VP Debate, OpenAI Financial Churn, and Guest Mike Maples Jr.

24:23So what do you think about that? She's triangulating. She's just trying to take away. She's trying to remove cudgels. or in crypto is, we talked about this a few episodes ago. There's so few places where there's undecided voters where I think people up for grabs. I actually think one of them is young men. The Latino vote's really interesting. The Latino vote is totally moved away from Democrats. It used to be Democrats were up by like 40. I mean, they just used to own the Latino vote. And now it's not a toss up, but it's been dramatically, it's shifted. And I think it's really, I think it's a lot of it is too, is that we should almost do away with the term Latino in the sense that I got a bunch of deserved shit from people when I said I was taking my son to Africa for some charity work.

25:07They're like, well, we're an Africa boss. I mean, that's just a dumb thing to say. And Latino voters, I mean, talk about conservative Cubans in Florida. They have a much different viewpoint than, you know, undocumented workers, or they can't vote, but recent citizens who had immigrated from parts to Central America. I mean, it's very hard to start labeling and drawing conclusions from a group of people that you just label as Latino. Yeah, I would agree. It's a wide ranging. They contain multitudes. You don't do that to white people for sure. And there are very different kinds of white people everywhere.

25:41But what's amazing about, in some ways, they're more heterogeneous and more disparate than, say, white males. Yeah, 100%. And what's kind of inspiring about it, if you think about it, is they're just becoming, quite frankly, they're becoming more American. They're identifying with certain components of our country and others are identifying with other components of our country. I see it as the Latino community or that community is just becoming American. They're just attaching to the rights and the different things that work for them or don't work for them. Yeah, absolutely. Finally, very quickly, a familiar face we cover in the election, one that you like, I know you do.

26:18Amazon is in late stage talks with former NBC and MSNBC anchor Brian Williams. I know you do. To host a live election night special on Amazon Prime Video. And then, you know, and if you don't like his take, you can buy another one. That's the big joke. What do you think? They're getting in the live news game. Like Netflix and Amazon have stayed away from it. They have all stayed away. Like every time you talk, Netflix isn't in the news business. I've heard that from the Netflix executives a million times. And same thing from all these, the Amazons, the Googles. We're not in the news business. We don't want to be in the news business.

26:48But now they kind of want to be in the news business. What do you think? Well, first of all, I just want to, for a moment, backtrack to, what's his name? David Muir, the guy who did the ABC. Handsome. Moderated the ABC debates. Handsome, man. But he posted, they did, I posted a clip on Threads of one, you know, they have those feel-good shows at the end where they're like, okay, we just did 27 minutes of how fucked up the world is. We're going to talk about a dog, you know, marching across the nation to find his owner. But they had the loveliest episode about this young couple who planted a tree and they take a picture in front of the tree.

27:20It was just, did you see that? I love that story. It was so lovely. Yeah. And it was on ABC News tonight. He was just sitting there. 80 % of my comments or 80 % of the comments in the thread were, this guy has no credibility. This guy is the worst journalist in the world. And I thought to myself, how many of these are bots just trying to undermine the credibility of ABC because they had the willingness to fact check? I went back and I thought, did they not fact check her? It's not that they didn't fact check her. They didn't quite frankly press her sometimes when they said, you didn't answer the question, Madam Vice President.

27:54That's because he was a font of lies. It was like 33 to 1. But go ahead. That's different. I think. Anyways, I thought what I'm saying is, and I think you agree, is I just, it seems to me. Anyways, I don't know him, but he's so handsome. I empathize with him in a weird way. Brian Williams or David Muir? They're both handsome. Yes. Yes. But going back to Amazon. Yeah. They're smart. They want to get into live. They wanted to get into sports. They wanted to get into big events. That night, they might get. I mean, more people have Amazon Prime than have a Christmas tree, a pet, go to church, own a gun.

28:28That is essentially our common bond or our thread or connective tissue. And Brian Williams is so perfect. I just can't wait for the first, like, that's like getting a moose to drive a convertible. And you're like, oh, I just like it. I don't know what that means, but I get it, sort of. I love Brian Williams. I know he got in trouble for the helicopter thing, but I'm going to forgive him. Forgive him. That was stupid. In today's age? In today's age? So what? I know. He looks like nothing. Are you kidding? Although, he shouldn't have. He's not killing bears or like sending dick pics out. Nobody likes glory that wasn't earned.

29:03Anyway, that's fine. He shouldn't have done it. But nonetheless, he would be great. Come on. Statue of Limitations is passed. Statue of, great. That's what I just said. I literally don't think it's a good thing, but it's Statue of Limitations. And he doesn't age. You got to love a good looking guy who doesn't age. I have to give you a Statue of Limitations every week, essentially. But I think he's great. I never say anything offensive. You know why they don't wear miniskirts in San Francisco? Oh, no. Okay. Because it would show their balls. Oh. That was wrong. That was wrong. That was wrong. By the way, the Folsom Street pair was here yesterday, and there's a lot of balls showing.

29:38Nonetheless, it's very dicey to get into news, I think. So I think it'll be an interesting thing, but I think if anyone can do it, Brian Williams is a great choice. All right, Scott, let's go on a quick break. When we come back, OpenAI's Financial Wins and Losses, and we'll speak to a friend of Pivot, Mike Maples Jr., about spotting a successful startup.

