The Investor Who Backed 10 Unicorns Explains the AI Bubble - Avichal Garg (Electric Capital)

If you extrapolate exponentially, you just sound like a crazy opening is going to be a trillion dollar company. Stuff is in this bull market right now on it makes me nervous because it's too easy to get over your skis. It's too easy to drink the Kool-Aid. It's too easy to believe your own hype. In 4 years, you can go from Anthropic not being able to raise around to, oh my gosh, this is going to be a trillion dollar company. Anytime you see a platform where software is eating that industry, the companies that win tend to be run by software engineers. So at Amazon, software engineers make all the decisions and they make all the money. Partnerships people don't. I think of my job much closer to Rick Rubin and less close to Warren Buffett. If you look at Ivan from Notion, he's just got a really opinionated perspective about the way software should be.

I noticed that you have a really cool watch on your wrist. Maybe you can show it. Are you really into watches? I am. It's sort of a side effect. A friend of mine years ago was telling me about how watches have appreciated and there are certain kinds of watches that have actually done really well relative to stocks. And I was like, 'Oh, I wonder why.' And I kind of went down that rabbit hole. It turns out it's very similar to a lot of other markets like gold, bitcoin, or fine art where there are all these underlying properties that drive the market. Once you understand that they're all kind of the same, you can assess if it's real, if it's fixed supply, hard to make more, portable, easy to transfer, a global liquid market, durable. All these properties, you realize that all these markets are driven by the same underlying principles. The other dimension, which is a little different from investing in companies, is that you can have some form of self-expression. What I like about this watch is it has a GMT complication, which was created because humans could fly. We could get on a plane in Europe and go to the United States, so pilots had to track two different time zones. People needed this tool to solve a problem. To me, it's like I like that aspect: humans had to create this tool, and through technology, they solve problems. A lot of the watches I like have something symbolic. When the astronauts were going to the moon, NASA commissioned a watch that would work in space, and Omega created the Speedmaster. It has a certain set of properties. The glass is not sapphire because sapphire can shatter and get into the parts. They picked a different material. When you understand the history, you realize this is not just a watch; it represents humans going to space. We needed to create a watch that could hold time accurately while astronauts were going to the moon. Stories like that are super cool beyond the store value. Art is like that too: you can have the investment aspect, but the art represents something, so it lets you have a little self-expression in the mix.

It's really interesting. I hadn't thought of this until you asked. There's a parallel here to all the AI stuff happening. In the 70s, the watch market changed. These things used to be tool watches, then they became more luxury. There were competitions about how accurate your watch was. The Swiss watchmaking industry had been doing it for centuries and used to win. Then the Japanese invented the quartz movement, which was more accurate and cheaper. It basically killed that industry. They stopped doing the competitions because quartz was better. From the 70s to the 90s, the industry imploded because who would pay all this money for a tool when you have a better electronic tool for $10? The industry recast itself as a luxury good, a symbol of what humans can produce that machines can't. These timepieces require precision that needs a human hand, at least for now. The fact that it takes 100 hours for a master craftsman trained for 25 years is like proof of work in crypto. What you're wearing on your wrist is proof that some human who is exceptional at their craft put 100 hours of effort into it. In the last 15 years, the industry is bigger than ever. There's a lesson for AI: in the short term, you think of things utilitarian. AI will eat up utilitarian work. But what you might get is a secondary effect: things that a human had to put 100 or 1000 hours into become even more valuable on the other side of commodification. From a career perspective, the things that uniquely humans can do are probably 10x more valuable on the other side of AI, not everything going to zero.

One way to ask that question is what are the moats on the other side of AI being smarter than us? For some time, the physical world will be a moat because AI is mostly digital. Maybe robots overtake us in 10 years, but there are constraints. Anything around physics and biology, like fundamental energy or biological systems that you can't simulate yet, you have to run experiments. Those become more valuable. For example, health: once people have enough money, they spend it on being healthier and living longer. Anything with an artificial regulatory moat, where you need licensing or the government controls supply and demand, is defensible. Things mediated through humans where a human is making the decision become more valuable. I don't think the government will outsource procurement decisions about defense to an AI. There's a person at the Department of War, formerly Defense, making decisions about contracts. That person came up through the military, maybe West Point or the Naval Academy. If you have a 25-year relationship with them, there's no substitute. Strategically, you're in a really good position.

If you look at defense contractors, for example, not investment advice, but take a small business that works with the government. Those things don't trade at huge multiples because they're people-heavy. But you might argue they become like the luxury watch industry: more valuable because the real asset is human relationships. A lot of the work that humans had to do, the AI can do. So you have a critical asset in the relationship, and AI makes your business more efficient, so margins go up. There's an entire category of businesses that on the other side of AI are way more valuable. You can identify a bunch in various industries. Those are three examples.

I agree. The other thing I was thinking selfishly is why we're in the business we're in. In the early stages of starting a company, so much of it is who you surround yourself with. The seed or Series A decision where you first take money to build even before product-market fit is a very human decision. I suspect our business in venture capital, working with founders so early, becomes more valuable because those decisions are still made by a founder. At some point, we'll have AI-started companies raising money on the internet, but before that, we'll have a lot of human founders. Our business will be defensible because the human relationship piece is really important.

There are many guiding principles. That's definitely one of them. We're so fortunate to be here in Silicon Valley, surrounded by amazing people and opportunities. You can get capital, and most of the world doesn't work that way. People talk about privilege, and they often conflate money and privilege. Money is a form of privilege, but an even greater privilege is these opportunities and access. You don't necessarily need money to have access if you're in this place. What's the best part about our job is taking the uniqueness of an individual human and turning it into a product and getting it out to everybody. The best products are an extension of who the person is, their values, beliefs, what they want to say into the world. Over the last 5 to 10 years, I've come to believe that the right way to think about startups is as an artistic endeavor. The person starting them is like a painter or musician. The ones that are really successful and have durability are trying to express a worldview. Look at Ivan from Notion. He has a really opinionated perspective about the way software should be. He spent his entire career building content creation tools, from Apple to Inkling. He comes from the mindset that if you give humans tools, they'll create great things. That's why Notion is successful. He's very opinionated about what it means to create good software that allows others to create. I think all great founders are like that.

That recasts my job. I think of my job much closer to Rick Rubin and less close to Warren Buffett. We're trying to find people who have something interesting to say in the world. The medium they express themselves through is code. That's an artistic endeavor. If you understand that, you start to understand the human relationship piece. People who understand founders as artists, like Marc Andreessen, have done a great job. You can see the impression of Mike and CIA on Andreessen Horowitz. They understand the founder as artist, taking care of everything around the talent. All of this comes back to the original point: opportunity is a luxury. The opportunity to have these experiences and learn these things is the real luxury. Even money can't buy these insights. Those opportunities unlocked all these insights.

I generally agree. Another way to put it is you have to do both. You have to listen to the market, understand your users, have empathy. But doing a startup that is durable and new, how do you cut through the noise? Through authenticity. Say something into the world where people are like, 'That person is just being themselves.' Hunter Biden going viral on Twitter because he's being himself. Donald Trump is president because he's authentic. Humans have a capacity to understand authenticity. In small tribes, we had to know what's real and what's not. Our brains are good at knowing when someone is lying. We have a sixth sense for authenticity. It hits a primal part of the brain and lets you relax. Markets are a collection of humans, so they are good at sussing out authenticity. If you are authentic, the market picks up on it. You at least have a shot. Your product has to be good, solve a real problem, make money. But you don't get a shot unless you're authentic. How do you become authentic? That's the intrinsic exercise. What are you trying to say? What can you say that nobody else can? Say a thing that when people hear it, they think, 'That had to be that person.' Once you get that right, people might give you a shot. There's extrinsic stuff like market size, CAC, but it's just as much an intrinsic exercise. It had to be Zuck that created Facebook, Larry and Sergey that created Google, Ivan that created Notion, Dylan that created Figma. Once you look at these companies, you see it's an extension of the person.

