Uncapped #18 | Peter Fenton from Benchmark

28:14And I have a tonne respect for firms that have likened reason for what it's in like Sequoia among others that have scaled the capital base and tried to do it with a really intentional, what does this mean to the entrepreneurs so that they have more, more, you know, capital, more resources more. But obviously, you know, we have a very different philosophy inside of benchmark. And my view has been, we have at benchmark the most adaptive organism in the venture ecosystem. What's interesting about benchmark is it started in the mid 90s and it was the top performing fund of that era. Got lucky, obviously, eBay.

29:00That's all luck anyway at the end of the day. Then with a completely different lineup, benchmark had the top performing fund of social mode. We were lucky enough to be early at Uber, Instagram, Snap, Twitter. or crypto is not our thing, that was the next wave that created trillion dollar market caps. And I think the question for us now is that do we have with a whole new lineup, me being the last, we said last piece of wood on the ship Athesias that the continuity, the common ancestry to prior benchmark, to be a top performing fun. And for me, top performing is not largest fun, it's very simple, it's the largest cash and cash multiple the poll for early stage venture.

29:44We don't need to win because it's not a game where there's a winner and a loser. It's a, you know, are we able to get close to and be, you know, deep partners to the best entrepreneurs of this generation? Arguably, the best entrepreneurs so far have come out of foundation models. Look at your brother, the whole team at OpenAI or Daria on the team and Anthropic. It's our belief that the next three to five years, we will create multiple trillion dollar companies in our industry. And that's how we wake up every day and think about, okay, can we serve those people, those entrepreneurs to their success?

30:19Well the other big funds do that too. I expect so, but different models. Our ideas that we serve as close partners to entrepreneur for a decade plus individually close partners, meaning serve on the board, build a close relationship, be there with them in good times and bad. And I think that five plus or minus, so four to six equal partners at the peak of their ambition, of their relevance, of their capacity to serve, which means young. Honestly, I think it means late thirties to mid forties. If you go back over the history of entry, that's when John Doors doing his investment in Google or Mike Britzes at his peak.

31:04And so So our adaptive model has been different than large funds, which is that we've accepted the fact that benchmark is completely ephemeral. Like the lineup is completely ephemeral. No names on the door. It is designed to be destroyed from within and reborn, but the mechanism is the same. The adaptive mechanism is all those things we talk about core design principles, shared identity. There's clarity across all the partners in exactly what we're doing. Fast and inclusive decision making. The idea that each of us is an owner gives us a sense of autonomy, another core design principle. And there's not quality control and overhead and processes and there's no memos.

31:48There's no, you know, so much shows us the data room we tend to laugh and like, oh God, I have an example of this big comeback in Hauntus, but we invested in a company called page in Joshua said at the end of the process, he's like, well, you know, we're talking a lot of other firms and they've all gone into the data room and we want to cross this threshold with you. We feel this is the full potential partnership for us, but you haven't gone to our data room yet. And, you know, our LPs may not like me saying this, but I said, there's nothing good that can come from that. It's like, because I'm going to go in there and ask a bunch of questions that undermine the commitment you're getting from us, which is to say that you, Joshua, at Hey Jen, with Wayne in your team are building a generational company.

32:34And that I've seen what I've seen from how you've talked about the product roadmap, probably brainstorming about where you're going to go with the next set of releases and

32:43whether or not you're retaining a learning and distance training, you know, user that isn't the long -term goal for business doesn't help me. And I think so that value proposition is different to entrepreneurs and it's somewhat it's a Not a rejection of these other models, but I do think the nutrient rich environment that ventures been in has created Cancer as growth where and how I think that One of the things that the cancers need to thrive Is they need to hide from the immune system my sister is facing a rare cancer which he's been fighting and as today free of it And but it gave me a window and to just how Darwinism and evolution and natural selection actually applies much to our pathologies as they do to our well -adapted things.

33:27And so one of the challenges and I guess this is a question for women and partners is that they should be the immune system. But they've been very patient. And I think at some point there's a question of like in the same way that ventrilo -sanctioned as an asset class because it has all these spectacular possibilities. A semesthetic return, you know, a dollar can become $10 ,000. So if nothing like it in the investment world, truly nothing. But it also has been underperforming the NASDAQ. Yeah. Well, and I guess part of what's going on there is just like we're all felible humans. The LPs are also felible humans that have their own incentives that are not perfectly rational on a broader scale too.

34:08So there's probably a lot of play there that through the whole pipeline that makes the whole system hard to change. And I've been struck by Humans have an ability to turn sound of systems and devise systems And I've struggled and I've gone through this myself in my own life, which is sometimes You look at the incentive of startup and One of the common themes of the really great entrepreneurs is that they play infinite games not finite games This is the James Carz book who's some I remember that Patrick calls and Toby both recommended I read it. I'm talking about reading that book. I guess this is, and their attraction to that, one of the things I guess we sort of see in the great entrepreneur is that their value system is first and the incentives that sort of flow from that sort of support it, but they're not the motivating factor.

