The Past, Present, and Future of AI, Robotics, Venture Capital, Crypto | Why Deep Tech Startups Mess up Value Capture | Michael Dempsey, Managing Partner, Compound

23:11And then the question is like, okay, what's the product experience? What's the mechanism to make it not be talking to an AI chatbot as if it's a therapist? Because that's like very skeuomorphic approach to this and that might work for very specific things there's a company in europe that's doing this across i believe it's like male ed is like a problem and they they're scaling quite quickly around that people have talked about doing this for very specific indications eating disorders for women was another one that people are talking about like how to why would an ai therapist be better but i think in general the product experience probably looks a little different and so we are kind of just in this phase of trying to talk to as many people who have interesting views.

23:47We're pretty creative, but that's a relative part of VCs, not to actually people who build things. And so we're trying to talk to the builders on that side.

23:55Turner Novak:Yeah. So maybe to get back to your initial question, I think AI is at its maximally obvious point today. There's massive consensus across the entire industry. And anytime I see that, what that typically means is it's probably time for Compound to observe and not deploy too much money. And so you can make an argument. Compound has built a firm in some ways being early to AI in 2016, 17, 18. And from 2020 onward, we've made three AI investments. But that goes pretty counter to what it seems like the consensus strategy is. Like you should be investing in AI because the companies are growing and you're getting markups, which always looks good.

24:41Turner Novak:Like, why do you choose not to do that? Because it's just, it's so different from what most people are doing. I don't think markups matter. Like, they, or rather, they matter for sure because they help you raise funds, blah, blah, blah. I think we are fortunate enough that markups are not going to be what dictates success or failure for Compound at this point. Because you have some, like, you return capital. You've made money for investors. They're not, like, oh, cool, we got like a 5x markup on this AIC. We don't care at this point. Yeah. And I think that's a privileged position to be in as a newer-ish fund, I guess.

25:17And then I also just think, again, it's just not what we do. I think so much of investing is about figuring out what is it that you're really great at and pushing that advantage over and over again. Because something I deeply believe is all venture firms decay over time. They don't compound over time as much as people think they do.

25:35Turner Novak:Interesting. That's what most LPs would believe. Most LPs would believe that because they look at persistence of returns. They look at the fact that Sequoia and Greylock and Index have had great returns for 20 years. And that's great. And also, if you were to look at the universe of that versus the universe of investors from 2020 onward, it's just a totally different game. and I also think we're going through like the first generational turn ever in venture history which is happening now and that also means that these firms are probably decaying even faster than people appreciate and so anyways I just think like we need to stay focused on like what is the things that we're great at and the things that we believe we're great at is being a very generative firm that focuses on where non-obvious things could work and we lose money 40 % of the time is our model and if we're right on two out of the 25 companies that we invest in we'll have very good returns if we're right on one of them we'll have like pretty good returns and right on none then we probably don't deserve to exist so you said something interesting there and made me think about maybe there's like survivorship bias yeah so if you go back to you know the the late 90s early 90s the 80s i don't actually know when you go back to but like you know we think about Kleiner, Sequoia, these like blue chip funds that they survived.

26:52Turner Novak:They're around. They had good returns. But there was a lot of other funds at the time. Maybe it's like a magnitude, a little fewer than there were today, but there's still a lot. It's just like, those are the ones that survived. And then there's probably some that we like, none of us know of that were also survived. That first kind of the dot-com bubble that survived through the aughts, the zeros, and then died in 2010. And they've been like forgotten again. And like you think of maybe a blue chip fund that's persisted throughout time, but it's really just a survivorship thing that they, you know, not saying anything, any specific funds.

27:28Turner Novak:But I feel like that could actually be a piece of it is that there is survivorship bias in thinking about this persistence of returns. Yeah, I think if you were to think of it as like percentage of ecosystem that dies maybe would like be the way to look at it, which is like if there's like 10, 10 survive over 100 firms back then. 10 % of firms survive. And if you do that today, it's like, yeah, there's hundreds of firms that survive and there's thousands of new firms. Yeah. That would suggest the same thing. But I think the difference is probably just the variance of returns is still quite high, even fund to fund.

28:07Again, some of these legendary firms, that is not the case. But I just think it's meaningfully more competitive. and the structure of the industry is so much more well understood such that, yeah, you just have to be consistently trying to like re-figure out what is your advantage? How has the world changed? I think for us, one of the things that we talked about at our annual meeting this past year was like Compound was predicated on this idea, which is like we understand very complex things natively and that's like a great edge. But the truth to that is that now anyone can put an academic paper into chat GPT and be like, explain this like I'm 16.

28:47And so actually the edge of like understanding complex things natively is like no longer really that defensible for us, right? Like it's not an edge. It's just another tool in our toolkit of maybe we can understand when something's a little novel. But like actually what that means is you have to be very good at understanding second and third order effects of these technologies and like how they cascade over time into value accrual into startups. And so I think like there's a world in which, you know, I could easily just be like, the thing we do at Compound is like, we understand hard things. And like, that's just totally bullshit today in a world in which anyone can put anything to ChatGPT and have it explained relatively easily.

29:21Turner Novak:That sounds like a great marketing kind of tagline though. Like we understand hard things. Yeah. So then how would you build a, or how do you think about building like a research driven institution? Because you guys, you do a lot of research. If you look at the team composition at Compound, And there's no like Stanford MBAs. It's not like an Uber PM that's coming in. So how do you set this up and get this going? And then to your point about like the chat GPT stealing your secret sauce, like why are you still doing it if anyone can do it? So like the argument we're not still doing, right? We're trying to figure out the next order of things.

30:00So I think now you can look at the team, which is we have people who are obsessed with categories, have deep understanding of technical areas and are incredibly generative and creative. Right. And so what that means is like we have Shelby, who focuses largely on bio. She's a Ph.D. from the University of Cambridge in bio. Right. Like she understands it very natively and she can understand some of the dynamics of being a scientist, some of the complexities of building companies there. We have Smack, who's a pseudonymous investor.

30:32Turner Novak:I love that. Just Smack. I was trying to figure out what Smack's name was. Just Smack. And we met on Twitter. And he has prior background in traditional finance and structured finance. And now has been investing in crypto since like 2014. And so it was like very native to the space. And then we have Mackenzie, who's a researcher on the team. And Mackenzie is just an obsessive person who sits at the intersection of understanding companies and understanding technologies, like loves trying to figure out how the entire world works. And I think like all of us have this obsessiveness around where's the world going?

31:10How does science and technology impact that? and most of what we do is try and push on that idea of like being generative such that when we talk to founders, we can have constructive kind of novel feeling conversations. We're not just asking them the same 10 questions everyone asks them. And two, such that when there are times in which we are maybe feeling like the air has been sucked out of the room for 24 months, we can try to figure out, okay, but like what would be the things that would get us excited and why and actually be more direct about those. We have a thesis database that does that.

31:45We do thesis development sessions once a month where we sit for three hours. Everyone brings together two to three ideas based off of a bunch of research and says here are types of companies that should exist and how should we think about going deeper with those. We host research days in like very specific areas like biohacking and cryptography.

32:01Turner Novak:Is this public or private internally? The research days are like open events of like 50 people. It's like kind of top researchers in a space. do you do open invites or do you just like kind of close doors organize these things yeah we like we put it on twitter and then we kind of just like pick and choose and then there's usually like six to eight presentations and then we'll present something at the beginning and connect everyone after and i think like our whole thing is like how do we there's you know like the there's a bunch of weird ideas in the world that we think will matter long term and we should have a grasp on all of the possible ideas that could matter.

32:37And I think that's kind of how we orient our research process, which is reading a lot, wasting a lot of time, reading things that probably will never be investable, and also meeting a lot of people who will never start a company. And the need to believe on Compound, I always say, is we allocate our time meaningfully differently relative to other firms. And the hope is that that time allocation plus how we think about the world and invest actually creates some form of alpha. There's other people who's like, their time allocation creates alpha because they're incredibly good at networking, at scale, the network, whatever.

33:14It's just like not what we do.

33:15Turner Novak:Yeah, Chris at Runway was saying, he said you have like dozens of random esoteric sub-stacks and blogs that you're like subscribed to. Hundreds, yeah. Hundreds, okay. Not thousands though. Probably across the team, thousands, yeah. We have a pretty big apparatus to track research and to track people doing research and stuff like that. That's the main thing that... And it's funny, now that we have all these AI tools, we've tried to basically bring in more signal versus noise. And I think the main learning thus far, and maybe it will get better, but the main learning is you still need to just sit at the river and watch all the things go by.

33:54You can't try and expect someone to show you the signal. Because I think maybe the special sauce is figuring out what is signal versus noise? And like, you have to be able to ingest the whole fire hose to figure that out. And so as a firm, like, it's very much like we just read all of the things and hopefully we figure it out.

34:11Turner Novak:Yeah, I think Andy at USV said, you seem to be good at looking at the stream and figuring out what is signal and like, what is noise and like deciding those things. Like specifically, like some of the companies you invest in really early, like runway, you could be like, hey, whatever, like AI is not going to be a thing. Like this is not a company worth, It's not worth building a product and a company around this. Like, what do you think is the secret to actually figuring out what is worth even paying attention to in the first place? I think it's spending a lot of time seeing all the things, right?

34:43And then you get to, it's like when people tell you, who's the BC? Trey Stevens, I think, is always like the first six months, you got to take 600 pitch meetings or whatever, right? And it's like you get the flavor of what's good and bad a little bit. I think like reading lots of research and then talking to researchers about it and your founders and people helps. I think the other thing too is like people grossly underestimate like how long these things like sit out in the world. There's this woman who wrote a piece called this, like I think it's called Discovering the Sleeping Beauties of Science.

35:15And the idea is that, and it's very similar to something that we talk about, which is like major scientific breakthroughs typically like sit out in the world for a long time if you can parse it, right?

