293: Josh Wolfe On Investing In Frontier Technology

This is Anthony Pompliano. Most of you know me as Pomp. You're listening to the Pomp podcast. Simply the best podcast out there. Let's kick this thing off. Josh Wolfe is a co founder of Lux Capital. His goal is to support scientists and entrepreneurs who pursue counter conventional solutions to the most vexing puzzles of our time in order to lead us into a brighter future. In this conversation we discuss finding the outcasts that build valuable companies, why science is not based on consensus, deflation vers, inflation, how censorship can stop innovation, Elon Musk and Tesla, Ray Dalio, space travel and aliens and bitcoin. I really enjoyed this conversation with Josh and I hope you guys do as well. Don't forget I write a daily letter to over 50,000 investors about business, technology and finance. I break down complex topics into easy to understand language while sharing opinions in various aspects of each industry. You can subscribe@pompletter.com Again, pomp letters or go in the description and click on the link there. All right, let's get into this episode with Josh.

Anthony Pompliano is a partner at Morgan Creek Digital. All opinions expressed by Pomp or his guests on this podcast are solely their opinions and do not reflect the opinions of Morgan Creek Digital or Morgan Creek Capital Management. You should not treat any opinion expressed by Pomp as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his opinion. This podcast is for informational purposes only.

All right, guys, bang bang. I've got Josh here. We got a whole bunch of stuff to talk about, so thanks for doing this.

Thanks for having me, man. Good to see you.

Yeah, for sure. For those that don't know you, let's just start background kind of where you grew up, and then we'll get into the founding story of Lux.

Born in Cali, parents split when I was three. Moved to Coney Island, Brooklyn, which I consider home, and grew up there. Sort of a mix between a science nerd and lover of all things basketball and hip hop. Went to Cornell, graduated, went to investment banking, wasn't even smart enough to collect my first year bonus. Started Lux. And man, it's almost two decades, so yeah, that's the story.

So one of the things is you post music on Twitter all the time, which I appreciate because I think there's an entire generation of kids that grew up relatively in the same age group. We all listen to hip hop. Everyone loved the NBA. Allen Iverson, right? There's like this whole generation and then when you get in the professional world, like, nobody really talks about it, but you still post all of the music and everything, and it's just like, look like that's who he is. That's literally the generation he grew up in. Right.

Either that's a nice way of saying you're old, or. No, it's true. I actually think for what we do, when we do venture capital is very akin to trying to find the next new band or artist you're looking on the outskirts. I've always been drawn to both art and music that was slightly off the beaten path. And so my wife is totally Casey Kasem, top 40, all the pop hits. And I've always been drawn towards weirder stuff that you would never hear on the radio. And so it's the same sort of thing in venture capital. I'm typically never drawn towards the stuff that everybody else is focused on. I want to understand what everybody else is focused on. So I will listen to, you know, all the top hits in music, but I like the weirder, fringe stuff. And there's a virtue of that because when you discover it, there's sort of a, you know, a future status that you get when you're like, oh, I knew this. You know, I was listening to this before everybody else. So I think that's sort of the hit that, you know, you keep getting. But it happens to be that the music in my mind is just better. The tones, the discordance. It's sort of more emotionally resonant with my own psychology than, you know, Beatles pop music.

How much of that do you think is, like, personal preference? Right. So, hey, I just tend to like this type of music versus you actually actively made a decision to go seek out maybe music that other people didn't like.

I think it was an emotional resonance. So I've always had a chip on my shoulder. You know, I was like the short kid. I was the kid, you know, that would, like, get beat up in Coney island, you know, I just sort of always distrusting. My family was split and broken, and so I just always gravitated towards, like, darker hip hop, hard heavy metal, New York hardcore, you know, and there's like this emotional crescendo. You know, I love music. In fact, I just posted on Twitter, like, I think it was Deftones and it was Rage against the Machine. Maybe it was Helmet, you know, now I get to indoctrinate my kids with this, which is really funny. Now they don't share the same emotional, you know, discordance that I had my whole life was geared towards making them grow up, you know, in a pop music kind of world. But I love when, you know, it just gets like super mellow, mellow, mellow and then just explodes with like rage and emotion. So whether that's a crazy riff and heavy metal or you know, just dropping an insane beat in hip hop, it's the same sort of thing for sure.

And then obviously you went into investment banking kind of to start your career. And at some point, you know, you've said a number of times that you wanted to find the intersection between science and finance and venture capital. It feels like Wall street was, I don't want to say late to the game, but it was definitely more of a west coast kind of Silicon Valley type business and maybe some in Boston as well. What was kind of the thought process for you guys? I know people probably thought you were crazy to some degree, but kind of what was really the genesis of wanting to jump into a venture?

Well, part of it is probably intellectual add. I mean the beautiful thing about venture is you get to focus on a million different things and usually it's driven by the brilliant people who are constantly pursuing something new and cutting edge out of their own, either greed or quest for status or fame or money or whatever it might be. So that was sort of the driving impetus. Science for me is interesting because it's the endless frontier. So no matter what we discover, every time that you expand the circumference of what's known, it just basically also expands the circumference of what's unknown as it touches the darkness. And so even the derivation of the word locks, Latin for light, was looking where other people weren't looking and shining a spotlight so that we could try to find interesting things that we thought the mainstream wasn't focused on. So at the time when we started Lux, everybody was focused on dot com and optical networking. And those were the things which were front page news and had dozens of top tier firms which we could never hope to compete with and hundreds have also rans. You had all kinds of incubators that were existing around the time for like dot coms and e commerce businesses. And all of that would go on in like any field. 99% of these things would fail, 1% would go on and change the world and make fortunes a priority. Very hard to pick who who that would be. But we said let's focus on an area where other people weren't. And we basically looked at the cascading S curves throughout the history of venture capital where every 10 or 15 years, some secular wave in a technology field. 1970s PCs, 1980s biotech, 90s telecom and TMT. And we said the next wave might be the physical and material sciences. So let's go to the universities, the government labs, the corporate labs, where those breakthroughs were happening and happened to be at the time, mostly because everybody was focused over here, but that most people were not focused on physics, chemistry, material science. And so that allowed us to carve out a niche in this sort of emerging technology. And over time, the rubric would change. It went from nanotech to emerging tech to now people call it deep tech, but it's basically just like hard science. The average entrepreneur's age is typically 25 to 35, as opposed to like 15 to 25. You typically have to have a PhD in some of these fields. The average starting pay for a biotech exec is an order of magnitude higher than your traditional IT exec. And one of the really interesting things, I think, is that the range of what we do, because it's very interdisciplinary, multidisciplinary, means that we might be working on, you know, something for telescopes and astronomy on one day. And then it turns out that the guy who won a Nobel Prize for something in taking a technique like that is creating a new tool to be able to do real time imaging inside of cells in biology. And so you're sort of constantly flipping between these fields. And I, I just think that it's at these interstices between these different disciplines where the amazing breakthroughs happen. And it's just, you know, it's like a smorgasbord of intellectual excitement. Now economically, it doesn't always work, but intellectually it's, you know, it's an endless game for sure.

And when you guys started, did you or your partners, did anyone have kind of deep tech background or science background, or were you guys coming at this and really having to immerse yourself and learn from scratch?

So I had a background in molecular bio. I was a published scientist doing immunopathology. I had watched a movie, quite literally in the early 90s. I was an early teenager called and the band played on. And it had this huge formative impact on me. It was about the AIDS crisis. And I was like, I'm gonna go be a scientist, I'm gonna literally cure aids. And this was the naive, absurd thinking. I ended up doing my Westinghouse in a small protein called urokinase and how it evolves in the progression of HIV into full blown aids, particularly in children. And I just banged on the door of a scientist in downstate Brooklyn to let me work in the lab, which I did for four or five years. And it was actually him who turned me on to finance because we would be spinning down a centrifuge of blood, and he'd be making tens of thousands of dollars trading futures and options. And I knew nothing, literally nothing. He gave me a Wall Street Journal guide to money and investing that I think he got sort of like a football phone that they used to give you with Sports Illustrated when you got your subscription. And that was like my first foray into understanding markets. And I also remember I lost every dollar I had saved up, which is about, like, $1,800 over the course of summer and a half of working at, like, TJI Fridays and, you know, shoveling snow during the winter and delivering menus in Sheepshead Bay, Brooklyn. Because I bet it all on a company called Iomega. And Iomega was like a hard disk drive. I think it might have been involved in fraud, but it was just, you know, absolute disaster. But anyway, so I had a little bit of a scientific background, just more on the biological science side. And Peter was journalist background. Coming out of Syracuse. I went to Cornell. He was at Lehman Brothers in equity research, and I was at Solly in investment banking. We knew each other through a mutual friend that I'd grown up with. And, yeah, then we started Lux and then just surrounded ourselves with really smart people.