29:58Ford was built on the belief that the world doesn't get to decide what you're capable of. You do. So ask yourself, can you or can't you? Can you load up a Ford F-150 and build your dream with sweat and steel? Can you chase thrills and conquer curves in a Mustang? Can you take a Bronco to where the map ends and adventure begins? Whether you think you can or think you can't, you're right. Ready, set, Ford. There is a lot to talk about when we talk about Donald Trump and Jimmy Kimmel. One big question I've got is why in 2025 are late night TV shows like Jimmy Kimmel's show still on TV? Even in our diminished times, Jimmy Kimmel, Stephen Colbert, they're just some of the biggest faces of their networks.

30:50If you start taking the biggest faces off your networks, you might save some nickels and dimes. But what are you even anymore? What even is your brand anymore? I'm Peter Kafka, the host of Channels. And that was James Ponowozik, the TV critic for The New York Times. This week, we're talking about Trump and Kimmel, free speech, and a TV format that's remained surprisingly durable for now. That's This Week on Channels, wherever you get your favorite podcasts.

31:26Scott, we're back. We're learning more about OpenAI's current financial situation as the major funding round comes to a close. The New York Times reviewed some of OpenAI's financial documents and reported the company expects around$3.7 billion annual sales this year. Very impressive. But OpenAI also expects to lose roughly$5 billion due to operating costs and other expenses like salaries and office rent, et cetera, and compute, obviously. Should investors be concerned? I'm interested to know what you say here about how much money OpenAI is spending. Obviously, you've got to spend money to make money, that kind of thing.

31:58But main revenue sources are sales of its services to companies, chatbots, subscriptions. OpenEye will predict its revenue will hold$100 billion in 2029. That's a lot more, which will roughly match the current annual sales of Nestle's or Target. That's a really big revenue leap. So talk about costs in line with the new funding, theoretical profits, et cetera. What do you think of that? I think this has all the makings of a company that's going to become one of the 10 most valuable companies in the world. And the fact that they're losing this kind of money, this isn't out of line for companies that grow this fast with this kind of momentum.

32:35Amazon comes to mind. Or Netflix. So they're expecting about$3.7 billion in sales. They think next year, and they probably already have pretty good, they probably asked ChatGPT what their revenues would be next year. But they're going to do$11.6 billion next year. And the losses here are not extraordinary. They can absolutely find this money. I wouldn't be surprised if they increase the spend and increase their losses because you've probably seen that graph, but it shows the adoption, the seminal technologies that really resonate, whether it's radio or the fax or the telephone or mobile, the kind of zero to mass adoption keeps getting, the cycle time keeps decreasing, right?

33:18And also what you have is what I'd call fastest zero to monopoly time. And I think just as you had this Wintel monopoly, I think what we have emerging already is what I'll call the open video monopoly or duopoly. Open AI has something like a 70 plus percent share of what is supposed to be an emerging market. This is like Google in the early days. I agree. I think people are making it's a lot of money, but it's cost a lot of money. And if they don't, they will get run over. It's the best value in AI right now. Look at their, I mean, their 425 revenues are going to be, if they're in fact going to be about$12 billion, that means they're raising money at 12 times revenues.

33:57The average SaaS company trades at six times. And then if you look at any of these other guys, they're trading at 50 to 100. Right now, OpenAI is the best value. And let me be clear, I think the whole space is overvalued. But I'm sort of, I don't want to say I'm a convert, but I am using this thing. I upload board decks now and say, pretend you're an aggressive VC. What questions would you have for me? When we're out, I'm talking about, I upload our download numbers and I say, what components or what channels, distribution channels should we be thinking about? What topics are we missing? and it gets it wrong a lot, but you always, it's just such a great thought partner.

34:40Yep. Interesting. Apple was one of the big names participating in this open-eyed funding round and they pulled out of those talks according to the Wall Street Journal. I'm not sure. I didn't do any reporting, so I don't know why. Yeah, I have no idea either. But I don't understand why they would leak that they were even involved in it to begin with. Yeah. I don't know. I would imagine when Apple shows up, they expect a lot. I mean, Apple's like, you know, when the hot girl comes to dinner, or the Hawkeyes, whatever. They're just kind of expectant. I got to imagine Apple is, we like X, Y, and Z.

35:12And probably at some point they said, no, we're not going to do that. I got to think Apple really expects and usually gets a lot from any terms they ask for in an investment. You don't quite have this company on its back to do that. You know what I mean? On its back foot. Anyway, Sam Alton is also denying the reports that he's getting a giant equity stake. I think It was 7 % of the company last week, though Altman and OpenAI CFO Sarah Fryer did note in a meeting that investors had raised concerns. Altman not having an equity stake. He makes money all kinds of ways. But what size equity stake do you think he should ultimately get?

35:49OpenAI Chair Brett Taylor told CNBC the board had discussed the stake, but no decision had been made. He's got to have a stake. I think it's kind of silly and kind of performative that he didn't. It makes sense. His incentive should be in line with the companies. I don't know why that's weird. Well, so typically what you do is be careful what you ask for. So typically the person who decides or the group that decides a CEO's compensation is the compensation committee. I've always found that the toughest part about management and being on a board is compensation. And because you don't want to pay your people too little, you don't want to pay them too much.

36:24And CEO compensation has gone absolutely batshit crazy. It's gone from 30 or 40 times the average salaries worker to over 300 times. because what happens is basically you get weaponized as a board member. You like showing up and getting a free dinner and making a quarter to a half a million dollars a year. And typically the CEO was the fraternity or sorority rush chairman. They're very likable. Over time, you get to like them. They're doing a great job adding shareholder value, or they're doing an okay job in the face of real challenges. They're very good at managing their board. They cherry pick people who will like them and do what they want.

