BONUS: Bill Gurley on Investing Early in Tech Disruptors & 'Runnin' Down a Dream'

16:43Barry Ritholtz:Really interesting. Coming up, we continue our conversation with Benchmark's Bill Gurley, discussing his new book, Running Down a Dream, How to Thrive in a Career You Actually Love. I'm Barry Ritholtz. You're listening to Masters in Business on Bloomberg Radio.

17:09The thing about AI for business, it may not automatically fit the way your business works.

17:14Barry Ritholtz:At IBM, we've seen this firsthand, but by embedding AI across HR, IT, and procurement processes, we've reduced costs by millions, slash repetitive tasks, and freed thousands of hours for strategic work. Now we're helping companies get smarter by putting AI where it actually pays off, deep in the work that moves the business. Let's create smarter business, IBM. Support for the show comes from Public. Public is an investing platform that offers access to stocks, options, bonds, and crypto. And they've also integrated AI with tools that can assist investors in building customized portfolios. One of these tools is called Generated Assets.

17:54Barry Ritholtz:It allows you to turn your ideas into investable indexes. So let's say you're interested in something specific like biotech companies with high R &D spend, small cap stocks with improving operating margins, or the S &P 500 minus high debt companies. Chances are there isn't an ETF that fits your exact criteria. But on public, you just type in a prompt and their AI screens thousands of stocks and builds a one of a kind index. You can even backtest it against the S &P 500. Then you can invest in a few clicks. Go to public.com slash market and earn an uncapped 1 % bonus when you transfer your portfolio.

18:30Barry Ritholtz:That's public.com slash market. And paid for by Public Holdings. Brokered services by Public Investing, member FINRA SIPC. Advisory services by Public Advisors, SEC Registered Advisor. Crypto services by ZeroHash. Sample prompts are for illustrative purposes only, not investment advice. All investing involves risk of loss. See complete disclosures at public.com slash disclosures. Being a small business owner isn't just a career. It's a calling. Chase for Business knows how much heart and effort go into building something of your own. That's why they make business growth their priority. The Chase team takes the time to understand your mission, where you are now, and where you want to go.

19:07Barry Ritholtz:Their broad range of solutions is designed with you in mind so you can bring your ideas to life. From banking to payment acceptance to credit cards, you can conveniently manage all your business finances all in one place with their digital tools. Looking for tips and advice? Their online resources are always available to give you the solutions you need to help your business thrive. See how your business can get stronger and go farther with Chase for Business. Learn more at chase.com slash business. Chase for Business. Make more of what's yours. The Chase mobile app is available for select mobile devices.

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19:54Barry Ritholtz:I'm Barry Ritholtz. You're listening to Masters in Business on Bloomberg Radio. My extra special guest today is Bill Gurley of Benchmark Capital. He has a new book, Running Down a Dream, How to Thrive in a Career, you actually love. I love the Tom Petty title. What led you to start with that?

20:15Bill Gurley:I put together, back when I was super active writing blog posts, I would keep these notes in digital form, but I would start, I'd probably start three or four times as many blog posts as I finished. And so if an idea popped in my head, I'd just write notes down and see if I went back to it. And that was a note? Yeah. I had read these three biographies of people that were from very different fields that all started on the bottom rung and became became remarkably successful in their field. And I noticed a through line between them. And I just wrote it down the same way I would figure out how an internet marketplace company might thrive, like, oh, do this, this and this.

20:58Bill Gurley:And I got invited one day back to my alma mater to do a speech and at Texas Business School. And I asked if I could do this one. And, and so then I developed it a little more and I put it out there. They put it on YouTube. And a few people noticed And one of those was James Clear, who wrote Atomic Habits. And I don't want to make this sound too mushy, but at some point, I decided that it was time to declare victory and hang up my boots in venture. And it was a decision. It wasn't like the other decisions. I spent 25 years in venture capital. I loved every minute of it. It was my dream job. but I wanted to start doing other things and there's a great book by Arthur Brooks Strength to Strength that talks about people that reach that stage in life and it really spoke to me and I decided to push this book out and two people had really gotten behind me and pushed me to do that.

21:59Bill Gurley:One of them was Tony Fidel who invented the iPod and was head of engineering on the iPhone. I know I recognize that name. He has a book called Build. He also started Nest and yes he told me that it was the best thing they'd ever done. And that's kind of hard to believe. And then I was talking to Danny Meyer last night, the famous New York restaurateur and founder of Shake Shack. And he said the same thing. He said the book Setting the Table was more rewarding for him than anything he had done. And I asked him, why is that? And he told a story. This is a very long answer, I'm sorry. He told a story about being in Africa at a hotel.

22:37Bill Gurley:and one of the local workers in this restaurant we were in, he was in, told him, look at how I'm doing the eggs. And it was a technique out of his book, Setting the Table. Oh, really? And the reach, his argument was the reach that he could get in sharing what he knew via a book, you know, was exponential compared to what he could do just opening another restaurant. And that was powerful. Anyway, once again, it sounds maybe a little too mushy or sassy. Not at all. But if I'd have written a book about being a VC or an investor, there's only a handful of people it might have touched. And I felt very compelled to share this because I thought it could have a much bigger reach.

23:21Bill Gurley:Because it's not just about – it could be applied to a career in investing, but it's a much broader book about doing what you love.

23:29Barry Ritholtz:So let's talk about some of the items from the book, starting with, there's a stat. I think it's in the introduction. It's not even in the first chapter. Six in 10 people say they'd do something differently if they could start over. That's a horrifying statistic.

