Motley Fool Money - Finding “Home Run” Investments

Episode Date: May 26, 2024

Venture capitalists don’t mind strike-outs, so long as they get their home runs. What can stock investors learn from that approach?  Ricky Mulvey talks with Ilya Strebulaev and Alex Dang, co-authors of “The Venture Mindset: How to Make Smarter Bets and Achieve Extraordinary Growth,” about: The benefits of building an “anti-portfolio” Why it pays to get outside of your own four walls Lessons from a piggy bank auction Strebulaev is also the founder of the Venture Capital Initiative and a Professor of Private Equity and Finance at Stanford’s Graduate School of Business. Dang is a CEO, technology executive, and advisor who’s worked with Amazon, McKinsey, and across Silicon Valley. Companies discussed: CRM, AAPL, IBM Host: Ricky Mulvey Guest: Alex Dang, llya Strebulaev Producer: Mary Long Engineers: Tim Sparks, Heather Horton Learn more about your ad choices. Visit megaphone.fm/adchoices

This episode is brought to you by Indeed. Stop waiting around for the perfect candidate. Instead, use Indeed sponsored jobs to find the right people with the right skills fast. It's a simple way to make sure your listing is the first candidate C. According to Indeed data, sponsor jobs have four times more applicants than non-sponsored jobs. So go build your dream team today with Indeed. Get a $75 sponsor job credit at Indeed.com slash podcast. Terms and conditions apply.

When everybody, everybody is running in the same place and you're running faster. Maybe you're overestimating the fruits of victory. So in the piggy bank game, in the fear of missing out in the former and in the stock market in general, investing in general, the winner very often loses. It has a special name called Winners Curse. I'm Mary Long and that's Ilya Strabulov, an economist and professor at the Stanford Graduate School of business. He's also the co-author of the new book, The Venture Mindset, which he wrote with Alex Dang, a technology executive who's launched new ventures at Amazon and been an advisor

for companies across Silicon Valley. Venture capitalists are looking for winners, 100x winners. Stock investors certainly wouldn't complain about those kinds of returns. So what can we learn from the people who are analyzing and investing in early stage companies? Strabuliv and Dang joined my colleague Ricky Mulvey for a discussion about why A-List teams are the best kind of bet. the good that can come from getting outside your own four walls and what investors can learn from a piggy bank. So Alex and Ilya, either one of you can take this. But for those with the venture mindset, why don't they care about strikeouts? Why aren't they worried about getting on base?

Why are they only worried about home runs with the investments they make? The reason is very simple. If you look at a typical venture fund, then out of 20 investments, 15 or 16, fail. Those are strikeouts. And then there will be a couple more where you get two to three X, which means for each dollar you'll get maybe two to three dollars. And you know what? If you're a very conservative investor, two to three X is okay. But for venture investors, that's a mediocre return. Why? Because it doesn't cover all those losses. And on average, my research shows only one out of 20 venture deals result in a home run, where you get more than 100x, or at least 100x, which is 100 dollars per each dollar of your return. So, if you think

about venture investors, the only thing they really care about is what can they do to increase even slightly so the odds of hitting a home run? If they experience one more strikeout, even five more strikeouts, but then they have that 10,000 X home run. Nothing else matters. You know, Ricky, I had an amazing experience once in my Stanford MBA classroom. So I've been teaching for many years the venture capital class, as you can guess, very popular. And I have a panel full of very successful VCs. Okay? And one very, very famous VC, a billionaire, spoke to my students.

And a student asked him, so what is your biggest regret as a venture capitalist in your entire life? and the venture capitalists started telling a story what one day he came to a friend and there were those two guys in the garage of a friend that were building a new search system. Well, at the time, there were 50 search systems and he even refused to meet those two guys. They were founders of Google. And do you know, this guy, he was in his mid-50s, again, an extremely successful guy. he's starting telling the story about how he missed that biggest home run in his lifetime. And you know what? Tears started rolling down his cheeks.

