Investor Mindset and Final Advice

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What happens when faith goes mainstream? That's this week on Explain It To Me. Find new episodes Sundays wherever you get your podcast s. Megan Rapino here. This week on a touchmore, we've got two insiders to help us unpack the WMBA's new CBA, three-time champion and WMBPA Vice President Alicia Clark, aka C and ESPN basketball analyst Andrea Carter. We're also going to take a look at our NCAA brackets and check out what's next in March Madness. Check out the latest episode of A Touch More wherever you get your podcasts and on YouTube . Today's number, a hundred thousand I'm already laughing. Today's number a hundred thousand dollars. That's how much a German tourist sued New York City chain lost tacos number one due to physical energy from spicy salsa. Well uh Ed, how did Hitler rise to power? Oh, he brat out the worst in people. I don't know why I find that so funny. Get it, brat worst. He brat out the worst. In people to sort of get a bratwurst. Listen to me. Markets are bigger than us. What you have here is a structural change in the world distribution. Cash is trash. Stocks look pretty attractive. Something's gonna break. Forget about it. Okay, true story. I just sold I told a very funny, but very dirty joke. And the team wouldn't let me do it because we have Bill Gurley, a famous venture capitalist on. So fucking VCs continue to ruin my life. Anyways. What are you up to? Just got back from Vegas. Oh, how was that? Guys weekend. Guys' weekend, bachelor party. It was awesome. Uh we did a lot of gambling, played a lot of blackjack, played a lot of craps, lost a lot of money, did what we're supposed to do. We stayed at the wind, we stayed at the Encore. We had dinner at Zuma. Let's just pause right there, you entitled spoiled bitch. When I was your age and I would go to Vegas, I would stay at theden Gol nugget downtown with my friend Lee Lotus. We would make sure we saved five dollars so we had enough gas to get home. And there was and we would eat twice the whole weekend, both times for $9.99 at the Golden Nuggets All You Can Eat buffet and then we would we would bet all night long at these two dollar blackjack tables. And that was it. That would that and and by the way it was amazing. But no, there was no wind, there was no zoom on. We did it right. We we bull we bowled out and yeah. It was a good time. It's like Jimmy Carr says that people don't realize how fortunate they are today to just be able to take a hot shower. You are literally constantly taking a hot shower and I'm worried you don't appreciate it enough. Claire, do you think Ed really appreciates how fortunate he is? No comment. I'm not I'm not taking sides on this one. Claire, you're also part of this entitled generation, right? How old are you? You're Oh you're s you're you're both twenty seven now. Claire, what did you do this weekend? Slept a lot. Uh and I went to a art fair, made some purchases bought a couple of photographs um one of my favorite things to spend money on is art so that was my big event of the weekend oh I had um I had friends over for Shabbat dinner Friday. So that was nice. Oh my God, Claire wins. Let me get this. Ed goes to Vegas. I go to Wait, hold on. I go to Tulum and buy Molly from a woman in the bathroom and Claire goes and buys photography and has Shabbat dinner. Okay. Yeah, I Claire wins. Claire wins. I think we're doing it right. Should we get on with the show? Let's do it. Let's get into our conversation with Bill Gurley, general partner at Benchmark Capital and author of the new book Running Down Dream. Bill, so good to have you on the show. A lot of people have been interested in having you on. I'm glad we have you on today. You are a legendary investor, but I want to start with your book, Running Down a Dream. It was based on a talk that you gave at uh UT Austin, and it's essentially your advice to young people, your career advice let's just start with what is your career advice to young people what do you talk about in the book I had this moment in my life um almost 10 years ago where I was reading biographies a lot of biographies and I noticed a through line through some of them. I I'm a former blogger as a venture capitalist. I look for patterns and ideas that and this thing kind of synthesized for me. And all of these people started at the bottom rung, and all these people were working in fields your parents would probably tell you not to go into. And um, I think it the single synthesis of the whole thing is that if you can find something where you have just immense curiosity, that you end up in this learning loop that's self-reinforcing. And m almost all the people we profiled um have are lifelong learners like just constantly learning in their field and um when i decided to turn it into a book a couple a bunch of people noticed the presentation james clear was one of them that reposted it and that's part of what pushed me to to go do the book. But we probably studied a hundred more biographies. We went through all the academic literature. We talked to Angela Duckworth and Adam Grant and and Daniel Pink and all the people that are known in the field got a lot of help from all of them. And so there was a lot more work that and we also did a study with Wharton um about people and whether they end up in in a job that they're happy with or not. And so there's a lot more synthesis, a lot more data in the in the in the book that relates to that. People should go read it if they want the full story, but if you could tell us what are a few of the main things that you saw across every successful person that you profiled. Curiosity, it sounds like, is the big one. Are there any other things that you noticed? Yeah, I mean identifying something that you have that much curiosity about is difficult and it's not easy. And Angela Duckworth, six years after she wrote Grit, said if she were doing it over again, she had said grit was half passion, half perseverance, and she said many kids we've taught to persevere, especially with the the state of the kind of resume arms race that goes into the college application, but then they burn out. And the the the thing is if you find something that you have this fascination with and then that that lifelong honing goes forever. And it it's it's just really hard to find. And I I have a number of examples in the book that I borrowed mostly from other people that have written books in the career space on trying to identify that thing. But if you do, then then you have just a this immense kind of learning machine that goes on where I I like to say if if you one way to test if you're really in that lane or not, would you would you study about your field at night instead of watching breaking bad? Like