Josh Wolfe - The Future, Now

We wanted to bring some pyrotechnics for our closing speaker both today and tomorrow, and I promise neither will disappoint. I first met Josh, really as part of the podcast, and have just absolutely loved and relished every conversation I've had with him ever since. One of my favorites was Josh is a Frontier Tech investor. It really does not get more interesting or wild. And you'll see some fascinating videos in just a few minutes of some of their portfolio companies. But maybe my favorite conversation ever with Josh was at a dinner where Brent was actually there as well in New York City, and those two were meeting for the first time. And for those that don't know, one of Brent's original very large business purchases was the nation's largest pool building company in Arizona. And for probably 30 or 45 minutes, Josh absolutely grilled Brent on this pool construction business. And I probably had talked to Brent about this pool business for 10 or 15 hours in aggregate, and maybe like 10% of the questions was covered ground. It was all entirely new stuff. And we finished the conversation, I was like, jesus, Josh, have you invested in pools before?

He's like, no.

Just curious, just generally interested. So Josh has this interesting background in both equity research, so understanding business at an incredibly deep level with this just insane, insatiable curiosity for the edges of technology and what might be possible in the future, sort of the convergence of what he calls science fiction and sci fact. So please join me in welcoming Josh Wolfe from Lux Capital to the stage.

All right, for those of you who have listened to the podcast at less than 2x speed, know that I talk really fucking fast. So I'm going to cover a lot of ground. I'm going to cover some of the constructs of how we think about stuff, the theses, and some of that is going to be the sci fi, the sci fact shrinking gap. And I'll give you some examples that we catalog. Some of them are fun, and then how they've manifested in some of our companies. There's another phenomenon which is this mix of intellectual humility and total arrogance that I call 100-0-100, where I have no idea what the next thing that we're going to be investing in is, but I generally have this clue of where it's going to come from, which is being inside of some cutting edge company and then them leading me to it. And so I have this sort of asymmetric, unfair, legal inside information that leads me to the next thing. And that mix of paranoia and ambition, you know, sets it up and Then the third are these directional arrows of progress. And you don't know where the company is going to be or who the entrepreneur is. But there's these like inevitabilities. And when the inevitable meets the impossible, with the impossible being the perception that everybody else has that this thing will never work, it gets interesting. So I'm going to give you a bunch of intellectual frameworks and then you'll see how that manifests in some of the companies. I'll show you some videos that have never been seen before and some crazy theses that we're working on. So just quick note, right now Ventura is too small to see, but I've talked about this, I think on Patrick's podcast of the minnows and the megas. There are a of very small firms that are raising $15 to $100 million. There are a growing number of very large firms at, you know, $2 billion plus SoftBank being the 800 pound Godzilla. And I think it's a setup for liquidity crisis and some of the big companies, I think it's a very dangerous time to be investing in venture. Most of my LPs aside from the self serving interest that I have of making sure that they're allocating to us, I basically am telling, you know, admonishing don't invest in the asset class unless you're doing setups for secondaries. Because I think there's going to be mass liquidity divestitures of corporates and early stage VCs that are trapped in ZOM. Okay, so some of the philosophies this right now to me is the cost of capital. I call it this tractor beam for the future. Things that were once 20 year fanciful ideas become these 20 month frenzied projects because the cost of capital is effectively near zero. And you know, the hyperloop and new sonic jets and all this kind of stuff like five years ago, you know, that started to get traction in five years I think that you're going to see a posse of capital for those kinds of things. Everybody in our firm is indoctrinated with this idea that 100% of the information that you have right now is based on the past, which is a truism and 100% of the value, the decisions you make off the information you have is based on the future, which is inherently probabilistic. More things can happen than will, which is the Elroy Dimson, I think perfect description of Locke, of risk. And we're constantly trying to imagine all the shit that can happen. I Am the cynic. I always wear dark and my partner wears light colors. But I always say that failure comes from a failure to imagine failure. And so I'm always thinking about the things that can go wrong. I think about risk and value as this interchange of forces where if you can identify all the risks a priori, you kill them with time or talent or money, and then you create value. And it's just sort of my construct. My partner Peter, who runs our west coast office, Apropos, is generally thinking about who can we introduce and populate the syndicate with. And, you know, what's the sort of next two financings look like? He's way more optimistic, I'm way more cynical, and it's a good yin and yang. These are some of the things I'll talk about, some of the cool, cutting edge stuff. The two that I'm most excited about at the moment where, as an indication of where I'm spending my most time, are this idea of superhumans and brain machine interfaces. And I think it's absolutely absurd, foolhardy, ridiculous, the idea that we're going to have brain implants. I think it massively underestimates the advance in technology and software and hardware to be able to read your intentions. And I'll show you some things that haven't been seen publicly related to that, where we get edge and where we focus. One piece of this is time arbitrage, something that I learned from Michael Maubouson in thinking about how you can change your gaze and your direction to look where other people are looking. And then this idea that Patrick alluded to of science fiction and sci fact and how that stuff is kind of shrinking. And then I'm going to invoke these ghosts. And the ghosts come from our old office right outside of Times Square, where near the library walk, there were these placards that basically had these famous literary geniuses. And I'm going to talk about the inspiration from there. So three sources of edge I think everybody knows. Informational, analytical, behavioral, and the behavioral edge. The famous example that I love, of course, is the Simon Asch experiment. Have people seen this before? Quick show of hands. Okay, about a third. So the guy in the red shirt is a mark. He's the sucker. He doesn't know what everybody else is in on the trick. Everybody else is going to look at a series of lines. They're going to basically be asked how big are the lines? They're all going to lie to see if they can sway him. And he's basically going to look at them and say, oh my God, you guys are idiots. And then you're going to see how quickly he just falls in with the consensus. So that's the mark. In the first test, the correct answer is 211 1.

