YouSaid · the spoken record

Josh Wolfe

lines on the record: 143
first: 2019-08-16
most recent: 2019-08-16
sittings or episodes: 1
sources: podcast

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“Why is this happening in part because there is a junior person at a major fund who found the hot deal that made the fund a lot of money? But the problem is that person is not part of the succession of the partnership. They don't have the economics. They're not going to get paid. So the limited partner is recognized, you know what, Jane Smith or Joe Smith, they were really the dealmaker here. Let's put them in business because they are the future of venture capital. And the LPs are thinking, how do I get a big allocation in the next Kleiner Perkins or Sequoia? And how do I get that early? So that has created what is intelligent to do on a small basis with a handful of these people, but again, a priori, you don't know which ones are going to be really successful.”
2019-08-16 · Masters in Business · Josh Wolfe Discusses Innovative Investments (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source
“This is a phenomenon right now. The minnows and the megas in venture capital. Historically, you had lots of firms that existed, and maybe they were 200, 400, 500 million dollar firms. What you've had in the past few years is a phenomenon that has created a barbell of capital allocation to very small funds and many of them, what I call the minnows. These are people who have raised 10 or 20 or 50 or $100 million. They are a single or in some cases a duo GP, general partner.”
2019-08-16 · Masters in Business · Josh Wolfe Discusses Innovative Investments (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source
“It's interesting because we respond to the bustle in the hedgerow, right? The little sound that's there. And is that a tiger? Or is it just the wind? In my world, I have to respond to that with heightened sensitivity. Oh, is that a little signal over there? Is that entrepreneur onto something big? And so we're constantly overreacting, in part because it is so zero-sum. I do not have the opportunity to invest in the public markets where I can say, you know what, I really like that and it's up 10% or it's down 10%. There is a zero-sum nature where I am racing to beat everybody else to the big scientific technological breakthrough and own it before everybody else can.”
2019-08-16 · Masters in Business · Josh Wolfe Discusses Innovative Investments (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source
“Correct, who also just wrote an amazing book. And it's really interesting because Danny has identified all of the mental biases, the cognitive biases that we have, and it doesn't matter because even being aware of them, you still, he will still fall victim to them. It's cool.”
2019-08-16 · Masters in Business · Josh Wolfe Discusses Innovative Investments (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source
“And that's it. If you can try to be as rational as possible, which means identifying all the points where you are irrational and mindful, you know, we were at dinner together with Annie Duke and Danny Conneman.”
2019-08-16 · Masters in Business · Josh Wolfe Discusses Innovative Investments (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, you know, he's not a very loquacious person, nothing to add. But I think that his rigor in being, you know, I remember there was a story that somebody asked him, what is the single thing that you would attribute your success to? And he said, being rational”
2019-08-16 · Masters in Business · Josh Wolfe Discusses Innovative Investments (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source
“Go to the front desk, and while we're going to the front desk, who is settling the bill for their private dinner restaurant? Charlie Munger. And here I am. My wife is really upset. You know, all our stuff was just stolen from the car. And there's Charlie Munger at the front. And she looks at me and she's like, go ahead. She knew that Charlie was going to trump the theft.”
2019-08-16 · Masters in Business · Josh Wolfe Discusses Innovative Investments (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source
“To see, you know, I have a funny story. My wife and I went years ago to the Berkshire Annual Meeting, and we were at the, I forget if it was the days into the Mario, whatever the hotel was. And before I actually had invested with Bill Gates, there was a dinner. And it was Bill Gates, it was Buffett, and it was Munger. I picked my wife up from the airport because I had arrived earlier and we go out.”
2019-08-16 · Masters in Business · Josh Wolfe Discusses Innovative Investments (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, totally biased view, but he had the biggest impact on me intellectually, this was modern Renaissance thinking. The book Conciliance, which I probably read 98, 99, 2000 thereabout, so over 20 years ago, was this idea in science that turned me on in turn to Charlie Munger. These two people are compatriots. Charlie's view of Renaissance thinking and worldly mental models and I.O. Wilson's view of the unity of the hard sciences and the soft sciences between psychology and physics, between economics and geology and finding patterns lets you identify some universal truths. And so, if you can continue to find those first principle universal truths, I think it sets you on a good path for making good decisions.”
