typical stories.

• 26:59Speaker 01

  I worked in a, I was at Berkeley and I worked on, in their big data lab, and I invented this new, you know, open source data analysis tool. And now I want to go make a business out of it. And that's, that's literally a company we funded called Databricks, which is a technology called Spark. Like, you know, that's probably a third to half of our company. So someone with very, very deep expertise. And then they have to learn, you know, they're, obviously their background is in, let's say, computer science or some other technical field. They have to then go learn kind of how to run a business and how to hire people and how to, you know, get customers. But, you know, we kind of make the assumption that that's easier to learn than the, than the opposite. It's easier to teach a computer science business and vice versa. You're never going to teach a business person computer science on the job, right?

• 27:41Speaker 01

  You have to go to school for that generally, or have some kind of work, like, long work experience. So. So a lot of it is that, is like technical expertise. Sometimes it's domain expertise. So, you know, someone will come out of, a person comes out of, you know, the media industry or the fashion industry, or you name it, right? Whatever industry it might be and says, you know, I've been working in this industry and I realized, you know, it's done, and there's a whole bunch of things that are done in backwards ways and I have ideas on how to improve them.

• 28:09Shane Parrish?

  Right.

• 28:09Speaker 01

  You know, and it comes from years of experience and deep expertise in that field. That's another common one. You know, another one will be kind of like, you know, maybe like Airbnb where it's just, for whatever reason, it seems like those founders, you know, kind of were part of a certain cultural movement that was, you know, around, you know, just sort of maybe it was a generational thing, or I don't know what it was, but people, you know, they, they, they had been sort of sleeping on friends' couches and things.

• 28:39Shane Parrish?

  Right, yeah.

• 28:39Speaker 01

  Seeing that behavior emerge and, and, and sort of, you know, built out, you know, kind of rode that kind of, I don't know, that cultural wave. So that's, that's typically a very important, you know, that sort of founder market fit. I think also, a lot of it is just, you know, tenacity. Almost all companies we're involved with run into extreme adversity.

• 29:02Shane Parrish?

  Right.

• 29:03Speaker 01

  I've almost never been involved with a company that didn't have moments of, you know, almost failure. And so it's how, you know, how resilient are the entrepreneurs?

• 29:12Shane Parrish?

  How do you, how do you go about determining that? Like, I mean, how do you go about testing their grit, their tenacity or not testing?

• 29:18Speaker 01

  Yeah, I mean, it's a good question. It's a good question. It's very hard to do. I mean, we do spend a lot of time with the entrepreneurs and try to get to know them. I think a lot of it will come in through their, through their personal backgrounds. You know, it's one reason why you'll, you'll see a lot of VCs will invest, you know, in repeat entrepreneurs as an example.

• 29:37Shane Parrish?

  Right.

• 29:37Speaker 01

  So, you know, like, if you look at like, you know, Travis who founded Uber, you know, he had been involved and I think he started two companies before and, you know, had a long track record and people, you know, and he had varied levels of success, but people who knew him spoke very highly of him as a, you know, tenacious and, and resourceful founder. There's lots of examples of that, of sort of people with some kind of track record. If they don't have a track record, it's, it's hard and it's, you know, and it's, it's something you really don't know until, you know, the moment the adversity comes.

• 30:07Shane Parrish?

  What are the obvious things you're trying to avoid in founders?

• 30:10Speaker 01

  Well, I think at the moment startups are having a moment of kind of pop culture trendiness or something. There's a lot of news articles about startups and venture capitalists.

• 30:22Shane Parrish?

  It's become very sexy, right?

• 30:24Speaker 01

  Yeah, you know, and the social networking movie thing. So I think what we're having now is a bunch of people entering the industry who maybe are, you know, coming in for the wrong reasons, who come to, you know, try to make sort of quick money or something and don't. And it's just really just not.

• 30:40Shane Parrish?