Yeah. One of the concepts that Paul Graham recently talked about is like, this whole idea of, like, learning to unlearn. And I think that you guys specifically, given how multidisciplinary the types of companies you look at, right. It's not like most these companies that are on that frontier are only using one piece of technology. Many times it's multiple pieces. How do you actually think about getting up to speed on a piece of technology or an industry that either you don't know a lot about, or you just haven't had the time really, to spend to be able to ask the right questions, to diligence the right things. And do you guys do that, or do you actually go to outside sources to help on that diligence?

Most of it is outside sources in the forms of both what you can read somebody else is publishing something, synthesizing what they may know or may have learned. And I mean, the Internet is amazing, Right. The ability for you to learn something today versus 20 years ago is just insane. So the synthesis of what other people are putting together, and obviously there's every degree from deep science that's being published to journalists, to lay people that might tweet something or put something on medium. But nobody really has a monopoly on really interesting insights and ideas and truths and frameworks, so you can get those from anywhere. It sort of gives me information anxiety, which is why I'm constantly reading every source I can. We can talk about that too. Just sort of where I read and what I read. And in the same way as looking for bands or music or startups, I think you have to find information that is off the beaten path. And then the other piece is talking to people. And so over time you build a network obviously. And we went from talking to pretty crappy startups to more serious startups, to Nobel prize winning scientists and heads of academic departments. And so most of the time now we're able to triangulate and understand if somebody for real or full of it. And in pretty cutting edge new areas, we could do a six month deep dive and we could have a whole set of views. I mean, I'll give you a perfect example. We started up a company around this crazy thesis that sort of bordered on science fiction for X Men, which was finding genetic mutants, people that have really rare phenotypes that exist in the real world. And there's some genetic basis for that. And so there were a whole set of people. When I first started looking at this, was there an opportunity for a new company to focus on that that I thought were like the people? And over time you triangulate and you start talking to five other people and then you get some negative references about this guy and then she's not really legitimate. And so you sort of build your own mosaic of like whose advice or information or insights you're going to weight more heavily and who you think is just utterly full of it. And that takes time, particularly if you're totally ignorant. So most areas, both by preference and almost by definition, we enter with a very high degree of ignorance. And then our job is to reduce that ignorance, get as smart as we can, ultimately develop a confidence that we think we're smarter than somebody else, because either we found something that they haven't found yet, or we know more than them. And then when we feel advantaged, we write a pretty big check.

Yeah, and I think that you're really talking about kind of the collision of a couple of trends here. So recently I saw on Twitter that you were talking about this idea that like science is not consensus driven. Right? That's kind of the whole point of science. But then how do you balance that in your mind with things like content, moderation and censorship. Where there are accepted norms, there's accepted pieces of information, and sometimes actually the people who end up having the breakthrough are coming from a place that was previously thought to be taboo or false even. And, like, how do you sift through that Azure, taking all this input of information and trying to really kind of come up with a. Maybe not a conclusion, but actually like a thesis as to how you think the world will move in the future.

So a few different things. So on the sort of institution of science itself, where there's actually a lot of negative things about institutionalization, but science as a process does not depend on a consensus. It just depends on a conjecture. There's evidence based on observations from a hypothesis, a conjecture, and then you can make a reasonable conclusion, basically tentatively held. Nobody ever says with certitude, this is what is. And oftentimes old ideas get replaced by better explanations or bad explanations get replaced by good explanations. And that's how science progresses. I think it was Linus Pauling, I may be messing up the attribution, who said that science precedes one funeral at a time. And so a lot of the old guard who gets famous and gets a chair department and has all the postdocs that want to work for them and gets the fame and gets the appointments and gets the board of directors at engineering companies got famous in many cases for flawed or bad explanations that were widely accepted until some young hotshot full of piss and vinegar, basically it's like, no, I don't think that's the way it works. And then, you know, they upturn it and this process repeats. So there's a predictability to the unpredictability of how science itself advances when it comes to, you know, policy, whether it's, you know, for a city or for a company or for how somebody runs their family or the choices that you make of what you put in your body, you know, that that is less about science itself as a process and more about prescriptions and advice and risk management. When it comes to, you know, sorting through everything that you might read online and, you know, recommendations and, you know, criticisms, you know, that's just all sort of analysis based on, you know, what everybody's putting out there. But. But science itself, I feel, you know, just sort of absolutist about it is a process that is just constantly trying to come up with better and better questions and better and better explanations. But it's an endless process, because whatever we hold to be tentatively true today Very likely to be overturned in, you know, some point in the future by somebody that's just come up with a better explanation.

Yeah, and I guess part of this is the science community is pretty aware of this. Right. As part of the process. They're almost trained and have the experience and those around them that have gone through that, the rest of society doesn't have that mindset. Right. It's kind of like there is a truth and that truth will forever be true. How when there's things like coronavirus, for example, right. Where at the time, given the information somebody has, there are certain conclusions or beliefs that are held, they get either disproven or proven over time. How do we kind of navigate that as a society, understanding that the majority of people don't have that scientific type bent or thought process as they're ingesting.

Information Broadly, to me, this falls under sort of two pieces, one of which is leadership and there's all kinds of techniques of leadership and persuasion. And the other one is psychology and network effects. You know, why some ideas catch on and spread just like a contagion, why they are believed and why, you know, some are outright rejected. You know, so whether you look at it in coronavirus, which you could say, you know, we'll have the post facto explanations of this, we're all easy, you know, Monday morning quarterbacks in armchair. But you know, I consider Gates an authority on this, not because he's an expert in infectious disease, but it's a topic that he cares deeply about. And he has said, look, I think it was January, February, he published in New England Journal of Medicine saying this is more serious than the flu and the signs are alarming. Five years ago he called for sort of a coordinated global effort and making sure that we had the capacity to deal with something like this. And it sort of fell on deaf ears. Or maybe people thought that he had the money and the willpower and would sort of handle it himself or something. But these kinds of debates, they've existed for everything from global warming and climate change. There's a scientific consensus on the one hand, there are actual scientific facts about what's changing. There's other things that you would say directionally lend itself towards a natural decarbonization of economy. And you have things like the vaccine movement and the anti vaxxers. And so there's clear evidence which would suggest that there is a prudent course of action. And there's always a minority or majority of people that will ignore that evidence and choose not to take that behavior. I Am outspoken in my non religiosity. I'm an atheist. I don't believe. But there are billions of people that believe in an invisible man in the sky that directs things and no amount of evidence to the contrary or the absence of evidence of a presence would swayed them. That has to do with, you know, early indoctrination, inheritance, psychology, you know, and leadership. And so I think it's the same thing. Any topic where, you know, you can't look at something with an absolute truth and people have sort of varying opinions is going to be a function of, you know, group think, psychology, leadership or the absence thereof.

Yeah, I guess going on that leadership thread for a second, there's probably an overhyped narrative that we've got lots of really, really smart people that are going into fields that don't produce lots of materials, you know, products and services or aren't hard science driven. Right? So it's kind of the whole like hey, everyone's going to build photo apps. Why do we keep funding this stuff? There's probably some grain of truth there, but also some exaggeration. How do you think about solving getting the smartest people in the country from an education basis into more hard sciences and more kind of production type roles ra than either wealth redistribution or things that are more nice to haves than need to haves.

Okay, so let's take this maybe three ways. One is economic incentives and this is a raging debate that my wife and I have. The second is the sort of moral prescription of what people ought to be doing. And then the third is sort of the unintended consequence. And so these will sound sort of mutually exclusive because you know, like Fitzgerald said, the test of a first rate intellect is the ability to hold two opposing ideas in your head at the same time, still retain the ability to function. So I have opposing ideas about this. So let me give you one idea which is the moral prescription, right? We ought to have more people pursuing more serious things. You know, we even talk about in sort of a, you know, self righteous way that we like to fund matter that matters. And we're not funding trivial video games. But the reality is a lot of the investment in what we consider frivolous or trivial ends up becoming critical. I mean there is no doubt in my mind that the reason that we are able to do real time protocol right now over video conferencing is in part because of frivolous stuff that people did for video gaming and Twitch streaming and all that kind of stuff that we would mock and be like, oh My God, what are these people doing? But proverbially, thank God that all this stuff was invented. Same thing, video compression codecs, people wasting away like couch potatoes on Netflix. It is enabling this at the moment. And a priori, none of that was predicted. So I always like to say that, you know, the detritus from one former wave becomes the combinatorial fraud for the next. And, you know, until we look at it post facto, it's not predictable. So a lot of the silly, seemingly trivial or absurd or wasteful things that people are doing today end up being useful later on. You know, a few years ago, I talked about how the most dangerous words and markets often are considered. You know, this time is different. And I think that the most valuable words in markets can be it will rot your brain. Because every time that that phrase was uttered, you know, if you look through the decades, it basically presaged the next $10 billion industry. So you had rock and roll music, literally, you know, generation of older parents, and this is devil's music, you know, Elvis shaking his head. You had the same thing with jazz. You had it with TV in the 60s and 70s. You had it with online chat rooms in the 80s and video games in the 90s and 2000s.

