Sam Lessin on Why We’re Heading into a New Era of Venture

I think as a system, that's not going to work in the future. And so we're going to have to stick to our guns on being different and like finding the real gems. And I think everyone else who kind of got lazy, right, in terms of the factory, because it's easy, you just sit on the factory line, you package all day long and get paid way too much money to do it. Yeah, they're gonna have to, it's actually gonna be hard again.

Today on Upstream, I'm excited to share one of the most impactful conversations I've had on my investing-focused show, Turpentine VC. In this episode, Sam lessened the fake unicorns we've seen sprout up in the past decade and what the next 10 years of unicorns might look like, why Constellation Software is his biggest bet, and ultimately the new era of venture we're heading towards. Enjoy the conversation.

Thanks for joining yet again, our annual tradition.

I love this annual podcast on something. I'm into it.

Exactly. So in preparation, I just read your excellent book compendium of screenshot essays over the past few years. It's a must-read. I appreciate how open you are on so many different topics. Is there ever one you write where you or Jessica says, hey, you can't publish?

Jessica says, why did you publish that? All the time. Look, there probably are topics in my head that I am not— I think even I think are bad ideas to to spout off on. But my kind of view on a lot of this stuff is like being willing to be wrong and put out viewpoints and seeing what you get back is just, it actually is people's, I think, surprisingly low stakes in the grand scheme of things. And I want to be right once every few years, right? And I'm happy to be wrong all the time.

Totally.

And I do get people that ask me sometimes, like, how do you, you seem to put a lot of stuff out there. Like, how do you feel about it? I'm like, I just, I, the part of, I think for some people they get super self-conscious about this stuff. I don't have, at least I don't anymore.

It's a gift. When you put that compendium together, as you're reflecting back on the past 3 years, what do you think? Are there some things where you were right on or directionally right on? Where are some things that didn't pan out the way you thought they might pan out?

I mean, I generally think I'm right.

It just hasn't happened yet.

Yeah.

No, I mean, look, you have broken clocks right twice a day, right?

Exactly.

You gotta wait long enough. I kind of try to write something once a day-ish, and I believe in volume. So there are things where like I come back to the same ideas over and over, if that makes sense. And I even forget I've already written something about X, you know, 2 years ago. And then I'm like, oh wow, that was like partially right, partially wrong, you know. And so I think like one example is like about 15 months ago, I was like, we're going to be in an 18-month timeout for venture capital. And, you know, recently I was like, no, I think it's going to be longer, right? Like, you know, I think that was probably too, too chill, right? In terms of being like, there's clearly like a factory line backup for capital, but we'll be back online in a year and a half. Now, did I think deeply about 18 months versus 24? No, like I was just like, it's going to be a long time. Um, but I think that's an example of something where, you know, I think you refine your views over time. Um, for sure. I still think Calendly sucks though.

That was one of the most controversial ones. Yeah. Even though it seemed innocuous.

Well, I, I do, I do enjoy that one because like, that's a good example where like, that was not something people were like, you know, I kind of like wrote that in 10 minutes and posted it, and I basically stand behind what I said about it. And apparently, you know, the board members of the company and the CEO reached out and be like, you just drove so much business for us. Like, this is like a major marketing moment for us, mostly people disagreeing with you. So I'm like, sure, you know, I have a good relationship with the CEO.

Yes, hate marketing is very powerful, very controversial marketing. Let's get into some, some of your theses, particularly start— let's start on venture. So You wrote that it's on timeout for 18 months. Flesh out that thesis a little bit. And you think it's longer now, but is it just a lot more capital needs to leave the system or where are we and what needs to happen?

Look, I think for the last 10 years, you and I have been part of what I call like a factory system of venture capital that came together, right? It literally, you can think of it as a production line, right? Like seed investors, you know, people kind of put ideas up. Seed investors said, oh, we're the first line of production. We'll put in money, we'll tinker with it. We'll help you refine the business model and package it to pass it to the Series A people. And the Series A people are like, cool, we'll like tinker with it and like help you kind of hit the right metrics and go after the right things and put capital in and package it for the Series B people. It's like this factory line that, you know, and the end of the line is supposed to be valuable public companies, right? And, you know, what happened basically is the— it's not that you won't have valuable public companies generated in history, you obviously will. But I think that the idea that you could just package and push things down a line, whether it was now direct-to-consumer companies, right? Or, you know, like more recently AI companies or whatever. And like, there's just like, there's a model you can follow that's going to predictably produce, you know, $1 to $10 billion self-similar enough companies, and you could just produce those at non-artisanal scale. I think that's kind of what fell apart. So now you see the biggest companies are even bigger, and most of the things that were the packaged IPOs have kind of been shitty. And so like, the whole factory line is now backed up, right? The public market for this stuff doesn't work. Which means the Series D investors overpaid, which means you kind of like, you literally like had a halt button on the factory line. And so I think it was pretty obvious 18 months ago that the factory line was going to grind to a halt. And as the Series C tinkerers who are packaging things, they hand to the Series A people in a self-similar way where they can easily buy them and then do their step of production. It was pretty clear that like we just had to chill out while they worked through all the inventory that was rotting on the line effectively. And like, The rot continues, right? Like, it's not like that's over. A few things might sneak out and get public. Maybe it's, you know, there's all that. Like, I just think like we have a whole, we have a big backup problem. The problem I now see candidly is I just don't see how the line turns back on, right? Like, I think that's the big change is like, like, okay, we'll work through this. We'll figure out the next thing we're packaging, right? And like, you know, some people lose some money or whatever, but like it restarts. And now I'm like, I'm really unclear as to how the factory restarts like ever. And I'm not worried about that as a seed investor. Like, I don't think it's that big a deal. I think these things used to be more artisanal. I think they will be again. I think there are types of interesting businesses to build and interesting things to invest in. Like, I'm very pro all that. I just, I think even we at Slow, I think got really in our heads that like, we want to bet on great founders and big ideas. But if we're being honest and look at our portfolio, there's a lot of things we did. We were like, well, We like the option value. Like, we know how to package this, we know who's going to buy it, and like, we get the markup and, you know, you kind of go from there. Um, you know, I don't think those have been our biggest winners, candidly, right? But I think we even— we fell into the trap of being part of the system, and I think we're kind of getting pushed back out to be real investors and real venture capitalists and not packagers on a factory line.

Say more about that. Flesh out what venture will look like once the factory line is no longer.

