Founder of Not Boring and Not Boring Capital. The venture fund is over 40, 50 million AUM. Now the newsletter has over 250,000 subscribers now. Why Substack? You could have started, you know, made up your own website.
I took a writing course. I took Dave Perell's Right of Passage and one of the assignments was there's this new platform called Substack. Go set up a Substack, get 20 subscribers, and go. We had to pick a writer that we liked. And I picked Ben Thompson and David like called it out in the 50 person class or whatever as being the best thing written that week. And I was like, oh, like maybe I can actually write. If my writing is good, the newsletter does well. When my writing is not as good, the newsletter does less well.
At the same time, your business model is, you know, a venture fund. Since we're in analysis mode, how do you think RAMP outpaced Rex? If they are saving companies 15% and saving them a bunch of time, what are you doing still using MX? There are going to be a wave of companies built now that replace these at least 50-year-old kind of company like the Boeings of the world. In MX's case, 140 years old, you should try to actually go beat the incumbent. If your goal is to not go out and try to be the very best in the industry, like what are you even doing?
Packy McCormick, founder of Not Boring and Not Boring Capital, which is a newsletter over 200... Well, the newsletter has over 250,000 subscribers now. You started about 5 years, 6 years ago,
Early, early pandemic. So, kind of started 2019, called it Per My Last Email, went full-time on it during the pandemic, switched the name to Not Boring.
And your business model is, you know, a venture fund.
The newsletter is a standalone business but they work very well together. Yeah.
So and the venture fund is over 40, 50 million AUM now.
You were early on Substack as a platform and I want to talk about Substack as a platform because it's evolved so much with the 2022 Twitter acquisition saga and Chris Best recently told the story of how Elon tried to acquire Substack, went sideways and they launched a competitive feature obviously in Notes. How did that... so this is I think 3 years into when you started the newsletter. So like compare early days, how did Twitter help like build up your Substack newsletter and then why Substack? You could have started, you know, made up your own website, do anything, right?
One could have made their own website or Medium or Beehiiv. I know they weren't around then. Like maybe 2022 you could have moved to Beehiiv. There are like multiple kinds of writers on Substack and just in media generally. There's people who's not as much a writer but like Austin Rief is a friend and I think just knows the media business inside and out, thinks about this stuff, thinks about growth and which platform to be on. Then there's people like me where I took a writing course. I took Dave Perell's Right of Passage and one of the assignments was there's this new platform called Substack. Go set up a Substack, get 20 subscribers and go. And like for the first couple of years it was really just inertia. Like I was on Substack. It worked well enough. I didn't have very many subscribers. My business model has always been sponsor not subscription. So don't pay them anything. I still have never paid Substack a dime. And so it works well enough for that. There were definitely times in the beginning where I overthought it and I was like, man, if only I had the Ben Thompson style footnotes where the dot dots where it popped up right in there. That would be amazing. And I almost went and did my own whole thing just to get those kind of features. And then you realize that is not the main game. Like if my writing is good, the newsletter does well. When my writing is not as good, the newsletter does less well. And so I focus on that more than anything.
I think certainly in the early days, Twitter helped a little bit through me sharing my own stuff, but often when someone else would read it and just kind of randomly say nice things about it, that certainly helped. I think there's been a general slowdown in growth. I mean I spend time on the Substack Notes app whenever I delete X from my phone, which is like often. It's on there right now because I wanted to tweet something on the way up here, but like normally not on my phone. I'll download it, tweet something and then delete it again. So I spend time in the Substack Notes app and it seems like a general sentiment is growth slows or open rates are down because everything gets sent to spam, like all these things kind of happen over time. Twitter certainly I think didn't help on the growth side, that feud. But I don't think it's a huge huge thing. The place that I'm at now, like 250,000 people is way more than I would need to do what I want to do with the newsletter, which is tell great stories of these companies. And find an audience of people who really want to read these 10,000, the last one was 40,000 word kind of pieces on this stuff. And so if I had a thousand of the greatest, the people that I want to read it, I don't really actually care very much about growth beyond that.
At the end of the day, you're writing for those 10,000 loyal fans that rule. I think that this gets discussed like in almost all of tech.
Yeah, that's the goal. That's the goal for sure.
What did you learn from that course with David Perell? What's the course called? Right of Passage.
I thought the course was great. So I think the first thing was just every week having to show up and have something to write and we broke out into small groups and we would critique each other's stuff and so you had to show up with something and so just writing every week was one thing. We had to do an assignment. Maybe it was the first assignment we did. We had to pick a writer that we liked on the internet and write about them and I picked Ben Thompson and David like called it out in the 50 person class or whatever as being the best thing written that week and I was like oh maybe I can actually write because I'd never written. I was a philosophy minor and did history and that kind of stuff but had never written online. So I think that confidence and then I think the big thing was really the idea that niches are much bigger on the internet than you think even when you know that the niche is bigger than you think. And he calls it this idea of a personal monopoly, which is instead of writing about tech, right? If you're like, I started kind of being like, all right, I like the Sixers, I like tech, I like business strategy and pop culture. And so, what if you just combine all of those things? I mean, the beginning really was take Bill Simmons and Ben Thompson and kind of put their stuff together on an assumption that Ben Thompson just would never get that unserious that I'd be able to carve out a niche of fun but still kind of rigorous business writing. And then over time I've kind of softened that a little bit. Hopefully it's still fun to read and fresh and all of that, but it's less, you know, like here's how Britney Spears would think about Slack or whatever.