36:56So generally speaking, boards are kind of bought off. And they also don't want to do any work. So they hire Towers Perrin or a comp consultant to come in and help with compensation. And this is what the Towers Perrin comes back. And it says, okay, a tech company that is doing 3.6 billion growing this fast, this is how much the median is. Zero is the lowest paid person in a similar company, a similar industry. 100 is the highest paid person. And they say right at the median, this person should make X. But no one on the board says, oh, Lisa's just an average person, they're like, let's pay them at 60 or 70%.

37:31The problem is that when you pay people 1.2 times the average every year, they end up doubling their salary every six to eight years, and you end up with just out of control CEO compensation. Anyways, having said that, in a company like this, typically, typically what you would find is that he or she would get options on somewhere between four and 6%. Now, given the extraordinary extraordinary valuation of this company at$150 billion. They could go get an amazing CEO for 1%, but because he's been around so long, I think that they could justify saying this guy should have 4 % to 6 % of the company.

38:08Four to 6%. Well, interesting. I suspect it'll be a little less. Yeah, at least three for sure. You're right. He could be bumped up to chairman and get a stake, but he's got to have a stake. It's kind of ridiculous. He won't be chairman. They like Brett Taylor. He's doing a good job. Yeah, they do. You're right. Yeah. Anyway, Anyway, we'll see. Good luck, Sam. You're paying for dinner next time. Neither of us are worried about this company, including all the drama around it. I bet if you looked inside Anthropic or Microsoft at any day of the week, there's always drama. This is just the company of the moment.

38:39And I think that's why it's attracting. And also, Sam, as you said, they didn't kill the king, and therefore the king gets to decide. Anyway, let's bring in our friend of Pivot.

38:56Mike Maples Jr. is the co-founder of the venture capital firm Floodgate. He's written a new book, Pattern Breakers, Why Some Startups Change the Future. And let me say, I was just telling Scott a second ago, you're one of my favorite people to talk to because you're so smart. You always give me good insights. And although at the same time, with many VCs, it's a low bar. So, but I've always appreciated your insights. It was always different and unusual. So let's just get into it. Just so people don't know, you were an early investor. You've always been a very early investor in Twitter when it was Odeo, Twitch, Lyft, and many others.

39:30We're going to talk about current companies, too, because we'd love your thoughts. We just discussed the open AI funding, et cetera, recently. But what exactly defines a founder or company as a pattern breaker? I mean, why did you call your book Pattern Breakers? Yeah, and, you know, some books are written because people are smart. This one was written more out of feelings of anxiety. So I'd noticed that over 80 % of my exit profits had come from pivots. And so over and over again, I'd see these situations where, you know, Twitter, they can't decide who the CEO is. They've got the fail whale, all kinds of drama, and they have great success.

40:04And they weren't doing a whole lot of best practices that I could discern. And then, you know, company after company did all the right things, hired all the right people, had a high performance culture, and then shut down because they didn't work. So I thought maybe I was just a lucky fool and I should retire before I get exposed. To give you a sense how crazy it was, I didn't even say this in the book, but like Twitch, I didn't know I was a shareholder in Twitch. So I had invested in Justin TV and it morphed into two companies, Twitch and SocialCam. SocialCam gets bought by Autodesk. So I just thought that was the company.

40:39And then one day, Twitch would make 84 times our money and I have to tell my LPs, hey, I'm really sorry about this, but we have this big windfall and I don't have it in my financials. Do I need to restate them? And they're like, no, we're good. Just send us the money. So I thought, okay, is it possible that I've just been lucky the whole time? And because I couldn't explain the success with normal frameworks. And so I thought, okay, I need to figure out if there's something more worth understanding, or I need to go find some new line of work before I, you know, luck, what luck giveth, luck will take it the way to, you know, usually.

41:15So why pattern breaker, meaning they do what? Yeah. So this is, and this is one of the reasons I'm kind of interested in talking to you folks, because I think both of you will have interesting takes on this, maybe pro and con, right? So what I came to believe is that the way startups win, startup capitalism is a different kind of capitalism. So most people, when they think of capitalism, they think of it as corporations. And corporations try to create competitive moats, and they try to build economies of scale, network effects, and brand, and supply chains. And they, you know, in many ways, when you invest in a normal company, you're betting on its ability to persistently compound more than most people think it will.

41:59But a startup, you start to realize, doesn't have anything to compound. And so startups create value in a different way than building moats. They create value by changing the subject. So startups lose or at least minimize their upside when the future is going to be a new and improved version of the present. Because then the startup has to compete by the rules of the incumbents. And business is never a fair fight. The only question is who gets to fight unfair. And the default is that the incumbents will fight unfair because they have the advantage of the incumbency. So what a pattern breaker does is they refuse the premise of the rules and they show up with something radically different and they show up with something that can't be reconciled with anything that's come before.

42:46So you don't, they force a choice and not a comparison. They can't be compared. Yeah, that's a really good, yeah. So like, I'll give an example that's not even in the startup realm, but it would be a pattern breaking example of recent times, the Tesla Cybertruck. Now, you may like it, you may dislike Like when I saw it announced, I thought he might be joking, right? Like I was like, is he really going to ship that thing? But nobody, when they see a Cybertruck ever says, well, so how does that compare to an F-150? So Elon kind of says, live in my future or don't, but you have to choose. So pattern breaker is the idea was that we tend to operate according to consistent patterns.