Well, again, I think it already is no longer. I think people, there's just like a bunch of investors who haven't, who are still, there's still kind of, there's a bunch of investors that are still doing their little step in production and they're like, why the fuck, you know, what's going on? Right. And then there's a bunch of people who are just sitting around twiddling their thumbs, waiting for the line to turn back on. And I'm just saying, you're going to be waiting a long time. Right. You know, I think for us, you know, look, the thing I've kind of come to recognize, you know, and I did a lot of angel investing in call it 2005 to 2012 or something. And then we have had a institutional fund from then until now, for the last decade. You know, you kind of start looking at the bigger numbers. You know, all of the deals I'm most proud of and we've made the most money on, both in terms of like real hard American dollar returns as well as like the biggest marks or the things I'm most excited about, they're all things that were pretty non-consensus in weird industries, right? Where like we had a thesis that other people didn't, And, you know, you do need your crazy theses to eventually become mainstream enough for someone else to want to finance the thing. Like, if you have a crazy thesis, unless you're willing to finance it all the way through yourself, which most seed funds can't afford to do, um, you need to be able to bring someone along. But you do have to start in, I think, a very non-consensus place, right? And I think that's kind of like all of our best deals have looked like that, right? The stuff we've done that, you know, fit more— we did some good clubby stuff, like, it's not bad, but like, It's not the real wins. And so I think the future of VC is going back to like really pushing investors and founders to think about what is the really interesting opportunities, what are they there, and they're not going to be the ones that necessarily fit into an easy YC batch, right? And then I think, um, I go a step further, which is I do think the other thing that will change is, you know, seed capital is not something you burn to then raise Series A capital. Right. Which is, I think, the mentality. I mean, we espouse it too. It's like, you know, if you asked us a year ago, I think most people would say, what is seed capital for? It's for running a few experiments and de-risking something such that someone pays a much higher price because you've figured out something on a million or $2 million. I think now it's gotta be like, okay, take the money, build a business that works, right? And then, you know, once the business is working, think about the ways to kind of, you know, how to scale it up, how to scale it faster, make sure that capital is always an option. not a required path in the market. And again, I don't think that's a bad thing. I mean, the reality is, is, you know, there are certain businesses, AI-type stuff, where you just have to burn a huge amount of cash to figure certain things out in theory. I'm not that interested in those businesses. There's a whole lot of other businesses that, especially given, you know, the magical platforms we now have access to compared to buying, you know, iron a generation ago or whatever it was going to be, right, is are pretty interesting in terms of their scaling properties.

Totally. And so does this belief in the factory lines over— does that imply bearishness on things like YC, the accelerator model, or things like on the other side of the spectrum, a16z or the multi-stage firm model?

Well, look, if you read enough of my screenshot essays recently, you know I'm very bearish on both and have been consistently for a very long time. Again, there's things I think, especially early on, terms of demystifying and opening up venture that you really have to give them credit for. There's no two ways about it, right? And, you know, they clearly, you know, sprayed and prayed their way into some pretty epic companies, right? There's no question about that. I mean, I think the, the model that's evolved though, I mean, like, we haven't done a YC deal in ages, right? And I don't think, I mean, most, most funds, either early funds or either in Silicon Valley, either are honest about that and they're like, we don't really do them anymore, or they lie about it and they say they don't do them and they kind of do them every once in a while. The reality is that, you know, you have too many— for the last generation, too many people have been too interested in access to deals. And like, you know, I think that they've gotten too big and they've gone in too many directions. And, you know, interestingly, by coaching the book to everyone, it's impossible to know the difference between any of the companies, and the prices are all too high because, you know, part of the problem is They literally are creating a marketplace that's too efficient globally for startup access. And then at the same time, like part of their pitch is justifying their vig, which is pretty expensive, right? By saying, well, you get a markup later, but like, who's that coming out of? It's coming out of investors, right? And like, you know, in a world flooded with money, who cares, right? Everyone's willing to pay the price. But when things get a little more rational, like I'm not paying that risk premium. You know, I'm fairly bearish on coached books. In general, and I, you know, at scale, I think, you know, again, with credit to YC in the early days and a lot of what they've done is undeniable. They've had some huge successes, right? Like, I'm not super psyched. There'll still be exceptions. Someone's going to make a shitload of money in a YC company. It's probably not going to be me. And then a16z, look, they're the greatest capital raisers in the world, right? They're far more indexers of the market than I would consider investors, if that makes sense. And again, in good times, great to be an indexer. Right. And if you can raise infinity capital and deploy infinity capital, indexing is not a bad strategy, but I, it's not, it certainly isn't part of the, the part of the curve that I respect. Let's put it that way.

And so when you think of the firms that you do respect going forward, or that you respect the most, what are they going to look like?

I think there'll be a bunch of different strategies that make a lot of sense. I mean, you know, I've loved and do love forever Founders Fund, I think, as an example of like a really interesting differentiated firm. They bet big, they bet different. Right? You know, they're not a seed fund by any stretch of the imagination, but they look at weird markets and weird founders, and they've done fabulously well being, I think, meaningfully contrarian is what I'd say. You know, I do think there's a bunch of funds out there, the, you know, the Joe Lonsdales of the world, etc., who are basically saying we're going to take a very industry vertical regulatory capture, understand markets, do harder shit approaches. You know, Lux does that type of stuff too. Like, there's a bunch of, you know, so there's a bunch of funds doing that type of stuff. And then I think there's a bunch of smart, seedy people. I'd like to think we're on that list, right? Who just have differentiated viewpoints and have seen a lot. And like, I think they'll do interesting deals, right? Like they're thematic thinkers, they're different, they attract certain types of talent. I mean, you know, I'm not done being a venture capitalist despite the fact I think the factory's broken, right? Is what I would basically say. So I do think there's like a lot of different strategies, but I think It's just going to look very, very different than the club model of the last decade.

Yeah.

And you think actually it's your time to shine or it's your archetype's time to shine in terms of someone who wants to do weird stuff, right?

Look, I would argue, say we shined pretty well in the last 10 years. It's not like we weren't shining, right? There's the stuff we've done and stuff I've done that I'm most proud of, which has done real returns and been really weird, Like, you know, again, like the most, I think one I'm probably most associated with is seeding Solana, right? Which was, again, that was a not expensive deal because it was so contrarian even within the crypto space at the time, right? You know, or, you know, one of my favorite companies, which isn't, you know, super broadly known yet is TeamShares, right? Which, you know, we did at an unbelievably low price for a seed at the time because we saw something in Mike Brown, the founder, and kind of the market that others were not interested in. And so like, there's plenty of stuff I think that was done in the last generation that fits this. I just think like, I would, I will admit that even I sometimes would look at a deal and say, look, I like the founder, I like the direction. We know how to package this. We know which Series A firms will buy it if they hit these metrics. And so buying option values, right? Like wasn't a crazy strategy. And I just, again, some of those will work. Like, I'm not saying that it's, it's not like a totally binary thing. I just don't, I think as a system, that's not going to work in the future. And so we're going to have to stick to our guns on being different and, and like finding the real gems. And I think everyone else who kind of got lazy, right, in terms of the factory, because it's easy, you just sit on the factory line, you package all day long and get paid way too much money to do it. Yeah, they're gonna have to, it's actually gonna be hard again, if that makes sense.

Right.

Hey.

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For the people who think that the factory model will be turned on, is that a macro argument or is that a state when you think it's not being turned on again? Is that a state about just the future of company building and, uh, or venture more broadly?

From the factory to make sense, it's, there's a lot of components. There's macro, there's where we are in the tech. you know, effectively arc of history and things like that. But I think the reality of the last 10 years is I think a lot of people got comfortable with the concept that if you were a smart technologist using modern platforms, there was a way to basically manufacture— again, I'll say for like $1 to $10 billion, not $100 billion companies, but like $1, $10, $20 billion companies, you could kind of manufacture them. And And I think you have to believe that the world will work that way and there'll be lots of public $10 billion tech companies. Like, I don't think that that's what we're seeing. I think what we're seeing is you see the behemoths, right? The real winners keep getting bigger because things like AI just extends what they can do, right? And that's super exciting. And I think like it's super exciting for them. And by the way, as a shareholder, super exciting for the shareholders of the companies. Like, those guys are going to crush it. And like, We're seeing those guys, they don't separate. We're seeing lots of things, but we're not just seeing that bulk of unicorns that get public and are actually worth unicorn values, right? And like, that's, I think, the thing you have to believe for a factory to make sense. And that's the thing I think that's broken. Yeah.

