Ethan Kurzweil on Venture Investing in the Post-ZIRP, AI Era
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Hello and welcome to another episode of the odd podcast. I'm geo wasn't though .

and i'm Tracy alloway .

od lots listeners. You are going to be listening to a big recording of the podcast, one that we recorded from cscope.

Yep, that's right. This was a conversation that we had at the sentences O A mama on november twenty th. IT was an event sponsored by principal asset management and our guest is even than curse while the founder and managing partner of chemistry, VC.

Yep, we talked about all things tech software investing, how investing today is different than IT was, say, and twenty before team and rates are at zero. We obviously talked about A I and how that changes the game of software investing. Tagal ism thrilled to be here with the perfect guest you can curse.

While at his new fund, chemistry IT basically launched like three weeks ago or something like that. And prior to that, sixteen years at best. R, so literally the perfect guest to talk about, you know, we ceased the landscape changing over time or something like.

well, thanks for having me. This is actually the first episode de of anything we've .

done since we launched chemistry. So thought there is obviously so much, so much we can talk about, talk about the macro environment, talk about AI, we could talk about the political environment. We will touch a little bit on all of IT.

So i'm just gonna like a really simple question to kick IT off, which is in the twenty tens, you know, people talk about the desert pea, and some people even look on that period quite fondly right now. Installed, even know at the time, serve sort seen, is like this negative thing, sing that bad out here. Though strictly from a macro standpoint, you've been in this game, so to speak, for a long time. What's the difference right now versus save? We were having this conversation .

in twenty fourteen, the good old days of twenty four thousand. I miss those days too. I wh. We could go back. So right now, there's a lots of things happening in sort of the tech landscape broadly as well as like venture. And so maybe just taking a few around venture.

You had this era of explosion of different things with lots of different funds, new products, money being kind of invested in the asset class, beyond what IT could take beyond the capacity of those companies to absorb the capital and do good things with IT. I'm an optimist about tch invention. I think more is generally Better, but there's a limit to that think everyone would now agree kind of in handset, we went a little bit beyond that limit.

Now in this kind of new era where that happened, we're of digesting the impact of that of all this capital coming into the space. And you have this kind of new technology phenomenon, by the way, it's not really new. Yes.

maybe new as IT applied to start.

I've been hearing about ai. I don't know a few decades. Yeah like that .

talk about that .

will get there. But that's now kind of the building blocks are now there. The technology startups without a lot of capital can take advantage of IT. And so that's getting people kind of very, very excited again, even as everyone knows, is still this fresh memory and everyone's had of how we kind of over capitalized everything. And so those two forces are sort of countervAiling yeah and it's having some interesting impacts that I I think we'll probably get IT into.

We definitely will. The new fund why does the world need a new venture capital fund? Or if I was going to phrase IT more diplomatically like what is IT that you can do at chemistry that you couldn't do at best .

over the world does not need capital fun. That's the last thing .

the world needs was before I O we were .

oversupplied adventure capital. And but the world does need the right venture capital fund. And i'll get to why we launched chemistry in a second.

But I do think that the effect of the capital that came into the asset class over the past kind of five to ten years has been to create a little bit of a misaligned, a misaligned tween l peace that whose invest in venture firms and the venture managers and then a misliked with founders ultimately. And that's what got us to sort of passionate idea, to bring venture back to its roots chemistry, sort of a simple idea. It's a beautiful e venture firm, is small, is designed to scale very slowly.

It's that we are not a hyper growth start up even though we try to find those to invest in. We want to bring some sort of personal service back to venture capital. We don't have big teams of people that we are the portfolio services team that works kind of hand on, hands on with our small ups. And that ethos, we felt like was missing from a lot of the way that kind of as the asset cuts got institutionalize, ed, you lost a little bit of the personality and the personal relationships, and we felt like I didn't have to be that way. There's nothing bad about the way venture used to be practiced and that the really if just became so missing that we felt like, okay, we'll go do this.