23:45Bill Gurley:Well, we were studying this Gallup poll that said like 53 % of people are quite quitting at work. They're not engaged or don't consider themselves engaged at work. And I think other people have echoed those types of thoughts. And on a whim, we, I was working with a co-writer and researcher, we did a SurveyMonkey survey and asked this question, if you could start over again, would you do something different? That one came out 7 in 10. We hired Wharton to do an official academic review, and that one came out 6 in 10. There's a book by Daniel Pink about regrets called The Power of Regrets. And he says that the regrets of inaction, the stone unturned, the path not taken, way in our brain, we ruminate far more on those than regrets of action.

24:34Bill Gurley:So we let ourselves off the hook for making mistakes. We're pretty good at getting past them and moving on. But the thing we never tried, it really eats at us.

24:45Barry Ritholtz:I forget the name of the book. They interviewed a bunch of 90-year-old people talking about their life regrets. and it's never the commissions or errors. It's always the things they never did. Because in your mind, you imagine an entire different pathway. And that's the regret.

25:04Bill Gurley:One of the catchphrases we use in the book, which came from my partner Kevin Harvey, is life is a use it or lose it proposition.

25:12Barry Ritholtz:For sure. Absolutely for sure. So the idea of career regret, you lay out a variety of principles to avoid it, starting with obsessive curiosity. Dive into that. Tell us about obsessive curiosity.

25:27Bill Gurley:All of the people that we studied and we expanded it from the presentation I gave at the school and probably read 100 biographies. But every single one of these people are obsessive learners in their field. And you and I are both, I already mentioned, but you and I are both friends and a fan of Michael Mobison. And I don't think there's a human that reads more books on finance than Mike.

25:53Barry Ritholtz:It's a race between him and Warren Buffett.

25:56Bill Gurley:Yes. And he fully synthesizes them. One cheat code if you want to chase a dream job in investing is you could just start by reading Michael's books because he's read all the other books. and it'd be a great place to start.

26:11Barry Ritholtz:I literally have a couple of chapters in here based on his work. Yes, yes. Because he's just so seminal in so many ways.

26:20Bill Gurley:And in the book, you'll see examples of Danny Meyer, the restaurateur, Bob Dylan, the folk singer. There's this part we uncovered. I'm sorry that the new movie missed this, but you get more of it if you go back to the Scorsese documentary. Some people called him a music expeditionary. So he studied music at a level. No one would know this like if they just listened to Dylan, but he is obsessive about learning about the art. And early on they called him a mimic because he was able to kind of parrot every other artist that he studied. And even today, you know, he did a podcast for a while where he went through histories of music.

27:09Bill Gurley:His newer book goes through 50 songs that he thinks changed the world. This study element is just inherent in so many of these people. And what I love about, first of all, I think it is a defining factor of success. Are you, does continuous learning in your field come easy to you? And it's a great test of whether you're pointing in the right direction or not. because if it feels grindy to do that, you're not in the right place. You need to try some other thing.

27:41Barry Ritholtz:You're going to laugh. Every morning I take a quick look at a bunch of headlines and run through, and I saw something this morning that said there's a high correlation between people who read books and longevity. So all these folks chasing down blood treatments and all these longevity things, It turns out, just read a couple of books a month, you'll extend your lifespan.

28:05Bill Gurley:How about that?

28:06Barry Ritholtz:Yeah, really, really interesting. So you mentioned Danny Meyer. You mentioned Bob Dylan. Sam Hinckley, the coach, is another one. When I first got the book, I'm always a little nervous when I get a book and I'm like, oh, this is going to be preachy and tedious. But it wasn't. It's interesting and narrative-driven. what led you to the storytelling format of all these people's life experiences as opposed to the more traditional?

28:35Bill Gurley:Your listeners can't tell because we're not on video, but I'm smiling, grinning ear to ear, and I'm so glad you noticed that. Oh, it leaps off the page. So there was quite a bit of intention in that. So just as when I was a computer scientist, as I was at home trading stocks as an investor, I developed on the side somehow, I guess through this act of reading, just a super appreciation for really well-written nonfiction. And there's actually, there's two books. Back of the book, you have chapters on it, on all your favorite books. There's a book called The New Journalism and a follow-up called The New New Journalism.

29:16Bill Gurley:And Tom Wolfe put together the first one. The second one is writers, people would know more today. that studied the craft of great nonfiction writing. Like that's what that book's about. And it covers Lewis and Krakauer and Gladwell and all the books that have done extremely well. And there is a through line in there that storytelling is something that people really love to read. Morgan Housel was on this podcast called Why We Write and he went on and on about that technique and I had discovered it as well. And so my co-writer actually does most of his work for The Atlantic. And so the book's divided into two halves.

30:00Bill Gurley:There's profiles and there's principles. And if you look at the table of contents, we interleave them, which was a technique I borrowed actually from Michael Dell's book where he interleaved two stories in the same book. And the idea, there was two things behind that. One, I thought the book would be more readable if it did that. A lot of the books that are the cornerstones of the career category, like Designing Your Life and What Colors Your Parachute, are structured more like a textbook. And I just felt that if it were more readable, it would be more approachable and more consumable for more people.

30:42Bill Gurley:And then I also, and this goes back to what Morgan Housel was pushing, reading the stories is, I think, puts it in your memory a little bit better than just reading a principle alone.

