Garry Tan on the Past, Present, and Future of YC

12:36Turner Novak:And that is where you don't necessarily pay money, pay taxes on revenue or income. It's based on like transaction volume of your service or something like that. Yeah.

12:45Garry Tan:And so this is exactly the tax that actually drove both, you know, Stripe and, you know, Square, a number of fintechs out of San Francisco. And, you know, we have something like a 30 or 40 % vacancy rate, you know, on the ride over here, looking out the window. It's like, you know, you will see a ton of empty space. And it's just, you know, it's been sitting empty for years. How are we actually going to fix that if nobody wants to, you know, the second you get product market fit, are you going to stay in San Francisco? You know, are you going to pay literally a thousand X the tax that you would in Mountain View or Sunnyvale?

13:26Garry Tan:You know, most smart people would probably find a way to say, you know what, like, I don't have to be here. And so and these things matter, right? Like San Francisco matters a lot. The reason why I'm fighting for it is that I want startups to continue to be in San Francisco and the Bay Area if they stay. That's the one thing that you can choose about your startup that can change your outcome so drastically. It's two and a half times more likely if people choose to stay in the Bay Area that their company ends up being worth a billion dollars. New York is about 2x and everywhere else in the country is basically, that's the baseline, right?

14:07Turner Novak:So just moving to New York or San Francisco increases your chances, all else equal by 2 and 2.5x? Yeah.

14:15Garry Tan:And, you know, I mean, I think there are infinity types of effects here. You're around people who you have access to capital. That's number one. You're around people who are very, very ambitious. And so, you know, your ambition rises when all your friends ambition is really, really high. You get access to way smarter people who have actually done the things that you need to do. So, you know, I think the thing that scares me is that if the state, if the city, if like the policies don't support tech, you know, it's not merely going to move. It's actually going to hurt America. It's going to hurt our ability to actually stay on the forefront of things.

14:56Garry Tan:And, you know, people sort of scoff at that. But, you know, San Francisco is where we made the self-driving car, right? This is where Uber came up. This is where Airbnb started. This is where GPT-1 was formulated by Alec Radford, right? Like this is the dawn of the AI revolution, like Anthropic and OpenAI started in the Mission District. And, you know, the third crazy thing that's happening that, you know, blew my mind, like it was going to pass until, you know, we harnessed people on the internet in December. the sitting supervisor in San Francisco for the mission district, where they came up with self-driving cars and large language models, wanted to ban AI labs, ban laboratories and research and development entirely in her district.

15:43Garry Tan:She would have made it so that you had to go to a special counsel, probably headed by her and her cronies, to even be allowed to open an R &D lab, even for cancer research. So, you know, to me, that's a ban on R &D in the place where some of the best work in the world happened right here in our city. Like, you know, how did we get here?

16:07Turner Novak:Yeah, well, even if you go back, like, semiconductors, think of, like, Intel being basically birthed and grown in the Bay Area, the internet, all these different companies, different software companies, Instacart, how they probably get their groceries delivered, DoorDash, I'm sure they've stayed at Airbnb. They've used Google products. The iPhone Apple was birthed and born here in the Bay Area. And if none of those exist, you don't have a way to reach your constituents as a politician. You don't have a way to go on vacation. You don't have a way to access the internet. All that goes away. A lot of the internet was built right here.

16:47Garry Tan:I mean, a lot of it right here in California. So, you know, I think people don't understand like this is it's the, you know, the golden goose. But, you know, we should enjoy the eggs.

16:58Turner Novak:We shouldn't eat the goose. Fair. So if I want to get involved in local politics, whether it's San Francisco or anywhere, what would you recommend doing? Oh, follow me on X.

17:08Garry Tan:And, you know, I guess what I'm trying to do is do a lot more research media. I mean, this idea, this, you know, understanding of the actual proposition. You know, I didn't necessarily want to break it on my ex. You know, I sent it to a number of reporters and it just astonished me. Like people wouldn't, they wouldn't publish it.

17:35Turner Novak:They didn't think it was noteworthy. I mean, based on what you just described, I'm like, holy shit, that's a pretty big deal.

17:40Garry Tan:I mean, this is where I sort of wonder, like, it doesn't feel like the media environment is designed to support this idea that tech should exist at all. Like, I think that it's so unpopular with certain sets of people in society that tech could be a positive force, that anything that might even resemble an argument to, like, not do an asset seizure, for instance. You know, the most mainstream business publications are starting to refuse to publish that. Which is just surprising like that, you know, how do we get here, you know? But on the other hand, on the bright side, you know, you do this all day and I'm trying to do this all day.

18:21Garry Tan:Like we get to go direct, right? Like what we're doing right now is not some sort of...

18:26Turner Novak:I'm not gatekeeping this. Like whatever you're saying, we're putting it on the internet.

18:29Garry Tan:We're just putting it out there. You're right. This is like what I've learned. And, you know, I mean, I think that's the counterbalance, I guess. I mean, you know, we used to have to go through a media and there was like a mediation of like how reality works, whereas now we can just go direct. And, you know, I'm not going to get everything right all the time. And I own up to that. I try to, you know, be as truthful as I possibly can be because, you know, I have to wake up and look at myself in the mirror and say, like, am I doing the right thing?

18:59Turner Novak:Yeah.

19:00Garry Tan:And so maybe that's our covenant as creators on the internet now. It's like, well, I'm not going to get it right all the time. But at least like my guarantee to the people who follow me is like, I'm trying to do it, man. Like, you know, I have a particular worldview. I'm not without bias. But, you know, it's a bias that's informed by I meet with founders all day. I meet with tech people all day. And I'm meeting legislators. I'm meeting policy people. And this is what I'm seeing. Yeah.

19:27Turner Novak:Yeah. Plus, if you just suddenly start saying things that aren't true or aren't well-researched and informed and people are just like, oh, Gary doesn't know what he's talking about. I'm not going to pay attention to him anymore.

19:39Garry Tan:Yeah.

19:39Turner Novak:You kind of lose your credibility if you're not continuing to fulfill that promise to your audience or to the people that trust you. Yeah. So on the other side, there could be audience capture. Yeah. Like you might be totally biased of like only communicating things that are favorable to tech in a way. So I guess there's that argument too. Which, I mean, then it's good. It's good to have the counterbalance, I guess, of all these different people with different opinions.

20:05Garry Tan:Yeah, I'm not the only person that people should follow. And I would never tell people like, use me as the only source of information. That would be bad. So I just think of that meme, you know, hey.

20:17Turner Novak:Oh, we're the media now. Yeah, we're the media now. you mentioned something kind of interesting with sort of these like eras of YC. You might've actually said this before we started recording, but you said there's kind of in these different eras of YC. And so maybe the first era was, maybe it was Boston. Maybe it was still the first era when Jessica and Paul moved to San Francisco. What was kind of like the second act or second era of YC?

20:43Garry Tan:I mean, basically it was Paul and Jessica and Trevor Blackwell and Robert Morris in Cambridge initially. And then they started coming to the Bay Area. And then actually Harge Tagger, who's a managing partner with me at YC now, was one of the first outside partners. He was a YC alum. He actually co-founded a company with Patrick Collison that went through YC the first time called Octomatic. and you know i i got to work with him paul bukite who created gmail jeff ralston who created yahoo mail we were sort of like a set of people starting in 2011 who became partners and so this is kind of like the second era yep so pg and jessica were you know still directly involved and it was like way more than a full-time job i would say and they had very young children as well

21:39Turner Novak:Was it like a, we're going to scale YC, we're going to try to help more founders, we're going to put more capital to work, we're going to try to make a bigger impact on the world?