35:25Turner Novak:Like Ozempic, right? Ozempic was like the 1989 Stanford guy. Gwern wrote about scaling laws in like 2016, I think. And it was like this random blog post. It was like, the thing that people don't notice about GPT-1 into GPT-2 is like, actually, if you put more data and compute in, like the performance meaningfully increases. And if you read these papers, like, it doesn't really look like this is going to stop anytime. And like, that was before anyone had the better lesson in scaling or whatever. OpenAI was doing ICOs around that time. Yeah. Yeah. I'm like, oh, maybe that was 18 that they did that.

35:55Turner Novak:Yeah. It's just like, there's all this like stuff. Like GPT-3 sat there for a long time and the instruction tuned in and you got ChatGPT, right? Like, and I think like you could see that. You could see that with AlexNet in 2014. You could kind of see that with like some of the stuff on how Solana was starting to scale in 2023 from like a transaction. Like there's data that sits. And if you're paying attention, the core thing that you start to notice is like, this is interesting and durable enough. And there's enough people talking about it. And like academia does a really good job of taking an idea and then like building on it.

36:27And so a simple thing I tell people who get interested in trying to do more thesis oriented research is like, if you find a paper that you think is really interesting, what you should just do is set citation alerts for that paper. And what you will do is you will get an email anytime anyone cites that paper. And you will get to see in, you know, some amount of time in your inbox every day or every eight days or seven, like more and more people start citing it. Like that's a pretty interesting signal where you're like, wow, like I used to get an email from Google Scholar every three weeks and now I get one like every four days.

36:57I wonder why. And like what that will tell you is a bunch of people who are ostensibly smarter than you are starting to care about a thing more and like are doing, spending material amounts of time writing and talking about that thing. And so I think we have a bunch of kind of signals like that in the same way that a lot of great VCs, you know, believe they have signals on like how to tell if a founder is amazing. Yeah. Interesting. Okay.

37:22Turner Novak:Is there anything that you've built internally? Like there's all these like AI, there's a lot of things you can do with AI to build tools internally. Most VCs, when they're talking about how great they are, they've got all these like data sources or they've got all these tools they built internally. Have you done anything like that on the research side to organize or surface it better? We've done for searching across like topics for like, how do we run topic modeling on academic papers? we've done some stuff for monitoring like esoteric writing platforms for mentions of companies more on the public side but honestly like it's all incremental none of it's like a silver bullet it's all like you still have to spend a disgusting amount of time reading a lot of words every week and i just don't think any of the models are good enough to be like hey I read a thousand posts today, this week on this thing.

38:21And here's the one thing you need to know, because like, you're going to miss the nuance and you're going to miss the like, oh, that's an interesting idea. Like, I don't know, like there's this concept of model merging that emerged in AI, maybe this point, two and a half, three years ago. And the idea is like, you can effectively like slice and dice models, put them together and you can start to see some emergent, interesting behaviors. And like, if you were funneling a bunch of AI papers, like you probably wouldn't have gotten the insight in 2020, four, three, four, when that happened of like, hey, like more and more people are like open sourcing these like Franken merges of models that they're talking about on Hugging Face.

38:55You kind of have to just be like watching everything and like watching what people are talking about on Twitter. And it's maybe like the 10th loudest or the 20th loudest thing, but it might spike on novelty. And so you're like, oh, this is weird and like experimental, but in like 10 high signal people are talking about it, where the other side would have been like, I don't know, like test time compute is like the most interesting thing now, which is, you know, running compute on inference instead of pre-training it for models. And it's like, everyone was talking about that. A bunch of very smart people were talking about it.

39:27So if you're an LLM, you're probably like, hey, this is the most important thing to pay attention to. And it's important if you care about like what's happening in AI today, but if you're trying to invest in where does the world go in the future, like the maximally understood important thing is actually probably like by the time it's there, you're going to not make money as a seed investor.

39:45Turner Novak:Yeah. And it's interesting too, the way that a lot of the way that we consume things now is algorithmic powered and driven feeds. And most of those are weighted and like sourced by time spent ultimately because the platforms want to keep you on. So if there's topics that people are spending a lot of time on, that's literally what it is. Do you click on a tweet and do you spend time reading it? And then if you do that, other people will see it. And that it's like a self-reinforcing thing where if I'm a content creator or a founder or an investor and a specific topic is getting more airtime, I and I and I need to be surface.

40:26Turner Novak:I need to like be people think I'm relevant. I need to start talking about those things also. Yeah. And I need people to spend time on my stuff. So you get this weird dilemma where like there's more content to fill that void. And then the algorithms think, oh, more people are spending time on this topic. So like, they'll push them even more. And then like, you know, again, like, so like, it's sort of like this weird structure of how the internet works now, where I feel like these algorithmic feeds have almost like amplified some of these hype cycles in a way. Yeah. This is also important why everyone should have alts that are like based off of like different mindsets.

41:01Like we have different, I have different alts for the type of stuff that like I'm trying to go into. Oh, interesting.

41:07Turner Novak:Do you have like a bio alt or something like that? Yeah. Crypto alt, bio alt. maybe like a more speculative future alt. And then like my feed is like half venture garbage, some public stuff and some like, I don't know, memes. Yeah. Hopefully I'm in the memes, not the venture garbage. It's the Venn diagram. Yeah. Well, so you actually tweeted something, I think it was either today or yesterday. You're like 70%. It was a couple hours ago. Yeah, a couple hours ago. You said like 70 % of venture content is probably like created by LLMs. Yeah. Or ghostwriters. Or ghostwriters, yeah. I guess, why did you tweet that?

41:47Turner Novak:Like, what's the rationale? Like, why is that a big deal for anyone listening who doesn't even know what that means? I don't know if it's a big deal. My Twitter is relatively unfiltered, and so usually tweets like that are when I just get annoyed at, like, I opened up an article or an essay and I thought it was going to be good, and then I see a fucking em dash, and it's not X but Y framing and all these things, and that's annoying. Yeah. And so I tweeted out. I also just think like, it's just so, it's so cringe at this point. Like we all know what those writing styles are. And the fact that these people are not even trying to like edit it a little bit to not have it be like that is shows just like a fundamental misunderstanding of how people think about content.

42:32And I think like we do a lot of writing, but our view has always been like, you need to treat content like a, kind of like a first class citizen in the organization. if you believe you're like a research-oriented firm, right? And obviously people do it for content marketing, but I just think it's like, it's another thing about venture that's annoying, which is just like a lack of thoughtfulness and like a venture slop is like a thing. And that can be investing. It can be how people are in board meetings. It can be how they are in pitch meetings and it can be how they write. And again, I think like if people were writing about novel ideas, but using an LLM to help them figure it out, like that's fine.

43:10but it's not that and the ghost writing stuff is just some people like there are some vcs who have like twitter threads about totally random stuff and it's like long and five times a day and all this and i'm just like what either you have the time to do that in which case like you shouldn't do venture or you're just like paying other people and i don't get why like i don't know yeah i i I guess I think like I'm just like I was on a pitch call with like a fairly young founder a couple weeks ago, maybe a couple months ago at this point. And he was like, you know, I like I was reading your stuff and like you're kind of like a boomer VC.

43:48I was like, cool. Yeah, like I guess so. Like I think I am just like.

43:53Turner Novak:So what does that mean? Why did he say you're a boomer VC? I think because I was writing about like how companies need to think about like value capture properly and like competitive dynamics. And like, it's not just about like doing like fast ARR and like expecting it to stick around. I don't know. And so I think I was just like, I wasn't like vibes based. Yeah. You were vibes based. Yeah. Yeah. I feel like part of it is because it's become a check the box exercise. So you just hire a marketing person. Yeah. And they just write everyone or they do everyone's stuff. Or it's, you know, somebody really just likes working with founders and like this marketing thing like they have to make a LinkedIn post once a week or once a day or whatever.

44:32Turner Novak:And they're like, ChatGPT, cool, copy, paste, let's send it. So I feel like that's maybe part of it is because people don't treat content like a first class citizen, like you said. I think I'm just a bit of a snob and also have too much of an ego around it to do it. I don't know. That's the reality. I'm still so bad at using ChatGPT to write. I literally do not use ChatGPT to write at all. Stay away for as long as you can. Yeah, I have started using it for ideas. Yeah, it's great. To get ideas on things. And I usually think about it as just like a, it's a volume thing. Like just hit me with, like I had a friend, he was coming up with names, new names for a product.

45:12Turner Novak:Yeah. And I just like was banging ChatGP for like 10 minutes, just like keep giving me more ideas. Yeah. And he like started to like all the ones I was coming up with. It was literally just like ripping ChatGP, like make it more futuristic. Yeah. Make it shorter, like make it rhyme or like hit the silver. Like, and he, and again, it was just like, give me hundreds of ideas and some of them ended up being good. And I would not have come up with that. I'm here for that. Yeah. Just don't put it into a 900 word blog post. Exactly. And then, so then how do you think that about building a brand as a venture fund?

45:46Turner Novak:Like how have you thought about it as compound? And then if I was like coming to you today, it's like, Hey, I'm starting a fund. How should I do my brand marketing? Like if I'm doing content, what advice would you give me? All people give advice for in the way of talking about the things that work for them. So I'm very aware of that. And so I'm always hesitant to give advice because I don't know. I think for us, the key thing that we're very precious about at Compound is like, is there a defined aesthetic across the entire firm in the sense of like, you can understand what is a Compound person?

46:14What is a Compound company to a lesser extent? What is the, like, what is Compound? What is the style of it? And I think over the past few years, we've started to have that develop more. And I think some of that is being very intentional. Like we have the types of things we want to put into the world, the style of people we hire. And I also think there is some like chaotic authenticity that people appreciate that we represent. So I think like for us, like we just continue to orient around like, it's very hard to build anything in venture today and investing today that stands out, Right. Like there's every person has a venture fund, every person is an investor.