30:53Barry Ritholtz:Oh, we are geared to remember narratives as opposed to data or dry principles. And the intentionality behind telling stories makes it very readable as opposed to, let's be honest, what color is your parachute? It's been in print for, I don't know, 50 years. 57 years. Yeah, forever.

31:15Bill Gurley:Still in the top 10 in the category.

31:17Barry Ritholtz:But it's kind of a slog to ply through. It's like reading a textbook. Yes. And when is the test? So I have a couple more questions about the book I got to bring up. The book seems to be very much a bit of a pushback to modern hustle culture. Was that on purpose or was it really, hey, you know, it's not a grind if you're really enjoying it and you should listen to your own body's signals that I'm really hating this, but I'm grinding it out.

31:50Bill Gurley:One fortunate thing in putting this book together is, and I think this is really just easier in the modern world, we were able to connect with some true amazing leaders in this field. So we ended up talking to Adam Grant and Daniel Pink and Angela Duckworth and people that have really made a name for themselves in this field. we stumbled across a podcast Angela Duckworth had done recently where she was looking back 10 years after on grit the book and the original thesis of grit was you need passion and perseverance and she said if she were going to rewrite it she would maybe instead of 50 50 say two-thirds one-third passion and her fear was that we've taught young adults how to grind like we and and I feel that the evolution of the college matriculation conveyor belt has been negative.

32:49Bill Gurley:I feel like it's become an arms race to get these kids into the hardest schools. The schools aren't expanding capacity, so they just keep getting harder and harder to get into. And the kids get taught to fill their schedule with programming so that that resume can be perfect. And they're not given the time to really explore and find. And many people don't really know what their dream job is. And some of them might not find it till they're 30 or 40. And that's okay, too. But we've pushed and pushed and pushed. And many of them have risen to the occasion of doing all that work. But they graduate from college exhausted.

33:32Barry Ritholtz:You describe this whole section, step off the conveyor belt. I was just watching something about Norway is this tiny little country, yet it dominates the Winter Olympics despite lots of other cold weather countries. And their secret is all these kids are encouraged to join sports as kids. But unlike here, there's no there's no trophies. There's no competition. It's do you want to for as long as you want, as long as it's interesting. and every one of their medalists say, yeah, I was a slalom skier until I was 14 and then I switched to whatever, but I had the background and it was great. There was no pressure.

34:16Barry Ritholtz:You could do what you want. It turns out letting kids play is a great strategy.

34:21Bill Gurley:And I'm not the first one to make that point. There's a chapter in Coddling of the American Mind titled The Decline of Play. and I do wonder if it's harder to find your obsession and find this thing that you're totally fascinated with if you're stuck in this game that's not one of your own making.

34:43Barry Ritholtz:You know, it's funny. The phone, which is always within reach, means that you're never bored, but boredom is what leads to creative output and I'm wondering what this generation is going to look like down the road.

34:56Bill Gurley:Well, hopefully some of them will be able to get a hold of this book and find their way to a better place.

35:03Barry Ritholtz:Coming up, we continue our conversation with Benchmark's Bill Gurley talking about the state of venture capital today. I'm Barry Ritholtz. You're listening to Masters in Business.

35:26So there's a lot of noise about AI, but time's too tight for more promises.

35:30Barry Ritholtz:So let's talk about results. At IBM, we work with our employees to integrate technology right into the systems they need. Now, a global workforce of 300 ,000 can use AI to fill their HR questions, resolving 94 % of common questions. Not noise. Proof of how we can help companies get smarter by putting AI where it actually pays off, deep in the work that moves the business. Let's create smarter business. IBM. Support for the show comes from Public. Lately, it feels like there are two types of investing platforms. Some are traditional brokerages that haven't changed much in decades, and others feel less like investing and more like a game.

36:08Barry Ritholtz:Public is positioned differently. It's an investing platform for people who are serious about building their wealth. On Public, you can build a portfolio of stocks, options, bonds, crypto without all the bugs or the confetti. Retirement accounts, yep. High yield cash, yes again. They even have direct indexing. Public has modern design, powerful tools, and customer support that actually helps. Go to public.com slash market and earn an uncapped 1 % bonus when you transfer your portfolio. That's public.com slash market.

36:50Barry Ritholtz:All investing involves risk of loss. See complete disclosures at public.com slash disclosures. Being a small business owner isn't just a career. It's a calling. Chase for Business knows how much heart and effort go into building something of your own. That's why they make business growth their priority. The Chase team takes the time to understand your mission, where you are now, and where you want to go. Their broad range of solutions is designed with you in mind so you can bring your ideas to life. From banking to payment acceptance to credit cards, you can conveniently manage all your business finances all in one place with their digital tools.

37:25Barry Ritholtz:Looking for tips and advice? Their online resources are always available to give you the solutions you need to help your business thrive. See how your business can get stronger and go farther with Chase for Business. Learn more at chase.com slash business. Chase for Business. Make more of what's yours. The Chase mobile app is available for select mobile devices. Message and data rates may apply. JPMorgan Chase Bank N.A. Member FDIC. Copyright 2026. JPMorgan Chase and Company.

37:57Barry Ritholtz:I'm Barry Ritholtz. You're listening to Masters in Business on Bloomberg Radio. My extra special guest this week is Bill Gurley. His new book, Running Down a Dream, How to Thrive in a Career You Actually Love, is out today. He's also a member of Benchmark Capital, a legendary venture firm. Let's talk a little bit about some of my favorite benchmark investments that I seem to use constantly. I think it's ironic we're recording this the day after this giant blizzard hit New York. The trains aren't running. The buses aren't running. I took an Uber here. So kind of full circle, you're the guy who brought Uber to the public attention, funded it, and walked it through the IPO.

