How I Invest with David Weisburd - E384: Former CalPERS CIO on Venture Capital, Power Laws & the Future of IPOs

Episode Date: June 5, 2026

What if the biggest edge in venture capital isn’t manager selection—but earning access to the managers everyone already knows are the best? In this episode, I sit down with Mark Anson, CEO, President, and CIO of Commonfund, to discuss what he has learned managing capital across some of the world’s most influential institutions, including CalPERS, the Bass Family Office, and Commonfund. Mark explains why venture capital remains one of the most persistent alpha-generating asset classes, how LPs earn access to top managers, and why relationships, responsiveness, and knowledge-sharing matter more than check size. We also explore performance persistence, the illiquidity premium, co-investments, and the lessons Mark has learned managing capital across multiple decades and market cycles.

Mark, you're the CIO of Common Fund, which today has over 40 billion of AUA and AUM. And before that, you were the CIO of the BASS family office, one of the best known family offices where you won Family Office of the year. That's right. And perhaps most famously, you were the CIO of CalPERS, the largest pool of capital in the United States. So let's start there. Before we started recording, you told me a story of how you got into one of the very top funds in Silicon Valley, a CIO of CalPERS. Absolutely. It's a great story. Alpers is the largest pool of institutional capital in the United States.

Think of it as a sovereign wealth fund. That's effectively what it is, you know, well over $600 billion at this time. Now, what's fascinating about CalPERS is as we were building out our private capital program, it was very difficult for us to get access to the best venture managers in Silicon Valley. And what's surprising about that is when you think about where CalPERS is situated in Sacramento, it's only about 80 or 90 miles away from Sand Hill Road where all the best venture capitalists are. But it was very difficult to access those venture capitalists. First, they're filled up.

They already have as many investors as they want. So they're often unwilling to bring in a new investor. And the problem with the public pension plan is twofold. First, it's public. And venture capital tends to like to operate behind the scenes and maintain a low profile. So that was one issue. The second, of course, is calpers can sometimes be political, as most state pension plans are. So for those reasons, the venture capital community,

were reluctant to accept CalPERS as an investor. But there was one firm that I focused on that I had some good connections with, one of the top five firms on Sand Hill Road in Silicon Valley. And I kept asking, you know, let us in. We'll be a good partner. I promised to keep your name out of the press. I promise to keep the politics away from you. And still, we could not access this great venture manager. So one day, on my way to work, I stopped at a donut place. and I bought myself a couple donuts and some donuts for the rest of the staff at CalPERS. And I thought, you know what? I'm going to send a box of donuts to the partner I know at this venture capital firm,

just to demonstrate what a good partner we are. So I sent a box of crispy cream donuts. And they laughed. They said, okay, we understand that you're really willing to go this extra mile to be a good partner. And that's how we got our first venture investment. It took donuts to do it. What do you think the ROI was on that box of donuts? Oh, it was huge.

We were in one of the best vintage years with a great manager. It was a home run for them because we were a good partner, and it was a great home run for CalPERS to get those returns. Jokes aside, what's the lesson there? What did that teach you? The first thing is with regard to venture capital is you have to work with them. You have to be prepared. You have to show up.

You have to understand what their business model is, which is the fact that they're going to invest in a number of companies that are going to fail. That's part of the venture model. It's not so much avoiding the losers. It's investing with the winners. And you have to accept that they're going to have a number of losers in their portfolio until they find those one, two, or three really strong winners that are going to propel those returns. That is the nature of venture capital.

There are a lot of failures to go with successes. And that may not be okay with politicians from time to time. But as a long-term investor, you accept that. And that's part of the venture model. And you can demonstrate your good partner and you're willing to accept that is the paradigm that works in the venture industry. then you can get access to those great managers. Set another way, venture capital, unlike any other S-class in the world, is all driven by these power law outcomes.

