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Let's say everybody selling banana, you can't say, I'm 5x better banana you instead you should come out and say, I'm an apple and not everybody's going to want your Apple, but a hundred percent of the people who prefer apples are going to want. What you have?
I feel like I could rule the world. I know why I could be what
I want to put my all in it. Like a Days on
the Road Less Traveled never looking back.
All right. Yeah, Shawn this I was playing this pump podcast, pretty good. How do you feel? It was good. It was like we showed up no no context. Like what are we going to talk about? Do I need to do any talk about Bitcoin do? I need to have something smart to say about Bitcoin? Because I kind of just, you know, I believe, I buy. I hold, right. I'm like, a monkey this space. And I'm not like, you know, one of these experts. But but we talked about solo, biggest solo capitalist, a solopreneur and
Some of the different kind of like things around that. So I thought it was actually pretty good conversation. Ben was there and he was like I like this one because I feel like everything you said in this was something new that I had never heard you say before. He's like where as you know, once you listen to somebody for like hundreds of hours, you kind of hear the same Greatest Hits over and over again. He's like, this felt like new stuff. Speaking of listening to us for hundreds of hours or listen to you. At least we had a good episode. We just interviewed this guy named. Mike, Maples, Mike was pretty cool. So, Mike is a little under the radar, but
He started this thing called Floodgate, which is a really big Venture Capital firm, but really fascinating guy. What all have they done? They've done lift twitch, Twitter, Crews. OCTA, which is like a giant Enterprise company that's public. So yeah, bunch of bunch of big Winners that he was an investor in pretty early considered one of the best Venture Capital firms are is so real insightful. Guy he kind of had a hint about edgy a little bit. I mean he was like real high.
Q. I've been using the word hi functioning. He's like a real high functioning. Yeah I want to thank Southerner. Yeah this disarming way of talking because he's got this you know kind of like is this Southern and Midwestern accent. Yeah and you know very very relatable likable guy but then the things he was saying each one was like you know like sort of a bullet into you know an idea of an insight. And he definitely had like a few refined ideas of where he thinks the puck is going. And I appreciate that I like that he gave us basically these four waves. He's like
Yeah, I believe these for inflections are happening right now, and that's going to create a bunch of opportunity and that's what I look for is like how is the world changing and then, what's going to be new because of these inflection points? Yeah, I was taking notes. The four things are blockchain Cloud office, American X. The cloud culture for a consumer. So those are the four things and we went into, like, we didn't actually go into each one entirely, but he talked a little bit about each one and we delve, we went deep into Cloud office. They talked about the opportunities there. I thought it was great.
Great. Would you think I loved it? I loved the way he had some phrases for things. I thought at the beginning, he was like a little bit too intellectual for me. I was like, okay, wait, where do I go with this? But it was interesting, but I didn't know how to attach it to like a concrete idea. And I thought about, you know, that was maybe the first 25% and then the next 75 percent, I thought were fantastic. Where ya came down to earth and also, he has these his, this kind of amazing way of talking. I'm kind of jealous. Dude, you are like that. I
What Ira cuz I like, because I try to be like that, when I see somebody who's really good at it. I'm like, oh shit, you're good at this thing. Most people don't even care about this thing. He had these little phrases coined terms for either himself, or his fund or his philosophy, or his mental models. And he'd be like, you know, startup is like a jazz band, not a marching band. And then he was explaining the analogy, and then he was like, and he was like, I want people to choose not compare, which is hard to understand. But once he explains, it was like, oh, that's actually a
Wonderful, mental Frameworks like that iconic song where it's like, what does it mean? It's like, I don't know what it means, but it sounds provocative. And that's how I felt with a lot of his thing's was, like, At first, I was like
immediately interested. I leaned in, when he would say one of those phrases, even though my
brain hadn't figured out exactly what it means yet, and then he would explain it. So, anyways, I thought was really good and super nice. Dude, I really thought he came in. He was so humble and very likeable so I don't know. Great episode, I liked him a lot. I agree and he offered to come back. I couldn't tell if like when
Guys are being nice. I'm like, well, if you have time, let's just keep going, right? I could tell if he was being kind of, will have to have him back on. He was awesome. Right. How did you feel about it when you hit him up for some interest? There was that smooth? I thought it's pretty smooth. Yeah, you gave them the opportunity to be a hero and if not, it was totally okay. Yeah, I asked him. I'm gonna start asking every guest. That the question I'm going to start asking is who do you think would be an awesome guest like who would give those podcasts?
And then, what do you thinks the best way to get in touch with them, right? And then they have the opportunity to be like, yeah, just reach out, he's a nice guy or, yeah, let me just shoot him know right now. I'll tell him, I'll entry you guys, but I don't know. I thought that was a great angle. I know I wanted to call it out because people listening, they get this sort of behind the scenes of, as I heard you say it. I was like, uh-oh, smooth, guys, say I'm gonna be in trouble. We didn't get the kill on this time, but we go II feel as though,
We built enough rapport with them. I can out e-mail Mike and maybe he'll help the hook it up. But yeah, he did a good job. There we go. So Mike do you I was connected to you because my friend, my good friend, Noah Kagan was like, gotta holler at. This guy's pretty interesting and I'd known about you as well, because Tim Ferriss lived near me and was a friend of mine. And he told me that he's like, there's like, two people or three people, Whose advice? I listen to when it comes to investing, one is of all the founder of Angel list.
Sure, who is Scott belsky who started behan sand? Is now probably going to be the CEO of adobe and three was you and and I was like, that's kind of interesting. You know, I have not really heard of Mike too much, you know, you're kind of you kind of, you kind of keep a low profile and I looked it up. And so, you start Floodgate, which eventually you guys have nested in like Twitter, twitch, lift all types of amazing stuff. But we so we have this podcast on a nice, pretty popular.