34:58It's not maximized in that word. And I think this ecosystem we're in has had, we've slipped a bit in that we've taken incentives. It could be incentives of the fees that come from a larger fund and then try to create values based on those incentives. And the values then sort of are rationalized as a way of supporting those incentives. I don't know that's conscious. I don't think people are calculating that way. But one of the challenges of venture business is the incentives for a limited partner, allocation to brand name funds, having good marks. Venture Mark historically, we keep our valuations that we report to limited partners at a fraction of the last round price.

35:37And it's an interesting conversation with the woman. So like, because they're being evaluated based on the private marks. So I think our view has been that we want to always surprise and delight to the upside and that we have some sobriety perhaps. And if you look over the course of benchmarks funds now 30 years is that we've been grossly undervaluing our private companies. not we don't publicize any of this, but it's part of its the value of surprise and delight. Don't count it, don't count your chickens until they've hatched. But I don't know. I think we're in a different kind of ecosystem, but ultimately there's this long duration of selection pressure put in venture.

36:18Long duration is that, you know, maybe they're going to get lucky. And, you know, as one of my former partners said, there's high barriers to exit in venture. No barriers to entry. I mean, you start with a phone, which is going to kick ass and it's going to be, I mean, know this because you have value system that I can see of caring to serve entrepreneurs of having a long game in mind and all that. But the barriers to exit are also now sort of stuffed into multiple funds with multiple commitments. And so, I don't know what the selection pressure looks like. AI may hopefully make that a relevant because we create so much wealth out of this that nobody acts to ask that question.

36:53Yeah. Who knows? I have a question that is going to sound a little ridiculous, but you said that But the thing you're optimizing for is cash on cash returns, which I think is probably how the game was always supposed to be played. And that was all, you know, I feel silly for even asking it. But because in recent years, people have felt no longer embarrassed to admit that there's other games to play. I guess I want to just ask directly, like, why is that the metric that you care about? You know, it's a fair question. It's honestly not the motivating force in what we do. It turns out it's the outcome that it should create, the motivating force.

37:30The motivating force is to be early and really close with an entrepreneur on an average of 10 to 15 years of commitment where we, in a way, represent the most unconditional support for that founder. I have too many companies in my career where the founders moved on, but I didn't. And I'm on the board of Docker, which has been around now for 10 plus years. And Solomon, who's an amazing inventor, running another company, phenomenal human being, just, you know, fatigue moved on. And I have other examples where it's not the goal, believe me. but it's the idea that we're not conditioned on, is it work here or not?

38:17Because if it's not working, we're going to move on. Means that we're better off early, better off with enough commitment that in success, you know, we're able to, because of that long -standing commitment, have achieved the compounding effects of a long investment. So if you're getting an early and it's con growing, and that's different than saying buying a stock or having a position and we've deviated from that occasionally and it doesn't feel great. Meaning we've made investments that have been relatively low stakes and not on the board, low commitment, but you made a lot of money from it. And it feels wrong.

38:56Why do you think that is? Maybe ask differently. That value that you're now, it's the highest ideal of serving founders, being their partners through thick and thin. Why is that the center of all of this for you. Yeah, I've done this job for enough time to have been able to reflect on what brings joy. You know, we get into a career here in this now and you'll figure out, okay, this feels good, but sometimes it feels good stuff wears off. And then, you know, kind of looking back, almost like, you know, the obituary ethics mindset, like what was durable, what was deep, what was profound and sort of move my soul and spirit.

39:33For me, it always is the relationship of the founder. But that is it. If I'm one of many, I get in the sense of like there's 40 people helping me in more money and like this is great, we get together once every six months, that's different than a close deep relationship. So the motivational factor for me, which is what I'll be doing for as long as I'm conscious being, is to seek out the most creative dynamic people where I can be an amplifier to what they want to do. Where the relationship they come in, they say, I have more energy after I spend time with that person. And we both do. And that's what I were into.

40:07And what I found also is that depth is a constraint. It's a constraint, which is that, you know, in the same way I think about our personal lives. Like why did we stay married? And why do we build these deeper relationships? Well, they're iterative games. And there's something about like, you know, the next year of learning and experience, you make new mistakes in a relationship, you discover new distance and new trains, So there's this like infinite possibility that gets manifest in a few deep relationships that I've found I can't achieve in broad scale Superficiality. Yeah, so it comes back to how do you build a firm that orients against that my partner sure that value That that strong desire to have deep personal relationships and We can ask the question.