Oftentimes it's just once-in-a-generational company. I had the luck, privilege, whatever you call it, to invest into a $4.1 billion valuation for Anthropic. Now it's turned into tax planning nightmare for me, which is a good problem to have. But if you don't capture one of these breakout companies, if you take it out, the asset class, you could argue, you shouldn't even invest into the mean asset class for venture

capital. I think the mean is low single digits. The median, though, when you put in these power law outcomes, ends up being one of the best asset classes in the world. If that's the case, if it's all about getting into those top vintages, where you're really looking from an unlimited partner, somebody that will back you through the good and bad times, knowing that the way to win this asset class is to keep on deploying and to get these power law outcomes once in a generation. Absolutely the case. You know, there's a lot to unpack there. First, power law, I love this expression of the power law. It's one of those terms that we all throw out, and everyone seems to understand, but it's never very well defined. So let's take a moment to try and define

what that means. Basically, the power law says is it's just a handful of concentrated companies that are driving most of the returns to venture capital. And we see this now with AI. Certainly, the best known AI names out there are the ones that are generating not only the headlines, but also the tremendous wealth growth. So that's one thing. It's just understanding the power law, which is you want to be in with those handful of companies

that are really going to drive the returns. And again, that's understanding the nature of the venture model, which is there's going to be a number of losers before you get to those power law companies. So that's one. I think the other thing you have to understand is the point you just made.

The dispersion in venture capital is the greatest of just about any asset class. In fact, I'm looking at some numbers here that I brought with me. Over the last 10 years, top quartile venture managers earned about 18%. Compared to, let's say, top quartile public equity managers at 11%. So again, that's a 700 basis point increase over public equity markets selecting the top venture managers. Now, the median venture managers earned about 7.5%.

Compare that to the median public equity managers earning about 10%. So if you're with the median venture managers, you're actually earning less than the public markets. And bottom quartile venture managers, minus 1%. So that dispersion in the venture industry is great. The top quartile managers far outperform the public equity markets. Median venture managers underperform the public equity markets. And the bottom quartile venture managers actually are getting negative returns. Now, you take this dispersion and you look at the flip side.

The flip side of the dispersion is the performance persistence of venture capital is the greatest of any asset class, which means the top performing venture managers tend to perform well again and again and again. Any given manager can have a top quartile manager in any given year, but to do that through market cycles across many years, in fact, across decades, takes talent. And you see this performance persistence the greatest in venture capital. So even though on the one hand, you have the greatest dispersion of returns in venture capital, you also have the greatest performance persistence. So what it comes down to is it's no secret who the best managers are in venture capital. They're pretty well known to everyone.

It's getting access to those best managers and keeping that access. That's part of what it means to be a successful investor as a limited partner in venture capital. To go full circle, that's why you as a CIO of the, largest pool of capital in the United States, you think BCs would be pitching you. You sent this donuts in a reverse pitch to this top fund. It's exactly the case. When you're working with the best venture managers in the world, you have to come prepared. You have to understand the industry. You have to understand their hit ratio. You have to understand what are the trends. You have to understand what their investment thesis is. So you have to be coming to that table, to that AGM,

to that venture manager, understanding the nature of the asset class. And that manager's particular expertise within that asset class. And so we work very hard, working with our venture managers to demonstrate we are in good deed, good partners. And that's why at Common Fund, we have a dedicated venture team. That's all they do is venture capital. They're not generalists. They stay on top of the trends. So when they're sitting down with our venture managers, they're on top of the trends, and it's a very informed conversation. You said something extremely important, which is it's more or less obvious which managers you want to get into in venture capital. There's nuances there for sure. But more or less, you know the basket of managers

that you want to access. At Common Fund, you have the not so easy job of deploying $40 billion, and a portion of that goes into venture capital. How does Common Fund win? First, we share information. One of the great things we have at Common Fund is we have Common Fund Institute, which is where we house a lot of our thought knowledge, our research papers, all the studies we do on endowments and foundations, all of research and podcasts that we do, we share that information with the venture managers. Anything that we can bring to the table that is helpful for them, either maintaining better relations with their LP or having some insight into an industry. So we're willing to share our information with them. Again, that's part of being a good partner. And when we talk about partnership, it's not just economic partnership.

It's knowledge sharing. It's being there with them when they say, gosh, we have a great opportunity for a co-investment, and we need an answer in 48 hours. You better be ready to do the analysis and get back to them in 48 hours and not say, oh, gosh, I need another two or three days. You have to be ready to commit that capital when that opportunity rises, and we are ready to do that. That's a critical part of being a good partner with the venture.

Again, it's not only a great asset class, but it's partially, and access class as well. And venture capital as an asset class at every layer is becoming this consensus asset class. You mentioned the top funds are known. The top startups are also known, which is why you have this scenario where the top startups are asking you to fund them within 48 hours. It's well known at this point that the top CEOs, the Sam Altman and the Darios will text a group of people and say, we're raising around, bring us term sheets. And then 72 hours later, they'll have $5, $10, $20 billion. And you said something remarkable. which is that you're able to react to co-invest in 48 hours.