38:45Barry Ritholtz:Zillow, I use all the time. OpenTable, I have to use a few times a week. Tell us about these giant consumer-facing companies that became wildly successful.

38:58Bill Gurley:asphalt so um i stumbled upon and this actually will involve mike mobison again um him and i were working together in the research department at csfb and we became enamored we became book shares like and that's been true for 30 years but we became enamored with this book complexity by mitchell waldrop about the rise of the santa fe institute which i know he's involved yeah i am as well. So we're both on the board. And Bill Miller of Leg Masons, a long time involvement. Carl Kawaja from Capital Group just joined the board. So there's a handful of investors that get a lot out of it. But the original book highlighted this guy named Brian Arter.

39:44Bill Gurley:And Brian had done work on what he called increasing returns. And they published one of his pieces in Harvard Business Review. It was ironically co-written by Cormac McCarthy, but no one knew it at the time. And that's come out since then. Anyway, increasing returns was this argument that if you have the right pieces in place, your company will accelerate towards winner take all. And when I read that and I started looking at what was capable with the internet and possible, this notion really was prominent in my mind and I can remember I think the first one of those that we invested in was OpenTable and I remember my partners pushing back and saying selling computer hardware to a restaurant is a crappy business and you know SMBs how will you ever scale it and the idea was well if you got more if you got all the restaurants on the consumers would only want to go there.

40:50Bill Gurley:And if you got all the consumers on, the restaurants would feel obligated to be in that place. So, you know, there's no reason to have multiple of these things. And that was the thesis when we made the original bet. It wasn't straight up. We lived through the dot-com burst and had to grow after that. But it did play out that way. And the network effects were present. And then from there, I started thinking about what other industries would that apply to and that's what led to all these other so open table leads to uber

41:22Barry Ritholtz:leads to zillow is that the progression absolutely huh because because you know it's hard to argue that those three are pretty indispensable yeah uh what about uh others that stand out next door

41:34Bill Gurley:grubhub what else is in that group um yeah and stitch fix you know did really well uh i um And then also the firm, while I was there, invested in Twitter and Snapchat and so many different companies in the social space, Instagram. I don't know how we did them all. Well, you didn't do them all.

42:01Barry Ritholtz:First of all, VCs in general do something that I'm very much enthralled with. they're kind of proud of their failures, which the rest of finance is sort of terrified of. The idea that, hey, we invested in this, it went to zero. We skipped this. We missed this. A lot of VCs on their websites have, hey, here's what we blew. Here's what didn't work out. And you very famously missed Google. What were the lessons from that experience?

42:29Bill Gurley:Well, I think the biggest takeaway, which leads to what you just described, Barry, is that when you miss a big winner, it's very asymmetric to the counterfactual, right? If we invest$12 million and it goes to zero, you lose one time your money. If you fail to invest$12 million in Google, you miss out on... 1 ,000x. 1 ,000x. And so over the years at Benchmark, I would tell you that I don't recall very many discussions at all about, oh, that one went to zero. Let's study why that happened. My partner, Bruce, came up with this phrase, what could go right? You orient yourself towards the failure being missing out on a huge winner.

43:21Bill Gurley:And so we changed the kind of things that we studied as failure that you want to correct.

43:29Barry Ritholtz:How different is that, an experience and a process, from making investments in existing legacy public companies.

43:38Bill Gurley:Well, I don't think you have the potential for the 1 ,000x as often. And so you're not going to. And the 1 ,000x can make up for eight losses that you never heard of. And so it just forces you, if you're in that big game hunting mindset, to really, really focus on could this work as opposed to could it fail and only be obsessed about that part. You mentioned it makes sense. And I think it's different. Because we are oriented to absorb failure at a level that you can't do in the public market.

44:16Barry Ritholtz:So you mentioned it's 1 in 10. Is it that much or is it closer to 1 or 2 in 100?

44:22Bill Gurley:I mean, for the big, big outliers, of course, it's what you're saying. But one in 100 could return the fund. But you've got to find that one. I mean, think about that. That's a really weird dynamic to be out there doing.

44:40Barry Ritholtz:So I'm legally obligated to ask you about AI and artificial intelligence. How do you look at this sector? What do you think is going to happen?

44:48Bill Gurley:By the way, one last thing before you go to AI. I think that the venture industry is constantly evolving. And today's venture industry looks nothing like what I practice, which looks nothing like what the generation before me saw. It's gotten way more competitive. And the best investors have become aware of power loss, where these big winners go on forever and they become these trillion-dollar companies. And as a result, they're very comfortable now betting it forward. And so we have firms like Thrive and Cotu and Altimeter are willing to put big, big checks into private companies in a way they never would have in the past, making the bet that that compounding law is going to keep playing out.

45:39Bill Gurley:So everything's changed.

45:41Barry Ritholtz:So that raises a really interesting issue. Benchmark has stayed kind of small, early, nimble, while a lot of other VCs really beefed up. What is it about avoiding becoming a megafund, chasing late-stage growth that was so appealing to you guys?

46:01Bill Gurley:So, one, I do think we've reached the point of kind of the industrialization of the venture capital world. And these funds and these assets under management are starting to parallel large PE firms. And I think, one, it's very hard to stay focused on the artisan craft of identifying early opportunities if you're running this thing that has to look after. It's hard to get excited about a$7 million investment if you're managing billions and writing$500 million checks. and you're earning, by the way, a management fee and a venture carry on the 500. Why would you? You just get oriented differently.