43:26And that's actually not a bad thing. That helped us avoid saber-toothed tigers or helps us fit in socially in communities and stuff. But pattern matching creates a bias as well. It causes you to not see other opportunities. Yeah. I would say the better comparison would be, even though he was an incumbent, someone like Steve Jobs, actually, when he would take things off of the computer. And he'd always say, like it or not, this is what I'm doing. when he would take dongles off the side, when he would do, remember, he did a bunch of things like that. And he goes, well, either pick my choice or don't, but this is what I'm doing.

44:01I agree with that. And to take that even a step further, right, like Steve Jobs didn't think of the quote unquote market for smartphones like it was a map that exists and you got to go find the treasure on the treasure map. What pattern-breaking founders do is they propose a radically different future that can't be reconciled with the present, and then they teach the rest of us how to think about it. The problem with the notion of product-market fit is it suggests that there is some market to go be discovered that exists in some objective, tangible way. But sometimes the product creates the market, and it's the pattern-breaking founder with the pattern-breaking idea that creates the new market.

44:43and create something that we didn't even know we wanted or didn't think could even exist before, right? Nice to meet you, Mike. Doesn't this all bubble up to what I think is somewhat conventional wisdom among early stage investors, that it's, you're really not investing in a concept or a company or investing in a team. And that team has the ability to recognize patterns and if and when necessary, make a pivot and that you face the enemy. I mean, I reduce everything to war. And the reason the Americans were so successful is that when we were more agile, that when the leader of a platoon got killed, the rank and file were just very good at adapting and figuring out a new strategy in the fog war and the heat of battle.

45:26Isn't that really what you're looking for as an investor? There's a little more to it than that, but I'll be curious about kind of how this lands with you, Scott, because I know you've started companies before, right? So you're not just playing a founder on TV, right? But like, so what I believe is that founders need to harness particular forces that enable them to change the subject, right? So like the Lyft founders were great founders, but they harnessed two things. They had an inflection, which was the iPhone 4S had a GPS locator chip. So an inflection is a new thing that happens in the world, independent of startups.

46:07And most of us don't even know that they're around us all the time. Most of us don't realize the thing in our pocket gives us a new form of empowerment. But in the case of the iPhone 4S, you could have had the idea for ride sharing before that, but you wouldn't have been able to implement a system that embodied that idea until you could algorithmically locate everybody who wants to be a rider or driver. So that's the inflection. So the inflection is important because it lets the startup wage asymmetric warfare on the present. So the one question I ask founders that maybe not everybody asks is, hey, this sounds like a great idea.

46:43I'm excited about it. Tell me some more. But before we even get there, could you explain to me what inflection this thing rides? What is the external change event and what is the specific form of empowerment that it offers and who does it empower? And why now and only now can that empowerment be unleashed. And so a lot of the companies that I worked with, that's why they pivoted successfully. They were riding an inflection that was important and profound, but their first product was a reference implementation of the inflection, right? And then when they realized they weren't quite on target, they adjusted.

47:18And so then the other thing is the insight. And so I believe that a great startup has to not just be right, but it has to be non-consensus and right. And it goes back to pattern breaking. My view is that if a customer has the option to buy from the incumbent, why would they buy from a startup? And so there has to be something about it that's radically different. And so I take your point, founders matter a lot. And there's a whole other set of things about how do they act different, not just how they think different. But I do think that some ideas embody more power than other ideas and that those powers can be understood.

47:59And why I care about this so much is that I don't care about failure in a conventional sense. I care about failure when the founder loses their time, when they're three years into an idea that they don't believe in anymore or that they're doing it out of obligation rather than passion because they pursued something with a capped upside without not knowing it. Just to double click on that, I invest in a lot of small companies, not nearly at the scale or the success of Floodgate, but I think of it in a sort of a similar way, what's the offshore storm? And that is, I used to surf when I was a younger man.

48:34And whenever I'd go to Hawaii or Costa Rica where there were gray waves, I'd convince myself I was a good surfer. And I realized, you know, waves are almost more important than the surfer. And I always think market dynamics will trump individual performance. And I would ask any company, similar to what I think you're saying, what's the offshore storm here? What's going to create waves that are coming such that you're just going to be an amazing surfer and we're going to think you're a better CEO than you are because you knew what big waves were coming. I mean, like zigging when you're zagging.

49:02I think the genius of some of these companies, NVIDIA just zagged. It said, we don't need factories. It's all about the IP. Netflix said the fastest, the best broadband in the world is something called the United States Postal Service. We're going to start sending zeros and ones through the USPS. And they just saw these waves and they weren't afraid when everyone's barking up the same tree, they just weren't afraid to just go entirely the other way. And by the way, Scott, that's when it hit me. I was surfing. That's like, so an inflection is a wave. I was like, you got to ride the right wave. Okay.

49:37You're bringing up what you note in the book, the right amount, and this is a quote from you, the right amount of disagreeableness can be a founder's ally in developing breakthrough ideas. Now, at the same time, it can lead to toxicity. You mentioned Elon. He was very disagreeable, but it's morphed into toxicity now, right, in a way that everything is disagreeable, right? Talk about that balance, because I agree with you. I think I'm a disagreeable person. I think that's one of the reasons I'm successful, because I disagree. No, but I go, I'm like, I want to do podcasts now, 10 years ago. This is what I, even though, and a lot of people said no.

50:11Don't say anything. Don't say anything. Shush, shush, shush. But we talk about this disagreeableness and when it becomes kind of, you know, I was right before and you'll see that I'm right again because it's not always the case for sure. Yeah. So I'm going to tread carefully on this question because I'm a little bit more positive on Elon than you might be. Yes, I know that. So like the way I – Because you're a VC looking for his next deal. What VC out there with a fund open is critical of Elon Musk? Okay, well, let me, so I haven't invested in his company. Anyways, but I'm sure your fondness for him is genuine.