And.

And so anytime a parent says it will rot your brain, you know, when you see it now, right, My generation of parents with kids that are sort of tweens or younger, we all ambassad screen time. You know, you gotta do this digital detox and you have to be in the moment and present. But again, look at our current absurd situation. And these kids are digital natives. They're fluent. They're teaching parents how to connect, you know, and I actually think that the mediums that they use today, whether it's, you know, TikTok or Marco Polo or whatever, actually very creative artistic mediums that we're going to express genius through. So that's the argument for why we ought not try to redirect and just let the frivolous happen. Because the geniuses will end up repurposing the frivolous for the useful over time. Naturally, the raging debate economically that my wife and I have is, I always say, do we really need another marketing major going to school, taking on debt and just coming out with no expertise? Don't we need more computer scientists and engineers and people? Well, the market already sort of sets a price because your graduating salary, if you were going into nuclear engineering or you were going into hardcore material science, or you were going into CRISPR for biotech, would Be much higher than if you were coming out with just a liberal arts degree or some marketing degree. And so you're already sort of a subprime credit if you're pursuing the latter. And so I've made the argument, why not lend just like we used to during the, the last housing crisis. There was prime credits based on your likelihood to pay and subprime credits, why not, based on the major that you're electing to choose to pursue, have lower borrowing rates. So you might be a better credit if you were pursuing computer science over the past 10 years and you should borrow at 1 or 2%. Well, that would lower the cost of access of capital. It would increase the number of people that were potentially applying for it. And over time it would end up increasing the supply of labor, which would then bring down the price and wages in the marketplace. And so you'd have a natural sort of filtering function just letting the market based on salaries dictate where there was need. Five years ago, four years ago, insane demand for artificial intelligence researchers, people that had come out of the nuclear winter and deep learning and convolutional neural nets were suddenly the hottest in demand. And somebody that was making $50,000 or less as a postdoc was suddenly being offered half a million to a million dollars at Google and Facebook. And and so that was just insane. And it created a scarcity of labor which was a signal to the market. And now, you know, every computer science program is like, you know, flooding the zone with, with future AI researchers at a time when it will probably bring down all the wages. And then, you know, the next area that's totally scarce will become, you know, the hot demand. Same thing in an area, you know, where you're an expert in crypto. Right. There's anytime there's this sort of information arbitrage and ignorance and that's reflected in the prices of wages labor. I think it's a signal. And so if you want to redirect where useful resources of humanity goes, prices today are still the best way that we have to signal that to the masses.

Yeah. And I guess part of this is how much of that is driven by the individual understanding that I always joke whenever I talk to a college kid and I literally say, why do you want to go do X? And they'll give me some usually non financial driven reason. And I say, do you know how much that person earns? Have you talked to anybody in that industry? And there's just a lack of, I think, education information. And it's more of Like, I want to go do what makes me happy type situation. And so do you think that that disconnect is when you're younger, they care less about the financial outcomes, and so there might be some dislocation there, or do you think ultimately it all falls back to the financial incentives?

Well, there's definitely an ignorance about income. I mean, if, you know, my oldest is. My daughter's 10 years old. Sorry, one sec. The oldest of my kids, 10 years old. And, you know, if I ask her, oh, what do you think, you know, that person makes? Or, you know, no idea. You know, I don't know, like, $100 a year. You know, it's like, not quite that absurd, but so there's a general ignorance where it's just, you know, what's more interesting over time, of course, you have a signal of, like, what are other people valuing with their attention? And so a lot of people, you know, take where I grew up in Coney island, most people wanted to be ballers or rappers because that's what was being celebrated in the community. As a culture, you get what you celebrate, you know, both in a local community, in a small ethnic or demographic group, and as a country at large. So if we were to celebrate engineers and entrepreneurs and people that were scientists and not, you know, just celebrities, you would get more of that. And so I think there is a virtue of a culture celebrating something so as to give status to it and to elevate it. And, you know, you're starting to see that, I think, whether it's in the fictional world when you had movies like the Martian or Gravity, or in the real world, as you know, I'm very critical about what I consider to be the ethics and the mendacity. But Elon Musk is a tremendous boon for an entire generation of people that look to both the stars and a brighter future and say, I want to be like that. And so to the extent that figures like him can encourage people to want to pursue science and engineering, it's a beautiful thing.

Yeah. So obviously I want to spend some time talking about him, but I guess part of this is you are probably one of the more outspoken people who I believe separates what I'll call the promotion and marketing and kind of the outward message from the science that's being done there. And just so people understand, I think your position is big believer in the science and kind of the ultimate visions of those companies. But the way it's being executed is the best way to scrape it might be there's better ways to do it. Is that fair?

That's diplomatic. I mean, I've been blunter online. So, you know, let's list the things, you know, sort of in intellectual honesty, the things that I would admire. I think the pursuit of going to another planet, you know, or to the moon again, is a brilliant thing. What we will discover and learn as the sort of entropic exhaust from that, that will be useful for society will be huge. It gives people both a sense of purpose and meaning and society generally needs that. So that's a virtue. The talent that has flooded into places like SpaceX and Tesla and Boring and others are brilliant engineers and they're motivated by somebody who speaks to them, you know, as a, as a, as a good leader of this is a future and I want to take you there. And so I think all of those are very virtuous things. I think the design is brilliant, I think the renderings. I think there's an artistic aesthetic ethos to all the companies that are quite brilliant. And a lot of people say, well, you're really critical about the stock or the valuation. And I'm actually not so critical about stock. I mean, people can, you know, it's a free market, you can own something, you make money or lose it if it goes up or down. And if you think it's fairly valued or undervalued. My main criticism is again, what I would call the mendacity, the relationship with the truth. This is something that people can't understand. They say, why do you hate Elon? I don't hate Elon. It's not a personal thing. It's a feeling that there's a knowing manipulation of the masses. In the same way that I would look at a Sunday preacher and there are some people that would look at a Joel Osteen or a Creflo Dollar or Jim Baker back in the day and say, this guy's amazing. And I'd be sitting there being like, are you serious? Like you don't see this guy is literally trying to fleece you for your money and bullshitting you. And so there's elements of that where I understand why it has to be done. The show has to go on and the showman must do sort of like the Simpsons Monorail man to get people to part with their money. But I also truly believe, if you ran the counterfactual, that he would have absolutely been able to raise tens of billions of dollars necessary in a loss making enterprise and do it honestly by saying, we are going to do some of the most ambitious thing that man's I've ever seen. And we're going to lose money for a really long time. And if you don't want to be part of that journey, you should not invest. But if you do, you know, I promise it's going to be a wild ride. People would part with their cash, they'd be part of it. And maybe some people have already rationalized that that's what it is. But when you're saying like we're going to be cash flow positive and we're profitable and you're playing with the numbers and you're trying to induce, you know, certain institutional investors and retirement money, when the stock's going up and everybody's fine, it's great. But you know, when things get revealed and it may take a long time for that to happen, it's, I think it'd be tragic.

Yeah. And I guess part of this is like there's a separation almost from setting the vision and the ambition on the science and engineering side and really having to motivate people right. To want to work on something that's really hard and it almost seems impossible when you talk about, hey, I want to go launch a rocket and re land it or I want to build this super sexy sports car on the electric vehicle side that can actually be a huge benefit in science and engineering. When you then turn to financials, it's almost like the gift on one side is the curse on the other to some degree.

Yeah, I think that's right. But I think that there are other models of people who do amazing things that are worth celebrating. I mean, I truly believe that Bezos, he's not without his moral transgressions and labor mispractices and there's lots to create. You know, nobody is infallible. But I truly think that his, his kind of thinking in building an enterprise, it goes beyond just commerce and pricing, it goes deep into technology. I mean he's somebody that says, you know, I can't predict five years out what technology is going to matter, but I can predict with very high certainty people are going to want more convenience, they're going to want more choice, they're going to want their stuff faster, they're going to want lower prices. And so all the technology investments that he makes, from robots and automation to inevitably self driving cars for 24 hour delivery are just very systematic and thoughtful and I find frankly inspiring. Now of course he's going to space also, but he's funding it out of his own pocket from profits and cash flow that have been generated from a business that has never raised equity capital since their IPO in the case of Amazon. So I admire that much more because I feel like it's rooted in sort of a grounded ethics and execution that is really rare.