You know, millions of people, listen and all we do is this brainstorm interesting ideas and so we thought, you know, we got to get you on to come and talk about some stuff. And so, here we
are, let's give it a shot. Why not? Thanks for
having me. And by the way, I've listened to your podcast bunch of times. I remember the the, in the episode with the with Kevin Systrom from histogram, is well good, one of my favorite ones, so if it
was exacting starting, starting greatness or staring, or even starting greatness. Yeah, starting great. This it's kind of a labor of love, you know, I some of the people that work
At Floodgate occasionally we'd have some hallway conversation or in a meeting. They're like dude, I wish we could have recorded that, right? So, so in many ways, the the guests, not only help with the content but we're trying to help help the some of the key ideas of starting greatness, come alive through the voices of the guests because I think there are some some counterintuitive lessons of starting a great startup that are not obvious to people,
right? And you have a you have a good voice and then be your intros are great on the Pod. You
It always had a psych. I don't know how much time you spent on that, but the intros are great compared to us. We put where for sort of famous for. We barely do an intro, like, you'll be 10 minutes in and be like, who the hell is this guest? And then, you know, sometimes at the end we do these sort of Irish goodbye. We're we're like, okay that's it. This is sort of like we ended. We go about our day and so people have like start to make it fun of us. Making sure it's about the, the Irish goodbye. Because they're like, dude, I also hate saying goodbye is it's it's you know, the height, the unwind of a conversation. I like how you guys just
Leave and so that's kind of our thing but we want I guess we'll start with we could talk about kind of
like all the great stuff you've invested in
but I guess I'm more curious about what's get. What's got? You excited now? What space is what trends are you seeing where you're like, huh? I don't fully I don't fully know what's there but there's enough there for me to be interested.
Yeah and it might be kind of a good segue into how I think about what the next big thing will be because there's this
There's this thing that I say, two Founders, which is very encounter. It's very counterintuitive. I say if you want to start a great startup, don't try to think of a startup and the reason for that is that great startup Founders or like Time Travelers and they get out of the present and they visualize different Futures that are a breakthrough that break free from the present. And when you try to think of a start-up right now,
You tend to orient yourself or the world of the present, and so you tend to come up with incremental conventional ideas rather than breakthrough ideas, that sort of change the our code present, to a different future. And so in that gets the areas that I'm interested in. So what I encourage Founders to think about are, what are the inflections? What are the waves of change? They're going to be so massive that it's going to allow an entrepreneur to change the subject about the future because on some level
These waves are the Gathering Power. It's like all the power of the ocean when you surf you got to catch the right wave to have a chance to do great things and it's these waves or these inflections. They allow the entrepreneur to wage asymmetric Warfare on present only with big inflections. Does an entrepreneur go from being disadvantaged two incumbents to having a fundamental Advantage be civilian
Compass. And so, then in terms of the areas that I'm interested in, I tend to go with the inflections. And so one inflection, I'm interested in obviously, is the blockchains with crypto. I think that, that if I was starting a start-up today, that's probably where I would spend. Most of my time another, another area of interest for me, is the transition from what I like to call office culture to Cloud culture. And so in the past, the cloud was sort of
Of a delivery mechanism and a business model for application software. But now what we see happening is that the you know, Microsoft Office literally is a metaphor of the office and its files and memos and file drawers and that's what our desktop looks like. But now people, you know, it's not the editor that matters as much anymore as the comment system and the versioning, it's kind of more like GitHub meets, knowledge work. And so, you know, when
Gnu. When you have Cloud culture rather than office culture, you can take advantage of a lot of Arbitrage, time Arbitrage, Talent, Arbitrage, geography, Arbitrage, you know, that very Tim Ferriss, you know, we talked about him a little bit earlier and then the other thing that I'm interested in is what I Loosely referred to as America Next. And so on some level, I think that 2020 was the first real year of the 20th century or 21st century. And why is that? I think that
There were a lot of issues that people were paying lip service to a lot of stagnation that people were paying lip service to. And I think that 2020 help people understand our military needs to become more agile, more Tech forward that our research and drugs and Drug discovery that our ability to get life-saving remedies to Market faster. We need to take seriously there's just, you know, China as a geopolitical.
Political Challenger. And so as a result, I think that there and you know, now people talk about build back better but I just believe fundamentally the United States. The Western world are going to decide. They need to invest for real, in Tech, forward infrastructure. And then on the flipside of that they're going to realize our infrastructure is vulnerable to cyber hackers and ransomware, things like that whether it's organized by Rogue gangs or nation-states so forth. So those are I'd say those three areas plus also
I'd say cloud culture apply to Consumer, which some call the metaverse, but those are, those are the main things that I'm chasing right now. And, you know, obviously, I have a lot of colleagues as well as flood gate. So we, you know, we go after cyber security and Cloud infrastructure and other things, but the areas that I described the ones that I'm most accurate, most actively going
after that, for that cloud office one. What products? Are you looking at that excite you
Yeah, so I'll kind of give you an example. So one company I'm involved with is called Almanac and it allows teams of people to create documents. But like, if you think about it, this is already happened in code and InDesign. So in code, you had get Hub. And in the past, you just had code Snippets that you shipped around and had some Version Control. But GitHub, made code, social and you could branch and fork. And, you know, collaborate as a team at the
Rather than as an afterthought and then figma did the same thing with design, right? So figma and so, so what we believe is that in a world where Talent can live anywhere in the world, it's going to matter more that you write things down and get consensus and part of how you get consensus as you have a paradigm. That's not office Centric in documentation, but it's Cloud Centric. And so, you know, why shouldn't you just like it, huh? Be able to branch and merge and Fork documents and be
Able to within that one document know, every version of that document that every ever existed in everybody's and, you know, if somebody Forks it and uses it, let's say it's an employee handbook. If somebody uses it for their next company, why not want to know that as well. And so but that's just one of many examples of where I believe that in the future you're going to have all these different products that presuppose that people will collaborate. You know what else do I think will happen. I think people will say
If it can go in the cloud it should, if it can be asynchronous, it should because if I put things in the cloud and make them in asynchronous, I can take advantage of all those different forms of Arbitrage to run my company better. Whereas if I'm a meeting Centric culture, I have to be in the room where it happened when a decision got made. And I just think that that's an outmoded way of thinking about things in today's
world. What? So Sean and I are similar or almost the same age. We are we are the same age. We