It's a founder market fit, founder company fit, founder product fit, founder culture fit. Google's culture is so good at allowing people space to solve hard problems because Larry and Sergey came from PhD programs. That means they are terrible at firing people, but it's because you don't fire people from a PhD program. That thing you're working on in the corner might be a giant breakthrough. So they leave you alone for three years. But they are not strong at solving commodity technology network effect business problems like payments or social networks. The Google approach to social networking was to build circles and better ways, but it was like 'let me do real-time facial detection to put a cap on your head.' You just want to send an emoji. They built Android but didn't get WhatsApp. It's because it's a commodity technology. The culture is an embodiment of the founder. If you understand that, you know what your company is good at and what not to pursue. All of that is intrinsic. Founders are too focused on the extrinsic and don't spend time on the intrinsic: why are you the right person to solve this problem?

Yeah, that's right. I think there's a lot of truth to that.

It's an interesting question. The through line I realized is that I was really fortunate to be in the audience for Steve Jobs' infamous commencement address. He had a line about connecting the dots looking back. When starting Electric, the through line was that I'm most drawn to systems, tools, and technologies that allow people to take their unique gifts and succeed. The fundamental philosophy is that we make progress at the species level because of small numbers of outliers who push things forward. You can't know who those people are at scale. It might be Einstein, Elon, Lee Kuan Yew. It's a philosophically opinionated view that we should identify those people and give them disproportionate resources. That's how you affect change for everybody. Singapore and Nordic countries might disagree, but capitalism, startups, gifted education, arts schools do that. They find people and give them resources. I don't mean just utilitarian progress; they make us think about society and culture differently. So dedicated art schools are important. It's opinionated to say we should give 10x to 100x more resources to outliers. Once I realized that, I saw the through line in my education company, investing, and philanthropic work. It's all about finding those people and giving them resources. If you had 100 Elons, you'd get to space faster. We probably haven't identified more than 10% of those people. There are 7 billion people; how many have access to basics? How many genetic outliers? We have no system to identify them. That's a civilization-level thing to crack. Historically, the best institutions for that were great universities like Stanford, Harvard, Oxford. They create a brand so people find them, give access to ground truth, professors, cutting-edge research, a network of peers, alumni, scholarships, and a sprinkle of 'you deserve to be here.' That formula is extremely successful. Those universities have served a good purpose, though some have lost sight. Oxford is older than the Magna Carta. Harvard is 400 years old. These are remarkably durable institutions, like the church. The purpose of finding outliers and empowering them is durable.

Harvard is 400 years old. These are remarkably durable institutions, arguably like the church. Religion is perhaps the only thing more durable. That tells you that fulfilling that purpose in society is really important. If you get it right, you can build something that lasts. In our business, we have the same formula as Stanford: build a brand so the best people find us, give them access to ground truth, peers, capital, and a sprinkle of 'you're capable of great things.'

It's a bit of an X factor. When you meet somebody, you kind of know. Raw ability, smart enough, clarity of thought and purpose, but there's something about the ability to catalyze things and get them done. You're like, 'Wow, that's remarkable.'

A little bit of both. That's why we ended up in this business. I've certainly gotten better with more data points. I happen to be well wired for identifying those people. I started angel investing in 2012, seriously around 2014. Of the first 30 or so companies I invested in, about 10 became worth more than a billion, several more than 10 billion. I had a realization: 'Wow, maybe I'm way better at finding entrepreneurs than being an entrepreneur.' So maybe that should be my startup: finding those people and getting them resources. I got better at it, but I was blessed in some way to spot those people.

Probably about 2017, 2018.

Yeah, it was a little bit on the other side of that. Some of those things started working early. Curtis, my co-founder at Electric, and I left Facebook in 2016 and 2017. We hung out, had long lunches and talks, sort of co-founder therapy. We were trying to figure out what our next company would be. A lot of insights came out of conversation. It's like therapy; you talk and things make sense.

I think I do. It helps me structure my thoughts. Talking and writing really help. There's an intuition, and I talk it through or write it down to crystallize the expression. Everyone is different. Eminem writes everything, Jay-Z thinks it out, Lil Wayne forgets what he said. For me, it's a combination.

I'm not deliberate about it. Over time, the people I work with at Electric are people I've known for 10+ years. Curtis and I went to college together, 20+ years. It's survival of the fittest. Whoever managed to be my friend for 20 years is a good person to talk through stuff. A small number of people where talking through it makes sense. I'm fortunate to have very smart, thoughtful people who push back in the right ways.

It goes back to what we were talking about: impactful books. He has such a phenomenal story and is a phenomenal storyteller. That's why the Bible is a book everyone should read in the West, and the Gita for India. Humans have abstract beliefs and stories. Stories are easier to remember. Our brains are wired for stories because of oral tradition. People who have unique life experiences and can convey them in a memorable story have a superpower. At the society level, we make progress by telling and remembering stories. It's also important for communication: understanding the structure of stories helps you understand others' perspectives. People who are uniquely gifted at storytelling have a superpower I aspire to have.

Yeah. It's part of the job. As a startup founder, you have to tell the story of how you get funded, to your first team, to the company as it grows, to Wall Street, to your board. You're the chief storyteller. The cap is not intelligence or technical skills; it's your ability to tell stories.

You're rate limited by the stories you read. You can only be as good as your inputs. The more good inputs, the better your brain can transform them into unique output. There's natural ability, but you can hone it. It starts with getting more inputs.

A lot of it is personal stories from the one-on-one conversations I have with founders.

It's like, well, why are you doing this thing? Like, where do you come from or why? And so those stories to me, I think, are actually the most interesting now. And kind of in like an AI context, it's like the unique data is the interesting data. And so like anybody can go read a published book. Um, not everybody can go talk to a successful but relatively unknown founder and understand their story and get them to tell that story. So to me, those like sort of unpublished word of mouth, you sit at a dinner table with somebody and have a conversation, that those are actually the real interesting stories.

That's the real yeah.

Um, it was different at different stages. You know, I think early in my career, a lot of it was just about learning and being surrounded by the right people. And so going to Google at that time was it was such a special place to be, is probably what Anthropic and OpenAI, you know, a couple of these places are right now, was just like the density of talent, it was just so remarkable at the time. Um, so it's like the mid 2000s. Um, and so you know, Google had not acquired, there was no Android, there was no Google had not acquired YouTube yet, like it was a crazy time to be there to go through all of that. Um, and so a lot of it was just being around the smartest people and learning as much as I could. And then I think, you know, by the second, the first startup, it was really to solve a problem that we cared about. We were building essentially machine learning plus education and trying to personalize content delivery in that domain. In the second startup, we sort of realized we made just a bunch of first-time founder mistakes. We picked a bad market. We didn't execute well. Um, and so we wanted to do something where we were much more strategic about it and.

Curtis was a co-founder, second startup. Yeah. And um, and that thing, and Curtis had had a previous startup too, which was also sort of like a small exit. And so we both sort of realized all the same sort of insights. And so for the second one, the way we thought about it was the realization was that if you really do want to have effect change and do good things in the world, the business has to work and the business has to scale. And so you need to have certain properties like being in the right market. Um, and so we were very deliberate about kind of how we did it. Um, and then we ended up in a situation where the product was kind of working. Um, you know, at the time, this was early Android 2011. Um, you know, we had hundreds of thousands of downloads and probably, I have to go back and look, we're probably approaching a million, which was real at the time back in 2011. Um, but the unit economics of the business didn't make sense for what we're doing, and so we had to basically get acquired, and that was the right thing to do. Um, and again, we sort of optimized for just being around the right people, and Facebook, you know, in early 2012 before the IPO, the talent density just reminded us of Google in the early days. We're like, oh, this is going to be an important company in the world, which obviously it turned out to be. Um, and so we were sort of motivated by that again. Um, and so you know, after that, I think things changed, and they changed a little bit because we were so fortunate to be there at a time where the stock did really really well and the acquisition set us up. And so we ended up being financially successful enough that we could then sort of enter this well, what do I really want to do? Mhm.

