Animal Spirits Podcast - Howard Lindzon Unplugged

Episode Date: January 1, 2022

On today's special episode we speak with Howard Lindzon about his career, the state of venture capital today and what it's like investing in start-ups. Find complete shownotes on our blogs... Ben Carlson’s A Wealth of Common Sense Michael Batnick’s The Irrelevant Investor Like us on Facebook And feel free to shoot us an email at [e-mail] with any feedback, questions, recommendations, or ideas for future topics of conversation. Learn more about your ad choices. Visit megaphone.fm/adchoices

Welcome to Animal Spirits, a show about markets, life, and investing. Join Michael Batnick and Ben Carlson as they talk about what they're reading, writing, and watching. Michael Battenick and Ben Carlson work for Ritt Holt's wealth management. All opinions expressed by Michael and Ben or any podcast guests are solely their own opinions and do not reflect the opinion of Ritt Holt's wealth management. This podcast is for informational purposes only and should not be relied upon for investment decisions. Clients of Rithold's wealth management may maintain positions in the securities discussed in this podcast. I am so excited, so excited. We are joined today by Howard Linsen. Howard is the founder of Stocktwitz. He's the GP at Social Leverage.

Howard, you were one of probably the first five people that I found when I joined Twitter in 2009. So depending on when people join Twitter, they probably either know you from Stocktwitz or from your early investment in Robin Hood. So I've heard bits and pieces of your story, but I've never heard anything prior to Wall Strip. So where the hell was Howard Linson in his 20s and early 30s? Hey, guys. Does Ben get to say alone?

Hey, Howard. Hey, Ben. What milky smooth skin you have, too. Thank you. So what you lack in hair, Michael, you guys both have great skin. Thank you. Where are you today, Ben? I'm in West Michigan.

Oh, West Michigan. Cool. Well, hey guys, in my 20s in Texas, I'm born in Toronto, upper middle class. I was born on third base. I just thought Toronto was like, it's a great city. I don't know. I chased the sun, and in my 20s, went to ASU. I wanted to go to Arizona.

My family had a home in Paradise Valley, Arizona. Like, generally Jews from Toronto and New York go to Florida. We went to the desert. And that seemed cool. And it's kind of like Sinsie, your father are the same kind of patterns. So we went to Arizona, and my dad loved it because he didn't have to run on all the people he didn't like from Toronto going to Florida, it's usually like you do in New York or Josh when he runs in Florida.

He probably sees the same people he sees in Long Island. And so I grew up in the sun there, and I went to an ASU football game. And I'm like, are you fucking kidding me? This place is ridiculous. So that's where I went to grad school. And I think it's kind of like DeVry. I just had a pulse on a drive. driver's license. I got into the MBA program. And I fell in love with the desert. I'm here again

now. It did a detour for 10 years to Coronado, which we still spend summers. But in my 20s and 30s, I was Arizona and married in my early 30s and was a stockbroker. I graduated from Thunderbird and Arizona stay with a dual master's. Needed to get sponsored because I was Canadian. It was post-Bush World War I or whatever, Bush War I, and the S&L crisis, I mean, it was crazy. Like, it was a true recession. I don't even know what a recession is. And even then, I didn't know what a recession was because I didn't have stocks or anything. I didn't have loans.

So back then in 1990, it was all the thrift savings and loans and all there was thousands of banks and they were all going under. And bank stocks were at a dollar. and there was a true recession. Were you the kind of kid who in high school was reading Bairns or did you get into this later? No, I didn't. Like I said, I was kind of like an upper middle class kid so I didn't have to worry so much about those things. So I was more about friends and education and putting off work. I was always entrepreneur and had summer jobs and businesses.

But I was the type of kid like, I'm not relying on my parents, but no one was pushing me out of the house. I was just stacking degrees and living like a pretty charm life. But then the real world hit. I had to go work and I wanted to stay in the state. So I had to go get sponsored. I became a stock broker because that was the only thing that you could do in the recession of 91 in Arizona. And I just clawed my way to learn the stock market. And I just found love with the stock market.

So I was in my late 20s when I really got interested in the stock market. And how long were you a broker for? I think like three years and I was really good at it, but I did hate being on the sales side. I saw myself on the other side and therefore my fantasy was the only way to be on the other side is start a business. One of my clients that I was cold calling at the time started a company called The Grip and he became like my way out. So I quit through my book away of brokerage business in like 92 and went to work for my friend's startup called The Grip and it became like a pet rock it became like the manscape of the pre-internet generation it was bird seed and balloon we

were putting corporate logos on it was the time of this was my first big startup and we had like 90% gross margin which in a pre-software world that's insane you only got those things making widgets in china and so we had 90% gross margins selling to QBC and to health clubs and to computer stores that Carpola was a squeeze ball, and we did tens of millions of dollars in sales out of Phoenix, Arizona, and I started to live my dream. I became the other side of the table pretty quickly. Did the company go public? The company went public in the sense that we didn't know what we were doing, and everybody