I've actually never heard that across almost 400 episodes. How exactly do you go about processing co-invest in 48 hours? So first, our investment committee, our private capital investment committee, which includes venture capital, that meets every week on Monday for three hours. So every week we're bringing forward all of our investment memos across the private capital industry, part of which is venture capital. But because we're so up to speed, because we do this on a week by week, basis when there's a great opportunity right in front of us and there's a short fuse to respond to

it, we can mobilize very quickly. One, because we're up to speed, because we're meeting on a weekly basis and going through industry trends, updates, as well as investment memos. So to respond over a two or three day period is not difficult for us. And again, we recognize that to be a good partner, getting a response back, and sometimes the response is no. It's not always yes. Sometimes we say, you know what, we have enough exposure of that area that we're going to take a pass. But to be able to give that response back to our venture managers in such a short period of time helps them manage their capital. There's one other point I wanted to come back to is we know who the great managers are today.

Question is, who are going to be the great managers tomorrow, or five or ten years from now? So when we look at our pool of capital that we're allocating to venture capital, we'll reserve 15 to 20 percent of our venture capital with new managers who we think are up and coming. And it's interesting, where we source those new managers is from our existing partners. We ask them, gosh, who's out there who's smart, bright? You keep coming across. He's up and coming. And it just helps to expand our network. Perhaps a dumb question, but everybody has people that you like or dislike. What's the process that you go to in order to tell who the next best emerging manager may be? First, it's references. So again, we'll ask, you know, our venture managers

where, you know, we have most of our capital invested. Who's out there that you're working with that it's really smart and bright, that, you know, has a sense of humility associated with them, but at the same time is willing to take risk. So, again, there's a new manager that we just committed to their third fund, but that's a solo venture capitalist. But we found that venture capital, that solo venture capitalist, through talking through our other venture managers, they kept running up against this individual who was committing capital to some of the startups

that the other large funds were getting into as well. And so we began investing with this solo capitalist just as he was passing the hat around. He was coming up with individual deals on a one-off basis. We were contributing capital to that. And then he institutionalized and said, all right, now I want to start a fund. We were an anchor investor in that fund one. Now we're on to fund three with them. Our expectation is he's probably going to be doing this for the next 15, 20 or 30 years,

and we'll probably be with them for the next 15, 20, or 30 years. But, you know, how do you find these people again? It's through the network that you build out. and we're looking for people that have a sense of honesty, integrity, humility, because venture capital is a tough game, but are willing to take the risk. Expert calls have always been one of the most powerful ways to build conviction, but today, investors are asked to cover more companies, move faster and do it with leaner teams. With Alpha Sense AI-led expert calls, their TGIS call service team sources experts based on your research criteria and lets the AI interviewer get to work. The magic is in the AI interviewer. purpose-built and knowledgeable-based information to conduct high-quality context-stretched conversations

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The rest follow. Learn more at Alpha-sense.com slash how I invest. It's perhaps the most boring thing in finance, structural alpha, but once you see it, you can't unsee it in terms of how people generate alpha. You mentioned the weekly meetings. A lot of LPs have quarterly meetings just to give you a sense for the industry standard. So how do you react to deals? You have time set aside every single week to process those deals.

You mentioned finding the next great manager. Everybody wants to do that. That's not a differentiated take. What's differentiated is that you structurally do it by asking all of your managers. So you're constantly tracking, you're systematizing that process. We are. because surprise, surprise, when it comes to emerging managers, there's also consensus. And this is also not sexy.

As a BC, you want to find the diamond and the rough. But everywhere in venture, at least today, 2026, it seems like there's a lot of consensus even around emerging managers, even paradoxically around fund ones. How could that be possible? Because these top fund ones oftentimes are the top managers from these large top quartal funds. Well, and it gets back to being a good partner with our venture managers. because we're not only economic partners, we're knowledge sharers as well, but at the same time, we ask them to share their knowledge with us

and trying to help us expand our knowledge base, our network, and just better understand the ecosystem that's associated with venture capital. And it's a two-way street to extent that we get good references from them that help us build out our venture, our portfolio. It also helps us expand our network, which we can then feed back to our venture managers. And then it becomes a virtuous circle. and then just begins to feed off and build on itself, and that flywheel just continues. Our advisor, Britt Harris, who's former CIO of Utimco, also TRS.