Um, and so that forced a lot of that introspection. Um, this is actually a perfect example we're talking about before with storytelling, right? It's like um, that um arc that we had I think is an arc that a lot of people go through um, which is like early on you're just trying to learn, but a lot of what your orientation is as a founder is scarcity mindset, which is you're hungry for every single opportunity. It's not just that opportunities are a luxury, but it's like you're worried that any given opportunity makes... Yeah. Um, and so you're sort of like frenetic, you're trying to pursue every single opportunity that you can. Um, and it's a luxury to end up in a situation where you don't have to do that, where you can be really deliberate about the opportunities that you pursue, but I think that has to come with some degree of success that you've already achieved. Um, because that allows you to be patient and that allows you to think about what you really want because even the opportunities that you pursue have a cost. There's an opportunity cost in your time and your attention and your focus. And so you can be much more deliberate about these things. Um, and that's kind of what that acquisition gave us. It gave us the opportunity and the luxury to be deliberate about what we want to do next. So we take our time and really pick the right thing and be deliberate about how to achieve that. Um, but you know, it was certainly downstream of having enough financial success, which is a relatively low bar. You don't need to be a billionaire. Um, but I think having enough in the bank that you're like...

You're like, 'Okay, I'm not going to starve. I can afford healthcare, you know, like there's some base level there that a lot of founders don't have. You're just sort of always in that mode of like we're running out of money. We're going to, you know, this thing's going to burn to the ground. How do we succeed?' Um, but back to this sort of story idea, I think it's like you can tell people that you can say, 'Hey, look, you want to be really deliberate about the things that you pick. You don't want to run after every opportunity. You don't want to just fast-track your way to a million dollars because you might leave a generational opportunity like your life's work on the table,' but that's easy to say, right? It's hard to live through and for a founder. Um, and so I talk about this with our founders sometimes, but it's sort of like if you look at the life story of the Buddha, and again I think these religious stories like the Buddha or Gita or my favorite parable in the Bible is Matthew 25, the parable of the sheep and the goat. Um, I think these stories are really powerful. Um, and so if you look at the life of the Buddha, he had to be a prince before he could go on the journey that he went on, right? Because the sort of like, 'Hey, look, money doesn't matter.' Yeah. He's like been there, done that. And it's like if it's a poor person telling you that, it doesn't have the same credibility in some sense as the person who has the thing. Um, and so that's why even if you look at a lot of the most famous self-help people, they sort of follow that pattern, right? They had to be successful first and then like every rich person tells you money doesn't matter, right? And so there's this weird double-edged sword to it. Um, but I think that's part of the journey. And so for a lot of founders, it's actually back to this idea of intrinsic motivation. I think for a lot of founders, there's a really deep tension of what they want to do and the reality that they're faced with. And actually, if they had $5 million in the bank, they might do a different thing. But they realize that the path to getting $5 million in the bank is to do a certain set of things, and so that's what we're going to do. Um, and people can tell, back to this idea of authenticity, you can kind of tell why they are doing it. And so as an investor, we really want to be working with the people that are like, 'I'm doing it for these sets of reasons.' And that's not to say that this set of people is misguided or anything. I actually think people should do that so that they can go over here. Um, but you have to be honest with yourself about what the motivations were. And so I think probably for that first two startups, we were as motivated by, 'Hey, it would be really nice to exit a company and have some liquidity' as we were about the thing that we're doing. Um, and now we're just motivated by the thing that we're doing. Um, and so it's just compounded in a different way. It's just like the world can somehow tell that we're not trying to do it because there's money involved. We're doing it because there's a set of things we want to say and do in the world.

Yeah. Well, I think you'd still do the pitches to VCs and you can raise money and you can sell a company for $100 million and walk away making a bunch of money. Um, so I don't think there's anything wrong with that. Um, you just have to be really smart about making sure that the fund math makes sense. Um, and so that the math for your business, the industry that you're in, how much money you're going to raise, all of that sort of lines up. So you can still be rational about it. Um, and so, you know, I think the mistake would be taking a bunch of money from somebody that wants you to pursue a generational opportunity. You see that happen. There's this tension with a lot of founders. They're like, you know, the board's not going to let me sell the company. And it's because, well, what you did was you signed up for an opportunity where somebody's saying, 'No, no, no. Like, the only way this makes sense for the type of investing that I do is if this is a $10 billion company.' And what you're presented with is the opportunity to sell your company for $500 million. So, we have a misalignment. So, as long as you're aligned with the style of investor and what their fund strategy is and so on, that can totally make sense. And so, a small $25 million seed fund, if they give you $500,000 or a million dollars and you sell for $500 million, that might return the fund for that fund. And so, that's totally great. So, you just have to be really smart about who you take money from to make sure that's all. The second thing I'll note is I think the markets have changed a lot in the last 20 years, which is there are now opportunities for people to do secondary opportunities and go from this scarcity mindset into this generational mindset. And um I think that's actually really good and really healthy. Um, there are a lot of investors that would disagree with me, but I think founders, you know, if your company's worth $200 million, $300 million, $400 million, I think getting like $2 million out changes the math. All of a sudden you're like, 'Oh, okay. Like I can buy a condo in SF and pay for healthcare and like my future kids will be okay, and nobody's going to be on the street.' Um, and it just removes a lot of that stress and now you sort of shift into this other mode. Um, so the market has in some sense solved this problem by letting people do secondaries. Um, and so I'm a huge fan of founders actually relatively quickly in the journey doing secondary because what it's really doing is aligning incentives with the investors long term. Yeah. Which is now if you've gotten too out, why would you sell the company right now? Let's go make something big.

Um, far too many people to count is the short answer. Um, you know, I think these things sort of build on each other and so it's just I feel very fortunate to have I was born in this country so I feel very fortunate to have been able to come here, um, go to great public schools, um, and we talked about this before, it's not uniformly available in all public schools but I was really fortunate for the places that I went to that there were teachers that sort of said, 'Oh, you seem to be able to do certain things, like maybe we should get you tested and see if there's actually opportunities that you should be taking advantage of.' And so, you know, everything from the teacher in elementary school that said, 'Hey, let's figure out what you're good at and got me tested.' And then turns out I was really good at math and some other things. And so, she worked to get a special bus where I could go to the high school in the morning. There would be a bus waiting for me and then the bus wouldn't bring you back to the elementary school midday. Plus, you were taking high school classes while you were still at elementary. Yeah, but it's just, you know, a random teacher that was like, 'Hey, we should do something for this kid.' Um, to, you know, Curtis, who's been my friend since I was 18, and taught me so much just as a technologist, obviously is a phenomenal engineer, but also as a human. Um, to all the early lessons from Google and having access to Larry and Sergey and Eric and Marissa Mayer and all the names that people know now, but back then Sundar and Brad and Nick Fox and all these people that I got to learn from were just people who worked at the company. Um, and same thing with Facebook, just the talent concentration is so ridiculous. And so all these great people to learn from. Um, all the way to when we started our investing, just being able to have access to people like Elad Gil, who you could walk through Silicon Valley and there's hundreds of people that would tell you stories about how he changed their trajectory. Um, but he's taught us so much. We wouldn't have gotten off the ground if it weren't for his help.

Oh, he helped us co-create this. I mean, he actually owns the domain. He'd been thinking about, you know, back in 2017, there were a bunch of people trying to figure out Bitcoin and Ethereum and what's going to happen on chain. And so Elad spotted this opportunity and he knew Curtis and I had poked around with this stuff from the cryptography side and the distributed system side and privacy technology because those are all things we care about. Um, and so he approached us and said, 'Hey, have you guys thought about putting some structure around all the stuff that you're doing, the angel investing and the cryptography work and the privacy work, and you guys know how to build software and it seems like there's an opportunity here.' Um, and so he catalyzed it all. Um, and then was instrumental in us actually raising that first fund that we did in 2018. Like literally he flew to New York with me to go pitch a piece and gave us feedback on the pitch and helped us iterate on the deck. Instrumental. We wouldn't have gotten off the ground if it weren't for his help. Um, but he's done that for hundreds of people. That's amazing. Yeah. Um, that's why people love him. Um, and all the way to I was very fortunate to be at YC and I never went through as a founder but I was fortunate to go through as a visiting partner in 2017-2018, and that was a phenomenal experience, getting to interact with Daniel Gross and Sam Altman and Michael Seibel and seeing Paul Graham and Jessica Livingston come back and how they interact with the founders. And a lot of these things are there's some explicit nature to the compounding where somebody like Elad comes in and takes you under their wing and teaches you directly and is a great friend and a mentor. Um, and then some of it is just back to this idea of opportunity as a luxury. It's just being able to be in the same room as some of these people and see how they work and how they operate and how they think. Sometimes that's enough, right? Sometimes all of a sudden that makes that thing click in your head. I'll give you an example. When I went to demo day, the thing I didn't fully appreciate until I saw it was how Paul and Jessica at YC interact with the founders.