40:50I'll ask it for you. Which is like, how what hand? You know, like what do we really do at the end of the day? Was Amazon gonna be Amazon with throughout venture capital or or, you know, I'm close with Toby, a Shopify. We got very close to working together. We didn't, and I had to look at that and say, you know, he was gonna be just fine with out of me. So I'm humble enough to say, and boneble enough to say, I don't measure it if like, as like, did this, there's a score card of relationship justifies existence in the same way I don't think of my friends that way. Or my wife that way, like, unbalanced, because I don't view myself as being, There's this great insight that I think we've come to recently, which is that intelligence isn't in your head.

41:34In your head is a 80 billion neurons that have been wired into 107 billion humans who've ever lived that have created a collective intelligence that through language and other things that are not you, but that are us makes you bright intelligent, creative, and all that. Now you have endorphins and hormones, all these things, but the idea that we've localized intelligence in our head, so a lot of this, this, they sound like an abstraction, but it's in a company while it is an individual heroic move and courageous to get to go down that path. It's always the network. It's the system. It's the entity that is created as the organism.

42:16It's not the individual. And so I feel the same way in terms of how I work with a company. It's like I represent a part of the system that should elevate, amplify, inspire, and it doesn't scale, which is the big sort of fisher between our strategy at benchmark and every other venture firm, which is that we've reconciled, we actually embrace the fact that it doesn't scale. And that hard constraint means that the value system we have of depth and relationship is really at odds with. Yeah. And specifically what you're saying is that this relationship doesn't scale. Like fundamentally, it's the amount of time that needs to go into the relationship to get what you're talking about.

42:58Yeah. That doesn't scale. Like obviously the venture business can, you know, empirically scale, but those deep relationships from a board member at the early stages, there's just not enough hours in the day, basically. There's a fixed constant. And then I think two other things which I point to the dawn scale. If you can, you could say, very large corresponds to that. It's like scale the capital and then scale the people in a way that's, and I think if I were running a large venture firm, I would think about it as a between group competition game. Like scale, I have 20 partners or something. Yeah, but I would do it as a, we all know that like five to seven people is the optimal size.

43:30So I would do like multiple groups and I have them compete with each other. That's how it's scale firm and it'd be total coherent because it would be consistent with what we know about multi -level selection, which is one of the big ideas out of, there was a book that was very popular. Actually, real quick on that, would you have the movie generalist or would you have them be verticalized? I would have them do whatever they thought would allow them to generate better returns and then compete got it. So super driven in. Yeah, that's a completely cool. That's right. Arguably, that's what LPs were doing.

43:59And then they stopped doing that. And they started putting it into a few large megafunds. We can talk about that. But so the logic of that that Darwinian model, multi -level selection is a really disruptive idea that people don't actually understand. So so right now if you look at most people in biology, they're subscribing to the idea of the selfless gene is that it's all about genetic replication. So docins wrote a book called the selfless gene is very popular. Why is that relevant to this? Well, because if you think about the world as a bunch of individuals or genes trying to replicate and that that's where selection occurs.

44:31You completely bulldoze over the fact of how organisms evolve, how species evolve. And you can't explain things like altruism. Like why would anyone ever, so there's these like in the world we live in, there's these two competing narratives that we're seeing today. There's on the one hand, La Jaffaire, you know, individual first, homoeconomicus. And that's probably what you learn when you study economics at Princeton. Right. Yeah. It's like, you know, Milton Friedman maximized your individual utility. The other aspect that you have, like, you know, top down, planned communities, it's all like, you know, systemic, you know, it feels like communism.

45:07It's a very extreme on the other side. And I think what we learned is that there's a third way, which is you could actually have selection occur at multiple levels. And the individual is part of a group. And the group is in competition with other groups, which cluster together to form Silicon Valley. or so. So if I were running a fund, I would not have one large organism because then you have then what makes sense is within that group to compete and win, you get individual selection, not group selection, and you get cancer, you get people who serve. The best example is if you think about monopoly, like if they make it real multi -level selection.

45:47So let's say like we're playing monopoly with four people at the table. The game is to win. So you try and maximize the amount of money you have in Monopoly. But let's say there's like five other tables here and each table has four people. Now there's a new game. The game is your table needs to have the most wealth after the four hours of Monopoly play, which people lose the wealth to live at the end of an awfully game. And if the game is no longer to beat your competitors, but to have your table create the most wealth. Yeah. That's the benchmark. Yeah. And if you think about the nature of a five person partnership who wants the table to be most full means that you have part place.

46:22I'm going to give you some of my stuff here so you can give me some of your stuff there and then the table gets larger larger. And the group that they just can't operate that way. Yeah. If you have 40 people playing good luck coordinating. Yeah. So what we do know about human societies is there's breakpoints and I've learned at a benchmark. We got to eight nine partners. It stopped being fun and something happened because there was this bifurcation of the dynamic. There were different subgroups. there's cultural feature. So I think the only way to scale fun by view is that you still have the fixed gun.