So we were having a broader back and forth in your great podcast, More or Less, in, you know, backchannel group. And someone was saying, hey, tech, you know, every decade gets bigger and bigger. And then you had a response, which is it might get bigger, but it's consolidated among the incumbents. And so it's a great time to be an incumbent, not as great for people who are relying on new companies. We had a lot of fake unicorns the past decade, basically.

100%. And again, the analysis I did and popped in that group was basically showing that like, if you look by market cap, right, at different eras, it turns out the biggest companies in the world were the companies that generated in the '70s during the PC revolution. And like, that's because they got to benefit from the internet and everything else along with it. And so like, You know, you might, you know, it's the Apples and the Microsofts, et cetera. You had an echo boom with the birth of the internet, which really fucking mattered with Meta, with Google, et cetera, where you saw they actually aren't even as big as the '70s companies, but they're still really, really big, right? In the '90s, you see kind of a dearth in the 20— in the 2010s and kind of beyond, which again, like Facebook was 2004. You got to squint a little bit on your timelines because it's not perfect decade alignment, but the stuff after that really just hasn't panned out. I mean, you know, You know, you can make an argument that Uber is back to being a $100 billion company, which is a big number, right? You know, Lyft is dead, but I would say Uber is probably the biggest company of that generation, and it is a 7th of a Facebook. Now, the counterargument to that, which I also in intellectual honesty point out, is it's just a 10-year problem, right? Like, you basically say these things double every 10 years, and if you do that, you kind of get from the internet company size to the 70s. You can make the argument But I think what you just see is that, and at the same time, like you see way more companies and a bunch of them die. So like incumbents, you can kind of justify it either way. But I think what I pretty plainly see, if you look at the data, is like there are eras that create rifts in the universe where really, really huge things can be built. And then there's an era of also-rans, right? Um, and like power consolidates to the biggest guys.

Do you think in the next 10 years we're going to have fewer unicorns but bigger? And do you think that any of these, you know, that will have potential rifts in the next 10 years that could go by, you know, one day be?

Look, this is the thing. I'm like, people are going to want to say AI is a rift in the universe that creates a bunch of big companies. I don't think it is, right? I wish there was a way to short that story. And I guess there kind of is, which is you go long big tech companies and you don't invest in a bunch of AI startups. There's no direct way to do it. But, you know, I think like that, I think that is a, I think that's like a mirage, not necessarily for value creation, but for startups.

Right?

Um, it's not a startup opportunity. Like, the Adobe of AI is Adobe, right? Meta's gonna make all the money on the ads, right? Like, it's not like there's, you know, so I think like, I just think, you know, you've already seen this where people got so excited and then all these valuations got crushed in a matter of months as everyone's kind of come to the realization that like, yeah, AI is a big deal, but not for startups, right? Like, you're not gonna win at this, right? Um, in terms of value creation, of course there'll be an exception. You look at generation earlier, like, and by generation, I mean like 2 years, the Hoppins of the world or whatever, those, you know, Everyone's like, oh, remote work is going to be the— and like, no, it's not. You know, like, so I just think people kind of miss— I'm, I was, I'm an early '80s kid, right? So I missed the '70s story. I didn't get to see that, but I saw the results of it. I did for sure see the internet story. And you kind of get addicted to like, there's going to be this thing that changes everything every 10 years. That's not what I think actually happens, right? I think the internet was a particularly big rip. People are desperate to find the next internet-level opportunity. People are like, it's mobile. It's not mobile. Mobile's super big deal. It's just internet, but more, right? And the value went to the internet companies, right? Like AI, it's just more internet, right? And it's going to go to those companies. So like, I think that's the way you have to think about it. You know, look, if we get superconductivity and like, sure, right? Like that's an infrastructure world I don't necessarily know very well, but like that could be a true rift in the universe, right? Or, you know, uh, in, in the space-time continuum, you know. There could be things out there, but right now I see a bunch of compounding. I don't see a bunch of sea changes. Yeah.

You had a tweet recently, which is, a few decades ago, '70s, '90s were the time to start truly disruptive companies. There are a lot of ways to make a buck today, but without a major narrative shift, it's not AI, not VR, we're just putting.

And to be clear, there'd be great putters. You could do great in your life as a putter, but I think it's like, People talk a lot about luck in terms of the socioeconomic background you were born in, right? And like, were you born— but I actually think one of the biggest factors of luck is like, when in history were you born? Like, what year? Because I look at my classmates from like when I went to college, there's a shocking number of billionaires, right? And like, they're smart. Like, I like them, right? But it's also just like, they're incredibly well-timed, you know? And I just, I think the reality is, is like, you gotta kind of, Play the— play the— I don't know, I don't play golf, but play the ball where it lies. This is not an era of huge drives. This is an era in my mind of a lot of really interesting opportunities, but they are more, you know, they're more chips, they're more putts. And, you know, I will tell you, this is kind of arrogant. This is going into the Sam's secret sauce of what I'm really thinking about and I haven't written about yet. And I'm like kind of protective of it. This goes like, you're like, what do you not write about? This stuff, I have this kind of hierarchy. The stuff I really, really believe in, I want to build. Right. The stuff that I sort of believe in, I want to invest in, and the stuff that I can't figure out how to invest in or build myself, then I just write about it. You kind of just like throw it out there. So this isn't a fuck— this kind of goes beyond like what I'm writing about right now, but like, God, is Constellation Software interesting. Do you know about Constellation Software?

Just a little bit, but can you share more to educate the audience?

It's like this completely fucking huge company that's made up of them like basically running a PE model and buying out and getting better at like lots of the applications of software. And the things are fucking rocking. Rocket ship. And like, I, I know more friends now who are kind of doing interesting stuff combining lots of small businesses and software platforms. So it's like, you know, that this kind of goes into what I'm actually thinking about and spending time on is like, we've invested at Slow, we are interested in small business platforms and franchises and all types of like, I think that stuff's really interesting. But even I'm like, man, do I need to start a holding company? Like, is that actually the future? Because it's definitely not trying to start Amazon again, right? Like That's just not, this is not the moment for it. But like, you know, I love profitable things and I do think there's a way to make them more profitable. And the world is huge. Like the entire, if you add together all the small businesses in the world, way bigger than the FAANG, right? Like, and like, I just think there's interesting opportunities there. My bet is, and again, going a little bit beyond the writing into what I'm really thinking about is like, I'm really, I think the next generation of great businesses are going to look more like Constellation Software, not Amazon.

Because it's just too hard to build Amazon and it's so much easier to get new businesses off the ground.

I just think you've got to look for where things are cheap and mispriced and where there's big opportunities to do things. And it's like, we've had a generation of all the smartest people going out and raising venture capital and trying to like play shoot the moon. And like what that's meant is that actually most of the economy has been left in these other states and these other configurations. which are much more ripe for disruption, right? Like, I don't want to play with all the smart kids who are just trying to play shoot the moon in Silicon Valley anymore. Like, I want to go play with like the weirdos that are like doing other— there's still business. They're like, they're— there's a great line from the movie Half Baked where they're— do you remember Half Baked?

A long time ago, but yeah.