Well, they just have such a deep reverence for what it means to be a founder and a genuine love for these people. And so, you know, it's like Jessica will stand off stage and when you come off, she's just beaming and she makes you feel so good that you did it, right? It's such a stressful thing and she gives you a big hug. Um, and I don't know how to describe it other than they have a deep reverence and love for these people and it just comes across. It's this intangible thing that you can kind of feel. Um, do you know who's doing that now at YC? Well, I think it's still partly them. Um, but I think Gary has that too, having been a founder. Um, and I think most of the partners there are now former YC founders, so they have deep empathy for that. Um, and I think that was really smart on their part to enforce that. Um, we're the same way. I think about 40% of Electric is former founders. Um, and it's by design. Um, but that little bit of insight of, 'Oh, I get why this place took off the way it did.' You needed the product market fit, you needed all that, but it's just an embodiment of who they are. They're not thinking of this. Obviously, they want to make a ton of money and they're business people, they're venture capitalists, right? But well, it goes back to your point about authenticity and expressing yourself in the world. 100%. It's just so authentic for them. They just have a genuine love for these people and a genuine curiosity. And I have this really striking memory of, you know, YC does these weekly dinners with former founders that have been successful. So Brian Chesky or Brian Armstrong will come in or whoever. And Paul and Jessica are extremely successful, they're literal billionaires. They could be off on a beach somewhere. But they're sitting in the middle of the room like listening to this talk from this person. Effectively, it's like a teacher-student kind of relationship how it starts. Um, but then these founders go off to be very successful and then they come back and Paul and Jessica will be sitting in the middle of the room intently listening to the lessons from this founder and they'll ask a question and you're like, wow, they're just genuinely curious. It's just who they are. Um, and so I kind of saw that, the light bulb went off, like, 'Oh, I kind of see why this thing works.' Um, and I think it just comes down in so many of these products, so many of these companies, it's just they care so much. It's that story of the furniture maker that sands the inside back of the drawer that no one technically cares about. Yeah, we can see it, but they can see it. And it's just that little extra bit of care where you just care enough, but you care so much more than everybody else, but you have to care that much. Um, when you see it, you're like, 'Oh, I get it.' So, that's a form of compounding where you sort of have this little light bulb go off when you see these people and you have access to them. Um, and you can see how they operate even if they don't realize it. Um, and then that just builds, right? And so every time that happens, it just compounds. And then I think what's great about Silicon Valley is this place is a tight small group of people in the grand scheme of things. Um, and so information flows very quickly about who's real, who's creating value. Um, and one of the really interesting properties about technology, I think, is that the time from being a nobody to being somebody is very short. In four years, you can go from Anthropic not being able to raise a round to, you know, oh my gosh, this is going to be a trillion dollar company. And so what that means practically speaking, any person you meet at a house party might be the next Aario. And that enforces good behavior in a certain way. But it also means that if you actually genuinely create value for people, odds are you've created value for people who will go off and do interesting things in the world. And so it has this way of coming back to you and compounding. Um, and so it sort of enforces really good behavior. And so the compounding I think is sort of inward in terms of these people make you better, but what's really great about the structure of how Silicon Valley works is that the way you really compound is you sort of pay it forward and it has a way of coming back to you because the community is so small and the networks are so tight.

Yeah, there are a couple. I mean, the reverence for founders thing I think is a really big one. I mean, our first value, everyone here will tell you, is founders come first because I think if you basically just do the right thing for the founders, everything else takes care of itself.

Yeah, totally. I think it's, you know, like we are strong advocates of founders retaining control of the company because I think in the long term, founders running things is better because they have moral authority and so they can make very hard decisions. You can go into a local maximum and you can break out of that because the founder says we're going to break out of it. Um, I'm a huge fan of founders getting liquidity. Um, so like secondary is what we talked about, and uncomfortably early in a lot of cases. How early? Like series B. Um, you know, you have to have something, but I think unlocking the thing if it's working and the founder being a big unlock is important. I feel like series B is not that contrarian early because there's been a lot of series A secondaries in the last few years. I think it's a big change from 15 years ago. Series A can work if it's the right person, case by case. The problem is you can create perverse incentives, so you have to be a little careful in how you do it. Um, but you know, I think that that realization that the whole thing works if you have a deep reverence for a founder, that's your customer, that's the person you need to optimize for. Um, and these things are not one shot, right? It's, you know, anybody can go look up the history of Parker and Zenefits and Rippling. Rippling is the $20 billion company, not seeing it if it's right. And YC understands that. Um, and so they backed Parker unconditionally, right? And that was the right call. Including the specific circumstances of that particular case, but intuitively they understand that backing the founder is the thing you're doing. Um, and so it may not even be the first company. It may be the second company, the second time around that it happens. Um, and all these things, it's sort of like, hey, it's good to be good. That's intuitive and makes sense. But I think people don't fully appreciate that the reason these things persist, the reason why he's successful, is because there are real market forces at work here. So like why is that the right thing to do? Well, one is that the timeline from being a nobody to being somebody is very short. And so that's a thing. Um, there's the power law nature of venture which is that one company if it's worth $100 billion, that's the only thing that mattered, right? Like nothing else mattered. Um, because your return on that pays 10-fold what you put in for everything else. Um, and so if you think somebody is capable of doing that, then you should just give them more money. Double down. Right. Um, you know, if you think that the only things that matter are the things that can be worth more than $50 or $100 billion, and in those cases it's that much more important that the founder retains control of the thing for the long term, then of course you would do certain things. You can actually from the properties of how startups work back into, oh, these are actually the right principles, which is why I think over time you've seen venture capital move in that direction. VCs 20 years ago were very different than early stage VCs have to be today, but it's because the reality of the market pushed in a certain direction.

Yeah. Well, first of all, it's unclear that they would hire me because I didn't go through YC, right? And so it's, you know, maybe it made sense, maybe it doesn't. I'm very fond of that place. My wife has been through three times. Three times? Wow. Is that how you guys met? No, we met through Stanford friends. So we have tremendous fondness for that whole ecosystem and Paul and Jessica have been very good to my wife. Um, so you know, we have a deep fondness for that. Um, but I think also at the end of the day, it's um, I think I have the desire to create my own thing and create my own space. Um, and so this probably wouldn't have been the right fit for me. Um, again, setting aside whether or not they would have had me. Um, but for me, the act of creating something from scratch, there's something gratifying about that. Um, and I think it makes me a better investor too because for the person on the other side of it, they know that the person they're interacting with is themselves a founder. So they like a lot of the people we've invested in over the last five years have seen us grow up as a startup. So we're kind of like a series B company. Um, which is like we have a thing, it's working, we're trying to figure out how to scale it. That's kind of where we are in our evolution. Um, and so, you know, I think for a lot of founders, they can kind of tell that the people on the other side are also building something and that's very deliberate, but I think that actually makes us better investors. Um, so Curtis and you have these friend therapy sessions and you introspecting and trying to figure out what you love and what you're good at. You figure out that through all your angel investing there is this great track record and it sounded like the track record is across a bunch of industries across the board. It wasn't necessarily just crypto. Why did you decide to start back then a crypto fund?