50:49Anyways, go ahead, Mike. So let me just kind of describe, like one of the things that I try to do, and, you know, there are trade-offs to it, is I try to keep my tribal affiliations small. So, because like Elon contains multitudes. And, you know, like if you look at NASA versus SpaceX, to launch a kilogram, SpaceX can do it for a 20th of the price. And so I say, OK, I'm pretty interested in that. Right. Like I'm glad that that part of him exists in the world. And then when I look at what he's done, you know, to enable Starlink over the Ukraine. And so there's like, there's things about him. I wouldn't do those things.

51:38But I try to kind of separate, you know, the things that he does that are really positive and not try to like paint him with one single negative or positive brush. I think that people are just complicated. and especially people who change the future. And so I'm a little bit more sympathetic to him than you might be. I mean, I understand your objections to him. If complicated means having 12 kids and living with none of them and demonizing trans kids. We get what you're doing. He's complex. What I'm saying is I'm not just a shill for Elon, right? I haven't invested in his startups. I'm not trying to be tribal about it, right?

52:17Mike, you have a very calm attitude. Mark Benioff has the same one. Here's the only thing I would say about the cutting prices. He was allowed to blow up rockets. NASA isn't. Like, so he can be more disagreeable and risk-taking than, you know what I mean? It's very easy to figure out the way to do it if you're allowed to blow things up. And so I think, and by the way, I think that's good. I think we need more of that, right? Like, so, you know. But NASA can't. So attacking NASA, NASA actually can't blow things up. But I'm not attacking him. I'm just saying a pattern breaker changes the future.

52:49You're acknowledging the truth. He can put shit into space for less money than anyone else. And I'm saying that all things being equal, I like it. So, like, the thing that Elon brings that I think we need, you know, an ingredient in this recipe is he builds things, right? Like, when he says he's going to blast rockets into outer space, he does. And when he says he's going to make an electric car work that's interesting and awesome, he does. And, you know, I got a lot of time for people like that in this society. I'm curious, Mike, you strike me as infinitely likable and reasonable and balanced and separate the person from the politics.

53:25All other things that I think are important, good lessons for younger people. I'm just curious, when I was living in San Francisco in the 90s and raising money, there was this sort of, I called it the code of the white guy, because all VCs at that point, and it's gotten better, but all VCs in the 90s were white men. And no matter how competitive they were, how much they may have disliked each other personally, they would never say anything negative about each other. It was very much a gentlemanly kind of clubhouse rules kind of environment. And some of the stuff I've seen out of VCs shitposting each other the last 12 months, it is so aggressive.

54:07And as someone who's quite frankly, not shy to be judgmental, probably overly judgmental about people, some of it makes me blush. Why do you think it's happened in the last 24 months? And can you give us a sense for why you think it's sort of burst out under the open and whether you think it's bad for the venture community? Yeah. So, and this goes back to, I think I learned this from my dad a little bit growing up. So my dad was a pretty prominent exec at Microsoft back in the day. And he used to, he used to, we used to talk a lot about just the dangers of tribalism. And one of the things that we talked about a lot is how being too affiliated with a tribe makes you stupid.

54:53And so like, like, for example, like I'm an Oklahoma Sooner fan growing up and I just love the Sooners. Right. And I'll all shit talk about the Sooners versus who they're playing and stuff like that. Now, fortunately, the stakes don't matter. So it's just like me being a fan. But what I find is that people get that way with their religion or with their politics. And I don't care which side of it you're on. I don't care if you're pro-Trump or pro-Kamala Harris, I see no limit to people's stupidity on both sides and how they're acting. And I think it's because they've let their tribalistic urges get the best of them.

55:30And so I'm interested in immigration. I'm happy to talk about it, but I won't talk about it by parroting somebody's talking points. And if I make my political tribal identity too big, I'm just going to become blind to that. Nobody's going to listen to you. Nobody's going to listen to me, and I'm not going to listen to anybody else. Right. You're very sensible. I hate sensible people. Let me ask you, I'm going to switch you from this just for a minute, but there's so many AI startups now. We just talked about what was going on at OpenAI, and we thought losing money, all the mishikas, it doesn't matter.

56:03This is a world-changing company, right? It's been doing astonishing things. Ultimately, it probably will settle itself out. But what would get you to invest in one? And what are you interested in, especially considering all the competition now? There is a lot of OpenAI, Google, Microsoft, Anthropic. It goes on and on and on. Yeah, I haven't done a whole lot of AI investing. No, so we've had a couple of ones that have been good. So Applied Intuition is a company that helps with autonomous vehicles and EVs. But it's enterprise software, you know, really large contracts. And then I invested in Trip Adler's new company, the guy from Scribd.

56:43It's called Created by Humans, and it's trying to let creators create licensing deals with the LLM companies. Open AI is really not my kind of investment. I mean, I wish them very well, along with Anthropic and all these other guys. But my business is hard but not complicated. I'm wrong 85 % of the time. And when I'm right. Airbnb, correct. Yeah, yeah. And when I'm right, I have to be spectacularly right. And so I'm really good if 5 % of my investments, I make 100x on the first check and another 10 % or so, I make more than 20x on the first check. I don't see a path to doing that investing in OpenAI right now or XAI or any of those guys.

57:26Well, it's not a venture investment. You're a venture investor. It's no longer a venture investment. Exactly. And by the way, a lot of people who call themselves venture investors in today's world are unrecognizable to me. for what I think it is. But that's up to them. I'm, you know, I'm not trying to comment on their strategies. I wouldn't expect them to have an opinion on mine, or at least I'd rather say what my own is. So I don't know. I mean, I'm rooting for the company to succeed because I like their products and I think they're doing interesting things, but I don't really think of it as an investment.