46:56And so we at least want to be known for something. Otherwise we think we're like known for nothing. And that's the worst place to be. And so we orient towards like a lot of this more scientific, more thoughtful and prescriptive thinking in the world, hoping people will come and want to tell us we're wrong. But at least then the conversation we're having with founders is different. It's not the same 10 questions. It's like, you might think I'm an idiot because I I wrote some posts that directly contradicts how you think about building a company. And that's actually kind of a little bit how Alex at Wave and I started talking early on.

47:28And I think like at a minimum, you can kind of like continually hit on that. I think the thing that we're maybe not as good about is like trying to figure out how to continue to expand the universe of people that know about us. I think as a new person, I think there's twofold. One is like, what is the credible reason why someone actually wants you on their cap table is like the question that we ask ourselves all the time. Our view is like VCs don't impact the upside of companies. We think that they like impact the downside. And so I think a lot of the lessons we've learned, which again, I know you can make all these expected value arguments.

48:07That means the upside, blah, blah, blah. But like the thing that we believe is like there's a lot of lessons to be learned around building end of one highly technical scientific businesses and or in areas that most people don't believe exist. And the way in which you can run commercialization long term early on in some of these companies. And I think that's like part of our reason. The other is we're very high context. And so early on, people don't have to explain everything happening in the space with us. We can kind of be thought partners a little more. Like, oh, we also read that paper. Yeah.

48:39Like, we've read this. We understand. We understand all these companies. We get, like, where technology is going. And thus, you know, if you're building an AI product today built on models, we get, like, we have a view of what capabilities will come out of these, whatever, a bunch of stuff.

48:51Turner Novak:But don't some, I mean, other funds do that, right? Sure. Like, to have an opinion on things? Yeah. I think our argument would be, like, our opinion is oriented very much around early stage and probably just being, like, net more thoughtful. So it could be like with AI, if you wanted to actually invest in AI today, inception stage investing versus like, should you just invest in open AI? Or like, should you just invest in NVIDIA? I was talking to a group of investors who were debating raising a fund of funds to do AI investing. And like, they want to do half fund of funds, half direct. And there's three people and they're kind of split on which to do.

49:31And one of them's like, I kind of want to do this passively. Like, I feel like I can just play beta on this space and make money. and the others, like, I want to kind of be more in the weeds. And yeah, my view to them was like, listen, like, it's going to take a long time to build up the alpha generating side of this. Like, go take out some OpenAI and Anthropic Secondary, buy some meta in Google, and like, I don't know, if you want, buy some NVIDIA and like, you'll probably be okay. And like, you'll perform in some way, right? And like, here's the waiting I would think about, just sit. And like, we had a slide on our AGM this past year, which was like, you know, we had all these ideas And then the last slide was like, but even with all these ideas, like you should just long NVIDIA in 2020.

50:10Turner Novak:You would have outperformed our fund. You would have outperformed every fund, like 23x or whatever it was, right? And so it's just like, I don't know. Like, yeah, I think like there are some moments in time in which you recognize like beta is the play. And typically I think when beta, when tech beta is like the thing, that's when compound retreats. And when it's not, that's when we kind of like try to push our advantages. And I think any new fund has to be oriented around that idea of like, this is risk capital. Yeah. I think if you want to go and try to compete against Founders Fund and thrive and do growth stage, call it levered beta alpha view investing, good luck.

50:53They're incredible at what they do. And also, as we both know, raising that sum of capital is non-trivial. But like, if you're a new person, you have to have an orientation of like, this is something I believe in. And I'm willing to like lose all the money doing it. And it's like not safe at all. And what we tell our investors is like, we should be the riskiest dollars in your allocation to investing. Because I think, especially as so much capital is flooded in, in order to generate meaningful outperformance, you actually have to do riskier and riskier things over time.

51:25Turner Novak:Yeah, that's fair. I feel like a lot of the solution to that has been, oh, we'll just invest earlier. Like we'll just do inception stage now. Like we're past that. There's nowhere earlier to go. Like I'm not. College students, high school dropouts. Yeah. Like it's great. Like prod is great. And like Z fellows is good. Like they're very good at these things. But like, if you want to build like an investment firm that can be durable, it's why I like these like the Gen Z firm orientation thing is like it's a narrow it's like a short term advantage, but it's not a long term advantage because like these things ebb and flow.

51:59And to the point, like one day you show up into Zoom and someone calls you a boomer and like you're no longer the young person in the room.

52:05Turner Novak:Yeah. And like millennial as millennials, we used to be what Gen Z are. Yeah. And now we're like, we're like old. like the kids on tiktok are wearing wide-legged pants oh yeah like that's the things like they like come out i'm like that's ugly yeah objectively like give me my just like skinny or maybe straight jeans yeah you're a boomer i can't do this wide leg thing yeah but yeah we're just i guess we're just old yeah um so you and you you mentioned a thing i wanted to ask you about you said wave yeah that's the name of it yeah you said you actually disagreed about something yeah what what happened there?

52:39Turner Novak:Because that was one of you, you invested in their first round. Yeah. I think I saw they just raised, it was 800 million euros or something was what I saw in Crunchbase. Like, so I hope that that's been a good investment for you. So yeah. So what's the story there? Yeah. So I was fortunate enough to spend a bunch of time when I was living in SF for a brief amount of time with some of the early like Waymo team. Those 510 systems became Waymo. And I think as I spent time with them, And the thing that I kept hearing was there's like a very famous demo in which they drove over the Golden Gate Bridge.

53:12And that was like mind blowing at the time. And they were like, oh, we if we can do this, like we got this, this is it's game over. And this was in 20. I think they did that in 2014, 15. And then what they kind of realized actually they had done it earlier, but what they kind of realized is like they kept hitting new ceilings of like, oh, we actually can't do this.

53:31Turner Novak:Because there's like really random edge cases instead of keep solving edge cases. And they were just like, we just have to like keep hand engineering these rules and solving these educations and computer visions getting better, whatever. And he's like, throw out the code base every year, start over, go. And I think the main takeaway that we had was like, self-driving was obviously a very valuable problem. It's very interesting. But everyone's building it in like a non-human way, which is like, you get on the road today, you go anywhere in the world, you basically can drive. Like, you have two cameras in your eyes.

54:02Your eyes, yeah. And you have like a lot of compute in your brain and like you kind of figure it out and you know the rules of the road. Whether you're in China to New York to London, wherever, like you kind of know.

54:13Turner Novak:And they can be like, oh, by the way, in London, you drive on the left side to the right. Yeah. Cool. I know that. And you don't even have to be told that. You can just look at the road and be like, oh, people are driving on the left side of the road. This is the way the world works. And so we have this like framing of like, OK, if someone is going to solve self-driving as a new company, they're probably going to do it in a much more like AI native way. This is 2016. And at that time, Cruise had been acquired. Waymo was starting to scale. Tesla was still early, but they had kind of autopilot. And we wrote a bunch of stuff around this, which is like, you know, a lot of founders are going to spin out of these companies and raise short-term rounds with similar technical approaches and then get acquired for like, it was very similar to AI today.

54:55These companies were getting acquired for like 10 million in engineer back then, which was crazy and, you know, hilarious now. And I think we also said, okay, there also might be companies that sit as middleware or as different data layers on top of autonomy. So pedestrian understanding was one.

55:15Turner Novak:A single company focused on pedestrian understanding. Yeah. And we had read, or I'd read this paper from this guy, Alex Kendall, when he was at the University of Cambridge. And it was his PhD thesis. It was called SegNet. And basically, it was like a new type of computer vision. model. And I emailed him and was like, Hey, this is pretty cool. Like if you ever think about starting a company, let me know. Cause I was 24 at the time, or that's like how you thought about sourcing stuff is you read something and you email someone, right? Like that's how you still do it, I guess. And he responded and he's just like, I'm getting my PhD.

55:47Like, thanks. But like, I'm good. Two years later, 2016, we hear from one of our venture partners who was at Uber on the self-driving side, like, Hey, I met this guy, Alex Kendall. He's got this like really crazy approach for self-driving. You should talk to him. And I was like, the name sounds super familiar. Bumped the thread and we ended up bleeding a seed round. And our thinking at the time was like, the wave approach was a single model end to end and you can teach a car to drive itself because you don't need a bunch of handwritten rules because humans figure it out themselves, right? Like lots of data, you have emergent capabilities and in retrospect, we all understand that now with LLMs, you just toss a bunch of data and they actually start to reason quite well.

56:28But in 2016, that wasn't really the case. And our view is like, look, maybe they're going to be wrong, right? Like, maybe this is a total miss. But like, if they're right, they are one of the only companies attempting to do this. And like, this makes way more sense as to why this could win as a final mover relative to Cruise, Waymo, Tesla. And, you know, Alex's main argument to me was like, all this stuff that you're talking about of like pedestrian understanding and like these like, you know, little features, like that's never going to actually be a thing. It all is going to live in a model. Like it's a single model.

57:04Like these things will be emergent. And so, you know, he was like, the first thing he said on the phone was like, I read all your stuff and I don't really agree with it, but like we should talk. And I was like, cool, great.

57:14Turner Novak:Yeah. That's exactly the point. Anyway, so we let their seat around, been on the board of the company since then. We've gone on, raised a bunch of money. the company's doing well. I took a ride in a car in New York, which was the first New York ride we've had a couple of weeks ago. And it was like, I don't know. It was like, I don't have kids, but it was like one of the first times I've ever been like so proud about an investment. Cause I was like, I am crossing the Brooklyn bridge in a self-driving car that like for seven years, I had been wanting to do this for eight years. Yeah. So I don't know.

57:44Like, I think again, there's a world in which the company just doesn't work, but like our framing is like, you have to take big risks on possibly great things. And if you do enough of those with really good reason as to why they can disrupt incumbents and capture all the value, which we think Wave has and will, I don't know. You got to be right one out of every 25 times.