Yeah, the observation was it was just startup thinking, right? It was okay, like an inflection point. Yeah. So how do startups have to start in order to be successful? What you have to do is pick a beachhead. You have to pick a thing that the incumbents for some reason are not capable of doing, land there. And the bet you're taking is that that market is going to be enormous, people are underestimating how big that market's going to be, and that the advantages you accrue in that beachhead market will allow you to then go compete against the incumbents and back into the incumbents' market. Um, this is the classic adage of startups are trying to figure out distribution while the incumbents are trying to figure out innovation, and that's the race you're in. And so our bet was this as a beachhead market would be a thing that the legacy firms other than basically Andrew, um, would not pursue. Um, but it would be a huge market. And so if we could land there, we could build the business, build access, build tooling, and then we would have a shot at backing into all frontier investments over time. But you know, just showing up and saying, hey, I'm yet another one of a thousand seed investors, it's a very crowded space, difficult to break through. This was a beachhead we could do that with. The other sort of belief we had specifically about that market because we spent a lot of time thinking about privacy technologies or cryptography was that what had happened circa 2016 with Ethereum was a new platform had been created and that all of fintech and financial services would move to this new platform. And you've been a beneficiary of new platform creations over the years, social and mobile, the internet. And so we said, I think this is a new platform, and anytime there's a new platform, you see a new generation of companies come in. And our belief was that these crypto technologies would really what they were was software eating money, to use an interesting turn of phrase. And so if this was really programmable money, that was the thesis we wrote in 2017, we called it programmable money. That you had these stores of value emerging, digital stores of value. On top of that, you get stablecoins, and that was a way for money to flow around. But if you got stablecoins on these things, then you would have capital markets that came on here. And so, stocks and bonds and private credit, all of these things would move on chain. Um, but that venture capital would have to as well. Um, and there's no reason that venture capital from an operational perspective, it's just capital deployment, so there's no reason that couldn't also move on chain. And anytime you see a platform where software is then eating that industry, there's this corollary that happens: the companies that win tend to be run by software engineers. And it's because all of your critical levers in running the business become software enabled. So let's take an example. Let's take something like Amazon versus Walmart. In e-commerce, all the critical levers have to be run by software, like how you acquire customers, how you track the funnel, how you track where your packages are, everything becomes digitized. And so what you have to do is empower the software engineers to make all these decisions. You have to create an AB testing framework on your website, create an automated advertising funnel to buy ads and track all these things. Um, and what that does to the organization is that you have to set up an organization where the people who are making the critical decisions in your company have to be the ones that have all the power and make all the money. So at Amazon, software engineers make all the decisions and they make all the money. The partnerships people don't. That's basically the inverse of what happens at Walmart. In a legacy retail business, the person who has a deep understanding of in-store shelf pricing and how the stores are laid out and the relationship with Procter & Gamble, these are all the points of leverage. And so Walmart for years and years, it's a little different today, but for years and years always had tier 2 engineers and they were never going to be able to hire those people. So Amazon wins. Walmart 25 years later is still trying to figure it out. Now they're making a lot of headway, but it took them 25 years. The writing's been on the wall for a long time. And so why weren't they able to do it? The reason they weren't able to do it is because what you really have to have, back to this idea of founders having moral authority, like Sam Walton would have made it. He would have blown up the organization and made it happen. Um, but what you have to do if you're a professional CEO is you actually have to go into the organization and say, 'All right, all of you people over here, you're now fired. All of you people over here, you now make half the money. All of you people, you make twice the money. And by the way, you might not be the right people to do this, so we might replace you, but now we're going to pay all the engineers twice as much so we can get good engineers.' And if you look at the org chart, somebody like Sheryl Sandberg reports to Mark Zuckerberg at Facebook. In most companies, Sheryl would have been the CEO and Mark would have been like the chief product officer. So literally, you have to bend the org chart tree and put a different person in as CEO. Um, and so is the CEO of Walmart going to go in and say, 'No, I'm demoting myself, the COO, and that person is now my boss.' That's a weird thing. So all of those human things end up being the hard part, not the software. Walmart can put up a website. They've had a website for a long time. They have an amazing logistics network. So the software part is easy relative to the human part. And you see the same thing with Tesla, the same thing with media companies like Facebook or YouTube versus legacy media companies. Even in media, the New York Times managed to pull that off and survive and is now thriving because it's effectively family-owned, so they can blow it up and reboot for the modern world, whereas the Chicago Tribune or LA Times or Seattle Times, they're gone. That's not going to happen.

I think they'll be more empowered and I think the role of the founder becomes even more important. Um, because who you're working with and who you're working for and what you're working on start to matter even more when software becomes commoditized. Those things matter more. I'll give you an example. I think software businesses, a lot of them start to look a lot more like direct-to-consumer businesses. Um, and so the branding, the marketing, what are you trying to say in the world, the culture of the place, all of these human things start to matter a lot more, which I think actually empowers the founder even more. Um, because that's what founders tend to be good at. Um, and at scale, you're not writing the code anyway. It's not like the founder is writing the code. What is the founder doing? They're dictating culture, hiring processes, brand, how you say what you're trying to say, how you reach customers, and coordinate all of this. Um, and so I think it actually empowers certain kinds of people even more. Now, historically, if you look at anytime there's been breakthroughs or improvements in technology, there's a pattern that you tend to see: people who can go one or two levels deeper in the stack tend to have all the advantages. Um, and so what does that mean? Let's say you're a designer, a product designer. A lot of the best designers have a very good understanding of how front-end engineering works, they have an intuition for JavaScript and CSS and they probably write those things or React. The really good ones also often understand how the API layer between the front end and back end interfaces. So they can optimize the front end with those constraints or understand why certain things are possible or how to architect things such that the front end can do certain things. Um, and you see that pattern over and over. The best backend engineers understand how the APIs are set up, how the infrastructure is set up, how data centers are built, how the chips are built, all the way down to how cooling works. So the ability to go deeper in the stack and understand how these things fit and what the constraints are, or when a new technology comes in, how to adopt it, all of those things are what give you leverage and insight and what to do with the tooling. So I actually think understanding computer science and software and being able to write good code doesn't mean that you're now writing the code, but it gives you a deeper understanding of what's happening below you in the stack. Um, and then a different set of skills start to matter, right? So it's like a designer is different than orchestration. Exactly. So it's like, can you communicate? Can you orchestrate? Can you define the problem in the right way? Do you know how to do the right prompts? Do you know how to break things into sub-agent tests? All of these other skills start to matter. Um, but it doesn't mean that the computer science mattered less. It just means the point of leverage changed, but actually the computer science is still a critical point of understanding and leverage.

Yeah, that was always the plan. That's why we named it Electric instead of something. Yeah. Who came up with the name? Was it Elad Gil because he had the domain? Um, well he had the domain. Um, but that was sort of happening in parallel. We were brainstorming a bunch of names. Why did he have the domain? He's actually, Elad is surprisingly good at branding. He also named Color, you know, Color Genomics. And he's actually very good at naming. Um, and so he had like five or six names he was kicking around. We had some names we were kicking around and we sort of intersected. Um, and then he went and checked the domain and it was actually available so he bought it. Oh, got it. So he's not like a domain hoarder. He has 500 domains? I don't think he does. Um, but he's very good at branding. We were having these conversations about names and there were five or six we were considering. I don't even remember most of them, but the one, Electric, sort of came out and stuck with us for a couple reasons. One, we thought this technology of programmable money stack was kind of like electricity. It would just power everything and it would just disappear one day, you wouldn't even notice it. Um, two, it was a nod to Electrum. Electrum was the first coined money in the Lydian Empire. So there's a coinage of silver and gold alloy. The reason that's important is a technology is like before that you had to weigh your gold, so you'd take a chunk and have a scale. So having standard denominated coinage was a technical breakthrough, and that's what we thought this is, like a money technology. So it's a nod to Electrum, the first technology. And then we thought it was sufficiently brandable, an open generic name that one day when we're doing all these other things, it would work. And so it wasn't like Block something or Coin something where we would be narrowly in that lane forever and then have to rebrand. Um, and so yeah, we were pretty deliberate about that from the very beginning. Our mutual friend Hashe told me that you have this feeling of inevitability about crypto that every time the market is down, he's like, 'Oh, the market's down,' and then you were like, 'Great, we'll become more rich, buy more.' That's right. Yeah. I think it's like I get nervous in bull markets, like AI stuff is in this bull market right now and it makes me nervous because it's too easy to get over your skis, too easy to drink the Kool-Aid, too easy to believe your own hype. Um, and that just makes investing harder. And so it's a little bit of laziness, which is like if you have some fundamental view and the technology shows that it's the case, it's almost like theoretical physics. You can look at these things and run a model and you're like, 'Hey, look, the math kind of works out.' And it might take 20 years, but the math eventually points you to a conclusion and you're like, 'Yeah, there's a Higgs, right? We understand it.' Um, and I kind of think a lot of technologies and markets are like that. That's not to say they're inevitable the way physics models are. Um, but you can develop enough conviction to say, 'I think eventually this is what happens.' Um, and once you find one of those things, actually the best thing to do is just buy and hold. Right. This goes back to other biases I think humans have, which is like we don't really understand large numbers. If I show you a pile of bananas, you're like, 'I don't know, is that 30? Is that 40? Is that 50?' And if I show you a really big pile of bananas, you don't know if it's 100 or 200. So our brains are not set up for millions and billions. Um, we don't really understand exponential growth. It's not like you go to sleep one day and wake up and outside your window there's a giant tree that wasn't there before. That doesn't happen in macrobiology. It happens in microbiology but not in macro. Um, which is why most humans didn't understand what was happening with COVID because it was an exponential curve. And we don't understand low probability events. So people are scared of getting struck by lightning or dying in a plane crash and they're not scared of riding in a car. And if you just look at the numbers, you're like, this is totally backwards. But our intuitions about how likely things are...