I love this guy. I love this line. And like, they go to like Princeton to buy weed and like, The guy's like charging too much for weed and they're like, what type of hippie are you? And he goes, I'm a business hippie. And like, I want to find the fucking business hippies are not trying to— the business hippies are not building AI companies in Silicon Valley right now. The business hippies are doing weird-ass shit. Like, I think in like the Constellation stock, like they're doing weird shit and I want to find those people.

What is the business like model that makes sense that appeases like You know, VCs and LPs, or do they just skirt that system? Like, is there financing that enters that space in a way that—

Of course there's financing. There's always financing, but the question is how, right? It's not going to look the same, right? It's not going to be, you know, it's not going to be LP. I mean, again, Silicon Valley is not dead. It's not going anywhere. People will still randomly build things and get super rich, like, but it's going to be more— I think the key model I have in my head is like, there's a lot of random walk in life. There will still be random walk in life. What's going to be gone is a little factory line that we tried to basically normalize and stabilize what is ultimately artisanal and crazy, right? And that's just over, right? And so, I don't know, the MBAs have to get out of Silicon Valley and go, you're going to have to find weird shit again. And the suits have to leave in some form, or you got to go find places where the suits aren't to make any money.

Yeah.

And you're an operator, you're an investor. What do you think about the studio model? The Atomics, the production boards?

Yeah, it's again, very salient question you're asking me this week. 'Cause here's, I'd say this historically, you know, there's the studio model of I'm an ex-product leader somewhere and you know what's super fun is coming up with product ideas. You know what's not fun is actually building the businesses. So here's the idea. I made some money. I'm gonna, and I have great ideas 'cause I'm a fucking VP of product from Facebook. to be personal about it, right? So like, I'm going to come up with all the ideas and I'm going to start all the companies and I'm really good at incorporating things and making logos. And then I'm going to find smart other people to actually do the hard work. And I'll give them cents on the dollar for that because I'm taking away— that doesn't fucking work. Every smart— it's, it's, it's exactly what every product person wants. They want it to work because it would be sweet if it did. It doesn't work. So that doesn't— that, that, you know, that's not going to happen. There's then the Atomix of the world, et cetera, which I think have a slightly smarter business plan. We're like, we're not going to just call whatever the fuck we want. We have a pretty tight target of what we do and don't do. And like the business, the type, and we can get really good at a specific type of business, right? That's kind of boring. You know, if you're the, if you're a kid in a candy store, you know, who's made enough money that you're not worried about eating and you're just like, I want to have fun and like, I'm smart. But I think it is a model that works better. Those will continue to exist. I think that there's a tight target and a tight range of companies you can build that way. It's not the most interesting stuff to me, but I think you, I think people might get smarter about those Over time, you'll see studios like that work. And then I think there's this alternative course, right? Which I'm really interested in, which is like, what happens if you're not trying to build Amazon, right? Like instead you're like, you're a business hippie, right? Like your target is money, right? And your target is like, you know, plowing profitability back into money and you're not trying to build a single thing, right? Like, is there a model there? I don't know. Like, Again, it's kind of a timely conversation because I am very interested in it.

Yeah, I've also been curious just in terms of the sort of mass inheritance or transfer of wealth that's going to happen as boomers die out, and not just in terms of inheritance, but also their businesses. There's all these family-owned businesses that will pass over to people around them.

Well, this is the TeamShares thing. Again, my one tip for you, right, is the company that I'm— again, that no one's heard of yet that I'm most proud of is this company TeamShares. that I invested in a long time ago. Mike Brown's the founder, and this was their target from day one, is like, there's going to be all these small businesses, people, you know, they're incredibly cheaply priced per unit of cash flow because people really want to— want out of them. They're not dead yet, but like, they want to move to Florida. How do we figure out how to build the Berkshire Hathaway in some way, shape, or form? How do we deal employees in? There's like all these interesting angles to that that I think is like very salient. So yes, like that is interesting. The problem is like in the end of the day, it's like, But you gotta have good operators who want to do these things, right? I think that's kind of the thing that you gotta figure out and like, who's going to get excited about this? I will say one interesting fact, and this is, you know, talking TeamShares' book for a second, is what they will tell you and makes a ton of sense to me because I want it to be true and I think it's true. But it's like, there's a great Space Ghost line, which Andrew Cortina, my good friend, used to love quoting, and I think he still does, which is like, I believe everything that man just said because it's exactly what I want to believe, right? That's a good one. Yeah. And what they say is like, look, the story is 2 generations ago, all the smart kids wanted to go into banking consulting. One generation ago, but then that got shitty and like not cool. Then everyone wanted to go into big tech, but now that's not cool. And what people really want, this new generation of smart young kids, is to go like have meaning in a community and build like something and like can we create opportunities for the smartest kids in that context? I would love that to be true. And I think it might be true, right? Like people are like, fuck, I don't want to go be a cog at Amazon, right? I want to go like be the GM of something that matters in a community. And then maybe I'll do 5 of them and like, you know, have like local meaning and sponsor the local baseball team. And like, I'm less interested in like playing global domination games. So I don't know, you got to follow the talent too. And if that, that would be cool for it to be true. And I do think there's tons of opportunities.

It seems that maybe people are interested in lower variance careers in the sense of, hey, either shoot for the moon or bust. And maybe they're willing to—

Which again, I think culturally totally makes sense, right? We just went through this pandemic where everyone got completely randomized. People got randomly super rich and poor. They took all their stimmy money and put it into Bitcoin and NFTs, and some got randomly rich and some lost it all. Like, we just live in, like, the future is in general, like, far more random walky, right? Like that's, you know, power lawy, outcomey, random walky. And so if you told me the generation of people that grew up online, they're just burnt out on that and they're like, fuck, how about like I start a business that I'm proud of that like can make me a millionaire slowly and like I can control the destiny of, and I feel like I'm not at the whim of, you know, God knows what. I totally emotionally get that. And I don't think it's a bad thing. Again, I think there's like real opportunities around that.

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Let's talk about crypto because you've done very well in this space and you've thought a lot about the space for the past few years and acted in it. What have we learned as an industry in terms of what's real or enduring or what's going to be real and enduring and what just didn't pan out the way people thought it might?