Yeah. I guess like once you discussed it in your cohort, right, of 50 people, at least you had this confidence that if nobody else, I have like 50 subscribers right there.
Totally right. Well, it was I mean like I had 300 followers on Twitter at that point. It was like mostly me tweeting about the Philadelphia Eagles and so I had to tweet and be like, dude, my assignment this week is to get 20 subscribers. Like please 20 people subscribe because I don't want to ask... I send it out because I don't want to ask one on one for anybody to subscribe to this thing. I was like embarrassed. I thought my friends would talk shit on me for writing on the internet, like all this stuff. And so that was the original 20 was just nice enough souls from Twitter who were willing to subscribe. And then the first year it grew from like 200 to like 400 people. It was super slow growth for a little while, but it was on the side. I had another job. It was mostly a links roundup as opposed to writing long essays. And I'd do the occasional essay. So when I went full-time it started growing faster, but at the beginning it was just very slow growth and just kind of doing it. I mean one of the reasons that I wanted to do it was we brought in this exact team that was not super cerebral to the company that I worked at and so I wanted to exercise my brain. The other was my grandmother had Alzheimer's and I have a pretty bad memory and so I was like, you know what, I'm reading so much stuff I at least need to write down my thoughts on what I'm reading so I kind of remember it a little bit better. And so, if nobody had subscribed, that would also be fine. The practice of writing has been really good. And I think I think about the world a lot differently now than I did before I started writing. But it's also cool now that people engage with it and that it has all these other benefits.
I'm going to come back to how do you think of the world differently from when you first started writing? Um but yeah, tell me more about this going up the content pyramid. I think there's this book Snow Leopard. Um, I don't know if you've heard of it, but it describes the content pyramid as, you know, you first have to become a super consumer. That means you're passionate enough to be chronically online and consume this content. And then, you know, the second step in the pyramid is you become a curator, which is, you know, summing up those links.
And then the final step is you become a creator.
That sounds almost exactly right. I mean, for that Ben Thompson piece, I think that's like all of it there. I'd become like we could have debated any one of his different pieces and I would have known it kind of inside and out. So it was consuming that, like TechCrunch I would read a bunch and all of that kind of stuff. Have always read a ton of books but yeah never really...
So you were a super consumer up until this point.
Super consumer up until this point, right. And then like I should go back and read some of the early links roundups. I don't know how they hold up now. But I started to write too then. I started to write pretty early after I became a curator, but it just wasn't kind of every week. But I wrote a piece early then. I forget exactly what it was called, but it was essentially talking about unit economics through the lens of Shen Yun. They, which you see the posters for all over New York and the country whenever they're coming to do their show. And so there's some fun stuff there where there were things that I was thinking about in my job or learning in my job and then being like, oh actually this could apply there, let me just write about it. And to the earlier point, learned through the process kind of each time and then brought that back to my job. So while I was still working there was a back and forth but yeah I guess that's a good way to describe the pyramid.
For people who don't know what was your job at the time?
So I worked at this company called Breather. We did on demand meeting and workspace kind of like this studio but without all the podcast stuff. People by the end to use as an office. And it was this beautiful thing where there's a smart lock on the door. We designed the spaces beautifully. Furnished them, we had cleaners come in after each and every, it was this complex, overly complex Rube Goldbergian machine to give people access to space wherever they were in New York and nine other markets. And we had this by the end we were fighting because we had moved up market a little bit into larger spaces. We were fighting against WeWork when they were being crazy and their whole strategy was try to out crazy the craziest company in the history of the world, WeWork. And then we were this little guy that hadn't raised a lot of money founded in Canada and so we had this wild strategy where we'd take the big spaces but then you didn't have to get as much space because you had a network around it and so it was this living breathing network of spaces that we kind of controlled end to end. And then ultimately I think and we brought in new management and they're like let's just go almost exactly like WeWork. We're going to pay brokers to get us... just disintermediate ourselves, the whole thing was just we didn't probably have a shot anyway because it was such a hard business model to lease a space for 5 years and run it for as little as an hour. You could get a premium on it and I think we got really smart about how to price it and manage the system. But to go head to head against WeWork with like $30 million versus billions was just an insane move that was never going to work.
But at the same time, WeWork was also, I think 2019 onwards and even post-COVID that was also probably not going to survive. It was becoming obvious.
Yeah. I mean obviously there is something, the people love the product.
Oh yeah. People love the product. Exactly. Which is people love the product. There's something about the business model.
Yeah. And you can do the business model fine and you can do the business model well, you cannot do what they were doing. Which was like we would by the end we were looking at the same spaces that they were and we had a really good both real estate team and data science team. And we had this underwriting model that ended up being like even for the spaces that we'd rent hourly like 98% accurate, 95% accurate depending on kind of the city and the space on what those spaces would do by month over the course, we were really good at underwriting spaces.
And half the spaces that we looked at that WeWork was also looking at and they put offers in on were like there's just no chance in hell in a million years that no matter what you did you're making money on that space and so you're locking yourself into a 5-year commitment and then putting a bunch of cap back into the space. It just made no sense. And in order to grow, they just spend insanely. It's also like real estate, commercial real estate is a very big market, but somewhere like New York for the types of tech customers that you're going after, you're really looking in Flatiron or Union Square or maybe Soho, there's these little pockets. And so those in particular just went parabolic compared to the rest of the market. And so the WeWork demand was big enough and we didn't move the market but we were price takers unfortunately. But that demand was big enough that it just made everything even less sustainable in a good market like New York.