21:47Garry Tan:Oh, yeah, definitely. I mean, I think that first era was fascinating to see because I saw here was this place where I was a software engineer, I was working at Palantir, I designed the logo at Palantir, actually, employee number 10. And then we were trying to hire away some YC alums who had just gone through the program.

22:08Turner Novak:So that's how you first came across YC? That's how I found out about YC.

22:10Garry Tan:Oh, interesting. So, you know, Palantir, we were only 10 people and we were just really into hiring the smartest engineers. And so it's kind of funny because, you know, 2006, 2007, that was right when YC started. And so it was probably, it wasn't until maybe 2011 or so, that was when Dropbox had become a billion dollar startup. But a lot of people said, oh, one, you're lucky. And then, you know, in 2011, 2010, 2011, that was when Airbnb became a billion dollar company. And then one, you're lucky, two, you're good. Suddenly, everyone in the Valley realized YC was actually really a place to pay attention to.

22:51Turner Novak:So Airbnb put YC on the map, just in the sense of, holy shit, they've done this twice. Yeah. There must be something there.

22:57Garry Tan:Yeah. And then that's when YC sort of went from giving people, you know,$12 ,000,$15 ,000 to, you know,$100 ,000,$120 ,000,$175 ,000. And yeah, it was just interesting to see the difference, right? Like, I knew back in 2007, 2008, like, this was where really smart engineers wanted to go start their company. Like I wanted to be like Steve Huffman. I wanted to be like Drew Houston. I wanted to be like James Limdenbaum who created Heroku, which we used. And, you know, really one of the best cloud software startups of that era. And so it was already in the minds of like the creators and the founders themselves that like, here's the super technical guild of all the smartest people making the things that we want to make.

23:46Garry Tan:And then other people started paying attention. It took like three or four years for the investors to catch up, but they caught up by 2011.

23:53Turner Novak:That's kind of classic though. Like the investors always catch up later when the true point is there. Which makes sense. Yeah. And then you, I think there's like a famous, I actually might've tweeted this as a joke, but you were like, were officially a photographer at YC at one point. That was like your first kind of role. You were just like volunteering, taking pictures. Yeah, totally. I mean, we were applying to YC.

24:14Garry Tan:I was actually trying to become an editorial hip-hop photographer at the time. Really? Okay.

24:21Turner Novak:So this is like a portfolio work of like build your brand? A little bit. It was like a quarter-life crisis of mine where, you know, I had rage quit my job at Palantir.

24:31Garry Tan:Oh, really? And I mean, I was just younger and, you know, I spent a lot of time on my YouTube channel sort of talking about my psychological and like sort of business journey, you know. So, and I, you know, honestly, I managed to sort of reprogram myself in a way and in ways that like helped me get to where I'm at, where I'm at today. But I put a lot of credit to Cameron Yarbrough. He actually started a exec coaching startup called Torch and Torch.io. And, you know, he was one of the people who taught me like, oh yeah, you know, you know, everyone sort of goes through whatever's going on for them, right?

25:15Garry Tan:Like you have your 10 ,000 hours of human training from your childhood and your teachers and like all the things that you saw. But, you know, on the one hand, some people treat that as destiny. Well, that's what I got. And that's it. And what I learned from Cameron was that these are things that you can actually control. Like you can change, you can, you know, are you a Westworld fan? I was the HBO show. Yeah, yeah, yeah, with the robots. And you could, you know, freeze all motor function, and then you could go into like a debug mode.

25:46Turner Novak:Yeah.

25:48Garry Tan:That, you know, that's what therapy and coaching can do. And that's something that helped me a lot. Like I, you know, basically stopped rage quitting after being able to spot like, Oh, well, this is a pattern. Like, I rage quit my job working for Joe Lonsdale at Palantir. I rage quit actually my startup. in 2010. And after that, I realized, oh, no, no, I have this cycle where I will sort of self-abandon a little bit too much. For me, the central core thing that I had to learn about myself was that I had this sort of mode where we might be co-founders. I disagree with you on this, but rather than just saying it, I might eat it.

26:33Garry Tan:I just don't even say it, right? because I want us to have a good relationship. Like I sort of mistook this idea that you always hear the advice like, oh, you better have a really good co-founding relationship. And I mistook that for like, oh, you should never fight, which is not true at all. Great co-founders fight absolutely all the time and about everything, but mainly because they care so much and they do it in a way that like preserves the relationship. There is never a conflict or a fight that is so much more important than the relationship itself. And, you know, that could be a co-founder, that's in marriage, that's in like all, you know, good close, you know, friendships.

27:15Like this is sort of the repeating thing.

27:17Garry Tan:And so I learned that actually I shouldn't self-abandon. And then my pattern would be, I would keep it to myself. I'd say like, oh, you know, I can deal with this. Some of this is that my mental model for human beings is like, there's a horse and a rider. and I have a very strong rider. Like my prefrontal cortex and my language center can like control the horse, I guess. It's just like, you know, you would call that like very strong will, I guess. And this is like a very subtle weird thing where I would use that to sort of like squelch all of these other things that I knew was correct, whether it's like, oh, the homepage should say this or actually like, you know, actually, the startup, you know, we started like this, but we should pivot to that, right?

28:06Garry Tan:Like, these are all things that like, you should be able to talk to your co founder about. But it was on my end, like I was a terrible co founder to my, to my co founder at Posturus back in 2008. That was my YC startup. And so yeah, these are things that you can control and you can change. And, you know, for me, I would run into a point where like, I had chosen to self-abandon enough that, you know, to use the horse and rider analogy, the horse would just say like, F this. Like I couldn't eat. I couldn't sleep. Like it became, you know, a somatic actually. And this happened a few times and it took like quite a bit of therapy and coaching to realize, oh yeah, this is a cycle.

28:48Garry Tan:This is something that happens and I can actually do something about it. Like I can be aware of it. I can, you know, so today in my work with my therapist and my coach, like often I'm trying to think through like, okay, freeze all motor function, what's going on here? Like, and then if I'm very lucky or very, very astute, and usually with the help of others, I'm not able to do this myself. I can place an if statement in there. And it's like, when my face gets hot, I'm going, you know, I'm going to stop. And, you know, I might have like a default reaction. like shutting it down or like, you know, I said self-abandoning, like the part that would happen would be I bottled up so much, then I'd blow up.

29:36Garry Tan:You know, I went into a one-on-one with one of my first designers I'd ever hired and I just blew up at him. And he was like, Gary, I've never been more disrespected in my entire life. Like, how did this happen? Like, where's this coming from?

29:50Turner Novak:And so - It's probably just years of you just not voicing the thing. And then it It's just you hit a tipping point and here's 18 things and I'm laying on you. Exactly.

29:59Garry Tan:And that's definitely not healthy. And so the cool thing, though, is like, I think it happens all the time. I think that it's actually one of the more fundamental things that I really want founders to understand because like, you know, I just gave my map and it took me many, many years to like sort of map that out to freeze all motor functions like regularly every single week and figure out like what was going on. Everyone else has like, you know, clearly other things like, you know, it's my thing is not universal, like mine specific to me. Everyone has sort of their own set of things. But like it or not, like, do you know how people talk about startups and startups themselves take on the personality of their founders?

30:41Turner Novak:Yeah, I've heard of them.

30:42Garry Tan:And so this is like a direct outgrowth of that. Like if people don't handle these things and get a chance to, you know, figure this stuff out, like it just shows up in your org in ways that are, you know, it'll just happen someplace. And you'll be like, well, where did that come from? And then if you really pull on the thread, it's like, oh, because that's me. Like that's how I, you know, who you hire, who you fire, like how you deal with almost any conflict. Like that is actually how the organization deals with conflict. So on the one hand, like most people look at this, you know, internal work, it's sort of like, oh, it's like some West Coast, like do some ayahuasca and like talk about our feelings type bullshit that doesn't matter.