Two.

Literally, you idiots. Once again, the correct answer is 233 3.

Three.

I mean that's, you know, that's what you guys are all here and while you're in business, right, is trying to find, you know, those situations. So flip this on the side. Obviously, time arbitrage, just being able to take a different time horizon than everybody else. Tie yourself to the mass. In our world, we get investors that are okay with being locked up for 10 years and so, you know, sort of dispositional. I' skip the marshmallow test. You guys know it all. Okay, ghosts. So these are the placards. And the three ghosts that I like to invoke are Twain, Fitzgerald and Schopenhauer. Right outside of our old office, it said that the reading of good books is like a conversation with the best men of past century. So you get to literally invoke these ghosts. And everybody here I know is a voracious reader, so you'll appreciate this. But Fitzgerald's famous quote was the test of a first rated intellect is the ability to hold two opposing ideas in your head at the same time, still retaining the ability to function. If you think about this in option value, it's basically like being long volatility between these two ends. You can have really smart people on both sides of this. People that say gold is nothing but a shiny piece of metal. People that say gold is a great store of value in an otherwise fiat currency world. People that say China is an engine of growth. China is a bubble or a fraud waiting to collapse. And there's nothing but lies, damn lies, statistics and Chinese government statistics. And the only certainty is the uncertainty. So those are Fitzgerald situations. And I basically say avoid those. Those are front page newspapers, front page magazines. It's where everybody's attention is and therefore it's not valuable because it's not scarce. Twain. The famous dictum is, it ain't what you don't know that gets you into trouble, it's what you know for sure with overconfidence, that just ain't housing prices. The famous Taleb turkey, you know, turkey born every day gets fatter and fatter and fatter. And then Thanksgiving comes, you know, and misestimation. Schopenhauer is the world that venture capitalists live in and entrepreneurs live in, which is the talent's Hitting a target that nobody else can hit. And genius is hitting a target that nobody else can see. And so those are often considered arrogance of the highest order. Some entrepreneur says this is the way that the world ought to be. And our job is to basically assess if they're full of shit or not and give them money. So these talent.

Final seconds of the.

Third, and here's Wade got it, a third three. And this is also talent. That is a live shot of our office. When we sell a company, it's the same sort of immature behavior. So best way to predict the future, to invent it. I'm going to talk about the people that invented it historically, 1925, 1928 or so. This is Bell Labs, a bunch of white guys in suits. Engineers, super smart engineers, not very diverse. You let a few women into the crowd, you start putting on scientific suits and white lab coats. Then you get these freaks and geeks. And I think everybody knows this. Of course, the founding team of Microsoft had the pleasure of serving on a board with Bill for now about six years and starting four companies with him. And super cool, surreal experience. I'll talk and show you some stuff related to that. But these are the people who are inheriting the earth. The geeks and the scientists and the nerds. And if you ask them what inspired them almost to a man or woman, they will say science fiction, something that they read or saw was like, I want to do and create that. And they are the ones that actually create the things that were once imagined by others. So I like to say that the gap is shrinking. Either our scientists are becoming way more creative or our sci fi authors way less creative. And you can make an argument that scientific tools are compounding on each other exponentially, but that gap observably keeps shrinking. So you had the StarTAC phone or the tricorder rather that came from the Motorola Star tech phone. All these things are, you know, crazy inspirations. The phaser, which we got, the Taser, okay. Everybody thinks Steve Jobs a genius. I think that he was an amazing sci fi archivist. This is Captain Picard's Star Trek Next Generation that presaged the iPad by at least 10 years. He's got like 20 of them. 2001 Space Odyssey. The first time you saw video conferencing, literally the setup that Steve jobs used for FaceTime. So Hal, Siri, Terminator on the top. We have a company down in San Diego that's focused on blind and visually impaired people. They, they basically took the glass holes, the Google Glass, and now they Take anybody off the shelf and are basically giving this to people who have an agent in their ear and can navigate the world instead of just relying on a stick and a dog. There's a company called Aira, we have another company called Evolve up in Boston. U.S. bill Gates, General Catalyst, a handful of others funded that are basically doing millimeter wave detection at the speed of a metal detector. So the stuff that you stop at an airport today and you get the backscattering radiation, but you can just walk through at video frame rate. And if you remember, one of the greatest cinematic feats in history is Total Recall. Schwarzenegger entering a safety zone.

No unauthorized weapons allowed beyond this point. You are now entering a safety zone.