Look, crypto, I'm still very bullish on crypto and very heavily invested in it and very much believe in the long run. I mean, I think part of it is just understanding that anything that's kind of frictionless finance is going to have boom and bust cycles because it's so easy to get so excited about it. And then there's nothing unlike, you know, systems that are more stabilized by outside forces. Like when it crashes, it crashes hard. So it's like kind of a— so I completely understand the sugar high. And again, a bunch of stimmy money flowing into people looking for 1,000x returns because You know, your $600 doesn't matter much, but like it is kind of a chip at the table. You might as well put it all on the long odds thing. Like, I think we understand how we got there, right? From a lot of this stuff. Look, I think the crypto story, the fundamental tech is super cool. The opportunity to say that we have markets right now and a system of doing finance which supports a few thousand public companies in the world and like a tiny percentage of the world's assets. And that's stupid. We like liquid— the idea that tech brings liquidity. And liquidity is valuable for more things and more financing options. And like what that means around DeFi, I think is like fundamentally correct. But I do think the reality is, is like this stuff can't all be on promise. Like people do need to connect it to the real world, right? And they do need— people need to see the real value kind of to get to the next plateau. So that's been my thing for a long time is like the tech of crypto is great. It's great infrastructure, but like it needs to be connected to like real-world use cases people give a shit about. I think people have with the metaverse thing got like momentarily started believing weirdly that like the virtual, and especially because of COVID because everyone's locked at home, they're like, oh shit, like, is it going to be an entirely parallel universe of actual value that's purely digital? No, that makes no fucking sense. Like, you can't, like, digital land makes no sense, right? Like, it's the whole point of it is that it's infinite and free, right? So like, I don't know. I think you can't have fake scarcity. You have to have real scarcity, and like that exists in the real world. But we have to kind of connect the dots for crypto to have leverage on that and matter, right? As opposed to it being all fictitious. You know the way the way I framed it is we went through an era where people basically took maybe like if you think about DeFi as like a Ferrari, it was like a Ferrari with no fuel in it. As you were like, oh shit! This is a really it is really cool tech. Let's like just. Plug some NFTs into it, and it's like that'll be the fuel. Like no, you actually need real fuel. Like let's put some real fucking assets on chain and like drive the thing. But the problem is that's hard work, right? And like people wanted it now. So I don't know. Long way of saying I'm long term very bullish on crypto. I do think that like there is a ticking window around regulation and a bunch of other things where like you have to demonstrate real value or it's just. It's just a really cool idea, right? Beyond Bitcoin. Bitcoin's in a separate class in my mind, but I don't know, I'm still around, I'm still excited. And I do think in the spectrum of things that are disruptive to the system versus enhance the system, crypto's really disruptive, right? And that's exciting. Like if you want to like topple a bunch of financial giants and really change the world, like I'd actually argue like crypto is the internet of money broadly is like really interesting.

Right. So you think AI and VR are more likely to be enabling of incumbents, whereas crypto might create $100 billion or trillion dollars?

I think that that's got to be. I mean, crypto, again, like, is like, the answer is like, when a big company looks at something, they're like, is this going to help us or hurt us? Crypto, undeniably bad for the banking industry, right? Like, there's no scenario where it's good for the banking industry. They basically have like a regulated monopoly to print cash in like a bunch of ways. And crypto is like a totally different way about thinking about finance, which is very, very Aggressively against how they operate, right? And like, that's really exciting. That means all the forces of the incumbents align against you, right? And there is regulatory capture, and there is a bunch of other stuff. So like, you get the war brewing, whereas like any tech company in the world looks at AI or LLMs and like, thank you, like that's awesome, like let me immediately stick that in my products and they're going to be better and make more money. It's like everyone's like, fuck yeah, right? The fact that all the big companies are like, fuck yeah, is the reason it's not disruptive. And metaverse too, it's like the thing about metaverse is just too expensive to play, right? Like there's only like 2 or 3 companies in the world that can afford to even play in this space. So again, like any small company, you can try to like be the minnow nipping around and try to make something happen, but like it's just like the ante's too high, right? And so both of those are just extending innovations for big companies. They're not disruptive, right?

Speaking of, uh, uh, sort of different models of finance, um, let's talk about investing in people. You've, uh, been a pioneer in sort of the space of investing in, um, in people, both creators and entrepreneurs. Um, the question I have on the creator space is, will the future of creator investing look more like record label investing or, you know, music investing, i.e., um, 360 deals, you know, over the individuals kind of long-term? I think you guys do 30 years, or will it look more like venture where it's less around the individual creator and more just around the entity that they create. I really, I believe you're doing a hybrid.

Here's the basic thing here. The world gets more uncertain, right? Let's start with that. You don't know, you know, like some people are going to do, the 0.1% does fabulously well. Lots of other people don't do as well. It averages to a higher number, right, than it was. So it's, you know, net wealth generation, but not evenly, right? And not predictably. So If you're entering that environment of high unpredictability, there, you know, unless you know it, debt is very hard, right? Just like start from first principles. Like you're a nurse, you know, you're going to earn, it's regulated, there's a union. Like you kind of know what the path is. Like use debt. Like that's a better strategy. It's going to be cheaper, right? Because like everyone, you know, you predict the future in a different way. It's like a better structure for you. Equity though really aligns with kind of discontinuous outcomes, right? Because the super winners pay for the losers financially. You can do things like, oh, pay me back if you make a shitload, don't worry if you don't make any money. Like, you know, there's like a whole bunch of really interesting aspects to being just aligned with people rather than, you know, any— than, than kind of like a debt structure. So I think there's a way better model of financing people in the future, especially, you know, again, like, you can argue the government does this, right? The government charges you 55% taxes, and in theory, like, instead of prepaying you and giving you money up front, they say, well, we'll give you a pension down the line, but it is a similar model, right? In a certain perspective, I think the private version of that, we say, look, I can't bet, I have no idea how you're going to be successful specifically, but I can bet on you. I'll bet on your drive. I'll bet on your intelligence. I'll bet on your will to succeed. And if you don't win just like a seed investment, that's fine. As long as I have a diversified enough basket of people in the right direction, my economics will work out and the winners pay for losers. So like, I think thematically, like that all makes sense. The nice part about creators, Right, from my perspective, why we've been doing more and more creators is they can demonstrate upfront some commitment to the craft, right? They can have a user— there are numbers you can look at, right? They can demonstrate some early revenue traction and commitment, right? Like, you know, the biggest problem with this stuff is adverse selection early on. Creators helps you with that. And like, you can think about it. The second I'd say is, you know, the historical model was you build a company that builds a product which creates a brand, and the brand could do more stuff. Creators build the brand first. I'm like, holy shit, your penetration, people's love of you in this vertical, huge, right? I'm not exactly sure which of the 6 things you're going to do to monetize that are actually going to work, but I bet one of them will, right? And I bet one of them you can ride. And so I think that's like a really interesting model where you're aligning kind of a person saying like, I'm willing to finance your experiments, I'm willing to finance you, I understand, you know, you kind of your niche. Um, I'm not sure what you're thinking about. So I think That works really well. You know, you look at like the biggest creator in the world right now is MrBeast. I don't get his content. It's not for me. That's fine. But like, you know, everyone was all excited a year ago about his burger company. Dead, right? Like, you know, you do not want to invest in the burger company. That would've, you know, 6 months ago, lots of people would've invested in the burger company. Terrible investment, right? Because like it only works because he wanted to do it, right? And like he was just, the second he is like, no, now I'm in the candy bar business. I don't want to be alone with any of these businesses, but I'm happy to say MrBeast, you know, or like the, you know, the person coming up in a specific vertical, I believe in you. I'm happy to offer you seed capital. Let's make it a type of thing where like you become a billionaire because you get it right. Everyone wins. And if you don't, it's totally fine, right? Like this is what seed investing is.

Will the 19-year-old Sam Lessin, let's say he grew up in 2040, uh, will he be raising money for a company or for individuals? Who's going to be raising money for individuals versus their businesses?

It's a great question. I think both are going to clearly exist, right? The people investing, I think, should be much broader than the company investing. Like right now, you know, I think I'm the only one meaningfully doing like people investing. There are people who talk about it, people do holdcos, but like we're, we're, you know, we're— there are tiny number of deals being done there and almost everything is investing in companies. In the future, if you told me like most investing was in people and then every once in a while someone's like, oh fuck, that specific business needs so much, like there's an opportunity there, especially later stage. Should we invest in it? Sure, right? So I think they'll both exist, but I think that the people thing is far more broadly applicable, right? Is what I basically say. It goes back to like, what does venture capital look like, right? Is it a factory or is it a more artisan thing? I think we're going back to it being a more artisan thing.