So that's how personal they take it. So they care about home runs. And you know what? I'm pretty sure he couldn't even mention or even he could not remember any of his strikeouts from that period. So when you looked at a lot of these venture capital companies, many of them, I think, only invest in what, like four projects a year. Why not then? Why not have a sort of a lower due diligence process, spread your bets out more and then hope that more of those home runs

come in? Well, many VC firms invests more than four, in fact, a year. It's true that if you think about any partner in a venture capital firm, they might invest only in one or two per year. That is true. So at any point in time, a typical venture capital will maybe be on eight to 12 boards. Okay. So it's a very limited number. So why then not to do spray and prey? That is how we call it. And by the way, some angel investors are doing this. Here's the reason.

It's because if you're doing just doing spray and prey, it's in fact very, very unlikely that you either will hit a home run because hitting home run requires a lot of due diligence, okay? A lot of decision making. But also, it's even less likely you will be able. if you hit that randomly that home run, it will be less likely that you will be able to follow on. So the trick with venture investors is that not only they hit a home run, maybe one or 20 times, but when they do so, they can invest in this home run again and again and again.

So it's a meaningful bet. While you're doing spray and prey, those bets are not meaningful. And Ricky, you mentioned so-called due diligence. And interestingly enough, but VCs call themselves risk reduction engineers. And the reason for that term, because they actually do do due diligence, they not start with it, they filter out many deals right to why, but they do want to know and understand what kind of a company they invest in or said differently what kind of a team they bet on. Alex or Ilya, when you hear about the red flags from the venture capital,

You study, what are some common red flags? What are some common reasons that they immediately say, nope, I'm not going to continue further research into this company? And Rick, it will vary. Some VCs will immediately ask what is the size of a market that you are addressing. If they are a total addressable market or TAM is not big enough, you're done. I mean, that would not be of much interest. But there will be funds who would pretty much ignore the size of TAM. What they will pay more attention to would be, are you? able as a company to be a kind of a semi-monopoly within this market. And Peter Thiel's fund is pretty well-known.

Founder's fund is pretty well-known for that feature. But number one factor, number one factor across all of the VCs, and that's what Ilius survey and research demonstrates is the team. It's all about the jockey, not the horse. It's all about the team that plans to lead. And there they will look at different characteristics. from are they great team members? Do they have enough skills to make it happen?

It will not just be about the founders, but are they able to bring great talent to the team? So that's all going to be about the team. If you compare that to Angels, angels may invest in the very early idea with maybe just a single or two founders. At a VC level, they will look into the team. That's why, and that's actually such a big contrast.

I used to work at Amazon, launch multiple businesses there, was a McKinsey partner. And trust me, within larger works, companies pay way more attention to business plans, not teams. And that would demonstrate the power of Jockey versus horse. And Jockey is truly, truly important for VCs. One of the legendary VCs, Ricky, George Doriot, said, I'd rather invest in an A-level team pursuing a B-level idea, rather than invest in a B-level team pursuing an A-level idea.

And the reason is that the moment there is a great idea, you know, there are many, many teams pursuing this right away. Okay. So let me give it just quickly one example. Some years ago when the first iPhone was just released, everybody was talking about file sharing. So file sharing was not yet possible. Maybe some of your audience, Ricky, still remember, you know, those USB drives, maybe floppy

disks, etc. Okay. But everybody was talking about this. There were actually more than 80 startups that were pursuing file sharing. And so partners at Sequoia, and I'm sure in many other venture capital firms thinking, oh, that's a great vertical. Do you know that one of the partners at the time, his name was Samir Gandhi, he met with dozens and dozens of startups.

And he did not invest in any of them because he did not believe that that team would execute. And then one day he met the two founders, serendipitously. They didn't have the money. I actually think they didn't have the money to fly across the U.S. They took a Greyhound bus from Boston to Silicon Valley. He met them and I think in half an hour, he said, I'm going to, I'd love my partners to meet them. And there's Doug Leona, Mike Moritz, partners at Sequo met. And I think in a couple of days they invested.

