Deven Parekh on the State of Startup Investing

26:32And then if it gets through their own team, then they would bring it to the overall investment committee. So I've heard some venture capitalists talk about valuation almost as if it doesn't matter, which as a public markets guy, I kind of shudder when I hear it. I think it was Mark Andreessen who once said, all right, we were early stage investors in Facebook. Had the valuation been doubled, it practically wouldn't have affected our returns. My immediate answer was, well, they would have been half if the initial investment was double, but 100x point taken. How do you think about valuations, especially when you're looking at early stage A or B rounds, where it kind of feels like total addressable market, growth projections.

27:20I don't want to say fabricated, but they're squishy best estimates. They're guesses. Yeah. Okay. I mean, look, but in an early stage deal, like, it's a guess. I think the person who wrote a check in Palantir didn't know that Palantir was going to become what Palantir became. But they saw an entrepreneur with a vision, with a potentially large market, and decided to make the bet that this person could execute and turn it into that larger market, right? Look, I'm not going to say the valuation doesn't matter. But I think what you can say is that we have – it's a line that one of my partners uses that we don't overpay.

27:58Companies just miss their numbers. Which is just – I mean it's said in jest, but really the point is that generally – not always, but generally the price we paid, if the company hit the numbers that we thought they were going to hit, even if the price seemed high on current revenue, it feels reasonable. So companies that – even recently AI companies that seemed expensive six months ago don't look so expensive six months later just based on kind of how their run rate revenue has changed. So the way we think about this is we do care about valuation. We lose deals on valuation. But that doesn't mean the deals that we win aren't high absolute valuations.

28:38It's just how much conviction do we have in the growth, right? And this is why these markets are not efficient. You can have very high conviction on XYZ company's growth, and I can have low conviction. And one of us will likely be right. And if I was right and did it, good for me. And if I was right and didn't do it, it just depends on who's right. So I think the way we think about it is all of these deals today, certainly AI deals on a multiple of revenue basis are going to feel expensive. Of course, you have to look at growth adjustment. So even as a public market investor, you'd say that a company that's growing at 10 % is going to have a different valuation than a company that was going to grow at 30%.

29:24Now, how do you even start thinking about a company that's growing at 100 %? It's hard to think about. And it's not hard to think about it for a year, but if something can grow 100 % for three years, and then even if it deaccelerates and compounds off three years of 100 % growth, that's a pretty high multiple that you can pay. So the way we really think and talk about it is not valuation doesn't matter, but we think about in terms of if you're paying a high multiple, then your conviction needs to be high on the growth rate. Now, you're not always going to be right, right? And that's part of the business.

29:57We just have to be right enough. You mentioned software. The first thing that comes to mind is Silicon Valley, San Francisco, the West Coast. Insight Partners is New York City-based. I know you have offices around the world. Is there an advantage or disadvantage to being based here in New York? We think there's an advantage. Maybe we're just convincing ourselves that because we live here. But I think that not being in – I mean, I can tell you what the disadvantages are, but I think the advantage is not being in the bubble. We're not all having breakfast at Bucks and talking about the same 20 deals.

30:37Now, maybe that's bad if those 20 deals are the deals you have to be in, but there's a tendency to have everybody kind of want to do the same thing. And I think not being in that every day lets you step back more and kind of decide what you want to do as opposed to what everybody else is doing. You know, I think there's a disadvantage too. Like the strategic buyers are all out there. You know, we're not in the same flow of those companies sometimes as people who might be seeing those people all the time. But on balance, I mean, I think we've done okay and we've managed to sell to a bunch of strategics.

31:10And so I don't think it's hurt us to be here. And I mentioned you have offices around the world. You literally, you know, it's not just New York, Silicon Valley, London. You guys are all over the place. It's really four presence. It's New York, it's San Francisco, it's London, it's Israel. Those are really the four places. So how does being global help the firm? What do you learn from having that sort of global perspective? Well, I think we're pretty disciplined about how we've grown. And I'd be surprised if you see us have a lot more offices in five years. If you look at – take Israel, which Jeff Horning really drove that strategy for us to get into Israel.