And this system is now live in Lincoln center and cultural institutions and churches and schools and basically being able to detect plastic explosives and things that aren't just, you know, metal. That's me. Okay, so Star wars and Star Trek, obviously huge troves of this. On the top you got Luke Skywalker getting his hand repaired after Vader, you know, chopped it off. On the bottom as a company called oris. We were founding investors in that company and sold it to J and J last quarter for $6.1 billion. And the scientists will tell you, the engineers will tell you that they were totally inspired by the scene. Another Star Wars. This is on the bottom, a company called Looking Glass between Brooklyn and Hong Kong that we were also early investors in. On the top, of course, the famous lea holograms. So this is volumetric display. What you have to believe here is that the resolution of this will go sort of like YouTube did from, from 240 to 480 to 720 and 1080p to 4K. And we're sort of convinced that it will. I don't know what the use will be like. You know, it might be art, it might be kids photos, it might be video conferencing. They haven't figured that out yet, but the technology is advancing. Replicate it from Star Trek and you know, pick your 3D printing. But the ability to conjure, you know, your morning coffee mug or cup or whatever, all that is becoming cheaper and cheaper. Now this, you know, Makerbot, I think it was one of our companies, they got bought for I think 600 million or so. I don't know if it all paid out, but by strategist, but that was pretty shitty. It's just like plastic, you know, there's something to like an education market. We have some more sophisticated stuff now. This is a company Called desktop Metal, it's one of our fastest growing companies. Went from about 0 to 300 million in bookings in a year and a half. And they make small machines, they make giant machines. The giant machines can do the entire line of Tiffany's jewelry, getting rid of 1200 craftsmen. And we can, you know, have a debate about, about labor and capital and robots. But the really important thing here is.

Also spurring in industrial design. The technique enables the creation of objects unimaginable using traditional tool and die techniques. The company is designing with software made smart by the artificial intelligence technique called machine learning. And here's the ironic twist. The machine is designing parts that appear to come from nature's playbook. Check out these two parts. On the left, a sleek human design. On the right, the root like handiwork of a smart computer.

So what's interesting about that is instead of saying, I want to design this rectilinear, you know, hinge, you basically just say like, this is the load support that I have and the basic dimensions and you let the computer evolve it and there's no strain, there's no stress. These things are ugly looking, but they're also ugly because they're not intuitive and aesthetically appealing to us. But if you think about nature and the way that nature designs things, you look at a tree and its stability, all those things look way more like an HR Geiger, you know, artwork or Gaudi architecture. And I think that the future of design is going to start to look much more biological because it's actually more mathematically precise for some of the uses that engineers are going to have, as opposed to everything around us being these rectilinear, platonic, solid kind of things. Robots obviously replacing everything in manufacturing, this was Foxconn, you know, replacing their workers. This was also presaged, not quite by science fiction, but listen to the words that Lucy says. I think we're fighting a losing game. This was a company called Adept Robotics doing chocolate picking. I think we're fighting a losing game. So, you know, cliched, trite quote, but true futures here is just unevenly distributed. That is the privilege that I think that venture capitalists get to do. You get to find the people who asymmetrically have something in their mind and then it goes out to the rest of the world. I love the quote by Linus Pauling, I think attributed that I know something that nobody else knows and they won't know until I tell them. And when you find that scientist or the engineer that has invented something crazy like that asymmetry is to me a source of value. Kymeta was one of those that started with a crazy paper in PNAS around new technology called metamaterials. Metamaterials are materials that can have a negative index of refraction. The first application for this was satellite antennas and being able to beam steer communications. The thing on the top left, which I'll animate in a second, is a traditional satellite. And if you have a geostationary satellite, which means that as the earth turns, the satellite is fixed on that point, then that thing on the left is basically going to rotate and move. So if you are on a plane and you use Gogo Internet, it literally has a mechanical rotating gimbal that tracks the satellite. And what you would like is for satellites to basically work like our cell phones. You go from tower to tower and you switch just electronically with no moving parts. And that was never really possible before except if you had a giant military sized phased array antenna. And that is now possible. So on the top left you can see this is an animation of it. I'll show you the real thing in a sec. You know, so you lose that thing for a minute, you've lost connectivity. Boats, plane ships, trains, anything that's moving of mass, you know, to give it widespread Internet connectivity. So we started that company with Bill Gates and Ethan Mervold and some others. And Bill and I joined the board. This is this phenomenon that I call 100,000, where I never know what the next thing is going to come from the last. And so 100% certainty we'll be investing in the most crazy shit over the next two years. Zero percent certainty what those things will be and near 100% certainty where I will find them, which is the edge of our already cutting edge company. So from that company, Chimeta, it led to this whole sequence of things. So this was inside of Bill's office. This is the first antenna that came off the line prediction thus far of anything we've produced and it's the reliability. So this can transmit. This is at a receive frequency.

Okay. Receive only.

You could transmit with it. Though the antennas were received. That little thin piece of glass took advantage of all the manufacturing from thin film transistors and LCD screens. Everybody went out and buy thin film screens. Now we can take that same manufacturing process and print the electronics that would basically have the active switching element being the LCD crystals that would beam, steer and create waves for sending and receiving. So that led to a company called Planet Labs, now called Planet. That little antenna was requested by these Three guys in San Francisco in the dogpatch area, they said, hey, we want to take these antennas, put them on our little satellites. Those little satellites are about the size of a loaf of bread. They cost about 100 grand a pop. And they first did this one here. They launched a bunch of cell phones up in space. They did three of them. They called them Alexander Graham and Bell to be cute. And then they've done these small cubesats. This is a successful launch on the top. That was on an Antares rocket. This was a different kind of launch. That brings Cygnus on its third CRS mission with the ISS. That main engine's at 108%, not supposed to happen. So we lost about $3 million of payload on that, about 30 satellites, which is not a big deal. They call it Agile Aerospace. Next month they just went and did it again. This was after they docked with the International Space Station and released these things. You'll see how small they are.

There's a video of two of them being deployed from the International Space Station. It gives you a bit of a sense of the scale of them. I mean it's like little satellite.