31:26Garry Tan:And I'm like, no, no, no, like, you know, maybe psychedelics are not for everyone, like be very careful about that. You know, that's my take. And on the flip side, like, no, no, no, like how you do anything, you know, how you do anything is how you do everything. Right. And so I certainly recognize this like repeating pattern in myself. And I mean, I think we see it play out across thousands of companies, right? And we can't be there all the time. Like, you know, being a YC partner for a company, like we try to be there, but we also see these sort of repeating things. And, you know, we have to like take control of ourselves.

32:07Garry Tan:Like, if you can be a better person, like actually, you'll show up better, you'll hire better people, you'll manage better, like everyone will be more functioning, functional, like not afraid, more truthful, more focused on the outcome. And then that will produce a better product and actually winning in the marketplace. So it's like, it's not this, you know, in the sky, like, let's talk about our feelings thing. is actually like, it's pretty fundamental to whether or not a startup works or not.

32:39Turner Novak:Well, so speaking of that question, I feel like YC has published data before on these are the most common reasons that a startup fails. I think number one is you run out of money, quote unquote, and then maybe number two is kind of co-founder disagreement or conflict. Is that? I mean, maybe this is a funny aspect of YC.

32:56Garry Tan:YC companies tend not to die because they ran out of money because they have some money. Usually they shut down because they get tired. They get demoralized. I mean, it's sort of real. It's honestly like often co-founder issues. And so a great co-founder conflict, you know, you might not agree on everything, but you're able to get to some sort of outcome. And then the outcome and decision like leads to success. And then, you know, good things beget good things. Right.

33:25Turner Novak:So even if you have disagreement, You might disagree on everything at first, but you're able to come to a common understanding or decision and just do it and just move past it. And maybe not move past it in the bad sense of like burying it, but like talking about it and figuring out like, this is actually what it means. This is what the decision means to us or why we should do it. Absolutely. And then the nuance is like, honestly, you're, I like the analogy of an idea maze.

33:54Garry Tan:you're at the beginning, you're actually at a maze, right? And how do you, you're trying to get product market fit, you're getting to it, you want to create something that people want, make something people want is the t-shirt that we give everyone.

34:05Turner Novak:Oh, you actually get a t-shirt?

34:07Garry Tan:Literally get the, like, that's the, if you had to sum YC up in one sentence, one mantra, it's make something people want. Like, you can just think on that, like, you know, say, you know, we should just make people say, make something people want, like as a, as a Hail Mary or something. It's like, here, we give you absolution. Just say, make something people want 1 ,000 times and meditate on it and your startup will succeed.

34:31Turner Novak:But then you start thinking of like, make something people want. What do people actually want?

34:35Garry Tan:Yeah.

34:35Turner Novak:Like, I feel like some people, you just forget. Like, when I started this podcast, it was like, what would I want to hear in a podcast? Like, it's not just, you know, what's the checklist of what you should do when you make a podcast? It was more of like, what would it be fun to talk to Gary about? Like, what would I actually want to hear if I had him come on? Awesome. So you kind of just, I think about that with everything. It's like make something people want, I guess.

34:57Garry Tan:Yeah, you start with the verb like make, right? You got to make something. And then what's funny is make something is too short because it's missing like the interaction with other people, you know?

35:10Turner Novak:Oh, yeah. So then you, I guess we're continuing the phases of YC. So you joined at some point. It was like after you went to this journey. So you had raised quit and then you were suddenly like... Yeah, I rage quit my startup.

35:23Garry Tan:And then Harge said, well, you're a great designer. And this is sort of the era of consumer startups still. So this is the moment when people said like, oh, well, you need a designer with your co-founding team. And so I actually came on having no intention of ever becoming an investor, ever becoming a GP or starting a VC fund. I was just like, I'm really burnt out and I need to recuperate. and Harge and PG and Jessica said, why don't you just come and help a bunch of YC companies design their homepages? And then I just did so many office hours that, you know, my pet theory is like, maybe they, you know, saw how much work I was doing and they were promoting other people who were great into investing partner.

36:08Garry Tan:And they said, well, you're doing so much work,

36:10Turner Novak:like we kind of need to promote you too.

36:13Garry Tan:So I'm like, I snuck right in there.

36:15Turner Novak:So unclear if you're actually good, but you were working hard. This is my imposter syndrome at work, but it worked out.

36:22Garry Tan:I mean, I learned a lot. I, you know, what was really cool about it, I, you know, I really loved that moment because, you know, I was the same age and like, I was, you know, a practitioner right at that moment. It's very interesting to be, you know, 12 years, 13, 14 years into like the other side of that. I think this is probably the life of many an investor. You start out as a true peer to a lot of the people you're backing. And it's very funny. But on the other hand, I feel like I can be right back there. This whole weekend, I was just sitting there in Cloud Code, making a new website and doing new interaction design.

37:07Garry Tan:I'm like, oh my God, I'm back.

37:10Turner Novak:Back in the game. That's right. Right. Like the investor like truly rolls up their sleeves and they're like, they're in the trenches there. That's right.

37:17Garry Tan:All the new tools.

37:18Turner Novak:Yeah. Yeah. So then there was a period you kind of started initialized then you were still at YC. How did that kind of go?

37:26Garry Tan:Yeah. I mean, this was back when people could do, be a YC partner and do personal angel investing. And then Harj and Alexis and I were sort of the young partners who had not made any money yet. Palantir was still private. And Posturus had sold to, or was about to sell to Twitter, but Twitter was also private. And so Jessica said, hey, you could probably be an investor by, and she introduced us to some LPs basically. And so we raised Initialize Fund One, which is a$7 million fund. And we ended up returning more than 55X DPI on that one.

38:03Turner Novak:Not too bad.

38:03Garry Tan:Yeah. Yeah. So, I mean, it was mostly Coinbase and Instacart. But, you know, I think that's probably the thing in an investor's sort of worldview that like you read about it, you hear about it. And then until you see it, you don't believe it. Like we funded 100 companies. and you know all night if you could you added up the dpi on all 98 companies it was like 1x and then instacart was 1x but we couldn't take any prorata because sequoia did it and then and then coinbase we took the prorata in multiple rounds

38:42Turner Novak:and that ended up turning the fund 53x oh wow so when you see the power law it is

38:50Garry Tan:astonishing and unbelievable, honestly.

38:52Turner Novak:Yeah. And then you, so Initialize, it seemed like it was going really well. So you stepped back from YC like on a daily basis and were running Initialize full time.

39:01Garry Tan:Oh yeah, yeah, yeah. I mean, basically, just like the Sam Altman era. And, you know, at that moment, you know, I had helped raise the continuity fund, brought in the first LPs for it. And then I said, well, YC is in pretty good shape and it's got institutional backing. It's going to keep going. And then for me, it was like, it's more fun to be a pirate than to join the Navy. But here I am.

39:28Turner Novak:I'm an admiral again. So then how did that come about where you had started your own fund? It seemed like it was going really well. I think you had probably raised like your third or fourth fund. Maybe I should have looked this up again before. But it seemed like, oh, you're set with initialized. Why would you go back to YC? How did that happen? Yeah, I mean, I guess this is a special thing.

39:50Garry Tan:Like YC is not just sort of like a boot camp or it's not even just a school. It's like, it's a way of life. No, I guess like more seriously, I mean, all of our wins, like 80, 90 % of the wins were either YC or YC alumni.