  They don't appreciate how hard it is. And how do you pick somebody like that out? Like when they come and they present to you, how do you determine that, you know, oh, I think they're in it for the money versus I think they're in it because they're passionate about the idea or some other, you know, narrative that we want to wrap around that?

• 30:57Speaker 01

  Yeah, a lot of it's just depth of experience. How, you know, how long have they been working on the problem? You know, I'll just give you an example. Like I was a, I was an early investor in Kickstarter and, you know, and they didn't have, you know, Perry, Nancy and the founders of Kickstarter. They didn't have kind of the classic computer science background I described.

• 31:14Shane Parrish?

  Right.

• 31:14Speaker 01

  They had basically been working on the idea for, let's see, I'd say seven years at the time.

• 31:19Shane Parrish?

  Oh, wow.

• 31:20Speaker 01

  And, and, you know, had tried everything to kind of get funded and, you know, and had, and, and, you know, and you talk to them and, and it was really motivated. You know, the original idea for Kickstarter, Perry was, he was living in New Orleans and he was involved in the kind of music and art scene and had wanted to actually service like Kickstarter for himself because he, I think, I think he had, he had tried to organize a thing where like a band that he wanted to come play would come play and he had a bunch of fans who wanted to see them. And he just didn't have a way to kind of coordinate the two things, to have the fans put up the money. He didn't have Kickstarter, right?

• 31:51Shane Parrish?

  Right.

• 31:52Speaker 01

  And he kept thinking about that and he kept thinking about, you know, the, the kind of going back in the history of the arts and the patronage model, you know, the going back to the Renaissance Italy and things and, and how the internet could kind of let you reimagine that model. And, you know, when you, when you talk to him, so I think I invested, I don't know when it was, like 2008 or 9. Um, he was first starting, you know, it was clear this was a person who was, you know, this was his kind of white whale he'd been pursuing for, you know, forever. A long time, yeah. And, and you ask, you could tell, just you ask him questions and this was, you know, he had the depth of thinking, he had thought of everything, you know, he had gone through. We, we have this concept we call the idea MAs and the idea MAs is the, is sort of the idea

• 32:37Speaker 01

  that, that the startup ideas aren't really just kind of a static thing. Um, it's kind of like, you know, you see the, the TV or the movies and they have the, the way they kind of, you know, have these, you know, someone has this epiphany and they, I imagine that it'll be like a, you know, a intermittent windshield wiper or something. You know, in reality, it's much more of kind of a maze, meaning like, you know, you sort of imagine how the product might work, but then you imagine if the world responds in a certain way or the technology changes in a certain way, here's how I'll adapt. And you sort of imagine yourself traversing through a maze and at various points in the maze, there might be a dead end or there might be a trap or there might be a prize or something like this. And you don't really know how the maze is going to turn out when you first start, but

• 33:20Speaker 01

  really obsessed founders will have thought through all the possibilities. And so a lot of what I like to do, at least in my, when I meet with entrepreneurs is kind of try to traverse that maze with them and understand the depth of thinking that, that they have, you know, kind of gone through to get there. Um, and so in a case like Kickstarter, um, you know, I mean, it was just, it was, I mean, like it was, I'm not saying it was easy, it was an obvious investment or that it was, you know, obviously going to work, but I will say that like it was obvious that they had thought it through very, very deeply. Right. It was a mission for them. It was not, um, uh, you know, it was sort of a fun, you know, whatever, a new career choice or something, or something done for some kind of more mercenary reason. So I don't know, I mean, the, but the answer, look, is this is not, there's no, um,

• 34:05Speaker 01

  Great science to this. People have tried many, many times to use data science and other things to try to quantify these kind of questions you're asking.

• 34:15Shane Parrish?

  Really?

• 34:16Speaker 01

  And the results have been pretty, pretty poor. It's been very hard to predict these things. So I don't have

• 34:22Shane Parrish?