58:06Turner Novak:I have a question on that, but one thing I want to say in terms of having kids, the first time my daughter texted me back was like a crazy experience. Just as a millennial growing up, yeah yeah oh my god she can she texts like she's on her ipad she texts how old was she i think she was seven wow at the time she's she's eight now but i was like wow that's like it just blew my mind it's a real it's like a real person like honestly it was crazier than when she like walked and when she could talk but it was like texting me back i was like holy shit this is nuts yeah but so it sounds like when when you're thinking about like approach to to starting a company and like sort of like the opportunity in a space uh i know you've said before that not enough people think about kind of value capture.

58:48Turner Novak:Like how do you actually like build, you know, cash flow or enterprise value? Like what do you think people get wrong when it comes to thinking about how do you actually capture value for the business that you're creating? Or what do they get right? Yeah, I think the, well, I think the main thing people get wrong is in deep tech areas is like the commoditization curve. Like they think that the edge will be, will lie in technology. And like it almost never does. right? Like all technologies generally commoditize on some time horizon. And so distribution or product uniqueness. Yeah. Like, I mean, right now it's like velocity, right?

59:25Like right now it's like everyone is sprinting. And if you're not consistently sprinting for the past three and a half to four years, you probably got disrupted by someone who like started, you know, at a different point, but could leapfrog you in some sort of product vector. Again, like the, the, the, the way we frame it often is like there's short-term, midterm and long-term moats. And I think it all correlates to like revenue necessarily or like you know like in the short term long term these things kind of accumulate over time but like i think short term your moats are like ability to raise capital it might be technology like you had a specific breakthrough and you have to understand what's the half-life of that like of that technological edge that you've built and then it's like okay talent right like how do you compound talent over time such that you have a moat on talent in your space, especially in deep tech areas.

1:00:13Typically, there's 50 to 250 people in the world that are elite at the thing. And then there's going to be a teardown of great operators that are, you know, call it 200 to 1 ,000 people. And like, that thus means there's call it 1 ,500 people in the world that could work at your company when you start it, right? And so there's a bunch of stuff you have to think about there. And I think lastly is probably just like, how much of the given stack do you need to own such that you don't suffer death by a thousand cuts? And this is actually more of like a newer problem, right? So there's like, there's the tealism, which was don't invest in like competition is for losers, right?

1:00:50And that was like a very prescient, albeit obvious take. I think now it's actually like, you have to figure out like what vector are you competing on that's different from customers or from competitors such that you can accrue value in your idea space. And the reality is that probably in the first 24 months of your company, almost no matter what today, because the amount of people, the amount of founders, the amount of dollars, you will have competitors then. You have to very much think about why your value accrual is more durable than theirs, such that you can outlast them on a marathon. Especially because now, six or eight years ago, So by the time a company got to series B or C, a lot of competitors would die out.

1:01:35Now it's like there's four to six companies that have raised$100 million going after the same thing. And you actually have to just continue to think about why you're part of the stack or why your product is positioned in a way such that value flows majority to you relative to competitors or to partners. So the famous example of this is in synthetic biology and maybe bio broadly. the first generation of these like next-gen bio businesses like zymergen and ginkgo to a lesser extent like really messed up value accrual they they thought about product really poorly they like manufactured products that nobody wanted and they worked in these jv models that like really didn't actually accrue much value like they didn't capture much value from and i think what they the next generation are now realizing is like okay you have to go after like super high value products such as you have a lot of margin to to be able to leak some value if you need to or you have to be able to get much further data in a data pipeline on like a, call it a bio company, such that when you go and partner with big pharma to do like a scale up or to do a JV or something, you actually have a much like deeper data package and you have more leverage in a given conversation.

1:02:45You don't leak like 95 % of the value after spending, call it your seed to series B, trying to get something to market. So it's very different space by space and then crypto is like a whole nother world that we can talk about if you want.

1:02:59Turner Novak:So to the point of capital no longer being a moat, is it because there's just so much capital? If something works, there's a fund that's big enough to say a$50 million bet on something that doesn't exist yet. It's 0.5 % of their fund and they can do it like an angel check. Yeah. And there's enough capital around endowments, pension funds, Middle East money and sovereign wealth fund, whatever, that are just looking to deploy such that the universe of investors that can write those checks is pretty large. And I think what's happening today in AI is pretty interesting because people are trying to king-made companies, right?

1:03:38They're trying to foie gras these startups into just blowing as much on inference as possible to nuke a market. And it just doesn't work.

1:03:46Turner Novak:is because there's so many other people doing the same thing. There's so many other people. And also, it just isn't, again, the vector of differentiation is just not wide enough. And the funny part is we kind of saw this lesson. You remember, it was 2017. We had Brandless, WAG. We had a bunch of these businesses that the original SoftBank Vision Fund blew money into. And it was like$200 million in this company with like$10 million in revenue. And at the time, it was crazy. That's like a pretty standard series. Yeah. And they all failed. Like they all failed. Because you just like, you can try to brute force distribution, but it just, it hasn't worked.

1:04:27And I don't think it's going to keep working. And I do think that the thing that has happened in AI, though, is like, you have these like, late movers of like, really pedigreed people that then go and raise money. And like, they're not in it to like, actually compete. They're in it to like, feel like they're not leaving a bunch of money on the table. and I think that also is like these these like talented researchers get king made as like these next generation labs that are going to steamroll the randos who could build before them and it

1:04:55Turner Novak:just has not been borne out at all so what would you do if you're a founder right now like should I go out and I have a couple million revenue I'm able to raise 200 million to do like what would you recommend if you're like on my board and I'm like dude what what do I do here like what's what strategies or how should I think about it? I think there's a few different ways to think about it. One would be, so the obvious one, what do you actually need money for? Why do you do it? All that stuff. We'll call that the simple down the middle of the fairway. I don't think we need to talk about that too in depth, but do the reasonable thing.

1:05:32Turner Novak:So make a budget. How much money do you need to accomplish your plan based on your goals? And figure out what are the experiments you would run if you had extra capital such that it could be they could be like asymmetrically skewed bets that you can take as a company. Yeah, accelerate getting to that. Yeah. We've built the competitive advantage and we're a public company and we have all the products and distribution. Yeah, or there's like we need to corner the market such that other people can't make offers to our talent because we can pay them two to three X top, which in today's market, unless you are literally Mark Zuckerberg, you can't out-compete on a comp.

1:06:11So good luck. I think the other one would be, think about where you are in the cycle and think about the lesson that a lot of people maybe are starting to forget and also learned in 2021, which is when the circus is in town, sell peanuts. And so if you believe we are approaching some sort of local top of the market or frothiness, and you want to insulate yourself from dealing with that, and you understand that your research trajectory or your spend trajectory is long, go and raise a bunch and have clear alignment with the board, which is like, this is what our two-year budget is. And we are going to raise 4x that because we believe either in two years, we will have a clear inflection where we know how to deploy that money very aggressively.

1:07:02And we think being able to go heads down and do that is important. Or we think that there's a world in which the financing market falls off and the companies that survive will be those that took advantage of capital markets when they were ready. But I think a lot of people use capital as a barometer for success. And the only thing I'll say is as you start to build a scaling business in AI, you do now today more than ever have to start to understand at least some of the dynamics around like, how do you get liquidity for employees as you scale and stuff like that? Because that is becoming more table stakes at growth stage companies.

1:07:41And so you might need money for that.

1:07:44Turner Novak:Interesting. Just in terms of like 100 million bucks to just top people off or like buy their shares. Yeah. Like, hey, we're going to raise an extra, yeah, an extra hundred because, or 50 because we're going to run secondary sales that we can guaranteed founders$10 million a year for the next five years. And that is our retention mechanism against meta, Google, insert other company that has effectively liquid stock. I think that's the thing that OpenAI has done really well. They figure out how to create consistent secondary. Obviously, SpaceX has done that really well. And so even though they're private organizations, if you're an employee and you're doing the math trade-off versus the public companies, you actually are like, my stock's like 85 % as liquid as theirs.

1:08:27And it probably has more ability to jump up in like big multiples each time, as we've seen with SpaceX and OpenAI, such that the math is a little easier to stomach.

1:08:35Turner Novak:So as an investor, when you hear this phrase, like playing the game on the field, I'm sure you've heard that before. Should you play the game on the field? Like to what extent should you play that game? As an investor, no. As a founder, I think you have to. So as a founder, like you take the game, you play to the best as you can. to whatever your strengths are. As an investor, you just like don't play, like you just sit and watch? We raised our most recent fund in, we closed it in April of 2021. We called capital in September of 2021 and we effectively didn't invest until February of 23. And it was because we looked at the market and we said, there's not stuff that we're super interested in and everything is so expensive and raising such crazy rounds that we don't think we can make money doing this.

1:09:22I think the hard part and what we've seen across different peers who maybe like also had some feeling about the market is that you, it doing that makes it harder to step back in. And you typically need to at least have the ability to like get back into the market in the right time and start to play a game.

1:09:45Turner Novak:Because you, because people know you're not active, quote unquote, and you lose deal flow? No, because you as an investor get validation for so long that you're right about the market structure that you're investing in. And it usually takes like, there's more burden of proof to reverse your mindset. And so you kind of are like, yeah, like maybe things are coming back. I don't know. And so like, I would say the mistake we made was probably we could have started investing, you know, more consistently in that November to March, November 22 to March 23 period. And it took us a little longer to be like, okay, we think that the follow on market will come back.

1:10:29Because a lot of our thinking was like, the stuff that we do, no one's going to do a series A in this thing in 24 months. And so So if you're looking at, you know, April 2022, you're kind of like, unless this is, I mean, at the time it wasn't even clear, but unless it's like an AI company that like hits it, there's like no Series A capital still. And we spent all this time talking to follow-on investors and you asked them like, hey, what do you want to say to get a deal done? And they're just like, I just deployed$600 million in 14 months. I have no fucking idea what I'm going to do. They're just like totally lost.