Let's say I have a lot of money to whatever and i'm thinking you about locating money to a VC funder from that sounds really nice personal relationships, all that, but mostly I just care about getting returns. And let's say my assumption is okay. Yeah again, IT all sounds very nice, but our advantages to scale, there's deal flow that large firms see that you maybe they're the first call in some round or something like that. Why would that be wrong? It's not wrong, OK.

but it's not the only way to practice. okay? There is definitely advantages to scale, but I think IT comes at a cost of being able to focus uniquely on companies that at this inflections point moment, this printing lectionary where they're about to take off because when you have a lot of capital to manage, you're going to make decisions that aren't necessarily about how do I find that company that needs a three to seven million dollars check at that moment, you're thinking about how do I move with up, move the merchandise, move the money that I have in the system.

And so IT may be appropriate to make that investment, but IT may be appropriate to make a whole host of others that are across purposes with making finding the one defining company of that era. And I think for us that I have been experienced at working adventure firms and identifying the patterns that lead to that, we felt like we could pick those out pretty well and that we would have a good sense of where to spend our time without the resources and without the brand magness of other firms. And that is a small community. We could get our brand out there pretty quickly to folks that are used to identify in those parents and referring those deals on tests.

So I think you just finished your first fundraising was a three hundred fifty million.

three fifty million.

First one, what was the fund raising experience like? Now VS say a going back to the good old days .

of twenty fourteen. Ah, yeah, good question. So it's different to respect us because we were a new entity too. And so we had a whole bunch of vetting around hate.

What's our track record experience founders want to work with us because this old premise was on, we're going to bring the individual personal service back. We need to be able to say our personal service is good, like you want to work with the chemistry team because we're known for that. So there was a lot of vetting around that.

There were lp. S that felt like the other classes under delivered. Those were generally came into conversations, very skeptical and are argument to them and some of them invest, some of them didn't. But argument to them was, look, that's true writ large. But by having exposure to just the earliest stages of the asset class going back forty years, that at that phase of the market has always performed.

If you took a slice of the venture market and looked at just early stage investing, just the phase of typical kind of series a and serious be investment, maybe the medium fun has not performed that. There's always been outline fun throughout that period. If you looked at all of the asset class writ large, including all the growth checks, the leader stage investing sort of pri po rounds that came on that ask classes is really underperformed of the last five years. So we were sort of oriented around we give you exposure to just the early stages, and we don't want to do anything else. That's that's a we form the firm just to do that.

So there's no guarantees ever adventure, and we know there's outliers. But the basic idea here is that venture may be cynical or maybe structural, but early stage is not cynically in the same way that these the potential returns have been stable at this level.

If we make the we make the right number investments, we have to make the right investments and we have to get a few right, maybe is a little luck involved. But if we do that right, that will outperform. We won't water IT with bad of investments.

Later, let's talk about how to make good investments then because that's really what matters. Obviously, the twenty tens, the sort of cheap cloud computing and all the sas friends that made people fortune. How is evaluating a company today? And this is well, like I guess, the AI part comes in whether the company's AI specific or in sum level is going to be plugged into an A A I model somewhere. How does that make the process of evaluation evaluating a company different .

and IT makes IT radically different and exactly the same, all at the same time. So what what do I mean by that? Radically different in that the entrepreneurs now promise pretty incredible things.

You can talk to a system and get IT to code for you is something that three or four years ago you would sit like, sure, good luck with that. Like you need, you need some engineers on your team. You can now make promises like that.

But ultimately, the way we evaluating companies is thinking about the end market that they serve, the business user or the consumer and how are their lives made Better? How is this process improved if you're making a consumer video editing APP, how is that awesome for consumers to to use? And so you start with like the question of can the technology deliver what the entrepreneur says that's radically different? And then you step back to, hey, this good business opportunity or not? Is this something that people will play lot of money for that will be able to motives itself in some other way that's very similar to how .

we've always done the job? Is there a difference in the sort of due diligence process for A I verses you know old school sas?

Not terribly honestly. Old school sas often had a data element to IT that's somewhat similar to A I you know how they harness stated IT in the application. What's different now is you can apply a frame of reference of what's possible.

It's just much broader. It's just much more interesting. It's just much more potentially transformative to b business users or consumers. That's a little different. You might not be a skeptical about founders of ability deliver. There's this whole democratizing element to A I just riff on that for a second in that you maybe don't have to have the most ultra specialized skill set of engineer to be able to deliver something pretty transformative. And so if you back up from that and think about a new diligence process, you don't necessarily need to spend as much time questioning the entrepreneurs ability to liver.