Yeah, I see why if you're an investor, it makes sense to invest in the person. If you're a person though and you have the optionality, You probably in many cases want to just have them invest in your businesses.

Yeah. Yeah. So I think historically that's been true. Like, I think that, and that's even true today, right? In general, especially if you believe in the factory model, but here's the interesting thing about a near future you could imagine, which is let's pretend I'm directionally right. There really are not a bunch of IPOable $5 billion companies you can cookie cutter out.

Right?

There are a lot of profitable companies you can build, right? And like, you can wrap them in all sorts of different ways. Like, what does that configuration look like? You know, right now the financing for companies is, I think, very cheap, right? As it's personally, as it's currently set up. And it's also kind of structured in a way where everyone's like, oh, I'm going to get liquidity from like some IPO in the next decade and I'm young and whatever. But I think the world, if it changes enough, Right? Or as it changes, people recognize like, oh shit, like, you know, you'd much rather as a person own a business that does $50 million in top line, right? With good margins versus be someone who owns 10% of something doing 10 times as much and is illiquid and stuck in some nether region. Like, you, it is so much of a better life to own a $50 million top line company that you have flexibility over and control. But like, it's not really clear to me that that's the way the world will continue to work, right? And like everyone's going to be shooting for these like rare slots at IPOs effectively. And I think there's like so many businesses that like are so good, they're just not quote unquote venture scale. And so how the financing for that all bakes out and what you're financing and why, like, I mean, I'm thinking about this even now. It's like these hold companies, it's like, I don't know. It's a really interesting question and it's not a foregone conclusion. It is totally a foregone conclusion to me right now that someone's like, Hey, 10% of your Series C at the current price and whatever setup for this many millions of dollars versus you. There's good arguments that if you can do it, finance the company, not the person. But I'm not sure that's where we'll be in 10 years, and I'm actually not sure that's healthy.

Yeah, that's really interesting. We've been talking a lot about how the venture landscape will change. Do you see, um, LP landscape significantly changing in terms of how they allocate capital or think about the asset class?

Look, It, it will, right, is the answer. I think like, you know, right now the LP landscape has changed as everyone's like, because everyone's just pumped the brakes for a second is my general sense. There are always exceptions, but like, you know, and it's like really simple. It's like they just have less money coming back to them. So like when they invest less of it and they're overweight ventures, they're going to try to like, it's not rocket science what's happening now. You know, I think the question is, is there like a meaningful change or like And I don't know, I think the answer is there should be, but I don't know the timescale on those types of things, right? And like how many more years we have of people, you know, there's the funds and what makes sense for the funds. Then, you know, LPs, just like anything else, they have a whole infrastructure behind them of humans that have jobs and goals, right? And so like if you're on the venture team at some LP and you have a mandate, you know, when your factory stops or your mandate changes versus when the machine factories, like these things are all like, you know, kind of pieces that have to wind down or wind up together. Right? Like, no LP currently has anyone dedicated to the question of, you know, how do we invest in people? I can promise you that, right? You know, one of the big barriers to actually building a bunch of what we're doing beyond kind of some of the early experimentation and kind of proof of concept, we need to convince people out of some pocket that this is a good idea. And it's harder when no one's got the mandate, right? So like how LPs will shift, they will, but the timescales and how it happens, I think we'll see.

Like, is it fair to say that if there's a massive incumbent in a certain space, like you're kind of, you're less bullish? Like you're not doing a ton of consumer social these days, are you, for example? Or like—

Well, who is? I mean, like, look, someone's going to do something interesting in consumer social again, but the companies in the space are pretty well operated, right? Like it's, you know, you see flash in the pans, right? Like, you know, what was BeReal or whatever?

I was gonna say Clubhouse, but a different kind of flash in the pan.

Again, I go back to this question is like, is the future— there will be many more social products built. Is the configuration going to be another thing at the scale of what exists today anytime soon? Or on the other side, is there going to be like a bunch of like microbrews, right? And like those microbrews can be, by the way, great businesses to own. Like, will there be a bunch of microbrew social apps that do $50 million, have a niche, create community, Absolutely. Now the problem is going to be this go back to the capital stack question and how this configures. If you finance a microbrew as though it's going to be Facebook, everyone is fucked, right? The investors are fucked because they priced it wrong and they'll never make any money. The founders are fucked because they're going to be stuck for the next 20 years working on a thing and they can't take any money out, right? Like, so this is why the financing machine matters so much. On the flip side, like if some dude builds the or some woman builds the microbrew. They own the microbrew. Maybe they took a seed check along the way and like they're pumping out cash and like they have total latitude over what they do with that and they can reinvest it. Is there a financing structure that makes sense for that? Absolutely. And then everyone's super happy, right? So I think it's all about kind of what you're shooting for, right?

Yeah.

You, you, you had a post a while back about why venture is looking like PE or will look like PE. Is, is that related to this concept?

I don't even remember writing that, but yes, like that, they see now having not remembered what I actually wrote. Yeah, sure. I mean, that makes sense.

Does it? You also wrote about how you're dubious of the sort of the mantra of concentration that VCs and LPs talk about. Is it, and it may be because this idea of, hey, the incumbents are so big and so consolidated that you really just have to make sure you're in them as opposed to, you know, being concentrated in maybe these fake unicorns. Is that the argument?

Well, I, again, I'm not even remembering specifically what I wrote on that. I'd say like, it's a terrible idea to be concentrated in fake unicorns, right? That's just a very, very bad idea, right? And so, you know, like if you're going to do the concentration chips and then you better fucking be right. If you're going to be an indexer like a16z, then index, you know what I mean? Like, I just think you have to be, I think the biggest thing is just to be honest about your business plan and stick to it, right? From that perspective.

Totally. And they would not want to be called an indexer, right? They would say they are doing lots of investment, but they have the best brand, they get better terms, they get into the best companies. I guess the right indexer—

Well, they clearly get worse terms because they're the people who high bid everything. So sorry, keep going. I'll keep shitting on you.

They do high bid, but there's certainly lots of great companies.

Yeah, totally. They are. And look, again, I don't know their returns and I don't know what they'll be. I know they've done well in crypto and in Again, I'm not, I'm not, I'm being silly a little bit in terms of shitting on them. They're clearly good at what they do, but like, I think it's also hard to argue they're not indexing and they're very clearly willing to overpay, right? Which I think has distorted the market. I mean, not to the degree of, of, um, the only one who overpays clearly more than them is like the, what's, is Masa, right? So there are people who overpay more, but like, they're known for overpaying.

One clear takeaway from this, this sort of prediction of venture, what it means for who will be good is it's less about people who are well networked. And can get into everything. And it's really about people who have better judgment and can invest in things that no one else will invest in.

Differently networked. I think the good news for people who like want to see the fall of certain elements of Silicon Valley culture is the bro deal sharing, everyone gets a cut Silicon Valley circle jerk is not going to end up being very profitable. Right. And so for people who want to cheer for that, congratulations, you're going to get your wish, right? I think, right, in terms of like where returns come from and where value is created, the syndication of everyone playing in the club and being the cool kids club and that being the way to make money. And if you're in the cool kids club, you get to raise a fund and you get to just live off the fat of the land. I think that era is coming to a close. And again, I think that's good. I think that, you know, for capitalism, I think that's good for, you know, lots of things. Um, it's good for everyone except for the people who, whose only real value was just being at the table and being in the club. Right. And no one really likes those people anyway. So like, it's fine.