knew that. So it was public that we didn't know what we were doing. But there were no blogs and Twitter to out of us. So it was a very small public offering of us being idiot. So my partner was Mark Scatterday, really incredible entrepreneur, but doesn't mind being bankrupt and starting over and bankrupt's being starting over. And we used to fight every day because I was like, we've got to treat this with respect. I had the MBA and I had all these degrees and he was like a dropout that was like a firefighter

that had this idea for a stress ball. And so he was partying and like, this could go on forever. and I was like sending them Harvard case studies of like the fire logs to reflame and how these things get copied and how we're all going to go out of business. And I was right, but I wasn't the founder of the company. I was just an investor. So it was really like all these lessons wrapped up in one. And we had offers to be bought by a public company ride snowboard at the time. It was a high flying company.

So I understood markets and I understood shooting stars and how rare it was to have. like a home run. And this is all pre-internet. We didn't even know what the internet was and what growth was and what the cloud and scale. You're doing high-margin business in the physical world, or as I call it, the pre-cloud world. You've got to like respect that and you take whatever offers you can get. And we just kind of whittled that away. I went off to start a hedge fund. What year was this? 98. So we had a great run. I just said, you take the reins. I took a bunch of money. and I just went out and started a $10 million hedge fund. Was this mostly your money or did you have outside investors?

My money, his money, a few family friends, no institutions, and slowly built it up to like 50, 60 million. I hated every minute for 18 years, kept doing it in the background as I did Wallstrip and stock Twits and finally kind of gave everybody back their money and moved into the venture capital side. All right. So let's talk about Wallstrip because I've heard you speak about it a million times. I never really knew what it was about.

but I checked out this one clip of you going around New York City you look like shit you look a lot better now you looked like the original Dave Portnoy yes right you were trying to break a $20 Canadian bill yeah yeah so this is great

so while so going way back guys and I don't know how long you have how long is the show usual we got time keep going to matter so do you edit it or no no okay so going way back to Toronto so in Toronto in the Toronto in the I was born 65, so Toronto in the late 70s, early 80s,

was fucking comic central. There were Chicago and Toronto. Chicago had Second City, but Toronto had their own second city with John Candy, Joe Flittery, Eugene Levy, what's that? Was Jim Carrey from Toronto? Jim Carrey was Toronto, outskirts. And so we had comedy club called Yuck Yucs. And so I was fascinated.

I was a weird kid, spoiled in my own way, got whatever I wanted. And what I wanted was to be left alone by my parents. And so I got straight A's and had this nightlife, I had this secret life because my parents were too busy to, like, as long as I was getting A's, but you couldn't get much trouble in Toronto. So comedy clubs come along. That was my thing. Six o'clock. I was gone at like 15, 16 years old, just going to comedy clubs. I was a Letterman fan and a Johnny Carson fan.

You grew up with Second City Television, which was a spoof of a television network. I don't know if you guys knew that, but, like, Second City, Toronto, John Candy played like a crippled person. or a handicapped person in a wheelchair and Joe and Eugene Levy. And they were basically spoofing a news channel. But this was like 50 years ago, 40 years ago. And I was so fascinated by comedy and writing and laughing that when Yuck Yuck Yuck's Open, which was kind of like the Comedy Store of Canada in Toronto, I would just go to open mic nights and write jokes for people and just be there every night.

And I failed miserably as a stand-up. but it was during the time of Jim Carrey doing open mic nights and Mike Myers who was just phenomenal he was like 17 years old and doing a million impressions and not even on NSNL yet and so I was around all these people but it was really a freaky culture really depressed type of group and they would steal your jokes and it was just pretty ruthless it wasn't like u.s. drug stuff like the drug culture it was more just like weird people and I was a Jewish upper middle class person I didn't make a decision to go to college, I dropped it. So all my life that was kind of in the background. And in college, when you're partying and you're watching Letterman later night, I was that guy's

just like, was into that culture. So you started making videos? No, I don't like being on video and I don't really like being on stage. So it was just repressed doing the opposite life. Like being an entrepreneur and obviously a hedge fund is the opposite of all this. So I was like a really unhappy successful person watching CNBC trading by myself in Arizona and I had all these thoughts in my head I would be talking with you guys you would be talking to the TV going why is this guy still on like he was an expert in oil and now an expert in semiconductors and weather and epidemiology this was like before Twitter CNBC was like why is that guy back and why is his track record up there but we all watch so you saw an opportunity to make better and so combined with second

City, I was like, I'm going to create Second City of CNBC. That was my pitch. What year did you start Wallstrip? 2006. So YouTube comes out and it was all cat videos and I'm trading stocks and I'm like this fantasy that I'm going to create a 24 hour news channel on YouTube that spoofs CMBC. So I saw your Jack in the Box video. You were parodying Dick in the Box.