And there is this maxim that, like most entrepreneurs build, what they want to build just is up the right thing and is the timing right with the A I R that you get that on stereo ids products can be built the way the entrepreneurs ys them now? Will they have the impact of the entrepreneurs? Still have that still a question that we have to answer when we make our judgments?

What's the differentiator in that case, if it's not necessarily about the skill set of the engineer, what is IT that makes you think an A I project is Better than another AI project ultimately .

convict to look what impact will I have in the market. I don't think about A I as a category so much. I think about A I is an enabler tech just like cloud, computer, mobile or mainframes back in the day or your data center technology. It's just it's just a way of building tech that can potentially allow an entrepreneur more weapons to be able to deploy. But there's nothing inherently like the end user that using a finance application or that using a communication APP, at the end of the day, they're using them up because they want to do something with IT, they want to communicate, they want to run their expense reconciliation process, they want to do X, Y, R, Z. And there's nothing different about AI that makes that any bit of a different analysis that we had before around was the impact that, that particular product is going to have.

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Wealth fargo, the bank of doing, see how IT wells fargo dot com slash they do well. Fargo s philanthropic support includes contributions from wells fargo and company alfaro bank N. A. And the well fargo.

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Today, we got in video earnings a company that people may have heard of and .

they were really .

strong and a posting ahead and have all the scarcity. When you're writing a check to a company today, you know one of the things that characterize twenty times just persistently fall cost of computing power when you're writing a check with how much of that today is going to pay some sort of in video attacks to have access to that? And how does that make the sort of capital decisions of a company or the types of companies that you're invested in going to look different than they were?

Well, there's an interesting and two countervAiling forces because the more of your check that goes to you, attacks like an NVIDIA attacks are an OpenAI tacks.

S.

are you built on some generally for us, is being built on a model. They're not using the sort of bear metal of of the GPU. There's puts and takes there.

But the more you invest in that, the more you've got your own technology that's more defensible. So a lot times we're seeing open stores. So a lot times, we're seeing not a lot of money go towards that, but they're deploying open source tools. If they are built on models, they're freely available to anybody. Until it's a question of can the founder, the entrepreneur, make a process improvement or product tize commercially available technology to everyone in radical, different unique text? Better way, so much Better a user experience, the deep tech founders who are doing what you're going, where a lot of the check goes to building the core technology, you have to believe that in the business outcome being so great that it's so it's worth IT. It's worth this huge R N D investment of this huge investment in training specialized models.

But just to be clear, you're so okay. The non deep test ones that are build using some existing models is the amount of money that is going to say an OpenAIr e o r s ome e ntity t hat a lready b uilt t he m odel. Is that fundamentally look different then say the expense sheet of a of another software company and twenty and four. And when they think about how much outside tech their brainpower.

it's not radically different for the ones that are the thin layer yeah the thin layer, the thin later ones are not that radically different. I think of IT as a small incremental tax on top of their amazon web services. Bit already be paying.

And the technology is so good, it's so performance is still a availed everyone that most of the companies we look at because we believe in the lean startups and most startups that can be built on that kind of technology will build on that kind of technology. It's not a huge tax and cost. The huge tax and costs comes when you try to sell IT and you scale up the go to market Operation, the cells and marketing, but the tech itself OK. There is only a handful of companies where that's a real barrier entry, and there are some .

just on this sort of big versus small point. I think one of the weirdest things about you know the sudden rise of AI over the past couple of years has been the fact that microsoft has been really good at IT, which I think you know three years or so no one would have expected going forward.

Do you think like who's gonna the best at this? Is that gonna the incumbent who now have a head start who have the deep pockets, the access to data? Or it's going to be know that leaner startups here may be experimenting with new things and building on top of existing models.

Our view would be at the foundational layer, like the model layers that a lot of people build on top over that we as consumers used for sort of our basic of chatbot style applications is gonna to the big players plus maybe one or two new entrance. And that looks like that game is sort of established. I mean, I don't know if you can't OpenAI as a separate company from microsoft, but that they're clearly around to stay and maybe there will be to others.

