#81 Jason Calacanis: Intelligent Risk
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Really, what angel investing is about is you're playing at a game where the implied odds are beyond what exists in the normal world. So then you have to reconfigure your brain and your brain chemistry because you can withstand 50 losses, 100 losses, and make up for it with the 101st that pays off 200 to 1.

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You're a high stakes poker player. Can you talk to me a little bit about what's going through your mind when there's a lot of money on the line? Yeah, I play higher stakes poker these days. I started playing poker in New York with my friends at a place called Forlini's down in Chinatown, an Italian place below Little Italy. We would just buy in for like 10 bucks and people would just get drunk real quick and

People didn't know if a flush was better than a straight, but over time I went from bigger and bigger tables and learned a lot about trying different styles of poker. And so I made a lot of friends in the poker community. I'm good friends with Phil Hellmuth and back in the day, Annie Duke, and really just love the game and what it teaches you about taking risk and what's an intelligent risk. And it's very analogous to angel investing in many ways and also not. It's a very interesting way to,

to learn how to take risk and to read people and to understand situations with a little bit of math involved, which if you think about what I do for a living now, angel investing, it's very analogous. I have to read people. I have to take risks. I've got to take intelligent risks. And I only make money if, you know, I'm taking risks on a very consistent basis, right? Poker, people have this idea that like,

you know, there's this big advantage people have. Sometimes in poker, you know, people have a 51 to 49 percent or 60-40 advantage, but they're playing so many hands of poker over such a long duration that that little edge adds up over many hands, right? And that's why you see sometimes, you know, the world's greatest player like Phil Hellmuth losing over and over again because, yeah, he might be 60-40 versus somebody which,

over time means that person's going to lose millions of dollars to him. But you might not see it in a particular hand or in a particular five-hand run or a 10-hand run where two players are playing against each other. Let's double click on that for a second. How do you get feedback then when you're right or wrong? Because you could play the hand perfectly and still have a bad outcome. Yeah. And that's why when Trump was at 15%, I made a bet with my friend that Trump was going to win

Because and I think a lot of people were shocked when they saw, you know, oh, Trump won. He had 15 percent or, you know, whatever. Five thirty eight was like, is that the name of the website that does the statistics? I think so. Yeah. Yeah. And they're like, oh, my God, Trump won. He only had 15 percent or is only 20 percent. It's like anybody who's ever had aces and had them cracked.

knows what, you know, how often 20% actually happens, right? It's like one out of five times it does happen. That's where tilt control comes in. And you've got to be very careful to understand when you've played bad or when you've played good. And that's why recording your hands and writing them down in your iPhone or whatever during a session or replaying the hand and understanding the mistakes you made and being super critical of yourself is

is really important. And I think that's a skill that very few people have. They remember their wins and then they get this survivorship bias of like,

They hit a two-outer, and they're like, I'm a great poker player. And it's like, well, you had a 4% chance to hit that card. You're not a good poker player. You got your money in bad. Or I got my money in good, and the other person hit their two-outer. They had a 4% chance. I want that situation every time, even though I just lost $10,000 on that hand, right? And so when you put money into the equation, it really does change when you have skin in the game. It really does change people's

And that's why you'll see the really good players try to kick up the stakes constantly because at a certain point, people's brains kind of tick over and break. And they're like, oh my God, this is a lot of money. And once you have somebody thinking, this is a lot of money I'm risking, their game just collapses and it becomes predictable because they start taking less risk and then they start playing tight. And that's why I've always loved to play well below my means and not have the amount of money

change the way I play. And I, and I opt out of like very big games. I was invited to all the Molly Molly's games in LA. Cause I was living there at the time. And she used to invite me to all these games.

And be like, at the Four Seasons, oh, Leo's here and Toby's here and they really want to see you. And I was like, they really want to see me lose 30 grand. They don't want to see Jason Calacanis. Give me a break. But, you know, they were playing very high stakes poker. And I think they were trying to get people uncomfortable and, you know, get an edge. And poker is all about having an edge. And when you're at that table, you're looking at the other players saying, which team?

Which two players are better than me? Which three players am I better than and which three players are as good as me? And you want to stay out of hands with the players that are better than you and you want to get in hands with the players who are not as good as you.

at least everything I've learned. How do you develop that edge and how do you know what your edge is? Yeah. I think being super self-aware of not only how other people are playing, but how you're playing. So how do people perceive me at the poker table? I think about that a lot. How do people perceive me as an angel investor? How do people perceive me in Silicon Valley? And then what advantage do I have in that perception of my role here? And how do I lean into that? So

People generally would look at me as a very conservative type poker player who cares about the money, which means if I take the time to bluff or I fold a lot, people expect me to have it. So when I do bluff, my chances of successfully bluffing go up, but I might be laying down a lot of good hands. And what I've learned in poker is really it's about when you get up from the table because if everybody is relatively similar in their ability –

What I see a lot is there's people who like to lose. I know this sounds like a really crazy concept, but there are people who are gamblers who love the feeling of being down. And if you've seen the movie Uncut Gems, have you seen it yet? No. Okay. So Adam Sandler's Uncut Gems is a masterpiece. It's very uncomfortable to watch if you're not a gambler or you don't know somebody who's a degenerate gambler. But it's about a degenerate gambler, and he has the disease where he loves to come back from being down.

There are people who, if they're down $100,000 and they come back to zero, that's more rewarding to them than getting $100,000 up from zero. Oh, wow. So let me say that again. Digging themselves out of a hole is a better feeling, more rewarding to their dopamine receptors than being up 100 from zero. And I know a lot of people like that, actually.