I'm thinking out loud here for something like this to work. We're going off on a tangent, but since you brought it up, would it be a holding company that has all these bespoke co-working spaces and communities like New House, Soho House, some of these, right? Like they all have their own niches, their own business models and then you know maybe and you cater to very different audiences and maybe the part of the value is in the scarcity and your unique taste and
And that's hard too right because Soho House is going private now because a lot of people are like they've kind of lost that ability to pick the right people to join and if you're selling on exclusivity when the thing, it's like the hot new restaurant in New York that is incredibly hot until it's not anymore and then it completely falls off. So I think that can work. There are also plenty of models where a landlord owns a building and they're like, you know what, we're going to turn three of our floors into flexible space. There are operators who will help them do that. Companies like Industrious who have done pretty well. Convene is just high quality office with some event space which can be very profitable and meeting space and that just serves kind of a corporate customer but with some taste and quality. You can also go like before WeWork it was a company called Greendesk and then it kind of evolved and they were just really cheap desks kind of and people need that too. And so I think there are different ways to segment the market. I just think real estate is a really hard thing to grow really fast, right? And you're locked in through cycles and your customer demand goes like this. And so you just need to grow very very carefully.
How did you get involved with Breather and would you do something real estate again?
I would make that decision at the time again and I would not probably... I mean I have the dream job for myself. So I wouldn't change that. I found Breather on Angelist actually. I was working in finance, had applied to business school and was getting ready to go and just was starting to toy around with Angelist and was looking at their job section at one point. I wanted to go to business school to ultimately go work in startups and then I was like, what if I just skip paying $200,000 and go do somewhere and take a huge pay cut but I'm not in debt at least so let's do that. Found Breather on Angelist and the thing that appealed to me was in banking there were times when in the middle of the day I would just go to a bathroom stall and just sit there to hide out and get a little bit of rest.
And so I was like whoa, because none of it existed yet. So I was picturing these perfect spaces right by me. I was like, whoa, if I could just go across the street for an hour and just read or something as opposed to sitting in a bathroom stall. And then over the next couple of weeks, just the different ideas that I kept having for what you could do with a network of spaces like this, I just couldn't stop thinking about it. And so it was time to make the final decision to go to school. I was like, can I get my deposit back? And they're like, nope. I was like, could you defer me a year? They're like, nope. And I was like, all right, cool. Well, I'm going to interview for this company. So, I interviewed for just because I was already interviewing with Breather for a company called Seven Rooms that just got acquired for a billion plus dollars when there were like three people there. So, that financially would have worked out a lot better. But then Breather just got its hooks in me. And so, the interview process was, I had to go up to Canada and meet with the team. There was no role, so I had to write a job description for what a US person might do. It was like general manager, but they're like, this is the real MBA.
Yeah, this is real. I mean, a lot of this was I had to do, I had to go to the Ace Hotel lobby in NoMad/Flatiron and then I had to go to a Marriott business lobby for the because one of the co-founders was the design co-founder and she wanted a presentation on the differences in those two lobbies and how they made you feel and all of that. And then for one of them I had to go, Julian Smith, the CEO, was like there's a guy at Uber in New York who does something similar to the type of thing that you'd want to do here. Go find him, have him interview you and blah blah blah. And so I went out to Queens to Uber's first New York office. Found Josh Moore, who's awesome and has become a friend. And had him interview me there and I guess passed that. And it was interesting. I think Julian is like, sleeves of tattoos, gauge earrings. The fact that I came from finance was a negative. The only thing that I think was good about it was it showed that I could work a lot. And so that was good. But I had also started a party bus company.
This company called... I don't know, Throgo, it was a stupid name. But I wanted to teach myself to code. So I built this dog shit... I wish I had just paid to keep it up. HTML and CSS website where there was a Spotify embed and I made the logo in Photoshop and it was complete trash. But we did party buses from New York to Avalon, New Jersey where I went because there's no good way to get there and then to the Hamptons. And he liked that experience more because I had to do marketing. I had to do operations. I had to... I didn't do insurance. I got very lucky there that nothing bad happened because there were just 50 drunk kids going down to the beach and back. But it was so much fun.
You really did get lucky.
That is such an interesting experience. I think like that entire interview process, they were looking for somebody who stands out and they were looking for someone who had agency and in many ways the right fit for a startup. But in many ways, someone who's in banking, it's from like I guess the tech industry looking into the banking industry, you're usually looking at lower odds of finding someone like that. Was banking like the mistake or
I don't think that... I don't think there's any mistakes on this.
There is no mistakes. But how did you decide on banking as a career? I guess
I thought finance was fascinating. Just kind of generally, growing up, my dad is a consultant, but we would talk about finance a bunch. At Duke, it was an econ major because we didn't have finance, but we had an amazing kind of former Goldman bond trader, Emma Raziel, was the most popular kind of professor in the econ department and she got a bunch of us worked up about finance. Lehman Brothers the year before the crash had a case study competition that me and two other folks won and we got to go up to Lehman and interview for jobs and then literally they crashed after that. Like I'm actually reading More Money Than God, the Sebastian Mallaby book on hedge funds now. And there's a lot about that that I love. I do think investors probably get a bad rep generally. Whereas you have to be kind of broadly... it's a good excuse. You don't have to be but it is a good excuse to know a little about a whole lot of things which I think is really fascinating. And then you have to kind of prosecute your beliefs in the form of a trade. And so I think all of that is really really cool.