31:54I think – I might get the numbers wrong slightly. But I think we had 60 or 70 companies in the portfolio before we put the first person on the ground. And at that point, there were six firms that had five to ten people there that had portfolios of five or ten. Because I think the thing that we want to avoid is if you put somebody on the ground before you have a portfolio, then they need to rationalize their existence by creating a portfolio. And maybe that's a good idea, but maybe it's a horrible idea. And by having the bar that if you want to do a deal in Israel or you want to do a deal in India, you actually have to get on a plane and go 10 ,000 miles or fly 12 hours.

32:34Got to be a really good deal. You got to be really excited about it, right? And so it creates a natural like, no, I like this deal in Long Island better. OK, well, you spoke with your – you spoke with – and it probably should have a little bit of a better return in order – if it's that far away, right? And so we've kind of waited in these places to have really conviction that that's going going to be a market because we have a lot of companies in that market before we add presence there. So there's plenty of places in the world where we have companies, more companies than funds that are in that local market.

33:08Really interesting. Coming up, we continue our conversation with Devin Parekh, Managing Director at Insight Partners, discussing the state of startup investing today. I'm Barry Riholtz. You're listening to Masters in Business on Bloomberg Radio. I'm Barry Ritholtz. You're listening to Masters in Business on Bloomberg Radio. My extra special guest this week is Devin Parekh, Managing Director at Insight Partners. The firm runs over$90 billion in venture capital and various… Hi, I'm Stephen Carroll. And I'm Caroline Hepker, here to introduce you to a podcast that brings you the news you need to start your day in just 15 minutes.

33:50It's called Bloomberg Daybreak Europe Edition, covering all the top stories across Europe and around the world. Each weekday morning, we're up early to bring you the latest news by 7am. We've got everything you need to know from geopolitics and global events to economics and what's moving markets. I'm covering it all from London. And I'm in the EU's capital, Brussels. We have 3 ,000 journalists and analysts around the world to tell you what's happening, what it means and why it matters. It's more than just business headlines. from the price of your breakfast to global shifts in power. Economics and money aren't just part of the story, they're often the driving force.

34:26So start your day with us on Bloomberg Daybreak Europe Edition for the news you need to know and the context to make sense of it. Find new episodes of Bloomberg Daybreak Europe Edition by 7am London time on Apple, Spotify or wherever you get your podcasts. ... stages of private equity. So you guys have a reputation for being software investors. Why have you focused on that one space? And how many different subsectors are included under software? Well, we've been doing software since 1995. And if you look since 1995 to today, I think I might be wrong about this. And maybe there's one other category for which this is true.

35:11But I don't think since 1995 there's been a single year where the software industry declined in aggregate revenue through every recession, through every cycle. And as a percentage of GDP, it just continues to increase. The software component continues to increase. So I think if you had asked a bunch of us 10 years ago, maybe you thought, oh, maybe we're going to cap out on software. We're going to have to go do something else. That really hasn't been a problem. I don't foresee it being a problem. So it's a massive industry. who's had great growth, but the projected growth over the next 10 years is very strong.

35:46So I think that we don't need a new category to go after. We like this category. This category has got amongst the highest growth rate of any category out there. And it's really well downside protected too. If you had a lender on, they would tell you that software is their lowest loss ratio. What catches your attention first when you're looking at either a startup in software, or a reasonably developed company? Is it the founders? Is it the technology? Is it a combination of both? Well, I think it depends on stage. Like, you know, I think in an early stage company, you know, founder and tech is really, really important, right?

36:26And market. Now, as you said earlier, you're making a guess sometimes on a market at a very, very early, at a series A stage. Now you're hopefully making an educated guess based on lots of pattern recognition of companies, based on lots of data and how big that market is measured in different ways. But it's a common mistake to underestimate a market, right? I mean, when we look back, it's a little bit more of a consumer example. But when we look back, I remember looking at Uber, and we convinced ourselves that how could you ever pay a valuation that's higher than the total TAM? Right. And the total TAM was New York and San Francisco of black cars.

37:02Well, it turns out that's not really the total TAM of Uber today, right? Forget about food delivery and groceries. I was just talking about cars. Just yellow cars. Yeah, just because they went to UberX and UberX totally changed the TAM. So I think TAMs are not static. And I think that's a very, very hard thing to recognize that, OK, maybe they're going after a small problem today. But that might be the Trojan horse to get into bigger and bigger markets over time. And that's where intuition and pattern recognition and kind of seeing what a great founder is, which is why I look early stage I think is much harder than growth stage or buyouts.