But that's not, in our view, a humongous start up opportunity because there's such amazing capital investments that need to be made there on top of of the how do we take that tech, take those abilities of the amazing researchers at OpenAI, aided by microsoft and others, have built and make IT useful to the end consumer into the end business user. I think that's where we're going to see kind of this new era, kind like we saw cloud computing, where there were a few early interest in hr tack and financial applications and things like that. And then this explosion of cloud computing applications that disrupted .

the states quo, the platforms that emerged to dance in twenty ten, just like exerted to vary degrees, but just tremendous locking for their client. And some i'm not talking in the formal legal sense or there maybe will get to this. But like but like the fact that is just like with someone without truly without competition.

And there's like this debate about like when IT comes to these foundational models, there seem to be there's a lot of entities, there's not thousands, but there's quite a few that can make incredibly impressive performance model. Some open source, some close source. Do you see any of them emerging with the same sort of like true lock in kind of dominance? Or when you look at the companies that you're funding, do they seem like issues like, yeah, we could use open eye, but also without too much trouble, we could switch to another provider. Fairly trivial.

I I think it's a really good question. I think the the rocket is not to disseminate from the cloud era where you could switch off of one cloud computing vendor from one to the other. But the word that many of them now in this year, there might be a few more.

And I think open sort, there's no open source cloud computing provider know someone to got a plug in the hardware air condition. The data center make the networking work with large language models. There are open source models that are gonna get to be pretty good.

And so I think that's another element here that's a little different from the cloud are probably allows a little more fluidity than even you have among cloud. But there's not going to be dozens and dozens of models because to be performing to be human like, be able to provide people with responses that makes sense, that have emotion, that really fulfill on the promise of what A I can do. There's only so much money that can there's so much money needed to that. There's not that many companies that can capital as on IT.

Setting aside the big foundational models themselves, what's the coolest application of A I that you've seen so far that sort of built on the big guys?

Well, the consumer applications, the companion are probably the cool is right. They're not very realistic and they're sort of getting up getting up there and they've start to emulate real people in the world daters.

I think there .

should be a Tracy, there should be a Tracy character APP that out there in the public. And could in fact, with google, with a google system, you can actually create a whole podcast from a notebook .

that some people have done.

Some, it's like a .

little is really important. I've listened to some of those google created. I mentioned this another vizard. I've listened to some of those, and they are not as good as me. Tracer.

but nothing could .

completely unbiased .

are not terrible like it's sort to disturb me because I I listen to to the the AI generated podcast, some document that the department of energy made and I like our shoot. This isn't that bad like it's not totally a boring. It's not a terrible way of consuming .

that content. So someone I know, I had to read an entire book and generate a twelve podcasts a on that book. And IT was, IT was, I totally agree IT. The person ality was lacking.

right?

IT was. And they tried to make IT personable and I just fell flat. And I think that's a little bit what's missing today.

but I will get Better. Yeah, not as good as you. I should.

We're do no other. okay. I'm just going to asked this question. You know, most people in this room have probably been talking a lot about A I for two years playing in this room.

It's three years in the rest of the country is probably about two years. You, as you eluted to have been probably thinking about A I some respect for thirty to forty years, tell us a little bit about your background. Having thought about this for at least three or four decades longer than the rest of us. And how does that inform when you make predictions? Now when you try to pick winners, how IT is forty years with the experience, inform your .

choices to fashion the book that the podcast that I just mentioned, this sorted. That was my dad's book. But my father, AI technology future, has been thinking about. I was about sixty five years what he would say in large language models for forty, because that is field to his pattern recognition. They take being able to recognize patterns and apply them to .

language was his first companies.

So I was debating with him. He thought I was great. And I said, I think the pod casters aren't t as good as Tracy.

And thank you. Now, your names, that sort of what I said. And that was the debate we had. And but they've got I got the substance right. Yeah but yes, to your question, A I and it's maybe made me both more excited about AI and slightly more cynical about this moment because has been around for a long time and now .

it's been so there been yeah.

and we will be in a disappointment about what I brings hypes cycle in about my bike calculations two point six months from now. Then we will come back at at a very precise estimate, and then we will come back out from that. And then I will start my house after four point three.