And it really is about when you leave the table. And so I did this when my wife was asking me to explain to her gambling. I was like, oh, let's go down to the roulette table. I'll teach you what they call it, the Merringold system, where you double your bet every time. And I took out a $100 bill. I said, where do you want to go to lunch? We were at the Wynn. And she said, I want to go to the Dim Sun Place. I was like, yeah, perfect. That's what I like. And so I said, OK, look at all the roulette tables. Which one has the most number of reds in a row? And she's like, that one has six. And I was like, OK, so that means nothing statistically.

because every chance is 50-50, right? She's like, obviously. She's smarter than I am. So I said, great. We're going to put it on black. We always bet black. So I said, put $100 on black. Boom. We win. Take the $100. Go to lunch for free. She's like, this is great. Let's do it again. I was like, okay, calm down. Then she's like, where do you want to go to dinner? It's like, oh, this Chinese food place with the Peking duck. I know that's your favorite. Let's go there. I said, great. How much is that going to cost? She's like, it costs like $200. I said, great. Let's go. Boom. Put down $200. Lose.

Boom, put down 400. Lose. Boom, put down 800. Win. And then we go have the Peking duck. And she said, well, why don't we just put down like $5,000 and pay off the mortgage or whatever? This was 15 years ago when I had a mortgage. And she was like, I was like, you see that it has a limit on the table?

And she's like, no, I didn't see that. I was like, yeah, look at the table. That table is a $5,000 limit. That's so people who are doing what I'm doing are not allowed to do it. Because if we're going to flip coins all day and I get to pick when the game ends, I'm going to win. Right. Because I can just weather the storm. And they know that. And they'll just not book your business if you do that. And I did this once with my friend at the World Series of Poker.

And I said, I'll buy lunch. Let's just go do my system. And I put $100, $200, $400, $800, $1,600, and I lost five times in a row. And obviously the odds of that are extremely low, but still very possible. Then the pit boss comes over, and then another pit boss comes. There's two of them. I didn't have $3,200 on me. So I said to my friend, give me all your money. He gives me $3,200. And I put it down, and the pit boss just leans over, whispers into my ear, and goes, that's the last one.

And I was like, oh, God, this is how it happens, right? I'm going to lose six in a row. And I win. To win $100. You know, like net $100 at the end of the day. And I felt like such an idiot because you will lose six or seven hands in a row and get your ass kicked and hopefully not have your hand broken by a hammer in the back room like in casino. Yeah.

So how does that transfer to angel investing? So angel investing is very interesting as a pursuit because unlike playing at a poker table where the most you can win is the most you risk, right? So if we're at a poker table and there's 10 players and everybody's got $10,000 in front of them, the most I can win if all 10 players went all in is everybody's $90,000. So 10x, right? Now-

If I told you there was a casino where not only could you win all the chips at that table, but all the chips at every poker table in the world that played that day, might that be interesting to you? Well, that's angel investing. So an outlier like an Uber, for the people who are in the seed round, paid off somewhere in the range of $4,000 to $5,000 X, not percent, X. And it's important to pause on that because every time CNBC talks about, if you invested in...

Amazon at this round, you would be up 1,200%, right? Like, okay, 1,200%, not 1,200X. The outliers are so ridiculous in angel investing. If you happen to hit one, I could not invest in enough startups to negate my investment in Uber, right? When you hit one of those. Now, will I ever hit another one? It's probable that I will not. But will I hit another 300X, 500X, 1,000X? It's probable I will if I keep up at this pace.

And so really what angel investing is about is you're playing at a game where the implied odds are beyond what exists in the normal world. So then you have to reconfigure your brain and your brain chemistry because you can withstand 50 losses, 100 losses, and make up for it with the 101st that pays off 200 to 1. But our minds are not designed to

to deal with that amount of bad news, that consistently. And the bad news when you're angel investing is the founder coming to you possibly crying, possibly in a very dark, depressed state saying, "I can't believe this is going to fail. I told everybody this was going to change the world and I was going to build the next Google or Facebook and basically I'm a fraud." And you have to be able to weather those storms and say, "No, no, what you did was an experiment and it's a failed experiment.

Take six months off, come up with another experiment. Let's run another experiment and see if we win on that one. And because I changed my perception of investing at the earliest stage, you know, I'm talking when the company's two, three, four or five people and they've got the product in market for two, three, four weeks or months. I look at these as experiments.

When the companies get to 10 to 20 people and 500 to a million dollars in revenue, then I look at it as an investment. And that's freed me from worrying about a failed experiment. If we were trying to cure cancer here and we had a thousand failed experiments and the first and the thousandth and one cured cancer or a specific type of cancer, be like, let's do it again. Who cares? Keep going.

And that's where you have to change your brain chemistry. And the example in poker would be, could you withstand losing 100 hands of poker in a row over five days and then get to the sixth day and have one of them pay off 200 to one? I don't know that most people would want to play that game. And that's why I play that game. How would you judge the quality of investing if you were to take away the outcome and you could only look at it at the decision point?

Yeah, that's a difficult one. A lot of people like to profess to be like great pickers of companies. And I've given a lot of thought to this and what is the cognitive bias there? Because people tell me like, oh my God, you're the greatest picker ever. You picked Uber and Thumbtack and Robinhood and Wealthfront and, you know, Calm. And then I look at them and I'm like, yeah, but what about the 190 other ones I picked that didn't become that, right? And so this survivorship bias there is great. You start to think you're a great picker.

When in fact, it might be geography and timing more than anything. I started investing in 2009 during the Great Recession. There were very few entrepreneurs then. And if you are an entrepreneur during the Great Recession, you were a masochistic, true believer, and resilient to a level of Elon Musk and Travis from Uber. You had to have that level of resiliency. In other words, peak resiliency and peak desire, commitment.

And most people don't have that. And so really, I think a lot of my success is the network I had built, the location I was in, California, and the timing starting at the bottom. It'll be very interesting to see what the cohort of investments I did in the last five years when I was a better investor, I think, with better knowledge compared to the first five years when I was a neophyte, but the timing was better because the market was on the floor.