37:39where you have lots of data and financial metrics that you can kind of rely on. I love the idea of the Trojan horse. Somewhere along the lines, someone said you could practically ignore the seed stage or early stage business model because there's always going to be a pivot, the Trojan horse or the founders. How accurate is that point of view? Well, I mean, I think like in everything, when people make statements like that, they tend to focus on the winners, right? So they'll look at XYZ company that pivoted and say, oh, look, everybody can pivot. Well, everybody doesn't pivot. And you do have a huge, very high loss ratio at seed early stage and even series A.

38:21And the strategy is different, right? You have a power law in series A, you have a power law in seed, and you have a power law even in buyout. It's just a different power law. In buyout, you can basically – your power law is not a lot of losses. You can have some 1Xs or 1.5Xs, but you probably need a couple of 4X or 5Xs. In seed, you probably need 100X and you have a very high loss. In series A, you need a bunch of 10 or 15 or 20Xs, but you can still have losses. So depending on what stage, there's this view that power law only applies to venture, really applies to all stages. It's just what a loss is, what a losses is defined differently, right?

38:59A loss in a buyout might be just a 1x or a 0.8x. You can't really have a lot of zeros in buyout, right? So I think the power law continuum is true across all these markets. So AI is obviously a really big sector today. What other sectors excite you the most? Or how much does AI fit into just looking out there as as game-changing technologies? Well, look, I think every firm, whether they're a venture firm, a buyout fund, doesn't really matter what type of investing people are doing, I think it'd be a huge mistake to ignore AI, right? Even if you're not investing, quote-unquote, in an AI company, you better be thinking about how AI is going to affect your business model or how can it improve your business model.

39:47And those who don't, even people in services businesses, like if you're running a law firm today, you're running an accounting firm today, You really need to think about how is AI going to affect my business. So, of course, in our case, in our more mature companies, a lot of what we're thinking about is how do we accelerate growth and revenue through new AI products? And how do we reduce costs and increase margin through applying AI technology in the companies? Our earlier and mid-stage companies are often AI native. They're actually going after a new market, the legal vertical or construction vertical with kind of a new AI-focused product.

40:21I mean, I think what's true is that every company to some degree is an AI company. It doesn't mean that they're.AI in their name. But every board meeting that we go to at Insight, we're talking about AI. And the irony is even the board meetings I go to at NY Langone, we're talking about AI. Board meetings I go to at CFR, we're talking about AI. Because if you're a medical – if you're a hospital today, you're thinking about how do I have a better experience for my patient? How do I think about increasing throughput? The average wait for a neurologist today across the country is eight to nine months to get an appointment.

40:59And imagine you're suffering from like a real problem and the doctor says, well, I'll see you next year. That's the average. Now, what if we can get AI to be able to help assess these problems earlier and all of a sudden you take the data from the best institutions and you make that available in an AI application so now people in Appalachia have access to the same level of care as people who have the benefit of being able to be near NYU Lingo or Mount Sinai? And so I'm going broader in my answer to your question, which is I think AI is now affecting everything we do. And so I think everything – every company that we invest in, we're talking about what's the impact.

41:46And then the other thing we talk about is like the other big debate in kind of AI land is what will get owned by the LLMs and what will get owned by the application providers. How much of this – how much of the value will accrue to the models, the open AIs and the anthropics? How much of the value will accrue to the applications? I don't think anybody can answer that question. We don't know. So I remember in the late 90s when the dot-com was just exploding, it kind of felt like a handful of companies were sucking all the oxygen out of the room from everybody else. Is AI doing that? Like I would imagine things like cybersecurity and fintech and other software-driven startups, are they starving for capital?

42:39Or is there just so much money out there that even AI can't suck all the money and air out of the room? There's a tremendous amount of capital out there. And there are lots of companies outside of the ones that everybody knows that are growing really, really quickly, often serving a vertical market. I mean, what's still true is that if you have an application that is serving a market where there's a lot of domain expertise or data required, you still have a moat. And so I think this – because one of the big debates is, oh, does AI mean that the software companies are going to be dead? We don't believe that.