So what's the catalyst .

for disappointment? What's coming that .

some of the companies that have been hyped to fulfill on this promise of completely human like life, like understanding, reasoning abilities and emotion won't quite fulfill on that promise right away. And they'll have to wait another four point nine months for that. What longer a couple years?

I can tell how much this .

anyway you know what else is coming in about two months is a new administration. And yeah, it's kind of been in the news. You talk to lots of people in the VC space and you know the founder space, what are people saying about the incoming administration? Like what are the hopes, dreams, fears that people are talking about?

There's people that are promoted out there that advocated for this are four against IT that are know have their passionate point of view about why the new administration is good or bad at the kind of surface level data day. This felt like. okay.

You know there's a change coming and there's just not a lot of translation between that and the data day of venture capital because you know technology is force that sort of laws through mark applauses, through market cycles, technology administrations unless you're in a very highly regulated industry crippled off, for instance, or something like that. I feel like with my circles around you, how was I going to be commercialized for business and consumer? It's not an event that people are as focused on us, perhaps the most prominent .

personality. so.

Well, fargo s seeks broad impact in their communities. They are focused on building a sustainable, inclusive future for all by supporting housing affordability, small business growth, financial health and other community needs. That's why they've donated nearly two billion dollars to strengthen local communities over the last five years. Well fargo, the bank of doing, see how IT well fargo dot com slash, say, do wells fargo s philanthropic support includes contributions from well fargo and company, wells fargo bank N A, and the wells fargo foundation.

The forces shaping markets and the economy, often hiding behind a blur of numbers. So that's why we created the big take from bloomberg podcasts. To give you the context you need to make sense of IT all every day, in just fifteen minutes, we dive into one global business story that matters. You'll hear from bloomberg r journalists like that. Levine, a lot of this meeting, like self is, I think, embarrassing to the c .

follow the big take podcast on the eye heart radio APP apple podcast or wherever you listen.

I'm very curious about, like this sort of tech inflected side of this administration, the influence of eon maz j events having been a VC. But the really low hang through policy question is on the merger side. And there we don't know who's going to run the ftc.

We don't know who's going to run the D O J. IT. Certainly seems plausible, however, that the new administration will have a much more liberal attitude tours letting mergers go through. How much is just from a nuts and bolts steam point when you are think about returns, when you'll think about investments exits of various flavors, there's a big a sort of ninety degree turn, maybe one eighty degree turn on merger policy. Change your thinking.

not a time. But there is no question that the current administration, not just here, but in the E, U, in the U. K, where remember any global merger now to get through basically three anti trust bodies has been really a lot tougher than an administration we've seen democrat or republican in the past. So do you when you're getting when you're seeing with the entire getting excited about some big dreams or tech, are you thinking about what I wonder what lena cons thinking about, you know, the consolidation of the market for design tools that no, not at all. But is IT probably a good thing for entrepreneurs s options to be able to access their business and our business, which realize on that yeah .

probably reality of like the prospective and exit into machine design tools didn't like all the prospects of who would be a bear. Those kind of conversations weren't coming up at the earliest stages of a conversation with the non.

not with an early stage founder. Now with in a growth context, it's tremendously important because because we don't have the option to exit for billions and dollars, you can only go public. There's a pretty narrow set of criteria you have to meet to be able to go public.

So then it's a pretty material thing where a chemistry focused on the earliest stages, this technology going to get out and have an impact there. You just kind take a fire. You kind of assume that if he does that to be valuable in any kind of context, whether it's in a in a one or some other action.

So another aspect of the incoming administration is they seem to be crypto friendly. And i'm in a cop to question that's been submitted by the audience. But what do you think about crypto o in general as an investment? Is that something you're interested in?

That's one where the ministry probably matters a lot. I have been procris pt up for certain newscasts in the past thinking about what's the infrastructure layer needed to make ripped out a part of the financial system. And so that's the security, the protocols, the permission, the privacy of that kind stuff.

I think it's really necessary, as crypt is still such a wild west to wear, you have to be pretty deepened to benefit from IT. And so I still think there's that like bridge technology to make IT useful for of everyone in their everyday lives like you know the coin basis kind of wallet types suffer for everything else. And it's probably true, to the extent you can kind of read the teachers on these things, that the current administrations a lot more friendly at there, at least that's messaging.