Why? Because those founders knew exactly how they're going to do it. They could describe. They could teach venture capitalists who spent like six months preparing their mind. how they're going to do it. And so they, Sequoer, ended up being the first institutional investor in what was to become Dropbox. I think one of the most successful investments they've made. And one of the investors in Dropbox as well, he was someone working at a rugstore, right?

Can you tell the story of how that happened? I think, Ricky, it really tells you a lot about venture capitalists, getting outside of the four walls. I think it's really important for all investors. You know what happened that this guy who was selling rugs in an Iranian store in Palo Alto, his name is Pajman Knossett, Doug Leona, who was a partner, a senior partner at Sequoia, was his customer, was interested in rugs. Oh, they're very, very beautiful, by the way, okay? And one day, Pajman told Doug, you know what? I'm from Iran originally, so I have access to a lot of smart Iranian PhD students. Do you want to meet some of them because I think they're working on startups?

Do you know, Doug Leone, who's a very famous, successful venture capitalist, like, why would he need to meet this rugstore dealer, okay, apart from buying rocks? Doug Leone reply was, yes, see you Monday at 7 a.m. in your office. And he met. And that was another connection that led to draw books and, you know, many, many other deals. It's a very early meeting time. You've got to be willing to get there at 7 a.m. Well, get outside of your four walls every time, 7 a.m. or 7 p.m. The difference between an A-level team and a B-level team, for me at least, seems difficult to find. So I'm in Denver. We have the Denver Nuggets out here. Nicole Yokic, pretty easy to see that that's an A-level player dominating on the court,

scoring 40 points last night at the time of this recording, just schooling people. But how do you do that in the venture world? How do these venture capitalists know that they're talking to an A-level team? You mentioned Dropbox where they had a clarity of vision and a clarity of how they they're going to solve the problem? What are these venture capitalists looking for? Amazingly enough, Rick here. It's not that different from sports in some ways. So here's what venture capitalists look for. First, they look for charisma. Charisma is very difficult to define, but you know what? When you say charismatic founder, you know. And the best way to

think about charisma is the following. Is the founder able to convince other people to follow them. Okay. So here's an example. You know, I'm very lucky because I developed this venture capital class at Stanford. And over the years, I had more than 2,000, almost 3,000 MBA students who took my class, okay? MBA MSX students. And there are a lot of charismatic students. So I can give you actually many, many examples. So we can definitely spend the next hour. Here's one example. I had a student recently. His name is Reneckasi. He's a, I think it's called maxillofacial surgeon originally. From my first. from Canada.

He came to Stanford. And you know what? He decided to build a healthcare platform to help people with rare diseases. It's an amazing idea, but you know what? It's very, very tough. You know what? Every single time he would come to my office,

talk to this idea, and I'm advising many of my students, every single time I was thinking about, gosh, I'd like to drop this big professor and join him as a team member. And he convinced a lot of people. He convinced the best. best computer science at Stanford.

He convinced amazing executives, like to draw what they do and join him. So that is, I think, charisma that venture investors try to find out and then invest in those people. Second, passion. Passion because, you know, the venture story is a long one. If you're a successful founder of a venture startup, you can be around with a startup for 10 plus years. and if you are not passionate now,

you're definitely going to be passionate a year down the road. So I think passion that you really care about what you do is something that venture investors care about. And finally, is resilience. You know, we love talking about successful stories. Who doesn't? But behind every single successful stories, there are a lot of near-failer experiences.

Okay? And many of them. And I think founders who are resilient, who are able to recover from inevitable, inevitable negative situations, they are much, much more likely to go into be successful. Yeah, Slack would be one of them, right? Where it was originally a team of video game developers that had a video game that didn't work out so well,

but they had an internal messaging tool that did work out pretty well, had a venture capitalist encouraging them along the journey, and then in comes, what is it, Salesforce, buying it out for billions of billions of dollars. and it's one of the top dog sort of messaging tools we use today. That's exactly the case, Ricky. But what is even more important that the statement about that this is going to be the bet on the team was written in the very first investment memo.