Yeah. And so one of the questions somebody sent me that I thought was fantastic was if you took over as CEO of Tesla, what would you do differently?

I would hire Elon, but I would put a ring around him of controls. You know, one of the things that's interesting is you can name a lot of great people at Microsoft, you can name a lot of great people at Amazon, you can name a lot of great people at Apple. It's very difficult for you to name a lot of people at Tesla. And the turnover has been, you know, pretty insane and well documented. But I think, I think Tesla needs Elon to be able to be a visionary, you know, And I wrote this letter which he sort of semi famously farted at right on Twitter, which was, were I on your board, this is what I would do. And it was mostly give him the permission to fail, meaning let him restructure, get rid of the debt, raise the capital that he needs, take a breath, be honest. And I think that would just be a wonderful reset. And I said in that letter, then I would be table poundingly long Tesla, which is such a weird thing to say.

So.

I think it's just really restore integrity and honesty and stop the, you know, the magician show. It's just not necessary.

Yeah, it's a super nuanced view. And the reason why I think it's so interesting to kind of hear you talk through this is it's not like you haven't invested and spent a lot of time with people who are doing other really ambitious things in science and engineering. Right?

Look, every one of our entrepreneurs, right, is basically telling us a story when they come in. I mean, they're telling us something that doesn't yet exist. And then we have to hold them to task and accountable. How much capital is going to accomplish what in what period of time. And then we put more money in. And the ambitions of what some of these guys are doing is just insane, right? I mean, we have people that are launching rockets, we have satellites up in space, we've got autonomous systems that are out at rogue 100 foot waves in the ocean. I mean, people are doing crazy stuff, but most importantly, they're doing it honestly. And the day that they lie to us about something to try to induce us to part with our cash is the day that they're dead to Us. And so I just think that the quality of the investor, you know, companies get, I think Buffett famously said it that companies get the shareholders they deserve. And when you have a largely retail investor base over time, I think it says something about the quality of your company.

So I want to switch gears for another possibly showman in another industry, which is Ray Dalio and kind of the thought process there where it's less about science and engineering and it's much more kind of the let me impart my knowledge and I've got this great financial returns. And we've kind of seen some similarities, both that ended up being fraudulent and some that actually ended up being perfectly fine. How do you think through, you know, evaluating a situation like that where there's tons of rumors but nothing that's necessarily concrete data or proven and it's unlikely that anyone will ever see the actual return date or anything like that until it either is an issue or it isn't right. It's kind of like we're all guessing until there's some big event and it's either revealed that it's what it says it is or it's not right.

Well, look, the positive thing here again is that, you know, I think there's 1500 plus brilliant people who work there producing research. And I think that they're all extremely highly pedigreed, really smart people. I think they understand everything that they're writing about, whether it's global macro currencies or relationships between fixed income and a variety of different asset classes, portfolio, construction, risk. I think they understand all of that and they publish it brilliantly. I think the vast majority of them, if close to all of them, have never seen a P and L uninvolved in anything in actual execution of trades. My basic view is it has been a levered long bond scheme that has benefited from a generational decline of interest rates. And I think the cult of personality and a little bit of red velvet rope and high minimums created this. And so I think that you have sort of a McKinsey like front end and a very questionable back end. And you know, people again are free to invest and if they get great returns then more power to them and people are free to raise eyebrows and questions. Jim Grant came very close a year and a half or so ago. He ended up with a footfall, stepping over the line on a few things and they went after him pretty hard. My view generally is when somebody is criticizing you being open kimono or just putting up the numbers generally shuts up the Critics. And that's true of Elon. It might be true of Ray. I don't know. But when you attack critics, it's generally a red flag.

Yeah. And so I guess part of this is going back to this idea of science not being consensus. A lot of what you do is you're basically finding people who believe in a vision of the world that is not popular or a lot of people don't agree with. And then you make an investment, and over time, that becomes kind of the consensus view. How much of that do you guys worry about? Hey, we are getting sold a vision that just isn't possible. Right. Or is that an understood risk as you're investing because you're able to triangulate with a lot of that diligence process that you went through?

Well, the fringe outlier reject who has a view that is different from the consensus to me is like super attractive. Right. I mean, it's again, going back to art and music. It's the underdog. It's the person that nobody's really listening to. And we like to say that we like to believe before others understand. Now, that doesn't mean unconditionally. You know, credulity is a great master that leads to fraud. And so, you know, we're all washing our hands, you know, wearing masks because of a madman or somebody that was deemed to be a Madman in the 1800s in Vienna, which was Ignaz Semmelweis, who said, I actually think that when doctors are going from opening and teaching in a rectory with cadavers and then going and delivering babies, that they're spreading disease and people are like, this guy's insane. He was actually committed to an insane asylum and was beaten to death by guards, basically because of severe depression and acting out. But that theory of hygiene was correct. And we all know that this part of the germ theory and being able to wash our hands to stop the. The spread of disease was absolutely correct. But, you know, this guy nearly 200 years ago, 150 years ago, you know, was committed to an insane asylum and beaten to death. So we like the outsiders because when they are right now, of course, there's tons of crazy people, right? And they're just wrong. But if you're an outsider and you're rejected by the mainstream, and particularly if the mainstream has something to lose that they're threatened by, that's a really valuable proposition. So we're constantly looking for that. Now, sometimes we've made bets on people who are a little bit fringe and they're A little bit out there, and they're just wrong. So how do we protect ourselves from that? It's, of course, funding to milestones. If we fully fund a company, you know, then all of our incentive is to believe that they're right and not want to lose our money. And that is how you get into situations like Theranos and some of these other frauds where people never stop to ask a very simple question, does it work? So you fund how much money accomplishes what, in what period of time, you turn over the next card, you know, you ante up again, just like in poker, and then you flip the next card. We like to say that these sort of two intersecting arrows for us are the perfect situation. One is where you have a directional arrow of progress that feels like it's inevitable. And there's lots of examples of this. Whether, you know, you think about lighting that. We went from, you know, fire on torches to incandescent bulbs to LEDs. We are not going back to offices with sconces and torches. We're not going from horses to horse drawn carriages to cars to electric vehicles to autonomous vehicles, you know, to have horseshit, you know, in the streets. Again, it's just not going to happen. So there's an inevitable directional arrow of progress. Same thing in computing, going from mechanical spinning drives to solid state drives. And when you can identify those secular arrows of progress, that leads to the inevitable. It doesn't tell you who the company is, don't tell you the entrepreneurs, it doesn't tell you the specific person, it doesn't tell you there's going to be a hundred of them, but it leads you in a direction. So I like finding those directional arrows of progress, and I can share one that I'm obsessed with at the moment. But the other arrow is this perception of impossibility. And that's not our perception of impossibility. If we believe and everybody else is like, there's no way that that thing will ever work, then it's perfect. Because what it's basically saying is the market doesn't believe. And whereas you pay a high price for a cheery consensus, you also get a very great deal when nobody else believes. And so if you take a company like Ctrl Labs, this was something that to us felt like a directional arrow of progress, where you had what I call this half life of technology intimacy. 50 years ago, you interacted with a giant mainframe. You physically went up to it. 25 years ago you had a laptop, or rather a desktop, and you tickled the keys and you touched the button on the front monitor and you flip the back beige box to turn it on. Twelve and a quarter years ago you had a laptop and you're tickling the keys and you replace your mouse with a trackpad. Six and a half years ago, it's your iPhone. And then three and a quarter years ago, it's your Apple Watch. And then AirPods with computer and voice recognition inside. And so that directional arrow of progress is more and more information density and access, and it's becoming more invisible and it's getting more intimate with you. So what's the next logical thing? Well, voice, of course, and we have Siri and we have Google now and we have Alexa, but gesture is the next thing. You know, I'm sitting here and I'm talking, I'm wildly gesticulating as I speak. Most of what is capturing gesture today are three dimensional cameras, which, going back to part of our, you know, the things we discussed earlier, came out of the video game movement, you know, with Microsoft, Kinect and Dance Dance Revolution. And so when I got introduced to Reardon, who is the founder of Control Labs, here is a guy that's building a brain machine interface without any implantables and was going to detect from the surface of your skin what the roughly 15 muscles in your hand innervated by roughly 15,000 neurons, were doing and could detect eight, every single neuron down to what it was being triggered in the spine. And so I was sitting there typing on a computer, and he pushes the laptop away and I'm still typing in thin air, and the words are popping up on screen and I'm like, this is magic. Like the Arthur Clarke quote, insufficiently advanced technology is indistinguishable magic. This was magic. And so I was convinced that I had seen the future, that there was an arrow of inevitability, that the way that we would be interacting with our computers would be first by gesture, that I would be able to swipe in free space like a sorcerer's apprentice. And then soon, without even having to actually make a gesture just by thinking of moving, I could be able to control my devices. Well, most of the people we spoke to said, oh, that's got to be like 20 years out. Like, there's no way that'll work. And then once you see that this thing is working, you know, I've got information arbitrage, I know something that the rest of the world doesn't know and they won't know until we tell them kind of thing is the perfect setup. So you have Inevitability with the perception of impossibility. And when those meet, it's perfection.