Yep, no, Britt. Well, he popularized this concept of strategic partnerships, meaning he would take a billion dollars from the endowment, partner with a manager and their best ideas. And he had all these really interesting structures in order to partner with managers. Have you looked at doing the strategy? And if so, how do you structure something like that? that. So first, that strategy will not work with the venture industry. You can't take a billion dollars and give it to Andreas and Horowitz. Yes. As much as that might be enticing, they also

like to have a diversified pool of LPs. And furthermore, they would probably not be willing to partner up with such a large pool of capital to the potential disadvantage of their other LPs. That works, though, with the largest private equity managers. So I'll give you a data point from Calpers. Once upon a time, if you go back to the popping of the tech bubble, which I know is now ancient history, when you came out of that tech bubble bursting, which was 2000, the next three years we were in a bear market in the United States, and actually globally. Double-digit declines over the next three years in the public equity markets, both in the U.S. and around the world. It was a very difficult time to fundraise for private equity. So one of our large private

equity managers came to us and said, gosh, Mark, if you invest in our next two or three funds, we'll give you a fee break, which was unheard of back then, 20 plus years ago. And I responded kind of flippantly, gosh, you know, I'd rather have a piece of you, an equity stake. And to my surprise, this partner of this large, well-known private equity shop said, okay, let's sit down and talk about it. And as a result, Kelpers became a partner, an equity owner of one of the largest private equity firms in the world called Carlisle. We had a 75% equity stake because instead of taking a fee break, we took an equity stake and then committed capital to the next two or three funds. That's a great partnership that a large economic entity like helpers can do because you have

a lot of capital that you can commit. And at that point in time, when fundraising was difficult, it was great for Carlisle to have a Bellwether cow like Kelpers to lead the fundraising. And they could go around to their other investors and say, gosh, kelpers just anteed up in our most recent funds. You should do the same. So partnerships like that can work really well with the large buyout shops. Support for today's episode comes from Square. The all in one way for business owners to take payments, book appointments,

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Whether you're selling lattes, cutting hair, running a boutique, or managing a service business, Square helps you run your business without running yourself into the ground. It's actually thinking about this the other day when I stopped by a local cafe here. They use Square and everything just works. Check out is fast, receipts are instant, sometimes I even get loyalty rewards automatically. There's something about businesses that use Square. They just feel more put together. The experience is smoother for them and it's smoother for me as a customer.

Square makes it easy to sell wherever your customers are, in store, online, on your phone, or even at pop-ups, and everything stays synced. in real time. You could track sales, manage inventory, book appointments, and see reports instantly whether you're in the shop or on the go. And when you make a sale, you don't have to wait days to get paid. Square gives you fast access to your earnings through Square checking. They also have built-in tools like loyalty and marketing to your best customers keep coming back. And right now, you can get up to $200 off Square hardware when you sign up at square.com slash go slash how I invest. That's SQU-A-R-E.com slash go slash how I invest. With Square, you get all the tools to run

your business with none of the contracts or complexity. Run your business smarter to Square. Get started today. Support for today's episode comes from Square. The all-in-one way for business owners to take payments, book appointments, manage staff, and keep everything running in one place. Whether you're selling lattes, cutting hair, running boutique, or managing a service business, Square helps you run your business without running yourself into the ground. It's actually thinking about this the other day when I stopped by a local cafe here. They use Square and everything just works. Check out is fast, receipts are instant, sometimes I even get loyalty rewards automatically.

There's something about businesses that use Square. They just feel more put together. The experience is smoother for them and it's smoother for me as a customer. Square makes it easy to sell wherever your customers are, in store, online, on your phone, or even at pop-ups, and everything stays synced. in real time. You could track sales, manage inventory, book appointments, and see reports instantly whether you're in the shop or on the go. And when you make a sale, you don't have to wait days to get paid. Square gives you fast access to your earnings through Square checking. They also

have built-in tools like loyalty and marketing to your best customers keep coming back. And right now, you can get up to $200 off Square hardware when you sign up at square.com slash go slash how I invest. That's SQ-U-A-R-E dot com slash go slash how I invest. With Square, you get all the tools to run your business with none of the contracts or complexity. Run your business smarter to Square. Get started today. Works less well with the venture capital industry. With the venture capital industry, it's much more, like I said, knowledge sharing,