Yeah, yeah. And I wasn't an actor, but it was like YouTube. Like anything's better than a cat video. and obviously street.com at the days I was inspired by back in the day and all that stuff that I was using. So I had gone on blogs, learned how to do term sheets and randomly stumbled upon Fred Wilson's blog. And Fred Wilson happened to be the seed investor in street.com, which I didn't know at the time. I did not know that. He was CEO for like a day in 2000, actually, and Michael Perrax. So I had been going on Fred Wilson's blog.

and that was kind of like my comedy club. Fred Wilson was writing this great stuff and he had this whole my blog log and it was like discuss and my blog log and communities were on the blog. There wasn't Facebook yet. Wait, when you say going on his blog, you mean you were commenting.

Yeah, he had comments and you could put faces. Like each blog was its own Facebook in a way. So was Fred involved in Wallstrip at all? Yeah, so I pitch Fred. So I'm like, I'm a hedge fund guy. Fred thought I was pretty funny from leaving comments on his blog. And I said, what if I,

created Kramer giving bad advice or like Susie Orman losing her mind or like Saturday Night Live meets second city meets street.com and he was like that's great and YouTube had just come out so I said it's going to be on YouTube and it'll cost nothing and who cares who watches but it would be a highly produced stuff and Fred was like I'll put it and so Fred wrote the first check not through his fun personally I didn't even know who he really was and then he gave me like 12 phone numbers and I just started smiling and dialing Fred's friends and I raised $600 from like Roger Arenberg and Mark Pinkist and these people were like all answering their phone and I'm giving them like a pitch. I got an idea for a show and it was like okay I'm in for 50 grand and they'd hang

up on me and that was like my first foray into how the power of the social graph works meeting by getting Fred into my deal I basically as long as I wasn't an idiot I had cemented did my success. That's where social leverage and all this whole idea came from. But the cool call and being in the community of Fred Wilson, as much like you did with Josh and Ben and the way you guys all connected, like just showing up and being in the game and adding your two cents and growing the community, if you have the chops, you are going to go far. I'm not saying I had the chops, but I had the right idea at the right time with the right investor and work my ass off and put the team together and Lindsay and the whole thing. And guess what? Six.

months later, CBS bought my company. So I went from like, six months. Six months. Did they do anything with Wallstrip or did they kill it? Well, the first show I did was that show where I was trying to change $20. It was like a, that was the first one I did at CBS, which was, okay, here's my idea for a show. I'm going to have $20 Canadian dollars and I'm late for a meeting at CBS and I've got to convert it on the street. It was funny.

It reminded me of a late night talk show. Well, that's why I was inspired. Like, I didn't have any unique ideas. I was like, just do it on YouTube and just be an asshole. It was like Larry David meets David Letterman meets finance. And that was 2006 that I was doing that shit. And it had a really tiny audience. You may think it's funny now.

But like, we weren't getting like 100,000 YouTube. Back then, if you had a good show, it did 9,000 views. But guess what? The 9,000 views were like, CEOs of media companies and like actors, because there was a cat video or our show. It was really weird. And so it's just one of those miracles of the early internet. We call it Web 2.0.

And I know you guys are excited about Web 3.0. But Web 2.0 really was a term that TechCrunch had started. But until Twitter and YouTube came along, it was called Web 2.0. the reason to stop being called Web 2.0 is because great companies came about that made Web 2.0 something. And this is what the argument

about Web 3.0 is right now, Jack and all these people bitching, is like, hey, man, eventually it's not Web 3. It'll be defined by a company that comes out of it. I think the problem of Web 3, and I'm jumping forward here, is that in a decentralized world,

and I use that term closely, there won't be another Facebook because it's supposed to not be another Facebook. So we're at these inflection points. So, like, I think that's why there's all this excitement in 2020, 21, 22. It's the same excitement that I felt in 06 when YouTube and Twitter and Facebook and LinkedIn were catching on because, and you had a real estate boom at the tail end of a row. So you had one of the greatest moments in time in 05, 0607. But we were coming out of a long NASDAQ bear market or sideways market. And no one wanted to believe.

believe in YouTube. I thought it was fake and it was take down notices and blah, blah, blah. But we were just there at the right place at the right time. Well, obviously, the biggest difference today is just there's so much damn money sloshing around. And so obviously, like some people always want to look on the bad side of that saying, well, the valuations are going crazy and people are getting all this money. But aren't there also entrepreneurs who are getting a way longer runway than they ever would have in the past? How do you come across on that? There's just so much money. Like, everyone wants to be a VC these days or a startup founder and everyone's getting a chance. It's like if you can't raise money now, you're never going to.

Yes. So it's the number one burning question, and so I appreciate it. So if you want me to hop forward to that, let's go, and then we can hop back and forth. So it is the question. So out six, it seemed easy because I called Fred Wilson. He wasn't on Twitter, or even if he was, we were still on his blog. So you had to be in his community, and that was like alpha monkey for Web 2. Or alpha, whatever it is, wherever a disease spreads from, whatever you call that.