46:52So why don't I do that? Why doesn't Benford do that? Because I want to be one of the players in the game. Like I want to be one of the sub funds because to me the substance of the work is in scaling the entity. And now there's Shares of Critique, which is like, are we less competitive as benchmarks? Because we don't have all these other entities and all these other resources and all this. My answer to that's very simple, which is that you do references. If you find somebody who says that we're anything less than the most powerful, deep, transformative relationship, if you find that in our ecosystem that we work with, we've fallen short of erratic.

47:28What would happen if you said, I'm going to take everything I just said, but instead of leaving A's, I'm going to leave series C's. And now I'm going to just write four times bigger checks. I'll have four times bigger fund. I'm still going to take a board seat. I'm still going to make that promise. I'm just going to do it later. I don't believe that works for one reason. I've trained my entire neural net, cosmology, et cetera, for that early formative stage. And what you'll find as companies is that what you've done with 15 employees or less, you probably found this a lattice in doors free -turned -in.

48:05And the impact you have at the beginning at that embryonic stage and being in the dialectic and getting close to the sources of energy that led to that person to do the irrational thing called starting a company. If I'm there at that beginning and section stage, my capacity is to be there for the duration or infinitely greater. And yeah, I've committed, I heard table had 25 people and I invested, Twitter had 27 people. They were a little later. or, but I find myself as wishing, wishing that I had been there earlier so that the systems that got started that became pathological. I can't take credit for, I mean, that I would have stopped them from happening, but I would have at least felt connected to them.

48:48And so it's sort of like, why am I not a public stock? I could take that to the extreme of why not invest in public stocks, why not invest in, and there's something as you know that's so at that liminal state at the beginning, When we don't know, the other thing which I found is really good about being there at the beginning, Olam is my most recent example of this, but there are many examples in the history of technology, Twitter, Instagram, Discord, where if we're there at the beginning, we really made that personal commitment. We're in a position to let the entrepreneur go and be free of what they were trying to do that didn't work to do the thing that might be much more successful.

49:27And Olamo was originally called inferred .hq. They didn't love that. They was security for Kubernetes. My God. I mean, sorry. And then AI happens in public open source LMS and I don't know. By not being 30 people locked into a strategy, series C, okay, we have a financial plan. We just, we have so much more freedom in. I don't know. Maybe that's that's an incomplete answer, but it's certainly how I live it. One of the other things you said earlier is that you really see the game you're playing and the way you play as like a younger person's activity. Yeah. Not incredibly young, but you know, why do you see it that way?

50:04And like what have you learned as you've observed sort of, you know, 20 years of benchmark? Yeah, I found that aging occurs in all parts of your life. And sometimes aging makes you better because you have wisdom and perspective. Other times it leads to ossification. to sort of like, well, don't do that because back then we did that and that was a mistake. And so you start to harden yourself. And I think one of the greatest challenges of being in the venture business is to continually blow up ossification, sort of, to let go, to be more, to be less certain, to be more naive. And why has it you look at other venture compared to, say, hedge funds or Stan Druckermelner we talk about it being home with this giant.

50:57But the absent for node, which is I think a completely different species, it is, then the venture, and he would probably not ever want to be called a BC, it's true, his credit. There are very few exceptions. Venture capitalist tend to get worse after the age of 50. And why? And so you say, okay, well, is that because their networks have atrophied? Yes. Is it because they've become too rigid in their thinking and too rooted in past generational technologies, yes. These are all causal factors. I actually think the biggest one is ego, because entrepreneurs that are at the beginning that are by definition operating an uncharted terrain where past success and old people and all their their stories.

51:50They're not why they're in the game. They're there to create the new future. And so our ego's tend to give us the sense of like we know better. We've seen there been there done that and believe me, I have all those experiences of many of them that I could tell stories about, but in a way that blocks you from the fresh eyes and the sense of possibility and wonder. And you know, it's why I'm in my last chapter at benchmark because I don't think that our firm is the best firm on Earth, unless we average our age closer to 40. And of really committed, at meaning some 30 -year -olds, late 20 -year -olds, and maybe some 40 -year -olds, because our center of gravity at that point is maximally attuned to the entrepreneurial wave coming up.

52:34What I'd love to do is support those people, you know, my future partners, well, as a limited partner. But, you know, there'll be others, and I'm sure if you talk to my peers in their 50s, I'll give you a different story, but I find that it sort of runs a foul of the history of the industry, which is the sort of the fresh energy of a young partner, just enough experience to be helpful, and really where you are in it. Because you're meeting young to put on where they are in their life. And you have a shared fabric. You probably have playlists that aren't that different. You have tastes that have been shaped in the same forces.