43:20What we do believe is if you have a very generic application that doesn't have any vertical domain expertise, doesn't have any data moat, then I think you're at a significantly higher risk. But I think there's lots of examples. We're seeing them. We're investing in them in specific healthcare applications and legal applications, construction industry, where you have companies that have true business process, vertical expertise coupled with data moats. What other spaces have you excited besides AI, which is obviously going to have a giant impact? What other areas are really interesting these days?

43:55I think cyber continues to be a really important area, and one could argue – and we're just – I don't know if – we might just be announcing it. So I don't know whether we announced it yet or investing in something that's kind of related – AI-related security. And so every time you have these big new platform shifts, you have infrastructure around that platform shift that's important, right? And so I think we're seeing a lot of next generation infrastructure investments, cyber investments. There's a lot of markets that we're seeing. And I think what's happening right now is if I'd answer this question a year ago, I would say, well, we're doing vertical applications.

44:35We're doing these types of horizontal applications. And now it's all getting bucketed into AI because it has an AI angle. But there are subcategories within AI. There's not like just one AI company out there. There's obviously lots of companies. And it's just becoming that AI is becoming almost like an operating system that all of these new vertical applications are being built on. I haven't heard you mention crypto. Is that a space you guys explore or is that too specific? Well, I'll put it in the past tense. We explored and decided, well, one, we didn't do that well with it. And two, the fundamental problem that we've seen in it is that when these companies would come in, we met with hundreds of companies in crypto.

45:26So when these companies would come in and you'd say, OK, like tell me what it is about your application that makes it better than if it were just in a relational database. Like a very simple question. You'd kind of get back like all kinds of technical answers and white papers. And I'm like, right. But like as a user. What problem does this solve that I can't solve? Right. I can't use SQL for. We didn't just – we generally get a really good answer. Now, I don't want to say that there's not going to be any crypto applications that are going to be successful. I'm sure there will be. I mean obviously if you talk to CEO Visa, you talk to the CEO of MasterCard, they'll talk to you about stable coins and the impact stable coins could have.

46:06Obviously you have an administration that's very pro-crypto, pro-crypto regulatory. So I think you're going to see money being made in that category. We just – I mean I guess we're used to trying to find applications where we see here's a clear business use. Here's a clear payment for that business use and here's how they can scale. We haven't really been able to decrypt that in crypto. But I'm sure there are others out there who understand that better and I'm sure there will be some winners. But we've just chosen to not focus on it. So let's talk about some winners. I see a run of exits that Insight Partners is associated with.

46:46You're an early investor in Twitter, which IPO'd, Buddy Media, acquired by Salesforce, eVestment, sold to NASDAQ, Alibaba, JD.com, Duck Creek, Apris, the list goes on and on. Tell us about some of these exits. You guys really have put together quite an impressive list. Well, I'd rather talk about our exits from this year. OK. So keep it current. Yeah, which – so my partner, Jeff Horing, led our investment in Wiz, which sold to Google. Well, I should say, signed a definitive agreement to sell to Google. Hasn't closed yet for$32 billion, largest venture-backed acquisition by Strategic. My partner, Richard Wells, led an investment in a company called Central Reach, which does software for autism clinics.

47:39We sold that for just under$2 billion to Roper Industries. And then my partner, Jeff Lieberman, led a deal called Dotmatics, which we sold to Siemens, for just over$5 billion. And the interesting thing about both – the interesting thing about those deals is one's a traditional early – so we did WIZ as a series, I think B, and then kind of continued to participate along the way. Both Central Reach and Dotmatics were venture buyouts. But the multiples on money were like venture multiples of money. Really? Right. So venture returns with buyout dollar deployment. It's a good combination. And so I think we've got more coming over the course of this year.

48:27So I think we've had a really strong year. One of the things that I think contributed to that is I think historically, we were not great on liquidity. And by that, I mean, not that we didn't have good companies, we just didn't focus a lot on liquidity. And as big LPs in our funds, we're generally the GP is tied or close to tied as the largest investor in the fund. So we're pretty aligned with our investors. We kind of were focused on multiple money and not so focused on IRR. I mean, within reason, we're focused on IRR, but it wasn't what we – and I think over the last 10 years, 15 years, you've seen a massive transition in the institutional LP base of a shift from Moik to IRR.