Um, so back to the idea of human brains. We have these goofy biases. We don't understand large numbers. Uh, like if I show you this you're like, oh that's five. If I show you a pile of bananas you're like, I don't know. Is that 30? Is that 40? Is that 50? And if I show you a really big pile of bananas you don't. Is it 100 or 200? So our brains are not set up for millions and billions. Um, we don't really understand exponential growth, right? So it's not like you go to sleep one day and then you wake up and outside your tree there's a giant tree that wasn't there before. Um that doesn't happen in macrobiology. It happens in microbiology but it doesn't happen in macro. Um, which is why like most humans didn't understand what was happening with COVID because it was an exponential curve and um and we don't understand low probability events. So people are scared of getting struck by lightning or dying in a plane crash and they're not scared of riding in a car. And you're like this, if you just look at the numbers, you're like this is totally backwards, right? But our intuitions about how likely things are...

Um, I think that's a good place to pause.

Are actually especially with very small probability events are totally wrong. So you take these three things like we don't understand large numbers, we don't understand exponential growth, and we don't understand low probability events, and that's startups, right? And so our intuitions about startups are totally messed up. It's very hard to intuit these things. But one of those things that you sort of learn which doesn't match intuition is that when a thing works, it likely continues to work. And so if 50 million people do a thing, probably a billion people are going to do that thing. If there's a, you know, what you've really got from that 50 million people is that there's some signal there. There's some problem being solved. And so, you know, by the time Facebook had 50 million or 100 million people, there's a very reasonable it was inevitable. It's gonna have a billion people. And even if you don't think it's that particular product, probably that category, by the time there's 50 or 100 million people doing social networking between MySpace and Facebook, you're like, "This is a thing." And probably a billion people are going to do it. Same thing with mobile, same thing with PC, same thing with the internet. And so now people have started to learn that you can make these projections going forward. And the projections really should be exponential. Which again it breaks your intuition, right? That's not how – because when you say these things, it sounds ridiculous. And if you look at the history of technology, you could stand in like 1985, you could stand in 1990, stand in 1995, 2000, pick any date and imagine you're standing on this curve, right? The growth of whatever that industry is. And if you sort of looked behind you, you would see that it was exponential, right? You'd be like, "Oh, yeah. For the last 10 years, it's basically been exponential." And if you looked forward, you don't know what the curve is yet. And if you extrapolate exponentially, you just sound like a crazy person. Right? You're like, really? Like, we're just going to have 100% of cars are going to be electric and we're just going to have solar panels everywhere. And, you know, there's that infamous thing. There's a McKinsey report that predicted how many Teslas would get sold and they were just off by 100x, you know. And it's because you can't make projections because you make these projections going forward. You sound like a crazy person, exponentially, right? Really? Like OpenAI is going to be a trillion-dollar company, you know?

Yeah. You know, it's these things sound crazy, but it's turned out that those are usually right in technology. And so, you know, I think I look at market corrections in practically any industry as an opportunity because what the market feels versus what's real have disconnected. And so if you can find those things that are like, you know, Facebook in 2008 and the market is crashing and everything's going to hell, but the thing is really working and you have amazing people behind it, and there's a real problem being solved, that's the thing that you go put a bunch of money into it and you just hang on for 10 years. And I think every industry has those. So yeah, I mean, I look at something like Bitcoin or Ethereum and I'm like, it's sort of crossed that point. It's just inevitable and maybe it takes 10 years instead of seven and then that impacts, you know, you have to be smart about rates of return and opportunity cost of capital and all that kind of stuff. But the lower prices go, the easier that is to make work, right? It's easier that you're actually going to get the compounding that you need to make the returns work. So I actually prefer it when that happens.

Um, yeah, for short answer is yes, many. And a lot of it has been sort of two categories I think. One is where the technology is basically correct and inevitable, but it takes the market a while to realize that and so you're sort of patiently waiting for that to happen. Another is that – what's an example? Self-driving cars, I think is a good example. But you weren't necessarily wrong here because clearly we're rolling out more of them. Yeah, we were early investors in Cruise and that was acquired by GM and was very successful before it was shut down. But, you know, I think we sort of misjudged the regulatory pushback that you would get and how hard it would be to roll these things out across the country and the complexities there. So being too early is the same as being wrong, as they say. I think another category of failure is where the technology and even the technologists that are making it are basically correct, but the set of skills that you need to really break through to make that thing work at scale with the markets require a different set of skills. And so the founder is not able to make that transition into that other role that is necessary for them. So they're a phenomenal technologist, but they're not necessarily a great CEO. What's an example? I don't want to throw anybody under the bus, but that happens a lot. There are a lot of things where the technologist is not able to make that happen or they're maybe too academic. Correct. Yeah. And so then it's like the technology has progressed to a certain point and somebody else can pick up the technology and run with it and then the person who picks up the technology after it's been progressed to a certain stage is the one who can take it to market. So I kind of feel like a lot of stuff directionally is, if you're close to the information flow, if you're close to really good people, you can sort of call. And then it's like, well, are you correct on the timing and are the specific bets that you're taking the right ones? And that's much harder. But yeah, it happens all the time. I mean, most fail, right? And most startups inside a portfolio even don't work to the degree that you would want them to work for various reasons. So yeah, as a VC you get used to being specifically wrong all the time. So you're like generally correct and specifically wrong all the time.

You have to have really good people around you. You have to have, I think one of the things that we've done a good job of is a lot of the people that we work with are people that we've worked with for a long time. And so, like a lot of people internal or a lot of people external or both. And what that does is it creates an environment where there's a lot of trust that's been built up over a long time, like 5, 10, 15, 20 years in some cases. And so that makes it really easy to disagree because you know that the person is not doing it for their own ego or their own sake. They genuinely are trying to be helpful. So I think the best hack I found is find people that are willing to disagree with you and are very smart and first principles thinkers. And then just surround yourself with as many of them as you can and stay friendly with them and close with them as long as you can because the ability to disagree with you is also a function of the familiarity of the person with you. Most people are not going to just disagree with you outright. There's a human dance that has to happen. And the way you get through that is you develop friendships with people and then they trust you and they don't mind disagreeing with you because then you're actually trying to help each other. You're trying to figure out what's real. It's like you mentioned Steve's a great example of this, right? I can disagree about all sorts of stuff and I actually like disagreeing with him. He's opinionated, he's thoughtful. And then we can hash it out. So you just have to surround yourself with a bunch of people like that. But I think the secret unlock is actually a group of people that has spent enough time together to feel comfortable disagreeing with each other.