Like, when we started work, I mean, we use Google Docs right away, but you're a little bit older than us and like that would, that was a you probably didn't. I mean, that was kind of kind of interesting to you, right? When that when that first came around. So when you say like what needs to be in the cloud in my head, I'm like, wait, are you kidding me? Isn't everything already like that what specifically or for? Example, there's there's startups that are doing, like, Virtual Office. They're like, great. Everybody's remote. You have all these advantages remote. What do you miss out on you, miss out on being a
Socialize and get to know each other and build trust
outside of the you know the water cooler. The what use the conversation that just happened in the break room. So there's these crazy startups that are saying, basically like like online town and stuff like that. They're like here's a virtual office, you can literally walk around, you can bump into people. I don't know if any of these work, right? But they're like, taking stabs at trying to move the like physical office into the cloud to Sam. So it's not just docs or in the cloud, but hanging out is in the cloud, right? But what interview, co-workers in the hallways
And
Claudia and the problem with most Cloud offerings today is that they're basically re hosted office culture, right? So like zoom zoom is a meeting but it's a meeting online. It's not like it's asynchronous in any way. It's not your just re hosting the meeting rather than redefining how work happens. Now with zoom, you can take advantage of geography Arbitrage, I suppose. So that is a good thing but you're not able to take advantage of time and talent Arbitrage as easily. But like like what I
You've ends up happening at the limit is in office culture. Everybody has a job description. And, and what I think in Cloud culture, you know, people have already talked about this, but this idea of jobs to be done Theory. And so, like, when you think about it, all of us don't just have one job. All of us, do a whole bunch of jobs. Like, if you take, even a very simple example, let's say that I work at a flower shop. I might type things into the computer to manage customer records. I might take
Reservations in orders. I might some parts of the day arrange the flowers. Well, when you really think about it, the principle of comparative advantage would suggest that any parts of that, any of those jobs to be done, that can be done asynchronously or in the cloud, you should try to do that if you can. Because then you could take advantage of Labor, Arbitrage, time, Arbitrage, and geography Arbitrage. And then if I'm a good look, great flower arranger. That's what I should be spending. My time on is the thing that I'm really good at. And so what I think
Cloud culture, lets people do it. The limit is broadcast, their comparative advantage to the world and get paid by the network for giving the network what it wants. So I think that it will, you know, the reason I call it Cloud culture as well as who says everybody has to work at a company, right? Like people said that robots are going to eat the jobs, but I think that's precisely the opposite of what's true. I think that software is going to reduce the need for people.
Well, to think they need to work at companies because it's going to all the things I would have had to possess to have a job. I'm not going to need those things anymore by working at a company. I'm going to be able to have all those things in software on my own. And so I think more and more people are going to people are going to realize that really there is a aggregate of jobs that people do. And all of them could be thought of as, like, almost like a derivative that could be assembled in different ways and then move to the cloud or
You know what you specialize, and I think that that'll overtime change the fundamental culture of how teams work.
Tell me, tell me if I misunderstanding this, but I think one thing that you just said in there is that this idea that one person belongs to one firm is right. Actually now an outdated and, you know, suboptimal idea that instead you said like a user basically contributes to the network and gets paid for that contribution to the network. And so one person might belong to multiple firms.
And you know, for my change. So so what does that look like? You're the time traveler? Yes let's say we fast-forward 10 years smart guy like me. How does my like today you know my company got acquired by twitch. I got a day job at twitch, you know. Great that's that's, you know, something I do and I know before
covid-19, thanks for your efforts there. By the way, I mean we monetize that a little while ago, but thanks for your efforts. Of course, anything I can do for you.
By the way, I'm a VC. Say we monetize. That is a wonder that
A really cool Flex. I'm gonna feel
that way. So okay, so then we're ten years from now, so like maybe maybe I should start from the beginning there. So, what do I think is really happening, right? That underlies all my investing. I basically believe that starting around 1850, we had centralized means of production, Mass distribution, mass production, and what that allowed us to do is to create the modern Corporation, but in 1870,
There's no accounting. There were no org charts, none of the stuff that we take for granted as a company. Really existed. But mass production, Mass distribution had a tendency to centralize things because you got supply-side, economies of scale and mass distribution. Allows you to get things out to people. I think what started to happen probably in the late 70s. Early 80s with the microprocessor is now, the economy is animated by mass computation and mass connectivity, and those two
Those two attributes tend to decentralize the means of production. And so, you know, I think we've moved from River Rouge Plant for Ford Model T's to personal 3D printers in the future. And I think we've moved from peak centralization of three TV networks in the late 50s, early 60s to. Now anybody can be their own publisher or Media company that goes direct. And so there's a lot of very basic assumptions we have about companies.
That are just hundred fifty your artifacts of time. Like a somebody in 1820. Wouldn't recognize a normal company of today. There weren't there weren't any companies more than 20 people in the US. You know, in 1820 hardly be maybe a few spinning Looms with a hundred people. But so what I believe is. Now the idea is the social contract between a person and a big company people assume that it's not going to that it's going to persist I think it's going to be radically different so in the in the nineteen hundreds you know,
You had people wanting to be at a company for very long time, and you have large country companies, because the coordination advantages of having a large organization at scale with supply-side economics was valid and created abundance, then the same happened with the military. Then the same thing happened with the government media, all of our major institutions but now I think the pendulum is swinging in the other direction towards a worldwide Network.
Network where everybody on the network, every individual is a note on that Network and every individual, as a note on that network has a comparative advantage. And they get, they get paid by the network when they give the network, what it wants. And that's true for money. It's true for jobs, it's true for everything in my view.
Are there examples of startups now that are that are executing this.
Yeah, so in the early days, our investments were, in these pure-play networks, Twitter, twitch companies like
that. What?
And what I mean? Pure play
a pure play Network would be, you're not really reimagining a part of the economy. So liked, which was a whole new thing that you could argue that Twitter has had a big impact on the media. But but that wasn't the thesis when we invested. But then we started to get interested in this idea of well perhaps every sector of the economy is going to be reimagined around sort of the the the micro means of production and so rather than a couple economies of scale it's going to be
Be local economies of algorithmic computation and networks that span the globe. And so, why did we invest in lift lift was a more modern way to think about getting a ride than taxis? Taxis are a centralized command and control tops down. Dispatched, driven technology lift says, Hey Riders and drivers can advertise their presence in real time on a network and algorithms will form an ad hoc connection. So it's kind of like this.