49:07So I want to stay there because it's kind of fascinating. I had no idea because I don't play all that much in the venture space or the private equity space that, hey, we have longstanding liabilities that we eventually want to meet. And even though we knew this was locked up for, depending on the fund, five, seven, nine years, we'd like to see some exits sooner than later. When did this start happening? And what do you think is driving this? Well, I mean, it's probably been happening for years, but it's accelerated in the last, you know, post-pandemic? Yeah, post two to three years when you had the correction and people felt over allocated and 21 had this huge peak of investing.

49:47And so now there's this big bubble of investing but not enough liquidity coming back relative to the deployment. In the last two to three years, it's accelerated. And so we took that feedback seriously. I don't think we're the only ones who got that feedback. But we actually put a liquidity committee together. Whether it's from people across the firm, both our financial function, our investment team, our operating team. And we now have quarterly liquidity meetings where we target companies for liquidity. We kind of talk about what the IR is from here. And I think the – and that was set up about 18 months ago.

50:23But I think a result of that is – I don't want to say it's a direct result because you can't press a button. But a focus on it, everyone talking about it, everybody feeling like they have accountability to that process, I think has led to a lot more liquidity over the last – so I think we've gotten an ROI on really putting focus against it. Really interesting. I think our LPs gave us feedback on it. I think we thought about it. We said, yep, it's fair feedback. Let's make a change. Let's make an adjustment. So you mentioned the boom in 21 and then the pullback in 22. You started in the mid-90s.

51:00You've lived through numerous boom and bust cycles. What's your big takeaway from those experiences? Well, I think when you're living in the depth of it, it feels like it's never going to end. And it always ends. This too shall pass? This too shall pass. And I think that's – it's a hard lesson because it's – listen, the thing that's still the hardest to do is Warren Buffett's investment. Everybody is scared. And you get yourself ready and you've got your – I'm going to put – move X dollars to the Vanguard Index Fund and then you don't do it. Why? Because you don't think it's ever going to pass.

51:39Because if you thought you were going to pass, of course you'd do it. And human psychology is really, really hard to change. I'm including myself in that definition. It's so difficult to fight the crowd when everybody's running for the exit. You have to be built a certain way. I still remember when the market – 2008, the market was really crashing. And I remember having a conversation with somebody who – know the markets really well, well-known person. He said, yeah, GE can't roll their commercial paper. And I was just like, holy crap. That was after AIG and Lehman in September 8th. And I remember it was like a Friday and it was a long week and I called my wife and I'm like, honey, let's just like go out for dinner.

52:22She was like, let's stay in. And we're having this like five-minute back and forth. I'm like, why are we talking about this? And she was like, well, I thought maybe we should save some money. I'm like, it's not that bad. I'm like, we could go out to dinner. Well, but Ben Bernanke, former chairman of the Federal Reserve, famously sent his wife out to the ATM to get cash in case the system went bad. If he was terrified, it just shows you human nature is we're always going to be scared. So I think that the thing – so I don't know that you could ever teach people to like, oh, move money. But I think the hard part is really – besides maybe not making as much money as you could make, the hard part is just feeling like it's never going to end, right?

53:04And now having been through this as many times as I have and my partners have, I think it's easier to recognize that, no, there's light at the end of the tunnel. Makes perfect sense. Let me throw you a curveball question before we jump to our favorite questions. So we talked about AI and we've talked about cycles. What do you think investors in this space, either technology or startup or M &A or ventures, are not really talking about or thinking about, but perhaps should be? What's the most important topic, asset, geography, policy that's getting overlooked but shouldn't? I think people still – as much as we talk about it, I don't think people – I think people still underprice what happens if there's a real cyber risk.

53:54We think about cyber as, oh, my Citibank account got hacked. We think about cyber as I got a phishing email at work. By the way, all those things are bad and bad things can happen out of them and everyone has probably dealt with some version of that. I mean I'm more concerned about someone taking control of the electrical grid. I think we still – I mean I think – I don't want to make it sound like the government doesn't think about it. I think they do. But I think it's just people. I don't think we realize like the level of risk if physical infrastructure were kind of taken over. And there have been examples of it happening.

54:28Like physical infrastructure, like the electrical grid or something more specific? Water? Water purification plants, electrical plants. I mean, hospital systems going down, right? Well, we've seen a lot of ransomware with that. We've seen that in individual institutions. Right. We've not seen it systemically. And that's a pretty scary – That's a pretty terrifying risk. Now, I'm not saying – I mean I'm answering your question as to something that I worry about that maybe we don't worry about enough. I'm not necessarily sure. It's like I don't know how to price that into the market. It's not really a market answer.