I think this is the most important part of the story that that was the bet on the team. And when the team actually faced challenges and they had to pivot and they fail and they tried to find a new product, that's when this whole trust of. VCs on that team played out. So you have to make from the very beginning, that's why I've used the term risk reduction engineers. You have to identify, here's the risks that I'm taking, but here's the bet that I'm making. And in Slack example, and the company's initial name was Tiny Spack with a game called

Glitch, the glitch was glitchy, but the initial bet was on the team. So that's why it turned out to become Slack. We've talked about the investment memo a little bit in the importance of it. Those are listening right now, we encourage them to write an investment thesis before they buy a stock. What does it take to write a good investment thesis, a good investment memo from those investors you've studied? That's a great question, Ricky. You know what?

Let's step back and start with a strategy, which is why are you going to do this investment memo? It is, in fact, not just to make this specific decision. It's also because you will be then able to go back after you made this decision. and the decision could be to invest or not to invest and to review and you will have an unbiased record of what your decision was. For example, what many VCs do,

they use those on investment memos later on to form their anti-portfolia. So anti-portfolia is something that I think is extremely useful to any investor even though I haven't seen it implemented much outside of the venture world. So this is one of the tricks of the trade.

Antip portfolio are those companies that you met, that you likely investigated, that you likely wrote an investment memo and decided not to invest. How many, Ricky, how many of our audience decides not to invest in the stock and then continue to follow the stock maybe for months? Just think about this, okay?

What venture investors do, like Bessemer venture partners, famous VC firm in the Valley, they actually publish this anti-partfolier on their website. Now, most other VC firms don't publicize their anti-portfolio, okay? But they observe. And here's the trick.

If your anti-portfolia is more successful than your portfolio, you know what? It's time to make changes to your decisions. Okay. So, therefore, these investment memos are really way more useful. You just need to find out the ways to use those investment memos. Now, how to write those investment memos? So, I think, first of all, follow the pattern.

for the pattern, set up really good procedural rules. Think about that you write investor memo, even if you're making your own decision, think about it as though you're writing an investment memo for a committee, for others. And by the way, a recommendation that I've been told by some investors, think about that you're writing to the top VC investors in the world. Now, if you're a stock investor, think about that you're writing a investment memo for Warren Buffett. Now, Warren Buffett may never see your investment memo. But once you think about, you know what, I'm going to write this investment member for Warren Buffett, you'll put much more effort.

So you mentioned clarity, Rick, earlier. Investing member must be very clear. It should identify strengths and weaknesses. It should identify what is known and what is unknown. What could be investigated by doing some more due diligence, you know, in public. companies by reading their annual earnings or quarterly earnings reports, much more carefully, or reading their social media. Or equally important to identify in the investor memo, what is likely we will not be able

to uncover even if we spend hundreds of thousands of hours before we make our decision. So all of those must be in the investor memo. And again, clarity and consistency is key. Because again, I think that, and that is how. I think investor memos in a lot of situations outside the venture world is kind of misused or not used effectively. The beauty of the investor memo, you are going to write hundreds of them. And if you do this right, you will be able to compare the outcomes. Okay. By the way, nowadays, with machine learning and AI, okay, you can accumulate those investor memos

and you can use even ask your algorithm that you're going to develop or you're going to take over the shelf to analyze those. and it will help you to make better decisions in the future. Let's keep digging into the memo and the process. I've heard you say before, Ilya, that, you know, a VC can't use traditional valuation metrics. For a young company, you can't use a price earnings. You probably can't use a price to sales. You're kind of leaning on a total addressable market in many ways, which, you know, I'm not saying anyone's doing this, but I've seen those stretched and manipulated because who wouldn't

want to come in with the largest possible total addressable market? market into a meeting. How have you seen successful venture capitalists? How do they think about valuation for these very young rule-breaking types of companies? So first of all, the critical point is whether it's very early on or is it's later stage. So the moment you have a startup where there are some revenues, so there are customers, there are revenues, okay, even though there are no profits, you actually can start using some more traditional valuation metrics that, you know, stock investors familiar with. Even though you still have. have to be careful about them.