53:10And I think that that matters. It matters for the depth of relationship. It matters for the duration, all those things that mean this is an industry. I come back to this that wants to go through creative destruction. But, you know, John Doer, Mike Moritz, these giants, my former partner's Bob Kegel, Bruce Dunlady, don't run our industry. And I love that. And they moved on with grace. And, you know, they still play a vital role in different ways. But do you, like, as you're reflecting in the stuff I love, do you experience it as like I wish that I could do another 20 years but I think it's like best for me not to, for the firm and its longevity and just the ecosystem.

53:52Or have you also had your own evolution where you're like, I've done this for a lot of years and I'm also gonna have new chapters. Like do you have an evolution of your own that matches it to it feels natural? Or are you pushing yourself away from holding on? I was given two big gifts. Coming to Pinch Far. One is the brand. The represented this sort of mysterious possibility, all those energies, the positive stuff that I loved about Benchmark when I was at Excel or before I even got an adventure business. And I was given the ethic of the equal partnership where no one lays any claim. No one has any purchase or write or ownership.

54:38Everyone of my partners, founding partners, Bob Kagle, Bruce Dunlavy, Kevin Harvey, raised their hand and said, it's yours. No residual claim on economics, no piece of the management company. I share this with other people in the investment world to like, that's crazy to the point of being stupid. I'm like, no, no, no, it's genius because what they've enabled is that I honor the same thing. So they answer a question completely. Yeah, I think the Bill Gurley who left most recently and MacColor, they raised their hand and said, it's time. And what a beautiful thing to have none of the drama, none of the, like, where's my this or where's my that?

55:21And so my answer to this question is that I'm going to point in my career. I love the job. I'll make a few more investments that'll get my heart and soul. But then I got to add 10 years to having new commitment I make and say, okay, then I'll be in my 60s. And there's a point at which like, you know, and more importantly, I think more vitally, I want the energy of benchmark to be centered just as it did for benchmark one. And then bench, the benchmark seven, which was the social mobile fun with Uber and Instagram. I guess the you being handed the keys in a certain way makes you I'm sure that in view to certain duty to do it the same way.

55:55Yes. It also sets an example for your younger partners that they're going to watch you do it a certain way. And then that's how they're going to do it. It's the gift I was given. And I really feel as a you have to be able to say, man, it's so hard to create that gift from it. It must be so rare for the first group to make that gift because I can see how if you're handed it, you're like, I need to hand this on. Yeah. But while it's got to be rare for the first group to not just say I'm going to hold these economics. Well, Andy, it rockcliff and Bob Kegel and I remember when Bob told us things like, you know, I now feel like I can do this because he wanted to feel firm was at the point where he could move on and not have it.

56:32Yeah, and he was roughly where I am in my life. And what a beautiful thing. And that's consistent with creative destruction. The ephemeral lineup of benchmark is juxtaposed to the non -ephemeral value system. The non -ephemeral structure of great partners to the, and I actually believe, again, in an adaptive landscape, we inherit, we evolve, but it's not to say we won't, like, benchmark will experiment. We've experimented in the past. We had a European fund, we had a Israel fund, but it's usually against the backdrop of a very constrained core ethic of what the firm is. One of the things I wanted to ask you about is Mark Andrewsson, when he was on the pod, talked about this analogy of like the sushi boat back in the day, and when he started Andrewsson, that he experienced a lot of San Tils VCs is just like waiting for the sushi to come down the line, which was waiting for the startup to come pitch them, and they would just like swing at the fat pitch.

57:30They didn't have to work that hard and that has gotten dramatically more competitive over time and he saw that opportunity and everything. You've been doing the business for a long time, both at Benchmark and prior. I'm curious if you've experienced truth in that. What has been different in your experience from that, how much more competitive does it all feel over the 20 years of your time here? You know, my experience has been no one at the beginning ever called me. there was no sushi boat, there was no picking of, you know, warm dover, typically not good sushi on sushi boats. It was always, and still to this day is for me, are you nurturing your sense of curiosity?

58:13Are you really activated and identifying not just like trends, but like, who in this ecosystem is, you know, many standards of deviation more exceptional based on how they're showing up perfect day. And not to me as a constant. Like, you know, so you read a lot, you meet a lot of people, but then you're in a meeting and you're meeting's not going so well because there's a lot of those in the venture business. And instead of sort of like tuning out and thinking about like, oh, what am I going to do tonight for dinner? Fold that back into, what can I do to make this an interesting meeting for me in this entrepreneur?

58:48I'll typically say like, you know, okay, well, you, oh, I noticed you were at strike. Oh, that's okay. You know, who impressed you there? And like, If you think about people you most want to work with, so you're constantly sort of populating your awareness with the extraordinary opportunity potential and to meet as opposed to a sushi boat. And then 99 % of the time you're reaching out. You're not maybe cold calling, but you're going through your networks to get, and yeah, actually this is really good because I'm doing this without experience, partners teaching me how to do stuff. So what is sourcing done really well look like?