1:11:01And so you're like, OK, well, if that person who like is ostensibly going to keep my company alive is trying to keep a bunch of other companies alive, like they're probably not going to step up.

1:11:10Turner Novak:Yeah. So you have to be thinking about the game that's being played on the field, even if you are not actually playing. So you have to observe still. You got to have the streaming subscription to like still watch the games, but you just don't play. Yeah. So like what is the importance like when you're making an investment? Do you think a lot about follow on capital? Like what percentage is it like 50, 25 % of our fund? Or what do you mean? Or like, oh, what do you think about? Yeah. So if you're like, okay, I'm going to invest in runway. Yeah. I'm maybe going to do the next round, but probably not.

1:11:41Turner Novak:Yeah. The C and the D, like how important, like what percentage you're like, okay, I need to make sure that like we can put 300 million to this company between now and the IPO. Like, is that a big piece of it? Is it a small piece? He's just like, kind of, he's like, Jesus take the wheel. Like, I hope that these guys crush it. Yeah, I think it's, we do a lot of understanding of what are the, what is the like trailing six to nine month view on what milestones are needed to raise from a position of strength in every area we invest in. And so in bio, that's very different. In robotics, it's different.

1:12:13AI, different, crypto, different, right? And so we have that. And that's like a big framing that we always tell founders, we want to align with you on the 18 months of your company and like the seven to 10 years and everything in the middle, we don't know. but I want to know going in like, hey, month 14 when we decided to go and raise capital, like we're in agreeance on like what we need to have done, right? And like that is pretty important. There are some areas that like this actually trickles even further. It's like bio right now, I would argue there's a lot of, there's like a good amount of seed capital.

1:12:47There's a good amount of A capital. There's like almost no series B capital.

1:12:51Turner Novak:Is that scary? Yeah, for sure. But our view is like, bio is so skewed to the upside right now. It's so hated at the growth stages. Again, unless you're building an AI foundation model for bio, which like, cool. What does that even mean? Yeah, it's like so many of these. That like, we are actually just betting that the market structure will change four years from now, which is when a seed company that we invest in today might go and raise a series B. And like, there's a world in which we're like wrong. And we will start to see like, hey, you know, that we might recognize 20 months from now. Hey, we're probably going to be wrong.

1:13:28I recognize 36 months from now. But like, our job is to make sure that founders can be a little bit more, like, aware of what's happening for that next round, like further out. But yeah, sometimes it is. Jesus take the wheel. And the interesting part about right now is like everyone wants to do AI and like most people don't want to do most other things like AI, American dynamism, everything else, some tech bio stuff. And I think as a seed investor, what that means is you just have to have confidence that like markets will mature and or like depth will move into breadth, which is like funny enough a trend that we see in like public markets too, right?

1:14:08And so I think that unlike Runway at the A back then, nobody thought Creative AI was interesting at a seed. And we were like, who knows if anyone's going to do it at the A. But back then, venture was built around the idea of everyone invests in everything, kind of. You do fintech. Software is software is software. And I just want to understand who the buyer is, what the traction is, what the user looks like, show me some core data, whatever. It wasn't like, I only invest in AI-enabled software that does this, this. It was less prescriptive.

1:14:38Turner Novak:Yeah. So I think another thing you actually did really interesting, Blake Robbins told me to ask about this with the longer deployment periods that you have in the fund. Did you do that on purpose or was it kind of like because it was 21 and 22, you did a little bit of a different move there? We always aim to do four years. Our first fund was 2016 to 2021 and it had a pandemic in the middle of it. And our second fund was 21 to raise a new fund next year. And that, the dumbest bull market in tech history in it. And so each will be a year longer. But our main view is like, we just don't get high conviction enough on a subset of ideas on a given year.

1:15:17And we're like pretty confident that you need a certain N number of companies. And we like the idea of being able to be very methodical and slow and not trying to raise capital and or deploy capital such that we can raise more.

1:15:31Turner Novak:Makes sense. You had a pretty interesting comment. You basically, you called Compound a forecasting firm. Yeah. I mean, maybe self-explanatory this far into the conversation, but maybe expand on that a little bit. Like, what does that mean exactly? Yeah. I think one of the things that we do a lot of internally and then we've published two externally is like we try to take year by year views of what will happen in a given area. So we've published two of them. One of them was in 2022, we published something called The Crypto Future, which was a, I think, 35, 40 page book that was looking at the next five years in quite great detail and saying, like, Like, here's what will happen across companies, regulatory, whatever.

1:16:09And we did that in biohacking last year called a biohacker future. And we have this for a few different areas as well. And I think why we do that is it forces a level of rigor around like time horizon and around confidence intervals on your beliefs across a bunch of different things. And to kind of the initial point of like Compound was originally built around, we understand complex things to now is like, we understand how to like model the second, third, plus order effects of how technologies move through the world. Like to do that, you actually do need to then like draw direct lines over multiple years.

1:16:45And so I think for us, we view that as like, again, a partially academic exercise, but actually one that very much informs like, you know, sometimes it results in actually this idea that we have that we think is a little crazy for 2025 isn't. We think actually the time to adoption or the time to this idea proliferating the world is going to happen much faster to the other side of like this cool idea that we think should exist. Like we actually can't imagine a world in which a venture-scale business is built over the next seven to 10 years in this space because we've kind of reasoned through how we think the world is going to change.

1:17:20And I think it also allows us to have founders like, hopefully have some view of like where they fit within these futures that we model and then either like fit within them and say, Hey, like I'm building something that you talk about happening in 2028 and I think it can happen now, or they can come in and just like, like totally shatter. And it's like, this is never going to happen, but what is going to happen is what my company is doing. And that's equally strong signal to both. We invested in a company called TIA many years ago, which was healthcare for millennial women. And our initial thinking was actually the right wedge was fertility because it was super high pay, very fragmented, bad experience.

1:17:58And those founders read a bunch of our reading on why we think the fertility market was quite interesting for a clinical healthcare model and a digital healthcare model. And Carolyn and Felicity came to us and said, like, you guys are wrong. Actually, the way you should think about this is women don't build a relationship with their doctors until they have kids. Most of the time, the average woman from the age of 20 to 28 in the US cycles through their primary care physician three, four, or five times. And that's because you don't see them as often. You don't have the same type of connection with them.

1:18:29But once you have kids, you actually change a lot less. And so if you actually catch women upstream of that and you build an experience in which they are in your healthcare system from 20, 21, 22, you actually can then own them for the entire life cycle. And, you know, women's health is a very different type of healthcare than men's health. They actually go to the doctor more often. They spend more, all these things. And so like, that was their pitch. And we were like, yeah, like it makes sense. Probably right.

1:18:56Turner Novak:We thought we had this, we had this great view and yeah, but you, but you probably got exactly like, oh yeah. But it's like the perfect, it's a perfect setup though, because you kind of knew why you were wrong then. Yeah. He's like, you got it. Yeah. You're like, oh, I thought this thing and he's wrong. Here are all my priors. And I go, I know exactly what you like have voided. And I know exactly what you've kind of like confirmed. And I now have confidence that like, this was right. This is wrong. And I think again, like, that's just, it's so, it's so, I just don't, I actually don't know how people do like reactive venture investing because any company sounds fucking awesome when you sit down with them and they tell you about it.

1:19:32Turner Novak:Yeah. That like, I would just say yes to all of them. Like, it's just like, of course, like this makes sense. Unless the founders, you know, you don't believe in the founder. But like, I think outside of that, it's just so hard to have high conviction. And I don't know. Yeah, that's just that's how we do it. But who knows? And so like it feels like the do you think you can have success being more of like a generalist investor, like not having a thesis? I couldn't, but other people can for sure. Yeah. And it's just because you have these other advantages of like you have the unique developed network or you have like this great unfair advantage in understanding some technical things.

1:20:10Turner Novak:So founders come to you and you get a fairly priced equity because of your expertise that you have or the value you provide. Yeah. Like that's a great sounding pitch. I don't know. I think like in general, it's just like this is the playbook that we know how to run with relative success. And like, we think that like a subset of founders really want to work with someone who like has opinions on their space and know the space, whatever. And a subset are like, I would never want Mike Dempsey on my board. Like, it's annoying to have some person who like reads a bunch of shit and wants to talk about it.

1:20:44Yeah. Like, and I totally get that. And like, I think that that ebbs and flows. And I think like so much about being a board member, so much about being a lead investor, which we normally are at the seed stage, is like believing that you have a singular role to play in the company, not a totalitarian one. I think where a lot of VCs go wrong is they like step into a board meeting. They're like, I have answers for all of your questions. And I'm like, I don't know, there's probably like 50 % of stuff that you're not going to ask and I'm going to have no idea how to answer. But like I have a bunch of types of companies that, you know, in our portfolio, we see struggle with weird, complex things that often overlap with ambitious technical end of one businesses.

1:21:22And like, maybe you want to work with us for that. And that enough times allows us to win. And then all the prior work allows us to identify and theoretically pick.

1:21:34Turner Novak:Okay. So I want to talk to you about crypto. I want to ask one thing first, though. So if I'm, let's say I'm 25. Yeah. I just got a job at a venture fund and an associate. I'm really excited about it. Yeah. What advice would you give me to help me understand what I'm getting into and do a good job? Or you're getting into just a massive pile of egos. I don't know. Like, my advice has become known for something so that you're irreplaceable. Like, I think that most firms hire junior people to expand the bandwidth of the partners. and what they should be doing is expanding the bandwidth of the firms.

1:22:14And so when we've hired people, the thing that I've had to impress upon them is they kind of in the interviews will be like, I really want to understand what's hard in your world? What's hard in your life? What are things you think I could take off of your plate? And I'm like, I don't need you to take anything off my plate. I need you to go add a bunch of stuff to Compound's Plate. That's what you should be doing. I think good junior people figure out what is the thing that I will become indispensable for And then what are like the things that I am like above replacement on for the partner I work with or for the team I'm on or whatever?