  I was hoping you had like the secret recipe for us.

• 34:24Speaker 01

  I wish I did. And I've certainly tried. Many people have tried. A lot of it's like any kind of creative endeavor. You know, how do you pick a musician early on? How do you pick?

• 34:34Shane Parrish?

  Right, yeah.

• 34:35Speaker 01

  You know, a writer early on. There's, there's certainly like having spent years practicing in the field is very helpful, but ultimately a lot of it comes down to kind of an art, I guess. So.

• 34:49Shane Parrish?

  So many things to do. So switching gears just a little bit here. What's one thing that you think the future holds that no one is talking about?

• 34:58Speaker 01

  Uh huh. Good question. I don't know about no one, because I think

• 35:02Shane Parrish?

  Or very few people, then.

• 35:04Speaker 01

  I mean, that I, maybe, maybe I could change the question slightly. Just say that some of the things I'm excited about. I mean, I think some of the investments I've made have been things that are somewhat unpopular. So for example, I'm not unpopular, but I would say, I don't know, controversial, or I don't know. So I'm an investor in a company called Coinbase, which is the leading Bitcoin company. So I'm very excited. Bitcoin is an example, which, which I think is somewhat

• 35:30Shane Parrish?

  So digital currencies.

• 35:31Speaker 01

  Still currencies. I was an investor in Oculus, which Facebook, you know, which is a virtual reality company that Facebook acquired. I'm very, I'm very, very excited about virtual reality.

• 35:40Shane Parrish?

  How do you think that's going to change our lives, virtual reality?

• 35:44Speaker 01

  So I think it's the next day. I think it will be like when we look back on the history of computing, it will be the key milestones will be, I mean, this is, I'm at the extreme end of excitement here, but there'll be, you know, the PC, the Macintosh or something like this, then the, the internet was the next key moment, and then the mobile phone, like the iPhone, and then I think virtual reality will be the next, the next wave.

• 36:08Shane Parrish?

  What about artificial intelligence?

• 36:10Speaker 01

  That, that's another interesting one. And that's a step, that's sort of separate but related.

• 36:14Shane Parrish?

  Okay.

• 36:14Speaker 01

  To talk about that too. I think virtual reality though will, I mean, I, I don't know how long it will take. It, you know, Oculus is going to release their, it's announced they're going to release their consumer product at the beginning of next year. And I think initially for the first year or two, it'll be primarily used by people playing video games.

• 36:31Shane Parrish?

  Right.

• 36:31Speaker 01

  Um, but I think in the next few years after that, it will, it will be used much more broadly. You know, I think it will be the predominant way that people at some point interact with computers and other people at long distances. I think, you know, in 10 years, we'd be probably having this conversation in virtual reality and we'd be, you know, looking at each other across the room and it would feel like we're in the same room. Um, and, uh, and, you know, I think, um, it's going to have, it'll be, the implications are far beyond gaming and it'll be all kinds of, you know, I think movies. Um, there's lots of interesting health-related applications, communication, social things.

• 37:09Shane Parrish?

  Do you think that'll bring the world closer together?

• 37:12Speaker 01

  I do. I think, I think it will. I think it will, um, you know, there's some great videos on YouTube. I'd encourage people to, to, to go on there and check them out. If you just search YouTube for Oculus or for virtual reality, you'll see a lot of them where, uh, there's one the other day where it was a guy who, um, was using virtual reality, a demo to experience, I think it was like the Apollo moon landing or something. And, um, you watch these videos, people are literally crying at the end of the day. I mean, it's, I've never seen a computing medium that, um, has such a strong emotional impact. Um, because, you know, in that case, it was a guy who had dreamed his whole life about seeing this and he was crying and he was like, this, I would never be able to see this in any other way. And, um, um, you know, I think, I think what it does, I think what it does is it lets people, um,

• 37:55Speaker 01

  you know, I think like, I think for example, a big application will be virtual tourism. So just going and simply, you know, visiting the Great Wall of China and the Taj Mahal, all those other kinds of things. And things which right now are very expensive and, and, you know, one of, one of my favorite demos, um, I say demo now because it's all very early and it's not like, they're not full products, but, uh, is a, is a thing called Ocean Rift, which is a, just lets you just, uh, like scuba dive around the ocean and. And and observe different, um, you know, aquatic, um, the sharks and the, you know, underwater.