59:23I mean, you just gave a good example of it. you're meeting with somebody who you were that impressed you. But like, what's the body of work in your mind of really good sourcing? Yeah. That's prime. Well, I've seen younger partners come up, uh, you know, we worked, you know, talk about Victor today and is a great example on their competing strategies for sourcing. Ultimately, it had to manifest to you. So I'll give you one strategy being the expert, not my strategy, but I did play that game for a while, an open source where you say, okay, here's an area that I know will create great opportunities.

59:55And I'm gonna get in front of it and be a thought leader. And that strategy in certain cycles and certain, you know, sub -sectors can be the right strategy, but it has one major risk, which is that great entrepreneurs are gonna be more expert than you'll ever be. So you can, you get me. And so who's a good example that Fred Wilson was a great example of being an expert on social. Yeah. And he was blogging, he lived it. He was authentic. and he's sourced in a way that Tumblr, Twitter, and Fred was there. That's a great source in Strathees in New York. So the second strategy, which, and these are overlapping, granted, is to be a version of what I would describe by a phone, to have an ability to see and cultivate your capacity to see extraordinary human beings.

1:00:47And I think we're all extraordinary. Yes, every snowflake is unique. PG said this once in a while, He's like, how do you do your interviews? You say, I do 41, 42 interviews. Why do you see why I was doing those interviews? And more than that, it's not so fun. But I know pretty quickly, Michael, what is it? And he's like, yeah, you feel it. There's an authenticity. There's the idea this person's not taking someone else's eye concepts and mashing them up. They're manifesting it. And it may not be the right thing they're saying, but you see it in the clarity from which they come at there. And they're fearsome.

1:01:20And so you feel like you can't control them and all these other attributes. So the second model, which I think is highly recommended for someone like yourself is to put yourself in a position so that when somebody you meet first hand secondhand or pitches you that you can receive in an instant, like that's different. How do you do that? So I think about my thumb when I met Evan Speagle when I met Toby and I didn't invest in Toby Bell, I felt it, I mean, I fucking knew. It sounds really hard to put the word, but it's not just taste. It's not like when you hear a musician play, you think, wow, there's something there.

1:01:59But my experience of this is I become, and I really think this is a common theme that goes throughout, even when I met Jack Dorsey at Walt this way. It's an oceanic feeling. As crazy as that sounds. But you say, when Evan said, I am motivated to do this because of what has happened, with social media has taken away people's capacity to share without self -awareness. And when you share with self -awareness, it constrains what you do because you feel like all those mechanisms that you get at age 6, 7, 8 of shame and ostracists, I want to give that back to people. And there is like, again, ocean feeling, this person, once he starts to do this, it's going to compound and grow.

1:02:41and I, by the way, it's so real because I can look back over that last prior year. I don't remember a single meeting and it's going to happen, dude. Maybe it's hindsight bias. We'll say, that meeting stood out. I mean, for us, it was Alex, you know, from scale who came in presented him and Eric brought a bunch of companies in that year, but when Alex presented, it was like, and the one that stands out, you should always do it. Historically, it will lead you to some of your greatest fail. Yeah. And some of your greatest success.

1:03:11But that's a other side is equally damning, which is the, it kind of makes sense. It checks the boxes. I like the numbers. So by the way, that, so this is the second to that. Well, if you pursue that, my model of venture investing has been that, which is, I met how he knew, and like, I knew five minutes and like, there's something here that is oceanic that I want to be there. And like, we build an energy together, because it's self -selection too, like you're not going to respond to everybody who's great. And I wish I had spent time with Parker, honestly. I didn't. You know, you know, you know, the third, the strategy, which I think is one that works quite well as a compliment to the other two is to be a business model investor.

1:03:56And I think there are people who've been extraordinary at that. My partner Bill Gurley stands out of a course of the industry of saying He understood marketplaces and the systemic Network effect that gets activated and to me that's different to being an expert because he was never an expert in like you know Marketplaces for take your friend random topic restaurants, which is open table He was a business model investor. Yeah among other things he did all the other Aspects and there's certain people who can say like so today what would that look like a business model investor today would say we're going to disrupt two -thirds of the economy is going to be completely upended by AI.

1:04:33Let's pick the top 10 % that are vulnerable to margin expansion to the use of AI. So we're going to start with accounting firms, real estate often. You put on the list and to me that's a different model. And how do you source in that model? Well, you're kind of systemically looking through that category. And you could do all three. The biggest gift I haven't mentioned was I took not gift, whatever, But I responded to an open source investment, J -Boss, Mord Flurry, because the person was sort of, yeah, thermonuclear. And that then landed me on the shores of open source in 2003, and then I did 20 plus years of open source investing.