40:08Turner Novak:Oh, from initialized?

40:10Garry Tan:For initialized. I mean, super big ones that we're still super psyched about. I mean, ended up being the first investor in Rippling, you know, first seed investors at Demo Day for Flox Safety. I mean, we have a ton of incredible companies that are all like, you know, today worth a lot of money. And then I looked down and realized, well, this is all a part of like this larger ecosystem. him. And mid to end of 2022, like Sam had gone off to work on OpenAI, Jeff Ralston, who I'd worked with for many years, took over as sort of a caretaker president. And then he said, you know, a bunch of people from that era, especially PG and Jessica said, you know, we really want you to come back.

40:59Garry Tan:And Brian Chesky was a big part of that, of Airbnb. He said he was on the board and still is on the board at YC. And he said, Gary, it's time for you to come back. And were you expecting that? Not at all. I mean, I just, that was like, I never thought that would happen. On the other hand, it's like a dream job to me. I mean, YC gave me my start as a founder, gave me my start as an investor. It was like, you know, probably 50 to 80 % of my friends are like all from this world. I mean, basically going from like being on the branch to like, you know, tending the root of the tree of prosperity. You know, some of it was like, if it wasn't going to go the right way, I might as well retire.

41:45Garry Tan:Like, you know, it's one of those only people of a certain age will understand my reference of it's kind of like the hair club for men. You know, like in many, many different ways. I'm not just the president. I'm also a client. So, you know, I both went through YC and I was also one of the investors at Demo Day. And I, you know, managed to turn in like multiple 10X, you know, plus, you know, sort of legend VC funds. And so I'm like, no, no, no, I understand this ecosystem really, really well.

42:18Turner Novak:Yeah, because you'd almost been like every sort of like constituent that you serve in the ecosystem, you've been on the other end of it. Yeah. And I mean, I'm sure that,

42:29Garry Tan:Most of my VC friends would agree with this at this point, but that was a concerted effort the last two or three years to basically realize that YC is a managed marketplace. And that's a good thing. Basically, it's a managed marketplace for all the smartest people starting the next companies. We're about 20 % of all the names, all the companies worth$5 billion and up started from 2012 and later. I did. They participated in YC?

43:00Turner Novak:Yeah. So, I mean, and frankly, like, it's a network effects biz.

43:06Garry Tan:So, it stayed about 20 % for going on like, you know, 15, 18 years, I would say. And why shouldn't, why can't that be 30? Why can't that be 40? So, you know, you can, you know, mark 2026 on the calendar. And, you know, If I'm successful in five or 10 years, I'd like that to be 30. I'd like that to be 50. Why not? This is and should be a network effects business where it's not about the money. It's about having a community of all these people who you can trust and they're there to support you. That's actively... I think of it as like Disney Imagineering. Disneyland is this incredible place. And, you know, if you go down into the bowels of Disneyland, like you'll realize, oh, there's like an incredible amount of care and thought about like every little detail, like every part of the experience is designed.

44:03And, you know, I really credit Brian Chesky for that.

44:07Garry Tan:I mean, it's like sort of the original designer founder. Having him on the board is absolutely insane because it's like, you know, mile a minute ideas about like what we need to do to create, you know, it's no surprise at all that he created Airbnb because he's that good thinking about human experiences.

44:28Turner Novak:So any examples of that? Like what have you learned from Brian Chesky in terms of designing human experiences or ways to make YC a better product? I mean, a lot of it is just focus.

44:38Garry Tan:Like his, I'm sure people, I mean, if people haven't seen it, like they should definitely go and watch. I mean, you need to read Paul Graham's essay about founder mode. And then Brian's done a bunch of things like, actually, I like the one he did with Jessica Livingston on the Social Radars podcast about founder mode. and basically he had to remake that company from scratch like during covid and he basically realized that you have to like press like leadership is like his presence not absence like he the classic advice that people give to startup founders who reach product market fit is like hire the smartest people you possibly can find and give them the keys to kingdom and his advice like flies in the face of it.

45:28Garry Tan:And he's like, oh, I did that. And it created a company that I did not recognize. Like my directs with like, I mean, there's just so many different things that he sort of realized. And then I think as founders, especially post-product market fit, you just don't listen to like basically your own beating heart around what you need to do for the company. And so what he said, you know, I'm not the founder of YC, but I feel like he gave me sort of, you know, between him and Paul Graham and Jessica Livingston, this like incredible sense that like, no, no, no, like I'm not the founder, but like, you know, we are going to run it, you know, like founder mode.

46:14Garry Tan:Like I, you know, I need to take like a really, really radical ownership about what is that experience like? What's demo day like? What is the application process like? We brought back in-person interviews. We moved San Francisco. We got an office right here in San Francisco. We told all the founders, move to the dog patch. Move to the center of where all the stuff is being built and be surrounded by all the other people who do that. When I came back, it was a remote program. Basically, the batch is not remote at all. You cannot do YC remotely. But it wasn't really working as a remote program.

46:51Garry Tan:Really?

46:52Turner Novak:So when you talk about that 20 % number, did it start to dip? Or did you feel like you were losing that 20 % and it wasn't going up anymore? I mean, that's what it felt like, honestly. And I mean, some of it is, we did a lot of

47:07Garry Tan:really amazing things. YouTube started becoming a really big factor for YC. But YouTube is not enough. Like this is part of the reason why we're going to open an office in Cambridge. Like we need to be on the ground with the world's best founders. And, you know, frankly, some of the best ones are right there at MIT and Harvard. And...

47:28Turner Novak:But it's kind of like you, so you're still trying to scale it. It sounds like before the answer to scaling the YC experience was online application and interviews and, you know, maybe it's like a little bit more decentralized. I think I saw a chart of like international YC companies, it was kind of going up quite a bit where you guys funded more teams around the world. But now it sounds like it's still trying to hold that like in person, what makes it special, we're creating this like network, but maybe trying to scale that, like maybe try to recreate what exists currently in the dog patch in Cambridge.

48:00Turner Novak:Oh, yeah.

48:01Garry Tan:I mean, the thing that keeps me up at night, you know, some of it is like, we mint 99 % of people who apply to YC end up getting somewhat of a mortal ego wound by being rejected.

48:15Turner Novak:I was going to ask you about that.

48:16Garry Tan:I see a lot of like, I don't know, it's like people who are upset that they didn't get in. I mean, it keeps me up at night because like, you know, it's not a good thing, right? And this is something we talk about inside YC. It's like, you know, something like a third of the batch, maybe even depending on the batch, sometimes half of the batch will have been rejected prior to getting in. and that number has been going up. People sometimes have to, you know, it's quite common for people to apply two to four times before they get in. So, you know, I think we're always worried about over-rotating.

48:56Like, you know,

48:58Garry Tan:basically being too small can be bad. Being too big can be bad. We're always trying to figure out what that number is. But I think we're pretty clearly right now, Like there are way more really, really capable founders who we are rejecting. And that keeps me up at night. You know, we should not have to ask people to be rejected like time after time. I will say, though, if you can survive the mortal ego wound of being rejected, you know, once, twice or three times, you're actually made to be a founder. If you cannot be rejected even once and you like mortally hate YC after being rejected once, maybe try a different profession because being a founder really does require an absolutely insane amount of resilience.

49:46Garry Tan:And one rejection, you know, the get ready buddy, like it's going to be a thousand more, you know, like in every possible way. And a really great founder just says, you know what, like they got this wrong, but I'm going to prove them right. I'm going to prove myself right. And, you know, to be frank, that is what we love. Like we, I particularly love funding founders who, you know, we might have gotten it wrong. There's actually an example of this in Fall Batch, actually. There's a company that they're, you know, very active on Twitter right now. And, you know, Diana picked them up for the Winter Batch.