So what's interesting is those things are being launched on a certain cadence so that they can get into orbit. But now there's other companies that are coming along that are saying, you know what, we can put little plasma thrusters or air jets on to be able to place these things. And so the entire like white space starts getting eaten up as a sector evolves and you just pay close attention to what's next. With all the imagery that was coming off of a company like Planet, we funded a company called Orbital Insight, which is basically taking longitudinal analysis of parking lots or crops or cars going to productive chemical facilities in China or ghost town residential buildings and selling it to global macro and hedge funds and supplemental spy data.

And.

But you know, we never would have gotten this company if we didn't get Planet, and we never would have gotten Planet if we didn't get Kymeta. And that would have never happened if there wasn't this breakthrough in physics. And so a priori being intellectually honest, like we had, you know, no idea what's coming next, but you can sort of, you know, post facto paint everything back. Same thing with drones. And again, this is sort of sci fi sci fact on the top. Prometheus, which was, I thought, pretty good, but prequel to Alien. Basically a drone using a lidar goes through this cavernous region, reports back what it's seeing to the mother and same sort of thing here with these were early academic versions of this. Height, width, length, mapping out of space, giving somebody situational awareness. This one's a little bit more fun. On the top, pod racing. And on the bottom, drone Racing League. Has anybody heard of Drone Racing League? Okay, so I actually, this is always a precursor, I think, in our firm. Whenever I say that's the stupidest fucking idea I've ever heard, it usually ends up being a good idea. So that was my response when I met Nick, because I, I just thought this was an absolutely stupid idea. You can see the parallels between Sci Fi and Syfact here, and it's pretty thrilling to watch. I'll just play a quick clip.

This is drl.

The Drone Racing League.

DRL is the global professional circuit for drone racing. We combine live sporting events with custom drone technology and in house content production.

To create the sport of the Future. In just three years, DRL has held.

24 global events at some of the world's most iconic vet.

Anyway, they destroy about 650 drones in every race. And he has a mantra, the CEO Nick Orcheski, who says that if you aren't crashing, you aren't racing hard enough. And I literally can't fly these things. They go about 80, 100 miles an hour in half a second. Some of you heard also in Patrick's podcast that I had a special trip earlier part of this year with special ops and there's a division inside of Drone Racing League called Performance droneworks, which is dedicated just towards some of the black ops and being able to intercept and fly autonomously without any RF interference or ability to detect. And so some straight out of Enders game, Sci Fi stuff where the Air Force and SOF are identifying pilots that can do things that, you know, traditional military pilots couldn't. So we've got, you know, drones in space, we've got drones in the sky, we've got them on sea and on the ground. So Saildrone, also a company that I actually thought was a stupid idea also we started with one of these things. Now you've got a few dozen around the world on missions. They basically charge 2,500 bucks a day instead of a big NOAA ship, you know, at a huge expense. And these things are going over like 100 foot rogue waves and surviving. They're in the Arctic with hydrogen, without any access to solar, but basically powered by solar wind. And doing all kinds of missions for fisheries, helping cruise ships find paths with less wave turbulence, being able to look underwater, all kinds of cool stuff. And so they are basically thinking sort of like planet. In the same way that planet wants to cover every aspect of the Earth. With hundreds of satellites, they're looking at covering every square nautical mile of the ocean. And as I'll talk about in a little bit, I think it's really interesting when you get this network effect. And the key question is not what happens when you have one of these things that's out in the world, but what happens when there's a network of these things and what data and information can come off those platforms. Zoox is another company slowly coming out of stealth. I always say that hand to my heart, this will either be a $50 billion business or a giant crater in the ground. We invested pretty early, put about 25, 30 million dollars in. They've raised about 800 million dollars. They'll have to raise another billion dollars the way that they're conceiving the car. Has anybody seen this before? Zoox handful. It's worth seeing just because they've hired some of the best people away from Apple, Google, Tesla, Uber, Waymo, over to an A.I. you guys here.

That really doesn't get old, man. It's like being on a ride at Disney. These AI robots crank to the course at 45 miles per hour and the VH5 is set to rip through it at a delightful 75 miles per hour.

We can choose all wheel steering, two wheel steering, crab steering, dual motors, and then we have direction.

I like the crab steering. Zuke's got its start here in this abandoned firehouse back in 2015. With only six employees, they've since raised an astonishing $800 million and have expanded their operations into a one stop robot making shop. With the help of 400 employees, Zoots is now on their way to turning these prototypes into full fledged vehicles by 2020. For the moment, though, Zoox does most of its software testing in these modified versions of Toyota Highlanders, which have the decided advantage of being street legal.

We're actually going to get you to drive autonomously from this facility to our new headquarters in Foster City. And then Jesse's going to jump in and you can drive up to downtown San Francisco.

Coming up right here, we have to do a left turn, yield. So you got to see this other car.

Yeah. So we're a bit concerned about this car that's coming towards us from prediction level. So we just want to make sure that they do the right thing. And now we're yielding. If you look on this screen, see there's yellow here.

Yeah.

That means we're yielding for that vehicle.

Okay.

And now we're off. We're about to drive onto the freeway. So this will be interesting. So there's quite a bit of traffic on our left.

Yeah.

And the vehicle is indicating at the moment it's going to brake a little bit harder because we've got this vehicle right on our six.

Yeah.

And we're running out of Runway. And now we merge in. So that would have been a hard situation even for a human driver. We needed to merge and that person on the left was not letting us in. We tried to go in front. They stayed with us. And then we had to brake, let them go past. And then we pulled in. That was all autonomous and you can see how smooth that was. Good robot.