2019-08-16 · Masters in Business · Josh Wolfe Discusses Innovative Investments (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, and really the best is can you develop the reputation and can you actually be able to help companies so that you get the best entrepreneurs? Because the truth is, what we do in the end of the day is security selection and a little bit of competitive intelligence gathering and some smart capital allocation, but the most important thing that we can do is attract the best founders because they are the people who do everything. At the end of the day, limited partners give us money and they allocate to us. And we in turn give it to the entrepreneur. And the entrepreneur in turn decides who they're going to hire and who they're going to fire and what technologies they're going to prioritize and how they're going to sell. And the single best trait of an entrepreneur is somebody that can tell a story, somebody that has that narrative power going back to science fiction and just being able to back those individuals. They are the people that recruit talent. They are the people that raise money. They are the people that garner attention and win deals. And that is what makes the metric capital business.”
2019-08-16 · Masters in Business · Josh Wolfe Discusses Innovative Investments (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source
“Although, if you go with this, can you fail on purpose? I can guarantee you that I can fail on purpose. I can pick the absolute worst entrepreneurs that cannot raise money. I can absolutely pick fraudulent companies and I can absolutely pick teams that can never deliver and I could fail on purpose.”
2019-08-16 · Masters in Business · Josh Wolfe Discusses Innovative Investments (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source
“3X. You see, I'm only going to put the money in the 10X. Correct. Now, of course, what we do, wherever your confidence and your conviction is high, you upsize and portfolio allocation, you put more money in the things that you think are going to be great. You try to put less money. But so much of this is reputational. And so you mentioned John Dewar before and some of the great venture capitalists of the past. And it was their reputation in backing a winner that begot them the next deal. It's very much like when you sit in a movie theater and they say from the director that brought you or from the producers of. And it's that signal. It's the same signal of why elite universities attract elite performers and you get this path positive feedback effect.”
2019-08-16 · Masters in Business · Josh Wolfe Discusses Innovative Investments (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source
“Your companies are total zeros. You lose everything A third you make back, give or take a dollar. And the third, you make 10x, and you end up with a 3x cash on cash. The problem is you don't know which companies when you invest are going to be.”
2019-08-16 · Masters in Business · Josh Wolfe Discusses Innovative Investments (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source
“We get to focus on five, six, seven years because our investors' capital is patiently locked up for a decade. If everything goes well, you might get $3 to Forex cash on cash. Now, some funds, you might have a 10x fund and some you might have a 2. But on average, that's what you're aiming for. There's two ways to cut it. First is you assume that one or two of your companies return the entire fund, all the capital that you've raised one time over. Our newest fund, $500 million. We've got a pair of them. We recently closed a billion dollars. But the $500 million you might have one company where you own 10% of it and it sells for $5 billion. You've got $500 million back in gross proceeds. It's returned the fund one time over. Your next five companies in aggregate proceeds return the fund another time over. And in our case where you build a portfolio of about 25 companies, then the ensuing 15 or 20 companies will turn it another time. And you end up with that 3x cash on cash. The other way to think about it, and again, simple math.”
2019-08-16 · Masters in Business · Josh Wolfe Discusses Innovative Investments (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source
“Advantage that we have as venture capitalists, let's say over peers and other alternatives like hedge funds, hedge funds might have quarterly, monthly, maybe annual liquidity, redemptions. And that's a hard thing because it creates an institutional imperative where the manager is focused on the short term.”
2019-08-16 · Masters in Business · Josh Wolfe Discusses Innovative Investments (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source
“Exactly. The other extreme, stick with rhyming, wait and pay. Okay, so you wait until a winner emerges. You pay a very high price for the higher chance of being correct, but obviously the higher the price you pay, the lower your expected return. So, in one case, you're saying, well, let's bet in 50 or 100 or 200 companies and make small investments buying lottery tickets. In the other, you say, we're going to load up into the ones that are winners, but we're going to do it at such a high price that maybe we're only going to get a double. Now, for a successful venture fund, you're looking for 3x or 4x cash on cash over the 10-year period that you've got locked up money. Now, I always say the great...”