being prepared to respond quickly, sharing information with them, and just being a good partner as opposed to just showing up with a lot of money. You can't really buy your way into venture capital. You have to demonstrate you're going to be a good partner over a long period of time. Just to play devil's advocate, could you not partner with VCs in order to help them scale their co-invest? Is that not an attractive differentiator today? It absolutely is. You know, to the extent that a venture capitalist sees a great investment opportunity,

and they only want to commit a certain amount from their fund, but then pass the hat around to raise the additional capital so they can have a large, share and controlling stake in a company. It's absolutely a great idea for them to do that. And that's where we try and invest more capital on top of our existing venture relationships is by taking a larger investment in the co-investment opportunities. But even those are so popular now that again,

you have to not differentiate. Exactly. You have to fight for the access to get it to a bigger chunk. I've just been thinking about this capitalism right where you were sitting ahead, the CIO Mubadala capital, Oscar Falger, and he talked about this concept that there's very few pools of capital on the planet that could write more than $10 billion checks in a single investment. In this case, it was a buyout, obviously not a venture capital investment. So I've been thinking about are there places in the venture capital market where capital itself could be a moat as an LP?

Gosh, you know, I think when you look at seed capital, seed capital by its very nature tends to be smaller funds. And the venture capital industry is very good, in fact, at policing themselves and understanding what's the rights. size of their early stage or seed capital funds. They understand that they can't put out a billion dollars in seed capital. So their funds tend to be smaller. You know, maybe it's 300 million, maybe it's 400 million. And that's where the initial moat gets built in venture capital. It's a small seed fund, so only limited number of LPs are going to be allowed into it. And you're going to be rationed. You know, you'll ask for a certain amount, but at the end of the day, you'll probably get cut back. What we have seen happen, though, is that the best venture funds that have

seed capital funds, they've now had a mid-stage fund that they've added on, and then maybe a late-stage or a growth fund. And what they're now doing is they're asking their LPs to invest across the spectrum of their products. A stable. Exactly. We want you and absolutely want you in our seed fund, but we also want you in our mid-stage fund and then our late-stage growth fund. We see this more and more with venture managers that they have expanded their offering. And so when they come back to the market, usually it's a package deal where you're investing across early stage, mid-stage and late-stage venture. And what we do is try and figure out how many dollars do we want to place into their early-stage fund versus their mid-stage and

their late-stage. And typically that's how we divide up and we debate this every Monday at our Investing Committee. It's how much do we want to commit across that fund structure. And it's a staple. You're right. Is this one of these things that is annoying and that you do anyways, or is this a good way to get diversification? It's a good way to get diversification, but it also is the nature of the venture capital industry today. Go back 20 years ago, and the venture capital industry was there'd be an angel round from friends and family, a seed run from a venture manager, maybe an A and B, and then the company went public. Orgens of the original four-year vesting. That's how long it was predicted to go. Right. And of course, now we're seeing a

B, C, D, E, F, and G rounds. Companies are staying private for much longer. Much of the wealth creation in the startup companies is now happening while they're private. It used to be that a venture-backed company, again, would have seed capital, A, B, go public, and then much of the value creation would happen after the company went public. But now we're seeing these astronomical valuations for Anthropic and Open AI that are closing in on a trillion dollars. You know, there are approximately 900 billion right now based on the last round of financing. Most of that wealth creation would have happened in the public markets 20 years ago.

Now it's still happening in the venture private capital markets. So again, when you're investing with the venture manager, it's now to your advantage to invest at a C level and a mid-stage level and a late-growth level because these companies are staying private longer. And if you want to capture that value, you have to do it across the whole length or whole breadth of the venture capital stage. You're CIO peer at Calsters, Chris Aylman, who was there for multiple decades. I had him on the show, and he said that what really worked in terms of their co-invest program was rules-based co-invest. So picking and going to committee and saying this company is good, this company is bad, over time did not really work.