50:23Garry Tan:But, you know, both Nico and I had interviewed and we should have accepted them for fall. And so, you know, if you're watching, I'm so sorry, I made a mistake. And I've said that on Twitter already. So yeah, I mean, this stuff keeps me up at night. Like, I, you know, I don't like to hand out, you know, honestly, like, you know, how many is it? Like, we get about 80 ,000 applications.

50:46Turner Novak:So it really is, you know, something like 78 ,500, you know, like mortal wounds, you

50:54Garry Tan:know.

50:55Turner Novak:This is per year? Yeah. Do you accept probably like 200, 250, 300 per batch? Oh, no.

51:00Garry Tan:I mean, I think we're doing about between 700 and 800 companies a year. So yeah, I mean, it's a lot of companies. We reject a lot of companies. And on the one hand, like, hey, please apply again. There's that meme I try to post that's like, hey, getting rejected from YC is sort of the first step to sort of being accepted to YC.

51:28Turner Novak:Yeah, nice.

51:29Garry Tan:Yeah, it's the Adventure Time meme.

51:31Turner Novak:So what would you recommend if somebody's listening to this and they have or haven't applied to YC yet? What are some of the things that maybe they're obvious, maybe they're not obvious, but like, what are you looking for when someone applies to YC?

51:44Garry Tan:I mean, I love Builder. So just being able to see, I mean, honestly, what Cloud Code can do today. what's funny is like boilerplate, like what just comes out kind of sucks. And so, you know, one of the things I'm even realizing from the last weekend of like going deep on it is that like you can still, you can create, like there is pretty much no excuse why people can't make beautiful, super well-made stuff. Like there's sort of, I'm sort of worried. Like maybe this is, you know, the boomer 2010 startup founder talking in me right now. But I think that there is a craft to creating online and sort of startup experiences for people.

52:31Garry Tan:I mean, if you're building software anyway, like there's just something there that I think it's easier than ever to create something that is like all the way sanded down. Like the story I always think about is Steve Jobs would famously talk about how like a cabinet maker can recognize other cabinet makers as being really great at their job, not by like looking at the front. Everyone can look at the front. Like, you know, most everyone thinks about the fit and finish of what's in the front. A great cabinet maker will finish the back. And then that's how, you know, you can really, like game really does recognize game.

53:07Garry Tan:And when I look at the partners that we have, like we have people who have sold their companies for, you know, hundreds of millions of dollars that, you know, there are people who have like, you know, they're really great practitioners of getting to product market fit themselves. You know, like Tom Blomfield created Monzo, which is worth billions of dollars. One of the absolute top fintech companies in the world. And so, you know, we have 15 people, all of whom I can say without a doubt, like, you know, especially after doing funding, you know, even two or three years of companies like, you know, two or three years of YC time as a partner is equivalent to like 20 years in like venture, I would say.

53:47Garry Tan:Because think about like...

53:47Turner Novak:Isn't the reps?

53:48Garry Tan:The reps are unbelievable, right? Like if you are reading personally, you know, 1 ,000 to 2 ,000 applications every single year, you're working very directly writing. I mean, frankly, like even as a seed investor, that's pretty wild. Like writing 50 seed checks in a given year, like sometimes 75. Like... Yeah, I do about six to eight in a year.

54:10Turner Novak:Not quite as much. So if you get those reps,

54:12Garry Tan:Like, you know, the organization learns, you know, and actually that's sort of the reason why it works. I don't think that I can, you know, I can try to pull out the, you know, billion dollar idea for founders. And, you know, that's hit or miss, like that just requires inspiration. Like I think that people like Paul Graham or Vinod Khosla, for instance, like par excellence, incredible. I would say that like all of the YC partners are, you know, top two to five percent in the world at like being able to do that. But on top of that, because we get so many reps and we've seen so many things, like it's actually about stopping you from blowing yourself up on like the sort of 10 ,000 landmines.

54:53Garry Tan:It's like, oh, that's going to lead the co-founder to conflict. Oh, like be careful about taking money from that investor. Oh, like you got single channel concentration. There's sort of like literally 10 ,000 things. Like the good thing is like, because we've seen everything, like we'll never freak out. I mean, that's actually really good investors are like that. They're like soft advisors who never freak out.

55:15Turner Novak:They're like, oh, this is happening. Interesting. Like your company is probably going to die in a month if you don't make this change. But there's three people that have actually done this before. Exactly. And here's what they did.

55:24Garry Tan:Yeah. And then you look like I can tell you this, but also talk to the person where it happened. And that's where like, you know, it takes a village to create these things. And so, yeah, if I look at like, why is it that YC can do this? Like, well, you know, whoever is in that batch is the top 1 % of what's going on. And then if you put them in a room, like they just like by default, create this community of like, you know, default trust. And then the partners themselves, like you get, you know, one out of the 15 that's like, hey, we're here for you for like the life of the company and beyond.

55:56We're actually there to fund the founders. Yeah.

56:02Turner Novak:Talking a little bit more about the app, is there a common reason maybe between that top 5 % and 1 %? Like the... You guys send an email that's like, hey, you're in the top, I think it's either 5 % or 10%. Is there a common reason that maybe people don't quite get to that accepted, but they're ranked pretty highly? Is there something where you usually get tripped up in the application? or it's like somebody who maybe the first two times they didn't get in, but then the third time they get in and they're really successful. Like, are there things that you feel like they're like fringe, almost make it into YC types of things?

56:37Garry Tan:Oh, man. I mean, the hard part is it's, you know, I couldn't tell you, like every single company is such a different, unique snowflake.

56:45Turner Novak:There's a lot of subjectivity probably too, where you just kind of had like a gut feeling on this one, but not this one.

56:50Garry Tan:Yeah. I mean, we often try to do re-interviews. So it's actually more and more common that if one partner says like, well, there's something here, I can't do it. I mean, sometimes people just get full up. Like we definitely, we don't want partners.

57:07Turner Novak:You each like pick your...

57:08Garry Tan:Yeah. Each partner picks their own cohort. And basically sometimes our eyes are bigger than our mouths and bellies, I guess. I don't know. I mean, so we try to pass it to other people who might want it. I think a lot of it is just about, yeah, what, you know, what do you, it is that snap judgment in 10 minutes. And, you know, all we can really do is give you more shots to like, sort of have it click for someone. Because, I mean, it's a considered thing. Like, YC done wrong, it sort of feels like, you know, random winning the lottery. and YC done right is like you're meeting someone and it's actually pretty high pressure for the partners because like it or not, like we're going to get text messages and emails and like, you know, it's, we're signing up for like the long haul like work.

57:58Turner Novak:So it's considered, you know. So what is, you talked a little bit about like, you get into YC, there's this batch. What is, how does it kind of go just for someone who's not familiar from the outside? And then what would you recommend to get the most out of YC? Yeah. Like if I just got in and I'm listening to this, I'm super excited. Maybe you tell me this when I get in, but what would you say to someone to get the most out of YC?

58:20Garry Tan:Yeah, I mean, we just extended it to a 13-week program. I mean, this is what I mean by like, it's, you know, Disneyland and like we have to imagine near this stuff, right? Like we pay attention to, we talk to people and it's like, how did it go? Like, what can we do better? We went to four batches and realized, oh yeah, actually like the batch got a little bit shorter and people need a little bit more time.

58:40Turner Novak:So you added, you went from two to four and you shortened it when you went to four?