2019-08-16 · Masters in Business · Josh Wolfe Discusses Innovative Investments (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source
“So let's look at the macro on venture. You've got two extremes, one of which we say is spray and prey, exactly what you're doing. Spray and prey. Exactly what you're describing. Just bet a lot of lottery tickets. You have intellectual honesty or total naivete. You don't know what's going to work.”
2019-08-16 · Masters in Business · Josh Wolfe Discusses Innovative Investments (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source
“You're typically conflicted, but sometimes depending on the stage of things, you might invest in one and then later on something else comes along and you might invest in it, but because you know Part of one enterprise and it's better own something smaller of something much bigger than to try to compete head to head. So sometimes we will influence those outcomes. But by and large, the stuff that we're investing is at the cutting edge of science and technology, it's hard. There's barriers to entry. There's intellectual property that imposes a negative right on people so that you have a moat. Again, all things that, and I am psychotic about competitive advantage, give the company that you're investing in a better chance than just pure luck.”
2019-08-16 · Masters in Business · Josh Wolfe Discusses Innovative Investments (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source
“A field of 500 competitors in software. You know, you've got, let's say, equal probability of one in 500 chance. If you can find something where there's only three or four or five competitors, you can look a lot smarter because now maybe you have a 20% chance assuming all things equal of picking the winner.”
2019-08-16 · Masters in Business · Josh Wolfe Discusses Innovative Investments (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source
“Now, I know that you're a student of skill versus lock. And the great question always, I think, in this domain is can you fail on purpose? Something that Michael Mobison has. In picking amongst”
2019-08-16 · Masters in Business · Josh Wolfe Discusses Innovative Investments (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source
“So it really is something that's in the cutting edge of an area that we think that other people haven't found. Now, the reason we do that is we want really high scientific and technical complexity, not because we want to tackle things that are really hard. It's because we don't want competition. It is way easier in venture capital to go find the next company that is developing an app for the smartphone or some social media software or something that is relatively easy. But the problem with funding easy things is you get hundreds of competitors.”
2019-08-16 · Masters in Business · Josh Wolfe Discusses Innovative Investments (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source
“It's just a diverse group of people that all think differently. I always say that if two people think the same, one of them is unnecessary. And it's a lot of fun”
2019-08-16 · Masters in Business · Josh Wolfe Discusses Innovative Investments (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source
“And when we descend upon a company, the entire, and it's funny because I use this analogy the other day and people had no idea what Voltron was. And I feel like I'm a young guy, but geez, it dated me. But it's like Voltron coming together. You get all the robots come together into this Megatron.”
2019-08-16 · Masters in Business · Josh Wolfe Discusses Innovative Investments (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source
“If you had a firm entirely like him, we would be lemming growth investors just paying any price and going off the cliff. The balance that we've had as friends for 25 years and as partners for 20 has made culturally the firm what it is. Now, from us flows everybody else. And so you've got 10 other investment professionals in everybody is intellectually and ethnically and gender diverse. Now, what does that mean for me? We've got people that are Kashmiri, Pakistani, Iranian, Brazilian, Australian. You've got a bunch of white New York Jews. But the intellectual mix of people is so different. You've got electrical engineer PhDs. You've got people that have stem cell PhDs. People in material science PhDs, people that have no technical background and are excellent at capital raising and marketing.”
2019-08-16 · Masters in Business · Josh Wolfe Discusses Innovative Investments (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source
“Correct. Pete, you will catch him in Nantucket Reds, in pastel colors. He is much more like my wife, who happens to be an activist hedge fund manager. She's more perma smile. Me, as they say, you know, I've got RBF, you know, resting. So I expect the worst. He expects the best. And if you had an entire firm that was like me, we would be a bunch of cynical short sellers just trying to spot the frauds and doubting everybody.”
2019-08-16 · Masters in Business · Josh Wolfe Discusses Innovative Investments (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source
“Let's start with my co founder, who's Peter Aber. Peter is my dispositional opposite, which I think if you are going to have a firm is a critical thing. Now, It's interesting because in hedge funds, you typically have 1 p.m. and they make all the decisions. In private equity, you tend to have teams. So Peter and I are the co-founders. And the reason that it's important is he is the optimist. I am the pessimist. I'm sitting before you and I am wearing all dark. I wear all black. And it's just my disposition. I expect the worst. It helps.”