And doing a rules-based approach across hundreds of investments not only worked, but actually, paradoxly worked roughly the fee savings that they got. from the co-invest. Is that something that you found? It is indeed. So first, know Chris Well. Smart guy, super individual and did a fantastic job at Calsters. He was there for 20 plus years. So kudos to him. What we have found

is one, because we have our investment communities every week, so that's part of the rules-based system. It's just having a regular investment community meeting where we sit down and look at not only current investment memos but the trends going on in the industry. So we're all up to speed and I understand that. That's one. Two, understanding where our chips on the table

and in which industries. Now, clearly, We have some very large investments in artificial intelligence. But let's not forget, you know, crypto, blockchain, there's still opportunities in software. So we don't want to put all of our chips on the table just in artificial intelligence. We want to ensure through our rules-based approach that we're investing across other industries. And then absolutely you want to have vintage your diversification. One of the things that we've done at Common Fund that's fascinating is we've taken the business cycle over the last 20, 30 years,

the ups and downs of recessions and peak growth states. And we've overlaid that with startup companies. When were startup companies like Google, Facebook, Amazon all started. And what we've discovered is innovation is completely uncorrelated with the business cycle. It doesn't matter whether you're in a boom year or a bust year, innovation happens regardless. And so what it gets back to is when you think about a diversified venture portfolio, you don't want to pull back in any given year and say, oh gosh, we're in a recession. let's sit on our hands.

No, you don't want to do that. Innovation's going to happen no matter what. In a recession year, innovation will happen. In a boom year, innovation will happen. Staying disciplined, staying in a rules-based approach where you're committing capital every year on a vintage year diversification basis is critical to having a successful venture program. And it's not negatively correlated.

It's uncorrelated. So again, you can't stop innovation. It's going to happen regardless of what's happening. to the business cycle, and you don't want to miss out on that, because great companies are formed every day. The last point, you know, I should make about ventures. We all talk about how artificial intelligence is disrupting companies, disrupting other technologies. Well, you want to make that disruption work for you. And how do you do it? It's through a well-thought-out venture program, rules-based, where you're committing capital on a vintage year by vintage year, and you bring

that disruption into your portfolio and you make it work for you. like to say the safest place when there's a dragon is on its back. Dr. Alexander Wisner Gross said, if you're not at the table, you're on the menu. Perhaps another way to say it. You reference the dot-com bust. You also reference Carlisle. At some point, apparently, they had difficulty fundraising, which today is hard to imagine. I've been really reflecting on this quote, which is there are some decades where nothing happens and some weeks where decades happen. Is that something that you've seen throughout your career? In other words, is that something that you've seen throughout your career? In other words, is there truly once-in-a-generation investment opportunities that investor could access if he or she has the

reputational capital relationships and financial capital to make those investments? It's not once in a generation or once-in-a-lifetime. We see these cycles about every 10 years. Go back to the 1960s. The big trend back then was semiconductors, the invention of semiconductors, you know, and the birth of Texas instruments and other companies like that. Then you go to the 1970s, the computer began to be expanded into the early 1980s. when the PC was born. Then you had the internet in the 1990s. Then you get into the 2000s when you had cloud computing and mobile. Now we're at artificial intelligence. So about every 10 years, you see some platform come forward in the technology world that is a trend that's going to change our lives

in one way or the other. So again, it's not once in a generation, but it's about once a decade. And clearly right now, in this decade, it's artificial intelligence is the key driver. But 10 years from now, probably be something new. And I think the biggest mistakes that investors make in that case is trying to get too much idiosyncratic exposure. In other words, they obsess over Anthropic versus OpenAI versus if you go back to dot-com boom, if you invest in all 10 search engines, you know, the Lycos, Ask Jeeves, all these search engines that everybody has long forgotten, you would still do extraordinary well by virtue of exposure to Yahoo, which at the time was a good exit as well as Google.

So I think people get really obsessed on which company and they end up hemming and highing and missing the entire generation. And it gets back to the nature of the venture industry, which is the hit rate is going to be low. There's going to be a lot of companies that don't return capital or basically go out of business. You have to understand, back to the power law,

it will come down to a handful of companies driving most of the returns. So it's not avoiding the losers. Those are going to happen. It's ensuring that you have the winners in your portfolio. So back to the search engines, you're right. There are about 10 of them at the time. Google now, of course, is the clear winner in terms of search engines.

But if you bet on all 10, including Google, you did pretty damn well. At least 1,000 X. Google's done pretty darn well. And Yahoo, I think, at the time, would have been probably 4 or 500X at IPO. Yes, absolutely. And, you know, take that money and put it in Google. Then you would have maximized it all the more. So we started the conversation talking about how.

how everybody wants to get in the same venture managers, how there's all this capital going into the private markets. Historically, there's almost been this academic notion of the illiquity premium, meaning the market will reward you for locking up your capital for long periods of time. Some people think that illiquidity premium is a thing of the past. Is there still an illiquity premium today? Some people call it the liquidity premium.