57:57I don't think of any of these companies that are high prices investments. So how do you invest in this sector then? Yeah. So the struggle for me has been I see lots of inflections everywhere I look, you know, so there's I see all kinds of ideas where I'm like, that is very empowering. I could totally see why I would use it. Millions of people would use it. That's amazing. But what I can't answer is, why won't there be 10 just like it? And it goes back to you've got to be non-consensus and right, because if you're not non-consensus and right, your opportunity gets arbitraged away. And so I have to find something that's not only empowering, but I have to say these guys have a structural competitive advantage somehow to win the future.

58:40And there haven't been many of those, right? There's been few and far between, to be honest. It's been tough. In this sector. Yeah. I just mentioned Airbnb. You had talked about it, that you passed on this. Stupidly. Talk about why you did that and what do you look for when you make those misses? Like, how do you as an investor when you everyone's going to know I can think of a dozen different people who missed. What is the what happened there for you and what do you do to change that as an investor? Yeah. So first of all, it's helpful to just consider the backdrop that these startups are wild in the early days.

59:19Like people talk about startups the wrong way. it's like trying to spot a beaked finch in the Galapagos Islands with a super long beak that has an adaptive advantage that allows it to survive in a new way. But like you've never seen one before, but it's wild, right? It's like a mutation. So with Airbnb, the prior week we'd been pitched by a company called Mojo Mix that lets you pick cereal online and it'll assemble it and ship you in a box. And my partner, Ann, said, this is dumb. Why are we talking to these people. This isn't even what we invest in. And I was like, okay, that's fair. I tend to be the optimist and tends to be the skeptic, you know, when we look at this stuff.

59:57So then a week later, we go into conference room, it's air bed and breakfast. This is a year before they'd applied to YC. And, and, and, and looks at me, all these cereal box, like what the hell, another cereal company. And I kind of look back at her like, no, it's air bed and breakfast. I don't know what, what's this cereal about. So I asked him and he says, we're funding the company by selling cereal boxes. And so I was like, okay, so it's Obama owes and Captain McCain crunch. And then, and then I say, okay, well, what does air bed and breakfast do? And he says, well, uh, our advisor says that you like demos and not slides.

1:00:30I said, that's right. So he fires up the product and he can't get it to work. And so I'm like, okay, that's cool. We'll, we'll do it. Let's just go to the slides. He's like, well, I didn't bring any. So we're like 20 minutes into this meeting, full of cereal boxes in a conference room. And I still have no idea what air bed and breakfast as it does. We're just kind of looking at each other in this room. And so, but, you know, he, I knew even at the time that he had this certain X factor, but I let myself get preoccupied. I thought somebody's going to get murdered in one of these things. Because, you know, at the time, it was barely more than a WordPress site.

1:01:08You know, you invite a guest to your house or apartment, and then you serve them Pop-Tarts the next morning. They sleep on an air mattress. and I was just like, this is just crazy, you know? And fortunately, because Ann and I had stupidly passed on this company, when Lyft says, hey, we're gonna do this ride sharing thing and people are like, our strangers are gonna wanna get in a stranger's car. Ann and I were like, hey, we'll take a walk on that wild side, you know, I can see it happening. So, but with Airbnb, it was just such a discombobulated meeting and the idea was so crazy and you had couchsurfing.com, which was free and it was going nowhere.

1:01:46And I just wasn't awake enough. My mind was not open and awake enough to the possibility of what it could be. And as a venture, you have to do that. You have to sort of spend. And I told myself, I'm going to learn as much as I can from that mistake and never repeat that mistake. Because like in corporate capitalism, you know, Buffett would say, rule number one, don't lose money. Rule number two, don't forget rule number one. In my business, rule number one is don't pass on Airbnb because I would have made 6 ,000 times my money if I'd say it. I could have made no good investment the rest of my entire career.

1:02:20It's still been really good. So I spent a lot of time really understanding what I got wrong. And, you know, another good lesson in that is quite often the best seed opportunities don't present well. And it's incumbent on you to be awake to what it could be rather than, oh, the entrepreneur didn't present well, I'm out. You know, that's important. Right, which often happens. Which often happens. Maybe more often than not. So, Mike, when I think about the different life cycles of a company and the kind of incumbent asset classes, angel, venture, growth, IPOs, public company, mature, declining, distressed, I have invested across all the different asset classes and been involved in companies across that entire lifespan.

1:03:07Hands down, the best investments I've ever made have been in distressed. I think Angel's by far the worst. My sense is that's consumption, not even investing. And I think venture is a close second. I think venture investing is so difficult. And with, I think, two-thirds of investment in AI is now coming from just four big companies, the kind of the big four, and that just an increasingly smaller number of not only tier one VC firms, but increasingly smaller number of partners at those VC funds are getting all of the deal flow because it's not the check, it's the signal about the early company and these VCs have developed amazing brands.

1:03:48My sense is just the venture capital as an asset class is getting more and more challenging and more and more concentrated that all the returns are clustered amongst a smaller and smaller number of firms and people. Your thoughts? Yeah, in general, I agree. In general, I think that venture shouldn't be thought of as an asset class because the venture, and just like startups, the average isn't any good, right? Only the extremely rare exceptional is very, very good. So this is the way I think about it. So, you know those old British guys in the Anorak coats who like have journals and they spot these trains coming and going and everybody thinks that they're socially maladjusted and dorky when it comes to trains.