55:06It's just something that I think like it's an asymmetric risk. No, that's the right. So I'm not looking for a market, you know, asymmetrical dollar bet. You're raising an issue that perhaps we're not paying enough attention to. I think as the average investor, the average person, I don't think – I think that risk is way bigger than we think it is. If you talk to people in government, they would probably – they would agree with that. All right. So we only have a certain amount of time. Let's jump to our favorite questions we ask all of our guests, starting with, who are your mentors who helped shape your career?

55:43Well, I think to a few different mentors. I was in elementary school a pretty indifferent student to the point where I had Indian parents who were like, you're supposed to have good grades. And I did have bad grades, but I was kind of an indifferent student, didn't really focus a lot on school. I had a teacher in third grade who said you shouldn't spend more than 30 or 45 minutes on your homework. I'd go home, look at the clock, 45 minutes, close my book. And then I had a teacher in sixth grade, Mr. Brown. I'll never forget Mr. Brown, who for whatever reason, and I still can't tell you why, saw some potential, you know, saw something in me that maybe other people didn't see.

56:23And all of a sudden I went from like an indifferent student to like a straight A student. And it was that year he took interest in me. He would say, hey, look, you're really good, right? You should focus more on these things. And so for me, sixth grade, Mr. Brown, very transformational. Mentor in a way because he made me believe that I had something that I didn't really think I had. And then my dad gave me three important things he told me was – one of them is kind of funny. He's like, you really need to learn how to – you need to be able to speak well. You need to be able to read well. And he's like, if you're living in this country, you should know how to play a sport, right?

57:04And so the way he tried to implement those is he made me take a speed reading class in elementary school. Was that useful? I speed read. You do? Yeah. No loss of comprehension? No loss of comprehension. He made me take a public speaking class with college students when I was in high school. And I was so scared of public speaking. I never could imagine then that I'd be doing a podcast. He didn't succeed on sports, but his idea was he was like, you know, you should learn how to play golf. That would be a good thing to know. Did you? Well, I play golf horrifically. But in high school, you could join the golf team.

57:50It was a no-cut team. That doesn't mean you were going to get to play. Varsity letter. But you got to learn. And I just said, I'm not doing that. So I got two out of the three. But I think those two out of the three have been really, really important. And I've had a very, very positive impact on my life. And of course, along the way, there have been lots of people at all the places I've worked that have been mentors as well. Very, very interesting. Coming up, we continue our conversation with Devin Parekh, Managing Director at Insight Partners. I'm Barry Ritholtz. You're listening to Masters in Business on Bloomberg Radio.

58:28I'm Barry Ritholtz. You're listening to Masters in Business on Bloomberg Radio. My extra special guest this week is Devin Parekh, Managing Director at Insight Partners. Let's talk about what's keeping you entertained these days. What are you watching or listening, streaming, podcasts, anything along those lines? This we could do a whole podcast. We could do a podcast on the podcast. But my wife and I just finished watching Friends and Neighbors with John. So good. I thought it was great. So good. I really enjoyed it. That's just pure kind of entertainment. Absolutely. On the podcast side, you know, I – just like I speed read, I can only listen to podcasts if I speed listen.

59:06So I listen to all these at 2.4 acts, which drives my wife bananas because I'll get in the car and, you know, I'm listening to something. It goes to the, you know, the Apple thing and she's like, turn this off. But, you know, there's a bunch.

59:48financial markets, if it impacts companies, if it's impacting trends and narratives that are out there, we are on it. We also have a lot of fun doing it. Bloomberg Business Week also brings you the analysis behind the headlines through conversations with our expert guests. And we are doing this all live each weekday. And then we bring you the best analysis in our daily podcast. Search for Bloomberg Business Week on YouTube, Apple, Spotify, or anywhere else you listen. Check it out on your way home from work to catch up on the conversations that you miss during the business day. And on the weekend, check it out for a complete wrap-up of your business week.