Some call it the illiquidity premium. But the idea is, if you're going to lack up your capital for a long period of time, you should earn some premium over and above the public equity markets. Or else you wouldn't lock it up. Exactly. You know, private equity, venture capital, you're still investing in the equity of a company.

Now it's private equity, it's venture capital, and it's going to be locked up for six to ten years. So if you're going to do that compared to the public equity markets where you can get your money in and out on any given day, you should earn some premium for that. And what it comes down to is, you know, organizations like Common Fund,

we are a permanent source of capital. You know, we've been doing this now for 50 plus years. We allocate capital every day out into the markets, across generations. If we're going to lock up our capital for long periods of time, we should earn the liquidity premium. And it's the same for all LPs that are in this space. The question is, does that liquidity premium actually exist? And if so, how much is it? For a long period of times, going back to my days at CalPERS, the consultants have always said,

the liquidity premiums about 300 basis points over the public equity. markets. Finally, about five or six years ago at Common Fund, we produced a research paper, again, part of our research facility called Common Fund Institute, where we actually identified the liquidity premium, and we demonstrated in that paper how you can calculate it from market data. And what we discovered, going back over the last 30 years, is that the long-term average is 3.5%. Again, that's the premium over and above public equities for investing in private equity. now that we've identified it, we can track it. And so we do. We track it on a quarter by quarter basis with the long-term average being 3.5%. So we can see whether that premium is going up or down. It is a

risk premium. And like all risk premium, it's not stable. It goes up and down. It's volatile. Right now as a data point, it's above its long-term average. In fact, it's a little over 5%. So right now is a good time to be investing in private equity because the liquidity premium is above its long-term average. So yes, it still exists. It is real. It is legitimate. We have identified it. We have tested it against other risk premium to see that as indeed independent. And it is. So it's independent with regard to the equity risk premium. It's independent with regard to duration. It's independent with regard to credit. It's independent with regard to what I call the Fama French Factor's that small cap value growth. It is its own standalone risk premium.

and it accrues to investing in private capital. So because we measure it on a quarter by quarter basis, I can tell you right now that, yes, it's still out there, and in fact, it's a little more rich than what it has been over the last 30-plus years. You're both the principal and agent. You both have AUM. You also advise others.

So I'm going to ask you to put on your principal hat. One of the weird hacks, and perhaps the most useful thing I've learned in the last couple of weeks, was from Jeff Bramall from Mark Andreessen's family office. office. He talked about the idea that if the expected value is high over long enough period, even if volatility is significant, the volatility over long enough period keeps on getting smaller and smaller. You think about this dice. So you have a dice two out of three is positive, one is negative. If you roll that dice 20 times, it's very unlikely that you're going to have

a negative outcome. How do you think about that? Is that something that you think about when you construct portfolios? Yeah, it's an interesting argument. It's not part of our portfolio construction process, but I like the intuition of it. Part of it is, is over time you continue to collect more data points. The more information you can collect, the better you can assess whether an investment is earning an appropriate risk-adjusted rate of return. Whether the volatility actually declines over time really depends on the maturity of the market or the investment itself. Venture capital, as we've been talking about, is a very volatile asset class. It produces extreme outliers. It produces disruption. If you take that volatility away from venture capital,

then you'll get smaller results, tamer results. You may not get the disruption that we're all seeking for today. So actually, when I think of venture capital, I'm actually anticipatory that that volatility will be there and it will stay there because that's where the disruption is going to come from. And when we think about disruption, think about, for instance, we no longer have video stores because of Netflix. and I'm still surprised to see taxi cabs because we have Uber. But guess what? Uber's now being disintermediated by Waymo.