1:05:15So it turns out, once you build a little practice area, it gets a lot easier. You see things that aren't visible to other people, but it all comes back to that same personal thing. You mentioned like, you know, in their, you know, Jack Dorsey, Toby, Evan Speagle, which, I guess, as I'm listening to that, is the, is the rarer, harder, more valuable thing to do to notice greatness when you meet those people, or simply to have met those people, period. In other words, are there fewer people who could see greatness if they met that cast of characters, or are there fewer people who could get into the room with that cast of characters at the right time?

1:05:52It's a good question. and it gets back to the sushi boat. The sushi boat isn't full of Michael Torello. The sushi boats, if they're the sushi boats, are filled with the people around on that typically. So what I found is that people who have that density of excellence, of like, they're known. Yeah, like people don't meet Sam Altman and walk away inside just none of them. No, they meet an expert. And so you have to have a nerve, you're in your network for lack of a better term. Innovate your life with people who are likely to bump into those folks. And if you do innovate your life and then encourage them to tell you about them.

1:06:35So the fact is you're likely going to have to reach out to that individual. I remember meeting Michael Torell and like, Ditz is pretty fucking obvious. Six minutes in, you're like, okay, there's 40 coding companies. is this and that, but there's one person who has this clarity. Totally. And you just don't even have to finish like the five minutes in the meeting you're done. But then it's clumsy because you're like, you want to, it's a relationship. So you want to have a two way, you want to have a, you don't want to just say, oh my gosh, yes, you had me five minutes in because I think the next thing is it's one thing to be extraordinary.

1:07:08It's the others. Can you be amplifier for them? Yeah. And do they come out of the meeting saying like, oh, I want more of that. Yeah. And or Brett Taylor, who obviously are very close to you. Speak to him for 30 minutes, you know, you're not talking to a regular person. I met Brett five minutes in 2007, John Lilly, who is an awesome human, introduced me. And he's like, you got to meet Brett. That's a good example of like, I innovated my network. I mean, John knew that I was responsive to those kinds of people. At the time, he was at Mozilla. So John sent me, I met Brett. I'm like, yes. Like, what do we do?

1:07:42He became an entrepreneur residence. And this is before Google had built an immune system to stop good people from leaving. So I think I... Okay, so then you meet these people somehow. Then you're like, wow, this person's special. You met young Patrick Callison and like the rest of the world, you realized it's a special person, whatever. Now what? Like, how do you, what, what have you learned about convincing those people to work with you? I mean, obviously, listening to you talk, I can hear a lot in sort of the way you talk about partnership with you and I'm sure that's like a big piece of it.

1:08:16But like, are there any generalizable learnings you've had about one very simple thing? And I made a lot of mistakes early in my venture career when I was insecure. I still am, we all are. It was understanding, deeply understanding how could I be an enabler in amplifier? A positive force that's deep and real. And the mistakes I made early on was I thought that was throughout the produce. Let me tell you about this thing I learned about. And I learned that that wasn't something that you have the right to do until you've earned it over many years of seeing things and calibrating the way they see the world, the way you see the world.

1:08:57So the single most important thing, which I focus on early on, is deeply understanding what this person is trying to do. And if I really understand, not at some superficial level because it's a hot deal and we're all tempted to those momentum go do it, but understand it. The purpose really, for lack of a better term, not the objectives, the purpose. And to meet the entrepreneur at that point and then go further with them and to say like, that's interesting, but do you realize that there's another vista on the horizon? And so if in a way they feel real and deep understanding of what they're doing, Then there's trust.

1:09:37I love the answer because it's like the best sales people ever worked with that, you know, lattice and software sales in general. If you ask them, how do they do it? The first thing they'll say is, well, you have to be a really good listener. Yeah. And you have to see what your customer really wants and what they care about and what drives them and what are they afraid of and, you know, what do they need to accomplish? It sounds like the fact that you started with listening, that seems like that's pointing at the right direction. Yes. And then I think in a good relationship, there's tension. It can't just be saying yes to whatever they do.

1:10:09And so I think you have to, after you achieve understanding, through the dialectic, substancefully expand their thinking. And I mean, it could be around something as simple as, when do I hire the VPU engineering? Or how do I think about building a pro -social organization where it's high functioning at scale versus pathological, like most big companies. But you meet them at the edge of their understanding and then advance it in a way that they feel like, oh my gosh, I'm a better entrepreneur. I'm more likely to achieve success, but even at a higher level through this relationship. And it doesn't always work.

1:10:48There are cases where you try to do that in a fall short. And you know it, I'm really okay. One of the beautiful things about Ventures, it's never going to be a winter takes all game. We have a heterogeneous ecosystem of models of people and to recognize if you're forcing it, it's not for me. There's certain people who I know I'm not going to name names, but I'm like the great investments, but that would not have been a good relationship for me. There's others where it breaks my heart because I think that's the kind of person that, so my haunted, you didn't get to anyone ventures as long as I have, you have a list of like, oh my god, I shouldn't be allowed to practice because I didn't say yes to Toby and as an example and that haunts me.