I want to get into a little bit about how angel investing has changed since 2009, but talk to me about some of those lessons you learned as a neophyte that if you could pass on to other people, would be helpful for them to hear. Yeah. I mean, number one is, if you can, wait until the product is in the market and talk to a customer. We all, if we're positive people, if you're attracted to angel investing, you're probably an optimistic, world-positive believer, right? Yeah.

And so somebody tells you a story, an entrepreneur, and you're like, that's a great story. I could actually see this working. Now, that story might be correct, but in most cases, the story is going to turn out not to be correct. 70, 80% of these investments go to zero.

So every time I hear the story, I'm like, okay, 80% chance this is zero, but do I want to make this bet anyway? And what people don't realize is if they just waited six months until the product was in market, then they could talk to a customer. And when the customer says, I love this product, then the customer is not the founder's cousin or former sorority sister or fraternity brother or former employer. It's like an actual customer.

Now you've reduced the risk 90% because the product made it to market and there's a customer. There's at least one person who likes this product. That's number one for new investors. Now, if you're a more seasoned investor, yeah, maybe you could dip into pre-product market fit, as we call it. But the other big mistake angel investors make, let's say they have a bankroll of $500,000. They invest $250,000 in a company.

The company never gets the product to market. The founder asks for another $100,000, they give them $100,000, they get it to market, nothing happens. The founder asks for another $100,000 to market the product or go for another six months, they give them another $100,000 and they blow $450,000 and they go, "Wow, angel investing is stupid." What you really need to do is bet small while you're learning. This would be analogous to poker. If you're at poker, you wouldn't go into the high stakes room, you'd play at the lowest stakes tournament for $20, get the most value for your dollar and learn.

as opposed to the $20,000 buying game. And just make, in the same analogy, a $500,000 bankroll, I would make 25 $2,000 bets, put $50,000 to work, and then out of those 25, look at the top five and then say, okay, I'm going to allocate $25,000 to $100,000 into the top five based on their performance. That would be a much better way to shape your bets, which in poker...

shaping your bets has a couple different meanings but let's just say seeing the flop you know getting yourself a little more information on the strength of your hand and the strength of your opponent's hands would be a good idea so bet small see a lot of flops and then continue to bet on the flops that are the strongest for you and conversely you know likely the weakest for your opponents are you betting on people ideas companies like how do you think about that

Yeah, I mean, ultimately, you're betting on the person's ability to not quit. That is the number one killer of startups is people quitting. If you are betting on somebody to take on a major, majorly difficult task,

The number one killer is that they give up. At some point, they tap out. And most people think it's because the company runs out of money. That's actually the second reason a company shuts down. I've seen companies where the founder refuses to quit even though they've run out of money. They tell the staff, hey, we're not going to pay everybody for two months while we raise this next round. If you want to do that, you can stay on. If you don't, we understand you can quit, but we're going to keep going if you can.

So that's number one. You're also betting on their ability to execute, what kind of craftsmanship there is in the product, what kind of ability to build a product that delights customers. And then, yeah, of course you're betting on a market, but these market-based investors, they tend to be the MBA types. They're analyzing the market. And it's really a fool's errand because the truth is the outliers, which is what I'm going for, the market is hard to define. So when you asked Bill Gurley early on about Uber, he said,

And he built models. He wasn't just looking at the cab business. He was also looking at renter cars and car ownership. And actually, in fairness, I don't think he was even considering car ownership. None of us were in the early days of Uber, considering that people would go full Uber and get rid of their cars and just take Uber everywhere. That was not even on the roadmap. The initial product, people thought they were competing against Lincoln Town Cars, the high-end car service.

Then they thought, okay, they're competing against cabs. And so all the models built were against those two things. Then you started to look at it and go, well, you know what? People are not buying cars or they're getting rid of their cars and just taking Uber. Okay, that's completely different. Oh, this is replacing public transportation for some people. Oh, wow, that's interesting. Oh, this is replacing renting a car at LAX, which is the most painful thing you could ever experience. Oh, this is amazing. This is more than just...

Lincoln Town cars or cabs. And Airbnb is the same thing. There's more Airbnbs, I guess is the famous statistic, in Paris than hotel rooms. And the Paris hotels didn't go out of business. So the best products induce a market to manifest itself. The market for a meditation app and the TAM of meditation, when I invested in Calm six years ago, five, six years ago, when nobody else would invest in this company, or very few people, the TAM of meditation apps was zero.

There were none. People didn't pay for meditation. People didn't know what meditation was. People thought it was kooky. Mindfulness, they thought it was kooky. And now LeBron James is the spokesperson for Calm, and there's millions of paid subscribers, and everybody's releasing a meditation and sleep app. So you have to, I think, if you're going to be great at this, not try to be a coward and

hang your hat on the market size. I think that's what cowards do. I think what you have to do is look into the eyes of the founder and determine if they are going to give up or not, and look at the product and talk to the customers and say, hey, do these customers actually love and use this product? And that takes work and that takes skill. And then finding some ridiculous, you know, TAM statistic on some website or some statistical article that mentioned some Gartner group number or something,

you know, that's the like cheap way out in my mind. Let's double click on that for a second. If I were to like open up your brain and look at the source code for how you determine if a founder is going to give up, what would that algorithm look like? Well, I mean, I have a bunch of like secret questions like, hey, what else are you working on? You know, you ask Elon Musk what he's working on and it's like,

I'm on Tesla Tuesday, Wednesday, and then I fly back to SpaceX on Thursday, Friday. That's what he told me back in, I don't know, 15 years ago. And if you asked him this week, he would say, yeah, well, I'm at SpaceX on Monday and Tuesday I fly up to work at –

Tesla, and then I'll come back either Wednesday or Thursday, depending on the needs, and get back at SpaceX. It's the same thing. He is super consistent. And then what else are you working on? It's kind of like nothing. He really tries to focus in on his projects and actually deprecate anything else. And so that's the singular focus. When you saw Travis sell all his Uber shares, I wasn't surprised. He got off the Uber board. He's 1,000% focused on Cloud Kitchens.