One, I don't think I was like... I had plenty of friends who were smarter who were better at it than I was. And that's just not my... being the most precise is probably not my forte. The other was some of these guys just loved it, really really really loved it. And I didn't. And so that was a good sign that I was like, I'm going to go to business school. I liked startups. I worked for one in college and all kind of baby step stuff, but it was what interested me a whole lot more.
Oh, that's fascinating. I guess if you won that business case competition for Salomon Brothers, you said Lehman Brothers organized it, right? That probably gave you the confidence and probably gave you the signal that this is something you're naturally good at.
I was with two other smart people on the team. So yeah and they I think actually both of them still work in finance and have gone on to have great careers and so it taught me that I could present which... that was probably one of the skills. There were like I don't think I would have been bad at it. They're just like I have friends who are just exceptional and they absolutely love it and they're doing the thing that they should be doing and I'm glad that I was able to kind of bounce, be comfortable bouncing around enough to find the thing that I think I should be doing.
I guess like early on in your career you sometimes get these signals that give you the confidence or the belief that this is your thing right and you double down on them because you've probably gotten some advice that double down on your strengths and you just go chase those but in that stage you sometimes don't get to explore some other parts of you that you might also be really good at and maybe those are worth going down and I don't know how you get into that exploratory phase like early on in your career or
I mean for me it was literally the party bus company was one of the ways that I did it and reading pretty broadly and all of that kind of stuff but yeah like if you're doing your job right as a young analyst in investment banking you don't have a lot of time to go explore.
You got to do everything in the bathroom break.
And cell phones weren't even that good back then so you couldn't even do that much on your phone. I remember like we were transitioning from Blackberries to being able to get the app on your iPhone if you wanted it at that point. So yeah, you can't even hide in the bathroom and do very much.
Um but yeah, I don't know. It was great. Like I think each one of the experiences is super valuable. I do think that ability to just grind ends up being fairly valuable.
If you look back, what parts from each of those experiences shape your career today or the person you are today and play a role in your career.
I mean, I do think finance was just the ability to... my MD was from South Philly. I'm from outside Philadelphia, but Italian dude would just fucking scream at people, but awesome. He was really really good at his job, right? One Christmas party I got him a fireman, sexy fireman calendar because I got him for secret Santa and he loved me after that. There's things like that where if you do your job well and fuck around a little bit, I had that in high school too where I would write the funny version of the essay that we had to write but it was really well written and so you could get away with that kind of stuff. So seeing that that applied, you could still have fun with it as you grew but then also I would be in the office for 45 days in a row and be totally fine with it. Like you just have to turn off part of your brain where you're like, all right, I'm just not going to assume that I'm going to be able to go have fun and I'm just going to work because good things do take hard work.
Particularly I think one of the things that's carried over to Not Boring now is there are people who are way way way way smarter than me. The essays that I think are the best are when I'm not trying to win on smartness but just outwork people. Like this last essay that I wrote, Electric Slide, was 40,000 words. I thought a handful of people were really going to like it and everyone else would be like why the fuck did you send us 40,000 words? And it turns out that it's the most shared piece by over 3x that I've ever had in Not Boring. The feedback has been amazing. And that was not because I have some genius insight into the way that the electric stack works, but really because I was just like this is fascinating. I don't understand it and so I'm going to go spend two days trying to understand that little tiny piece of this whole thing and then rinse, watch, repeat until I kind of understand how the whole thing fits together well enough to explain it to other people.
So I think that was there. From Breather it was... I mean certainly the hard work again, like for the first year I was cleaning these little spaces myself when we couldn't get people but also hiring a team. Actually I think it probably... I already had the love of strategy like maybe being born to consultants does that for you but seeing that actually play out in practice for both good and bad I think was really valuable. Like I think of VCs I probably overweight strategy more than other folks do.
You know we at one point I've told this story before but because we had an investor who was also an investor in Uber. They were like Uber won by getting a ton of supply. You have to go out and get a ton of supply. Get one new space on the map every day for the next year. Uber has non-contracted, part-time, non-employee drivers who can come on and off the system. We were signing five-year leases and then doing construction and buying furniture and all that. So, it's a terrible analogy. And we did it which shows I think having the wrong goal can really screw you. Like you can do the best, that was an almost impossible thing to pull off and we pulled it off and I think we did a really good job and it put us in the hole.
So gross margins on our spaces, not net margins but just across the portfolio what we paid versus what we got out on the spaces themselves were negative 25%. And then me and this guy Ben Roller who is at Composer now which I love, who ran data science for us and then product, spent Christmas break just being like how do we fix this and we figured out this whole plan to fix it. It's like maybe the first time that I wrote a strategy thing, we wrote this long doc together. We shared it with the exec team and the company and we rallied them around it and got people excited about it and they understood because we wrote clearly what they wanted to do, what we needed them to do. A bunch of them had to change what their job was pretty dramatically and everyone just rallied behind it and it worked and so that was cool.
And then we brought in the new management as I mentioned before who threw strategy out the window, was like it's all about execution and then just ran the thing pretty much right into the ground. COVID, I think, helped them save face, but it was heading that way almost inevitably at that point. And so it really showed me that no matter how hard you work, if you're running in the wrong direction, you might as well just be reading a book and enjoying yourself because that's worse than not working hard at all, I think.
There are a ton of things to dive deeper into there but that would mean spend a lot more time strategizing because if you're like, if the baseline, everybody agrees that these people are great at execution, just don't go run in the wrong direction and you will often times you will, which is fine, some things you will only learn by running in the wrong direction but for the big stuff, yeah.