46:44Bill Gurley:And second, I think it would be very difficult for those firms that get that big to have IRR that is anything other than industry at best.

46:54Barry Ritholtz:So you've been pretty loud about valuation discipline and the risk of having a high burn rate. Is that a function of looking at earlier stage companies or is it just simply an analyst discipline of looking at companies? I think it's the latter.

47:12Bill Gurley:I think it's reading all those books, like studying Buffett, Graham and Dodd. I brought to the venture capital industry a study of investing history that most VCs never have. And I think it was differentiating for me. Some people call me like the VC cynic, but that's okay.

47:34Barry Ritholtz:So I think of you as an elder statesman in the VC community, but you're hinting at something I'm going to ask explicitly. What rules have too many venture capitalists not learned that you think would behoove them and their firm to go back to some basics and focus in on that'll help both their returns, their LPs, and their funded companies.

48:02Bill Gurley:The thing I would say to answer that, Barry, is that it's always going to... Howard Marks wrote this great piece a long time ago who highlighted that the way you make really good money is to have contrarian non-consensus predictions that are right versus wrong. And right now, and AI, you know, these big waves create so much wealth that I think for a moment when the waves happen, you have to move past that and realize that the wave could be so big that you can just plow in. But eventually, Howard's going to be right. And eventually, the market is going to become oversaturated. There's this great book by Carlotta Perez where she said that bubbles always follow real waves because you attract speculators and charlatans and all that.

48:56Bill Gurley:And people would want you to say if you use the word bubble, you don't believe in AI. But it's the opposite. I believe that it's real, and that's why it's attracting the charlatans. And eventually we'll go over the top. We always do.

49:10Barry Ritholtz:Every new technology comes with this void of people that are deeply enmeshed in it, knowledgeable, and articulate. And so there's just a rush to fill that space.

49:25Bill Gurley:And they get rich quick. And when people are getting rich quick, fools rush in.

49:30Barry Ritholtz:I love the Bill Bernstein quote. We use the word guru because it's too difficult to spell charlatan. And it's really very much true. So let's stick with the concept of variant perspective, another phrase I really like, and part of the job of being both contrarian and right. What do you think is a non-consensus view you're willing to articulate today that's going to look obvious 10 years from now, but right now, very non-consensus?

50:00Bill Gurley:Um, I would, the thing that pops in my head, just because people have been talking about it the past few days, I think this, this paper that came out yesterday is just completely over the top. And the notion that every tech company in the world needs to have their terminal value set to zero is probably not true.

50:21Barry Ritholtz:I love the barbell. Either AI is a bubble that is not going to do anything for us, or it's going to be so effective, everybody's going to lose their job. Isn't there anything in the middle? Hey, maybe this is a useful technology.

50:35Bill Gurley:Well, look, Buffett's the one that said, be fearful when others are greedy and greedy when others are fearful. So if AI fear is the topic of the day, the contrarian thing to do would be to try and figure out what price points you believe represent true value. And I'm not saying we're there yet, but hey, stocks, since the ZERP period, high-tech stocks have been rather expensive from a PE standpoint for, what, seven years now? They're on sale all of a sudden. Buffett says you want to be a net buyer, so we should all be excited.

51:09Barry Ritholtz:You know, people don't – I heard last year that the Magnificent Seven, all this market concentration is going to kill us. And yet last year, only two of the seven beat the S &P 500. So this sale process started a year ago. And then so far this year, it's pretty clear the rally is broadening out. It's going to other stocks. We continue to see sort of a rotating sell-off as these AI fears hit different companies. It's going to be really interesting to see what's going to get cheap and attractive and fear-driven going forward.

51:45Bill Gurley:Yes, I agree. That's where you should be looking.

51:47Barry Ritholtz:Before I get to my favorite questions, I have one other sort of non-consensus question to ask you. What do you think people are either not talking about or thinking about that they really should be? What topic is getting overlooked but should really be much more front and center than it is?

52:07Bill Gurley:Everything but AI. I mean, I've never been in a scenario where everyone's so all in on this one thing. And it is important. I think the best way to protect yourself against AI disruption is to run at it and be the person in your field that knows the most about it. But boy, everything else is just not being discussed.

52:31Barry Ritholtz:Everything else. So let's jump to our speed round, our favorite questions. Let's do it. We'll plow through this. Tell us about your early mentors who helped shape your career.

52:40Bill Gurley:Well, I already mentioned Mobuson. It was kind of more of a peer, but still, I was so lucky. Al Jackson gave me that first job on Wall Street. When I showed up there, there was a gentleman named Charlie Wolf. I don't know if you ever met him. Of course.

52:55Barry Ritholtz:Charlie Wolf was one of the few guys bullish on Apple when the first iMacs came out and the iPod. And the street did not understand Apple, and he's the only guy who did.

53:06Bill Gurley:And Charlie was a force of nature. People loved him. He was a professor, simultaneous professor at Columbia and cell-side analyst on the street. Great. And I got to hang out with him.

53:17Barry Ritholtz:That's a name I haven't heard in a while. He passed away, unfortunately.

53:20Bill Gurley:Yep, unfortunately.

53:21Barry Ritholtz:You mentioned a lot of books. There's a whole chapter at the back about various books you and other people recommend. Yeah. What are you reading currently? What's interesting?