Turn of the Invisible Hand. And now, all of a sudden, the Invisible Hand is done by algorithms, rather than, you know, kind of in the good old days of people trading fur for musket or something like that. But like, it's, you know, that's what we see happening time. And again, you know, ohm connect is another board. I'm on, they're trying to create incentives for people to use less electricity, but they're basically applying the ideas of software defined networks to
Subtracting energy that homes use during certain times of the day. And so I believe that every you know what is Tesla really? Tesla is a car company that's animated by Network capitalism not industrial capitalism, right? They it's a software to find car that's updated over. The air Leverage is machine learning. It leverages Network effects with all the sensors in the network to help it self-drive better. Apple was a network Capital eccentric phone compared to like Nokia which thought
Need to sell the best widget. And so in sector after sector of our economy, accompanies that our software to find at their core I believe software-defined Network Centric companies at their core going to keep winning and they're going to keep displacing the companies that think of computers as the thing that you did to make your industrial thing go faster. So, you know, Burger King. Is it a software-defined network even though it has computers. It uses computers to say, how many hamburgers did I sell today, but it doesn't use computers to read.
Invent food in any fun, Beltway and the companies that we're investing in our companies that leverage Network capitalism to reimagine reinvent Market from beginning, and the big idea that wasn't, there may be a little bit out there, but Wells, kind of.
Yeah, it's such a big idea that it's hard to. How can I make this more practical for myself and the listeners of someone interested in this field, are boys and girls. Time to talk about this week's sponsor, the HubSpot CRM.
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Yeah, and so the way I would say to make it more practical if your listener is the tendency is to say what's my career path going to be, but through the lens of the 20th century, you know, I'm going to I'm going to make a progressive set of steps and I'm going to, you know, I'm going to get rewarded as I do the things that I seem to need to do in society. But I would argue that it's more important in today's world to figure out a, what am I awesome at or or
Not even one of my the best in the world at, but what is my one of my best? At among all other things? I'm good at. What am I best at? And then what does the world value? And then what am I passionate about? And it's like the intersection of that set of things is where you want to develop your talents. Because over time, that's where your comparative advantage will be the highest and that is where the network will pay you the most for contributing to the network. But I think sometimes it's useful to not, think of not just what company do.
Do I want to join or what set of companies? Should I join my career? Instead you should say the entire world is a network. Everybody is a node in that Network. How can I be the best version of myself as a note on that Network? How can I create the most possible value for that Network? So that all could get recognized by it and paid paid for the value that I deliver.
So how do you do that? So let's take, let's take you, for example. So
let's say you look at the world this way as it's a giant
Network and and you're trying to have your compared to competitive comparative advantage. So what's your
Her Advantage. Yeah, I would say that my job is to be the very best partner for a super ambitious founder and the zero to one phase. So, right, like if you look at my podcast, people say, hey, why don't you have this guest? Why don't you have that guest? But starting greatness is all about zero to one. Awesome startup, super ambitious, what was it like before they succeeded, and there's power, there's addition and subtraction, you know, like sometimes by saying what you're not.
For but like niching down your very powerful to the people who care about your Niche because people say where have you been all my life. And so what you're trying to do is find that set of like-minded co-conspirators for the niche that you've really chosen to be great at and and not get preoccupied with the fact that you can't do it. All right? You're you're way better off, understanding what you can just stick The Landing act and and and and develop your talents. So you can do it even better and better Through Time.
And today, Floodgate is more like a traditional firm, right? It's like a company. Kind of like, let's say current world / old world, right? You have a, you have a brand, you have multiple employees. You have a central fund you have your LP base, sort of static. And then you're investing in a specific place, a set of criteria of companies, whereas the way you're describing things it's sort of field. Like if correct me if I'm wrong, sort of sounded like in the future. What you 20 years from now what
What you might have done instead of setup Floodgate is you would have set up. I don't know, you know, a one-person investing fund yourself or like a dow or something like
that. Basically, a trust that's going to invest in a whole
bunch of things on the network. And, and you wouldn't need the structure of of a fund with employees and with all these different things. So, would you, if you didn't have this already set up in your setting it up for the next 20 years, would you have set up your investing differently than you did with a kind of traditional VC fund?
Well, I like the
We're set up because I think that when you're when you're investing in these crazy risky startups to early way too early or legally Ambiguously too early it's good to have friends and it's good to have people to run ideas by. But we have a very I'm not saying I'm not sure our point of view works for everybody. So I don't even think a start-up is a company, right? So I think a start-up is the capabilities and talents of the founders and their insight about the future and what
What you're betting is on two things? One. Is that their insights, right? And to, is there good enough to navigate the idea to a great product someday. But, like, lift started a zimride and Twitter. They couldn't decide whether to call it voicemail 2.0 or TW T. TR twitch started. As Justin dot TV, OCTA started as a sure. And so like, what do you do with the fact that 90% of your profits? Come from things? That started out different and so my theory on that is
The way to succeed is to realize that a start-up isn't a company at all. And that it's the insights in the founders and your, you make fun of your ability to predict what they're going to come up with that. It is false Precision to even try. But instead where you should be precise has, can these people do the job? And is this, is this powerful enough breakthrough in
sight? You you I believe, it's your partner, I looked up who the top venture capitalist were? I think it was your partner. What?
What's her name
and Morocco?
Yeah, yes and is I like that like CBN sites 2020. 2019, 2018 2015. I think she was in the top 10. Sometimes number two or three in many. Many, many of the years consistently. You just showed me a sign or a thing of dollar bills with Steve blank. You know who's like Godfather of Silicon Valley saying everything Mike does turns into money. You wish what what makes you guys
Is great. What makes you able to spot these interesting opportunities?