58:45Garry Tan:Yeah, yeah. We went down to like maybe 11 or 11-ish weeks, 12-ish weeks. We realized, oh yeah, no, we need to add like two more weeks and get this to 13. And so, you know, the first sort of nine to 10-ish weeks, I would say, we're just trying to find product market fit. Like, let's get in market. Let's nail our messaging. Let's figure out who we're building it for. and let's build it. Like, let's get, you know, a set of real customers, sometimes enterprise, sometimes, you know, DevTools is very funny because DevTools is actually like consumer startup, but your total addressable market is like 20 million people.

59:24Garry Tan:So now with CodeGen, like maybe that's 200, you know, like it's, and so yeah, AI infrastructure is growing really, really fast. And, you know, that's just ongoing, like always changing. Like I think YC is like totally insane for infra and cloud startups in that respect, because you basically look to your left, look to your right and look like at, you know, 800 companies that were funded the prior year. And like all of those people will reply to your email and like, we'll at least give you a fair shot. Like, you know, it's not a guarantee they're going to sign on. But, you know, man, the first like three to five customers matters a lot.

1:00:00Garry Tan:And that sort of sets the tone for the whole company. And then, you know, we actually tried to keep the amount of time spent on fundraising to like, maybe two weeks. Like basically, the funny thing about fundraising is like, I think the mistake that people make as founders is like, considering that like the, you know, that's the finish line. And it was like, No, no, no, that's not the finish line. That's the starting gun, guys. Like, you know, have a party and then like, actually get back to work the next day because like, you know, safes are, you know, they're not actually debt, but you should sort of treat it like debt.

1:00:35Garry Tan:Like, you know, someone gave you a million dollars, they gave you$5 million. But guess what? Like, you sort of signed up to say that, hey, we're going to return a big multiple of that based on the things that we're going to, you know, we're going to do from here. Like that, you know, that million dollars is going to be worth 100 million. It's going to be worth a billion. You mentioned earlier, you alluded to like, things or investors you should take money

1:00:58Turner Novak:from or shouldn't take money from. If I'm doing YC, I'm approaching demo day, maybe explain a little bit how demo day usually goes for someone who's, you know, has only heard of this but never been there. And then how do you usually recommend somebody kind of picks what investors they should or shouldn't work with? Yeah, totally.

1:01:15Garry Tan:I mean, I guess the reality is people start basically towards the end, like we want people mainly working on the startups because that's what actually matters. And then there is sort of a starting gun inside YC for going to talk to investors. So if I were an investor, I want to sort of talk to them that like probably Saturday, like, you know, we sort of do the send off, like you're done with fundraising prep, you're ready to talk to investors. And then usually that Saturday, it's like, all right, off to the races, like, let me start meeting people. And so it's pretty important. I mean, the number one thing that a startup founder can do going into YC is like, make really, really valuable things and get real customers that pay and retain.

1:02:04Garry Tan:And then fundraising is easy because everyone can see it.

1:02:08Turner Novak:Yeah, because it's like you're trying to give someone an attractive asset to invest. Yeah. And that's what they're doing. They want to make money. They want to give you money. and then in 10 years, you give them back 100 or 1 ,000 times more. That's because you made a valuable thing

1:02:21Garry Tan:that's worth a lot of money. Yeah. I mean, the cool thing is about 20 % of YC now is hard tech. You know, defense tech is up more than 2x in the last batch. Like, you know, defense tech is interesting because it's sort of both. Like you want commercial validation. Like Icarus was the, you know, one of the top companies from the last batch. And they literally got, they booked more than a million and a half dollars from the Department of War during the batch. So that's, you know, that's why they were one of the top companies. Like they, during the batch, was able to go from here to here. And, you know, I think that that's the number one thing.

1:03:00Garry Tan:Like objects in motion, stay in motion. Objects at rest, stay at rest. And so, you know, YC is sort of the moment that you need to like learn how to run fast. And this is something that we hear from like all the billion dollar companies, even they look back and say, oh, like, if they feel like they're, you know, thousand person company is going slow, they try to tap that energy that they got when, you know, the first week, the first eight weeks of YC, when they were running fast, like, you know, Airbnb famously talks about, you know, they on post-it notes in the bathroom, put like a little graph of like every single week, we need to grow our revenue.

1:03:41Garry Tan:on the site, managed marketplace, 10 % every week, and they nailed it. And that's why they raised from Sequoia prior to demo day.

1:03:49Turner Novak:But didn't no one want to invest in Airbnb originally, right? I mean, they got rejected from all the legends.

1:03:56Garry Tan:So yeah, the funniest thing was, I think, Brian would always sort of obscure who the people were. But now it's such a legend story. I think I I saw Mike Maples post like, oh yeah, that was me. And Mike has nothing to prove. He's like one of the biggest legends in all of venture. So it's just like part of lore now. I mean, and that's what gives me heartburn sometimes. Like, man, like, you know, if we make a mistake and we say no to a founder who ends up like creating Airbnb, like, I'm sure we're going to do it.

1:04:28Turner Novak:The reality is like, I'm sure we're going to do it and I'm going to feel bad about it.

1:04:31Garry Tan:And I take that shame, I take that feeling, and I'm going to turn it back into productive energy to make sure that YC fixes that. How did that happen? We're going to fix that. And then the next founder, we're going to fund them, we're going to get it right. And I mean, I guess that's what Brian Chesky taught me. Like, I need to exercise founder mode on this tree of prosperity. And then if we do that, then actually, well, yeah, actually YC will fund like 30 to 50 % of all the companies that matter. And then if we're doing it, then we're actually even better equipped to help the next generation.

1:05:08Garry Tan:Because like everything that we do, you know, we kind of have to take our own advice. Like that's actually a common refrain we use all the time now. It's like, well, if we were a YC startup and we could do like option A or option B, like option A, spend a whole bunch of money and hire a bunch of people or option B, like let's do it quick and dirty and see what happens and like take feedback and then, you know, speed of iteration, like let's fix it next time. Like we got to do the startup way, like 10 times out of 10.

1:05:37Turner Novak:Yeah.

1:05:38Garry Tan:Like I, that's, I feel like that's my real job. It's like, no, no, no, we have to do it this way. We cannot, you know, YC at 20 years, by default, like almost always like post-product market fit, like you fall into manager mode. And it's like, nope, we're back to founder mode.

1:05:54Turner Novak:So I guess if we're kind of, if we're continuing, this has just been like an hour and a half conversation with the acts of YC, maybe we're at the end or the beginning of like act three or four or five, I don't know where we're at. But like, what is the next act kind of look like for YC? I think done right,

1:06:09Garry Tan:like more and more companies, like we actually just straight up want more companies to succeed. And so, you know, what does that look like? You know, I'm going to experiment with rebatching. Like I think that... What does that mean? Post-Series A, like after you get your Series A, like we should give you another batch. Like I'm going to start with the companies that I funded. And then if that works well, like, I mean, we're just going to experiment. We're going to try things. And then if they work, we're going to double down and build software around it. It reminds me of,

1:06:38Turner Novak:Standard Capital. Oh, yeah. They do the YC batch style

1:06:41Garry Tan:for Series A,

1:06:43Turner Novak:which no one has really done. That's right. And I have...

1:06:46Garry Tan:Yeah, Dalton and PV are insane. And, you know, Paul Bucay, like just super extreme legend investor.

1:06:51Turner Novak:Yeah. Yeah, I have a portfolio company that I think it will have been announced by the time this podcast comes out. But they work with them and it was just, it was like surprising. I was like, oh, that's cool. I didn't know you guys would be up for that. But like, it actually is a pretty interesting value proposition to the founders. Amazing. So, Yeah, I'm excited about that. Actually, one thing also, I heard that YC has this internal software called Bookface. I heard that you actually made it.