does it compete with with what you would consider to be free time activities. Because for most of the people that are really on top of this thing, the the if if a new article pops up, it's something they want to consume right away. And that work or what some people would think of as work doesn't require energy. In fact I think it emits energy um when they're able to think about this thing that they love so much. And so that's th those are that's really the foundational block. After that, I'm a big believer in peer groups, which is something I don't think a lot of other people had really explored as much. And so finding people that are on the journey with you at the same time and embracing them. And we have some incredible examples in the book of people that did that early on and and went on, the whole group went on to success. I think a lot of our learning from um how to think about your career climb comes from zero sum games, comes from athletics and that kind of thing. And so some people come in sharp elbowed and there's no reason to. There's tons and tons of winners in any career path, and and peers can be super helpful along the way. We added a chapter that wasn't in the presentation about going to the epicenter and probably have gotten some of the most positive feedback about that. There's a lot of reasons why a human would be afraid, for instance, to go launch their film career in LA or to just up and move to Silicon Valley. But I really think, and I could go into detail. I think there's just tons of reasons why that's going to maximize optionality for the individual. And then lastly, the the last principle, there's six principles in the book, um, has to do with having a give back mindset from the very beginning. And I I think that there's a self reinforcing loop that happens when you do that. What would you say to the people who take your views, take the knowledge, take the lessons, but then they say, well, AI is here now. And if we've got AI leaders telling us that half of entry-velle white-collar work is going to be wiped out in the next one to five years, something that we have literally heard from uh people like Dari Amade, this the and other AI leaders, that the rules of the game have just entirely changed now. If there were things that worked for you in your career and we know that your career was a massive success, well maybe it's not going to work this time round. What would you say to those people? There are a number of people. I think there was a Gallup poll survey in twenty twenty-three that said fifty-nine percent of people were they use this word quiet quitting, but I would say, you know, ambivalent about their job or indifferent. They're not they're not engaged or passionate about their job. And to me, those are the ones, and unfortunately it's a really big group of people that are most at risk from AI. If you think about it, the rote best practice of yesterday is exactly what's in the models, right? Like they've studied the best practice what's in the textbooks, and it's put it in the models. The thing that's not in there is the stuff that's on the edge, you know, the creativity, the the ideation of trying to understand the nuance in your field. And that that kind of artisan mindset is, I think, part and parcel with these people that are fascinated by what they do. They're just constantly studying on the edge. And in some ways, I would say people with high agency that are really fascinated about what they do, their life is accelerated by by AI. There's the people that you meet where they go, you won't believe what I did today. I got claw bot to do this. You know, I've met a lot of of what I might call local entrepreneurs who run businesses like, you know, storage facilities and whatnot. And and they're like, oh, I needed a third location and I ask it to map the city and I it what intersection was best? And they're like bouncing off the walls, you know, hyper excited about how their life's going to be easier with this with this solution. And so um I I think the answer is if you're high agency and super But the the unfortunate reality is I'd say the vast majority of people and and in at least in the US aren't in that place. Which seems to for those people if you're not curious, if you're not enthusiastic, if you're low agency, it's probably an accelerator to the downside, which seems like it will widen the gap even more. It certainly would seem to me that you'd be more at risk in in in that that case. Like ambivalence becomes a bit of a problem. And the the other thing that I I would say, which is not something that's necessarily in the book, which is the best way to inoculate yourself against And so to to to know in your field what it's capable of. And even just you could be more prescriptive. Let's say there are 30 people in your role at your company. Let's say you're the one that knows the most about what AI can do in that functional group. You're the least at risk. Like you're the one they're going to talk to about how to get leverage. So the worst thing you could possibly do would be to be skeptical about AI and angry about AI and and to to you know have blinders and not even try and play with it. Uh bell it's good to see you. Um I I have a story about how we actually met, and I'll use that as a lead into a question because I don't know if you've listened to the pod, but it's basically an excuse it's basically an excuse for me to talk about me. So from ninety two to two thousand, I felt like I was at Sand Hill Road pitching some nice white dude every week. Every week. And in ninety nine, I was starting a uh an e-commerce incubator in New York, and it was backed by Goldman and JP Morgan and Mavron. And I thought I need a Silicon Valley investor. And I met with a guy named Andy Ratcliffe. Yep. And he said it was either late 99 or early 2000. He said, I want you to meet one of our new partners. And I rolled by and I shook your hand and I all I remember thinking was, this guy is taller than me sitting down. And we I think we met for like 10 seconds, but that was back in literally late 99, early 2000. I think you just joined Burn Benchmark. Any way, I haven't been back to Sand Hill Road in 26 years. If I were to go back now as an entrepreneur and try to raise m oney, how have how has the business changed? How have the entrepreneurs changed ? How has the companies that are the winners changed? Like give me a uh a vision of Sandhill Road in the dynamics and the underpinnings uh in two thousand and then fast-forwarded to two thousand and twenty-six. more competitive uh through my entire career. And it it was more competitive when I joined than it was twenty years before that when it was very oligopic. And it's way more competitive now as I move away from the venture industry. And that