• 38:26Shane Parrish?

  Having the experience but not going, right? Yeah.

• 38:28Speaker 01

  Yeah, exactly. So, um, you know, I think it'll be all sorts of things like that. I think actually the gaming side is probably in some ways overblown because.

• 38:35Shane Parrish?

  Right. But we underestimate everything else, you think.

• 38:38Speaker 01

  I think so. I think so. So that's VR. So I'm very excited about that. AI, when we talk about AI or.

• 38:41Shane Parrish?

  Yeah, I'd love to hear more about that. The singularity. Let's talk about this whole like.

• 38:46Speaker 01

  So, okay, there's a lot to say about AI. So I think that, uh, well, I think there's two things. When people talk about AI, they often are really kind of talking about multiple things, right? So there's AI, like the, there's sort of like the how, um, singularity, like when we have a talking computer. And then there's automation and like our, you know, will computers take jobs away and things like this? So I think a lot of people have what I would call kind of a, um, a world's fair view of technology. So you remember like the world's fair and I don't know if you see like, I don't know, it's the Captain America movie or a bunch of other movies where they show, you know, the, you know, it was like Howard Hughes type guys. And they're showing, uh, you know, the, the Tesla coils and the Android robots and the flying cars.

• 39:28Speaker 01

  And, um, so a lot of people, you know, sort of a simplified way to think of technology is, is like the, you know, the robots are coming and people are going to build robots that take away our jobs. Um, if you actually look at how automation works, um, it's actually, I think, a lot more nuanced and, and less obvious. Um, so I'll give you an example, like, um, you just take, kind of take any, almost any technology company that's on our website that we've invested in. I'll just take an arbitrary example, a company called Zenefits. So Zenefits is a company, is lets you, is a, you know, a web product that lets you, if you're a small business, um, go and, you know, sign up new employees for healthcare and other benefits, right?

• 40:06Shane Parrish?

  Right.

• 40:06Speaker 01

  Um, so it sounds like just like, you know, it's whatever. It's a benefit software, right? Um, actually what it ends up doing is it ends up letting you hire fewer people at your company because you don't know, you now no longer have to hire, um, you know, somebody to, to do that job, right? So, um, what I would argue is things like, like a lot of automation doesn't really look like automation. It looks like just regular software.

• 40:27Shane Parrish?

  Right.

• 40:28Speaker 01

  That's, that's a lot of ways what AI really is, is, is sort of taking what smart people do and embedding it in software and giving that software out to lots of people. And so every new piece of software that you see in some ways is a, is sort of a, a piecemeal form of AI. And then when you sort of, when you combine it all together, what you get is kind of this broader kind of functioning super system of all the software interacting together. I think a lot of the real AI, the kind of, the real automation ends up sneaking up on you. Now, there's this other kind of AI, which is the kind of more spectacular stuff that you read about, which is,

• 41:01Shane Parrish?

  Stuff that gets the headlines.

• 41:02Speaker 01

  Yeah, you know, so Siri is an example, like, you know, which is, which is speech recognition. And then, you know, Google's doing a lot of interesting stuff with image recognition. I do think this, this, this stuff is at a, a lot of people in Silicon Valley believe that, that this kind of AI is at a inflection point now, and specifically around a technology called deep learning, which is basically a, I don't know if you remember neural networks. So neural networks of the trendy, you know, there are a lot of books written about them and things in like the nineties,

• 41:36Speaker 01

  which are basically computer systems that were kind of designed to replicate the way that the, that the human brain works.