But for a very early startup, VCs use, I would say, a different approach. They put it on its head, so to say, the valuation approach. Instead of saying, oh, what are the potential future cash flows, what is the, as a result, what is the discount rate, what is the value, using this DCF or multiples. What they're going to do is how much money does this company need to reach a certain milestone? Because it's at the next milestone where we will be able to provide a much more reasonable valuation for a company and we'll be able to decide whether to continue funding it. So, Ricky, you'll come to me. I'm very successful VC, smart VC, following the venture minds principles.

And I think, well, Ricky, to reach the next milestone, I think you need $5 million. And then they will ask the next question, which is, okay, what is the ownership stake that is in line with my venture finance? fund strategy. And most VCs will end up between 10 and 30%. So, and then once I say, Ricky, well, it's 5 million and I will get 15% or 20% let's say, okay? Then you divide one by the other and suddenly you have the valuation. So the valuation is magic appears out of those two numbers which are much easier,

much easier to get to at this early stage. And by the way, if you're a founder, then never try to argue with VC about evaluation, or should it be like 40 million or 50 million? Think about the ownership state that this is will effectively get and argue about that. And think about the budget, how much money you need to raise, because that will affect it change your pre-money valuation. It becomes more of a game of oxygen. How much oxygen do you have left in the tank to get to the next milestone? Absolutely. That's a great comparison. It seems like FOMO, in both types investing, stock investing and venture capital seems to be extraordinarily powerful. And that can

also lead to some negative outcomes. I think one of the examples you give that I think stock investors can learn from is the piggy bank auction where you can win a deal, but it may have been the incorrect decision because of so much excitement or interest into one particular company or auction. You know, Ricky, I've been teaching on Stanford for 20 years. And I think I have become quite rich by playing this piggyback many, many times. So, first of all, what is the piggy bank? I'm going to reveal a big secret, Ricky, okay, just for you and for the motley full audience. Imagine that you are in a Stanford classroom, okay?

There's maybe 70 students. So Alex was there, okay? He participated in that game. And they just bring a piggyback, a real piggyback. And it is full of pennies, one cent coins. It's full. Like I hold it in my hand. hands and I shake it and it's completely full.

Okay. And it's a reasonably sized piggy bank. In fact, I will come to you, Ricky, and you will be able to hold it in your hands. It's pretty heavy. And then, first, I will ask everybody to guess how much money is in the piggy bank. Okay? And then you just write down on the sheet of paper, like it's 20 bucks, 100 bucks, how much money you think.

Then we're going to play the piggy bank. auction game. What is this? You, Ricky, and everybody else in the class will decide how much money to pay for the contents of the piggy. Not for the piggy itself, but for the money. So let's say the piggy contains $20 and you're a key will write $10 and everybody else will write less than you. So you're going to win and you'll give me $10. I will give you $20 because that's what how much piggy bank contains.

So your net income is $10. Now, if you write $30 and again, everybody else like Alex and all the other students will write less than you, then you will give me $30 and I will give you $20. You will lose net $10. Okay? So that's the game. What is really amazing about this piggy bank game, Ricky? I think I played it more than a thousand times now with the students, but also

with executives and large companies, that's Ryshikov size and so on. In fact, with stock investors as well. I win every single time. Every, not a single time out of thousands, I've lost. Now, sometimes I win $5. I think my max was about $500. Okay? I'm going to reveal a secret.

I have many piggy banks. I'm going to reveal a secret about that specific piggy bank. I'm not not good. It's such a popular, a motley full podcast. I'm not going to use this piggy bank again, okay? So one of piggy banks was $11.87, I believe. And the max bid there was $700. So the person lost $690, almost so.