competitive dynamic uh in its in its current form um has resulted in really, really big checks going into any company that looks like it's breaking away. And most of those rounds now are done preemptively, meaning the company didn't decide to go out and raise money. There are investors with billion-dollar funds who may not have that bumper sticker on their car who are calling saying, please, please take my money. Um and that's just a very different reality, you know, from from where from when I started. And today, you know, you'll read about a $300 million Series B. You know, the numbers were very small back in those days. I mean, these companies were going public with one or two million a a quarter in revenue and and n not having raised that much money, like twenty million dollars or something. Today every company that is being identified as a winner is ingesting four or five hundred million dollars minimum before they even think about going public, if they're ever going to think about that. So it's a it's it's in it's institutionalized in a way, um, somewhat similar to what happened to the pea industry, you know, private equity industry 10 or 15 years ago. Um, there there are cycles of mania, and obviously that time frame you were talking about was a peak cycle in that way. And um and certainly one could argue things are manic today um for a lot of different reasons. I think the big theme here is the money has gotten unbelievably big, uh, in a way that it it wasn't before. To the point where, and this is something that Scott and I have discussed on our show, and I believe it's something you've talked about too, companies don't really need to go public anymore. At least that's not what we're seeing with OpenAI. That's not what we're seeing with Anthropic. We're seeing these ridiculous rounds. We're seeing uh series L rounds. We're seeing companies raising it $800 billion valuations. Like these are insane numbers. And I try to think about like why has this happened and what are the implications of this? It seems as though the institutions and the most moneyed individuals realize that there are a lot of gains to be had in the venture market. And so they poured into that market, and it has resulted in going in coming at the expense of, say, retail investors, where the way they would get into a great company like Amazon or Apple, as you say, who went public at far lower valuations, I think Amazon was like a billion dollars when it went public, they had that opportunity early, but they don't have that anymore. That's something that I worry about. I wonder if it's something that you worry about too. I do. I worry about it quite a bit. And and there's a number of I mean data points. So the number of public companies in the US is less than half of peak. And so we've really had a a a fall off in the number of companies that are actually public. Um partially you could blame that on just of a bureaucratic creep. And I would say kind of a legal creep, right? The the the number of like w weird derivative lawsuits that are allowed are are part of what causes it to be expensive to be public. Um, there was another thing that happened. There used to be a shareholder threshold that would force you to go public, and there were a number of companies that that literally had to file as a result of that mechanism. That has been whittled away and taken down. And then I'd say more if if you were gonna point a finger more directly, I would say the late stage funds have have come up with a pretty clever premise, which is if they can intercept those growth years that used to be in the public markets and keep it for themselves in an oligobic kind of way, there there's there's only a handful of these really really big funds then um then they get that growth they they get to steal that that economic upside maybe steel's a strong word but but simultaneously with telling the founder you don't ever need to go public, they'll go around to the LP community, the endowments and foundations, and say, Look, these companies are no longer going public. If you want exposure to those growth years, guess who you need to give money to? You know, me. And so it becomes self-reinforcing. And that's what's been happening. I also, one other thing that I think the the the venture industry used to go through these periods and cycles where it would get reset and people would learn that you're taking too much risk and you'd get wiped out. From like oh one to oh eight, the number of venture capitalists got cut in half. I think we were headed towards a correction like that coming off the ZERP years, the zero interest rate period. And right when there was about to be a correction, this AI wave took off and the money just flowed back in. So I it's almost like I felt like we missed a bit of a correction and and and there's just risk seeking dollars um everywhere. Um the thing that would cause it to stop is if somehow the money ran out. There was fear of an endowment tax causing a liquidity crisis at some of the foundations. Harvard and Yale, I think, got into the secondary market last year. And so there was, you know, a sign that, oh, wait, this could cause a liquidity crunch. And I think there's a reasonable argument, by the way, that both the commercial real estate, the venture capital, and the PE marks are all too high at all of those endowments and foundations. But that's a that's a that's a whole nother stor y. We'll be right back after the break and if you're enjoying the show so far please send it to a friend and follow us if you haven't al ready At Medcan, we know that life's greatest moments are built on a foundation of good health, from the big milestones to the quiet winds. That's why our annual health assessment offers a physician-led full-body checkup that provides a clear picture of your health today. And may uncover early signs of conditions like heart disease and cancer. A healthier you means more moments to cherish. Take control of your well-being and book an assessment today. Medcan. Live well for life. Visit Medcan.com/slash moments to get started . Support for the show comes from so far. 