1:04:37I'm that way when it comes to startups. So like, I can't, I can't do any job other than invest in startups because I keep a, I have this and I'm happy to share it someday. If y 'all are ever interested, I keep a list of every startup that's a hundred bagger and I create a time capsule for them. So I want to know not just why did they succeed? I want to know what exactly did it look like at the time you would have had to decide. And that's hard because even the founders misremember how it really happened. You know, people remember stuff differently when it works. And so, but like, I get just like fascinated with that, right?

1:05:15Like, I'll talk your ear off about like what I've learned about like these time capsules are looking at these startups and what the great ones were and what was rare about them, what we can learn. and which of our frameworks would have worked and which of them wouldn't have worked. But like, I just, it's kind of like Buffett and Munger would just read Fortune 500 reports all day. Like, I just, I just love doing that. And so I think you can still succeed if you're like a train spotter about it. But you'll notice I don't pay that much attention to other VCs. And so because even the good ones, even Benchmark Sequoia, they're wrong more often than people realize.

1:05:56You know, it's the magnitude of the right ones is very high. But I think that a lot of it has to do with just being interested. So so I would agree with you in the main. I'd say as an asset class, VC is bad, just like as an asset class, startups would be bad. Right. You're you're trying to find the exceptional. and then, you know, you're trying to find not just the exceptional, but who can persist in being exceptional. And that's really hard too, because there's plenty of people who are exceptional for 10 year window, but were they just right place, right time? Very few venture investors are exceptional over many years or decades or, you know, different sea changes of tech.

1:06:36You know, I think that, so I would agree with you in the main, but if Sequoia lets me invest in their next fund, I'm probably in. Yeah, that's a good point. I like that. We will end on you're a train spotter. You're an odd train spotter. I love that. All right, Mike, thank you so much. What a thoughtful discussion. Again, Mike Mables Jr. And by the way, his father was a legend. I remember him. Thank you. And again, the book is Pattern Breakers, Why Some Startups Change the Future. Thank you, Mike. Nice to meet you. Great to see you all. Thanks for taking the time. All right, Scott, isn't he a smart guy?

1:07:08Really interesting. Yeah, very nice too. One of my favorite people to talk to. So, Mike, he'd be a really good, he'd be a good kind of, he's not elder, but a statesman for the industry. He is like the Tim Walls of venture capitalists. Anyway, we'll be back for Wins and Fails.

1:07:29Okay, Scott, let's hear some wins and fails. Do you want me to go first or do you want to go first? Sure, you can go first. Okay. I would say a fail, and it's not a fail of the story itself, but the Washington Post had a story about a woman in Florida who got into trouble because her transgender daughter was playing on the girls' volleyball team. This is a story about parenting, and this community loved them until someone dropped a dime on it and then created hate. What a ridiculous thing. They loved the person and then suddenly didn't. And it was so ridiculous, and it's a beautiful story about parenting.

1:08:04And this woman is what a wonderful parent. That's all I had to say is just what a fail of society not to value what this woman's done for her daughter, her transgender daughter. And it's worth reading. I would recommend it. And it's just, you know, at the same time, Will Ferrell has this show on about a partner, a writing partner of his who became transgender. Amazing. Will and Harper. Will and Harper. I just love these pushbacks by parents and Will Ferrell and everything else. both the Will and Harper and this story are worth watching. And I think it's a fail on our society for making this so hateful.

1:08:44And the positive, I did a beautiful interview with Joanna Coles and Sam B. They have a new podcast. I'm going to give them a little touting here. It was really fun. They're really, they're trying to do Scott and Kara a little bit. And I wish them good luck in doing so. And I thought it was, I had a really nice conversation. They're still developing rapport and there's no penis jokes, but really good job, girls, ladies. Okay, so I have two wins. My first win is the death of Hassan Nasrallah in the last couple weeks. Nasrallah and basically the entire senior staff of Hezbollah have been taken out.

1:09:24Fun fact, in the last six weeks, Israel has eliminated more terrorists from the U.S. Most Wanted list than the U.S. has managed to do in the last 20 years. I think the world is a safer place with Nasrallah no longer in it. Vice President Harris said regarding his death, Hassan Nasrallah was a terrorist with American blood on his hands across decades. His leadership of Hezbollah destabilized the Middle East and led to the killing of countless innocent people in Lebanon, Israel, Syria, and around the world today. Hezbollah's victims have a measure of justice. I thought that was well said. Very much.

1:09:57My other win is the life of Chris Christopherson, who passed away. What a man. Okay, hold on. So a country singer, I put out a thread on this. I'm writing a book on masculinity, and I'm trying to find great role models. Anyways, this guy, all right. So obviously a country singer, played college football. He was a Golden Glove boxer. He was a Rhodes Scholar, Masters in English Lit from Oxford, Army Cat, and then decided to go join the Army where he rose to the rank of captain as a helicopter pilot, a Grammy Award winner, a Golden Globe winner for Best Actor, eight kids, seven grandchildren. I mean, talk about just a stack of patriotism, creativity.

1:10:51He was known as being a very gentle person. He was known more as a poet than a songwriter. A great songwriter, Sunday morning coming. Coming down. Best song ever. For the Good Times, Me and Bobby McGee, Help Me Make It Through the Night. I mean, I really do believe that. I've been so distressed. I think so many young people have such a bias against America. They generally don't recognize how wonderful America is. And I think that the basis of that amongst our rights, our rule of law, our blessings in terms of our resources, our constitution, all that, because we have so many really impressive Americans.