1:22:47Because you do kind of need like both where people view you as like short term, short term valuable, which is like they do stuff I don't want to do, which again, I think is the wrong way to think about it. But a lot of firms do. And then long term value, which is like, oh, my God, if they left, I would never like we wouldn't be able to do this thing. Yeah. And I think like building that framework across all types of founders is really helpful. The other thing I'd say is do not just try to anchor on talking to young people and all this stuff. Like venture and investing generally is not graded on a curve.

1:23:20I do not care if you're young. Like your returns have to be just as good as Pat at Sequoia's or Napoleon at Founder Funds returns to like be a good investor. I do not give a shit if you're 25. And so like that idea is something that people need to like really internalize. It's why I hate when people in their Twitter bio put their age. It's like, I don't care about your age. Like no customer is going to like be like, oh, this product sucks, but it's built by a 19 year old. So like I'm going to buy it versus like this one by a 30 year old is like a little better, but they're 30. Like the world's not great on a curve.

1:23:51So like understand that very quickly and try to figure out why you can become above replacement to like the GP at your firm in a certain area.

1:23:59Turner Novak:Do you think you should think about it as like a long-term thing? Like if I'm getting my first job, like should I be entering this thinking I'm going to do it forever? Or should I be thinking about it as it's basically a sales job and a chief of staff type job? Like should I just approach it from that perspective and embrace those skills? It depends where you work. It depends what you want to do. I don't know. Like I think like we only hire people at Compound that hopefully want to be investors forever. And my view is like, everyone will just continue to own more of the firm. And like, that's great.

1:24:30I think some firms are like, you're going to be here for two years, you're going to get experience talking to some of the smartest people in the world, then you'll figure it out. Venture is an incredible job because it creates massive amounts of optionality. It's a terrible job because you learn almost zero transferable skill sets. And so like, you have to figure out what it is, what your orientation is in it. I do think in general, all people, like millennials and Gen Z in particular, have this weird orientation now where everyone wants the next job to be the final one. Everyone always says that.

1:25:01You talk to them and you're like, I want the next job to be one where I can be at for a decade. It's not realistic to try and make the next decision be the one that lasts forever. It's like, how do I check in every six months, make sure I'm still on some rate of learning? and do I feel like I'm building a defensible long-term skill set? And I don't know, with the AI stuff, everyone's having existential crises. Like every week I talk to like a 24 to 32-year-old who like has no idea what to do with their lives and think AI is going to steamroll their career.

1:25:30Turner Novak:Do you think that's true? Like if I'm 34, maybe I slightly fit in that bucket, is AI going to steamroll my career? Like should I be worried about AGI or is it just a tool that I learned to use to take advantage of? like it'll probably steamroll parts of it i don't know like it's like to the point i've said like it's steamrolled our edge in understanding papers like i don't know and so what do you do you like evolve to use the tool to do next order things better yeah i think the like meme of the world will be built and split into people who can't use models people who can is like quite true uh but i don't think i have like a perfect answer i i will say i'm not like i'm more in the tyler cow in bucket of like diffusion of technology actually takes longer than people tend to appreciate than the like i don't know some of the like anthropic people who are like agi next year we're all fucked yeah well it's like with chat gbt like i'm still meeting people like i just learned about chat gbt last week i'm like oh that's cool yeah what do you think of it that's fun it's really fun isn't it yeah so actually i lied so i have two two more things so one of them so you do you do like the early stage in the public market yeah like it's complete opposite really at the end of the day, but maybe there's some parallels.

1:26:43Turner Novak:Yeah. What do you think that the two could learn from each other? Like if I'm a public market investor, what could I learn from learning to think more like an early stage seed stage investor? And then early stage seed stage investor, what could I learn from somebody who does public market investing and has that skill set and that appreciation of the world? Public market investors are starting to learn that idea moats and like the, the, framing of like narrative capture is actually like way more valuable than they ever appreciated. And I think private market investors have understood that quite well.

1:27:21Like being the Uber for X is like, is not nearly as valuable as being Uber and like understanding these companies that like create categories, dominate the narrative for their space and like act as what we've called them like shelling point companies of like, we think that that is like materially valuable that applies, that creates a multiple on your business. And I think that's something that public market investors have started to get. The Tiger Cubs started to get that earlier, right? They were all about compounders and like this idea that these things will just compound over long periods of time.

1:27:48And if you look at what they held, it was like mostly tech stuff and like Mag7 related stuff. I think early stage investors or venture investors, like the flip side of that is like, there are sometimes shooting stars and there are also like, there's gravity in markets. And what that means is that like you have a maximally optimistic vision of a company. And I think we saw this in 2021, which is like everyone took the maximally optimistic view of like WeWork isn't an office company. It's like a new type of real world data.

1:28:26Turner Novak:Yeah. And it's like, well, actually, if you like understand kind of like how these companies generate revenue, what margin profiles look like, they typically will only ever maximally be worth X. Right. Yeah. I think like that is actually quite important to understand. And the tension is that like Marc Andreessen saying software is eating the world was like incredibly prescient and actually defied a lot of the gravity of what people thought technology companies could be worth over long periods of time. But like that is now a consensus view, which is the consensus view is things will be bigger than anyone can appreciate.

1:28:55And I actually think it is more non-consensus to say that certain things have gravity. And there's some stuff that will defy gravity. Open AI Anthropic are businesses that defy gravity. Cursor is a business that defies gravity in the scale of which it's growing. I think that like there are the vast majority of others that do not defy gravity and like they will reach some sort of terminal value and thus private market investors should understand how to finance those businesses, how to exit those businesses and help founders understand how to navigate like properly landing the plane on these companies as public companies that continue to operate and generate cashflow or whatever, as acquisitions, as not overfunding them, whatever it is.

1:29:33Yeah.

1:29:33Turner Novak:So it's like public markets, it's realizing that the upside is so much higher than you think. And in the private markets, it's realizing that the public markets need to value these things at some point. So just remember how that works. Sometimes. And I'd say on the public market side, it's also like that there are things that are worth more not because of like quantitatively legible things. Like it's not showing up in the financial statements specifically. But like this thing is trading at 500 times free cash flow, but it's because it literally has 90 % incremental operating margins because of specific market structures or scale economies or like whatever the thing is.

1:30:16It can be that. It can be fundamentally driven, but also might be it's the only way to express this view in public markets. And thus the flows are inherently dictated to go there.

1:30:25Turner Novak:The multiple will just expand from 20 to 40 just because. How else can you get pure play exposure to AI and government and you long Palantir? How do you get pure play exposure to rockets when you see Elon as SpaceX? Well, actually, I can buy Rocket Lab. Like, how do I get pure play exposure into robotics? Well, there's like this random ass company called Serve Robotics that was publicly traded via SPAC and on 4 million in revenue is worth 1.4 billion dollars in public markets for a while. Like, there's a bunch of these. And I think like, yeah, sometimes flows just disrupt any sort of fundamentals.

1:30:58And I think if you were to, one of our core beliefs is like, crypto today is 80 % narrative, 20 % fundamentals and how these things are valued. And public equities, you could say, are, let's say, 80 % fundamental, 20 % narrative. It's probably not that, but I would say. And those things are going to converge in the opposite directions.

1:31:16Turner Novak:Interesting. Well, it's an interesting like transition into crypto. So just generally, like if I've never heard of crypto before, like I'm a smart person, I have the ability to understand it. Just like, why does it matter? Like, why is it a thing? I hate defending crypto at this point. So I will do it very lightly. I think there's a variety of things that have happened over with each year that goes by. I believe more and more in the core principles that underpin crypto. Those core principles are first order, like self-sovereignty and being able to like own and move and have transparency to the things that you own and move.

1:31:57And related to that is like a distrust of institutions and distrust in any sort of large actor in the world. And then I think third is like just massive inefficiencies that compound over time in structured systems. And smart contracts inherently are good at that. Like code is good at that. And immutable code is very good at that because then they can't be changed and that works its way back into the distrust, right? And so on the first order side, Bitcoin is like the greatest example in the world on this, right? You can move Bitcoin across borders, you can move billions of dollars and no one would ever know, except for theoretically on the ledger if you sent it, but you could just keep your hardware wallet with you and move.

1:32:36You can't do that with gold, you can't do that with cash. you also can't have assets that can be seized easily because again there's no treaty that can happen between the u.s and insert other company and they can

1:32:48Turner Novak:take hold of your bitcoin bank account or whatever like it's like you have a hard drive yeah that has the hashed code yeah that says that you have x amount of dollars or x amount of value in bitcoin yeah you can plug in anywhere you can go into go to japan you can go to brazil plug it into a computer and you have access to it. And this is like the argument of people who are like, well, stable coins don't matter because like I can Venmo someone and it works tomorrow. It's like you can. And also like the US government can tomorrow be like, hey, Venmo, you no longer can like serve any person who lives in any country, right?

1:33:21Like insert country name or you can't serve anyone who has tweeted against the president or whatever, right? And being able to like move a stable asset is also very valuable. And so like decentralized stable coins are very interesting. Tether is a good example of that in some ways. Dye is another example. And then lastly, these smart contract components, which is like, if I today want to get a mortgage under collateralized, it's still quite hard. That is something that is built on hundreds of years of trust. We actually haven't figured that out on chain yet. But if I want to do an over collateralized loan of any kind, and I know it's not as efficient, whatever, I can go on and do that by pledging an asset into code, pulling out dollars against that asset in two transactions and about, call it six seconds for$3 of gas fees if I do it on Ethereum, maybe a little more.