He needs to be. That's the sign of a great founder. If you ask a founder, like, what is she working on? Like, oh, I have a nonprofit and I'm doing a conference and my podcast and this and that. It's like, okay, well, they're not going to be successful at what they're doing. I mean, unless it's a podcasting company or conference company, then they will be. But that sort of like distraction happens.

Or you could ask, hey, do you have any other ideas or are you going to pivot this? And why are you doing this as a great one? So why this idea? Do you have any other ideas? I mean I've had people say, tell me their other ideas that they're considering. And I'm like, so you're asking me for money for A, but you're considering B and C. OK. You should figure that out for a little bit before I give you money to pursue it.

And it goes back to the, you know, will they quit kind of thing. And you can also look at their past. Like if you see them like, yeah, my last company, I worked on it for five years and it amounted to nothing and we shut it down. Most people are like, oh, wow, you're a loser. And I look at it and go, wow, you're resilient. You're hardworking. You're dedicated. That's what I'm looking for. You know, because these businesses take a level of focus and commitment and

That is otherworldly. Like the fact that people are even talking about life work balance and, oh, you know, you can have life work balance and that's what's important in life. Like these are people who don't understand exactly how startups work, I think, sometimes. Or they're looking back on their life after they've succeeded and saying, I wish I had more balance. Right.

without ever considering, like if you did, you might not have gotten there. Let's dive into that for a second, because that's one of the conversations that sort of happens on a regular basis in the internet that- Oh, so exhausting. Yeah. Talk to me, like share your thoughts. Well, there's a big flare up and it triggers a lot of people. And I think it triggers people because of their childhood. And you can tell that this has to do with more than just

the topic at hand by how triggering and insane the responses are. But there's a whole religious war that's been going on for 10 years. I had David Hanmeyer Hansen from, I forgot the name of the- Basecamp? Oh, Basecamp, Basecamp, yeah. Yeah, I forgot the name of it because it's no longer the biggest player in that space. There's other people like Asana who've built much bigger businesses.

But they decided they wanted to build a profitable lifestyle business. And when people say lifestyle in our industry, they don't mean that as degrading. They mean it as it's going to be a great lifestyle for the founders who are going to make $5 million a year or $10 million a year and just sweep massive cash off the table. That's a sick lifestyle. As opposed to you're going to make a bunch of people rich by having an IPO and you're going to swing for the fences, right? So anyway, his position is people work...

I don't need to work that hard, which is like, I think that that position comes sometimes from people who struck oil and they're like, oh, I'm sitting on top of oil. I don't have to work hard like Saudi Arabia, you know, or I found all these minerals in the West part of the country, like Australia. We don't have to work hard. We can just rip these minerals out of the ground. If you have one of those businesses, of course you don't have to work hard. You're just selling something under your feet. Whether you made it or not is inconsequential to the point of you struck gold.

And so for people who struck gold to tell everybody else who's an up and comer, you don't have to work hard. It is just farcical, right? So I don't know which cognitive bias this falls under, but they're correlating, you

Their success and then telling everybody else that it'll just be successful, don't worry. Well, what if there's competitors who are going to put you out of business? What about the 10 companies that tried to compete with Uber and Lyft who are no longer here? What about the 50 companies that tried to compete with Microsoft that are no longer here? Or the 1,000 companies that tried to compete against Apple on the smartphone space?

It triggers people because they're probably thinking about their childhoods and they're probably thinking about, oh, my parents didn't spend enough time with me. My daddy or mommy didn't spend enough time with me and that hurts me. Or maybe they're looking back at their life and saying, I worked really hard and I didn't have an outlier success. Therefore, I worked really hard and I gave up and I sacrificed for nothing. And so there's all these weird emotions in it. What I can tell people is there's a correlation behind your effort and skill set and your outcomes.

And so if you put in more effort and you gain more skills, you will have a better outcome. That's it. And so I think if you love what you're doing, work hard. If we look at a Navy SEAL, if we look at an Olympian, if we look at Draymond Green or Kobe Bryant, rest in peace, and other outliers who had work ethics that were insane, these people with incredible work ethics –

nobody's criticizing them for what they're sacrificing because it looks like they're having a good time. But we have business people who are having a great time doing what they're doing, and there's nowhere they would rather be. And if they put in 60 or 70 hours, they're workaholics and there's something horrible about it. This is a very personal question that people have to answer for themselves. And I think the people who are holier than thou, a lot of times—

They're kind of pulling up the ladder behind them. I see some people who are very successful and I knew them 10 years ago, 15 years ago before they were successful and they were working 90 hours a week. And now they're like, I made it. You know what? I didn't have to work that hard. So you shouldn't work hard. It's like, kind of lame. There's this weird thing about, I don't know if it's a bias or something, but we try to make success look easy. And as you were saying that, I wonder...

How much of your view do you think is informed by your childhood and sort of, I think you grew up poor and you struggled and like how much of that factors into how you see this? Well, yeah, I mean, a lot. And so, but, you know, I've kind of figured that out in my 20s and 30s, like, ah, why am I so driven to make money? Oh, we didn't have any. Why am I so driven to have power and

status. Oh, I had none. So I didn't grow up dirt poor. We grew up lower middle class. And my dad had a bar. So at least he was an entrepreneur. But it got taken away from him when he didn't pay his taxes during the 1987 big crash. And that was particularly painful. Your dad loses everything. You were 17 at the time, right? Yeah. I'm going to college in three weeks. And my dad's like, hey, son, I have no money and I might be going to jail. So

good luck. And I was like, okay, pop, I got it. I hope you don't go to jail. I'm going to go to school at night, I guess, and work three jobs during the day, which is what I did. It took me five years to graduate from Fordham, but I did it, you know, doing almost a full course load. And, you know, it was not easy, but it made me into who I am today, which is incredibly resilient and hardworking by design. So I don't regret it in any way, but it did give me a,