2019-08-16 · Masters in Business · Josh Wolfe Discusses Innovative Investments (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source
“I'm not a fan in case you can't tell. I'm with you. And look, it's easy for all of us to say back then, and I believe, by the way, because I know that you are a fellow skeptic, that was a fraud. It's harder today, both socially, to come out and say, I think that another company is a specific fraud. Now, there's an entire realm of quantum computing today. I think it is going to be wrought with frauds. It has all of the criteria for a fraud. People don't understand it. They have FOMO, if you're missing out. They think that it's going to be something really big. They don't want to feel stupid because they don't understand it. And so people are partying with money. And I think that you're going to see at least one and maybe as many as five public frauds related to quantum computing.”
2019-08-16 · Masters in Business · Josh Wolfe Discusses Innovative Investments (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source
“And now realistically, is it setback one year, two years, or three years, or has it raised the cost of capital for the people?”
2019-08-16 · Masters in Business · Josh Wolfe Discusses Innovative Investments (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source
“But to your point, there was nobody there that really had any sophisticated biotech or pharma experience. Now, the truth is, liquid biopsy, the ability to detect from a small drop of blood analytes that are indicative of cancer or something else will eventually from someone see the light of day. But you think about the scar that it has put on the industry and the sector and how hard it is for a legitimate entrepreneur that's developing legitimate technology today, they've raised the slope significantly.”
2019-08-16 · Masters in Business · Josh Wolfe Discusses Innovative Investments (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source
“And you'd be surprised how many people just want to believe the narrative of the story. Going back to science fiction and not verifying if it's science fact. Now, you had all these other telltale signs with her, the octogenarian boards, which all signaling value, people that had great military or geopolitical influence.”
2019-08-16 · Masters in Business · Josh Wolfe Discusses Innovative Investments (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, when the technology doesn't work, I had a friend who was at a very large deca billion investment fund that was doing crossover investments, their public market portfolio. They have $40 billion. They were making private investments. They were going to visit Theranos. And they said, what's the number one question that you would ask if you were us doing diligence? And I said, does it work?”
2019-08-16 · Masters in Business · Josh Wolfe Discusses Innovative Investments (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source
“And that is it, right? That was my next question. Now, here's the intellectually honest thing. You do not know at the moment of inception or conception of a company whether the person is malicious or delusional, whether they are intellectually honest or not. And so you put up a little money, it's like an anti in a poker game. You're trying to figure out, is this person for real? And you try to define what are the technological milestones that will tell me that this is for real and not BS. And the biggest thing, if you walk into my firm and you sit in our Monday partners meeting, if you asked any of the partners, what is Josh going to ask about the technology or what is he thinking the second that somebody is pitching it, I am thinking, whether I say it publicly or am thinking it privately, is this a fraud?”
2019-08-16 · Masters in Business · Josh Wolfe Discusses Innovative Investments (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source
“Not too bad. And all of these things were born in somebody's imagination. And if you think about really what venture capital is, it is believing before other people understand. And what are you believing? You're believing in somebody's vision. Now, the difference is you have to make sure that they're not full of it.”
2019-08-16 · Masters in Business · Josh Wolfe Discusses Innovative Investments (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source
“Exactly. Okay, now you've got today, you've got Siri, and you look at the image and the thing for Siri, it's just a silver version of Hal from Space Odyssey. You've got Michael Douglas' disclosure. He goes into this room and he 3D scans himself and he enters this virtual reality world. This was around the same time as like Lawnmower Man, if you remember that. Sure. You're not a fan favorite, but one of mine. And that sort of... Presaged the virtual reality landscape. You've got pod racing from Star Wars. Today, that's drone racing. You've got robotic surgery when Luke Skywalker's hand is severed by Vader. That begot both intuitive, surgical, and then oris, which was one of our companies that we sold to Johnson Johnson earlier this year for $6 billion plus.”