A lot of investors talk about betting on a product, a team, a market, and everyone has kind of a different kind of viewpoint as to what works. But there's definitely a subset of investors who believe just betting on the right market, even an okay team or average team, will still be successful. Do you subscribe to that or are you more the team, regardless of the market, if it's the right team, can end up being successful?

I would say that the number one thing that I've changed my mind over time and I give total credit to my co founder and partner, Peter Hebert, is people. I always thought the primacy of technology, which to me is the interesting thing, like can you do something or purport to do something? Have you invented something that is like the secret sauce that has the castle with a moat around it with knives and sharks and bombs that nobody else can attack? Because if you've got this thing, everybody else is like, oh, it's so not fair. They've got that thing. But the thing that I've learned over, you know, nearly two decades now is it's people. Because if you don't have the thing, if it's not working, the people are able to find the thing that is working. They're able to. We banned the word pivot at Lux, but pirouette into the next thing. And so Peter was always about the primacy of the people. The two legged mammals that we are betting on, who are the ones that really, I mean, technology doesn't move itself. You need a person to be able to raise capital. Convince people to part with their jobs and join you on a mission. Convince their spouses to let them do that, to move across country, you know, and start anew to convince investors to part with their capital, to convince journalists that their scarce ink is deserved to be spent on you. To convince a big company who's going to take a risk on a no name, no reputation startup to become a contracted partner. I mean, that all comes down to the people.

Yeah, it's super fascinating. You guys were very early obviously to nanotechnology, deep tech, whatever you want to call it now. What do you think are the next areas so that next generation of investors that are coming up that are sitting there saying, I think that I know something that the mainstream doesn't. Where do you think they're looking right now?

Well, I can tell you where I think smart people are moving to because again, it's like we all read Voraciously and we come up with interesting ideas and we kick it around our partnership, but most of the time it's somebody coming in and us being like, wow, like we never thought about that. So over the past few years we have definitely seen a big thrust of really smart people at the intersection between biotech and computer science, sort of computational bio. And so whether that is modeling in silico and then being able to produce drugs or design proteins or shorten a drug discovery cycle, the tools that you have computationally developed mostly for other IT purposes, reaching into the biotech realm is just absolutely accelerating that in a really interesting way. And it turns me on because you have some proprietary technologies and the markets happen to be huge because if you can repurpose an old drug more quickly or get something through FDA trials more quickly or better target a potential patient, you know, all of that is really accretive. So that one's a little obvious. And it's been done over the past few years. An area that I happen to be personally obsessed with right now, and this sort of fits with a broad theme across Lux is the gap between science fiction and science fact that keeps shrinking is the gap between simulation and reality. And so when I look across our portfolio companies, often what happens is I start to see a pattern amongst a bunch of companies. I'm like, huh? If you sort of extrapolate amongst these companies, there's some interesting pattern that has emerged. And the interesting pattern when I look at a company like Matterport, matterport was taking 3D scanned cameras from Microsoft Connect, basically assembling them into a module, doing a rapid scan of a physical space and then using software on the back end to stitch these things together so that you could basically have a video game doom like walkthrough of three dimensional space and then extrapolate into a dollhouse view. And it was just like this beautiful cool thing. Okay, what's the big deal? Useful for real estate, static images, non dynamic. Combine that with Unity, the gaming engines that are letting you to render in virtually real time with ever higher precision and resolution. And so I am seeing across our companies, you look at Zoox and Ava that are doing autonomous vehicles or solid state lidar to be able to look at the environment and capture with ever higher resolution what is actually happening. You look at some of our companies that are doing this inside of bio in biotech to be able to image inside of a cell. On the one hand, the ability to capture reality with technology and tools is getting better and better than ever before with higher resolution. Higher speed. So that is sort of point number one. Point number two is the ability to model and simulate what you have captured. Now when you have these two layers, the capture and then the model and simulate, then you have a computational layer between these two things that are talking to each other. And this turns me on because it's this basic idea of consciousness and how we navigate the daily world. You have a memory prediction framework. If I see you and you're wearing a Yankee hat, okay, so if I see you and you're always wearing the Yankee hat, or if you know me, I'm always wearing my skull vans. When you see those vans the next time, or I see your Yankee hat the next time, and then, you know, I didn't see your face. If you look up, I'd be like, oh, that's pomp. Or you might be like, oh, that's Josh. You're making a prediction based on a part of the whole from the memory. If suddenly you were wearing a Boston Red Sox hat, I would have emotional surprise. I'd be like, oh, I wasn't expecting that. And so I update my priors in like this Bayesian inference. And so a lot of our computers in the machines, from autonomous vehicles to saildrones to drones in the sky to defense systems, are doing that. They have a model of the world based on capture. They're making predictions, then they're interacting with the world based on sensors. And then constantly iterating between these two things. That feedback between the hardware of capture, the software of simulation and the compute layer between them is seeing a flood of really interesting talent. And so there will be people pulled from experiments that went into augmented reality and virtual reality, which in a form is that it's capturing what you see in the real world, putting a layer on top of it, making predictions that will go into all kinds of new industries that we never anticipated. So that at the moment is something that I'm really excited about.

Yeah. And it goes back to, I think a lot of the AR initial applications were thought of as games are kind of frivolous to some degree.

Right.

And obviously you're talking about much more what people would consider important. One area of biotech that's super interesting to me is genetic editing. What are you guys seeing there? What kind of work have you done or found that smart people are working on?

So two things that we've done. There's a new code that my partner, Adam Goldburn, who's a PhD stem cell biologist, has stood up with. One of our venture partners, Ian Paikon, Ian was a founding scientist of a company in the Lux portfolio called Kaliope, which is focused on the gut brain axis. And he built an incredible team and then wanted to go off and start more companies. We said, come in house to Lux and do it with us. And so together they started a company that at the moment is called vnv. It's virus, non virus. But the key thing about CRISPR is there's no effective mechanism for delivery to a very specific part of the body. And so what they've done is teamed with a bunch of scientists who are working on that, having the vector in part from viral delivery to be able to deliver to a very specific organ or cell segment inside the body. That's one area that I think is very interesting in genetic engineering because even if you can prove that you can use CRISPR or variant of it in the lab or in petri dishes or in mice, it doesn't really extend to humans. And you're going to need the delivery vehicles and vectors to be able to do that. Second area, which I alluded to before, which again was really inspired by science fiction, is going to the outlier regions of the world and trying to find outlier individuals, quite literally mutants, people who have very rare traits. So you're not just in this case looking for the genes, you're not looking at large scale databases and trying to find some interesting statistical variant. You're quite looking for the variant, something that they physically can do. So it might be acute eyesight in very dark conditions, the ability to hold your breath underwater for long periods of time. People get into an accident and their bones don't break, People whose hair just grows, you know, very thick or long, for a long period of time, the nails grow, people who never get, you know, facial hair, people who have very low cholesterol even though they eat a very high fat diet, people who only need one or two hours of sleep, of metabolism, people who have very high oxygen saturation rates, but at very high altitudes like the Sherpas. And so we put together a team in a company called Variant that is focused on going to these outlier regions, particularly people that are not pale, male, stale, white Europeans. So not people that have been sequenced by 23andMe and Regeneron and Genentech and Roche and you know, they're going to Pakistan, they're going to New Zealand with the Maoris, they're going to Nepal with the Sherpas, all these weird regions to find these really interesting traits with the idea that if there's a Monogenic condition, meaning a single gene might make the protein that leads to that trait. Then that gene might be a target for a drug for the masses. And that is really inspiring because it's right out of Professor X, you know, in X Men. Yeah.

And so, like, on that specific example, how do you go from, hey, those Sherpas have incredible oxygen capabilities that others can't. Is it something where you're actually taking, you know, DNA sequencing and trying to come back to a lab? And then the thought process is, how do we now scale this to bring to other humans? Or is it something where you actually start with, no, let's go find people who have very low oxygen capabilities and like, let's solve health care issues before we get into things that would be considered more like, nice to have, like, almost cosmetic type applications of genetics.