Right. I think that's right. There's certainly some of it is, we wouldn't have come up with the strategy that we had come up with that Christmas break had we not had four years of experience working in the company. And so there were things that we needed to iterate our way towards.
I also think that probably saying that you don't need to have a good strategy in the beginning is kind of cope a little bit as well. Like I look at RAMP and they've pretty much just executed against their strategy from day one and you see that show up. They are just exactly... I wrote this piece...
And you're an investor in RAMP.
Oh my god. Congratulations on what, 3000X?
No, no, no. I didn't get in that early unfortunately. But I think it will be a 3000X at some point in the future because I do think their growth is incredibly durable and they're just amazing. They keep moving faster as they get bigger, which is crazy. But I wrote this piece in defense of strategy a couple of years ago.
And part of the argument was what I was just saying about the right direction, but the other is I love this book Good Strategy Bad Strategy by Richard Rumelt. And he talks about the strategy kernel which has the diagnosis, like what's going on out there? What are people not doing in the market? What do people need? Like just what's the landscape? The guiding policy which is just generally how are we going to approach this opportunity? And then coherent actions and coherent is the key word there where it's like all these things that if you put them together form this chain link that almost nobody else can do or copy without doing all of the things that you're doing. Like you couldn't just take Walmart's low prices and be like, all right, we're going to underprice Walmart. You have to do all the other things that Walmart does in order to offer the low prices and make money.
And I talked about the fact that coherent actions with the right strategy, it just compounds over, like you can set up your actions such that they build on each other and then it compounds in your product and your velocity, all of that stuff. And then you look at RAMP and it really is the company personification of that idea. From the beginning it's like we're saving customers time and money, sticking to the core and then only adding products that contribute to that goal. Now they had worked in a company that saved customers, consumers, time and money at Paribus before that. And so I think they learned a bunch of stuff and then at Capital One and so they came with that experience already, which is maybe one of the reasons that second time founders work because you have learned a bunch of lessons and then you can just start with the right strategy for the space on day one.
But I do think you just don't waste valuable time and excitement. And Jerry Newman writes about this uncertainty window which is the only kind of moat that startups have. And I think there's really something to that and so if you're not wasting time in that period where you have the advantage of uncertainty, you're just better off, you can just get further and get to the point where you kind of have moats by the time that other people try to copy you.
Explain more about the uncertainty window.
Yeah. So he goes through and I'm going to blank on the name of this series, but this great series on startup strategy and moats. And goes through and talks about all these different things where startups actually can't get differentiated profits from all of these different things. The only thing naturally available to a startup is... I think counterpositioning and he might say this as well, counterpositioning's job is to extend the period that you have before someone can compete with you but it's not a permanent moat. But all of the other ones are like if you have IP the value is actually in the IP and it's not really something that... there's just a bunch of different things where he goes through and takes all the different things you know from Hamilton Helmer's Seven Powers about how companies get power and you don't have those in the beginning of a startup. The one thing he says that you do have is uncertainty. So like Airbnb by the time that people realized it wasn't completely idiotic to have people sleeping on your couch they were already big enough that they had a network and they learned to take beautiful pictures and that worked and they learned how to grow the thing and how to acquire new hosts and by the time anybody else tried to repeat what they were doing, they already were a real enough company with some network effects and actual moats.
And there's a bunch of these other examples where it's one of the reasons that something that looks stupid actually can end up working. Like most things that look stupid don't but that period where everyone thinks it's stupid if you're moving in the right direction and learning and building on yourself then you actually come out moated.
Jerry actually in Colossus, Patrick O'Shaughnessy's magazine today wrote a piece on the fact that AI does not have this similar dynamic and actually he thinks it's the late stage of Carlota Perez's techno-economic paradigm, like of the internet paradigm. And he compared actually to the shipping container and like one guy for a little while made money on shipping containers but actually it was just this great consumer surplus event. And so he goes through a lot of the same reasons, like there's absolutely no uncertainty in AI. All the big labs are spending a ton of money on it, the big companies are spending a ton of money on it. It does not have similar dynamics to early PCs where people thought this was really stupid and it took IBM a decade to get into it and then the New York Times finally mentioned computers, all of that kind of stuff is a normal dynamic here. And I think his point is maybe OpenAI ends up making a lot of money but he doesn't see there being like happening at the application layer because there's just not this uncertainty.
Yeah. Oh that's very interesting. Well amongst the many case against AI analyses that are coming out.
This has been... I've been on this train from day one. He said it better than I did, but AI was one of the examples that I used in the strategy...
And a piece at the same time that was very much based on stuff that he'd written before. But I think he put better words to what I was saying. But I've been saying forever like this is going to be an incredible consumer surplus event.
It's like very hard to see how, you know, and very hard to build in a consumer surplus event. Is that the case he's making?
I think like he's like you can get like some companies will make a lot of money and they'll get lucky or like they'll be in the one thing that like the labs didn't try to go for and whatever but like to be an investor investing in this stuff now like it is just like very unclear how you would actually make money in a way that like in Zero to One and I'm writing a piece now that have me reference this and I don't want to be like a Zero to One boy but you know Peter Thiel talks about the fact that you know at PayPal or LinkedIn or wherever you know all the value was based on profits 10 years in the future and that like two things are true. One is that growth is like undervalued and underappreciated by people even inside Silicon Valley but certainly outside Silicon Valley even once you've like realized that growth is really important.