I think that, you know, it's funny if you if you had say Warren Buffett on your show or you know, you've had Stan druckenmiller before on your show, right? And when they talk about Investments, you'll probably notice they talk about a few things, what's the operating history of the organization? What is their competitive moat? You know, they have a set of factors you know that
cause them to think that a company is a good investment or not. What's interesting is in our world. None of those mental models. Apply and so because the startups not a company, there is no operating history, there's no moat, they don't even have a product yet, they got no customers. And so what I think we're better at than most is a understanding that's true. And B then asking, okay so what should the mental models? Be right if Charlie Munger and warned
Fit have 90 mental models and they don't apply to Startup investing. Well what are the mental models for startup? Investing them and so we've spent years right? Just being students that question and you know, we probably got about 30 or so that we've developed but we try to we try to evaluate the startup through the lens of those mental models rather than make the mistake of thinking that a start-up is re hosted company and it's
not one or two of those mental models that we wouldn't expect.
Right. Like, you know, I might expect somebody to say, you know, we want to be in a big Market with customers. Really love your products like okay. Yeah great you know we want to be growing extremely fast exponential growth. Well yeah, it's obvious at that point. I also enjoy Checkmate. So what's a what's a mental model? That's not so obvious. Where hundred people in a room would nod their heads and immediately say I already do that. I already think that way when I come, when it comes to Investing For Me.
Yeah, so just give a few examples, you know. So I'd say
Meta level. We have a set of mental models about founding teams and then we have a set of mental models about insights and founding team. A good example would be jazz band and not a marching band. So in companies you have org chart, you have people who want sheet music and dance steps. And if you don't give that to them, the organization is going to be a chaotic mess and all screwed up and discombobulated. In a start-up it's more like when you go to the French Quarter and you watch a jazz band there
The got the lead goes on a riff and everybody else just goes with it and you'll never hear that tune the same way ever again, but everybody knows that that's what they're in it for. Nobody's saying, hey, that's not on my sheet music, you didn't say that was going to happen rats, that's the way they like to offer their art to the world. And so I like to say when a, when a start-up starts, it goes through this breakthrough sequence, it has to have a great Insight, which is something about the future. That's not obvious that most people don't know. And then after that, they have to create a product.
Were they get product Market, fit and zero to one and then they have to have a growth breakthrough where they get escape velocity and then, and only then do they earn the right to someday be in the pantheon of companies, but it's but it's wrong. Headed to give startup Founders, big company advice at any of those stages. In fact, all of those stages are different. It would be bad to give growth advice to an Insight developer, for example, because it would be precisely wrong. So, that would be an example on the team side to me the on the
Site perspective, it would be don't be Market first because there is no market yet and so rather than trying to think of a start-up Market, we want to arrive at startup markets by following inflections. We want to we want to say okay cost of an AI prediction is going down exponentially. How is power going to shift in the industry because of that and like what new markets might arise that it never existed before seasoned?
Actions they power. Your why now so like with lift GPS is got included for free and smartphones and we believe that everybody's going to smartphone someday. Even though in 2010, only 10% did so you could say, wow. Now I can see a world in the future where drivers and Riders will be able to locate each other on a network and ever and there will be a network effect because there'd be all these people have these phones, you could have been right about that before then. But you would have
Still failed because you wouldn't had enough people with the phones and they wouldn't have been able to find each other and so I'd say that's the other counterintuitive thing is that you can't you can't look at the company's tangible operating history because there is none what you have to do. Instead is imagine a world where they're inflections change the future in a dramatic way and that that you know change the rules and like all the stuff that people think is going to happen, something very radically different is going to happen. And why do I believe?
Entrepreneur. What is it that they've discovered about the world that could cause me to take that
bet. What you're describing is is awesome and it's like but it's a, it's an arrow, it's an arrow but wonderful Outlook. So what you're describing about inflections and looking at the world in 20 years is definitely about disruption and these are things that are this is what allows an Uber or Airbnb to go from. Not even an idea to a small idea to a fifty to a hundred billion dollars.
Company. These are like truly disruptive and transfer transformative things. But then, on the other side, there's like, on the podcast actually are today. Sean interviewed this guy named Brian who owns 100% of 1-800 got junk. The revenue might be four or five hundred million dollars and he owns all of it. So he who knows, he's probably worth two or three billion dollars and has probably a pretty calm wife and he's not doing anything probably probably Innovative at all. I mean, maybe there's like micro Innovations like, you know, are
Aging is a little bit interesting or the way that we dispatch people's a little bit interesting or or it could just be operational excellence. Meaning our website ranks number one or we know how to gain, right, whenever you Fran. How do you like your all your? What we just discussed was far on one end. Do you ever look at the other side or or for your job you only care about one side and maybe you just like the first shoot the shit or talk to your friends.
So want to get wealthy? Do you say like yeah but this time it's actually kind of interesting too.
Yeah. And it's funny because we alluded to this earlier. I don't try to be for everybody. I try to be the very best at the thing. I try to be good at and so my view is that I want to go very focused on breakthrough startups and in that zero to one phase and how they. So I like to say I'm a rocket fuel salesman.
And I go, I go to Founders, I say, don't take my fuel if you don't want to achieve escape velocity with that rocket, that's on a launch pad because if you're not sure, it's a rocket is fuel. Isn't going to be good for your vehicle, right? Me Justice and your scooter, right? It's so like I probably don't deserve too much credit when it does escape by pry. Don't deserve too much of the blame when it doesn't, right? I'm just like just be clear about what I'm selling here and and people say well you know it's not realistic that that everybody should.
Build one of the twenty Billion Dollar Plus exit startups of the year. I'm like and you're correct about that. Like I'm not saying that my advice or my Approach is mainstream or even normal. In fact, I would say it's hyper not normal, but like but in that area in that area of I sell Rocket Fuel to people who want to blast their Rockets into outer space and get escape velocity. I try to be the very best period And so like that's that's what I'm in it for. So a lot of your listeners might be like, oh, that's interesting.
Being and kind of intellectually interesting but I'm not I'm not one of those but that's okay. There's lots of ways to get rich in this world and there's lots of lots of ways to succeed in business. Every comes back to, everybody should know what's my comparative advantage and not and not be preoccupied by all the things. You can't be the best staff
so you're not even close to the guy who sees like oh wow, there's a ton of really poorly run laundry stores or laundromats. We should buy all of them and put it back and software. I mean that doesn't
In kind of closely or that doesn't even here, even get you excited.