So the cool thing about all the simulation technologies is it's part of another theme of this blurring line between reality and fiction. This was inspiration a few years ago when I had this thesis around Nvidia that it wasn't the gaming chip anymore for just PS4s and Xbox, but it was going to be the soul of the new machine that was modeling out all these kinds of driving simulations in rain and dark and shadows and occlusions and cars cutting in front and kids walking out and modeling all kinds of moral dilemmas. So that led to this Nvidia thesis, which in turn led us to looking for what's the next GPU company. We found a company called Nirvana Systems, and we're early investors. And I was talking shit about intel being a company in secular decline. Intel bought them about 10 months after that for $400 million without a dollar of revenue or product that's now the kernel of all of Intel's AI run by a guy, Naveen Rao. And anyway, so that gave us this idea just about like the blurring lines between simulation and reality, which is gonna affect a lot of different markets. This I love. I'm sure you've seen this online. I think it's a great quote, a great visualization, the visual density of what you had back in like 1997. I think it was NBA 2k when Kobe was a rookie versus looking at the progression over time to when he retired, there was more computational complexity, like in the sweat drop than there was in the entire game here. And you can just see again how this progression is improving. And our ability to discern these things is really hard. So one of the other quotes that I love is that the foremost dangerous words in investing, of course this time is different. My four favorite words are it'll rot your Brain, which I think is predictive of a next 10 billion dollar industry. It was true in the 50s and 60s with rock and roll. It was true with TV in the 70s. It was true with, you know, chat rooms in the late 90s. It's true with video games today and all that it is leading to. Video games went from, you know, this pitfall, you know, to these crazy multiplayer online games with insane graphics and it's just only going to keep it moving. And of course, you know, you got sold out esports and you know, phenomenon that people, I guess that was sort of predicted in the wizard with Fred Savage back in the day. But of course our couch potatoes are now our drone pilots, our robotic surgeons. You know, I think it's just this compounding effect, this gap between reality and fiction is also something that's sort of timeless. So when the first pictures came out, there was this fear. Like there was, I forget the French brothers that did this, but people were like scattered in the theater because they for the first time had the perspective of a train coming out them. You know, that's a picture. But like other people, they freaked out. And you see the same phenomenon now with cutting edge technology like V. Old people and technology are always fun. So Michael Douglas disclosure, you know, I don't know, 1990 movie or something, you know, virtual reality enters this 3D dimensional world. The graphics then were pretty shitty. You've got companies now that are doing that. Another sci fi movie that captured this was the congress with Robert Wright Penn, where she basically sells her soul in this Faustian bargain where she will get money and in exchange gives her digital simulacra, you know, replica that they can use, you know, in any way in animation or you know, worse. So this is an interesting theme. Just this real vehicle on location that's not real. As it drives, the Blackbird captures high quality environmental data of its surroundings. The combination of high dynamic range imagery and laser scanning allows the to build a virtual version of the environment around the car to create completely realistic CG car renderings. High quality digital assets created by the Blackbird can be reused again and again for marketing across all platforms, making it a hugely cost effective production tool anyway. So I just think that the, you know, the veracity, the ability to detect what is real and not is increasingly going to get harder and therefore it's going to become, you know, more and more valuable. I'm going to skip a bunch of these things for the sake of time. This is notable in that the same stuff that this cost for Hollywood special effects like $40 million. Oops, maybe it's not showing now you can do it with a webcam and some algorithms to basically be able to mimic. And the political implications for this. You see this with deepfakes, you see this with video and voice, I think are really scary. This is even three or four years old. But the ability to send, you know, people into a frenzy, you know, basically digital puppets of people. Pretty powerful. One of my favorite quotes from one of my favorite shows, Westworld, on this blurring line between reality and fiction, you know, she says, you want to ask, so ask. Are you real? Well, if you can't tell, does it matter? If you can't tell it, does it matter? On this idea of network effects that I talked about with like Saildrone and Planet, I think this idea of, you know, asking what happens when everybody has one leads to really interesting things. We have a company in New York, San Fran and la, called Citizen, that does situational awareness for crime, sort of crime porn. Some people feel safer, some people scared. Uber Lyft, you know, of course, wasn't possible before. Ultra big implications for autonomous vehicles. Vehicles and for robotic surgery where a single surgeon or a single accident that occurs, you know, now can. If I get into an accident, it's siloed with me. You know, either I die or I learn from that accident, or maybe I don't. But the idea that, you know, millions of robots or millions of cars or millions of surgeons robotically can learn in this sort of network effect, I think is going to be a powerful phenomenon of connecting devices to each other or system just automatically. Almost like GPS navigation inside the body and network to other robots. Okay, last one or two things. I'll talk about half life of technology intimacy. And then I'll show you something that hasn't been seen publicly. This is one of those directional arrows of progress, right? So you spot these directional arrow of progress. And again it leads you to, you know, a general idea. We're not going from flame to incandescent bulb to LED back to sconces with, you know, torches in our offices. We're not going from mechanical spinning discs to solid state drives back to, you know, spinning hard drives. You're not going from, you know, horse to horse, drawn carriage to manual car, automatic car, electric car, autonomous vehicle, back to horses in the streets. And I'm convinced that the way that we will interact with technology, including this thing, are going to start to disappear. And so we went from, you know, this monolithic mainframe computer about 50 years ago. And then the first half life, about 25 years ago, you know, you get your personal computer and you're tickling it with your fingers and you have a mouse under your palm. And then the next Half Life about 12 years ago, the dominant form is your laptop, which of course is physically touching your thighs. And now you get rid of your mouse and you have a trackpad. And then six and change years go. Next half life, you've got your phone cradled, first thing you touch in the morning, last thing you touch at night, and swiping and caressing and pinching and zooming and pretty close to your body in your pockets. This, you know, three and a half years ago, next half life and constant contact with my skin 24 hours a day. And then AirPods now with more compute inside. And so that direction, arrow of progress undeniably is going towards technology conforming more and more to you and less and less to you, you know, hunched over the QWERTY keyboard. And so this led to our investment in Control Labs. It's one of the companies I'm singular most excited about. Probably the most stressful thing that I experienced in the past two years was getting into the deal. And the most stressful thing that I have right now is making sure that the founders don't sell early. And I truly believe that this can be a 10 billion dollar business in the same way that Microsoft was the operating system for, you know, our compute at that time and Apple and Android are our operating systems for our mobile devices. I'm convinced that this will be the operating system for how we connect with all of our technology. So people know chef's table, Netflix, so they're going to be doing a version of this for technologists and this hasn't been seen publicly, but it's pretty cool. Riordan, who is one of the founders, I think people may have heard his background on the podcast, but 17 brothers and sisters, 10 biological, seven adopted mathematics science prodigy taking classes at MIT, not actually enrolled, gets tapped by Bill Gates, joins Microsoft, builds Internet Explorer, single handedly launches that program, is also bills writing a guy through the DOJ monopoly trial against Andreessen and Netscape, then does a company called Avogadro open wavephone.com basically invents the mobile browser, retires, goes to college, gets a degree finally at 33 at Columbia in classics and Latin and then spends the next near decade getting a PhD in neuroscience science. Where we intersect because the guy that we had backed was one of his thesis advisors. And I think he's a special guy. I think the technology he's Developing is singular. I think it's sort of an unfair advantage. And I'll give you a preview here for a few moments. Left, Right. Up, down, shoot all without moving a finger, just thinking about the movement.