He was like board ape number one of what 2.0. And if you were in the network of Fred or in the loop of Fred, Bradfeld of certain few people, there wasn't even Andresen yet, you were a made man if you could execute. And by the way, he was predicting that I could execute. I didn't have any confidence in myself. So I felt a great responsibility to people like that, Roger and Bradfeld and Mark Pinkus, because these guys were like, if they pick me and then they know something that I don't. So here we flash forwarded today, and everybody's got money, balloons for everybody,

what you said about runway is true. Not only is there endless runway ban and endless capital in a world where Tigers coming along and ETFing what Vanguard did for private markets is you have high margin businesses. So when I started the grip, 90% of companies failed, hence my fight with my partners about we should sell the business. Forget about going public. If someone offers us $5 for a land-based business, let's sell it for four. When Kramer and Seinfeld says, whatever is the black lawyer's name, goes, okay, they're going

to offer you for the coffee. And Kramer goes, well, I'll do it for less. But in a cloud-based world, in a scale-based world, not only you have endless capital, but you have business models that are hard to break. They may not be worth trillions of dollars, but you can run businesses of 90% gross margins forever with a lot of mistakes. If you're running a non-cloud-based business, your margins aren't 90%, so you can't afford screw-ups and legal. You can't afford packaging scripts. You can't afford going to another

country and not launching successfully. But in a digital world, so I think you have this multiplying effect of both government printing money, people getting mentored online, globalization of this mentorship, and then combined with a high-margin software businesses. And on top of that, the first bubble created all these telecommunication products that we use for free today. Even if you took one or two out of those things, we'd still be in this massive bull market. And so the hard question now is, what don't we see as an allocator of capital now? I'm like, I don't want to be pessimistic because I don't want to be the guy shits on everybody. That's why I get mad at Jack and all these guys shitting on people is like,

guys, you don't know anything about macro. All these people, all of a sudden, they've made a billion and they become macro experts. Well, you and I, all three of us have seen enough max for our experts to know that we never listen to any of them. My theory is that those people have hyperinflation in their own lifestyle. But they don't do, which makes it even more so, because inflation really doesn't bother them. Like a restaurant would really have to be outrageous for me to notice the prices. So no way Jack is stealing.

But it's the $50 million homes. It's the seed round that used to be $4 million. That's now $25 million. That one is the one where I want to get in on because the $50 million home, no one needs that. end of story. So if that's their problem, then good. That's what inflation should cure is their idiocy. Let's jump back and then we could jump forward because I just want to talk about you saw network effects because Fred, as you described, he was your shark and you were what is like the group of fish? Is that what the call? The pilot fish, meaning the pilot fish. Like I said, he was the board

ape for the board eight. I knew how to sell. That's one thing I knew how to do. I knew how to nurture relationships. I knew how to do cold calls. I knew how to contribute. to a relationship without asking for things. Those were all the things pre. Those were what you did before a social network. If you wanted to know how to sell, you don't walk up to somebody and yell at them or you don't go walk up to somebody

and say, give me money. You build a relationship. All these people come on tour and go, it doesn't work. I go, well, yeah, it doesn't work because you got to do something. You did it. So you built a powerful social media empire

with your own brand, with Stocktwitz. When was Stocktwits born? Was that concurrent with Twitter? Was it shortly after? Shortly after, Andy Swan, who's really funny guy and his brother Landon, we were all farting around FinTech. FinTech was stupid.

Like, we all were farting around FinTech and Phil Perlman because we would hang around on Fred's blog. And we all hated the same people. We hated CNBC. We hated Wall Street Journal. We hated Yahoo Finance. We hated all the products we were used. We hated Bloomberg.

We were just, like all these kids on Reddit today, we hate the establishment. They don't realize. And in the 90s, we hated the same things too, guys. just didn't have good tools like you guys had like these kids today with their reddits and their discord so we had our own little pockets of people that were rethinking how we wanted to invest and what the opportunities that we wanted to see and so with wallstrip selling i had all this incredible access fred wilson started showing me deals and he

showed me twitter and i remember when fred showed me twitter like the crisis had happened we were coming out of the 2000 at Crest and I remember it was at a 20 million valuation now this goes to Ben your comment about 4 million pre and 25 million pre so flash for it so in 2008 when fred invested 3 million into Twitter at a 17 million valuation they had a finished product everybody was using it they were using it on their blackberry there was no iPhone yet and it was viral and that was a 3 on 17 and so I even this is my comment at the time to I go, are you insane? How am I going to make money if I invested a 20 million value? So note to people that are making fun of valuations today is you have to put everything in

context. So in 2008, that seemed insane to raise three on 17 as Twitter was doing. But they had a finished product. It was already doing well. So, Ben, to your point about investing today at a 25 million valuation. What's crazy about today's valuations to me is there's no product yet. And the team hasn't even been resolved, and that's what scares me most about anything today, is that everybody has an idea, everybody wants to be a venture capitalist, everybody wants to be Mark Zuckerberg, everybody has money, but no one's done it before. And the few people that have done it before are priced out of the market, and so you don't have access to them. So I think, long story short, if we were to talk about today, my big issue is there's not