1:34:13That is pretty elegant as a solution. And there's a lot of building blocks that can start to be built on top of that. My favorite example, which is actually a largely failed protocol, but there's a protocol called Alchemix. And basically what it is, is let's say you have$100 ,000 of ETH. You can put your ETH in and you can take out$50 ,000 of USDC that you can go buy a car with. And what the protocol will do is it'll take your ETH and start to lend it and earn yield and auto pay back your loan. You don't have to do anything. So you now have pledged an asset, you've gotten money out, your loan is being auto paid by generating yield elsewhere.

1:34:49And at some point you can come back and you can be like, okay, I'm just going to take my ETH out now. It's been all paid back. And it's like fully locked in smart contracts, in code. And that is like a mechanism that does not exist in traditional finance. There's no like take a loan, put money market, have it route this way to like pay back my loan. There's like many layers in between. There's people clipping 25, 50 basis points of fees all along the way that make that process even more expensive.

1:35:14Turner Novak:You're saying different like asset management firms or different Verifiers. Collateralized. All sorts of stuff, right? And so I think like on the DeFi part, that's quite interesting. And then there's a bunch of other stuff too, which is like capital formation matters actually across a bunch of areas. Like we think decentralized science is really interesting. And today, if you wanted to run, if you wanted to do research on a rare disease indication, like the pharmaceutical companies have largely punted on that. It makes no sense. And as a VC, it actually also probably doesn't make sense to back some of these rare diseases.

1:35:47But there's a cohort of 5 ,000 people that it really matters. And they're going to happily put money in to own a piece of the IP and watch this drug come to the real world. And like doing that on chain is like incredibly efficient and also allows people to coordinate capital in a trustless way to then go and do trust. Someone will do something, which is the science, but you can observe that science being done. And again, we think that's like very interesting. I think the problem with crypto is that it has largely been held back because I would argue the best builders in the world on average have chosen not to build in crypto because up until this year, it was uncertain whether at some point in your life you would be dragged in front of, insert legal body, because someone one day decided like everyone who ever worked in crypto should go to prison.

1:36:37And I think now that that, in my opinion, is largely off the table and I think will be more clearly off the table in the next few years, like you will see a lot of more talented, less grifty people enter the space.

1:36:48Turner Novak:Yeah, because when I think of crypto, I just think my general mental model is like 99 % of it is just like frauds and scams. And there's maybe like some interesting stuff, but like too hard because just generally the incentives around it just lead to a lot of fraud. So it's just kind of like a void. so the so like an example like like you know with stable coins you know it's like you know the the government says you can't send money to this place but you can with stable coins i mean there's a reason that the government is not allowing you to send money right like is it like a like are you only using it to commit fraud or is there like real reasons what if the reason is just like we are having a bank run and as a government we don't want our citizens to be able to move money out of the country so it's a way to make sure that you're not trapped in that like yeah like we assume that all governments operate in the interest of their citizens which is like not true yeah and like in america it's not even clear if it's true yeah exactly in other countries it's definitely not true yeah and i think that like that component is like quite important to internalize which is like i don't like this is this is the most ridiculous framing i've ever had in the same way that like Like you don't trust the random startup to like off into your email and read all your email.

1:38:03Like I don't like there's a bunch of people who are like, you know, the real world problem, not our, you know, first world problem is like I don't trust the government to off into my entire life earnings and like be able to see it and take advantage of it and seize it at any moment.

1:38:18Turner Novak:Yeah. And like, why don't I do that? Well, because like that startup's been hacked 10 times and their emails have been leaked. And like, they're like, well, because this government has like printed money five different times and inflation has been 80 % for the past seven years. And so like, why do I want to hold it in this native currency? And it's like, well, I know why they want me to hold it in the native currency. Exactly. They benefit from it. Yeah. But like, I don't. And so like, I think there's a lot of things like that. And I think you can go, this is a little bit crazier, but like our, one of our beliefs is like, I think you can go further and look forward in the future and say like, what we have seen over the past few years is that monetary policy is actually fairly pointless unless you are one of the most powerful countries in the world, right?

1:38:57So if you control the yuan, if you control the US dollar, and then the euro and the pound and some of these other more felt, but controlling monetary policy is incredibly complex and difficult. And a lot of countries are starting to just be effectively soft pegs to the dollar because it's all that matters, or to the yuan. Some have totally ceded and they're just like, we're actually just going to trade dollars now. And I think more and more countries are going to start to be like, listen, the only thing that really matters is like, can you send a bunch of military into my country or not to control our citizens?

1:39:26And like, can our military control our citizens? Not like printing dollars. And if that's the case, like, why don't I just instead like use Bitcoin or use another asset or just use a US dollar or something else? And like, I don't have to worry about this anymore.

1:39:41Turner Novak:Worry about trying to figure out my own rates and policies. Yeah, it makes sense. And you kind of saw a version of that when like the Euro, like European Union happened, right? It's like the Euro actually was like great for, well, it was good for Germany in some ways, but it was great for other countries as well. And so why hasn't crypto just like broadly taken over everything? Because like the things you just described, a lot of them is you talk through them like, oh yeah, it does make sense. Yeah, you know, it does make sense. Yeah. I get that. Why isn't every single financial service currently offered like on chain in some capacity?

1:40:14I think up until like three years ago, it was like pretty hard. The infrastructure is pretty hard. I think a large number of people don't want the accountability, to be fair. They don't want to have to have their codes and their keywords and their hardware wallets, whatever. We've started to solve some of that with Privy and stuff like that. I think the regulatory environment up until 12 months ago was terrible. You could legitimately go to prison if you did something in crypto. And you also couldn't attribute value to tokens. Like you were, it was illegal to be like, this token is actually worth this$400 million that's sitting in this treasury.

1:40:47Like it's a claim on those assets. And like that makes it really hard to make these things feel totally valuable. It's kind of like some people believed it, some people didn't. And so like, I think now that a lot of those things are starting to ease and a lot of the infrastructure is starting to change, it will. But it's been definitely slower takeoff than we would want. But again, like, I don't know, we're like effectively we're like 13 years in, 14 years in. I know like Bitcoin was earlier than that, but like, I don't know, 2008, 2012, I don't really take into account as much growth in crypto.

1:41:24Turner Novak:So you said something about how up until 12 months ago, like you could just kind of randomly go to prison. Like you didn't know what the context, what exactly happened? Because I feel like i've seen a little bit but like i don't know the exact nuance it sounds like you're pretty there's been more there's a bunch of stuff that we believe will happen over the next 12 months but there's been more clarity around what is a security and what isn't what is a current like what's a currency versus not who controls like the legislative body that would theoretically regulate crypto there has been more of a signal from the government of we want to embrace this and we are working towards this.

1:42:06And that's what Trump and Saks and a bunch of these people are kind of theoretically working on. There's also been a disgusting amount of grift along the way with meme coins and other stuff. And now there are starting to be like stable coin bills that enable banking institutions to like bank people with crypto to traffic in stable coins, things like that. And so I think there's like a lot of, I would say there's not a bullet proof and there's also now new legal frameworks as well. that are enabling people to create entities that can be governed by decentralized groups effectively. And that took some time to be properly recognized at a state level.

1:42:46And so I would say it is still unclear whether if you want to direct cash flows to a token, which would make it pretty security-like, whether that would be totally embraced today, legally, but the signals are we are working towards embracing a version of that and giving clarity on what are the reporting mechanisms and the transparency needed in the same way that public tech companies have to, or public companies broadly, have to abide by a certain amount of rules in the SEC from a filing perspective. And up until then, there was zero guidance and there was zero willingness to talk about what the guidance would be.

1:43:29Turner Novak:so you just you didn't even know what you're supposed to do in order to do things correctly no yeah so it was just like you you wouldn't do them because there's a chance that you'd be in prison for life yeah i mean like you just there's very famous of like multiple people at coinbase paradigm on the legal side a bunch of the dows like the uniswap team whatever going trying to talk to the sec and they basically just refuse to tell them anything and they're just like sorry, we're just like, we don't, we're not going to talk. So like we, we don't have an opinion or we're specifically not sharing things with you.

1:44:00Just like we, you want answers to figure out how can you legally do this properly? And we are not going to give them to you because we hate crypto. So it was just like, maybe it was like an irrational or is irrational from them for

1:44:13Turner Novak:certain reasons to be against any sort of crypto adoption. I think it was operating in bad faith is what I would argue. I think that there is like a, if you have people who've been operating businesses to the best of their ability legally for long periods of time and are actively documenting and trying to figure out what do we need to do for you to make you give us some guidance on if what we're doing is proper, legal or not. And you're saying, not going to tell you. And at the same time, you're like throwing lawsuits at a bunch of these companies. it becomes like you're operating in bad faith.

1:44:49And like Hester Pierce, who was one of the SEC commissioners, said that about Gensler last year. And like there was a very clear dissent and disagreement amongst the SEC of like, this is clearly not operating in good faith. I think now that has changed and it's actually more of a bipartisan issue. And so we're quite bullish on how that can progress over the next few years.

1:45:10Turner Novak:So it's basically like, tell us what we need to do in order to abide by the law. Yeah. And we'll do that. Yeah. And you think that that will actually cause probably fewer, do you think there'll be less grift in crypto going forward? There'll be less grift and also there'll be less people, victims of grift. Because it will be very clear like, hey, we are at least making a good faith effort to try to do things that are trackable, auditable, fundamentally legal, whatever, sits within in some legal purview. And people who are like, I'm not going to do that are going to inherently probably suffer from a lesser amount of capital flows and interest.

1:45:51Turner Novak:It could be objectively clear like these guys are doing something illegal. Yeah. I mean, illegal or just like there's some people in crypto who just refuse to believe that they should be under any law. And that's cool, but that's just not the way the world works. I'm sorry. It's like you have to be a part of something. And so I think that is that's, we'll start to see more of a separation of those things. Yeah. And it's interesting because the way I've always thought about crypto as my framing is just like, it is its own separate economy in its own world. Like you, let's say you, you have $50 million of Bitcoin, like you bought it a long time ago.