53:28Bill Gurley:I'm reading an early unreleased copy of David Epstein's new book called Inside the Box. He did Range, right? He did Range, which I adored. I adored Range. And anyway, Inside the Box, where he's talking about how constraints drive creativity. And it's really been, what I love is when a book makes me think differently and about other things. And I've already, he and I have already started to have a text thread about taking it even further beyond what his intention was, which is awesome.

53:59Barry Ritholtz:That description immediately makes me think of the scene from North by Northwest. I don't know if he mentions this in the book, having not seen it. Yeah. The Hollywood MPAA code did not allow movies to show a man and a woman getting into bed. So it's Cary Grant, and I forgot which leading lady is the woman, and they're on a train, and they're not allowed to both be seen in bed and then cut to the image of the long train driving into a tunnel, all the subtlety of a sledgehammer, that was fine. But the two of them sitting on... I got you. That's the constraint that forced Hitchcock to say, oh, you're not going to let me do this?

54:44Bill Gurley:Hold my beer. And I had mentioned earlier Tony Fidel, he would tell me that Steve Jobs for the iPhone, he didn't come in and dictate every little thing, but he would say, I want it this thin. And by just saying that rather than how thin can you make it, it forces people to think creatively. And you come up with more ideation and innovation than without the constraint. Really interesting. What are you streaming these days? What's keeping you entertained? I just watched Pluribus.

55:13Barry Ritholtz:My wife just started it without me. How'd you like it?

55:16Bill Gurley:I loved it. Really? I really did. That's in the queue. She was so good on Better Call Saul, but this is her shining. She already won the Emmy for it. But there's some implications for AI that are really clever.

55:34Barry Ritholtz:It's definitely on my list to check out. So my next two questions are kind of answered in the book that I ask everybody. So essentially, it'll be a summation. what sort of advice would you give to a recent college grad interest in the career in either

55:52Bill Gurley:venture capital or finance well in finance um this is going to be so redundant i apologize i would tell him to go read michael mobison's five books because mike has read every single mike's the most read financial mind that i know of and he synthesized everything he read in those books and so it would be like starting on first base i i mean on second base i i talk about in the book that you should study the history of your field and if studying the history of your fields uninteresting once again i think you're not in the right place and so that that would be it like start with the masters gram and dot and read the buffett letters like like it's all out there it's so wonderful.

56:38Bill Gurley:There's never been a better time to learn in the history of the world because it's all available.

56:44Barry Ritholtz:I'm so surprised more people don't talk about the success equation because the idea of the impact of luck, and he talks about investing business in sports, we underestimate luck tremendously, and it's such a great book.

57:01Bill Gurley:But you can improve your luck.

57:03Barry Ritholtz:And we have a - Increase the surface area of luck is the phrase that always sticks out.

57:09Bill Gurley:And there's a principle in the book called Go to the Epicenter where we recommend if you can at all, go practice where everyone else is practicing precisely to impact that equation.

57:21Barry Ritholtz:And our final question, what do you know about the world of venture investing today? Might have been useful 25 years ago when you were first starting.

57:29Bill Gurley:It probably goes into the thing we already drilled into. Like, had I been more open-minded to the question of what could go right and pursued the Google investment, maybe I retire earlier. Maybe we're not talking about the book.

57:44Barry Ritholtz:I have a feeling you would not have retired earlier. You would have kept going because you seemed to really love what you did. I did, no doubt. So, Bill, thank you so much for doing this. Can I leave you one last thing? Yeah, absolutely.

57:56Bill Gurley:The book was written for the hero that would make this journey, but there are people in every hero's life that act as advisors and counselors. There's parents and there's a whole bunch of people that shape your career process. I think they're going to get a lot out of this book, even though it's not written to them, because I think there is this overwhelming well-intentioned instinct to put the economic stability of a child's life at the front. And I'm not sure it's the right answer.

58:32Barry Ritholtz:Coming up, we continue our conversation with Benchmark's Bill Gurley. I'm Barry Ritholtz. You're listening to Masters in Business on Bloomberg Radio. Thank you.

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1:01:36Barry Ritholtz:I'm Barry Ritholtz. You're listening to Masters in Business on Bloomberg Radio. My extra special guest today is Bill Gurley of Benchmark Capital. So Benchmark has really put together an extraordinary track record. Uber, OpenTable, Zillow, Stitch Fix, eBay. Go down the list. What is it about Benchmark's model that was so unique and really produced better outcomes than so many VCs have over the years?

1:02:03Bill Gurley:Yeah, I really, and I have to give the credit to the founders because they're the ones that put this structure together. But this equal partnership structure has a cultural dynamic that encourages immense amount of support from the partnership. I certainly didn't have a fear of failure or anything like that. And also an element of peer pressure. So the pressure is not a pressure of do this or you're out. It's a pressure of my partners putting up these wins and I'm sharing equally. I need to do that myself. And so it's more the way maybe someone on a sports team might do well and encourage other people on the team to do well as well.

1:02:53Bill Gurley:And for me, and I won't say that this is necessarily true for everybody else. For me, that culture was a perfect fit. I enjoy having the camaraderie and the support of other people. I wouldn't enjoy being a solo GP and making decisions on my own. There's some great work that's been done on group dynamics and group analysis. And one of the really clever things is the group tends to know the weaknesses of the individual better than the individual themselves. And if you're aware of that, you can use that to help your group decision making. So I just adored every bit of it. I love that the firm is tilted towards thinking about the work as a craft or an artisan.