enough operators for the amount of ideas there are. So we have a shortage of people that want to do the work that will build a billion dollar company versus doing the work to raise your first round of capital. So it's never been easier to raise money. And that should be because it should be easy to raise money. That's what creates incredible progress. But where we're at is no one wants to do the operating part and the scaling part. And because Tiger and all these companies have brought up the valuations, man, how do you blame someone for cashing out? And how do you attract somebody great if your valuation's already at $4 billion? Because anybody great's going, I'll just stay at my $300,000, $500,000 year job at Google and take my best thing. So those are like the inefficiencies

that are happening because of these unintended circumstances of telecommunications being great and money supply being easy and all these things that we're seeing. But it wasn't easy for you when you started. So let's talk briefly about your angel investing, some of the first checks that you wrote and then starting a fund. So quickly on stock to it, because I never answered you there. So Twitter comes out. We're all using it. I'm like doing fart tweets and like where I went to the bathroom. And it was all in my BlackBerry. And people loved it. I was like, what? Do you guys not have jobs? I was like, hey, just like a piss. And like all these smart people were laughing and passing it around. And I said, no, you know what you guys should be talking about is stocks.

Because back then, everybody had the BlackBerry and you would use PIN. All the brokers were like pinning each other. It was like Discord meets StockTwits meets Telegram. And so before you kids were born, we had BlackBerry's. And they had their own pin-to-pin communication, which was like DM. Oh, yeah, I had a black guy. But the reason brokers loved it, it was around the firewall of the broker's room. So understand that the reason BlackBerry was so popular was because the bankers loved it.

That was their telegram of the time, okay, because Merrill Lynch couldn't see. see their messages or think that they could see their messages. So my big idea with Twitter is to just turn Twitter into that platform. And I would yell at Jack and Ev and Fred and go, guys, you're going down the wrong path with ads. I should build Twitter. Dot finance. And Jack and Ev were like, ah, just build on our API.

And I was like, I don't trust you. And Fred would always say, don't be somebody's bitch. Don't build on someone else's platform. So I had this problem. Like, they come up with the dollar sign. I'm tweeting with Fred. I'm going back and forth, telling we're talking stocks with dollar sign. And Fred was like, you got to start stock twins.

And I said, well, you invest. He goes, I can't invest. I'm an investor in Twitter. I was like, well, if you're not going to invest, why are you telling me to start another company? Long story short, Brad Feld and his firm foundry and Seth Levine came in and said, you should go start this company. And here we are 12 years later, or 14 years later, Stockwood is a profitable business. We started out on Twitter, but I had to go build our own.

platform and that saved us. But this is the downside of Web 2.0, is that you used to be, all of my tweets used to go from Twitter to stock twits. We kind of deal with the spam. And this is my argument with Jack and all these guys. They all are holier than now and all these people from Web 2.0. It's history. Who cares anymore?

But I don't like these guys rewriting history. They were there. They made terrible decisions. They can blame it on the VCs. They can blame on whoever they want. But they were in charge. Twitter was Bitcoin. Twitter was an open protocol

that should have been all these things from tipping to instead they decided to sell ads around the tweet and be a media company. One of the worst decisions in the history of business and that's my argument about this stuff. And in the board too,

they let Jack go start a competing business. Square is what Twitter should have been. You should have had cash app attached to your Twitter account. Hey, good tweet. Here's a buck. And by the way, do you want that buck? Do you want to put it in Apple for it?

Do you want me to give that? Every time you get 300 likes, I'll trigger and put a dollar in your kids account. Everything was attached to that protocol. And guess what? They let the BCs invest hundreds of millions of dollars. The VCs said we need to create a business. They f. All the developers.

They did it. Jack can't blame Mark Andreessen. Those guys didn't put a gun to his head. They let that money come in. Okay, let's tell the history. And Jack and F made horrific decisions. about where their business should head. And Web 3.0 was delayed 10 years because of Twitter

and all these bad decisions around APIs and building communities. And that's just how business works. It got stunted. So Web 2.0 is kind of like, great for the fang or Tang or whatever you want to call now with Microsoft or must be. If Twitter was already kind of fully formed

when you got to look at it, like where was Robin Hood when you got your first look? How fully formed were they? Well, that was my idea with Fred. Again, this goes back to Fred in our conversation. And Fred and I don't talk all the time because he's got kids. He's got his own life and his own businesses to run. But Fred was always from Street.com Day, and no one knows this about Fred.

Fred was into FinTech before there was FinTech because he did Street.com. He was pissed at the system too, Maltex and Street. And Mercado Libre that Fred did back in the day at his first fund. And so he loved FinTech. He knew Kramer. And so, like, the idea was, I go, you should be able to trade right from this. It was way before Robbins.