• 41:42Shane Parrish?

  Yeah.

• 41:42Speaker 01

  Yeah. And it was sort of held out as this promise and then it was, and then it was sort of, there was a letdown afterwards because it didn't kind of deliver the results people wanted. But basically what we've now discovered is it turns out that if you do neural networks and you use a lot more computing power, which we now have available because of Moore's law, which is, you know, the, the idea that basically all computing gets faster and cheaper very quickly over time. Basically, if you take neural networks and you make them a lot, lot, you know, a lot more computing power, a lot more storage, a lot more memory, a lot more networking, a lot more computing resources, it works really well. That's, and that's what, you know, a couple of years ago, Google did a very famous experiment where they basically took, I think it was on the order of tens of thousands of computers, had them study YouTube videos.

• 42:27Speaker 01

  And at the end of it, those computers were able to correctly identify cats, like whether it contained a cat, with a very high degree of accuracy. That was one of the kind of results they released that really. Just kind of shocked people as to how accurate it was. Because basically, a lot of this stuff in AI, and maybe if you use Siri as an example. Um, a lot of it is is relatively easy to get to like eighty, ninety percent accuracy. It's it turns out if you just like a regular programmer downloads a bunch of open source software and spends a weekend. You can you can make like a decent replica of Siri in like a weekend.

• 42:58Shane Parrish?

  Oh, wow. Okay. But you get to like. Higher accuracy on that is like exponential.

• 43:02Speaker 01

  Percent really quickly. And then it turns out all of the work is in the last twenty percent. So like self driving cars are another good example where if somebody tells you, oh, I saw a self driving car and it was able to drive on the highway during daylight. That's actually not very impressive. And that's actually something that almost anyone can build. I mean, anyone with a programming ability can build. Um, what's what's hard is all of the millions of edge cases. So by edge cases, I mean, it's dark, it's raining, a dog jumps out. Two jog dogs jump out, you know, a shadow that looks like a dog jumps out like, you know, whatever, like this, you you name it. There's a million little special cases where to learn all those different special cases takes lots and lots of additional effort.

• 43:43Speaker 01

  And so the the the kind of the big breakthrough with the with the cat video in Google was that they'd gotten kind of to this point of like ninety nine percent or something like that. Which no one had ever gotten to before. It might have been ninety seven. I forgot what the exact number, but it was a very high number. And and they've since gone on to do more experiments where they've done things that do like what they call image classification, which is basically take an image and describe what's in the scene and the the the results are getting very, very good there. Um, so, you know, you'll take an image and it'll and the computer will say this is, you know, three children eating pizza and it's right, you know, and like things like that. And so, um, so there've been a lot of really promising results and it's still very early.

• 44:24Speaker 01

  I mean, you know, look at your phone and and the autocorrect and you'll every day you'll see it makes like ridiculous mistakes. Right? I mean, like, so, you know, and it we can't we can't make an autocorrect today that that that that seems to work, you know, even most of the time.

• 44:38Shane Parrish?

  Doesn't even get the swear words, right?

• 44:40Speaker 01

  You know, so I still think we have a long way to go. I think the the the sort of the I would call the laboratory results are very promising.

• 44:46Shane Parrish?

  Right.

• 44:46Speaker 01

  Those laboratory results require like ten thousand computers.

• 44:49Shane Parrish?

  Right. Yeah. It's unfeasible right now to have that. Yeah.

• 44:53Speaker 01

  That's right. That's right. So the one of the questions will be just kind of how long does it take? For that kind of computing power to, for the price to drop and

• 45:01Shane Parrish?

  Right.