2019-08-16 · Masters in Business · Josh Wolfe Discusses Innovative Investments (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source
“The science fiction books. They wrote the graphic novels. They wrote the comic books. They made the movie. They did the special effects. And they imagined what could be. And it turns out you fast forward and you look at the Lux portfolio today. Huge number of the companies that we've invested in. The ideas behind them, the technologies, the design even was modeled on things that happened 20, 30, 40 years ago in science fiction. And I've actually kept an archive of some of the sci-fi archives. So if we went through these quickly, you've got the Motorola from Star Trek. Exactly. It was called the Star Tack Phone. That was one of their first things. It's as close as you can.”
2019-08-16 · Masters in Business · Josh Wolfe Discusses Innovative Investments (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source
“Okay, so everything that is around us today was invented by somebody. Somebody came up with the idea. And that idea started quite literally as a fiction. It did not exist. It was in somebody's imagination. Now, if you accept the premise that a lot of the inspiration for technology comes from other people who were inspired but didn't invent it, they were the people who literally wrote.”
2019-08-16 · Masters in Business · Josh Wolfe Discusses Innovative Investments (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source
“David Rubenstein, famous one, he raises the money. Bill, less famous by design and invests it. And he's just an incredible human. He decided, and again, I don't know the circumstances of the day or the 24 hours that preceded our meeting, but he was in a good mood. And we pitched him. And I said, you know, we want to build this great firm. And he said, I hope you make a billion. And he invested with us. It was a lucky stay in my life. There's nothing that I could have pointed to in the path dependence of this internship or this job or going to Cornell or this class I took that would ever lead to that meeting.”
2019-08-16 · Masters in Business · Josh Wolfe Discusses Innovative Investments (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, but again, if you're going to be skeptical about other people, then you have to be a little bit skeptical of yourself, too. So intellectual honesty, I think, is a good virtue, but it's hard. So I got lucky and I met a guy named Bill Conway.”
2019-08-16 · Masters in Business · Josh Wolfe Discusses Innovative Investments (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source
“It's funny because the word pivoting is totally banned at Lux. We only pirouette. We don't pivot, we pirouet. I got very lucky, and everything in my life I was described as randomness and optionality and ex post facto. I can explain everything as this perfectly linear chain, a priori you never know.”
2019-08-16 · Masters in Business · Josh Wolfe Discusses Innovative Investments (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, you've got New York City, people talk about as diverse, but the reality is you've got Brighton Beach with Russians and you've got Coney Island that's primarily African American Latino and you've got Korean enclaves. But you go to Coney Island on the boardwalk and it is just the absolute melting pot of New York.”
2019-08-16 · Masters in Business · Josh Wolfe Discusses Innovative Investments (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source
“Now, you want them to be ethical and ambitious because you also get a lot of hustlers and hucksters. Now, you grow up in Coney Island right by the Seaside Carnival, and you are filled with hucksters. So I would say, if anything, growing up in Coney Island made me super skeptical and cynical of human nature. I'm always fond of the Shakespearean quote that there's daggers in men's smiles. And you grow up with this distrusting, slightly squinty eyed, you know, what's this guy's angle? What's the agenda that he's got?”
2019-08-16 · Masters in Business · Josh Wolfe Discusses Innovative Investments (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source
“Tony Island, Brooklyn. Yeah. Well, I Well, first of all, if you don't grow up with money, you want it. So that's always a virtuous thing. And I actually think that the best entrepreneur is the kind of people that we back and we look for. If you can find the people that have the chip on their shoulder that they came from some sort of messed up background, it's almost always predictive that they're going to be very ambitious.”
2019-08-16 · Masters in Business · Josh Wolfe Discusses Innovative Investments (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, venture capital is investing in the people who are inventing the future and the people that are inventing the future tend to be technologists and engineers and scientists. And so you have to speak their language. But when I was growing up, I was going to be a doctor. I was going to go get an MD and then an MD PhD. And then I met people who were actually making money. And I got way more enamored with capital markets. And I remember doing my internships on Wall Street. And then I was at the Summers doing scientific research. And my mentor was actually trading futures and options in the science lab. And I got so excited. I said, you know, what are you doing? And he explained. And so I got way more enamored with capital markets than science itself. But venture capital was the perfect hybrid because you get to bet on scientists who are inventing the future, but you just got to understand what they're doing.”
2019-08-16 · Masters in Business · Josh Wolfe Discusses Innovative Investments (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source