And I was like, guys, eventually the dollar sign you should be able to trade from. And I went to E-Trade and I went to Schwab. And I tried to cut all these deals. I went to Bloomberg and 08, 09 with Perlman and my team. And I would just wore myself ragged, hence how I looked in all the videos and stuff, pounding the table saying, guys, this is the future. tie the idea. If Mark Andresen tweets that he likes Tesla, you should be able to click on that link.

This is back in 2007 and buy Tesla. And people are like, you can't do that. Betty Lou will sue us. And so the lawyers were running E-Trade Schwab. They're all worried about what's the fringe person who buys Tesla or Lulu or Apple because they got a tweet from a bot. And that's what led to Robin Hood. What's amazing about Robin Hood is it took till 2013.

Robin Hood didn't even come into existence until 2013. E-Trade and Schwab should have been doing this in 2008, 2009. And so what really led to Robin Hood was me being in Israel in 2010 and meeting Yoni Asia, who showed me what Robin Hood would be. It was an app called E. Toro. And I invested in that in 2010. So before I invested in Robin Hood, I invested in this company called E. Toro, which is now an $11 billion company. You son of a bitch.

You son of a bitch. And so Yoni Asi is the true genius in Tintang. And this is where, again, people talk about Jack and PayPal and all these things. This stuff has all been around for a while. And so Yarni had built this app called Eitoro, and it was like stock twits meets Twitter meets Facebook, but you could trade Forex. And it's like, it wasn't maybe the best app, but it was out of the UK and Israel. And so I invested in that. And that was in 2010, three years before even Robin Hood pitched me.

And so when Robin Hood pitched me, the timing was better. They had this beautiful mobile app first product. And honestly, the first meaning was hilarious because they showed me the app and I go, if you build this, they will come. Like I said, if this is the app that I could use tomorrow, I said, 100,000 people in stock who would sign up tomorrow. And guess what? They built it. And by the way, on their business, they said, and it's going to be free trade. And I said, hey, you f*** the one thing you shouldn't do is offer free trade. So kudos to them. Their one thing they liked me. And they said,

yeah, we want your money. And I invested. They were smart. They said, yeah, good idea. And never listened to me on that one idea. So why aren't there more competitors for Robin Hood? I don't understand that. You think there are? Yeah, yeah. I see hundreds a day that I get pitched. So I invest in a company called Alpaca, which is kind of like the reverse of Robin Hood. It allows everybody to build a Robin Hood. So part of the problem was SEC and FINRA, what a shit show. No one wanted to build. And remember, before Robin Hood, we went through 15 years of there not being a new broker

and no clearing firms and all these blowups because no one wanted to do the business post-08 and no one wanted to deal with the SEC and FINRA. So there was just this giant hole in the market that Robin Hood was willing to do the hard work. And remember, pre-Romanhood, 2010, 2013 was all about the regulator. Let's build Uber and we'll pay our fines to the city for breaking the law later. You can't do that in the SEC and FINRA. You've got to pay them before you start. So anybody that thought that they could build Robin Hood and get away with it until crypto came along.

So that flashed for a day. But that Uber, Airbnb, it couldn't be applied to brokerage because you had to go through the SEC and FINRA. And that takes 18 months. So Robin Hood did that quiet work building the brokerage in a box underneath a incredible, elegant API, and then went on to do the hard work. So they had a two to three year head start. And by the way, Ben, the other reason there's not a million Robin Hoods, because the world, the VCs were enamored with beating the assets under management. and so the VCs were spending hundreds of millions of dollars instead of investing in Robin Hood competitors,

putting money into wealth front and betterment to build a better Vanguard, and guess what, they're not, because Vanguard's good enough. So for VC to work, it has to be 10 to 20 times better than the incumbent. Robin Hood was 10 to 20 times better than Schwab, wealth front and betterment are not 10 to 20 times better than Vanguard. So VCs got it wrong. And sometimes VCs get a whole thing wrong, like Google Glass.

Mark Andreessen had a Google Glass fund. what the returns are that are, not good. And the third Blackberry fund in 2010 probably had 0% returns. So BCs do get it wrong. And I think with Robin Hood, a lot of it was like guys like me who were the investors and no one took us seriously because we were retail guys. And it snuck up on a lot of people. So Howard, you wrote today. Here's a quote from you. One big thesis I had the last 10 years is every financial security available to retail investors will get fractionalized and unbundling of the S&P index that was available to retail only through institutions like Vanguard. I have been paid well for the thesis in my portfolio. Amen, you certainly have good for you. I've seen you pound the

table on this for literally the last 10 years. So you were right. Let's fast forward to today. So right now, you are talking to a lot of column emerging managers, people like Pachy McCormick, who are doing this the opposite way where they're building a following, they're telling company stories, and they're getting access. They're getting seats at the table. This is a whole new front here for solo VCs. Talk about it. It's an exciting time because fast forward, everybody can do what I did with Fred Wilson times a million. Why shouldn't it? God bless people. I have money with PAC. I put money with PAC. I think what makes this interesting is in this blog post that I wrote today, generally I write for me, so I appreciate that you read it, is that I'm a one-trick pony.