1:07:16Garry Tan:Oh, yeah. Is that true? Okay. That's right. What's the story with that? Well, basically, YC started becoming a thing and then people started pretending to be YC companies. What? And then there was no way to verify it. Like we had a Google group or something. Okay. Oh, okay. Let me just, you know, Vibe coding wasn't a thing back then. And I just actually real coded it in, you know, in Rails. And initially it was actually just a Facebook. And this is a little bit of an inside joke from a skit from The Office.

1:07:44Turner Novak:From The Office with the gym. Yeah, gym working book face.

1:07:46Garry Tan:Yeah, yeah, I see. Of a certain generation. See, I like it. We still have the 22-year-olds do not watch any of the stuff that we came up with. So I recently had a showing of The Matrix for all the 22-year-old founders. Okay.

1:08:01Turner Novak:I'm like barely on that. I need to go back and rewatch it. Yeah. Rewatch all of them. I feel like it comes up and I'm like, I watched them once when I was a kid, but I don't remember. Totally. It's surprisingly relevant to startup founders. The Matrix is. Oh, definitely. So startup founders like Neo?

1:08:17Garry Tan:Yeah, for sure. Yeah. Why not? Interesting. Well, no, I mean, he's stuck in this office and sort of at the whim of like the man, right? Like, you know, you have, you're in this like cubicle and you have no control and no power. And then, you know, he's a hacker though, right? And he goes to these cool raves and then, you know, he meets these other secret hacker types that like, sort of understand the nature of the universe. I mean, that's how I felt when I was a software engineer and then went to become a founder. Like that's, I was like, there's nothing that felt right about me working as a level 59 PM at Microsoft.

1:08:59Garry Tan:And then I started to glimpse the matrix when I worked at Palantir and, you know, working for Peter Thiel and Joe Lonsdale and all my, you know, my, I was Fernie Brothers with Stephen Cohen and Joe Lonsdale. And I could see it, but I was still like in the matrix. Right.

1:09:19Turner Novak:So like on the cusp of getting out.

1:09:21Garry Tan:Yeah. And then finally, YC was what helped me take the red pill and make the leap. And it's like, oh no, I can be not jacked into the matrix. I can be in the real, real. And that's what it feels like, though. Being a startup founder allows you to be directly present and in touch with the market. The users, the customers. Customers can go anywhere. Customers don't have to use your stuff. And so, you know, being in the real allows you to create products and things that like actually get good outcomes. And so I don't know, to take it full circle, like, that's why like this billionaire tax, they call it the billionaire tax, I call it the asset seizure tax, like, Gavin Newsom himself, like, is just running around saying like, guys, like, we can't do this.

1:10:14Garry Tan:Why are we doing this? There are 49 other states. So, you know, people can just go. And that's what they're doing. Like Larry and Sergey have left more than a trillion dollars of, you know, people have left the state.

1:10:26Turner Novak:And so... And like once they leave, they go through all that hassle of like settling across the country. And they're like, you know what? Florida is actually pretty nice. Or Michigan or Montana or any of the other 49 states. Do I need to go back? Yeah.

1:10:41Garry Tan:So, I mean, if people are watching and they're startup founders, there would be startup founders and they're sort of in their, you know, I too was working as a, you know, sort of cog in the Microsoft machine when I was 22 years old. And there was something about like, go home and watch The Matrix. Yeah. And then realize like starting a company is taking the red pill and you might just turn out to be Neo.

1:11:08Turner Novak:One question I want to ask you, do you have like a personal AI stack? Like how are you using it? You talk about using Cloud a little bit. Just like, how do you use it today? Like, what are you taking the most advantage of? Like, if there was like Gary's top three hacks of using AI, what are you using today?

1:11:25Garry Tan:The number one thing, you know, I sort of learned this from Jared Friedman and Pete Koeman, my partners at YC, but I call it metaprompting. So you can take almost anything that you might do all the time and you just drop it into a context window and then say, you know, here's a bunch of inputs and outputs. Like, you know, maybe you have like a bunch of notes. And then for me, for instance, I have YouTube outlines where it's like, oh, you know, Turner had a really funny tweet. Like I would put that in the outline. And then, you know, I might find two or three other things that like sort of flowed together.

1:12:00Garry Tan:And then I would write YouTube script for me to like sort of, you know, go on the teleprompter and like sort of recite so I could get it recorded. But you can take like a bunch of these inputs and outputs and then just drop it into a context window and tell it, write me a prompt that can act as an agent that does like, you know, take this input and output over here. And you can even introspect. You'd be like, what are things you notice about, you know, things that I did to convert this, you know, from the input to the output. You do this for like almost any knowledge work. And then you can just start using it.

1:12:36And, you know, initially it's going to suck because it's just not that smart yet.

1:12:41Garry Tan:But, you know, what's funny is like now I also use it to. Like iterate my writing. And so, you know, for something like a YouTube script, like you really want it to sound like your voice. And so you can be like very direct about, well, I would never say that or don't say it like this or like you use the long word when you use the short word, man. Like you just speak to it conversationally. and then you, you know, simultaneously you start with the prompt, then you have an output, but then you can use that new output. But right after you get that new output and you're happy with what happened, you'd be like, give me the next version of the prompt.

1:13:18Turner Novak:Like evolve Mike.

1:13:19Garry Tan:Yeah. Based on what we talked about in this conversation, give me a better prompt that incorporates all the things we talked about. And you can do this with like literally everything.

1:13:28Turner Novak:Yeah.

1:13:29Garry Tan:And, you know, in theory, Like, honestly, like there's so, you know, there's so much about what people do day to day. Like you could use it for tweets, like you use it for like editing podcasts, you use it for like, pretty much everything. Like meta, like I just have a folder now of like prompts that, you know, I use all the time. And I'm trying to iterate like my YouTube prompt one is like, I think I'm like, V27 or something.

1:13:55Turner Novak:Oh, interesting. Okay. I have not used it a whole lot yet for content creation. I've done a lot of like, just throw into chat GPT. And it has memory, like it kind of gets context, but I haven't done like prompt evolution, I guess I need to master that. Great.

1:14:10Garry Tan:I mean, the other thing that's great is sometimes when it's not quite working, right? I'll use GPT 5.2 Pro, I'll use whatever the Mac's thinking like I'll even use Grok. And then I'll take for whatever reason, Claude seems to be the best at like, evaluating the outputs, I'll take all of the outputs from all of the different like max models and then I'll put it into Claude and I'll ask, well, given, you know, here's my, here's my prompt, here's the output from, you know, four LLMs, including yourself, rate each response and tell me what the pros and cons of each approach are. And then it'll spit it out.

1:14:48Garry Tan:And then, you know, you can sort of agree or disagree with like all, you know, I usually like to say like, give it to me in numbered form. So I can say, I agree with one, I disagree with two, like three is this, but the nuance is blah. And then after that, you can actually just say like, okay, well, given all of this, like synthesize. Yeah.

1:15:07Turner Novak:That's interesting. I like it a lot for rapid ideas. Like it's just like you get a hundred ideas and one of them is good. Like you can just, you can kind of give it feedback on like, I really liked this one or because like, it just comes up with stuff that you, maybe you would or wouldn't have came up with. But it just speeds up the process a little bit.

1:15:26Garry Tan:And then I use perplexity for anything that has to search the web. So I think that like the, you know, Claude and Gemini and these things are pretty good. But I still think my experience, like perplexity still draws on and synthesizes way more sources. So I really like that on tax mode.