So, okay. Now, why this, I play this piggy bank game, not just to become rich, okay? But because it is extremely instructive and a very important part of the venture mindset. and it's really important for stock investors as well. What it shows is the following is that if everybody would like to invest in something, okay, and they're going to bid, whether it's a startup, whether it's an MNA deal when a large company buys, or whether it's a stock investment, where everybody is plowing money in its stock, in any specific stock, whoever wins, wins because they likely overestimated the gates.

So somebody who beat $700 for $11 piggy, a bid not to lose money. He or she bid because they wanted to win. They overestimated. So if you really, really think that Microsoft is going to worth like $100 trillion tomorrow, and by the Microsoft might, but if nobody else thinks so, maybe you're just overestimating. And therefore, you're likely to win Microsoft.

stock. And this is a part of Formo. I think Forma is one of the biggest challenges, not just in the venture capital world, but everywhere, especially in stock investors. When everybody, everybody is running in the same place and you're running faster, maybe you're overestimating the fruits of victory. So in the piggy bank game, in the fear of missing out in the former and in the stock market in general, investing in general, the winner very often loses. It has a special name called Winners Curse. But I think it's easy to remember the piggy bank. Piggy bank's a little easier.

I don't, you know, if you ever need someone to run a three-card Monty in the back of your classroom while you're doing that, I'm happy to oblige. That sounds like a fun day over at Stanford. Okay. It's a deal. I got to work on some sleight of hand before I do that. I want to talk about some companies. We've talked about young upstart companies like Dropbox and rule breaking, young companies.

You also talk about both the different. and success of mature companies and their ability to innovate. One common theme seems to be get some good outside teams in and then get out of the way. Two of the companies you feature with that are Procter & Gamble and Johnson and Johnson. These are companies that are normally looking for sort of incremental innovation. They're not looking for groundbreaking ideas, right? Like a Procter & Gamble is looking at how they can sell more paper towels in a specific grocery store in Boise, Idaho. They can innovate there and do a little bit better. That's good for the company.

How have these mature companies been able to innovate into new ideas? Look, there are different ways to do so. And you mentioned a few examples of companies, but we also use PNG as an example of an inventor of amazing things like Magic Eraser and things that they sourced externally. And by sourcing externally does not mean that they acquire the company, but they basically used Innovation Scouts to find these ideas outside of their four. rules. So they use the same principles that VCs would use. They will leave their office, start meeting with entrepreneurs, scientists, and that's what J&J do. But in the opposite direction, they would invite such entrepreneurs to come to their JNJ labs to participate in their activities, to unlock to them all of the resources that JNJ has, experts, distribution network, expertise,

so that they can leverage that. And to some extent, and have this additional advantage compared to other startups. So the trick here is that both companies and many other companies that we mentioned in the book, they do understand the importance of this disruptive forces which may kill the company. Actually, we did this exercise. We looked at the Fortune 500 companies in the very original list of these companies. And then we compared this list to the most recent one. You may imagine that not that many survived, but the number was pretty surprising.

It's only 15%, which made it throughout these years. And we believe that the pace will only increase. And you know all the reasons for that. It could be AI Industrial Revolution, which is happening right now with robotics. So we should not expect that traditional companies would survive with a higher rate. Therefore, if you see companies which are making these bets, I think they have higher chances to survive. Let me add something, Ricky, very important. You mentioned Procter & Gamble and Johnson Johnson, and we give those examples as very positive examples of companies that found the way of combining incremental innovation with very successful disruptive innovation,

of finding really large new opportunities. But there are many companies that don't do it. You know, those 75 plus 80% of companies in Fortune 500 that are no longer with us. Okay. So let me give you a couple of examples. You know, Apple. Well, we all know about Apple, but do you know that Apple idea was rejected by Hewitt Packard? Do you know that Steve Jobs was rejected by Atari?