Well not only that. Like if somebody said hey can you give me some advice on how to grow this? I would say you should not listen to me, I don't know what I'm talking about, I don't know how to do laundromats it scale. Like it's not even a question of whether I'm interested. It's a question, whether I'm confident and I'm not, I'm like, I'm not and I don't try to be and I let go of the idea that I need to
be. I love, I love your answer, by the way. I have something to say about that.
To. But I would say like, you know, you've made me realize that I think one of the things that we're trying to build our compare advantages. It's like we could do this. We get on this podcast twice a week and we shoot the shit either. Just me and Sam or will bring it. We're going to Great guests, Like, You on, and we talked about everything from. I think, one of the most popular episodes was, you know, Balaji talking about like the future of startups are cities as I always watch and you know, apology will bend your brain with a blockchain and then the next episode a, so he's not part of the most listened to
And the second most us to is this side hustle. This entrepreneur has where he's we break down his business of vending machines. He's got 27, vending machines is making six figures or profit and you know, he got started with very little capital and its doesn't take rocket science or Rocket Fuel to do it and our listeners. Like the breath of that of how we can hop from Blue Collar. We have a segment called the hillbilly side hustle which is like the, you know, just a blue-collar kind of like simple thing you can do all the way to. Okay. What is you know, some disruptive
idea?
You how to say I impact is it base? It is it okay, if we talk about biology for a minute because I think he's like amazing so and it's crazy. It's so so like, you know, earlier I mentioned this idea of cloud culture, I think Balaji probably has the best handle on this of anybody. I talked to. So like and you know, I've listened to much of what he said but like what I think happens at the limit is that all of these different Cloud cultures are like their own societies. Yep. And so right now, the main
Main organizing principle of societies the nation state, which is also an economies of scale Centric model, right? But if you think about it, what is bitcoin? Really? Bitcoin is a society of people who care about sound money and the protocol is what enables governance. And so these Cloud societies at the limit, I think look more and more like the future version of countries, but, you know, what is a country? Really, it's a bunch of people who decide what their boundaries are, who decide who gets in the club, and they have a constitutional
You sure, they decide how to separate powers and how to protect the rights of individuals against the mob, and the Tyrant. That's exactly what Bitcoin does with its
protocol, and just to use some other examples of Bitcoin is the people who have this, you know cult-like, belief religious belief around sound money. Ethereum is people who believe in programmable money and then you dry wall Street bets, which is like, hey, let's just middle finger to, you know, to the large, you know, to the incumbents. So, how does David beat Goliath? And we're gonna, we're basically a screw around with them.
And make profits while we do it. That's what we're here for and we will we will assign ourselves names you know they call themselves retards and things like that because in their culture, that's okay, right. Yeah. Burning Man is a pop-up culture that happens for a week in the desert where all these people will go behave, totally differently than they will the other 51 weeks out of the year. And so there's a whole bunch of these either pop up, cultures, Cloud, cultures that all have different, different virtues, different admissions criteria, and all the different pieces you just described.
And it's so interesting because it theirs.
Historical parallels, right? Like in the in the Reformation, the Pope used to declare all the answers. And then all of a sudden, the printing, press comes out and double entry accounting. And now Martin Luther can distribute the Bible to lots of people with, in a permissionless way ironically and then not only that the merchants of Venice can trade with each other without a central Authority because they can have double entry records and keep track of iou's. And so to me like the internet and blockchain or just so amazingly
LL to that and I think Society Ebbs and flows. It's like when you're to decentralized for too long, it gets chaotic and so then then you have innovations that centralized the means of production, but then it gets too centralized. And so what we're seeing now, I believe is Wall Street bets. Perfect example. The people at the edge are saying, the network should decide not to Center, and if you read books, like Revolt of the Republic and things like that, you see a world where the people at the edge are starting to see.
About the people at the center, your illegitimate just like people at the edge back in the Reformation started to say that about the pope and some of the things that were happening with exclusionary, you know, sort of Insider only activities. And so, and in the last
two years, you know, social media went from, you know, the edge to call it pointing at mainstream media. Mainstream media now is like synonymous with with fake news, right? That wasn't even a thing, five years ago, right? Mainstream
Tia is now used as a derogatory description of something which is kind of crazy. Right. That's a big change and the
important thing is like I try not to be too judgmental about it so I don't sit there and say oh those mainstream media people are no good. I'm just like it's inevitable that media is going to decentralize. It's inevitable that money will. It's inevitable that politics Will. It's inevitable that a lot of these things will and it's like arguing for it or against its kind of like arguing against the direction of the wind. It's
It's fruit, but then back to the your listeners, to me what that means. Writ large is if the 20th century was about being the quote-unquote organization, man, and following the rules and progressing up the hierarchy that doesn't exist anymore. Now, you have to be you have to take Agency for your own life and own your comparative advantage and understand that that is your responsibility as a free person in this world. And if you do that,
Going to be incredibly rewarded in the 21st century, but if you wish that it's like the 20th, I got bad news for you. It's not going to be
Floodgate invested into refinery29 right? Yeah. For those that unfortunately, or I mean, it is what it is. A lot of our listeners are men so they don't know. Refinery29 is a huge Media Company get for women for finding. You're trying to 29.com. They were pretty big, right? They were like maybe two hundred million dollars or a hundred fifty million dollars in revenue and then they see.
Older merged or something like that with Vice, right? Yes. And vice is like a, probably a billion dollar-a-year entity at this point with everything they have going on. Do you think that media companies like that? Given what you're saying about gaming devices at this point even though they were new bison refinery29. ER, probably almost like old school at this point. Do you think that those style media companies are still going to be great companies? Given what you've just said?
Well, I think that there's going to be a very rich.
Ecosystem of all types of media companies, but to me, the defining new characteristic will be that media is no longer a function of the credential Elites telling you what to think. And that, that was the real problem that we started to get in the media. In my opinion, is that you had a set of credential deletes running these media companies of which there weren't very many. And these institutions are all inherited. Now, rather than
Did and so the people running these institutions didn't really understand what made him great and the old days. And so they started to get worse over time in their effectiveness and legitimacy. And so to me, the real question about media is not so much is there, one way it's going to happen versus not. I think that the winners will be those that Niche down, have a comparative advantage in the type of content that they cover and attract the attention of the people.