Yeah, totally.

And, and, and, and going back to our kind of, you know, lower variance founders, you know, it's interesting because right now in Silicon Valley, there's tended to be these, these 2 options, 2 binaries. You could either take all the risk and, you know, take a little salary, get high upside, and chances are your thing is going to fail. Um, and it's gonna be hard to exit, et cetera. Or you can, um, you know, join a company that gets high salary, but very low upside. And there isn't really an opportunity to get, hey, maybe like 20% equity in something or somewhere around that, plus like $300K salary or $200K, like, like get good salary and decent upside. And maybe in the future, there will be some hybrid option that kind of Lowers the upside, but also gives some upside, but lowers the downside, as in a safer path.

I mean, look, I just think there's so many businesses that you can now build if you kind of build the skill set and invest in yourself and fucking use ChatGPT to code along with you, right? And like, you can make millions of dollars a year, right? Reasonably quickly, and then grow in interesting directions, right? And like, I think that's like the thing that I'm most— I mean, again, And I'll tell a fun story, which is like, I'm seeing soon a friend from a long time ago, Greg Gallant, right? And Greg started a thing. This is like now in 2010, not even, '08, '09, that era, like in Dumbo in Brooklyn when no one was there. I had a startup, it was VC backed, and in that office Birchbox started, which was kind of invented subscription box commerce to the extent that was a space. And like they were super buzzy VC backed. Greg Gallon was there with one person on the corner building something called Muck Rack. Took no venture capital. Who do you think has made more money than anyone out of that office by a mile? Right? Greg Gallon, right? Not even like it's wild how successful that thing has been because he kind of slowly and methodically built a thing that he was passionate about that no one else thought was that cool, right? And yeah, I'm pretty sure it's public, but like putting out there, like I think they did their first financing with a PE shop, late-stage PE shop right now. To get some liquidity, and like I the level of success that Greg has had is like fucking mind-blowing, right? And like I just think that like I I'm so psyched to see more Greg Galants of the world, right? And not venture flameouts, and not things get overfunded, and like things that are just like great businesses that you can build. So when you talk like what's the like I think it's going to be hard to find the oh it's twenty percent in three hundred k. But if you told me like are there a lot of businesses you can found? Where by year 2, 3, you can make a few hundred K and have the equity and have the upside. Absolutely. And I think you're seeing those in the creator space. I think you're seeing those in the software space. And I'd encourage a lot of founders that are out there, like, you know, the historical story was if you do something like that, that's a microbrew, you're somehow giving up the option value of ever being bigger. I think that's a load of shit, right? Like, I actually think that actually demonstrating profitability, being comfortable, Building methodically is exactly the right thing to do. And like the era of let's just plow money into Uber and Lyft because it's some sort of zero-sum race, right? Like that, those are the opportunities that I think are all fake right now.

Yeah.

Going back to the 20%, um, you know, $300K, I think that option is for VCs who want to incubate companies because VCs are always looking for special economics and it feels like you can't get it in accelerators anymore. Like even YC's terms aren't as good as they used to be. It's basically just seed. Or see pricing. And so I think people are going to look to incubate stuff to get more and more special economics, and they're going to try to find people for whom they'll let the VC firm take those. Basically, I think there'll be more atomic structures.

Yeah, I just think there's a huge adverse selection problem in general with that.

Right.

And again, there are exceptions and there are people who've made it work. And I think atomic is particularly interesting because I think my sense is it does work. And it's a very narrow band of companies they build. Like they're not just like going out with anything. Like they kind of have a model they're following. And so I think that will happen. But again, I think that, you know, the problem historically has been that smart people don't need some VC to take a bunch of economics, right? To tell them an idea when they have to do all the hard work, right? And like, I think that'll continue to be the case, right? Is, you know, You know, is that I just don't— I think you will get people to do that deal, but it will not be the best people.

That makes sense. The 5 minutes remaining, we'll end on some fun topics. Why are the Kardashians a fluke? And what does that say about the future of media or celebrity?

I mean, the story I have in my head goes something like this, which is like, go back many, many years pre-internet, you had People magazine. Right? You know what's much more entertaining than People magazine is your friends, right? Like, sweet. And you know what's more entertaining than your friends is professional friends. And like, that's what the Kardashians are, is like, they're professional friends, right? They're way more entertaining and pretty and whatever else than your actual friends. They do weirder shit, right? And the question is, is like, AI slash what I'll call like TikTok America's Funniest Home Videos, that's actually funnier than the Kardashians, right? And so like, if you think about the algorithm and like where you're going with AI, like, I just, I think that the relevance of people like these That type of influencer, which is purely entertainment-based as opposed to like affinity or trust-based in like some net— in some sort of vertical way. Like, I think that the kind of the mass entertaining people will go away over time, right? And be replaced with kind of more specific— I mean, influencers absolutely are gonna continue to exist, but they'll exist because people trust them as brands, because they know something other people don't know, not just because they're entertaining. Because Goddamn America's Funniest Home Videos on TikTok and Instagram Reels is just so entertaining if you just want to be entertained and nothing else.

Totally.

Speaking of media more broadly, where do you think is your most substantive disagreement with someone like Balaji about sort of the history or state of media or the kind of the mental model of thinking about media? He's more dubious in sort of the state of journalist class, The media class versus the tech class and thinks that there's like—

Very pro-tech class, anti-journalist class.

Yeah.

I mean, like, look, I'm married to a journalist. I see how the sausage is made all day long and like kind of how they bring their, you know, bring truth to power in a lot of ways. You know, I understand why a bunch of tech people, a lot of them are very sensitive, like don't like, you know, to be questioned and like, you know, like we can kind of go down the whole like tech media thing, but look, I think journalists play a super important role and, you know, And there are all sorts of fucked up incentives in journalism, especially clickbaity journalism. I'm not saying I support that, but like, you know, we do need people who are paid specifically to deliver truth, even when that truth is extremely inconvenient to people who build very positive narratives of themselves and changing the world.

Totally agreed. Twitter. Do you think Twitter could have been a $100 billion company, or if you had taken it over, Last year with the intent of making it as big as possible, what might you have done?

Not last year. I mean, I think Twitter, the line is Twitter was a clown car driven into a gold mine that somehow drove back out of the gold mine, right? So there was a moment, I really enjoy Twitter. I find it very entertaining as I'm sure you do.

Totally.

And marginally business useful. It's not like people are like, Twitter has no value. It's like, no, actually, I have fun with Twitter, but I don't get zero value from it business-wise. And so you're like, well, you know, but how do you monetize it and build a big platform out of that? Really hard to say, right? You know, I think Threads is interesting. Again, you know, I think they'll get there eventually on engagement. There's clearly demand. Text is a great medium. We can go down it. But like the problem is, is it's really hard medium to monetize, right? And like there are things that are like, again, this goes a great example. If Twitter was owned by the Twitter founders, And like hadn't raised fuck tons of money and then tried to go public and then convinced a guy to buy it for way too much money. Could you make tons of money on Twitter and have a really interesting purview in the world? Absolutely. The problem is, is that the financing structures and the appetite for what it could be, I think really fucked up what it otherwise would've been. And like, look, Twitter is not a company that needed that much money, right? Like it really didn't. Like it's fucking text on the internet and like it, grew up at a beautiful time, but like, I'd actually argue with the real problem with Twitter is like, they raised too much money. They wasted too much money. They went public. People had expectations were out of line. You know, there would have, there was a much healthier way to do this, right? Effectively that I think would have been better. And by the way, if Twitter was a company that was tightly held by like a few people who founded it and was making a billion dollars in profit a year, like doing what they were doing pre-Musk or whatever.