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To learn more about SoFi Plus, head to SoFi.com slash SoFi hyphen plus . AI has reached the point where it's in every industry you can think of. And CFOs and CIOs are feeling the pressure, not only to justify their AI spend, but to incorporate it safely, because the real challenge isn't adopting AI. It's understanding how it's being used and how to maximize its value. That's exactly what Laridin focuses on. Laridan is the AI Impact Intelligence Platform designed to help organizations understand how AI tools are used. Laridin explains the opportunities to get more out of AI and the value AI initiatives deliver. Instead of just counting logins or installations, Laridin tracks real utilization, proficiency, governance, and impact. Metrics that matter when enterprises scale their AI. Plus, Laridan identifies the best opportunities to generate more value from AI across all your teams. So if you're a business leader who wants clear insight into AI adoption and outcomes, instead of guesswork, you should check out Laridin. If AI is already part of your organization, now's the moment to get control of it. Head to Laridin.com today and book a demo to start maximizing impact from AI . We're back with ProfT Markets. What do you think would happen? I mean, how how would a correction play out? Are you worried that we are maybe about to face one in in this market? I know there are concerns in the private credit markets. There were seemingly concerns about AI that there was a bubble. Now that's slightly dissipated. We're seeing the value. We're seeing these incredible tools. What are your thoughts on the possibility of a correction? What would it look like? I mean, I I always give credit to Carleta Perez who wrote this book So I I disagree with this idea that that oh it's either f it's either a bubble or it's real, because that's what when you say, oh, there's a bubble, people go, Oh, you don't believe in AI. No, the fact that it's real causes people to get rich quick, and when people get rich quick, uh charlatans and speculators flood in and things get overheated. And I think that certainly has happened. Um i I don't have any crystal ball to predict like what would cause it to reverse. I think the circular deals are horrific. I I don't think the auditor should have approved them. And I think whenever you eventually have an unwinding, they're gonna make it worse. Um because they won't they won't be sustainable. You shouldn't be able to move uh cash from your balance sheet and and create revenue on your income statement. I just don't think that should be okay. Um but they're all doing it. Like every single one of the big players is doing it. What would one of those big players say when you make that point to them? Because this is a point that that some people have been making, especially in financial media, the circular deals where NVIDIA will invest in a company and the company pays them back, but your voice holds more weight in those rooms. And I'd be interested to hear what they s how they respond when you say it. I explained the type of deals without naming a company or industry. I just explained the structure of them to ChatGPT, and I would encourage anyone to go do this like it's an exercise anyone could do. And it immediately started talking about WorldCom and Enron, like unprompted by me. Like I just said, what do you think about these types of structures? And you know, the the you can go back to the very first deal, which was Microsoft and OpenAI and there were credits involved. So you get equity for credits and then those credits are used, you know, to run workloads on Azure. That is cashless revenue for Microsoft. Like just think about it. There's zero cash flow whatsoever. And they're booking revenue. That's just i i it at the very least it's very low quality revenue. Um and I don't know why the auditors didn't get in front of it. I suspect when and if there is a reset, they're they're all of a sudden become awakened and they'll change the rules and it won't be allowed in the future. But it's it it it's it's bad, it's bad accounting. Like it shouldn't it shouldn't be happening. And it it's unfortunately happening, you know, across the spectrum. Like all the all of the major players are doing it. And the push you ask what do they say? I mean, people have asked 'em. They say, well, it's not material. And I say, well if it's not material, you shouldn't do it because it's causing concerns that I think is hurting people wanna understand why the NVIDIA multiple won't go higher. I I think it's the circular deals. Like if like if if they're not material, don't do them. Like like and then you'd be better off. But I do think from the very beginning, I think NVIDIA's been concerned about customer concentration. And there's an odd amount of of uh distrust is a strong word, but there's a lack of trust amongst all these big players. Everyone's working with everyone's competitors. Where do you think that comes from? Because it sounds like what you're describing is a culture in the tech community where this is normalized. And it has gradually become more and more normalized the more that we have seen it. And I would add to this list these sort of acquisitions that are fake acquisitions where you just you have a contract with a startup and then you hire the employee. So what Microsoft did with inflection and it's basically an acquisition and it seems to play into this same dynamic where you're kind of skirting around the rules. What is driving that? I think that second thing is a different dynamic yet. I think that has to do with get getting around regulatory approval and the and the long window that that has. But but um but I agree it once it becomes kind of normal, then the the the competitor, you know, imagine if you're in, you know, you work at in AWS or you work in g in the Google Cloud business and you see that Microsoft deal and then you see 'em announce as yours growing thirty five percent and you've got pressure, you know, on yourself to compete in that market, you you're gonna go do the same deal. And they did go do the same deal. That's exactly what happened. They all did the same deals. Which seems to be like the exact recipe for a bubble where you're all chasing the same fake thing which is fake revenue or is that an unfair way to put it? You don't necessarily have to call it fake, you could call it uh uh like souped up revenue, right? Like you're you especially like in in the NVIDIA case, they are giving money to a lot of nascent startups. Actually the thing that Nvidia did that's probably most um questionable is they so they propped up Coreweave to once again expand the the competitive set, but then they wrote a contract with Coreweave where it said if Coreweave ever is has extra capacity, we'll buy that capacity, which presumably helps it get more debt financing, that kind of thing. That boy, I don't know how you could sit there and say, Well, oh, that's a normal way to do business. And if the market's so hot, why do you need to do all this? Like why why w what's the point? But I do think it's become normalized. I think your word's perfect. Um and Trevor Burrus So let's go back to 2000. Early tech CEOs, Chambers, Meg Whitman, Jeff Bezos, they were sort of seen as jobs, kind of modern-day heroes. And it's much different today. Now I would describe the perception of Texos as their bond villains minus the charm. They're