1:00:19That's the Bloomberg Business Week Daily Podcast. I'm Carol Masser. And I'm Tim Stanovic. Subscribe today wherever you get your podcasts. Reading, I tend not to read a lot of business-y books, but in podcasts, I do listen to that. So, but the ones I listen to, I listen to Acquired, I listen to Business Breakdowns, I listen to Nikolai Tangens, where he interviews the CEOs. I listen to Invest Like the Best. I listen to you. I listen to Lex Friedman. And then I'm involved. At the EFT? No, Lex Friedman's got his own – he's affiliated with MIT in some way. Oh, OK. He's got his own podcast. He gets really, really interesting people to come on.

1:00:59I'm involved in Carnegie and CFR, so they both have a podcast. One's called Grand Tamasha, which is on India, which is a policy area I'm interested in. Why it matters is CFR's podcast. So I've got a – driving to the Hamptons is easy because I can – I have hours and hours of kind of content. Really interesting. Let's talk about books. What are some of your favorites? What are you reading currently? Well, I read a lot. And I think two books that I just gave – one kid just graduated from college and one is two years out of college, three years out of college. I gave both of them – I don't know if they've both read both, but I gave them both books to read.

1:01:39One is Psychology of Money by Morgan Howe. Sure. I thought that was a great book. I wish I read that when I was 21, but I still felt like it was valuable. The other is called Five Types of Wealth by Sahil Bloom. Sure. I thought that was a great book. And those are more – I wouldn't put those as entertainment, but I found those – if you read those books and you kind of try to apply them to life, I thought both of those were really useful. And then a lot of what I read is around topics that are around our philanthropy. So one book I read, which is – this is not an upper. It's a book called Anatomy of an Epidemic by Robert Whitaker, which is about the use of psychiatric drugs in this country.

1:02:27And this is not an uplifting book. Of course, there's an epidemic of anxiety and depression. I was going to say anything about American health care or psychology. But it motivated – one of the areas that we're philanthropically investing in is next generation ways of dealing with psychiatric conditions. And that book kind of was the starting point of that. And then the really depressing book I'm reading right now is – it's a new book. It's called Nuclear War by Annie Jacobson. And it's – you talked about what are these theories – what are the scenarios out there that were underpricing? And I just felt with what happened over the last two years.

1:03:11I think we all – we used to have fallout shelters. Everyone just think, oh, nuclear war, that's done. There's no risk of that. And I think the last couple of years just reminded me that like, nah, it's not done. Like now it's not a high probability maybe, but it's not done. And what this book does is it actually starts at time zero. A nuclear bomb drops. What actually happens, right? What is the defense mechanism that the offensive person uses? What's the defensive mechanism that the other country uses? What happens from – I mean it goes into it in not very uplifting detail. And it was just a good reminder that you have this thing out there that still has the chance to obliterate the world as we know it.

1:03:55And it's not a 0 % probability. It's a low probability. But I think it is important to understand tail cases. Yeah, to say the very least. We're ending on a very depressing note. So we might want to start – you might want to end on something more fun. No, it's – listen, sometimes you mentioned – so to make this positive, you mentioned Sahil Bloom. I had him as a guest on the podcast. You mentioned Morgan Housel. I've had him several times. He wrote the forward to my book. Both those guys, younger, all their work is much more uplifting, much less depressing. I wonder if that's an age thing. Yeah, I should have ended with that.

1:04:32No, it's absolutely fine. Listen, sometimes you got to shake people up and say, hey, this is a real risk. And, you know, non-zero is a pretty significant risk when the outcome is so catastrophic. Correct. So final two questions. What sort of advice would you give to a recent college grad interested in a career in either startups, venture capital or private equity? Yeah. So I think that keep your intellectual curiosity broad. And I was just speaking to our summer interns a month ago. And somebody asked me, like, what's your advice? And I think the mistake a lot of people make is they decide, OK, I want to be in venture capital.

1:05:13So all I'm going to do is read TechCrunch and listen to tech podcasts and just make you a very interesting person. And I've probably had more dinners or one deals because we found a common interest in art or a common interest in wine. I'm using the things I happen to be interested in, but it doesn't have to be those things. Right. And, you know, everyone has intellectual interests outside of the thing that they want to do. And I would encourage them to, like, pursue those and pursue those with passion because it's going to make you a way more interesting, well-rounded person. And don't just be so micro-focused on that thing.