How will that manifested? Delphin policy? No idea. But right now, a lot of people are scared at the space because there's a lot of uncertainty, ty, around IT.

Then the other element is just sort of the people in the orbit, you know, tech celera ism, exciting things getting to mars city. I said the mars questioned specifically a lot of IT seems very vibes based, and I don't know what policy levers any of that means in your view. Other other policy levels that could be pull that would be good for the american tech infrastructure or are not the industry?

probably? Yes, it's really hard to start a company, have to be successful, have IT. There's so many things stacked against you.

So what are the things you can do to remove all the unknown obstacles that might come up beyond the really hard ones of like will you deliver the product on time product? Can you deliver IT for a reasonable cost? And we'll have an impact on the market.

The regulation that kind of is another curve ball that you might have to answer to. That's an impediment. That's a blockage that serves at the cost of innovation, for sure. And so I think what probably has an impact, just maybe using crypto as an example, is clear regulation and lack of uncertainty where you have a sense of what are the rules going to be. Not that will apply these archie tests, and we don't know exactly how the court will interpret IT, but like exactly do these six steps and you'll be fine that taking out any uncertainty that's beyond the sort of Normal start up risk is a good thing for invention.

Uh, another question from the audience. I mentioned that obviously we've been talking about AI law and you talked about the disappointment and redemption cycle. Are there any other uh, decent tech areas or growth areas that you are excited .

about beyond A I, yes, think it's one beyond the AI rebeca. Let me think about that. I mean, I think the democratization of tech broadly, this is aided by aba, not principally the fact that a Normal business user are even a consumer, can now create an intelligent system, can doesn't have to be a coder necessarily to be able to write a complex kind of logic flow and be able to build build an application or a messaging to all or something for a business context. I think that's pretty powerful.

I mean, I ve always been interested in the democratization of tech like even cloud computing had a democratizing impact because you could give lots of people logging to a system and let them have impact even if they weren't technical. You could let people have edit the flow on the website, personalized a page, be able to engage with their customers directly on the website without having to code anything. And so I think there's a democrat to sing aspect of the internet of cloud computing.

A eyes are part of this. That's gonna more people, the ability to be more creative. And that's going to have a kind of second order to impact on just the kinds of things were going to be able .

to do even for like little knitter audiences for do you see yourself writing checks to companies that are making apps for virtual reality goggles.

for virtual ity?

What goggles possibly .

is that I write one before virtuality.

The S. S. virgamen.

Be a thing. Messaging, communication, working, virtual ality. Before I was eventually capes.

I worked in london and stuff. It's not a courtheuse for us, a chemistry. So odds are we want, but i'm open to IT.

Sorry, just I had a flashback to the time when you thought electric scooters were at the future of china.

There's so great.

I ve I just I love of the electric scooters, although it's a lot of the future.

So I just got this. I'll be now I forget what I was that that we came out here and I was like, oh my god, lime scooters are going to change the world. But for me, like i've take its way mo this time and like i'm just so completely way more pilled ah i'm just going i'm just it's just so amazing don't never I never once a king huber again.

The wall of the way more experience is greater than the wall of the good or yeah, there's less risk of death. Well, I mean, maybe if you think the way on my crash.

but they don't know what. So if I felt so good and actually I over today and IT felt worse, and like that was IT IT was a worse experience. And now when I go back to new york and take a uber, it's like going .

back to the land of flight.

you to move out the okay.

So when IT comes to A I one of the one of the debates let's been going on is like, what do you invest in the actual AI companies or maybe you invest in sort of picks and shovel and data centres and things like that? Is that like on your radar at all? Or do you this is a question from the audience? And a minimum, do you look at, for instance, investing in new technology that could help AI manage energy usage or something like that?

Yeah, I think there's a lot like second order x of AI that we can make investments to make Better energy use of being one of those are helping create the primitives to allow developers easier access to some of the more advanced functionalities of AI. There's a whole side theme that maybe or thought going to your question around the provence like how you don't really know what data has been input IT into an AI system is relevant to your answer. So I could have stolen some content could like who knows what trained IT to provide you with that particular thing that is said and so there's a whole side theme of like, okay, how do you make that OK for the for the people that the actual IP that that A I was trained on so that's another kind of IDE theme of A I that interesting.