• 45:01Speaker 01

  Become more ubiquitous and you know, there's Moore's law, there's all sorts of questions around Moore's law. Some people think Moore's law is slowing down. I think one of the big potential interesting things here is what's called quantum computing. Which is, you know, is this whole new kind of theoretical area of computer, of basically how to build computers that use quantum effects. So things from quantum mechanics. I would say the optimistic people, you know, including some very well respected, you know, computer science professors at Stanford, for example, believe that in five to 10 years, we'll have quantum computing in the mainstream. If that happens, you could see a dramatic

• 45:40Shane Parrish?

  AI will take off.

• 45:41Speaker 01

  It could, it could lead to a dramatic acceleration in the performance of AI. Yeah, that, there's a bunch of things, one of the reasons it's very hard to predict these technology things is that you, you often have these things that have kind of feedback loops. Which means like if we get quantum computing and if we, you know, you know, and if we get, you know, that will let us compute things faster, which will let us store more, you know, and then we'll be able to store more data and

• 46:04Shane Parrish?

  And that'll have all sorts of second and third order effects on

• 46:06Speaker 01

  Yes, exactly. It seems to be very complex kind of feedback loop systems. And so if I had to bet, I think we're still pretty far away from kind of the singularity. But, but you know, there are certain scenarios people can

• 46:19Shane Parrish?

  Conceive of, yeah.

• 46:20Speaker 01

  Conceive of that it's much sooner.

• 46:21Shane Parrish?

  So with all these different companies, like, how do you filter information? And how do you do that personally? Like, how do you know what's important and what's not important? Like, how do you determine signal from noise when you're, you know, surfing the internet?

• 46:33Speaker 01

  That's a great question. I'm a huge fan of, you know, Twitter, for example, I use Twitter constantly. And for me, it's a, it's probably one of my most important work tools in that I've, you know, I have a carefully curated list of people I follow who essentially I have, whatever it is, 2,000 of the smartest people in the world finding information for me and telling me what to read. That's how I view Twitter. So that's obviously very important. You know, at the firm, we have a whole bunch of different things we do. Including lots of people that we interact with and that we talk to regularly. We try to do things like, for example, we have a big academic conference coming up in a few weeks where we invite 50 plus of the top computer scientists in the world to come and do like a mini,

• 47:17Speaker 01

  almost like TED Talks or something at our firm. We do lots of outreach with academia and things. We try to get involved also in the open source communities. You know, go to lots of events, do lots of press outreach. A lot of what we try and do is just kind of be in the flow of a lot of different, you know, interesting groups of people working on new things.

• 47:39Shane Parrish?

  Right. So what do you think people are focused on that's a waste of time? Like, what do you think misplaced attention, where would that lie?

• 47:46Speaker 01

  Good question. So in the tech world specifically?

• 47:50Shane Parrish?

  Yeah, or in general, I mean, like, other than Donald Trump.

• 47:54Speaker 01

  I think that, I'll give you, well, I guess I'll give you one example of the food industry. So I'm an investor in a company called Soylent, which you may have heard of, which is kind of...

• 48:04Shane Parrish?

  Yeah, I've tried their stuff.

• 48:05Speaker 01

  Okay, so I think with Soylent, I mean, the idea with Soylent is that we're trying to create kind of what we would consider scientifically perfect food. Kind of the idea is you go and the guys, you know, have a team of scientists who went and read every scientific paper about nutrition and then designed and built this perfect food. I think when you look at the food industry, there's an interesting movement. Soylent's one example. There's a bunch of other Silicon Valley startups that are trying to do new things around food. I think that's an industry which is, it's just a very backwards industry today.

• 48:40Speaker 01

  It's, you know, if you look at the US right now, the diabetes and obesity are really at the epidemic level, and a lot of that's caused by excessive sugar and other kinds of ingredients like that.

• 48:59Speaker 01

  If you just go, you know, just down, just down, just now this morning, trying to find something healthy to eat at the, at the local store and, you know, everything is, is filled with

• 49:09Shane Parrish?

  Junk, sugar.