And then the second is like that all of that is conditioned on the durability of that growth. And like he specifically says like will this thing be around in a decade? And like that is the question that I have a really hard time answering in the affirmative for a lot of these AI companies. Like I'm having a hard time picturing IPO day. But I will be like spectacularly wrong on some of these and there will be like a trillion dollar company started right now that I would appate the apps category like you just have to be comfortable with that. I think there's some use cases that make a lot of sense and where you can build more in the industry but very few where there is going to be a winner take all moment and if you're not in that company then might as well not do that category at all.
Yeah. And his point is like the real moated ones are just like where a capitalist kind of a moat now and so like OpenAI has been doing this for almost a decade now and like they now can play with the big boys.
Yeah. But like he's like you know I'll think that we're in a new technoeconomic paradigm from the Carlota Perez perspective once you know people are able to change train like foundation models on their laptop and like once you have that kind of creative explosion until like while that is locked in a few labs like he just doesn't say it.
I mean since we're in analysis mode let's run another analysis. Where do you think how do you think Ramp outpaced Brex?
So I have a piece coming out tomorrow talking about some of this not in the Brex context specifically, but I mean it is funny that you know came out that that Ramp crossed a billion dollars in annualized gross revenue and Brex just you know I think accidentally not knowing the Ramp timing was coming out or else I don't know why you would do this announced that they had $700 million in annualized gross revenue and they started two years before they started making revenue and launched their product two years before they hit a cross $100 million annualized gross revenue I think a couple years before and like literally in a piece the second piece that I wrote on Ramp when they got valued at 1.1 billion to 1.6 billion back to back by D1 and Stripe. I have these graphs in there that's like I know this sounds crazy but like if there's two companies growing at these like different even like super high growth rates like this one with the higher growth rate like just is way bigger and grows into its valuation way faster in a couple of years.
And so I think like there's just been this tremendous focus on kind of trajectory and velocity which was kind of the theme of that piece. I think saving time and money is this like really durable idea and I think they were really really right on that. I think like and Brex has been an amazing company. I think like they've caught up a lot on the technical side. Like I think like they're doing like a lot of really good stuff, but I think like coming in and essentially being like we're going to own this kind of tech piece of the market with something that also offers rewards and points, but is just like kind of a friendlier product for tech companies is very different than like every company wants to save time and money and they're all being, you know, like classic innovators dilemma type stuff. Like they're all being overserved by these like by like the MXs of the world. They don't need points and rewards. What they need is like actually understand their business and like time is like a luxury now and all of that. And so like what if you built a product that did those things and you start with expense management, you can add a bunch of other things that do that on top of it. But what if you also did that with like a very like engineering and product led culture from like the beginning to the point where like teams that are not run by engineers and 99.9% of other startups are led by engineers at Ramp. I think there's this like very interesting dynamic of and their studio runs marketing, right?
And their studio runs marketing, right?
Yeah, exactly. That's exactly what I'm referring to. And I think there's this dynamic of like I'm still writing the piece and so like trying to get the exact right words for this, but there's this dynamic of like because they're focused on like how you make other companies more efficient, they also like they almost dog food that on themselves. And so it's this organization that like at that level of revenue just still does move really really fast and has I think avoided a lot of the bureaucracy that like comes for even like the very best startups when they reach this scale because there's just like a million examples of things where they're like that's something that we should cut out and replace with software or just like common sense or whatever and they're like ruthless about cutting that out and then they can also you know start building stuff for other companies that do that and now they're just on like two totally different trajectories.
And I do think like as bearish as I just was about AI and Joe Newman says this as well like that companies that can like put it in the right place in their workflow actually benefit a lot more than like AI companies. And I think Ramp is going to be one of them. When your goal is to save companies time and money and you can have agents that like do a bunch of the work that nobody wants to do in a company like and you've built your whole workflow such that like that stuff happens with software and then you can have this like incredible team build agents to like go do some of that stuff for you like it's just like very right place, right time for that bet. And so I do like I do think it becomes like almost irresponsible like not to use Ramp at some point which is exactly what an investor in a company should say and I think what Keith Boy had said on a podcast right about them but I actually think that that is true like if they are saving companies 15% and saving them a bunch of time like at some point like you really should like what are you doing not like still using MX for example.
It's an interesting like comparison. I guess it's also you keep making the MX comparison for Ramp and I think I guess they've also talked about it. They compare themselves to you know the very best in the business. They're not looking at any other company. They're like oh we're probably going to be the new MX if you're like for all of these we talked about this a little bit. Level of ambition is just
My whole thesis for you know generally is like that there are going to be a wave of companies built now that replace these like I mean in MX's case 140 years old but often like at least 50-year-old kind of company like the Boeings of the world and like the defense primes and like all of those companies some of them will do great and like you know get fresh leadership and have their Microsoft moment whatever but a lot of them like have just gone through like the financialization of the 80s and 90s and like they're you know pulling in supply chains from all over the world. And like it wasn't even the wrong move at the time. Like that was the era. You would have been punished like relentlessly if you had been like, 'Nope, we're saying full stack and like vertically integrated and like everything's built here in the US of A.' Like the company wouldn't exist anymore. So like they had to do a lot of these things, but they've gotten to the point where like they are just beatable now. Like there's a whole host of new technologies that companies can build on. And if you're building one of these companies and your goal is not to be like the very biggest in those industries given the fact that you have like a fresh sheet of paper capital markets that are very friendly to like the leading companies here. You know Andrew can raise as much money as it wants as one example. If your goal is to not go out and like try to be the very best in the industry like what are you even doing? That's what I love about these companies. Like you should try to actually go beat the incumbent as opposed to being like we're you know going to be this component that sells into the incumbents. It's like I don't know just go if they like they really need you so much like if that component is so valuable like use it to go compete with them.