So managing the IP.

managing the IP, the rights of that, the privacy that you know you might for a base level one in a AI trained on, you know, a core POS of data that's pretty basic, but then know the teller sweet of data, the really advanced IP holders you want to pay orbit than you want to get some of the money to the people that created that IP that made that I A I even Better. Actually, that's hard to do right now, but maybe not yet solved.

I wants to go. But actually you are saying about, how have you thought about in your life A I for four decades, that in some ways that makes you more optimistic because as you see, like the grand sweep, but also at least a temporary sort of cynicism, because you know that AI winters. existed.

It's very plausible. And you know there's all kind of stories about know running up its current limits of scaling and over. Can you tell us a story about what was the past A I winter that happened? What was something that at some point, people like how we got this, this is moving, and then they ran into a wall. And what's a lesson that can .

be drawn from speech recognition was probably at a war where people thought, AI you be able to talk to A I? yes. What was the in the night? In the night? I was one, one of the ara.

I don't. My father was involved, but in fact, he named one of his companies curse. While A I and A I stand, stood for applied intelligence, not artificial intelligence, because there was a bad word to say, A I, and have mean artificial intelligence, because IT fell, he was under delivering on an artificial intelligence. IT was more applied than the AI that we think of today. That was an aware.

And then just like the moment they like old, this is not growing or scaling or improving the .

way we people forget. And then something that that counters that counterfactual comes out and then everyone kind of hones in on that. And that period where people are forgetting about IT, that's the tough of disillusionment, where the beginning of that is the trough of disillusionment period, where there's a lot of prognoses about how this technology didn't deliver, then people forget something does deliver and then move on to a new cycle and the expectations get high again, that probably can't be met.

Are another question from the audience, also sort of a trumPeter lady question, Polly, market and other prediction markets, do you think those are like in for well, where they going?

That's a really good question. I don't know. I mean, I think that probably I believe that system had the best way of taking stock of kind of all the you known universe of information that was out there distilling IT down into a, okay, what does that mean for a particular van like the election?

So that's kind of cool. Now is IT illegal? I don't know what sounds like. Maybe not because somebody's .

going in a jail, but not going to jail. No.

somebody might face criminal .

prosecution about IT easy for an american to use IT, which is not seem like it's .

supposed to bright. You know, people having real money on the line does create A A more pious system that is sort of hard to replicate with any other any other approach is similar to how the stock market sort of works and in theory, gives you the the right Price of every particular asset that's listed. So I think for prediction markets that, that incentive is hard to replicate any other way. But should there be prediction systems? And there is a policy question that I I don't know.

Speaking of prediction markets and the sort of a broader philosophical question as well, that we live in an era of people betting on everything. In one one aspect, I think, of people sort of betting and speculating on all kinds of things is that IT seems to me that the sort of VC mindset of you want to just have a couple of gigantic winners and get that big score is spread to the non VC world, right? And people really look for those right tail opportunities, both in investing in stocks, their careers. There seems to be a sort like is do you perceive that the sort of VC world view has stepped out of the VC realm and sort of, I don't want to say infected because that is like a bad word, but is a transl VC.

Now that's exactly .

one hundred per way. A hundred percent .

when you're pointing out is true. And i'd be interesting to do root cause analysis like our way to blame for that. Um but first, as is that a bad thing or not, it's certainly happening.

And I think the cause of IT, I would say, is, well, this probably a number of kind of psychological causes, but there's been this democratization of access to private assets that happened over the last ten years too. We have talked about either where rather than trading used to be you traded stocks, then IT was sort of you could trade ipos. Now there's some access for main street consumer to private company assets as well.

More typically, venture voted and there's investor protection laws, but not it's the move has been to more and more and more democratization. And so the VC way of thinking is just seeing into more things, is that good? Is that bad? This probably present coat.

A lot of people here probably want to know how to spot winners in the market, but part of this is about avoiding losers as well. What's your best tip for spotting, I guess, are finding, identifying for in .

tech well, on the wrong person to asked because we back as a good even as good venture cap as we back so many losers like it's just an occupational hazards of the job. Now you ask about froth though, and so that's the sort of like perception disconnected, like what what's the reality of a particular attack? And I think you have to go to the source.