My trick has played out. So I was 56 years old. I'm not mad at the world. I'm just in awe of of everything that I worked hard for 15 years is like boring. You know what's cool? Taking some Ethereum flipping it in unyswap to buy a token at one penny and get 72 million tokens. Everything that I thought was bad in the world is now cool. So what the hell do I know? And by the way, the other thing that's a laugh is I spent 15 years trying to stick it to the man.

CNBC is doing great. Goldman's doing great. Schwab's doing great. How serious can you take your work? And how serious are these lunatics like at Twitter and Square that think they're so important when these guys are dwarfed still by the banks? And they all let the wolves into the den, whether it's plaid or all these companies. They took money from Goldman. All these Web 2.0 companies have the same cap tables as the Web 1.0 companies.

I think the promise of Web 3.0 and Paki is that these solo entrepreneurs or solo people can go do it. with a little differently, with a little bit more swash buckling style. And I think what will be interesting for the solo capitalist or the solar venture capitalists is can you really get outsized returns being a seed investor with a dash of B investing, with a little bit of public market investing, with dash of token investing? I'm not a believer. That's the one thing, like if I saw a packet, I said the one thing that I don't know if I give you Howie's institutional money, whatever that means, is you can have my money.

But here's all the things that I think you're wrong about. I'm very upfront saying, I think you're smart and I'll give you money. But I think you're not going to be able to build a brand because you're not Dan Loeb. But you haven't seen a million pitches and you haven't been in the board room and you haven't really done how to value a company and how the cap table looks like. So I think I'm all for it. I'm just like, we're in this frenzy of activity, and I think what comes after it will be really interested. I don't know how it ends or if it even gets better.

What if we just get more activity? We will get more activity. So I think you can't bet on less activity because everything is. How much easier do you think it is to have an edge in private markets? Because you've obviously done both, you've straddled both. You had the hedge fund. Because it seems to me like a lot of VCs want to say, like, I'm a contrarian and invested, but no one else would.

And obviously there's some of that. But so much of it from my purchase, just people that have better networks have so much better opportunity flow. Isn't that the whole deal pretty much? Yeah, and that's why I write. We want to do shows. And everybody does it to a different level of Barstall. He's doing it for his own reasons. You guys do it at the compound for your reasons.

I do it for Howard Linson and Social Leverage for different reasons. I'm doing it to stay in the game. You've got to be in the game. And I love the game. I complain about the players. I complain about my skin, my age, my prostate. but man it's never been easier to show up look at us we don't even have to air this on video like I could be buck naked right here

in manscaping and this thing goes live so it's never been easier to show up so I think activity accelerate this is what makes blockchain so interesting to me and computing power like in the cloud is like I am super bullish and I'm not bearish I'm just freaking out about bad had sloppy behavior. It's okay to wear Lulu. It's just not okay to have 99% of your body tattooed. In my, why did you have to take the Lulu thing and put tats on your forehead?

Like, I don't know where. All right. Howard, here's my question for you, because I know that you're not spraying and praying that you are deliberate about the investments that you make. But isn't venture not about, I'm probably stealing this from somebody, isn't venture investing about what you say yes to, not about what you say no to? because you have to get that big winner? I think there's a couple rules that I've learned.

If you love the product, and again, we're seeing too many things get funded pre-products. So that's my big beef. I don't care about valuations if the product's great and the traction's great. I don't care what the price. So if everything's great, the team, the tan, the product, and you're bitching about the price,

as Fred Wilson, me when I passed on Twitter, you're an idiot. Or don't. Now, I'm from Canada and I'm conservative. I think glasses have full most of the time, even though I'm an optimist. I'm a Canadian optimist. So the glasses got precipitation and there's clouds and a little mud. So the glasses have full, but they're shedding it.

So I'm still skeptical because I grew up with textbooks and I did an MBA about value. Not I want to buy value, but just like, how do you value this against profits and earnings and other things? This next generation did not study those textbooks. They went from bubble to seeing their parents blow up and leverage real estate to not being able to get a loan or a credit card from a bank, even though they got a Harvard degree or a Stanford degree or whatever, but they could go earn $400,000 and they can't get a loan to like, I'll just build this shit myself. And that's where we're at right now. I don't know if it'll work.

Everything right now, you could trade for the whole life without opening an e-trade account and have billions of dollars or a Schwab account. And that's pretty cool, because that did not exist three years ago. So I'm super, super excited about that. And so you have to stay in the game. What I believe about VC is that there are no rules. The rule should be, what can I return? Everybody's forgotten what the true rule is. How do I get my LPs back, their money, cash on cash?