Yeah, Well, I think the moral underpinning is how do you reduce human suffering? And so the bias ought to be, you know, how do you take something from some sort of superhuman and apply it to people that are suffering? Inevitably, it will raise moral and ethical questions about people doing genetic enhancement and people doing the equivalent of genetic doping for sports and more trivial things if you put a moral value on it. So in this case, it's really a combination of genetics, population genetics, computational genetics, looking at family histories, then you're looking at ethics and partnering with some of these local communities. So the thing about this particular company that I really admire is the first two people were computational geneticists that were founders. They came out of Cold Spring Harbor. And the CEO, which is going to be announced pretty eminently, has actually come from the Bill and Melinda Gates foundation, ran a huge program there. And the second and third person that they hired after that was a comp. Was a cultural ethicist. Cultural anthropologist and an ethicist. So the cultural anthropologist, because when you approach all these different, very diverse populations, you have to be really considerate. Some of them might care about financial remuneration. Some of them might just want better health access. Some of them might want to be partnered. Some of them might not want blood drawn. And so there's all kinds of unique, very idiosyncratic situations at each of these that you need cultural anthropologists. And then the ethicist to understand what is the right thing to do here. And so many of these indigenous populations have been exploited over time that their default stance when approached is, you know, no, thank you. So I think these guys will end up with a competitive advantage because of just the approach of how thoughtful and considerate they are in Approaching all of these indigenous populations.

Yeah. And then something like that, like how much of it is. I'll call it simple, but that's frankly not fair to the team there. Hey, people in Nepal that are Sherpas have high oxygen capabilities. Most people would guess that's probably true. Versus there's somebody somewhere in the world who has great eye vision in dark circumstances, and they don't even realize that that's actually a mutant or an advantage.

Right.

They just have grown up their whole life knowing that they can see in the dark. Right. And do you guys have to kind of go to both types of populations, places where it's a known fact that, hey, there's an advantage this human has over others, and then also do something to kind of get the serendipity or the exploration to figure out the unknowns?

To some degree, yes. Most of it starts with the former of trying to find the really interesting phenotype where somebody has advantage. But it really is critical to understand genotype, phenotype and understand whether something is because of a monogenic condition or because of some interaction between nature and nurture, between the environment and the genetics. In many cases, it may be that something that exists in a particular region, you know, really is turned on because of the epigenetics. The gene makes for some proteins that are expressed because of something in the environment that doesn't occur. You know, if you were to port it somewhere else, I mean, you see this kind of thing, for example, very naturally, sickle cell anemia. You know, many believe it was a adaptation to protect against malaria. But when you move people out of a particular region to a different continent, in this case because of the atrocities of slavery, then you have all of these people that suffer from sickle cell anemia. Same kind of thing. If you take people who genetically were adapted to a particular latitude of the earth and you move them further north where they're getting less sun, you have higher incidences of vitamin D deficiencies and all kinds of issues. So the interaction between biology, environment, where we are on the planet, the specific geography, it's so complex. The reason that some of these quote, unquote, island populations are interesting. When I say island populations, obviously the immediate thing that pops into your head is, you know, well, these people are in like, you know, Polynesia or on an island, but in Pakistan, for example, there are island populations not because of geography, but because of close interrelatedness where cousins are marrying cousins. You have a higher probability of a monogenic condition, which is, you know, single gene makes a Protein makes the trait. And that's really the needle in the haystack that you're. You're looking for.

Yeah. The best example, as you were talking there about kind of environment is. I know you were on Eric Weinstein's podcast recently, and I listened to the episode with him and his brother and this whole idea of like, the rats and the telomeres and actually science had it backwards simply because of where the rats were coming from in the environment they were basically being, you know, held captive in until those tests were being done.

You know, and Eric's. I mean, Eric's absolutely right because he is lovingly angry at his brother for not saying, dude, like, why are you not pounding the table saying, like, I was wrong. I was completely screwed by a Nobel Prize winner who had the clout and the status and basically took an idea that I had and sort of, you know, just. Just hit it and. Yeah, no, I mean, it has profound implications for nearly two or three decades of scientific research. You know, we've cured all kinds of things in mice from cancer to, you know, repairing vertebrae to let them walk again. And the kinds of mice that we're working on have been genetically engineered almost inadvertently.

Yeah. I want to switch gears and talk a little bit about crypto just so people understand, like, what have you guys done there, if anything, and kind of how does Lux think about that space in general?

So two or three of the partners focus on it a little bit more intensively. We've made probably five investments, including in one fund which was trading in cryptocurrencies, mostly for sort of information and intel. Blockstack is one that is right above us in New York. Some of these were bets on people and philosophy. Like in the case of Blockstack, Muneeb and Ali, we just thought were sort of intellectually honest. They were critical of a lot of other projects. They weren't sort of part of a hype train. We had some good co investors, and we just thought that the way that they were thinking about distributed controls and access was rational. My general stance has been one of true believer in the merits of distributed ledgers, of the mathematics behind it, and much more skeptical of the particular currencies over time. It would take a intersubjective belief, which Bitcoin, I think, has now become sort of runaway leader, whether it's 10x or 20x the number two. And I think that that will exacerbate.

Right.

I mean, I think it'll be sort of a runaway leader for some period of time between ethereum and Ripple three years ago, two years ago, I mean anything went but what the killer app is going to be or how long. I think that this is one of those things, sort of like science proceeds funeral by funeral. I think it's going to be a generational thing. I had thought pre Covid that we were likely to see a 2020 fall uprising in an election year driven by Trump pointing a finger at Powell in the Fed and basically blaming him for a market led recession. And so I had just hypothesized, speculated with low probability but high magnitude consequence that the market would tank, that Trump in an election year would point the finger at the Fed. And basically people not really understanding the Fed and what they do, but seeing all of the symbolic markings of an institution and Washington columns and bankers and banksters, it would reignite in Occupy Wall street of 2009. But this time instead of having sort of libertarians on one side wanting low government and anti banksters, you know, sort of Seattle who protesters, you know, on the other side that you would basically have the young and the old, the old basically rejecting fiat currency and going for gold and the young basically saying, no, our medium is going to be crypto and bitcoin. Both would be a rejection of the dollar. All of that was pre Covid and pre the fiscal and monetary stimulus of unprecedented proportions. And I think I still happen to believe at the moment, as a measure of derivative belief, that gold is still the world's protection against fiat currency being debased, which it has been for a century. But there's nothing that stops that from shifting to a generational view that crypto and particularly bitcoin is a better alternative.

So a couple of things in there. One, I'm actually of the same belief that gold and bitcoin are both going to end up doing well. And it's almost like you don't actually need the inflation to happen. It's more of like the fear of the inflation, right? People just say, hey, tons of printing, of course, I've got to protect myself. And they kind of run into these other assets. And I definitely agree that there's this generational divide. If you talk to the gold bugs, they literally hate bitcoin. They're just like, you guys are all idiots. How could you give up on the 2,500 years of gold? And also vice versa. You play into it from the bitcoin perspective with gold being for old people or the boomer rocks is the terminology on Twitter. How has your opinion on that stuff changed with COVID happening And all the Fed action interest rates going to zero, all the quantitative easing that we've seen, has it been materially changed? Does it accelerate that happening? How are you thinking about it now?

So in dollar terms, you've not seen a huge run in gold. In other currencies you have. And so as it relates to bitcoin, I forget whether it was a year and a half ago or two years ago when Korea had banned it and you would have expected this big thrust into it. You would have expected in Covid when news of the first phase or second phase or third phase that started to approach $4 trillion that you would have had this huge buying. And some people were saying, well, the sell off happened because you had liquidation and people needed to sell what they could. And this stop gap between bid and ask and a relatively still illiquid market meant that there was a big sell off that is relatively recovered today. It's at what, 10, 11?

It actually just dropped recently, so about 8,500, but it was at 10 a week ago.

Okay, so the volatility obviously is a measure of just belief. Right. I have admired actually a deep value investor who I think presented the most cogent argument for the ownership of crypto and bitcoin particularly and opened several hundred million dollar, I think mining operation, which was Murray Stahl of Horizon Kinetics. This is a strange stalwart value guy who rightly and is in total resonant criticism with me of passive indexation in equity markets and sees a variety of vulnerabilities and is put out from the simplistic of, well, I don't know, 16 million millionaires, if everybody owned one or two Bitcoin, that's the entire thing to a more complex if the entire world of fiat currency shifted over what would be the value of Bitcoin? And so I'm generally of the view that it would be idiotic to say this is a scam. The math is real, the logic is real. It still depends on the intersubjective belief and more and more people basically owning it. I think that you're having a growing number of people, particularly of a wealthy institutional investor class that say, whether it's idiot insurance or whatever, why not 1% or 2%? Now 1% becomes a pretty big deal as more and more institutions do it and look to each other and before you know it, that can become sort of a foundational basis for widespread ownership for no other reason than again, intersubjective ad infinitum. You have it and I have it and so on and so on until everybody has some meaningful portion of it.