That's right. Yeah. Curtis and I like that too. LPs have often asked us, "How do you guys figure it out if you don't agree?" I'm like, well, we just talk about it until we disagree until somebody like is right. And it's because if you're rational and you're smart and you're thoughtful, you can have that. You're like, "Wait, why do we disagree?" There's either some assumption that's different or there's some data that we have that's different or there's some reasoning that we're doing. So let's talk through that and you're like, "Oh yeah, you're totally right. That's not the right way to think about it." And then you don't disagree anymore. But having those kinds of people around you is a real benefit. I don't think there's any way to fake it other than you just have to do that with people for a while and then you figure out who you do that best with. I think that's one of the really great things also about founders and Silicon Valley is there's a lot of people looking for that. It's not like Steph and I have known each other for 20 years and grew up together. But when you find somebody like that, you're like, "Oh, you're the same. We're the same type of person." And then you click with that person and then you have an opportunity to disagree more. It compounds. In a couple of conversations you're like, "Oh, you're one of my people." You get it really fast. This ecosystem is full of those kinds of people, which is really awesome.

Yeah. Yeah, Elad's a unicorn. He's a one of one. But yeah, definitely I, there were actually four that we thought about very specifically. One was Y Combinator, so Paul Graham and Jessica. One was Peter Thiel at Founders Fund. One was Marc Andreessen and Ben Horowitz. And then one was Reid Hoffman. And what we liked about Reid we thought was really interesting is he didn't put himself in a box. So he didn't say, "Hey, I'm a founder or I'm an investor." He just says, "I have access to people, I have access to capital, I have access to information. Let me blend these together in some way to create value in the world." He's very good at that. What we really liked about Peter was Peter also does that. He just doesn't exist in a box. He's down to do whatever. Very creative, but he's willing to be misunderstood for long periods of time and be okay with it. I really respect that. He's not chasing anybody's approval. What I think Marc and Ben got right with Andreessen Horowitz is the recognition that the founder is an artist and what you need to do is build a framework around that. And what I think Paul and Jessica got right is that sort of primacy and fundamental reverence for the founder and everything else flowing from that. And what about El? Yeah, I think El does a lot of things right. The two or three that I've learned the most from him: one, he's phenomenal at selecting markets. His intuition and his reasoning around this thing is going to tip at the right time, it's phenomenal. Two, I think he is just the most helpful. He has an intuition for "this is what this company needs, this is what this founder needs and I'm going to get it done for them." His ability to actually deliver value is unlike anybody else, which is why he's so successful. Those two things I've learned from him and modeled a lot of what we do. So yeah, it's basically these five groups. And so what we aspire to be is sort of somewhere in the middle. There's a separate one which I usually don't say because it's sort of a cheap one, but I think Sequoia obviously in venture capital. I've read everything Don Valentine's ever done or the interviews or videos he's done. They really nailed markets in picking markets and that strive for excellence and good is not good enough. The durability of what they built is remarkable, but it's hard to model yourself on that. The brand they built around that is the remarkable thing. But it's hard to copy that exactly. So there's a bunch of the ones we talk about, but there's a bunch of others. There's artists and musicians and Rick Rubin. Veno Coastal is a really interesting one. Veno has a lot of these properties too. When I was doing the YC thing, we'd be at demo day at the Computer History Museum. After all the pitches, there's a reception with cocktails and snacks. Basically everybody would clear out except for me and Veno and this group of founders that wanted to talk to him at 8:00, 9:00, and literally the janitorial staff would have cleaned everything up and be shutting out the lights, saying, "Hey, you guys need to leave, we're closing doors," and would still be there. He didn't have to be. He's a multi-billionaire. He just loves hanging out with founders. That's what he loves to do. That's a very Paul and Jessica type of thing. He's just doing it for the love of the game. So all these other sort of one-off influences as well, but from a deep relationship, connectivity, direct access perspective, I think it's those handful of people I mentioned.

One way I would talk about not being put in a box or some of the other things is actually the way we talk about it internally is honesty. You really have to learn to be honest. You have to learn to be honest with yourself and you have to learn to be honest with other people. And you have to also understand that most of the world is not honest. Most of the world is actually dishonest. And it's not a moral assertion, it's an observation downstream of human psychology. Most people don't want to say the uncomfortable truth. Many people are put into situations where if they say the true thing, it has negative blowback on them, or they think it does. I'll give you a concrete example. If you have a business, a small business or startup, you might have to work with an outside accounting firm. The person on the sales team has an incentive to convince you to work with them. They'll say, "Oh yeah, we can totally do this. We're going to do a better job." Then the person actually doing the accounting work, the company may have booked too many clients. The reality is they're just not going to be able to do it. But if they acknowledge too early that there's no way they're going to get your taxes done, they might lose you. And now they're in a tough spot because they can't tell you the truth. So they'll tell you half-truths. You have to learn to read those half-truths to see what's happening. The reality is we're not going to hit this deadline. But they can't say that. This is hard especially for honest people because they assume other people are honest. Turns out most people aren't. It's not because they're bad people; admitting the truth is painful. It makes you look bad, somebody else look bad, your company look bad, your family look bad. So they'll hide the truth but give you signal that they're not 100% telling the truth. This goes back to human authenticity. Our brains are wired for this. If you can hone that skill, you can tell when people are actually telling you the truth. A lot of these things – whether you call it first principles thinking or being contrarian or being willing to be misunderstood – a lot of that actually just comes down to honesty. If you're just honest and 100% honest, all of those things sort of naturally flow from that.

No, actually, I don't think we struggle with any of those inputs. I think where we struggle is, one of the properties of our culture is we tend to hire engineers. It's because when your business evolves – and I think venture capital is evolving – you need to acquire your customers in a different way, build brand in a different way, run your business in a different way. So we built a lot of tooling internally, which is using agents to do things that historically humans would have done. What are some examples? We have Ken on our team who has built an entire system called Quest which has access to our CRM, our accounting, our fund data. We can just ask it questions. We can have it double-check finances, draft documents, and it has all of that context inside the company. And so now we don't hire analysts or junior VCs. Have you started building those tools since the AI inflection point? Yeah, mostly in the last two and a half years. But now we don't need to hire a 22-24 year old junior analyst to do reports. We have all the context, the history, the emails, the Slack conversations. We can write a memo about a thing in 20 minutes with deep research plus this internal tooling. So we don't really struggle with most of the things we talked about. The side effect of having people who think in that way is that really honest people who tend to focus on creating value for others, who will do the right thing for founders, they tend to not be good at talking about the work. They tend to be really good at doing the work. We're really good at finding founders, working with those people, spending all this time and money and energy helping them. And we're generally pretty bad at talking about it, which is branding and marketing. That's a skill we're still learning to develop. But I think about it like brands are a proxy for trust. There are two ways to build that brand, especially with a direct-to-consumer lens. One is you make a lot of noise and hope the value proposition matches the noise. Or you just create a really awesome product and then figure out how to get the world to understand. If it's genuinely an awesome product, the customers will start telling people. That is the right and durable way to build brand, and it compounds over time. So that's the approach we've taken, but that does require figuring out how to talk about your brand, which is a different thing than building the product.