And I think people have lost the narrative about, hey, minute, your job is. still to return high 20 net to be a venture capitalist, okay? And I don't think people, they're just excited about being in business. They're not thinking about figuring out how this investment will help them achieve a high, 20, low 30 net IRA because a great fund returns three tons that's money net after 10 to 12 years. I don't think a lot of the funds being started today are being thought through. They don't realize how hard it is to create a 5x fund or a 3x fund. And so I think a lot of these investments are made in the excitement of making an investment

without thinking through my getting pro rata rights. What will this look like at exit? Once I take my 2 and 20 out, what will those returns be? And it's our job to kind of remind people of that. But I don't want to shit on anybody's parade. What I will do is stand up to the jacks and the VCs and the people. bitching that this is a bubble or this is anything else. We don't know what this is until it ends. What we should be practicing is some good practices. And I think as Ben

has brought up, there's some sloppy behavior. That's just what's happened when you got this much easy money going on. In my old world of the institutional world, when we were picking managers, the rule was always like, if you want the big returns, pick those emerging managers, get them early, maybe get some sort of fee break. And then of course, every endowment in the world would go invest in KKR hybrid or something. They don't invest in the same big names because it was safer. So how do you transition from picking the startup founders to picking the people who are going to pick those startup founders? Is it still just a bet on people? Yeah, I still think it's a people bet. I'm investing in about 40 funds and I were formalizing it and investing in other funds

with social leverage. And so I encourage anybody listening as a first time fund like the package of the world, send me your deck. But in 2006 and then 2010 when I really started investing harder with my own capital and other people's capital. There was a thousand companies a year. There was Ycombinator, a little bit of tech stars starting, and there were 50 super angels, whatever we were called back then, Roger Arenberg, myself, Jeff Clavier, I don't even want to be in their category, but I was considered a super angel, whatever that was. Flash forward to 2022 where we're headed, and there's 10,000 companies a month, and a thousand micro-superangels. who want to be super, and they're not stupid.

They came from Uber or they came from Airbnb or Pinterest or Twitter or a thousand flex board or wherever they came from and they got a network, they got a unique network, they have a unique point of view. And the question, what gets me excited about is, can we, at social leverage, find the next Roger Arenberg's Fred Wilson's social leverage is. What's changed the most, like I said, now you have 10,000 starts a month, I'd be an egomaniac to think that as a firm of three people at social leverage that we can continue to pick winners as I wrote about on my blog today when my hand has already been played. I can't be

an expert in a hundred things. All the things that I made fun to CNBC on, but I'm now that guy that can switch from fractionalization to electricity. I'm 56. I can barely remember my to do list of the day. So I think it's really important that we, the success that we had of social leverage, we kind of pay it forward and spread our bets along the ecosystem. So we think as tech gets further distributed and decentralized away from San Francisco and the coast, and away from Germany to the rest of Europe, and away from China to Indonesia, that we're going to do better. We believe the alpha is in all these new unique places and we want to stay closer to the ground, but we don't have the ego to think that we will see those deals.

So we are trying to take what we've learned and pass it off to about 20 to 30 new managers. People with $10 to $100 million funds in their first second or third funds. And so it's exciting. So we're treating new investors as if they were founders. And we're asking them the questions

that we used to ask founders. Like, how are you going to get after $2 and $20? How do you think you look at a portfolio that it can return us? Where are you thinking about alpha? How are you thinking about position sizing? So we're asking all those questions. We're trying to do it in a much clear way than the institutions that passed on us because we never were able to raise from institutions.

So we think this money continues to come down. And as Tiger kind of vanguardizes this late stage investing and Code 2 and Insight and General Atlantic and D1 all copy or like Panic and SoftBank Trine all index that late high teen better than S&P, but not as good as venture capital type returns, I think it's never been a better time to be a seed investor. I just think you've got to really understand who the shark's in the water and where you are in the ecosystem and how these cap tables work and all these things that these young first-time managers

don't really know about. What do you think about the decks that you're seeing? What's your impression of the kids these days? Great question. So I've seen maybe 200 decks. It's hard to read that many decks because in the end I don't like to make a decision I like to meet these people in person and I want to talk to them and talk to the founders

that they backed to see how they write. But my impression is that everybody thinks they can beat the market, which is what happened in 99, 2000, but in the public market. So the risk here is that things are illiquid. So you're making an investment today that is not going to be priced maybe and liquid for 10 years. So I think everybody today is acting like we acted on the Yahoo message boards in 1999. And they should. Like it's never been more fun. They have a great network.

They've actually met the people. They might have already had their first job and it was at a growth company. And they didn't like their boss or the way they didn't have free booze anymore. So they're going to go start their own fund. But what I'm seeing is a lot of people saying I've had a hit, but they haven't applied it to what a whole portfolio looks like and the two and 20. So I think there's just a lot of like, not smoke and mirrors, but a lot of bravado around. Optimism.

There's a lot of optimism. Like there wasn't 99 on the message for it. Well, it's a bull market. Listen, if you think that you're the next Howard Linson and you want Howard Linsen, the real Howard Linsen to see your phone, what you're up to, get in touch with Howard. He's easy to find. Howard. This is awesome.

Thank you so much for spending so much time with us. Yep, Ben. Michael's Graer. I'm so happy that you guys have me on. Yeah, hit me up. Hopefully I can help some people.