1:05:50I just think it makes you a better investor, makes you a better person, makes you more interesting. So that's one. Two, in a world where we start getting people to do varsity soccer when they're three.

1:06:05allow a little serendipity in your life, right? I wouldn't have ended up doing what I was doing if I just followed the plan. And, you know, something's interesting, try it. And it turns out you might like it. Now, you might not like it and go back to your original plan, but we've forgotten serendipity. It's why I still subscribe to paper newspapers because I'm probably the only person in my building that might still get paper newspapers, but because there's serendipity. When you're flipping through the newspaper, paper, it's the article that you weren't looking for is where you learn something.

1:06:35Guess what? You don't have that same discovery. And I am very aggressive looking for interesting things. Me too. And I think you don't get that. You really don't. Economist is a great example. If you just get the digital economist and you see the article on AI, I'm going to read that. Guess what? I probably already know that, right? I'm reinforcing knowledge that I have. Maybe I learned one tidbit that I didn't know. It's when you open it up and, And, oh, there's this interesting article about nuclear that I don't know anything about. And I read it. Oh, wow. This is maybe this is a real tail risk.

1:07:06Maybe I should understand this. I will give you the one exception to this is the Times doesn't do this well, but the Wall Street Journal does. So you go to the digital edition of the Wall Street, WSJ.com. But you could also click in today's paper. You get the breakdown by sections. And then you can kind of click. And as you scroll through it, it's the equivalent of flipping a newspaper page where you get those, oh, I never would have. People always laugh because I'll show up on a plane and I've got my newspapers and they're like, look at me like I'm a Martian. And I'm like, no, there's a reason.

1:07:42No, absolutely. And our final question, what do you know about the world of investing today that would have been helpful to know back in 1995 when you were first getting started? it? Well, I think a really important one, it applies to investing, but I also think it applies to life, is oftentimes people don't trust their instinct because they don't think their instinct is a real thing. They think their instinct, the gut, they have these words that people use. But the reality is it's micro slicing a lot of data that you've experienced earlier life. Now, maybe at 21, your gut's not worth a lot. It's probably worth a lot in certain things, maybe some human interactions and things like that.

1:08:20It's probably not worth a lot in investing because you just don't have a database. But even at my age, you have this inclination to not trust your gut. There's something about this deal that just doesn't make sense. But, oh, but the revenue looks good and the margins look good, and so I'll just overlook my gut. And I've just generally, when I've overlooked my gut, it's not been a good thing. You mentioned patent recognition earlier. Your intuition improves as you get more experience. As you get more experience and more data. I don't know. Blink is perhaps overstates the case, but there's a lot there.

1:08:54But it's – I agree. I've read the book and I think it overstates it. But there's something there at the core. And then the second one is I think what we talked about earlier. Good times come. Bad times will invariably come and good times will invariably follow. And you just have to have confidence that both are going to be there and that you're going to learn from both. Devin, this has been absolutely fascinating. Thank you for being so generous. with your time. We have been speaking with Devin Parekh, Managing Director at Insight Partners. If you enjoy this conversation, well, check out any of the 550 we've done over the past 11 years.

1:09:33You can find those at Bloomberg, iTunes, Spotify, YouTube, wherever you find your favorite podcast. Be sure to check out my new book, How Not to Invest, The Ideas, numbers and behaviors that destroy wealth and how to avoid them, how not to invest wherever you find your favorite books. I would be remiss if I did not thank the crack team that helps put these conversations together each week. Alexis Noriega is my video engineer. Anna Luke is my producer. Sage Bauman is the head of podcasts at Bloomberg. Sean Russo is my researcher. I'm Barry Riholtz. You've been listening to Masters in Business on Bloomberg Radio.

1:10:40finance to defence, AI to entertainment, and from startups to the magnificent seven. We highlight the latest stories of the people and companies pushing the tech sector to new frontiers and the politics that shape global tech markets. We do this all every weekday, then bring you the most important conversations and analysis in our podcast. Search for Bloomberg Tech on YouTube, Apple, Spotify, or anywhere else you listen. Join us every afternoon on your commute home and stay ahead of the tech news cycle. That's the Bloomberg Tech Podcast. I'm Caroline Hyde in New York. And I'm Ed Ludlow in San Francisco.

1:11:14Subscribe today, wherever you get your podcasts.