Is the word preternatural? Like an inhuman desire to have power and money, which I had to then recontextualize, you know, my 30s and be like, okay, yeah, that had a good outcome. But I need to shift gears here and maybe have a little more purpose in my life. Because, you know, sometimes the dog catches the fender of the car and it's like, well, that doesn't taste very good, does it? And then you have to just set new goals for yourself, right? And so I think that kind of competitive, you know, fear-based motivation is

scared of running out of money, scared of not having power and competitive. Those are very powerful motivators. If you have them, use them. But then once you win a couple championships, well, now you got to wake up and say, what's the meaning? Why am I doing this for the next 10 years? What keeps you going now? That's a good question. I love what I do. I wake up and I enjoy meeting with founders. I want to go back to something you said earlier about skills and

You said hard work and skills correlate to outcomes. And when I was doing research for this interview with you, one of the things you said is there's no excuse for people not having the skills today. Yeah, there is no reason that you can't go on the Internet today and learn, I think, about 95% plus of desired skills in the world. Like when I was growing up, I always wondered what happened at MIT or Harvard or Stanford or

You can go on MIT's website right now and take all of their courses and then do all the project work and go to Google or any job and say, here's my coursework that I did on my own, on my own time. And I took these eight courses around machine learning. And I took three at MIT, two at Harvard, and one at Stanford.

Hand that to somebody like Elon Musk and they will give you a $300,000 a year job or $250,000 a year job. So think about that for a second. People would value you more if you hacked the system and didn't pay them and did it on your own than if you actually went to the school.

So what's people's excuses? Well, then they say, well, I don't have the prerequisites for that. And then you say, okay, well, there's Khan Academy that will take you all the way up through your undergraduate to learn this stuff. Okay, why aren't people doing that? And then it gets scary for people because I think then you have to look at motivation,

and people capitulating and giving up. I mean, these are very hard topics, I think, for people to discuss, but all the skills are out there on the internet. And when I wanted to start a company or learn some skills in the 90s when I was coming up, you had to buy books, you had to go find people. You didn't even know what a term sheet looked like. Nobody would show each other a term sheet. You had to hire a lawyer and spend $5,000 to even know what a term sheet was.

So all the answers are out there, and people are still watching five hours of TV a day and complaining about opportunity. There are systematic biases in the world. Of course, there's racism.

There's tons of problems in the world, but one of them is not the access to the information. The access to the information is unbelievably mind-blowing. And we have an investment in a company called Brilliant.org, and they find all these incredible math savants from around the world because they're on their website solving really hard math problems. And so the information is out there, and I encourage young people to just add skills. Just add mad skills, and everything will work out.

What's your opinion on the reason that most people don't do that? Is it fear of failure? Is it lack of motivation? Is it a comfortableness? It's a great question. Yeah, it's above my pay grade. But from what I've read, one of the main issues is if you don't see it, it's hard to be it. I've heard this, like you need to see it to be it kind of thing. And so we've worked very hard at our investment firm. It's called Launch.

to have events where we pull in more people who are less represented in Silicon Valley. An example of that is we do something called Founder.University. It's a two-day free course. We've done it 13 or 14 times. And about half of them are for women only.

And also transgender people. And with those people, we've had this incredible success. With these events, we've had this incredible success of finding them in order to invest in them as they grow their businesses. And when we would have a normal event, we would get to like 15% female in the audience. Then we started emailing the 15% and saying, do you know any other female founders?

And then we would get it to – and they would say, yeah, I know two. And they'd hit reply. And one of them would already be registered and the other one wasn't. So we'd offer them a free ticket to our events. And then all of a sudden we got 30%, 40% female founders in the audience. But when we did an event just for women, oh my lord, we got 300 or 400 applications. And then the number of female founders we were investing in went way up. And so very proud of the work we did there to –

It just create a space for those people to feel like we actually want them in the industry. And I think that's what I've heard from a lot of people when we hosted those events and we do one for underrepresented founders and people pick if they feel they're underrepresented. And there's all kinds of little controversies. We just leave it up to people to, if they feel they're underrepresented to apply, to come to it. And we've had this incredible outcome. And people say to me,

Well, when you tweeted this, that you're doing Founder University for underrepresented founders or for female founders, it just meant that you cared, and so I thought I should go. And I think our industry has particularly done a terrible job historically of letting people know, hey, we want you here. We want your entrepreneurial spirit. We want to invest in your companies.

And that's the thing that Silicon Valley had to change. That was the blind spot. I know I had it as a, you know, cis white guy from Brooklyn. I always thought like, I'm a kid from Brooklyn. I had it hard. I know what it's about. I had to grind my way here. And, you know, there's people who had to grind a lot further than I do to get here.

And so I had to kind of rethink my own version of this and kind of I matured on the issue, I would think. I evolved on the issue. I used to think, listen, I give free tickets to the event. You should come. Right. And I didn't realize like, well, people have to also feel welcome. Right. And you have to make them feel welcome if the system you're operating in has traditionally made them feel unwelcome. Right. And so I think that's why Silicon Valley is actually doing a great job right now.

with a lot of inclusion programs and making it explicitly clear, we want the industry to be more diverse. We want to have more female venture capitals. We want to have more people of color as funded founders. And the change in the last five years here has been amazing. It really is heartening to me. I know that, I don't know, maybe I'll get canceled for this, but I feel like massive progress has been made in Silicon Valley.

on the issues that matter. And I think people have good intent. That's another thing that seems to be lost on Twitter and all of this. People just want to cancel each other and

you know, you know, cut people down, but you got to give people a path to evolve. Right. And I think Silicon Valley, you know, has really gotten beaten up over the last five, 10 years and rightfully so, I guess, but you got to give people this path of like, if you release the diversity statistics, well, releasing the diversity statistics and they're horrible is part of the process of letting people know, Hey, I care about,

and I want to change these numbers. Here are the numbers. I know they suck. Anybody have ideas of how to solve this? Let's have an open discussion about it in good faith. And I try to work with the good faith people. And this is probably the first time I've ever talked about the diversity stuff we're doing at lunch in a major forum like this. I don't do it to get a cookie or to get a pat on the head from people or score points and get retweets. The reason we're doing it is it's actually good business.