• 49:10Speaker 01

  Junk and sugar and all sorts of other things. And it's really just an industry built around advertising and marketing and distribution and almost no money is put into actually researching healthier and better foods. So that's, that's something I'm very passionate about. I think, you know, we, we like to say sugar is a new smoking. So we think we need to look back 20 years from now, people will just be stunned by the kind of foods that we ate today. I think the whole organic food movement is a great thing. I think, I think that's mostly only accessible to wealthier people. So I think a lot of, you know, what, what I think is interesting are the people that are trying to think more broadly about how to reform the industry, not just for people that can afford organic food.

• 49:53Shane Parrish?

  A lot of my friends would call that, you know, the luxury of the rich, right?

• 49:57Speaker 01

  Yeah, exactly. So like, just what can we do more broadly? So that's an interesting one. I, I know I'm very interested also in healthcare generally. We're doing a lot more, spending a lot more time making investments in, in sort of areas that intersect between healthcare and computer science. And, and just think there's a lot of things there that, you know, if you, if you just look at the statistics of, you know, why, why are healthcare costs going up so dramatically? A lot of it has to do with the inefficiencies in the system, you know, everything from, you know, medical records are still kept on paper, you know, the insurance system is, is very complex and, and, and, and in many ways backwards, the, you know, it's

• 50:42Shane Parrish?

  The incentives seem all over the place.

• 50:43Speaker 01

  The incentives are all over the place. It costs more and more now to, there's, people debate the exact reason, but basically it costs more and more to create new drugs.

• 50:51Shane Parrish?

  Right.

• 50:52Speaker 01

  So there's all, there's all sorts of interesting things there. I think they can be improved.

• 50:55Shane Parrish?

  Listen, I'm totally conscious of your time here. We're nearing the end. I have three questions that I always ask everybody. So what's the one book you've read that had the greatest influence on your life?

• 51:06Speaker 01

  Oh man, I think, you know, I think when I was in high school, I read Godel, Escher, Bach. You know, Douglas Hofstadter's book. I don't know if you know that book.

• 51:15Shane Parrish?

  No, I'm gonna look it up now, though.

• 51:18Speaker 01

  So I was interested in computers since I was a kid, and this book was sort of, it tied, it tied together computers and philosophy and music, and it, for me, it was really important because it really broadened my horizons. It ended up majoring, I went to, when I, in college, I majored in philosophy, and that, I think that book kind of got me to do that. That would be, that would be a huge one for me. Also, anything by Daniel Dennett, you know, you read Daniel Dennett?

• 51:44Shane Parrish?

  Yeah, yeah.

• 51:44Speaker 01

  Like, Consciousness Explains.

• 51:46Shane Parrish?

  Love that stuff, yeah.

• 51:47Speaker 01

  That, this, that, that kind of, there was this whole kind of a thread of, I think, you know, Oliver Sacks, who sadly just passed away and uh, fooled. I used to just read all of those, um, kind of popular.

• 51:59Shane Parrish?

  No wonder you're so smart.

• 52:01Speaker 01

  I don't know, those are great, those are great teachers. So I, when I was a kid, you know, whatever, high school, college, I read all those books and I, and those were all just sort of hugely influential on me.

• 52:11Shane Parrish?

  So what's on your nightstand right now? What are you reading right now that you're really into?

• 52:15Speaker 01

  Uh, I just read, uh, what's it called? The Three Body Problem. Just finished it. You've read this book? It's, um,

• 52:20Shane Parrish?

  No.

• 52:20Speaker 01

  It's this, uh, it's this Chinese author who just, it's a science fiction book. Um, it just won the Hugo Award or something. It's really, it's a really interesting book. What else did I read? I read, um, I'm reading, I was, I just bought this, uh, what's it called? The Martian, which is, I guess, this, uh, popular book that's now made into a movie. And, uh, I, you know, I, books are one thing I like to, I, I'm, I'm not, uh, digital on books. I buy only.

• 52:45Shane Parrish?