One of my close friends is Claudia Van Mance that for about 20 or 25 years had been the head of IBM Venture Group. So her task was to find and bring amazing startups to IBM. When I asked Claudia, what is the single biggest challenge you had in all those years of heading the IBM Venture group? Her reply is, well, I would find those amazing startups, bring these founding teams to IBM engineers, and the response always will be the same. We can do it much better. And by the way, do you know what IBM engineers could do it much better?

They just never did. So I think for large companies, one of the single biggest challenges, if they don't go outside, if they only live because of the incremental innovation, is NIH not invented here syndrome. It killed many companies, Ricky. And I think that for stock investors who think about long-term investments, that's also important, where the companies are trying to diversify, where the company is trying to find new successful business lines, because if the company lives only because of small incremental innovation,

its luck is going to run for a while, but for how long? And to be clear, the people at these large companies, they're not stupid, they're acting according to incentives, where the fear of failure, if this goes wrong, you can get fired for it, there's an easy reason, hey, you know, Ricky had this dumb idea to spend $20 million on this project. It didn't turn into anything even though, let's say there's a 10% chance. It's a $50 billion idea and a 90% chance that it's nothing. A VC is going to be more amenable to that than someone who's on a salary, maybe has a little bit of stock and is worried about losing their job.

Absolutely, Ricky. So incentives drive behavior. And if you are, first of all, if you are punished for failure, you change your incentives. You change your behavior. If you are on a fixed salary, then you don't really care about the upside. And then, well, with a much lower probability, your company is going to experience a big upside. So if I were investor, I would really look carefully at the incentive structure of companies. Now, many people think that, oh, let's look at the incentives for the CEO of a large company. So the reality is that, yes, of course the CEO is very important. but let's look at the incentives of everybody else.

And everybody else might be, in fact, more important combined. Because you know what, Ricky, if you and I are, let's say, in a department in a very large company, whatever you and I do are very unlikely to change the stock price right away. So if you're compensated by fixed salary and by giving a little bit of stock, we really don't have the right incentives. That is the reason why so many companies create the so-called shadow incentives, which means that you're not going to be compensated, not just by a salary or bonus, not just by the stock price of our large company,

but by the implied valuation of our business units or of our internal project. And if I think investors should look more carefully about how decisions are made within the company and how specifically incentives are structured within the company, not just at the CEO level, not just at the C-suite level, but at the level of those people who are creative, who are executives, who are managers, who are combined really have a huge input on the company, but who are like at the maybe second or third tier of command. And I think most of investors really don't pay attention to them much. Final question. You follow a lot of young companies, a lot of startups. There's a lot of exciting tech. We've got, we've got AI, we've got CRISPR,

we've got space tech. Those are three that I can do off the top of my head. Is there any, is there any problem you're excited for this crop of startups, these young companies, a problem that they're solving? Very often I'm asked, oh, Professor, can you name like one space that you're really excited about? And in the past, it was very easy to do, by the way, okay? Or maybe two spaces. These days, I'm actually having difficulty. You talk about AI, absolutely. But you know what? AI is on everybody's mind. But I would say there are so many other spaces that are going on strong at the same time.

It's a space text. You say robotics, crisper, or biotech. There's a lot of defense stuff. There's a lot of amazing stuff in the education, future of work, in mental health. And I can continue. Like 20 more industries. I've never seen such diversity. Now, I'm thinking about long-term trends.

I think we will see more disruption in traditional industries in the next 10 years than we ever saw in the past. And I think that is a huge wake-up call for stock investors because these young startups are coming after the public companies. Some of them being very successful right now. The book is The Venture Mindset. I'm delighted to recommend it to listeners of Motley Full Money. I enjoyed reading it. Moreover, I learned a lot from it, and it affects, it will affect the way that I look at companies and the way that I look at stocks. Alex, Ilya, thank you for your time with us listeners on Motley Fool Money. As always, people on the program may have interest in the

stocks they talk about. And The Motley Fool may have formal recommendations for or against, so don't buy ourselves stocks based solely on what you hear. I'm Mary Long. Thanks for listening. We'll see you tomorrow.