1:11:33And anyways, I just read, when I heard he passed, I used to go see movies with my mom and my mom was a huge Barbra Streisand fan. And so anything with Barbra Streisand And we saw, and he was in the original A Star Is Born. And I didn't really follow him that much. Well, that's not the original A Star Is Born. It's made actually four times, including a very famous version in the 50s with Judy Garland and James Mason. Is that right? Yeah. Go ahead. And so when I heard he passed, I looked him up and I thought, my God, this is just what you want from men. someone who is incredibly strong, understands his fidelity and appreciation for what it means to be American, gentle, thoughtful, nice, really valued education.

1:12:20And by the way, just kind of outstanding at everything he tried. He was also known as a very generous person to other artists. So anyways, rest in peace, Chris Christopherson. That's my dead at the age of 88. What a wonderful American life. And then my loss is, and I imagine you saw it, But there was a wonderful, really well done article in the Wall Street Journal about how men are continuing to fall behind. And I just want to make sure I get the, oh, that's why you sent it to me. Rachel Wolf, by the way, about 30 people sent me this article. But for a variety of reasons, whether it's a lack of role models in schools or in the homes because of single-parent homes, whether it's that young men literally mature biologically later, whether it's the disappearance of middle-class jobs for men without college educations, there's just so many things that seem to be stacked, whether it's a predisposition towards addiction that's greater than women in divorced homes or single-parent homes.

1:13:25Girls, interestingly, have similar outcomes as girls in dual parent households, but boys come off the rails. It ends up that while boys are physically much stronger, they're emotionally and psychologically much weaker than girls. And a lot of these factors are really coming together in a very, very upsetting way. And Richard Reeves, who's kind of my Yoda around this stuff, the president of the American History for Boys and Men, just came out with a study about what a toll addiction and drugs are taking on young men. And since 2004, the incremental deaths amongst men of deaths of despair, in other words, the new incremental number of men that are dying because of things like drug overdoses, dying by suicide, gun deaths, it is 400 ,000 men.

1:14:16So we have lost more young men in the last 20 years to these deaths of despair incrementally above the average, the baseline before that, than we lost in World War II. And I do think that, unfortunately, because of the advantage that I received and my father received, that there is not the same level of empathy and recognition of just the data here. And there aren't nearly as many programs or thinking about moving in to help with programs for boys from recently divorced families, trying to get more males involved in primary schools, national service, figuring out more vocational programs, support groups.

1:14:57If you walk down the hall of NYU, there's, you know, Golden Seeds, Women in Venture Capital, Black Women Support Groups. There really aren't any support groups focused on young men who are struggling. and more and more young men, Richard talked about this interview he was doing with these community colleges in Oregon and they can't get young men to apply. And when they interviewed them, they went out and did a study. They said that they were worried they would be lonely. And there's really something very upsetting going on amongst young men. And I track pretty closely all the emails I get. And the number one email I get, although it's toning down, is something along the lines of, Is it too late to invest in NVIDIA, which is kind of funny?

1:15:40But the number two is all the same. It's people concerned about their boys. And it's not from their fathers. It's from their mothers. Yeah, I would. Can I just note something here? Well, a lot of people say, why does Scott talk about the struggles of men so much? Carrie, you should stop them. And I got to tell you, I always am like, you know what? It matters to all of us if men aren't thriving, very much so. Because men can be very destructive, too, by the way. And they are. And they can move into really destructive points of view. But it's just, it's very important we get this right with young men.

1:16:09I think about it, given I have three sons, too, about it quite a lot, quite a lot. Well, neither women nor America are going to flourish if men continue to flounder. America is not going to work if we don't have a middle class. And by the way, we should do nothing to get in the way of the fact that on the whole, women, especially young women in our society, are killing it. That is a sign of our collective victory. It's a cause for celebration. And also, it by no means means we shouldn't stay very involved and focus resources and programs and justice on still the many issues that women face. How many times do you hear, I know the most amazing women, smart, attractive, high character, and they can't find a man to date?

1:16:57And here's the thing. They can find men. They just can't find men they want to date. The pool of economically and emotionally viable men is shrinking every year. I would agree. Very good one, Scott. I'm going to add just one more sadness is Maggie Smith dying. I love Maggie Smith. What a - Oh, she's great. Pound for pound, that woman has provided us with more pleasure, whether she was in Harry Potter or Downton Abbey or earlier, the prime of Miss Jean Brody. What a woman. What a man for Chris Christopherson. What a woman for her. Anyway, very good wins and fails, Scott. Very good ones. We want to hear from you.

1:17:29Send us your questions about business, tech, or whatever's on your mind. Go to nymag.com slash pivot to submit a question for the show or call 855-51-PIVOT. Okay, Scott, that's the show. We'll be back on Friday with more. And doubtless, we'll have lots to talk about because there's so much news these days, including from our friend Brian Williams. We're excited to have you back, Brian. Read us out. Yeah, that's right. Well, that's like a horse drinking a Slurpee at a 7-Eleven. Today's show is produced by Lara Neiman, Zoe Marcus, and Taylor Griffin. Ernie Intertide engineered this episode. Thanks also to Drew Burrows and Miel Saverio.

1:18:01Nishat Krua is Vox Media's executive producer of audio. Make sure you subscribe to the show wherever you listen to podcasts. Thanks for listening to Pivot from New York Magazine and Vox Media. You can subscribe to the magazine at nymag.com slash pod. We'll be back later this week for another breakdown of all things tech and business. Golden Gloves, Army Captain, a poet, Chris Christopherson. Rest in peace.