generally seen as having a victim complex, not being good for America, being so obsessed with shareholder value that they're willing to compromise the well-being of the Commonwealth . Do you believe there's a fundamental change in the character and complexion of Tech CEOs now versus say a quarter century ago? Or is it a perception problem? Aaron Powell Yeah, I don't see anything that I would say is wildly different in the personalities or characteristics of the leaders. I've listened to to you guys talk about this fear mongering that comes out of anthropic. I I've never seen anything like that in my entire life. Um and I think you guys mentioned this, but the the polling on AI fear in China is like twenty percent or something like that, and it's like eighty here in America. And I I don't know of another reason for that other than some of the dooms doomerism is loudest within the community itself. And and that's start some of the founders. Yeah, and it's starting to have ramifications for the industry You know, it's it's uh but you a number of data center projects has been stopped. You know, there's this weird situation where and there was an article yesterday, I think, where half of the AI community is funding like one set of lobbyists do a super PAC and the other one's on the other side and they're like thrashing uh amongst the regulators. It's it's I I mean uh prior to SBF, I've never seen a startup worry about regulation this much you know, from the very beginning. And now and now we're seeing it again here. It's it's it's pretty foreign to what and I I I gave a speech a few years back about regulatory capture and I said that the reason Silicon Valley works so well is it's so far away from Washington. These guys these guys are rolling around in it. Aaron Powell So just along the lines of public policy, there's been a bunch of new tax proposals and some specific to California specifically, the wealth proposed wealth tax has gotten a lot of attention, and then there's a narrative that if these taxes continue to go through, there's going to be an enormous exodus out of California. Do you s do you sense or see personally amongst your peer group an exodus? Because to date, I don't think there's a lot of evidence of it. The people with the most options in the world Zuck's moving out. That's that that would be my caveat. Anyways, uh whenever I go to California, all I can all I the only question I have is why did I leave? But but when when you're there and you're you're rolling with these people, do you think it's a real issue or do you think it's overinflated? Well, I think Silicon Valley is, you know, going back to the chapter of my book or go where the action is, is a is a incredibly special place to be an entrepreneur. And the amount of of learning and mentoring and partnering and like the your your ability to jump from one job to the other. It's like no other place on the planet. And it'll take a lot to upset that apple cart. I have a bit of a fresh perspective on the tax issue that comes from spending quite a bit of time in in China over the years, which is one of the things China has done to kind of reach the the level of success they have is the provinces competing with one another. And I went back and and read a bit about like you know, John Adams and in the Federalist Papers was talking about state versus state competition. And and I wonder if the the best way to think about this is to shine a spotlight on what policies are working in certain states and which policies aren't working in certain states and almost, you know, amplify the different approaches to see what what is best practice. I mean, as an example, the peep not everyone knows this, but in in Austin Texas,, rental rates have fallen for four or five years in a row. While it's one of the fastest growing cities in the country. And so I I happen to know people that fought for the NIMBY policies that were changed here. And that's an example of a policy that appears to be working. A lot of people like to talk about housing prices and a concern, and and they pass policies where like government builds buildings for five hundred thousand dollars a unit or something. And there's no proof that works. And so I like this idea of like state versus state competition. It's such an interesting point. The way that politics has played into the AI story, especially recently. In contrast with your previous point, which was your view on Silicon Valley and Silicon Valley success, is it was very, very far away from DC. These were very separate worlds. And it does, you bring up this point, it's got me thinking, like, it does seem as though the worlds of Silicon Valley and Washington are starting to kind of mesh into one another. And we're even seeing, you know, many tech executives, tech investors, David Sachs would be an example, moving into Washington, taking up positions in government. And the two are becoming intertwined. Um, I I just naturally have like an uneasiness, I guess, about that concept, but I'm not exactly sure why. So I'd be interested to hear what you make of that. Why is that happening? Uh and what does it mean for the future? I mean, I share that unease with you, Ed, and and but it it comes from a place of there was a there's a phrase I think Andrews and Horitz used a lot called little tech and what they mean is the two-person entrepreneur, you know, and and there's this idealism that many of us that have lived in Silicon Valley and practiced venture capital love to believe that two people on a PowerPoint can create a new idea and and become disruptive and and create this, you know, huge company and and economic wealth and whatnot. If if every new category is immensely regulated, it that that kind of goes away, right? Because you need people with connections. You need and and part of what's driving, you know, what you're talking about is, you know, crypto, which got started without it but now is heavily dependent on whether or not regulation goes a certain way. Um many venture capitalists have gotten comfortable with funding military equipment companies, which wasn't a thing ever during my career as a venture capitalist, that requires connections and and approvals and spending tons of time, you know, at the Pentagon. So so there are these new there's these new areas that are and now AI where very young companies are begging for regulation, which is not anything I've seen, you know, in my career either. So I I agree that it's happening. It makes me uneasy because I like to believe in this more And there's places in between. Like I think, you know, the fact that I can earn four percent on my circle stablecoin via Coinbase is awesome and disruptive to a heavily regulatory captured finance industry that's been that way for fifty years. And there's