A lot of these founders have incredible insights and there's not competition for these deals because people are not making space for them to come to them and say, here's my idea. Here's my business. We had one business come to us. It's called Ruby Love. And they had like a quarter million dollars in revenue one month. And we were like, how much have you raised? They're like 50. And I was like, 50 million? And wow.

Or $500,000? And I thought I heard it wrong. They're like, no, we raised $50,000. I was like, and you're making $250,000 this year? They're like, no, we made $250,000 this month. I'm like, why is this woman, Crystal, not on the radar of Silicon Valley for this direct-to-consumer company, Ruby Love? And we were able to get in first and build a position in this company. So this is one of the things I'm really excited about is very similar to what the NBA did. David Stern wanted to make the NBA a global phenomenon.

And when they succeeded at doing that, all of a sudden Yao Ming, Dirk Nowitzki, and now you just look at the number of players coming out of

all regions of the world, they got a basketball in the hands of more kids, got more kids yelling Kobe, got more kids yelling Shaq, and dreaming about playing in the NBA. And now they're playing in the NBA, and it's a better game, right? And that's the way I look at it. And I tell everybody in our small little investment firm called Launch, which has 12 people, and we put $25 million to work last year, is don't underestimate anybody, and a great founder can come from anywhere. Right?

Just like Ratatouille, the Pixar movie. Great chef could come from anywhere. Not everybody can be a great chef, but a great chef can come from anywhere. A great founder can come from anywhere. Talk to me about some of the differences between, I think we're going to come back to this, between when you started in 2009 and today, other than the sort of like gender being and more systemic issues that are sort of like coming to the limelight now and

What are some of the other issues or differences that you see these days? Yeah, the sheer number of startups is mind boggling. Like,

Back in the day, I had this thing called Open Angel Forum, which was I would get a half dozen angel investors together and a half dozen companies. And I had a hard time finding six companies. I could find 10, 15 angel investors and invite them and six, seven, eight would show up. And in fact, Uber pitched out one of those and three of the 21 people at that event invested. It's a pretty famous story here in Silicon Valley. And now...

I get 400, 500 emails a day and we're bombarded with hundreds to a thousand applicants for every seven slots in our accelerator. We run an accelerator here. And those seven slots are like, you have a 1% chance of getting in. Back in the day, I had a hard time finding even seven to present. So it's just bonkers. And then overall, the quality on average has gone way up. So the number of people with actual businesses that

that have customers that are making $5,000, $10,000, $20,000 a month has gone through the roof. So we're finding ourselves investing later in the companies at the same price that we paid 10 years ago for companies that had not yet launched or had less traction and frankly, maybe didn't look on the outside as polished. And a lot of that is because we talked earlier about how MIT's courseware is out there.

How to Build a Great Startup is out there. My podcast, This Week in Startups, we have over 1,000 episodes. If you want to figure out how to build a company, you can just listen to 100 of those episodes and you'll get the idea.

So all of the answers and the playbooks and the techniques and the tactical information, the strategic information, and even the mission-based information is all over the internet. It's in podcasts, it's in medium articles, it's on Twitter, it's on Quora, it's on Hacker News, it's on Reddit. The answers are out there. So people are coming to the game so sophisticated. I mean, we have a trucking company, I won't say the name of it, but a

a company out of Ohio making software for trucking companies. And this is a first time founder. And this company looked like it was in year three or four and had a million dollars or $2 million in investing. And it was just him. And I was like, Oh my God, people are getting a lot done. Also the Amazon web services stack,

And WeWork for the office stack and legal services, all of these things have been productized. Even accelerators are productizing the first year of your business. So because those things have been productized, you don't have to go get a lease. You don't have to rack servers. You don't have to worry about hiring people. You can just hire freelancers on Fiverr or Amazon.

other services like that. So it's really magical right now. So there's many, many, many more experiments being conducted. Talk to me a little bit about the difference between, I mean, from the outside looking in, I'm not in Silicon Valley, but there seems to be a large sort of cultural conversation or maybe a change in the tide between sort of revenue and market share and now profits and making money

I'm just going to leave it there and let you riff on this. Yeah. We as private market investors, we're betting on how big can this get, right? And what is the enterprise value if you win? So for something like Amazon or Tesla, you want to know what percentage of e-commerce do they represent?

What percentage is the Model 3 of other comparable vehicles in terms of its sell-through versus those competitors? And the last thing we want you to do is pay as a dividend. If a company is storing a bunch of capital and paying you a dividend, that signals to us that you are not a bold and ambitious founder. And this is one of the big problems I have with Apple and Tim Cook, who I don't think should be CEO of that company anymore.

They're building up these war trusts of capital and then doing share buybacks and all this stuff. It's all to just drive the stock price up. And it's very similar to what Steve Ballmer did at Microsoft, which was a lost decade on a product basis. A great decade, I guess, if you wanted dividends. But for technology companies, when you start saying...

My gosh, all this excess capital, we don't know where to put it, or we're not sure that this can get any bigger. That's troubling to us in the private markets. Now, the public markets feel differently. The public markets have rarely seen money-losing companies...

at this scale. Amazon was one of them. Tesla is one of them. Uber is one of them. Lyft is one of them. And so now all these companies are going into the public markets that they don't believe. Masayoshi-san believed, right? He's a crazy private market investor who wants things to go big and how quickly can we get to a trillion dollar market cap? And so to me, it's kind of silly. I look at it and go like, if you see what Amazon has done, you see what Google and Facebook have done,

Like a lot of these companies, some of them have been profitable, like Google for a long time. Facebook, it took them a little while. Amazon, it took them forever. You know, we like to see in the private markets how big can this get. And the public markets want to see how much money can this make. And so that leaves founders with a really, they have to downshift really hard to

Because they're just racing towards the cliff. And then all of a sudden, a bridge pops up. They get more money. They race towards the next cliff. Boom, another bridge. They go over the bridge. Now it's like, you're going to have to stop the car because there's the end of the road is coming. You have to get to profitability. And if you look at Uber...