So technology will continue to create. It will continue to disrupt. And so I hope that volatility actually stays in place with regard to the venture capital industry. You made such an interesting point. It was very subtle, which is if assuming that venture capital was 18% median, as we talked about, over 30 years, and assume that volatility was low. That return would every year go lower and lower. because one of the things that makes venture capital a well-performing asset class

is that few people have the stomach to invest over multiple cycles. I put my mother in a couple of investments, and they're actually doing really well. She can't handle the illiquidity, and I've decided not to put her into future investments for her own good. And she's actually done exceptionally well, and better than the median to a large extent. A lot of people can't stomach that volatility, but said another way, that's one of the the reasons why these returns persist over many decades. And the flip side to that in the venture capital industry is that distributions are getting

more stretched out. So we all look at DPI, distributions to paid in capital. But as these private companies in the venture industry are staying private for longer, that means the distributions from those companies are going to be pushed out further and further. Now, the expectation is you're pushing out and delaying the IPO of those companies. because they continue to grow. But at the same time, the further you push those out for some future payout, it brings down the IRAs. Or again, you might have an organization that just can't

stomach the long-term weight for those distributions. Everyone wants to be an anthropic or open AI. Well, guess what? These companies have been operating for a number of years, and we've yet to see any distributions yet. And it might be another year or two or a couple years before. before we get any distribution from these great companies. So you have to be willing to stomach that, that that wealth creation is still on paper, and it's yet to be translated into a public offering or the sale to a strategic.

And until that happens, you're not going to get any distribution back, and those DPIs are going to get extended way out. And the further distribution could extend it out, the lower are going to be the internal rates of return associated with it. SpaceX, another portfolio company. I think they're going public in their year 22 or 23, just to give you a sense for how much longer than the 10-year fund cycle companies can

stay private. And when they do go public, the DPI is going to be huge, but the IRA might be a little smaller as a result of that. Depends when you got in. Exactly the case. And, you know, for certain investors, they have to put up those IRAs. And that gets back in the stomach the delay on the distributions and understanding that their IRA may come down as a result of it.

Mark, if you could go back to when you had just finished your PhD program at Northwestern many decades ago, what would be one piece of timeless advice you'd give a younger, Mark, that would have either accelerated your career or helped you avoid costing mistakes? There's three points of advice I'd give. The first is to go work overseas. I didn't do that when I first got my PhD. I had the opportunity, but I didn't take advantage of it. When I later in my career realized that it would be a good idea to move overseas at that point, I was married to my wife, Mary, who I met at Northwestern, and we had kids. So moving a family overseas is a lot more difficult than moving just yourself. But getting that perspective outside the U.S. is so valuable. We are a global economy.

So you can't just look at the world through the lines of the United States. And to get that perspective, the only way to do it is to work outside the U.S. So absolutely take advantage of that and actively look for an opportunity to find a job, find employment in some foreign country and just see the world through a different lens. I wish I'd done that an earlier point in my life. I waited until I was in my 40s and it was great, but I wish I'd done it when I was in my 30s. The second thing I would recommend to people who are coming out is get your professional credentials. I waited to get my CFA.

In fact, I got out with my PhD in a somewhat arrogant fashion. I'd heard about the CFA program, but I thought, gosh, you know, I got my PhD. I don't need to do that. Big mistake. Once I got firmly entrenched in the asset management industry, I discovered just how valuable and important the CFA was, and I had to go back and take it. And at that point, again, I was married, we had kids. It was very difficult to find time to study for the CFA program. I wish I had done it when I was a young guy who had just graduated.

Again, that was hubris and arrogance, and I had to learn from my mistakes. And the third thing I tell young men and women who are graduating, getting into the asset management industry, is understanding that they have a pool of human capital that is their own. It is unique to them. And while they're managing economic capital on behalf of clients, they should learn to manage their own human capital. And what I've done with my own human capital over the years is I've taken risks with it. Going to work for CalPERS was a big risk. I had a great job on Wall Street.

I was a portfolio manager living in a beautiful town called Short Hills, New Jersey. And my wife and I picked up our roots, moved our kids, and went to Sacramento, California. That was a big risk. But it paid off fabulously with me. Oh, and I had to take a pay cut to go to CalPERS. But I got so much more exposure and so much richer investment ideas as a result of doing that that I would have ever had if I'd stayed on Wall Street. So manage your human capital, take risks with it, prudent risks, but I've always found the risks I've taken with my human capital have paid me more than the risk I've wanted to written.

And by human capital, you mean career risk. Exactly. You know, when's the right time to go to graduate school? Should I go to graduate school? Should I get my CFA? Should I wait to get my CFA? That's all questions that relate back to how you're managing your human capital and how you're going to maximize the value of that human capital. That's what you should be focused on.

Well, Mark, this has been absolute masterclass. Thanks so much for jumping on. Looking forward to doing this again soon. I hope I get a second chance. This has been a lot of fun for me. Thanks again, David. This has been great.