a battle that's you know, there's an article out today where the circle stock is down because there's a draft that wants to make it illegal for them to pay that yield. So that's one where I've kinda in the middle. Like I I think the the bigger regulatory capture is is the actual banks and not crypto. I think stable coins could be wildly disruptive. But once those stable cone companies become big, will they turn around and use regulatory capture against the next one? Probably. I think regulatory capture in the US is a huge problem, th unrelated to whether Silicon Valley's a part of it or not. Yeah, it sounds like we probably all agree that what is best is for a market where there it disruption is readily available and it's frequent where that can happen. You can have a new guy enter the scene, burst onto the scene, and then create real disruption, create real value. And when you look at the the most valuable companies in the world today, it's like they're all kind of the same handful of companies and they're all acquiring the same talent in the AI space. I mean, I guess the new players are open AI as an example, but then you look at the shareholders of open AI, Microsoft being one of them who you know owns a significant portion of their profits. It's like it all seems to be the same handful of players. And I guess the next question becomes how do you address that? Like if we want to create a world, especially in the venture venture capital industry, where young new talent can succeed and they can take on the big players like Meta, like Microsoft, how do you actually create that environment? Aaron Powell A skeptic would push back on you Ed and say OpenAI and Anthropic, you know, came out of nowhere and they're already huge. And someone I think could even make the argument that they may have done to their host what what Microsoft did to IBM. You know they these it's not clear to me that owning a piece of the thing protects you against disruption. Right. And and there's a chance that that they've already birthed these two companies into a place where they're gonna turn around and be disruptive to the people that gave them the money. I I think that's possible. If it's if you separate those two things and just look at maybe the Mag 7 pre AI and look at how big they got. I've talked to a few people in the policy in the in public policy world that look at that type of problem. And I I do kind of think that breaking stuff up is the better alternative to to trying to regulate them because when they regulate them, you know, the incumbents r help write the regulations. I think it just further ensconces them. There was a period where they broke up ATT and disqualified their patent portfolio and that birthed all kind of innovation. I I think that had Microsoft not been under threat in the late 90s, you may not have seen Amazon or Google or a lot of companies you may not have seen uh if they had been allowed to push through the browser the way they had moved up the app stack, and they were certainly capable of it, but they got they got there was kind of a ring fence put around the browser. So if if if we believe network effects or something are making these companies too big and you want to do something, and I'm not arguing you have to, but you want to do something, I think the dismantling doing something abrupt in one time that changes the field is better than trying to s you know say prove to us you're not like the the people try this with Google all the time. Prove to us you're not uh favoring your own products over the competitors in Google search. Like there's like the ability to enforce that over the long run is very difficult Aaron Powell What happens when you make that claim in Silicon Valley? Because I feel like it's been people have pushed for it, but it's been shut down because it's it's it it's too much. It's overbearing. You can't just come in and break things up. Like how do people in Silicon Valley, the the leaders and the decision makers, react when you suggest that that might actually be a good idea? Aaron Powell I mean, I don't think they talk about it a lot. The the people that that are sitting in the positions of power at those big companies are obviously going to push back and tell you how competitive their world is and say, you know, if you're if you're Sundar, you're going to say, look, open AI is competing with search like they just came out of nowhere like this is highly competitive I I don't know that you're gonna get any unique insight out of them um but look the the the point of uh there's there's a concept in economic theory called pure competition. And there's a Wikipedia page on it. But the idea is that if you have like capitalism thrives when you have pure competition and marginal you know revenue goes down to marginal cost. And if we have companies that are that are extracting excessive rent for extremely long periods of time and have really, really high margins, it's indicative, I would argue that this I don't think you're gonna get a lot of other people in Silicon Valley that would be willing to say this, but it might be indicative of of market failure rather than market success . We'll be right back. And for even more markets content: sign up for our newsletter at profgmedia.substack. com This is advertiser content brought to you by Virgin Atlanta. Ed a couple weeks back. I got you a birthday gift. N toot pat myself on the back, but it was a pretty good one. It was indeed. You surprised me with Virgin Atlantic upper class tickets to London. So uh tell us all about it. It was pretty incredible from the moment I entered that upper class cabin, I have to tell you, I felt like a VIP. Anything I needed, a drink, snack, assistance with the seats. Flat seats. Flat seats. That's the case. Flat seats. Exactly. Had the four-course meal, got my champagne, very delicious, enjoyed the food. And the journey home? The journey home was great. I went to the Virgin Atlantic LHR Clubhouse, that's the Heathrow Clubhouse. Heathrow Clubhouse was awesome. Got myself a coffee, headed over to the meditation pod that they call the soma dome. Kind of felt like a sort of spaceship where you relax and and uh think think nice thoughts. So I did that for a little bit. Then we went over to the wing, which are these acoustically sealed booths where you could do some work. Uh you could even record a podcast. I didn't do that, but maybe I should have. It was a very enjoyable experience. So Ed, the real question here is what are you planning to get me for my birthda y? See the world differently with Virgin Atlantic. Flying should be more than just transport, it is part of the adventure. Go to VirginAtlantic.com to learn more. Tickets and lounge access provided by Virgin Atlanti c. When you think of the most influential