1:03:43Bill Gurley:And I find that to be true of almost everyone I profile in the book. If you care about nuance and detail, it's typically because you're treating the art of what you do in a craft-like fashion. Really interesting. Yeah, and I think that that's what Benchmark does.

1:04:04Barry Ritholtz:Venture capital as a team sport, do you want to draw any parallels to playing ball? Anything that comes into that?

1:04:12Bill Gurley:Well, I think it could go beyond playing ball, but do you create a team culture where greatness is going to be expected in an output?

1:04:25Barry Ritholtz:I bring that up because you mention Sam Henke in the book.

1:04:28Bill Gurley:Yeah.

1:04:29Barry Ritholtz:I think that's the best coaches try and foster that it's not just about your individual performance.

1:04:37Bill Gurley:You're a team. And it's hard. And people, I think, should be more fascinated with what Bezos did at Amazon and Elon has done across multiple companies because the individual, everyone knows that Bezos and Elon are innovative and independent thinkers and contrarians. But how do they scale a company to hundreds of thousands of people? How do you take that mindset and put systems in place where it's propagated all the way down? And I don't think enough work is going into figuring out what they do. I'll give you another interesting example. Sachin Nadella probably led either the first, probably from a market cap creation standpoint, the best turnaround of all time.

1:05:28Bill Gurley:No doubt about that. Absolutely true. I mean, maybe Steve Jobs. 20 years earlier yeah yeah okay those two but but they ask that one almost went down to the to the

1:05:39Barry Ritholtz:to the studs if you will on the remodel if gates didn't save apple that would have been it they

1:05:46Bill Gurley:would have been done so steve was starting with more bare metal satya had to turn this bigger ship yes and he claims what he did is he told everyone we're going to go from being a know-it-all to a learn-it-all culture. And man, if that one heuristic is what was the key to this, like kudos to him. I mean, what a miraculously simple insight. And then, you know, kudos to him on making it effective, like pushing it through the organ. I bet they had to push a lot of people out too.

1:06:21Barry Ritholtz:Well, if you look at the culture between him and Bill Gates, the gap, Balmer, very different personality, very different approach. You can make the case that Nadella was the anti-Balmer, and during Steve's reign, it wasn't great returns, although a lot of people didn't have great returns in the 2000s. So it's a little bit of both. I have another question I kind of suspect I know the answer. So you've spent decades not only picking business models, but founders, boards, addressable markets. What's the single hardest question you wrestle with aside from what could go right?

1:07:09Bill Gurley:I'd say the thing that pops in my mind, Barry, is this notion of TAM, total addressable market. And I think the investor community gets really stuck on that one and are not open-minded enough about what's possible, especially if the technology becomes disruptive. There's a famous interplay between me and this professor at NYU around Uber. He published this piece that said Uber would never be worth more than$4 billion. And I wrote one of my favorite blog posts ever titled How to Miss by a Mile, where I took apart his analysis and tried to, well, I had an unfair advantage. He said that the market Uber was attacking was the taxi market, and he used that as the thesis for his analysis.

1:08:00Bill Gurley:I already knew in San Francisco that Uber was 20x bigger than the taxi market. He didn't know that. So once you have that piece of knowledge, it's kind of an unfair game. But it gets at like the product became so much better than what the taxi market offered you. And it immediately became, you know, and I think in the long run will be a replacement for car ownership, which could allow for many, many years of growth.

1:08:33Barry Ritholtz:Especially if self-driving taxis become a thing. But by the way, huge disadvantage analyzing Uber in New York City in the early 2010s because it was a monopoly. Taxes were a monopoly.

1:08:46Bill Gurley:Not only that, in the report of his, which a summary version got public, but I found the background version, he admits that he had never ridden Uber and only taken taxis. So I think being in New York gave you the exact wrong mindset.

1:09:00Barry Ritholtz:The first time you get into an Uber, you're like, damn it, I wish I was an early investor. I remember being a beta tester of Google and sending an email and saying, hey, can I invest in this company? They're like, we are good. And then the first time I got into an Uber, it's like, oh, this makes perfect sense. On your phone, it's mobile. It knows where you are. It was so obvious after the fact.

1:09:25Bill Gurley:And credit to Dara for taking it from$40 billion. He touched$200. That's fantastic. $200 billion versus$400 billion. That's what a closed-minded TAM analysis would get you. You get your way off.

1:09:41Barry Ritholtz:So I'm legally obligated to ask you about artificial intelligence. How are you looking at the opportunities in this space? I kind of think we addressed that. Do I really need to ask that?

1:09:53Bill Gurley:You want me to? Yeah. Okay. Yeah, so look, I think there are people in the venture community that would tell you this is the biggest disruption wave they've ever seen. And there's no doubt that venture does extremely well around these dislocations. And there's great books like The Innovator's Dilemma that talk about why. But the mobile wave, the PC wave, the client server wave, all these things birth really big companies. Some of them doing the exact same thing. So there were four companies in the CRM space before Salesforce came along, but the SaaS wave allowed them to steal all that market cap that was in those companies.

1:10:32Barry Ritholtz:Is that a case of second mouse gets the cheese?

1:10:35Bill Gurley:No, I just think it's that these waves, it's very hard for an incumbent to be at the front of the wave. It's kind of different here with AI because there's certainly an obsession within the Mag-7 about AI and what it might do to them. But anyway, VCs tend to do extremely well when these waves come, and so everyone's all in. And look, it's very disruptive. It's very different than anything we've seen before. I would encourage people once again to really dive in and ask yourself, no matter what field you're in, what is AI capable of here? And to be that person in your organization that has the answer to that question.