Yeah.

Those guys are fucking psyched. That's a great life. The problem is, is like when expectations get outworked by reality and by the way, When the markets cash everyone out with those expectations and then kind of leave the bag to the workers who are like, oh fuck, like all the people who had the equity took the money. And now, like, you know, a generation ago, and now like we've got to like figure out like we can, you know, how to pay people to keep the lights on. Right. I think it's like a really interesting and problematic situation.

Well said. You've been interested in social capital. Do you think we'll figure out a way to represent social capital on the internet or to make it pretty, really legible? Or does it just not want to be legible?

I mean, this has been the problem I probably am most obsessed with in my career, back to like my father, you know, funded Six Degrees, which was like the original Facebook, you know, patent, you know, for bidirectional friend graph. So like, it's a fascinating question. I mean, social capital is clearly real, right? There's no question about it. You know, my test for this would always be, and I'm curious what you say, Erik, but like if a devil came to you and said, Erik, give me all of your social capital, meaning get rid of your identity or all your money, what do you give up?

I would give it my money.

Absolutely. Me too. And like, I've done okay. Like, I have some money, right? And like, it's because my reput— that means my reputation or my identity is, I think, clearly worth as much as whatever is in my bank account, right? And like, that's, you know, not— so like, it's a huge amount of value in the world, but it's very challenging because it's pairwise, right? It's not— there's no number, you know, whatever it was. Cloud is not a thing, right? You know, and it's very finicky in terms of how you denominate it. I think there is a conversion rate to it, but it's shitty conversion rate to financial capital, so it's not worth it for anyone, right? Like, you know, and so, I mean, social capital clearly exists. It's clearly valuable. Messenger products, WhatsApp, you know, you know, the ability to background check people and say, who is this person? Or figure out who their friends or friends are and who to trust and blah, blah, blah. It's all very real, but I don't think you're going to see like a number for it, right? As much as you're just going to see like a liquidity of social experiences increasing, right? Yeah.

Well, last question will be a big question or broader question. I asked you on a podcast 7 years ago, if you were to give a TED Talk, what would it be on? At the time you said the end of capitalism. Some people talk about we're entering hypercapitalism. I'm curious just to reflect on how you think about what that means going forward.

What the end of capitalism means? I mean, I like capitalism. So I think the real question, and this might be a thing that Balaji and I would maybe agree on, although I have no idea, maybe he'll listen and tell me, is like, I do worry that we're kind of, that people don't realize how awesome capitalism is and how open and free it is as a relative system where every dollar is the same. You know, the likely direction we're going with AI and like, I think a bunch of other trends in the world right now is really like very futile. Right? Where like, you don't know who to trust. You kind of have your tight-knit pseudo circle of friends. You're super resistant to outsiders. Like, there's just like a bunch of— that is like a very reasonable place we're going. Even like stuff like, you know, people are talking about, everyone's all upset about college admissions right now. I get it. There's no perfectly fair system. It's complicated. Here's the problem. You know, if you believe that college creates bonds of trust, right? And people have similar education, whatever. We have a fairly open system for that right now. If you're like, okay, college admissions, we're going to super manhandle who can get into what, you know, what's going to happen is the elites are going to just retreat into the little enclaves. They're all going to know each other. They're all going to be super networked and they're going to be super resilient to the outside versus a system that's like semi-open right now. So like, you know, capitalism is awesome. I hope it, I wish it well. I think there's a lot, you know, I think there's a lot of greatness to it, but I do worry that a lot of the trends we're seeing around AI in particular, trust, et cetera, really push us very far towards a feudal system versus what we have today, which is very bad. Yeah.

Marc Andreessen's word for it, I think, was something like polytheistic paganism, where you have all these different cults basically just having a radically different version of reality. And kind of having their own economy. Totally.

I mean, yeah, you can live in— there's no question. I mean, put differently, it's like, it's, um, the culture of the world should continue to get more weird and extreme as people look to define niches where they can have unique value and meaning, right? Like, that's kind of the world, you know, it used to be you could be the best basketball player in town, but now you go on Instagram and see way better basketball players. So like, you got to call this thing weirder, right? And like, so I think there is this like incredible gravity away from mass culture and towards super nichey weird shit, which will be interesting and challenging. And I think does kind of put up some pretty serious barriers between people in local communities, et cetera, which is bad.

Totally.

To bring it full circle in terms of weird shit, you guys at Slow will continue to be backing things on the edges, whether it's creators or crypto or Um, just kind of, you know, new financial structures. Um, talk a little bit in closing about where Slow is today and where you expect to go in the future.

Um, we're a seed fund that has a growth piece to it. And like everyone else, we got tons of dry powder and we're not going to be doing a bunch of AI and we haven't been doing AI. And we're going to keep looking on the fringes of things that we really believe that other people are not interested in. And so, you know, for us, I, you know, it doesn't necessarily mean things people have never heard of. I mean, we talked earlier about a bunch of stuff around franchises and small businesses or whatever that I think is like dramatically underfunded and ignored. And so not that you were the secret sauce, but there is, you know, if you're doing stuff in that space, reach out. I think we are very interested in that. Um, and there are other niches, but I guess the question for me is like, I mean, I've said this, I think, to you and others at one point, which is like, I really, really believe in pricing discipline. Like, so you're asking like, what's the future of Slow? The future of Slow is me paying not very much money for a few million bucks, right? Like at low valuations, not because of any like stinginess, but honestly, because our view is like venture capital exists in a market. If 1,000 people are going to fund you, then the value, the value of money is very low. And like, we're trying to sell you expensive money. So we have to find places where expensive money has value, right? And like, you know, so If there's, you know, when you're like, shit, no one else is interested in this, but I'm sure this is right. I want to hear what the story is, right? And like, you know, we'd love to give you very expensive money such that when you're right and we're right, we all make a shit ton of money. I'm not interested in being a market participant at 40 posts on a thing that anyone would fund because like there's no fun in that.

Yeah, totally. That's a great place to go full circle in conversation and wrap. Uh, Sam, yet another banger. Uh, thanks so much for coming on the podcast.

Always fun, Erik. Talk to you, man.

Upstream with Erik Torenberg is a show from Turpentine, the podcast network behind Moment of Zen and Cognitive Revolution. If you like the episode, please leave a review in the Apple Store. Turpentine is a network of podcasts, newsletters, and more covering tech, business, and culture, all from the perspective of industry insiders and experts. We're the network behind the show you're listening to right now. At Turpentine, we're building the first media outlet for tech people by tech people. We have a slate of hit shows across a range of topics and industries, from AI with Cognitive Revolution to Econ 102 with Noah Smith. Our other shows drive the conversation in tech with the most interesting thinkers, founders, and investors like Moment of Zen and my show Upstream. We're looking for industry-leading hosts and shows along with sponsors.

If you think that might be you or your company, email me at erik@turpentine.co.

That's erik@turpentine.co.