American politician of the 21st century, you probably think of a man. But there's one woman who might fit the bill. She never thought she'd be in politics, but went on to break what she calls the marble ceiling. Then they'd say, well why don't you all just make a list of things that the women want and we'll do those. What? This is in this century. Really? So the marble ceiling. It's not a glass ceiling anymore. It's a marble ceiling. And they all had it lined up, but you go go ne nextxt and I'll and I'll go next and I we're like well you know what we've been waiting over 200 years we're breaking in line. Mancy Pelosi the longtime Democratic speaker of the House live on stage at South by Southwest Today explained. Every weekday, and now on Saturdays to o. Hi, I'm Brene Brown. And I'm Adam Grant. And we're here to invite you to the Curiosity Shop. A podcast that's a place for listening, wondering, thinking, feeling, and questioning. It's gonna be fun. We rarely agree. But we almost never disagree, and we're always learning. That's true. You can subscribe to the Curiosity Shop on YouTube or follow in your favorite podcast app to automatically receive new episodes every Thursda y. We're back with ProfG Markets. When you think about an ecosystem, you well, I'm gonna ask more a more specific question. You're m not necessarily your best investment, but your most famous investment is Uber. And Autonomous is getting a ton of attention right now. And I said on on pivot that I th ought the the biggest winner in and and I'm talking your book a little bit here, the biggest winner in autonomous may not be Waymo, it may be Uber. Um I'm curious I would love to just get your recognizing I don't know if you've sold out sold out your shares, but recognizing you're gonna have a bit of a bias here. Aaron Powell Well I think it depends heavily on um whether or not there is demonstrable differentiation at at different levels in the stack. So all things being equal, I would say that the the network effect of the Uber system, which is what I think led to the wild success, is w would stay intact. If there were one vendor in autonomous that got so far out in front of everyone else, then that person's gonna have the ability to disrupt up to a certain level. And so the the peak from or the the difference from peak to trough every day is about 4X. And so it's pretty easy for a Waymo to compete in the first 25% of a market. As you try and go up, you'd have to ask yourself questions about um how active you want and and and utilization rates that you want, because you can't you can't really build a fleet to peak, if you understand what I'm saying. And so, you know, we'll see. I mean, obviously, what DAR is doing is running out and partnering with every A V vendor possible he can. The approach that I had been pushing for um which didn't play out but was one where you would actually embrace open source ideals around the autonomous stack as in many as many So distinctive professional advice around what industry to go into. What what advice would you have for your a lot of young people listening to the to the show, especially young men, what advice, maybe on a more personal level, would you offer to your twenty five year old self? Well I have a hard time not reflecting on on the book that I've been talking so much about in this window. And I I just I I've come to believe that if you if you if you were pointed at something that you just have a remarkable obsession with. And other people have made that statement. Paul Graham has this statement about disinterested obsession. You're you're just gonna you're gonna have all this energy to excel yourself past everyone else. And I it may be that that's impossible for some, like they just don't have that thing that they're most obsessed with. But I think your your job security is higher being differentiated and being a constant learner in almost any field, then you are picking a field because you think the field is safe. If you enter that field and you're ambivalent about whether you're making yourself better or not. Bill, do you have children? Yes. Any thoughts to young or any advice to young dads? I mean I listened to a lot of your stuff, Scott, and and um and I agree with with m m most of what you say. Like it's there is a um there the we've gotten ourselves in this game. This Jonathan Height calls it the resume arms race, where starting in sixth grade, we're so worried about the child getting into a good school that we start overpacking their schedule with lacrosse lessons and Mandarin lessons and volunteering at the SBCA. Like we're just the kids today, their their their schedules are so booked relative to when I grew up, and there's there's not a lot of free time. And by the time they get to the end of their senior year in college, they're so tired. They're just tired of grinding that they want to just like take a year off or they just want to relax or they they're like really burnt out. And so this is part of why part of the reason why I um tilt towards this fascination thing is it just doesn't feel like a grind. Like if you can get someone in a lane doing something that they that they really get emotional, you hear this word flow, like like if the if that's part of what they're doing, then I think I think they got a better chance of of being feeling fulfilled than not having anxiety. What would be your advice to someone who is trying to seek that flow state? Like they know that in order to win, especially in a world of AI, they need to be enthusiastic and have a lot of interest, curiosity, high energy, but they can't locate that. What would be your advice to them keep exploring keep looking like don't there's a there's a uh Dave Evans has these stats that like five years after college, forty percent of people are no longer in their major and like ten years after it's a much higher number. And so I think I worry that we we put these children through so much of a grind they have almost a sunk cost fallacy that they have to deliver in that lane. And it and it's just not true. So I think being open minded to the notion that you can move around and explore is is useful. There's a there's a uh a really cool uh idea I stole from one of the acquired uh podcasts uh there's where he created a side hustle at every job he went to, which is pretty pretty unique idea, but when he would land, he would say, if I'm willing to work extra, will you let me do this other thing also? So he got two shots on goal, if you will, at the same time. And at Microsoft, he helped create Microsoft Garage, which was differentiating for him and caused him to meet a bunch of entrepreneurs he wouldn't have met otherwise. That got him into a job at a venture capitalist at Mavaron and he asked them as a side hustle if he could do