They've done this really quick, right? And full disclosure, I still have a lot of shares. I sold some of my position to Masayoshi-san. Obviously, it was great to have him involved in the company. But I just think private company CEOs need to understand that at some point, when they get towards that public market situation, they're going to have to be profitable. So they better have unit economics that works, and they better not train the public to

that this product is so cheap. And there were some products that were absurdly cheap. I used to use this valet service, Lux, in San Francisco. It was a valet for venture capitalists, basically. You drive your Tesla up, they put a valet on the street anywhere you want. So just imagine how crazy this is. They put a person who gets paid 15, 20 bucks an hour wherever you drop a pin. They have a blue jacket on like a valet. You pull up in your car, you get out, they park your car for you.

Now, parking used to cost me $10, and I would give the guy $5 by my office. This cost me $15 to have somebody go valet it. And they would be waiting for me when I left my office downstairs with my car. So I didn't have to wait in line. So I was like, wait a second. If that takes him an hour—

$15 for his and 15, this should really cost $30 for them to break even. So for them to actually have this work, it should cost 40. And you know what? On date night at, you know, the Warriors Arena or at some place that doesn't have value, I might actually pay 40 bucks. Like it might be like a once in a while splurge to have that convenience for something, but this doesn't make any sense, right? I could just, so anyway, they went out of business real quick. And so you have to take that into account, I think. And so, well,

We'll see it get worked out. Lyft is doing their layoffs. I think DoorDash has got serious problems because the free money is over. So Masayoshi is the last person in. And I think he'll ultimately wind up looking smart because he picked some good companies. And I think he'll ultimately wind up having a very good return for his LPs. But it did create some weird moments. And I just take WeWork out of that because that was just ridiculous, the valuation.

But for the other companies, these are real businesses that if they just raise prices a little bit and they cut expenses reasonably, they'll get there. But some of them are still in a price war. So the Uber Eats, DoorDash price war is still concerning to me. But ultimately, Uber has the five-year runway or whatever it is, four, five, six years of runway, depending. We'll see what happens when they release their earnings. Talk to me about the no-code revolution.

This is a fascinating one. We had a couple of false starts, and this is one of the things about technology I love is we have these false starts and then something actually works and people are shocked. VR is obviously one of them. We've had VR headsets and VR iterations five, six times. It's still not here. We had the same thing with video sites like YouTube. Many different people were doing video sites, then YouTube broke out, social networks, yada, yada.

And no code is WYSIWYG. What you see is what you get. So can I build a website without being a developer? And we had visual editors. Netscape had one. Hot Dog was one out of Australia. There were a bunch of these, you know, Dreamweaver, I think was the Adobe one. You could build a web page and drag and drop objects around and then publish it to the web online.

And they kind of faded after the 90s. But now they're coming back in companies like Webflow, Bubble, and then companies that pull together through APIs, this information like Zapier or If This Then That. And then WYSIWYG website builders like Squarespace have gotten very sophisticated because they added things like shopping. And then you have Shopify making it easy to load a store. And then Squarespace adds their own e-commerce functionality. So

All of these tools now, like sort of the NBA getting more people to play basketball, the no-code tools get more people to build MVPs. MVPs in the technology industry means minimum viable product. In other words, the simplest product to demonstrate your vision for your company. And so I think we're going to see the pool of people who could build a product go from like, call it low single digits, 4% or 5% of the country,

or even the world, young people starting companies, old people starting companies, I think it's going to grow to about 20%. So people are going to be able to go on a website, learn how to do scripting and build workflows that would be similar to Airbnb. Like Airbnb, if it was being built today, could be built on Bubble, Webflow, one of these tools, Squarespace, Zapier, Slack, Airtable. You could glue all this stuff together and do it without a developer and probably get to...

$10 to $100 million in revenue without ever having a developer. Now, that sounds crazy. Oh, that's crazy. Yeah, people will debate it with me, but I think in this case I'm right. And the things I might be wrong on, it'll be worked out. I don't think you're building Facebook at scale with a billion users, but you certainly could build a Facebook-like product with a million users.

And then if you did build a product with a million users, of course you can just hire a developer team then. So more people are going to – it's almost like pop-up restaurants if you think of it that way or testing out your food company at the farmer's market. A lot of people use pop-up restaurants and farmer's markets to test their ideas and do those experiments. That's what no code is going to do. It's like increasing the pace of experimentation. Yeah.

Yes, and that results in better outcomes. And so making a full circle, my job is to make bets on experiments. And then when the experiments turn into successful, it's a successful thesis that then turns into a product to then buy more shares in that company. So we bet $100,000 for 6% of companies when they come to our accelerator.

And we hang out with them for 12 weeks. If those experiments really go well, then we try to buy another 10% of those companies. As opposed to the early days when I was a scout for Sequoia, I would just put in 25 or 50K. So I went from being a very recreational angel investor to now being...

kind of an angel investor plus a micro VC, let's call it, also allowing other people to invest alongside me. So we have a site called thesyndicate.com, which is just like AngelList, but with one investor, me. And we share our deal flow now with like 3,900 investors, and that's going to change the entire industry. So the pace of innovation, the democratization of private company investing, I think is the trend of the second half of

of my lifetime. It's really hard to make money in the public markets, or it's increasingly harder. And we're going to see some regulation in the United States where people are going to be able to be sophisticated investors. In other words, maybe they don't have the accreditation benchmark of whatever it is, $150,000, $200,000 a year in revenue, in income for two years. We're going to see sophisticated investors, which will be like you take a course on private company investing, and you're going to see

Uber drivers or Postmates delivery people or HR people working in LinkedIn investing in those companies.