I've come up with a new term right now. Might not be a new term for them. Replacement primes.
Yeah. Yeah. Prime candidates for replacement. Replacement primes. That's what we're going to see in the like next 10 to 15 years. Yeah.
That was a good analysis. Well, while we're on it and while you brought up vertical integrators, especially in the hardware or like industrial category, can you define that for the audience? And do you think the re-industrialized movement is a little before it's time?
Oh, I don't think there is a before it's time like I think it needs to happen. The question will be timing and all of that, but like both as a matter of just like not even national security, just like national interest like you need to be a company or a country that is able to build its own things. You don't need to be an isolated like everybody else pays a million percent tariffs and like you're doing everything yourself, but like you at least need to have the capabilities to build a lot of this stuff particularly the high value add stuff in the country.
And so I don't think it's too early. I just think it's like it's going to be very bottoms up. Like you were we were re-industrialized together and like you think about the re-industrialized movement from the top down. and you're like, 'Well, this is impossible.' Like, look at what China has going on. Like, there's no way we catch up to that. Like, even look at, you know, like South Korea or wherever, like in all these different categories. Like, there are countries that are just like way better at this than we are. And then you meet a lot of these companies and you talk to the founders and you're like, 'Oh, yeah. Well, that's definitely going to work actually.' And so, like if enough of those like things definitely actually start working, then I think like you are just naturally going to have a bunch of jobs created here. I think you know America is really really good at putting its most talented people to work on you know whatever the most lucrative problem ends up being and the most lucrative opportunity ends up being for a while that you know that was finance for a while that has been software and I think now that is going to be like go rebuild kind of like all of our infrastructure and all of these companies that we've like kind of taken for granted would be here forever and that there will be like multiple kind of like trillion plus dollar companies built which would have been like a crazy thing to say a few years ago But now there's plenty of trillion dollar with plenty of competition.
And so I think like the US capital markets and the US system is like really good at getting really exceptional people to go out and build the things that will create, you know, a ton of value. And now I think we're at the spot where like just those opportunities happen to be at the intersection of kind of software and hardware. And so the vertical integrator thesis is you know companies that use technology to build better, faster, cheaper products and compete directly with sclerotic incumbents instead of you know kind of trying to like be a supplier. It's like it's not deep tech. And I think deep tech is amazing and I'm probably not smart enough to invest well in deep tech. And I view the kind of core difference as being like deep tech you're taking some sort of like real science risk, right? Whereas in vertical integrators, you're saying like, 'Cool, did you just like come up with a new battery cell chemistry and like it actually seems to be working? Yoink, we're going to pull that into our batteries. That's great. We're doing pack manufacturing and then we're doing these like five other things to build like a system that takes advantage of better batteries.' And so that to me is like the kind of main distinction.
So is it like would you define it as a science risk versus an engineering risk?
Yeah, it's like it's a science risk versus either engineering or like system design risk.
Okay. So you're like, 'Oh, this system could have existed in this different way and this is like, you know, 50% better and or like 40% better, whatever that ends up being.'
Or like yeah. multiple times better and the business model is different. We can do way better, right? We're going to capture the market.
Yeah. And I think like, you know, what would be an example or a couple of examples of that?
Yeah. So, we were just talking about Astro Mechanica before this and I think they're a really interesting example where I wrote a piece on them about a year and a half ago and did like kind of a whole takedown on what happened with Boeing and all that kind of stuff and there's all the stuff that we talked about, but there's also just like we are now at the spot where you're just like making on the traditional kind of like turbofan jet engine like you're making these like little trade you're like I don't know do we want to be like a little bit more efficient or like get a little bit closer to going supersonic they can get up to like you know .9 you know not mach .9 and like there's just not a lot of like room to innovate on like the actual like airplane itself because like the engine is kind of like at its technological limits and so if you're a company that needs to keep showing like growing profits and whatever else like of course your seats get like squeezed and like you get less leg room and you get upcharged for everything else and flights are over booked and like of course that is going to happen because like there's nothing else to squeeze.
And so one of the ways that these kind of log jams get solved is that some new technology comes about and like kind of allows you to rethink the system in Astro's case that's this thing the turbo electric adaptive gen engine and like the key insight is that electric motors have like finally gotten powerful enough for their weight that you can include them in the engine without like messing up the math on your engine. you can ride the specific impulse curve so that you're not making this trade-off between like speed and efficiency that even the Concord or even like a boom would have to make because you can just like use the electric motor to turn the engine and make it work at different speeds.
And so you have this thing that like theoretically can go fast efficiently and compete as a private plane with kind of first class ticket prices. And then when you do that like you open up the you know private plane private airport network as like one place to do it and you can get more of those built over time and like kind of decentralize that a little bit. you know you can do trans-pacific flights in two hours and like all this stuff gets unlocked by this one engine but then you can build a whole new business model kind of on top of that engine. the is the business model for this new engine that this is like you know 10 times more efficient cheaper than you know the Rolls-Royce you're getting you know easier to service maintain all of that but in this case they are serving to the prime they're serving the prime like no no no they wouldn't like they'll build their own airframes is the idea.
Yeah so that's like the big thing on the vertical integrator piece like if you have this technology that is so much better than the that everybody else has. This is the hard part. Why would you sell that to somebody else? And like now maybe they partner on like, you know, large commercial flights with an airline. They just announced that like United invested in them. So is there a world in which like but they're not a manufacturer, right? Yeah. Yeah. Technically. But like maybe they would make planes. Who knows what that would look like? But they want to operate in the on the private side like they want to operate their own kind of like almost Uber for airlines.