  Oh, you're still physical? Why is that?

• 52:47Speaker 01

  I just really like physical books. I like having them on my shelf. I like the feeling of reading a book. Um, I don't know, I just, it's, it's something where.

• 52:55Shane Parrish?

  I'm the same way. I, I live in this, like, weird world where, you know, I read physical books and then go out and buy a Kindle copy.

• 53:02Speaker 01

  Do you really?

• 53:02Shane Parrish?

  Just because I can't keep every physical book, right? Like, it's.

• 53:05Speaker 01

  That's true, that's true. That's a problem. I just like the feeling of them, and it's also, I feel like I look at the screen too much as it is.

• 53:11Shane Parrish?

  Yeah.

• 53:12Speaker 01

  Distracting, too, to have, like, the thing, I, you know, I don't know, I read on the, on the iPhone, and then I can, like, check Twitter, and it's, like, it's too distracting. Oh, I just read the Elon Musk book, which I thought was good, uh, sort of the biography of Elon Musk. And, um, oh, I read a really good book called Sapiens. Have you heard of this?

• 53:27Shane Parrish?

  Oh, I heard of that book, yeah. Somebody else recommended that to me.

• 53:30Speaker 01

  It's sort of like, it's kind of like Gun Germs and Steel, like one of these, I think they're calling the genre Big History, where it's kind of the panoramic view of history, and it's just the history of homeless sapiens.

• 53:40Shane Parrish?

  Yeah, I've heard that was amazing.

• 53:42Speaker 01

  Yeah, it was really awesome. I highly recommend it.

• 53:44Shane Parrish?

  Um, and so you know what I'm trying to do with the Knowledge Project? Uh, who would you like to see, uh, on the show?

• 53:50Speaker 01

  Out of anybody, or?

• 53:51Shane Parrish?

  Yeah, out of anybody in the world.

• 53:53Speaker 01

  Can you, can you narrow it down a little, or?

• 53:55Shane Parrish?

  No, like, who, who would you like to hear me interview, I guess?

• 53:58Speaker 01

  Um, that's a good question. Um.

• 54:01Shane Parrish?

  I'm gonna call them and tell you, and tell them you recommended that they come on.

• 54:04Speaker 01

  Okay, uh, it would be good. Um, I, you know, it'd be great is, um, do you know, uh, uh, Venkat from Ribbon Farm?

• 54:11Shane Parrish?

  I do, yes, yes, yes.

• 54:13Speaker 01

  He's one of my favorite, favorite writers.

• 54:15Shane Parrish?

  He's, uh, he's already agreed to come on.

• 54:17Speaker 01

  Oh, wow, okay, well, there you go. So, um, I'm already, I have too much overlap.

• 54:21Shane Parrish?

  That's awesome, no, that's a good choice.

• 54:23Speaker 01

  You know, you know, uh, you know who's, who's like, who's incredibly brilliant is, um, Ben Thompson. He has this thing, it's called Stratechery, do you know him?

• 54:29Shane Parrish?

  Yeah, definitely. I just started following him on Twitter.

• 54:32Speaker 01

  Yeah, he's awesome.

• 54:33Shane Parrish?

  Well, thanks so much, Chris. This has been great fun. I really appreciate you, uh, taking the time.

• 54:37Speaker 01

  Uh, yeah, well, my pleasure, and thanks for having me.

• 54:43Shane Parrish?

  Hey, guys, this is Shane again. Just a few more things before we wrap up. You can find show notes at farnamstreetblog.com/podcast. That's F-A-R-N-A-M-S-T-R-E-E-T-B-L-O-G.com/podcast. You can also find information there on how to get a transcript. And if you'd like to receive a weekly email from me filled with all sorts of brain food, go to farnamstreetblog.com/newsletter. This is all the good stuff I've found on the web that week, that I've read and shared with close friends, books I'm reading, and so much more. Thank you for listening.