1:11:18Barry Ritholtz:You know, it's fascinating that all of the big hyperscalers are spending tens of billions, hundreds of billions, building out these systems. Apple's writing a check to Google to put Gemini into Siri, which was early and terrible. Now it's late and terrible. I'm hoping Gemini, which has been really good, turns Siri into something useful. How do you think of that sort of approach of saying, hey, it's cheaper to buy than build?

1:11:47Bill Gurley:I will tell you, I have a couple different answers to this, which I think are quite interesting. First of all, the MAG-7 formerly were creating, I don't know,$300,$400 billion in cash flow.

1:12:01Barry Ritholtz:$2 trillion in revenue, almost$400 billion in profits.

1:12:05Bill Gurley:Yeah, but now almost all of that has been exhausted into CapEx. And Mike Movacin and I would have long arguments about what that meant from a valuation perspective. But he sloughs it off and says they can stop tomorrow, and then the cash flow will come back. Fair. I argue if you're trying to build a DCF, now all of a sudden you have to make a decision about whether that would happen or not and whether there's a return on this CapEx investment. But the second thing I wanted to say is I have found over the years, maybe this is another contrarian thing, not enough, that big companies think there's some kind of safety net in making an investor in a new disruptor.

1:12:48Bill Gurley:And so here we have Microsoft and Google, you know, doing and Amazon making investments in these foundational model companies. And it's not clear to me that that is actually a good hedge because I think both of those companies, Open and Anthropic, now have escape velocity. I don't think they're dependent on the partner anymore. And it harkens back in my brain to IBM letting Microsoft put the OS inside the PC.

1:13:22Barry Ritholtz:And we sell hardware. What good is software going to be? All right. One last quote. You said there's a mess coming from zombie unicorns that all have stale marks in private portfolios. I'm a huge fan of Cliff Asnes's volatility laundering or the private ownership that doesn't get updated or marked to market. What does that reckoning look like when these marks finally show up in the real economy?

1:13:50Bill Gurley:So this is probably a three-hour conversation that I will try and do in a very short form. There is a very famous investor, or I'd call him an endowment manager named David Swenson. Of course, Yale model. That is the Yale model. And David said that everyone should be more invested in private and famously had returns that were spectacular.

1:14:19Barry Ritholtz:But as someone who's a historian in my space, that was 40 years ago when— No one was doing it. No one was doing it. It was a white space. So I think—

1:14:28Bill Gurley:Absolutely great valuations, great opportunities. I think the Swenson mimic effect has now played out. And I think personally that most of the endowments and foundations in the U.S. are overinvested in private, both PE and venture. And I think that the way the industry is structured, and this would require longer conversation, there's no incentive for the operators inside of the endowments or foundations to get the paper marks right. And there's no incentive for the GPs to get the paper marks right. And based on talking to people that do this for a living every day, I suspect both the venture papermarks and the PE papermarks and the real estate papermarks are all too high.

1:15:14Bill Gurley:Nonsense, yeah. And if we had had a liquidity run, like if an endowment tax had happened, you might get to that sooner. I think it's going to take forever to unwind. You ask kind of like when's the day of reckoning? I don't even know.

1:15:27Barry Ritholtz:So I read over the past few months, Harvard and Yale are both trying to sell. They did some secondary. Right. So they're doing some selling. That's a sign. Right. And now you see the whole issue with Blue Owl with some marks and Boaz Weinstein making an offer to buy assets at a substantially discounted price. Are these one-offs or is this perhaps -

1:15:53Bill Gurley:I think that's maybe the first sign of this correcting. But once again, the only thing that could really lead to a faster correction if there was a liquidity crisis within the endowment.

1:16:06Barry Ritholtz:And we briefly saw a threat of that when the president threatened to start taxing endowments and other things.

1:16:14Bill Gurley:There's other articles you can find about debt products inside of foundations which hint at the fact that you're not getting liquidity from your privates and you don't want to get over allocated in them, so you have to borrow money.

1:16:26Barry Ritholtz:So, yeah, well, all crises, financial crises at the underlying is leverage and debt. The other thing that to me was a big warning sign, I'm curious as to your thoughts, the whole democratization and, hey, we're going to move private credit and private equity to people's 401ks, that to me smells like someone rang a bell.

1:16:50Bill Gurley:I'm so with you on that, Barry. And I think you're going to watch the same thing happen with venture because what I talked about earlier where they're trying to keep these companies private forever, they're going to have the same liquidity problem. And I think they're going to run out of money because they've gotten these things so big. So watch for someone to lobby to put their 401k into a stage venture firm as well.

1:17:14Barry Ritholtz:Early already began. And, you know, it's going to be an issue.

1:17:19Bill Gurley:I fear the Swinson thing is going to have this, like you said, when he did it, he was the only one doing it. And it was contrarian back to the Howard Marks thing. Right. The fact that everyone followed him and the time it's going to take for that to play out and get fixed is forever.

1:17:39Barry Ritholtz:Thank you, Bill, for being so generous with your time. I've been speaking with Bill Gurley of Benchmark Capital and author of the book Running Down a Dream, How to Thrive in a Career. you actually love. If you enjoy this conversation, well, be sure and check out any of the 600 and change we've done over the past 12 years. You can find those at iTunes, Spotify, Bloomberg, YouTube, wherever you get your favorite podcasts. I would be remiss if I didn't thank the crack staff that helps me produce these conversations each week. Alexis Noriega is my audio producer. Anna Luke is my podcast.

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