And that's going to just totally change capitalism forever. And that's the thing that's actually got me super excited. I mean, you talked before about what's your purpose if you wake up and you've made enough money that you don't need to go to work anymore. I really think the democratization of capital and going full circle to my childhood, the ability for my parents or my mom, who probably had insights as a nurse practitioner and a nurse on what companies to invest in but would never have been allowed to,

She could have actually placed bets. She could have taken $200 from a shift as a nurse and bought into a medical company when it was in its first or second year. And she would have done that because she was entrepreneurial, but she wasn't allowed because of the accreditation rules and the fact that our economic system is designed to protect people who are poor by not letting them take risk. That's noble, but it's wrong in today's society.

The people who need to take risk and make bets that could have 200x outcomes are people who are poor and not rich people. Rich people have too many ways to make money, right? And if you just put your money in the indexes, you're going to be great. So what about poor people? If the Uber drivers could have said, let me buy a share of Uber every time I hit $100 in earnings, I'll buy one share of Uber for $10 and take the $90 and just set it that way.

We would have a lot of Uber drivers right now who were moving from one station in life to another. And that's really, I think, what I'm going to try to do with the last, you know, I'm 49 now. And my last act, if I'm moving into my third act now, hopefully I have a third act and I'm able to live that long. But my last 10, 20 years, professionally, I would like to democratize private company investing.

specifically so that people who are poor could become middle class and middle class people become rich or poor people could become rich and middle class people could become ultra wealthy. I believe in capitalism. You know, it's obviously got some weird, you know, outlier moments and some of the rules are unfair, but it's a heck of a lot better than, you know, where socialism and communism have led everybody. And it's very nerve wracking for me to see these young people who are like,

Yeah, it'd be better if the state provided everything for us. They need to look up in history when the state provides everything for you, what happens? Things generally don't go the right way. Can you expand a little bit on other ways that the system might inadvertently keep poor people poor and protect rich people? Yeah, I mean, the entire capital gain system, if you just think about it, is designed to

It's noble, the design of capital gains, right? You get people investing for the long term, creating businesses. We want that. But you can't have that and not let people have access to it. So it sort of dovetails with my first point. Additionally, I think there's some common sense things that are lost on the elite class. And I think we're starting to see them reverse it as the guillotines are being rolled out in society and people are really upset about

And I think, you know, Bernie's surge in the polls is part of this is, you know, people think it's it feels unfair. And even if it's not, even if everybody's standard of living is being pulled up, even if the number of people living in poverty is plummeting, even if all the rich people give away all their money eventually through the giving pledge, it still doesn't feel fair. And so I think people who are in that ultra high net worth category,

area need to think for a second and say, do I really need my company to pay no taxes? And when Amazon does something like HQ2, it felt overreaching, right? It felt unnecessary. And I think this is where, talking about blind spots that people have, I think the rich have a blind spot of they're so good at gaming the system and they have so many people working with them

to game the system and to optimize. Let's just call it optimize because gaming the system sounds like you're doing it in a nefarious way. Just optimizing. And poor people don't have people working for them to optimize their earnings and optimize their outcomes. And so you can over-optimize. And I think Amazon not paying taxes...

and Bezos doing the HQ2 thing, it felt over-optimizing. He didn't take the giving pledge. He hasn't given money away. And I'm not going to make it about Jeff Bezos. I like Jeff. I think he's awesome. And the world's a better place for him being in it, obviously. But he is over-optimized. And the same thing was true of Apple. Apple was treating their store workers as second-class citizens to people who were working at the headquarters. Amazon was

was really grinding the people who were working in their factories. And they have to stop for a second and say, okay, we're optimizing these workforces, but is it necessary to over-optimize like this? And the answer is always going to be no. And Apple got shamed into raising the salaries of people in their stores because they were getting paid like

very low. You can look it up. It was five years ago. And then Amazon had to raise minimum wages. So I think treating people who are coming up with more dignity, more respect, the minimum wage raising is one of those things. So this blind spot for rich people is over optimization and the optics of it, right? A bunch of rich people flying private jets to Davos and then crying about global warming

is optically really bad, right? You just burned a ton of jet fuel to get here, and then you're talking about global warming. People have to start taking some actions that parallel what they're doing. And I've done some reflection on this. Listen, I've only been wealthy for whatever, 20% of my life. The other 80%, I was broke or middle class or upper middle class, whatever. And everybody has to do their part. And I think

It doesn't feel fair. And if it doesn't feel fair, what do people go to? They're going to go to socialism. They're going to go to the state doing things. So this is why I think it's actually important that we solve the healthcare issue and everybody gets a baseline of healthcare. We already pay the most of any country and get the least for our healthcare system. And tying healthcare to employment creates very weird relationships between

employees and employers, where employees can't leave or can't take jobs because of the healthcare, and that employers have to keep people working for them who don't want to be there or can't hire people because they've got their healthcare issues are too acute or too expensive for a small company to address. It would be such a nice thing for us to be able to just give everybody world-class healthcare in this country and call it a day. And people fighting against that have lost the script. What is the point of being the most

affluent and successful country ever created in the history of humanity. If we can't say, you know what, we got public education to work, let's expand it by two years and offer trade schools to everybody. If we can't add a base level of healthcare, and I know I sound like a socialist now, but there is some balance here. And people want to go ban the billionaires and pull out the guillotines because we're not paying attention to

to spreading the wealth enough. And it's a very simple thing. And a lot of it is optics. Don't grind people who already have it hard, is my message to these big leaders of big companies. It's unnecessary to grind and optimize the people who are coming up.

It's over-optimization, basically. I think that's a great place to end this conversation, Jason. Thank you so much for your time. Yeah, I really appreciate it, and I'm a huge fan. It's an honor to be on the show. I listen to almost every episode. You're pretty prolific, but I really enjoyed the Jim Collins one particularly. He's always been a hero of mine. Oh, thank you. Thank you.

Thank you for listening.