a podcast. And you can see where that took him there. And so that's just one. There's many other ideas in the book, but like keep exploring, keep moving around, keep looking for it. And even in that movement process, I think you can differentiate yourself. My final question. This is ultimately a markets show where we try to understand markets and try to get rich. Uh you are a legendary investor. What is the difference between a good investor and a great investor in your view? The first thing that popped in my mind is just like being a student of the game and like studying. And this is advice I have in my book for anyone in any field, but like there are a handful of investors who have read all Buffett's letters and and kind of hang on every word when Howard Marks puts out a new letter. There's there's a ton of information out there about investing the and and people or rating. Today, I mean, one of the most amazing things about this AI world is if you want to learn something, it's never been easier in the history of the world to go learn and study. There's there's podcasts with people like yourselves, there's YouTube videos, interviews with people. Like you can go study, study, study. I think I think uh Toby from Shopify, someone asked him his number one piece of advice. He just said read more books. And I I I really for me that's the thing. Like the people that are best at it are students of it, like constantly studying it. And and and by the way, if you have that mindset and you make a wrong investment or someone invest in a company that you said no to, it triggers in your brain, oh shit, I've got something else to learn. And that that creates anxiety. Oh, I gotta go understand why that smart investor thought differently than I did. So that it it all goes back to that like infinite curiosity in your field. Bill Gurley has been general partner at Benchmark Capital since 1999. Prior to Benchmark, Bill was a partner with Hummer Windblood Venture Partners and a top-ranked research analyst on Wall Street. Before his investment career, Bill was a design engineer at Compact Computer. Bill authors the long-running Above the Crowd blog, which focuses on the evolution and economics of high technology businesses. His new book, Running Down a Dream, How to Thrive in a Career You Actually Love, is available now. Bill, this was a pleasure. Thank you so much. Thanks for having me on. Thanks, Bill. Nice to see you. Ed, what'd you think? I'm a big fan of this guy. I think he's a legend of the game and I was kind of I was happy to hear him speak candidly about the problems in the industry that seem to have grown. Um I just think it's always refreshing when a leader is able to kind of just be unrestrained and say, this is a real problem, especially when you talked about the circular deals. Um, I think the question increasingly becomes what are we going to do about it? Maybe it's just gonna be that you need a self-correcting mechanism in the same way that it's always been. Um , but I appreciate his willingness to just discuss it so openly. And I think his advice to young people is also great. I totally agree with his views on curiosity and the how essential that is in an AI era. What did you think? He's right about the circular de als. Uh the the whole community's gotten so strange. I think that the community has basically said, we're overinvested, we can no longer get market returns uh for our LPs by doing what we're supposed to do, and that is fall find small companies and nurture them along the way and do the hard work. So we're going to basically migrate upwards. And they have custody of the consumer, just the same way Uber has custody of the consumer and then can put in front of them whatever autonomous technology that Uber controls, or the same way Apple can extract $20 billion from a search engine because they have custody of the billion wealthiest consumers in the world, VCs recognized they had custody of the relationship with the entrepreneur. So what they said is, okay, if you're scaling, instead of handing you over to Goldman Sachs and the public markets, we're going to maintain that custody of the relationship and we're gonna continue to fund you. So we're gonna essentially maintain that custody of the relationship and the returns until which point all the returns have been squeezed out of the shit and then we'll foist our our shit on the public So they have migrated upstream. In order to do that, they now have to and can raise tens of billions of dollars and then put it to work in what traditionally would be the financing ecosystem of the public markets, which you have spoken a lot about, that the downside of that is that the average retail investor no longer has access to those returns. I think when Google went public it had a valuation of couple billion dollars, I think adjusted. Yeah. If Alphabet started today, it would have gone public when it was worth two trillion dollars. It would go public now, yeah. Yeah. So it's it's an entirely different ecosystem. It's it's also incredible like most industries that as they or a lot of as they it's in the genie coefficient is really high, and that is it's not only a small number of firms making all the returns, it's a small number of partners at a small number of firms. It's all about deal flow. Like when I was when I was raising money, there were just two or three VC firms. If you got a term sheet from Kleiner, Sequoia, and then actually benchmark was sort of the emerging Pepsi generation. If you got a term sheet from one of those three, you took it. Because what it did was it connoted your ability to raise capital further down the road because of the good housekeeping seal of approval? Whereas when you go public, Goldman taking you public gets you a pop, but a year later no one cares who took you public. So it and it's now played out in spades. If you get a term sheet from General Catalyst, you know, you're going to take you're going to take their money because and so as a result, they see everything. So the the aggregation and capital or the returns have all been clustered. I mean, there are there are so many VC funds. The kill zone, and this is true in private equity and hedge funds and in VCs, there's the Titanic iconic brands that are able to raise this billions of dollars and to get all the deal flow. There's the hyperfocused funds that do high-speed frequency trading for, you know, utility stocks in Spain that are just so focused. And And then everyone in the middle is in a kill zone. They're just getting taken out. You know, God help you if you're a $400 million long short hedge fund or a you know a one or three billion dollar private equity fund right now that's not very focused. It's just everyone wants to be in TPG or Citadel or General Callister Sequoia.