You have to see that what what impacts is having not are what are other people saying about IT? What are these kind of second order effects? What is does the entrepreneur look at the part in somewhere? Or are they kind of playing a role that makes their impact him about what's the impact of the technology and kind of like have blinders on for the noise is out there in the ecosystem because that's another impact of everyone know more and more VC like thinking is there's more and more hype around really exciting tech, some of its real, some of its froth.

We talked about this earlier, the fact that there are not terrible podcasts that are produced by AI and now IT does caused me as a professional power. Caister like IT causes me anxiety.

But like this is the other sort of big question, this sort of future of labor question, in a world where A I gets Better and Better, and like, what are we as humans good at? I mean, I so with that, what are we? And i'm talking now, just like in the next year or five years, but like to twenty years or fifty years.

And I know your dad made predictions that were fifty or sixty years out, so you probably think I wouldn't. I imagine you also have, in your mind, predictions that are fifty to sixty years out. And so when you think about like, what are humans good at? What are we are going to be good at?

People say the same thing of VC. By the way, I happened for many years. Yes, like assist, you'll be able to put this date into a system and they'll be Better .

and and you can do IT for stocks yet, right?

I probably at some level, there will be systems at eight people, but I still think what tends to happen. I'm not the fifty, sixty year out. I'm the sort of five year out.

Okay, I think but let's go with that time horizon. Yeah, it's we tend to as humans kind of move up the stack, we still have to do the creative work. We still guide the AI systems. We still to start a harness, the tech that's coming .

out of them figure out how to apply. So we can just put in more energy into our systems like we just going to like fall further. I think we'll .

still stay on top of the systems. Do I tell the systems to do? Like what chAllenges do we want them to solve? What's the problem space?

Do we want them interested in? What success look like for these systems? I think there's like there's real work that but we move higher, higher up and we do less of the ground work. That's the the sort of pattern as is exist has it's been .

existing today. So we've been focused on software for obvious reasons. But when do we get the good robots that can do the terrible jobs? Like I don't like the future where A I can do a podcast and write songs and poetry and all the fun stuff, but I still have to vacuum .

and fold lambot vacuum, okay, right?

They can fold the lake.

I don't know. I mean, there I have seen some systems now that they have sort like robots vicini human like characteristics and walk upstairs and Carry things and you know pick things in a warehouse. And so because it's hardware, there's less of an exponential to that.

So it's more are blocking and tackling around the sensors. And what's the cost about particular parts that go into that? But cars now drive themselves.

So that's a big step, changed what we used to have drive themselves and like difficult environments of rain. And so it's coming now. How soon in which industries is are gonna hit? That's a hard one.

The first question I asked you is like, how is a venture different today at twenty and twenty four first twenty four teen? And you gave a good answer. The question I asked, but actually a mental just asked you about what the impact of five percent interest rates were specifically verse zero.

And then I asked a very vague question, but I am curious about this sort of the strictly macro elements. We're also in a weird moment because rates have gone up, but the naas deck is at all time hides and IT seems intuitive that private company valuations have some tethered to public company valuations either by dt of being acquired or by ipos. Is there a difference though, just from the sort of macro government RAID side that affects you're thinking today verses zero percent rates? And twenty four in theory .

should be a lot harder, yes, because there are so many more internatio for where to put your capital these days that are appealing. There's macro big tech that's taking advantage of a lot of the transit t we're talking about not just startups and there's risk for free treasury bond.

And now countervail that with all this excitement around A I and you kind of have the current moment where IT should just feel like a sort of post two thousand error bubble, that's what I should feel like a take the like financial flows. That's where we should be. And we're not because there's just excitement of a White technology can do in the cycles are getting faster and faster. It's like you don't feel like it's ten years away now it's it's .

like almost here eating criswell. Thank you so much. That was fantastic, and I really appreciate you during this life all about.

Thanks for having this is fun.

And that was our conversation with even curse while founder and managing partner of chemistry V C.

And a big thank you to everyone who came to this live recording. IT was a very rainy evening in safran, cisco, so preciate, so many people coming out and a big thank you as well to our sponsor principal asset management for making this possible. Joe, should I leave at there? Let's leave there.

All right, this has been another episode of the all sorts podcast. I am Tracy l way. You can follow me at Tracy .

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