1:15:42Turner Novak:I like that about perplexity where, because one of my holdups, or one of the things I really like about Google is it shows you all these sources, you can kind of see where things come from. And if you just like the default kind of chat GPT response, like you don't know where the stuff is coming from. And like, maybe it's like the correctness or bias or whatever. But on perplexity, it shows you all the sources and you can jump in. But I do like that. I still use perplexity a little bit, too. I like perplexity for I feel like it does the best when I say I'm having Gary Tan on my podcast. What should I ask him?

1:16:12Garry Tan:Totally.

1:16:12Turner Novak:I kind of I kind of throw it in all of them. But I feel like perplexity always gives me the best on average.

1:16:17Garry Tan:Yeah, it's incredible times we live in right now.

1:16:20Turner Novak:Yeah. Yeah. Do you have one last question for you? Do you have a favorite CEO, founder or business that you've gotten inspiration from over the years? Who are you drawing from the most today? And maybe it's just Brian because it sounds like he's had a pretty big influence.

1:16:34Garry Tan:I love Brian. Getting to work with him on the board is insane. And then actually watching Aaron Levy from Box has been really, really wild. I only befriended him maybe a year and a half ago. And he is very, very funny. You should ask him for magic tricks if you ever meet him.

1:16:56Turner Novak:So I've had him on the podcast. I've never talked more magic. Oh, my God.

1:17:01Garry Tan:Yeah. But I mean, I think there's something really special about Aaron in that he's stuck with Box all of these years. And then the way he's thinking about how AI is going to change SaaS, I think is like, just, I mean, I really look to him for just like, how's this all going to change and work? And he's like really, I mean, I love his tweets. So I've learned a lot from him.

1:17:23Turner Novak:Yeah, it's so fascinating where you would think all of these scaled incumbent software companies are so well positioned to just capture everything that's going to happen in AI. And maybe it's sort of, like that sort of happened in some cases, but there's also a lot of cases where like, like LLMs have been around for three years and the product hasn't changed at all, aside from the website saying that it has AI. Like they throw on a chat box.

1:17:47Garry Tan:Oh my god. What's funny is like, I'm pretty sure you can just make a long short fund on whether or not the CEO is a hacker and has used CloudCode. And like, that would be it would outperform the S &P.

1:18:00Turner Novak:Probably. Yeah. Well, actually, right after this, I'm recording with Chathan and Benchmark. I don't know if that's going to come out after or before this one. I have to figure out the schedule. But that's one of the things we're going to talk about.

1:18:12Garry Tan:Fantastic.

1:18:12Turner Novak:It's like this universe of all these software companies. And the TAM is like trillion dollars in software spend, especially when you consider how it's going to change with AI. And it just seems like a lot of the big players have not done anything yet. Will they win anything or will it mostly be startups? Yeah.

1:18:28Garry Tan:I think people are underestimating to what degree like software is a very, very small part of like the majority of people's lives in the world. And the reason why is that, you know, there are only 10 to 20 million people in the world who are actually good at code. And then we're about to enter this other moment where like, actually, you know, billions of people can actually just very directly create their own stuff. and then the hope is like I mean my hope would be actually a lot of things get better faster cheaper like we need more markets and we need more ability to enter you know basically capitalism like we need actually not fewer markets but more markets actually and I think that that's what's going to happen.

1:19:18Garry Tan:Like there's a tiny, tiny percentage of GDP is touched by software at all. And then the result is like all kinds of just loss. Just, you know, this person was there and they could have, I mean, you know, Uber or Airbnb or any of these marketplaces are good examples of there was not going to be a market. And then the market was created out of thin air and then a lot more of it is done. And then what's the result? The result is like, I can get around, like the The nature of cities has changed really fundamentally. Yeah. You know, millions of people, perhaps maybe tens to hundreds of millions of people, like who maybe would have been hurt by drunk drivers.

1:19:57Garry Tan:Like that doesn't have to happen anymore.

1:19:59Turner Novak:And so now sober drivers also. That's right. With like, with Waymo. That's right. Like a car objectively, like I will not injure a human. Yeah. And I will just follow all the rules. And I'm not, you know, I was scratching my nose. I got distracted for a second. And it's just objectively like the software decides and knows, oh, this door opened and I sensed it within a split millimeter of a second and got out of the way. Yeah.

1:20:23Garry Tan:So yeah, I mean, there's basically like extreme tech pessimism. But to me, it's like, I mean, tech is here to make things better. And then I mean, granted, like I have a bias, like, yes, I am surrounded by the top 1 % of people who earnestly are trying to build technology in service of humanity. And if that happens, like all of these things can happen. And so, I mean, even with AI, like there's sort of the dominant narrative is like somehow all the jobs are going to go away. But, you know, I really like what Ryan Peterson from Flexport says. He says, look, like humans just want stuff, man. Like you're never going to get to the end of like the list of wants that people have in the world.

1:21:07Garry Tan:and like technology, like in the hands of people who can harness it, you know, and put it into the market. Like that's the mechanism that actually literally improves the life and well-being of like every person. Like people today, like I think, you know, middle-class people today live lives that like the kings and emperors of like 200 or even 100 years ago, or even like 80 years ago, like they couldn't even dream of having the life that we have, like just day to day, our access to healthcare, our access to transportation, our access to education. Like, you know, they couldn't even imagine that.

1:21:47Turner Novak:Like you can fly around the world. Yeah. Like you can literally just, you can go to bed and wake up on the other side of the planet.

1:21:55Garry Tan:Yeah.

1:21:55Turner Novak:Like that's insane. And then, you know, soon it'll be the moon and Mars. Yeah. So. Actually, probably like one of my most insane stats Have you ever heard the one about firewood in the US? What's that? Firewood used to be like 25 % of US GDP.

1:22:09Garry Tan:Just like the sale of firewood. That's insane.

1:22:11Turner Novak:Which is like, that's not even a line item anymore. Like it's probably like a couple, maybe 50 million bucks that we spend a year on firewood. That used to be the majority of the economy was people buying and selling firewood. I got to look that up. Yeah. I'll make a YouTube video and I'll credit you. Okay. Yeah. No, it's super fascinating. We'll do a collab. We'll do like a special. I'll try to find the tweet and I'll send it to you. But it's just crazy. And it's just like shows. It's like this chart just kept going down and it's like 0.02%.

1:22:41Garry Tan:I don't know, 50 years ago,

1:22:42Turner Novak:whenever this chart was.

1:22:44Garry Tan:Go back a couple hundred years and it's subsistence farming, right? And instead we get to sit here, hang out as friends, just like talking about ideas. This is so cool.

1:22:54Turner Novak:Yeah, this is a lot of fun. Thanks for doing it. Thanks for having me. Ed, thank you for listening. And thanks to New World Flex for supporting this episode. Put your sales tax on autopilot at numeral.com and upgrade to Flex Elite to get$1 ,000 from your first card using code Turner at the waitlist link in the description. If you enjoyed this conversation, please like, comment, subscribe, and share with a friend who should apply to YC. Make sure to check out the back catalog of over 100 episodes with the founders of companies like Robinhood, Mercury, and Box, and dozens of YC founders. Tune in over the next few weeks for guests that include Chathan Buttigieg at Benchmark, Jake Stelk at Serval, Mikey Nikila at Footwork, and Scott Stevenson at Spellbook, the fastest growing AI company in Canada.

1:23:36Turner Novak:If you don't want to miss any of these, subscribe to my newsletter, The Split. Links in the description to get each episode plus a transcript emailed directly to your inbox every week. Thanks again for listening. See you next time.