1:46:28Turner Novak:And it's like, you, you now are like a part of this whole entire economy, this whole entire society or world where like, you almost don't care what's happening in the U.S. or Azerbaijan or like Kenya, whatever, wherever you live. It's just like, I'm worth 50 million dollars in crypto. Like that is my reality now. So it's almost like become its own separate economy, society, country, like the whole nation. What's it called? Nation state. The biology thing. How does he describe it? Like it's become its own like sovereign state outside of. Geographic boundaries. It's like an internet economy almost yeah is is ethereum its own internet economy like is is right soul its own like thing right like i i don't i don't know if this is that's the right frame that's kind of in how my like non-expert i think of it as like there is a view that i i do believe is like there are in the future there could be three factions and like you know what what it's looking like today is there's the US faction and our allies.

1:47:32There's a China faction and China's allies. And I think there could be a third that is a more decentralized faction. And we have to order stuff from China, and we export to them. And people from the crypto side, transaction, all these things work together. But I do think there could be more split between those. I will say though, the interesting thing is because of the massive wealth creation, effectively on belief in crypto early on. This is a crazy thing to say, but there wasn't a lot of hard work to be done. The hard work was not selling your Bitcoin effectively. It wasn't like you'd build a company and do all these hard things.

1:48:14There is a massive amount of philanthropy and also more and more each day I talk to crypto people who want to do things that have impact on the real world. And so there is a desire to figure out how to translate or like cross over in these worlds more and more because i do think the once you reach pat once you get past the like wealth game and like the like i need to make a living game people want these like they want the worlds to coexist and so we talked to a lot of people who want to do like longevity bio investing stuff that feels super super tangible and important and they're using crypto wealth to finance it which is like an interesting signal to me yeah

1:48:53Turner Novak:I actually have one more completely unrelated question to any of this. So SMAC told me to ask you about how are you thinking about AI and robotics? I think robotics started as the history of robotics for us, which is 2016 onward, was like that moment in time. A lot of people thought that AI was going to make its way into robotics. And we backed some companies under that premise of using reinforcement learning and a bunch of stuff to have really intelligent robots. It was a little early. And what people then moved to was, okay, we have like mechanical engineering and like, that's like you build machines effectively, right?

1:49:28And they're not super intelligent, but they're very repeatable. They're robust. They can do certain tasks. Now, I think everyone kind of looks at the past few years of ChatGPT and says, okay, the main lesson we've learned is the better lesson, scale data, scale compute. You get emergent intelligence, apply that to physical objects. And so everyone just is kind of drawing the line and like putting a piece of paper and tracing it with robotics. And they're like, all right, so it's 2020 in AI time, but it's 2025 in robotics. And so next five years, we're going to see an explosion of intelligence.

1:49:59And then they kind of do the thing that is equally as not creative, which is like, and what kind of robot should it be? And it's like, oh, it should be a human. And it's like, OK, well, why should it be a human? Like we're it should be a human because like that's maximally generalist. It's maximally easy to understand. Think of the TAM on that thing. when you're raising money. This is the point. It's like the economy. It's a great narrative arc. I think the thing that we believe a little differently is like, you know, this point on creativity is there's a bunch of different mechanisms in which you can build robots that can do things superhuman, right?

1:50:29Like we shouldn't be aiming for like replacing humans. We should be aiming for building superhuman things. And so like a laundry machine is a superhuman clothes washer. Like it's incredible at doing that. Same with the dishwasher, all these things, right? And so a lot of where we think about investing is intelligence will scale, things will become more multifaceted in their ability to move throughout the world, understand novel environments, but actually more purpose-built robots will be able to win, both because they're easier to manufacture. You don't need nearly the amount of actuators and motors and things like that to do this with your hands.

1:51:04And also they'll be able to get distribution ahead of a bunch of these humanoids. Humanoids just won't be able to scale at the rate that other types of robots robots will, again, because of the technical complexity in building them. And so like all deep technologies, a lot of people build hammers and then look for nails. And I think in robotics, a lot of people have the hammer of AI scaling laws and humanoid robot and they're looking for a bunch of nails. And my view is it's valuable to replace a human. Don't get me wrong. Some human labor, physical labor can be anywhere from on a contracted basis, 30K to 200K a and the very valuable ones, like Intuitive Surgical built a surgical robot, which is not autonomous, but for the sake of this argument, does a very high value task of surgery.

1:51:49But the more valuable thing is actually not the human life. And that thus leads me to believe that if you were to build a humanoid, you care a little bit less about what is the dollar task of the employee you're replacing and more about what are the situations in which it's really bad to have humans in that scenario because their life is at risk. And so that leads me to be like, okay if you assume there's an amount of manufacturing of these humanoid robots that reaches some ceiling which like i don't know auto oems can only manufacture a certain number of cars each year because the manufacturing apparatus is limited um you would then say humanoid should be

1:52:22Turner Novak:in military and industrial settings only it's like firemen or something go into a home carry people out yeah like something like as a as a city as a taxpayer i like i'm not upset about how much firemen get paid, I'm upset about if a fireman dies, right? And so like the amount of value I'm going to spend is like materially more than the wage. And so this idea of like, we're going to have humanoid robots in our home that do what like mid-wage labor does is like a little ridiculous to me if you try and reason through it in the near term. In the long term, sure, like cost curves come down, manufacturing scales.

1:53:00But I think by that time, you will just have purpose-built robots that already have distribution today such that I won't need... In the same way that I don't have a server farm in my house because I actually like, we figured out how to get PCs into the house before we put server farms into the house. There will be other products that emerge that are adjacent for doing the same thing, which is like computation that will get distribution and win out.

1:53:24Turner Novak:So is it just the narrative of a human robot? Like it just takes over? Yeah, it's great. unlimited TAM, you don't have to pick the utility today. You can say what's going to be general purpose and so will be super malleable. And actually, if you look at AI, the best models are general purpose right now. And so, I don't know, would you rather be an investor in OpenAI or would you rather be an investor in 11 Labs? And it's like, they're both awesome companies, but I'd rather be in OpenAI. And OpenAI is the humanoid robot and 11 Labs is the defined robot, right? And so I think that is a ridiculous argument when you have to bring things into the physical world.

1:54:02Again, markets have gravity in some ways. Companies have gravity. But VCs and other investors get very lost in that. And some of the humanoid companies are incredibly good at marketing. And they make these sizzle hype videos. And a lot of investors love science fiction they get like nerd sniped into being like i know exactly how that world works because like i

1:54:26Turner Novak:saw terminator and i saw i read and robot frank and it's yeah like the foundation yeah and it's like okay cool like i yeah you know i can i can envision that versus like it's kind of hard for me to imagine what a you know purpose-built retail robot is yeah i actually asked mac told me to ask you about this too when it comes to like the hyped launch yeah what's your opinion on we're definitely in a phase where like that is the strategy yeah is like get a hundred thousand dollar launch video or maybe it's less than that with ai now but like perfectly polished launch video yeah you put out this narrative yeah and then you you raise money and try to build a company like like what's your opinion on like is that a good strategy is it it's probably a from an expected value basis a good strategy yeah like people will see the video they'll be able to understand it they'll share it and it'll drive inbound.

1:55:16And if the first fundraise is all about maximizing funnel size, like it does that well. I think it's like at this point, so unbelievably not creative. And like often the, like the videos themselves aren't even that creative.

1:55:31Turner Novak:It's just a playbook. Yeah, it's a playbook for sure. It's like the wood panels. It's the same. It's like every podcast. Every podcast has the wood panels. It's the same. It's like stand at desk, talk about product, zoom in to like screen to show product, whatever. Probably an American flag somewhere in the background, depending on who you're fostering to. Yeah. And so I just think, I don't know, it's weird that the best founders are spiky and they're contrarian and they are out of distribution feeling, whatever. And then it's like, people I give the most money to, if you're an investor, people I give the most money to are the ones who do the same exact thing, look exactly like all the others, act exactly like all the others.

1:56:10But again, I think it's reasonable. And I think that there's a lot of investors who make their way into these firms where the job is like, do the reasonable things. And if you do the reasonable things, you'll get promoted. And if you don't do the reasonable things, if you do the reasonable things, you lose money, you won't get fired. If you do the non-reasonable things and you lose money, you're going to get fired. And like, there's some next order middle ground, which is like, if you do the unreasonable things and make money, you'll get promoted. but if you do the reasonable things to make money, you actually might not get promoted.

1:56:42And so it's like, there's like a lot of like very weird, like multifaceted thinking. And so usually people are like, do a bunch of reasonable things and then jump firms such that it doesn't matter how they turn out. And that's like the like, on the other side of the table, that's like the expected value dominant approach to venture.

1:57:00Turner Novak:Yeah, that's fair. Because there's all this, there's sort of like performance-based investing and like AUM-based investing. There's like these two different, I feel like they're different strategies at the end of the day. Like, how are you compensated from making money for investors? Or are you compensated from raising money from your investors? Yeah. I mean, yeah. Being like, Kathy Wood is like the best fundraiser of all time. And she's also lost more money than anyone in human history. So. Yeah. Which is maybe a story for the next podcast. Well, this is a lot of fun. Thanks for doing that. Of course.

1:57:32Thank you. And thank you for listening. And thanks to Ram for supporting this episode.

1:57:36Turner Novak:upgrade your corporate card and get$250 at ramp.com slash the peel. If you missed it, check out last week's episode with Ryan Hoover, founder of Product Hunt and Weekend Fund. And tune in next week for a conversation on endowments and institutional asset management with Dan Fader, Senior Managing Director at the University of Michigan's Endowment. If you liked this conversation, please like, comment, subscribe, and name your next humanoid robotics model after me. If you don't want to miss a future episode, subscribe to my newsletter, the split linked in the description. You get each episode plus transcript emailed directly to your inbox every week.

1:58:10Turner Novak:Thanks again for listening. See you next time.