The big sort of spiritual or philosophical goal here is to rewrite the relationship between humans and machines. What we were trying to do in neuroscience is understand the code of the brain. What it is that neurons say to each other that allow you to behave. That's movement and thought and concept. And it seemed like the progress that you can make on that is slowed down by the fact that it's really hard to go kind of listen to the neurons inside your brain. The muscles are a neat thing to actually listen to in and of themselves, because the sort of chatter of the muscles represents the conversation between your brain and your body. And if we can listen really closely to that, maybe we don't have to go in through the skull and, like, tap into an individual neuron. We can just listen to the chatter of the brain as it turns different parts of the body on and off. Instead of trying to look at, like, the large picture of what the muscle does, we actually dig inside of that signal here, across an array of sensors, and decode the activity of individual neurons as they come into the muscle. So rather than, hey, my brain told my hand to open or close, we come down to neuron 1284 in the spinal cord.

Turn.

Turned on a few fibers within a certain muscle inside your forearm and caused your hand to ever so slightly start to contract. And we can separate neuron 1284 from neuron 1312. And again and again. And we can separate them all out individually. These models aren't just what your hand is doing. It's, in some sense, what your hand intends to do. And you'll notice it's the antenna tension of my hand. My hand is closed, but I'm moving that one finger in and out. Or I'm moving my pinky finger in and out, or open my whole hand, or I'll wave quick, or I'll try to scratch myself.

Right.

See, I'm not moving, but I'm communicating via my nerves that I want to open the hand, and then it opens and closes nicely. I'm going to unscrew this cap and take a sip of water from this bottle. And I want you to think about the number of neurons that are involved in that task. There's probably about a third of my brain, hundreds of millions of neurons involved in that task. It's really hard. You ever see a robot try to Take a drink of water, it's a mess. There's all these degrees of freedom in my arm. I'm compensating for something. Basically, I've never done this before. I've taken a drink of water, but. But not from this explicit bottle where the water is distributed and the weight is changing all the time and it's slippery on one part but not in another part. But I just do this all effortlessly. So our goal is to tap into that capacity we all have to change the interaction, to change the rules between humans and machines. My four year old will never learn how to type. He'll learn how to what we call word form. He'll think the words out to a screen. He'll perform them in a way my 2 year old will never learn how to swipe. And embedding in this idea that it's not so much what's the first application that this technology allows, it's what doesn't it touch. So literally, imagine every interaction you have with the machine today. Some of these are going to be obvious. Like the keyboard of your computer melts away and the mouse melts away and the joystick for your Xbox melts away. But go beyond that, like, why is there a touchpad at the atm? Why is there a remote control for your tv? Why does the thermostat have a dial on it? All those things I want to just, you know, point at the thermostat. I don't want to be Tom Cruise. And I know we're going to report trying to fight my way through the spreadsheet. I just want to will my way through the spreadsheet smartly as I explore the information that's embedded in it.

It's like using the force.

You only have 14 muscles in your arm that control your hand, but you have maybe 15,000 neurons controlling your hand. Those 15,000 neurons allow you to type at 80 words a minute if you're really good. But they ought to allow you to type as fast as you can think the language. And they ought to allow you to control, you know, some kind of crazy drone with six control surfaces on it. Not by doing six simultaneous joysticks, but by thinking six joysticks. That's our goal. I'm Thomas Reardon and you're at Control Labs.