1:11:31There are those that for whatever reasons like they wouldn't have activated me. Well, I feel like that one from the way you've been talking about it sounds like it haunts you because you feel like you would have really enjoyed the relationship too. It would have meant the world to me. Still we have relationship we talk we hang out and visit him in Toronto as much as I can. Yeah, no, but I know you mean where it's like there's certain companies even you know I'm so early into this but that I'll meet and I'm like that's a great company Yeah, and I have no way to help that company and so I shouldn't really force this yeah Oral see you know a different lens on the same thing is there's investors like you know when I spoke with the node Yeah, who I'm like this is a brilliant person and he is able to see things that I'm not gonna be able to see and so that's just a different type of thing where you can respect that kid.

1:12:20Even when I was hearing you talk about the thing that drives you of the relationship, the node would say something that I think is sort of like equally aspirational but totally different, which is like the technology. Totally. And that's cool. Yeah, it's just different. And I think he has built a system totally aligned with what motivates him. I've tried to do the same. And I think benchmarking it in bodies that, but then I'm also faced with the reality that There's this beautiful Buddhist self -imulation sacrifice that I'm about to go through, that we go through in the venture business. It's sublimating that and then finding a new form, but knowing that benchmark contains the hat value.

1:13:01And then there's this thing in the venture business, formal. And it's an awful thing. It's productive because like, oh my God, that's happening. I didn't see it and all that. And then it's an anxiety. And I would tell you, that's the one thing that I'm looking forward to letting go of. That etches you. In the sense that it's constantly your responsibility when you wake up to say, if the next Michael Turell gets going, what's not acceptable is that you didn't spend time with him. If you're not a value system fed, if it doesn't, okay, like, you know, and I don't even think like getting the investment wrong.

1:13:31Who cares? It's missing that opportunity for a deep partnership. Maybe it's like a closing question because we kind of talked about how to see great companies maybe winning sort of the last part of the job and I think this is probably very sort of central to you in benchmark is the sort of North Star of being a great board member and what should that relationship look like when it's done at peak performance and maybe if you can give the North Star of what that relationship is when things are going really well and then what's the North Star when things are going well. Being a great board member starts with this beginning commitment and we talked about it just really understanding the purpose and motivation of the founder.

1:14:15And if you're rooted and you're grounded in that, you serve that. And the organism that gets built that the board sort of, you know, is interfacing with carries the ambition of the then team, right? And the purpose and the motivations and all that. And so often, as you get going, that runs into trouble. You know, boards have these different roles. There's governance, there's advice, there's being a source of accountability. But ultimately, what motivates me in a board is when I see companies get oxidized with the stresses of being in the market, of scaling, of growing, of dealing with customer pains and product issues and team issues, the first ethic I have is to deoxidize them, to stay close to and proximate to the source of joy.

1:15:03Why do they do this in the first place? Because what we were talking about is not a rational thing to go start a company. It is, it's a eating glass, it's suffering, it's many days, weeks, months of feeling like you're on a groundless existence because there's no certain decent startups. By definition, that's what makes them so dynamic. So first thing that I think I have is to stay close and proximate to the purpose of the business because that is the sorting function. That's why we do it. Then the role I think as a director, you play and I'm about to go to a board meeting is to really have done the work.

1:15:35You do the pre -reads. One of the things I insist, and this is a bit of a crotchety old venture capitalist, hate slides, I think it's really healthy for companies to do pre -reads. For them, more than is maybe even for the board, to lay out for thinking in a crisp way, because I find that is a vehicle to make everyone better. So, do the work as a director, means you do the pre -read, you really understand as best you can, that gives you context. And then in the meeting itself, in the board dynamic, you're sort of looking at three layers. And for a lot of a better way of saying this, it's simplistically the strategy.

1:16:15To me, that's the purpose. Like, why are we doing this? What's the point of it? What are we doing here? And you can lose sight of that pretty quickly. It's part of it. You probably don't want to change that every board meeting. That's one that gets updated, but it's broadly, strategic and kind of. There's structure, which is what's the organism that you're building to manifest that strategy. and then there's staff, which are the people that then inhabit that organism. And oftentimes you flip the order and you're talking about people and not talking about structure or strategy. So as a director, I think the best we do is to sort of get clarity.

1:16:49So it feels like, okay, we're aligned with our purpose. And so when there's dissonance in the system, which is what a board member I think should hopefully identify, you can illuminate the awareness of the team and the leadership at the CEO to navigate around that. But a big part of that starts by listening and saying, okay, what's keeping you up at night, what are the things that haunt you? And so as a director, the North Star is, they come out of a board meeting. When we've done our job, they feel more energy, more aware, more conscious. And if I did anything at the end of the day, more curious.

1:17:22I love it. Well, I gotta let you go to your board meeting. This was amazing. Could have gone another hour. Thank you so much for this.