Yeah, what you're highlighting is almost this idea of money is a belief system. The thing that I don't know yet is what breaks the belief in fiat currency. If you take the US Dollar, for example, that is a very, very strongly held belief. It's backed by everything from the full faith and credit of the U.S. government to the military might and global reserve status. And there's a lot that goes into it, very complex system for that currency belief to break. It's not going to just be you and I wake up and we read a headline right now, all of a sudden, hey, I'm going to go move all my wealth out of US denominated assets, other currencies. Obviously we've seen them kind of fail very rapidly. And so I think that's the one piece of the analysis where if I understood that better or had a very strong thesis, I'd go put 100% of my assets. Because you'd say, hey, when this happens, everyone's going to shift over. I believe before everybody else. And therefore when it's consensus, I benefit. But to me, that is the one component here. I was talking to an investor who recently said it's all relative as well. Just as much as the liquidity injection in the US is happening internationally, you're getting tons of liquidity injected in other markets as well. Could you see a world where the US dollar actually strengthens? All other currencies either suffer or fail and those economies or populations start to opt into something like Bitcoin and you get a dollar and Bitcoin environment where both of those strengthen. And it's interesting. I don't know if that's actually going to happen, but I do think that belief is a key piece. And what it really does, then it says, hey, it might not be a technology problem. Money might not have a true technology problem. It may be a monetary policy problem. And that's where you've got to start to educate people and understand the benefits of Bitcoin versus fiat.

Right on top of that, you've got coordinated debasement. You have an entire camp of people that had a once fringe theory that is growing steam both. And it's interesting because the more that people criticize it, the more it becomes normalized as possibility, which is mmt, that a government that prints its own currency can't default and can just keep printing and printing even though it's debasing it by any measure. The amount of indebtedness that a Country has the best way out of that indebtedness is to inflate the debt away, basically stealing from savers and bringing wealth to borrowers. And so you have the MMT camp, you have the gold camp, you have the crypto camp, you have international monetary policy as both a tool and a weapon. You have the US which I believe is less sovereign stultifying than China, because I believe that China will be probably the earliest adoption of widespread nationwide digital currency. Not to say Bitcoin, but I think that they will do it because they want to surveil. So it is super complicated. And I think sort of the reasonable rational thing now is just a very small allocation but on a speculative basis. What you're really betting on is again the intersubjective belief that people will adopt this. Now there's still debate will we see a deflationary environment or an inflationary environment? The case for a deflationary environment is you have mass amount of people that are out of work, you have spending that has gone down significantly, you have technology that if accurately counted in GDP really would show deflation in everything except where things are highly regulated and you know, education and health care and you know, housing prices and others. Or you have an inflationary environment where our supply chains have been constricted, our ability to produce has been hampered. Pent up demand leads to an explosion in prices. People say holy shit. In the same way that I never thought that toilet paper would be out in the grocery store and people were bartering for it, or paying $8 a roll or paying $25 for a pack of Lysol or whatever, you could see that that is all inflation. And so if you saw that happening writ large, we've been warned about or talking about meat shortages and suddenly you were able to buy a lot more because Bitcoin for example, or gold was holding its value while the dollar on a purchasing parity basis was losing it. That would be a big shift too where you could see a crowd like phenomenon of people shifting. But again, like you said, there's so many variables, it's so hard. It's much easier for me as an investor to be able to look at an entrepreneur. Even though we normally do it in a very multidimensional analysis. And right now we're doing it often in a two dimensional analysis on a flat screen, void of all of the psychological aspects that you can do it when you're with somebody. But it's much easier for me to look at that person and look at the technology that they're building and see truth where it is, independent of what everybody else believes. Ad infinitum.

Yeah. I mean, look, I've been very fortunate to talk to a lot of these macro investors who they spend all day thinking about all that complexity. And somebody asked me what's the number one debate right now, and it is that deflationary versus inflationary environment. I think that once that is determined or there's some consensus view as to where that's going, all of the other investment decisions will cascade off of it.

And by the way, I think it will be not quite as a mirror or as a proxy of the market, but whether you think the market today is cheap or not, the equity public markets, some companies are rightly being punished. I mean, they're being destroyed, down 40, 50% and their likelihood of prospects in the future might be accurately accounted for. The market itself obviously is very market cap weighted. And so the Apple, Google, Facebook, Amazon, et cetera, which are beneficiaries today may be rightly so. So you could see the same sort of thing where certain companies will have inflationary outcomes and others will have mass deflationary outcomes. And it's not going to be a universal correlation of one.

Yeah. The other thing is somebody sent me a chart yesterday that basically denominates the S and P in Bitcoin. And as you would expect, it's basically a directional 45 degree angle down into the right. And it's one of these things where you also have to balance. That's a cute chart to float around on Twitter and kind of get all of that attention. But is that something that is sustainable and how do you think about that moving forward? So I think it's really interesting. The last thing I want to talk to you about before we finish up, I usually ask everyone whether they believe in aliens or not. And so we'll get to that in a second. But you've obviously done a lot of work on space and a lot of the science and engineering needed to both do transportation, manufacturing, space travel, et cetera. Just maybe just talk a little bit at a high level of how you think about space exploration, where we are currently in our ambition to do certain things in space and what you think maybe the next 10 years of space technology looks like.

Okay, so do you want to save the aliens for after or do you want to include that in here?

Let's get to the aliens last, because I think that the technology in space will help inform how you view aliens.

Okay, so let me give you my own moral prescription, which is If I had a limited set of resources to invest for sort of the world, space would be on the list. But I don't know, that would be top five. And this was sort of a debate that I would have with people about climate change, global warming, all of which is real. I have no debate about anthropogenic causes of global warming. My quip has always been that there are more important things to provide prioritize that are 10 year problems that should be solved in the next 10 years versus hundred year problems that could be solved in 50 years. Things like Alzheimer's, cancer, heart disease, where people today are suffering and deserve to be. Sort of the moral thrust of invention, creativity, talent, capital should flow to that first. So space to me is not one of those top five things. Now it's inevitable if you accept what I said before, that there's so much randomness and optionality of things in the pursuit of one thing that in the sort of exhaust of it fall off and end up being created, that I think you have all kinds of unintended positive effects. Missions to Mars or beyond to me feel like self aggrandizing, more ego driven stuff. Rather than trying to get us off the planet, I'd rather figure out ways to keep us healthy on the planet, on technologies in space. You know, we do have people that are doing launches, we have people that are launching satellites, we have people that are doing imagery from satellites, we have communication antennas that are beaming to and from satellites. In the near term we will have constellations of low earth orbiting satellites and there will be a slew of companies that produce that. So you will have SpaceX, you will have some version of OneWeb reincarnated, its assets and vision adopted, whether that ends up being by Intel Sats, some offshoot of Softbank or somebody else. You will have Facebook and Google and some of the big primes also trying to rain down Internet bandwidth to be able to connect the world. So that to me feels very likely. Positioning technologies for the satellites themselves is something that's quite interesting. So today you launch something, you try to do it at a certain frequency and sequence, but the ability to discreetly position is very interesting. You saw for the first time a robotic apparatus actually go and do a refuel and repair of a satellite. So that's something that I've been personally obsessed with. I think it's a little bit early and premature. We've met with a lot of entrepreneurs and I find it quite interesting where for example on the ground what they're doing is saying let me Raise some money to do a computer vision problem to prove that I can lock onto something that looks like a particular satellite. So entirely robotically, you know, basically with a black backdrop that mirror space. And let me show that I can perform a function on a physical object, whether that's adjusting a solar tile or removing a piece of debris. And so that to me is actually very inspiring. I think we will have autonomous systems with communication systems that are reporting and both repairing and whatnot in space. Of course, I think the biggest opportunity where the most money is going to flow is ultimately going to be in defense. And so quite literally, the new space commander for our space fleet two or three weeks ago was mocking Iran for launching, effectively, a webcam into space. But anytime you mock somebody, obviously it strengthens their resolve. And just look at Obama and Trump at the press dinner. But I think that when China blew up a weather satellite years ago to remove it, you know, it was not demonstrating that it could blow up a weather satellite. It was demonstrating that it could blow up anything in space. And so offense and defense in space for critical systems as we launch more and more things off the planet, off the surface of this planet, I think are going to be very critical. So I think a lot of things are going to revolve basically around satellites and robots in space, repairing, connecting suites of satellites and all of the sensor payload packages that are able to image and communicate back down anything in like.