I see. It's like they're going for the Gulfstream business model which is to start with
Which is right. Gulfstream Gulfstream plus managed kind of airline on top of it for you know for private planes and a lot of this a lot of the math ends up being like it is you know it is more efficient or it's for its speed more efficient but you can end up getting a bunch of savings by the fact that based on the fact that the plane only flies two hours where it would fly like seven hours normally and so you get like savings on the pilots and the crew and like there's all these like little things that add up to make it the same price to fly private at like 3x the speed as it would cost you to fly first class on a normal plane and face delays and all that kind of stuff and so like I know we're years away from that actually like from you being able to take a supersonic flight but it's worth funding and I think like there's you know ways to make a bunch of money kind of in the inter room and it just seems like the right place right time for this and I think like you see those kind of opportunities in a bunch of categories.
In part I mean like this one was just a clear example of like motors have finally gotten good enough for this to happen. There's others where it's just like we just haven't, you know, there hasn't been the funding environment or like there's been like this one missing piece or for whatever reason for the past 50 years we've focused a lot more on software than on hardware, right? And now like there's just this almost treasure trove of like it's not like I think that is like that view like oversimplifies and it's like what the hell were people doing for the past 50 years and nobody realized that and I think like it's just like the right spot in like it's the right time to compete with the incumbents and it's the right time technologically to build the new thing and the funding environment is there. It's like there are a million reasons why right now seems to be very everyone's focus has shifted and you know it seems to be the right timing.
Yes. Exactly.
Okay. We're going to go back to the, you know, talking about the media businesses and we started off talking with the Substack platform. I was listening to your interview with David Perell and in that I think he mentions that how he gives this very interesting analogy which I also just thought of as well was that YC was primarily an education business and their thesis was that you know if there's more content and education around how to create a business, how to register an LLC, how to grow a company you know then there will be more founders and so they had this whole like you know venture capital became the business model around it and then he describes that you know in media as well you know if you're at a certain stage newsletters can have venture capital as a business model or podcast 20VC Harry Stebbings can have venture capital as a business model you're 5 years into this you know and you mentioned that Not Boring is a completely standalone you know thing and the Not Boring Capital is a standalone thing but how do you see the future of I guess tech media this is we're specifically talking about tech media here, you know, what do you see the future of tech media becoming?
I don't know. I think the future the future of question on any of these is tough. I think the interesting thing that happened in like 2020 and 2021 is that media generally meant that you could start a venture firm. So if you were like a really popular like YouTuber who did something completely unrelated to tech because you had eyeballs and money and access, you like could get into some stuff and like throw a bunch of checks in. And I think a lot of those people have stopped doing as much venture because it's like not the thing that they were focused on doing. I think you know, you bring up Harry and he's like ended up raising larger and larger funds and is doing a really great job. And that's because he's been like obsessively focused for the past since he was I think what 11 on just like interviewing every investor that he possibly could to learn how to get really really good at venture and now is interviewing founders and people in the different roles in different companies. And so of course you might like a 10 year apprenticeship leader. Yeah. the 10 year like of course you monetize that through venture I think in part because like it's you know a good business like it's just a it is if you can pull it off a good business model and if you're any good it can be a great business model.
But also because like I think kind of the point I was making earlier about just like investors generally like to have all of that knowledge and that curiosity and like some competitive streak and to not go out there and see if you could like actually play the game. I think it's like I don't I almost like don't trust anybody who doesn't want to like see if they can if they can play the game. There are some obvious exceptions. Ben Thompson has built like a phenomenal business where he's like fully like just buy the book. I will not conflict himself in any way and I respect the hell out of that. But I think if you're focused on kind of tech and venture specifically either, you know, big firms are starting to do have been for a while trying to do, but I think Eric at A6Z is like doing a really interesting job early on. I think Founders Fund is probably probably done a better job than anybody by like kind of decentralizing it, having Pirate Wires kind of like probably the best model in their orbit. No, no, at all. You know, I think like Contrary Research is doing some really great stuff. And so like the venture funds are getting kind of good. I think obviously what Patrick is doing with Positive Sum and Colossus and like that whole team that he's building like that's really really interesting. And then there was like a million acquired. Do they have a growth fund now? I don't know if they have a growth fund now. I know they've been thinking about it, but I don't know if they do or not, but David in particular does kindergarten. And you know, those guys are great, too.
There's like a bunch of these and everyone kind of is playing in different flavors, whereas I think like and I did a little bit of this too on the first fund was just like that looks like a hot company and I have an audience and so I bet I could get into that. Whereas now it's like a lot more like Harry is going like European companies and you know Patrick is I guess has a pretty wide mandate but like things that require like a lot of research and they're building out like a pretty great research team and are doing some like really really interesting things over there. And so I think like if you really like venture and tech it is a really good way to monetize. I think a lot of people found that if like you don't actually really care like it becomes annoying to have a bunch of LPs be like what are those like 50 dog companies that you like yol into. And so like I think it's like a natural shake out. So it's not like the future of business models for media generally but I think for this particular type of thing it's an interesting way to do it. And then of course like you know Jordy and John have not done a venture fund and they could get into you know anything that they want. TBPN is amazing and so maybe they do down the line, but like maybe they can just be, you know, unbiased and I think probably build the greatest kind of like sponsorship driven business in the history of tech media. And so there's just a million different ways to do it depending on what you're going for.