Last thing, and then maybe we'll do a little bit of Q and A. I think I actually revealed it for the first time also with Patrick. It was the company that we started called Variant, also totally born in sci fi, you know, meets sci fact. This is Professor X who puts on Cerebro and you know, from a crowd of a million people he spots the music mutants. And those are people shooting lasers out of their eyes and conjuring fire from their fingers and superhuman strength. But it dawned on us that if there's a one in a billion chance of some super rare phenotype, some physical condition that's expressed but born in genetics, that there might be with 7 billion people on Earth, 7 people walking around with some crazy condition. You have muscle hypertrophy that you see in a handful of very young kids that look like bodybuilders, people who live to very long age. You have hyperthymesia where people can remember things like with acute details of day and time, 50 plus years. And there's about 50 people that are known with that, you know, what we consider savants and people that you know, appear autistic. There are certain genes that we know SCN9A for pain sensitivity. People who either feel very high sensitivity to pain or people who don't feel pain at all, which is actually not a good thing. They're covered in burns and all kinds of stuff. People who only need to hour of sleep or have very high metabolic rate. So we started this company in the fall and have assembled an incredible team of operators and scientists. And they found their first three populations which I think they'll be revealing publicly. But first was with the Maoris in New Zealand. The second is in Pakistan where there's about 40% intermarriage between cousins and the high degree of genetic islands, where it's very likely that you have a monogenic condition where a gene makes a protein that does something. And the third one, which is in South America, although they're not publicly disclosing, where there are nine families that remain with a thousand people. And those people have a very high metabolic rate at night. So when temperature drops, they evolve to raise their body heat. And we got to thinking, well, what if the 100 million plus obese people in the United States could eventually take a pill that raises their metabolic rate at night and burn fat while they sleep, which would be a pretty big deal. And so they are going out and looking for everybody who has not really been sequenced. Most of the people that have been sequenced are pale male stale white Europeans by 23andMe and Regeneron and Genentech. And they are going to weird places around the world and trying to find these outliers, these X men, these mutants, to be able to take it back to the masses. And so anyway, that's a quick flavor of the kinds of crazy stuff that we're funding. And I think maybe we'll sit for a few minutes.

Thanks, Josh. I was in Josh's office, I don't know, a month ago, and we were talking about this. He goes, well, maybe I'll just put together a couple videos. I thought, that sounds cool. So clearly he did that in spades. So thanks for a variety of really interesting stuff. So many of the conversations we've had have been sort of on two ends of the spectrum. One, a lot like this, which is, we'll call it a variety of frontier tech. And you said it in your talk about how I can't remember which company it was, but we're not yet sure. I think maybe the hologram company, we're not yet sure what the application of this is going to be, but the technology is just accelerating so quickly. We want to be part of that technology. And then other conversations we've had, like the one about the pool business or like Tesla, which you've been vocal about, have been much more like classic cynical equity research type conversations. And you seem to kind of hold these two poles at the same time. And I'm curious how you blend the two. So in many of these cases, maybe the cynical view would be there's a lot of solutions in search of problems and that the best businesses are built on top of problems. Jobs to be done. So how do you reconcile those kind of two selves that I've observed in you in our conversations?

So there's two extremes, which, and it's interesting because some venture firms basically say we don't take any market risk. And some people say we don't take technology risk, and we take both. And we don't always know what we're doing right. And after the fact, we're like, oh, we were smart about that, or we made a mistake on the market risk thing, which is like, addressable. You're able to see, okay, there's white space. Space, there's an opportunity, there's something that's not being done well. And I'll give you an example of that, which I didn't include. And that's often preceded by the wait, what? Where you learn something about the market that was totally surprising. And you're like, I can't believe that didn't exist. And then you're like, oh my God, nobody else knows about that. And, okay, can we do something from oris? There was a guy. And also, this is not publicly disclosed yet. So a guy, Daniel Hawkins, who was his top selling guy at Intuitive Surgical, he left and then did a company called Shockwave Medical which just IPO'd earlier this year. And we got introduced to him. He had left Shockwave maybe two, three years ago and we backed him in a company called Avail. The premise of Avail is, and I don't know how many people knew this, but I had the experience of wait, what? When you get a surgery, depending on what the procedure is, somewhere between 30 and 90% of the time a medical device rep is, is in the room with the doctors and the nurses. And my response was, wait, what? And the hospitals would like to get them out, the doctors would like to get them out. Sometimes they have to be there for clinical support. And he has a technology and an idea and having been an expert in this that says basically we can do a combination of telepresence and automated robotics to be able to give you the inventory, the parts you need. And the crazy thing, by the way, if you go in, if your procedure is scheduled on Monday versus Wednesday, you might have a different medical device rep because the, the way that the hospital negotiates, Stryker gets Tuesday, Thursdays and Fridays and Medtronic gets Mondays and Wednesdays. And so that's an example where we look at a market that exists and we say, wait a second, that sucks. And technology can go and solve it. The other extreme is, wait a second, this seems like a singular technology. Nobody else is doing what these guys can do. Combination of IP technical expertise, the engineers that they're attracting, control, you could argue is sort of like that. It started with like a whole, holy shit, that's pretty cool. And the first response that most people have is, well, what's it going to be good for? The gaming thing is easy. And I don't care about the gaming thing. They're getting acquisition offers for the gaming thing. I don't want them to sell because I literally see this as a universal controller for how we're going to interact with the rest of the world. I'm going to go in and change the Spotify song by just going like this and change my Nest style like this and just think about moving my finger to be able to control the stuff around me. So in one case, it's market exists, money is flowing, there's an opportunity to come in with a solution that people just hadn't thought of. In the other case, technology never existed before and it unleashes creativity and possibility. In both cases. We're taking big risks here. It's going to be technology risk, execution risk here it's market risk and we're fine taking both those risks. But you're right, they are extremes.