The manufacturing space that you guys have seen that you think is interesting or maybe not even a company. Just as you guys think through it, I know there's some people who think there's certain things around manufacturing in space that are either more cost effective, can't be done here, whatever it is.

No, I mean, we've looked in the fringes, you know, from everything from like mining to manufacturing, and I think that will be inevitability. But I think it's a really far off period. I mean, I think the most important thing will be finding ways to capture or generate fuel beyond solar. So, you know, today probably the most promising thing would be some sort of satellite that was a solar battery that could actually store it, turn it from a solid state fuel into something that approximated a liquid fuel or a battery that could be transported onto a satellite and basically refuel or repower it. You know, that would be magical to today. And we can't really quite do that. So no, that would be sort of the near term practical extent. But yeah, no, there's going to be tremendous. I mean, if you think about all of Our assets up there now, they're unmanned and there's going to be an insane amount of unmanned assets that are launched by competitors, sovereign competitors, corporate competitors. And there will be accidents and there will be technology intended to both prevent and police and investigate those accidents. And I think it'll be a rich economy in space.

Do we get autonomous space aircraft or do we get autonomous cars first and driving on US highways?

Well, technically we have autonomous space aircraft today. If you count satellites, you know, in the gravitational pull of the Earth, you know, locked in geostationary orbit and then low earth orbit, you know, is going to, you know, effectively be on, on its own autonomous path. But no, I'm more optimistic about autonomy, you know, terrestrially. I truly believe that you will see, you know, in the next few weeks, several big announcements. Waymo will announce, you know, several billion dollars may have already happened today, but this week it'll be announced, you know, probably $3 billion plus for Waymo. You know, Zoox is a company that we have significant investment in. They will need to raise a lot of money and their biggest risk is capital but incredible technology. Aurora, GM crews, you know, a handful of others. This Tesla is not one that I'm optimistic on for. You know, all that they purport about robo taxis and autopilot, that to me feels just like a really misleading grab of people's cash. But that'll get sorted out over time. But I'm absolutely convinced that before we see robo taxes, we will see 24 delivery of autonomous vehicles where in the same way that New York ultimately put in a bike lane, certain parts of the city will have right hand turn lanes. Right hand turns are easier than left hand turns because you don't have oncoming traffic that are basically running a physical world algorithm the way that our routers run digital world bit algorithms. And shuttling goods, 24, seven groceries, pharmaceuticals packages, FedEx deliveries, and a place like New York would, would probably be amazing for it, particularly in these times. So I think you'll see that a big OEM partnered with a big autonomous vehicle company and somebody like an Amazon doing 24, seven autonomous delivery vehicles with basically a human to do the last mile delivery. Because even though people are making robots for that, it's, there's still too many edge cases that are hard for a robot to do homogenously.

Is that like a two, three year thing or is that more like a ten year thing? What does that feel like on a timeline based.

I think the technology is there within the next year. I think the rest of it is going to be policy and economics. So if somebody wanted to put down a billion dollars, if New York City wanted to give a billion dollar concession, I mean, most cities are not going to be in any financial situation to be able to do something speculative and long term like that right now. It'll be neither politically popular or palatable or in some cases will they actually have the capital to do it. But if you had a billion dollars from the city and you know, company that was able to put in billion dollars, $2 billion share city to create right hand turn lanes and autonomous delivery, you know. You know, you can do that now.

Got it. Aliens believer or non believer?

Well, believer in the sense that, you know, we watch with our kids, you know, the Attenborough, you know, Planet Life series in this and what they have been able to capture a subsurface, you know, the depths of the ocean. The alien forms of life that exist there, which exist, they're documented, are just insane. These bioluminescent, you know, fish that, you know, have a little dongle that basically captures, you know, something that swims by it. I mean, these are the strangest things, you know, that you could possibly imagine. And we've documented them. So in that sense these things are aliens. Right? I mean, by definition they exist at the subsurface of the sea in the most harsh living conditions that no other life was ever believed to exist. So the prospect of something existing in space, you know, sure. Do I think that, you know, we have Rick and Morty like aliens, you know, that. No. Is there sentient life? I have no idea. Is it possible? Sure is improbable. Yes. Do I think that there's, you know, microbes or microorganisms or things that from the very basis of chemistry and chemical life and how life itself is a fight against entropy, you know, could that have evolved through basic physics and chemistry in some small form? Yes. You know, would I be shocked if there was some form of sentient energy acquiring autonomous organism that. No. But do I believe in, you know, rick and Morty three eyed aliens that, you know, we've imagined for 100 plus years now?

Yeah, there's. I forget the gentleman's name. So I apologize, but I think he's a Brazilian billionaire and his goal, if I remember correctly, is to go to the depths of all of the oceans and he's built basically a one man submarine and he's gone, I think he's gone to two of them. I think it's the Indian Ocean and one other. And it's just to me, that'd be fascinating. Like, what did he see? Right. Because he's literally gone where no other human's gone.

Yeah. And then, you know, there was a movie again. Sci Fi. Sci fact. Right. The Abyss. Back in the day, the Abyss was just a brilliant movie. But, you know, James Cameron in the Mariana Trench, Bob Ballard, you know, is doing deep sea diving. I mean, super deep sea. And the stuff that they're discovering, you know, is insane. And so I find that there's just so much on this planet, on our surface, subsurface, in our bodies, that is just this great frontier. I mean, quite literally fantastic voyage, you know, or inner space, you know, if you ever saw either of those two old school sci fi movies, that there's a much greater calling here, you know, before Ad Astra. So I hope that we solve Alzheimer's, cancer, heart disease, you know, and the things afflicting our planet and the people on it before we start worrying about, you know, intergalactic civilizations.

For sure. Last question for you. I know that you read a lot. What is the most important book that you've ever read? It's not your favorite, but the actual most important.

Well, the thing like I'm reframing that to say what I want my kids to read. I'm gonna give you two or three. And they're sort of all the same vein. Poor Charlie's Almanac, I thought, was just brilliant. Charlie Munger, I think, is one of the most rational people and a true synthesizer and polymath renaissance thinker of all these different disciplines. And I think, you know, it's difficult if you read his speeches, particularly the 94, 95 USC speech on worldly wisdom, and you come away with that with nothing. Being a subscriber to this view of the world, you know, I'm like, I can't connect with you, you know. Second would be a variant of that, which I think is a great compendium seeking wisdom from Darwin to Munger, which I think just has a lot of great, you know, interesting mental models. And then the other one, which played a huge role in my life in appreciating psychology, was Cialdini's book on influential the Psychology of Persuasion. And it was really a marketing book intended as a at least frame, as the defensive guide, you know, against predatory marketers. But I think it was adopted by many as an offensive guide. But all the principles from, you know, liking scarcity, authority, it just, it was to me, the early foray into behavioral science and our cognitive biases. And I've been very Lucky to spent a lot of time with Danny Kahneman. And the one thing that Danny will tell you is you can document all of these biases and you can know every one of them, but it's like an illusion, you know, even though you know it's an illusion, you still see it or still fall for it. And so the fallibility of us as individuals, as a species is, is both scary and inspiring.

I have a friend who always says people love magic even though they know it's not real.

I love magic. Love magic.

Awesome. Well, listen, I really appreciate taking so much time to do this. Where, where can we send people to find you on the Internet or learn more about Lux?

Well, definitely go to lux luxcapital.com and then we've got, you know, cool web series Futura, which we've been doing where we take you inside some of the cutting edge engineers and scientists and founders, a lot of them in the Lux portfolio, showing you everything from defense to space to sail drone to brain machine interfaces. And that's on YouTube. So love what you're doing and thanks for having me, man.

Yeah, for sure. I'll give you guys a big boost on Futura. I think you just did the Anduril one and I haven't watched it yet, but I actually have it pulled up. So link to that as well and we'll do this again sometime.

Cool, man, thanks. Good to see you.

All right, guys, I really appreciate you listening to that episode. I loved it. Hopefully you found it valuable. Before I let you go, don't forget to go and subscribe on your favorite podcast channel. To this podcast, leave a review, leave five stars. Help me get more people listening to all this great information. If you also want, we publish these on YouTube in video format. You can just search my name, Anthony Pompliano on YouTube and find the channel. Subscribe there. I hope you guys are enjoying all this. I'm loving making it. And so we will see you on the next episode.