Who care about that type of content and the credentials won't Define it because the old media companies had credentialed Elites running them but they also had a monopoly on distribution with the newspaper and how they how they got print magazines out and things like that. So I think that all that's going to change.
Is there any media companies or opportunities that you're looking at and you're like oh that's kind of interesting for us.
I would I would say that my colleague and
Most probably smarter about that than I am. You know, I and it's funny, even within Floodgate. I tend to stick to my areas that I'm excited about and I so there's a lot of exciting things that I'll that I'll miss probably but I ask you a
question. Yeah. I'm gonna ask you a question that might be hard to answer because it's one of those things like oh you know how are you you but you you've said a couple things that caught my attention. You know, you have these nice phrases so one is, I didn't realize that.
I see this on your bio here. I didn't realize you coined the term thunderlizards. I've heard many
investors talk about thunderlizards at something they want to invest in
just like sort of like, you know, the Godzilla type companies that emerge every decade or so. And like that's what you really Chase because those were all the returns are and those are what change the world. But you also said the kind of the rock. I'm a rocket fuel salesman. Yeah you are catchier than your average DC. You are more, I don't know yet but you have a little sort of gift there of coining. The
Little mine viruses. These little little phrases that stick with people rather than just saying a bunch of jargon. Is that a skill you learned consciously or is that just, you know, growing up your parents talk like that. Where'd that come from?
I don't know, but I guess the way I look at things in this world is, you want to force a choice and not a comparison. And and so like, what do I mean by that? Like like like you just did it again. Did
it again? Yeah, exactly.
It's so,
So like if I say hey we're investing in particularly disruptive types of companies. That's not the same as saying thunderlizards right? And so why is it so important? Well, if you're trying to create a breakthrough by definition, it breaks free from the present. So by definition, it can't be compared to Something in the present because if it's comparable to what's in the present, it stewing for metals to Conventional. And so like when I say force a choice in our comparison, I say two founders.
If let's say everybody selling banana, you can't say I'm 5x better banana you instead you should come out and say I'm an apple and not everybody's going to watch her apple, but a hundred percent of the people who prefer apples are going to want what you have and like, forget the guy wants the best banana. There's a thousand of those people. You needed waste, not in Iraq of energy on them. You need to spend your time on the people who potentially value your advantage and start a movement around that, you know, earlier, we talked about markets,
Companies have markets that could be segmented. Sub segmented and classified startups, don't startups, they create movements, they create, they have a secret about the future, they get early Believers, hukou, conspire with them to create a co-create, a different future. And the market emerges, as a consequence of the movement succeeding, but in the early days, we just have to get people moving. We have to get people moving to somewhere different not better and so as a result, we must force a choice and not a comparison and
As a seed investor, I have to do the same thing because there's 2,000 seed funds now. And so it was Innovative when they and I helped invent seed investing in 2006. But like now there's 2,000 firms. And so we have to come up with some way for people to say, okay, I can't reconcile the choice of working with Floodgate versus Brand X and
actually shot and Sam, right? Right. And checks with right and checks on the spot, that's how we'd
appreciate it. I don't know. But I think there's a lot to be. It's it relates to niching down, I think.
A lot of people would benefit from the idea of how can I force a choice? And not a comparison. It takes more courage and it forces you to say no to more than you say, yes to. But if you, if you do it the right way, the stuff you say, yes to. I like to say it's less but better is the way to think about it.
You've you've had some amazing people in your podcast. You've invested in a ton of amazing company that I bet, you know, just about everyone in this world of all these people that you've invested in or did business with
Guys were put on a stranded Island. Who do you think would come out on top? Who's the most formidable person that you've, you've worked with?
Go there, been so many great people. I think a lot of it would be a function of just who had the right idea at the right time. You know, so much of this is just I call it a Founder future fit, it's just like, you know, like when it went and rescind did Mozilla, it was just, he was the perfect person in the world of the perfect time to do that.
Idea. And so, you know it's not just how formidable is the person but it's also just was it was the timing right and where they just the right person, the
right time, but I'm a British accent. I'm obsessed with stories. And I love interesting personality types. Is there anyone that fits that bill of being incredibly formidable, like the point of like you think, how can you be more like that person or, or I wish everyone thought a little bit more like this
person. Yeah, yeah. So I try to learn from everybody but I not never try to imitate or be like somebody else.
Because then that, that defeats the purpose. I'm now I'm comparing myself to somebody else and so I never do that. I don't believe that people should compare themselves with anybody. I think they should learn from people but I don't think they should compare themselves to others and I think they should have Heroes. And I think that, yeah,
you mentioned a couple people that you've learned from, you know, biology being one. Tim Ferriss that he learned from you who are some other names. You know, if people listen to this and they're like, or me, right? I've really enjoyed hearing to talk during this hour.
Oh, I think you got a bunch of smart ideas. I want to know, you know, what's he eating basically? What's your information diet? What are what are your sort of some of your favorite people to follow and learn from that? You're getting a bunch of interesting information. That's not just like the rest.
Yeah so well I like the the Farnam Street blog a lot with Shane parish and and and by the way, just because I don't invest like Buffett and Munger doesn't mean I don't study him like crazy, right? Because I think that when I, when I read how they look at,
World all understand what's different about how they look at the world, but I'll also connect dots that will make the difference of my world more clear. I read a ton, I probably read about one or two books a week, just in general. What are some of the ones that I've read recently that I liked one? I like a lot is called the courage to be disliked by a couple of Japanese authors. I think it's amazing. And so, then I went down this Rabbit Hole of the
Psychiatrist Alfred Adler who kind of came of age at the same time as Freud and Jung, but was it his famous? But I think he's, I think that Alfred, Adler's ideas about individual agency are perfectly time for the 21st century. So, I've been liking everything that I can get my hands on about him. And it's, and it's weird because although I read a lot of books, there's there's always a subset that I come back to over and over again where I try to take notes and because
Try to try to make sure I really understand it so that I could explain it to somebody else in a really clear way. So I like the courage to be disliked quite a bit. I've been reading a lot of stuff on stoicism lately, which I find to be very misunderstood, but you know, what's the misunderstanding? I think that most people think of stoics, as you know, emotionless, turn the other cheek when things go bad and I actually find that
At, when you read about the stoics and there are actual philosophies in this world, they're actually quite optimistic and quite inspiring. And I find that it's helpful for me to internalize. So, the, like things like some of the, the lessons of stoicism. And some of the lessons of Alfred Adler, I'll find myself reading those books over, and over again and and trying to make the list of things to learn. And ask myself, everyday am I in my exercising those muscles and then there will be other things.