I'm going to ask the famous Larry Bird question where he would ask coaches, like, if it wasn't played for you, what other coach should I play for? Same question. In sort of the frontier tech space, first specifically, and then second, second just in the venture world as a whole, who the investors are that if you were done and you wanted to give your own money to somebody, who you'd give it to and why?

I'm a huge fan of the Benchmark partnership. I think they are really unique and rare. We are not an equal partnership. They are. I think that they've been really thoughtful about the way that they've done it. I think the reputation, the decision. I'm a huge fan, so I would give money to Benchmark and probably everybody should give money to Benchmark, but you can't, which is selfish, is a good thing.

Advice you can't use.

Sequoia is the other end of that. Right. Like, Benchmark is I think, actually a place that you would enjoy working. I don't know that everybody enjoys working at Sequoia, but cutthroat competitive environment, hyper competitive, but extraordinarily successful for investors. And so those are two extremes to me that I see that both have incredible performance but very different cultures in the frontier world. To me, everybody is a potential collaborator and competitor. And so anybody that can write a check, you know, is potentially, particularly now when the cost of capital is very low and everybody has it, you know, we're coming against, you know, a random angel or a random individual that was friends or roommates with somebody and they gave them their first money and we're competing with that. That's the minnows to me, generally where they're a source of deal flow. And if they think that we're going to be value add investors, we're going to hustle or the platform is going to add value, then maybe it's not so competitive. And then you have other peers where there's some reciprocity, where we do a deal and we show them deal. And, you know, you just develop friendship over time. You know, founders. Khosla, you know, I respect Steve Jurvetson, who just launched his own firm from DFJ Future Ventures, you know, people who are sort of willing to take that latter risk that we were talking between market and technology, you know, probably less than a dozen firms like that.

So my last question is a marketing question. So one of the things that Brent And I have talked a lot about is maybe making sure you understand the mind of the person you're trying to reach and then aggressively fight for positioning and share in that mind. And I think what's very interesting about what you do specifically, but Lux, more generally speaking is examples like today, right. That you're exceptionally good at laying out there, that you are in the business of funding companies like this and sort of creating a beacon for future opportunities for people that might give them to you or founders themselves. How much of that is very intentional and deliberate on your part? And how much of it is just. You just love this stuff and you just like to share it.

As cliched as it is, I believe that passion is the best predictor of success. I am psychotically competitive. I am psychotically passionate about cutting edge science. I love having the credibility. It feels very good when I'm taken seriously in a room of Nobel laureates and I can hold my own. That, for me, feels just, you know, special. It's what I wanted when I was a little kid, to be able to be in the room with people of high scientific esteem and be taken credibly. But as you know, Tesla is an example of something in the Valley where a lot of people think I'm an asshole. How can you be against innovation? How can you be against the environment? And to me, it's actually, there's no inconsistency. It's about being for scientific truth. And scientific truth, to me extends into just being a generally honest and high integrity person. And I think that companies that are not that way are doing damage. So for me, the brand is pursuing pursuit of science, pursuit of truth, cutting edge stuff. You know, the contrarian rebel that was totally neglected. And we've got in our portfolio, you know, people who literally have like, crazy pink hair and shaved heads and people that, you know, won Nobel Prizes. And to see them together is like, thrilling for me.

Yeah, it reminds me of one closing question again. An idea that we, you and I had talked about briefly on the podcast. But this notion of a chip on your shoulder as a competitive advantage for investors and business people. Maybe we'll close, close the day with this idea because we've talked about so many different sources of competitive advantage, and I know this is one that's kind of close to home for you. So maybe we'll go out with this idea of a chip on your shoulder. Why is that important?

I grew up single mom, Coney Island, Brooklyn, parents split, went through a custody battle. I had to live on a ranch with my Father in the middle of meth land in California for two years. I came back. I was more intelligent, or I thought I was more intelligent than some of the kids that I started, you know, going to high school or college with. And, you know, for me, growing up in a. I had four people in a. In a two bedroom, one bathroom house and. Or apartment. My grandparents and my mom and I resented the rich kids. And the rich kids, you know, had houses, you know, they had two stories or whatever. And then when I got to college, forget about it. Like, you know, I remember I had a friend actually who lived in Conyers Farm in Greenwich, and in college and I went and visited her house and, you know, you had. It was the WWF guy. His house was crazy. She's like, oh, yeah. I used to go, you know, on Sundays and we'd play with Ultimate Warrior. And, you know, I was just like, so jealous of this. And so for me, the jealousy in feeling like, you know, I had lost that ovarian lottery, so to speak, like, was a powerful push. And then you see other people who are just absolutely brilliant who had it way worse than me. And I want to give these people a chance. And so that, for me, just socioeconomically, was. Was a big chip. And I think that if you can identify that in entrepreneurs, they are often difficult people to work with because of it. They're irritable, they're irascible, they're opinionated, they're arrogant, and they have a lot to lose and they never want to go back to where they came from. But I find that no matter how much money or success they achieve that fire, whatever it is, it could be bad relationship with their parents or they were adopted or they suffered from a disease, but they have something. And if it's inextinguishable, that to me is like the most powerful source of fuel and progress and ultimately profit in the world. And, you know, I like broken people.

Well, as someone that definitely won the ovarian lottery, I'm very appreciative for the chip on your shoulder and for everything that you've shared with us today. So thanks. It was awesome, as I knew it would be. So thanks, Josh.

Thanks, man.