The first and most important thing is that the founders know we're just going to do the right thing for them. We look at it as a very long-term relationship even across companies. It's not that this company needs to work necessarily. It's a journey that we're on now for 10 years with these people and they'll figure it out. We would love to be a part of that journey. The way we demonstrate that is by overcommitting resources. We just spend way more time and energy and dollars with our investments than pretty much anybody else at our size. Like in what way are you overcommitting resources? Oh, we just spend way more time and energy and dollars with our investments than pretty much anybody else that I know at our size. Can you give me an example maybe of a company and what you did for it? Yeah. Well, the founder should really speak to this the most, but we'll invite the founder next time. But it's a do-whatever-it-takes mentality. Whether that's fundraising, customer calls, helping literally edit the deck to do the next round, or on staff we have five former executives from Fortune 500 companies that we have on our payroll and we can drop them into companies. They'll just go help. Like they're still working at those Fortune 500 companies with us. Oh, wow. Yeah, they're full-time with us. We just pay them and they go into the companies to help. There's a wonderful woman named Bas. She used to run HR at WhatsApp and before that she did Instagram and before that she was doing the ads group at Facebook. Mark would drop her into places where you had a special unique culture and you didn't want to blow up the culture, but you needed to get recruiting and hiring and HR practice in place. She was a phenomenal partner to a bunch of executives. She's worked with several very well-known pre-IPO companies as an adviser because the people that used to report to her are now running HR at these future hundred-billion-dollar companies. She's gone into two or three companies – I'm being vague on the names because that's their call if they want to disclose. But she's working with two breakout companies right now. Literally yesterday the CEO of one of them texted me, "Bas is amazing." She basically goes in and in the last six months she's worked with three different companies, either been their head of people for a few months or worked with that person closely. She goes into a company three days a week and does whatever they need. If you look at our business, most people may not realize this, but Curtis and I are the lowest paid people at Electric. We make less in cash comp than everybody else. And it's because we take all the dollars that a general partner would typically make and we just turn around and hire people like Bas or Eric or Elizabeth. We think that's the right long-term thing to do because we're going to make all the money on the carry and the way the firm grows and evolves. That's an example. We do founder summits, dinners, all these things, but it goes back to the idea that some of these things you can systematize, but a lot of it is just you have to care more than anybody else. If you care more than anybody else, the person on the other side can sense that. That's the beauty of creating something. You're trying to convey to the customer that if you're building that kind of product – there are other kinds of products, mass market, mass production – but for the type of product we're trying to create, the founder should feel when interacting with that product, "Oh, the people that created this just cared more than makes sense to care." They cared so much more than anybody else has chosen to care. If you get that right, there's an immediate affiliation and brand love that happens naturally. It has to come from within. They have to feel it.

I don't think you can learn how to care about a specific thing. Everybody cares about something. So just finding the thing that you are uniquely positioned to care about. That's the founder exercise. That's one of the questions we ask founders: why do you care about it? Like, of all the things you could do in the world, why are you choosing to do this? There needs to be a reason because if it's a rational thing, when things get hard, you'll stop. The ROI calculation in your head kicks in and you're like, "This just isn't worth the pain." If you care about something more than rationally makes sense to care about a thing, then when it doesn't make sense, you will keep going. A lot of times that's what you have to push through to get to the other side. That's where real value gets created – you just cared more than anybody else. You're willing to suffer through periods that rationally do not make sense. That's not just a startup thing. That's an anything thing. You can be making shoes, it's art. But even like, you go to some neighborhoods, you drive through a neighborhood on the peninsula, they're probably from the '50s, post World War II. When you drive in, there's a brick gate with the name of the neighborhood. Somebody cared. They sat there and said, "We're going to name the neighborhood and make it awesome." Or the park near you, the garden the person next to you has – they go out every day and put their heart and soul into it. The place we live now, it was a husband and wife, the husband passed away. They didn't have kids because back in the '70s there was no IVF. I didn't realize for the first year we lived there, but the woman poured her heart and soul into the garden. She timed it so that once a month something else blooms. I didn't realize until we went through one whole cycle. I thought, wait a second, literally there's something blooming every month. The degree of thoughtfulness to make that happen – she understood which things to put and they're all beautiful. You could just tell she cared. Does anybody need to do that? No. But she just cared more than makes sense to care. As a result, she created something beautiful. I think we're wired for that too. What does it mean to see something beautiful? You can intuitively sense that somebody put their heart and soul into something and cared more than it made sense to care. You can feel that. I think our brains are wired for beauty in that way. For any brand, any passion project, anything in the world – a church, a park, the entrance to your community, your front yard – there's something people care about and you can tell when they care. So the question of can you teach people to care is not exactly the right question. The question is, what do you care about?

It's hard. Some people are really good at storytelling. This is why you can have serial killers and this is why you can have Jeffrey Epstein. Some people are gifted and can tell stories in a way that people can't tell if they're being authentic or not. Nobody's going to bat a thousand. We sort of dodged SBF for a whole host of reasons. What were some of the reasons? There were two, and again we could have been wrong on that. If CZ had not sort of kicked that hornet's nest and caused FTT to collapse in that whole cascade, SBF was a seed investor in Anthropic and that would be worth like $50 billion and there would be no hole. Nobody would know about it. Because he was also a phenomenal investor and so we may never have found out and we would have made a huge mistake. But there were weird signals around the way he was conducting some of his fundraisings, the way he was interacting with the investors, some of the language didn't match the behavior. And for us, some of the math didn't add up. We weren't able to figure out where the money was coming from exactly. There was a rational question for us: is FTX the business and Alameda is supporting FTX, or is Alameda the hedge fund and FTX is the venue? So you were just thinking for yourself ultimately. In that case, there were a lot of little things they did in the fundraising process that signaled they might not be honest. Saying one thing and doing another. That's a bright line for us. We cut it pretty early. Then understandably from his perspective, after we passed twice, there wasn't really a relationship.

How do you define worst? I mean, it's a lot of these things. It's just like honesty. The best founders are ridiculously honest. There's no hiding. It just is what it is. The best founders are storytellers. It's all these things we've talked about. The best founders you can't put in a box. They have intrinsic motivation as much as extrinsic. All of those things are hard-learned lessons from founders. What do you feel like you're still learning as an investor? Oh, I mean, so many things. Basically everything we talked about. How to pick the right markets, how to think about timing, how to think about which technologies really matter, how to pick great founders. We run a process where we look at the things we said no to that we were wrong about and try to learn lessons. That's a continuous process. How to build a brand. It's never done. At least for me, I feel like I found a thing I can do for the next 40 years. It's that ever-improving thing. Hopefully I'm much better at this in 10, 20, 30, 40 years than I am today. So it's sort of all of the above.

Yeah, it's basically the Electric ones. It all stems from this. Honesty is one. First is the founders come first. Honesty. They all stem from this observation that the outliers in society are who you need to find and enable. That's the guiding framework. The properties of that market and those people then dictate all these other things. So put those people first. Be just so honest about everything with yourself and markets. Do things at a ridiculously high bar. Good is not good enough. You have to have conviction. A lot of times, if you can develop that conviction, it's easier to have it right. Why you have conviction matters. A lot of times, believing in something and somebody even when they don't believe in themselves is actually the secret. If you have the reason to do it, it's easy to do it. Then moving very quickly. You have to have a sense of urgency. You can't sit around and wait. You have to be high agency and high urgency to get stuff done. That's pretty much it. If you find your people, are honest, work really hard, hold yourself to an extremely high quality bar, have conviction, believe in something, and work hard and fast with urgency, then all the good stuff kind of happens.

I think it works. We're lucky. We work a lot, but it works because we have flexibility. Founders get flexibility. I think it's also for us, some people want their work life and home life to be separate. We've taken the approach that there isn't really work-life separation. It's just we're doing the things that we do for fun anyway and they happen to be our careers. So why wouldn't you want to integrate them? A lot of our friends are founders. A lot of people we hang out with are founders doing interesting things, building stuff, engineers, researchers. For us, the career stuff is kind of secondary. It's just we found our place in the world and we're doing the thing we want to do as humans, self-expressing, and it happens to mesh together. For anyone listening, any tips for finding your life partner and developing that type of connection? No, I have no advice on that. We've been together a long time now, like 16 years. We were just lucky, frankly. We found each other. You didn't have any methodology or framework things you were looking for? I just met through a friend and hit it off. Here we are 15, 16 years later. There's no process we went through. Maybe that's the advice. It was so easy for us. It should kind of be easy. If you had a startup and hit product-market fit out of the gate, what advice can you give? It just worked. Product-market fit trumps everything. If you find your person and you click and it's obvious, run with it. Don't overthink it.

It's an interesting question. Probably – well, there are two or three answers. Proud is a weird word because it implies accomplishment. I tend to think of it more as what am I most grateful for? I think I'm very grateful that I have managed to find groups of people who have supported and helped me along the way at exactly the right times. I'm proud that I've been able to create value for those people. In some sense, it's a payback, but also a pay forward. I'm most grateful for all those people that have helped me. I'm proud to say that in all of those cases, I've managed to make good on that.

That's a tough one. I think it may very well be that belief that everybody really cares about something and everybody is an outlier at something. What you need to do is find that thing. What we should be doing as a society is finding those people and giving them disproportionate resources to pursue exactly those things that they are outliers in and that they care the most about. Systems should be set up to enable those types of people and those types of behaviors.