Like my friend of mine, I'll say there's a really good book on my gosh. Just read that so Frank, you know, that's just fun. It's
great. All right, we're coming up on the hour so we can we can wrap it, Mike. Thanks for joining. This is great. Where do people find you if they want to get more? So obviously the podcast. So starting greatness. Where else should they follow to get more?
Yeah I'm on Twitter. @ m 2J R was see where. That's probably the best place. Yeah or
Floodgate.com yeah your Tweet and machine. I've been telling you since I talked to him years ago about you
You
okay. Yeah, and if you guys want to cover any other topics, happy to I know that we kind of bounced around. So I
want the American Next. I feel like that would have been an interesting one that I think we should we, if you're up for it, we could do a round two around America and I think it's a bunch, that's there that have that pure
about. Yeah, in all these themes, right? Like, I think that the idea also of, you know, blockchains and sort of thinking about the future of money and how we're going to a currency governed by
Almonds rather than Fiat government is interesting. I think that, you know, the evolution of, you know, I like to say that Computing phases, you had mainframes and you had PCS and you had internet and they always start with an enabling technology and they Commodities the prior. So mainframes computers were expensive and then PCS computers, were basically free proprietary software, becomes valuable, okay? Next thing, the internet could software
Um's open-source amassing, lots of proprietary data, becomes valuable. And so, one way I look at blockchains, are there the next wave of computing? And that they're going to probably democratize data and control of things back to networks and then what becomes a valuable thing? My instinct is it's about governance. So there's, there's like a lot of conversation. We could have about that. That might be interesting and then totally agree America. Next all the stuff that I think is going to have to happen, and for the military,
Be
more agile and for us to kind of upgrade our thinking about
stuff, you know, we're talking, I'm like this is what I could be. Like if I could just focus on three things that I really believed in and I just stopped thinking about other shit for like two years. I could have this level of clarity and insight and you're making me want to focus, which salmon, many others in my life. I've ever have tried to get me to focus before. And this may be the most effective way.
Well, there's no one way, right? Like, I like to
To be all compare people are like a tea, right? It's like a you want to be a mile wide and an inch deep so that you just can appropriate creative ideas from the world. But then I think you want to be a mile deep somewhere, right? It's like a tea, right? It's like that's why you read several books at a time, but then you also go deep on a small number. They're truly great.
Do you, who, who should we invite next on this podcast? So you think is some of the some some of the are some of the best storytellers and prolific.
Folks, you had Reid Hoffman, we're trying to get in touch with him. Is there anyone else that you think is is we should invite
you and Reid Hoffman the vollrath account. You know, Chris sacca is always a good Storyteller. Hmm. I can think about that, you know, the instagrammers are fun, Andy Radcliffe, it probably not as famous as some some of your guests and stuff. But boy. Is he a clear thinker? A great
communicator. What's the best way to get in touch with?
He'd just too cold emailing, you
think. Probably, let's see, or you just say that I've mentioned you guys, and that is a good show and then I enjoyed it beat up people that you just
mentioned. I'll email the people. You just mentioned. I was thinking like that. You're the Mike said, you're the guy.
Well, just so, you know, I haven't seen as much a Chris sacca lately. So I don't know if that would be as effective with him, but but I think that some of the other guys would would
Recognize me pretty
well I showed up for Chris one morning he texted me said hey I got a film, a shark tank intro. We need some bodies in the background to for my intro and I left my job. I went to where he was at 9:00 in the morning and I filmed a was a body double. I was I was an extra in the background for his Shark Tank intro. So I'll pull that favorite card into the cake. Chris ahead, Now's the Time to pay it back. Yeah,
if you haven't had Mark Cuban, I think he's really good.
And by the way, on this, so it's funny because you guys are using Zen Caster, so does Shane Harris? So I was on his sorry, Shane parish. And on his after he listened to the to the talk. He's like there's so many upfront questions. I wish I'd asked you can we do this again? And so I was like, sure. So we ended up having a lot of content that he kind of cut down. But like, if you find yourself in that position here, let me know. I'm happy to help you make it.
Is bet, you know less but better. Right? So if we can you know if we're going to ship a product at nice, will be fucking awesome. Right? So I love you.
Where are you from?
I was born in Oklahoma but moved all around its and dad was an IBM or yeah. And then worked at Microsoft.
Yeah. I feel like how, how old are you
early 53?
So your, I'm 31. So you would have had to have me when you were quite young but
I feel like you could you could you could be my uncle. I think
that's what the founders call me their nickname. For me, is the crazy uncle?
Yeah, I think we kind of look the same. I can tell you, I thought you would have been from the Midwest or maybe the style. I'm from Missouri. Show me state. Yeah. And my cousins live in Oklahoma and fit in Owens. Oklahoma, where they Buck Bull's Eye. I had a, I have a feeling you and I we could be distance cut.
Some cousins we don't even know it.
Yeah, yeah. You never know coming from Missouri Oklahoma you never know.
Yeah well I appreciate this man. This is awesome Shawnee. Anything to say now my camera died. I'm at the overheating Mark but Mike, this is great. Thank you for coming on. AA. Enjoyed that that was good and you're in Austin.
Now I live in Marin County so I'm in Northern California.
Oh, I thought you lived in Austin for some reason.
No, actually, I helped him though, find his place. So what he decided to move I
you know, I used to live in Austin about up until about 15 years ago, in my family's from there, all my relatives and stuff. And so, you know,
I'm you just beyond instead of what everyone else did
it seems. So nobody keeps asking me, when are you gonna move back to Austin? I, you know, I don't know. I'm pretty happy with where we live, but, you know, it's pretty crazy time, so you never know. We'll see.
Oh, well, thanks for being here. We'll talk soon.
I feel like I can rule the world. I know I
could be what I want to put my all in it. Like a Days on the
Road Less Traveled never looking back.
