Plain English with Derek Thompson - Four Brilliant Frames for Finding the Next Big Thing, With Venture Capitalist Josh Wolfe. Plus, What's Eating Tech Stocks in 2022?

Episode Date: February 22, 2022

All-star VC Josh Wolfe of Lux Capital joins the show to talk about picking winners and losers, tech's rough start to the year, and his four favorite mottos for detecting BS and seeing reality clearly. Finally, Derek and Josh play a game of "Overrated or Underrated?" for the metaverse, NFTs, and space travel. Host: Derek Thompson Guest: Josh Wolfe Producer: Devon Manze Learn more about your ad choices. Visit podcastchoices.com/adchoices

Head into the Ringerverse to stay up to date with all things superheroes and nerd culture entertainment. Hosted by a rotating lineup of superfans at The Ringer, including Mallory Rubin and Van Lathen, shows will provide instant reactions to blockbuster releases, insightful backstories on canon, and mind-bending theories, as well as fresh takes on the latest news and rumors. Check out the Ringerverse on Spotify or wherever you get your podcasts. Today's episode is an intellectual feast, yet it is about how to see the future, clearly. And because actually seeing the future is impossible, it's really an episode about how to see

the present, clearly. Today's guest is venture capitalist Josh Wolfe. We talk about the state of technology, the stock market meltdown in the last few months. We play a game of overrated versus underrated for the metaverse, NFTs, the space economy. But mostly this is an episode for Josh to share with us his big brain and his four big theories for predicting the future, for mottos, I guess you could say, for spotting the next big thing. And I had about as much fun in that segment as I've had doing anything in this show. So I want to start with a brief story about how Josh and I first met. It was three years ago.

I was in New York City. I was hanging out with a friend of mine who works at the intersection of finance and media. And he asked me, Derek, do you want to go to this off-the-record dinner at a Steakhouse that I'm going to. We're going to have wine and steak and smart people. And I said, well, those are, in fact, my three favorite things in the world. So you should definitely count me in. So I arrive at the steakhouse about 10 minutes late, because arriving 10 minutes late to things is my fourth favorite thing in the world. And I walk into this room and see the table. And I'm like, okay, I definitely do not belong here. I don't think I can name all the names because it was, in fact and off the record dinner.

But they had me seated between, on the right, a Nobel award-winning economist who is also a prominent media figure. To my left, a chief economist of one of the five largest banks in America. Across the table is a New York Times best-selling business journalist

and one of the most famous tech commentators in the country. I grabbed my seat, and immediately I'm like, all right, I'm going to have to chug at least three glasses of wine before I have the courage to say my name, much less offer an opinion

on world events. And then Josh Wolf walks in. And he basically blows everyone else out of the water. Like tech, science, politics, China, art, culture, philosophy. In 2018, LeBron James put up 51 points, eight rebounds, and eight a sense in game one to the NBA finals against the Golden State Warriors. Josh Wolf put up a 51, 8, and 8 at that table. And anyway, I'm not sure that I belong there at all, but I am very pleased today to

to bring you the very best of that evening. Josh is the co-founder, a managing partner of Lux Capital, the venture capital firm that backs entrepreneurs and scientists working on projects like AI and flying robots and synthetic biology and satellites and space and drones. His brain is a Wikipedia. He talks like he's always just come off

of his 13th cup of coffee after an extremely caffeinated afternoon. And I cannot wait for you, to discover what I found out for myself in a steakhouse in New York City three years ago. And that's that Josh Wolf is really, really friggin smart. I'm Derek Thompson. This is plain English. Josh Wolf, welcome to the podcast. Good to be with you, man.

How are you? I'm doing good. Josh, tell me a little bit about Lux Capital and how you try to distinguish yourselves as a venture capital firm. Since there is so much competition among VCs these days, what is it that makes luck special. There are generally these two arrows that I'm always trying to find. One, I call the arrow of inevitability and one I call the arrow of impossibility. The arrow of inevitability is the certain directional arrows of progress in almost every domain of technology. And again, just being a student of history can help to inform what you're seeing the present and what might be happening in the

future. And then the arrow of impossibility is when everybody else believes there's no way that that's going to work or that just ain't so. And if they're wrong, and we are right, we have entered at a low valuation reflected by the fact that there isn't a lot of demand for the thing we're investing in, and our future returns should be really high. So those directional hours of progress. You see them in lighting. You know, we went from incandescent, from a flame, you know, in a fire pit to an incandescent bulb, to a light emitting diode. Undeniable directional hour of progress that light became what was once more heat than light and is now more light than heat. You know, an LED is cold to the touch, whereas a flame is very hot. In automotive, we went from horses to horse-drawn carriages to carriages,

to electric cars, to autonomous electric cars, we are not going back along that hour of progress to having, you know, horse-drawn carriages in the streets, you know, strewn with manure. I mean, maybe in some cities you might. Same sort of thing where you look at communication protocols, you look at semiconductors, you look at computing, we went from spinning mechanical disks to solid-state everything. And so there's certain directional arrows of progress that you can find those hours of inevitability, and it doesn't point to who the entrepreneur is or what the technology is or who the company, which company it is, but it gives you a higher probability of being right. And then I read voraciously

and I'm just always looking at what does everybody else believe and where might they be wrong? And when those two lines intersect, it's perfection. So for those who out in Podland, you'll already understand two things that I love about Josh. Number one, his brain is an encyclopedia. Number two, I like to listen to my podcast at 1.5, 1.75 speed. Josh is pre-programmed to speak at 1.5, 1.75 speed, and I always appreciate that for information density, I suppose you could say. So, why do you tell

me about one of the companies in your portfolio that you're particularly excited about, that maybe lives at this intersection of arrows of inevitability and errors of progress? It sounds about a bit sanctimonious and righteous, but we like to say that we invest in matter that matters. Physical stuff that really has meaningful things.

And many times those things tend to have very few competitors because they're so technologically hard that it's just the number of people that might be able to do what these people are doing is few and far between. In this particular case, the inventor of this company icon, E-I-K-O-N, is a guy Eric Betzig. Eric had the distinction of winning the Nobel Prize. He won the Nobel Prize because he was looking out into the outer regions of celestial ether to find biology, you know, to look for aliens and that kind of stuff, inventing new

forms of telescopes. And so that itself is interesting, but he decided, okay, as is often the case with technological breakthroughs, almost always preceded by the words, huh, that's funny, he realizes that by inverting the technique he was using, and you could actually look not to outer space, but to inner space, by which I mean being able to look inside of cells in real time to see what's happening. Now, the reason why that's important is we've never been able to do that before. You can use a microscope. You can use a high-resolution microscope. You can look at a cell, but you're typically looking at something before and after. So if you introduce a drug into a cell

or a culture. And you were a pharma company trying to figure out, what is the quote-unquote mechanism of action? How does this thing work? How does it do the thing it does? It's almost like looking at a 7-11 security video footage camera. And you see 7 a.m. in the morning, you see 3 p.m. in the afternoon. You know that the store got ransacked. A bunch of stuff was stolen. The Cheetos are on the floor. But you don't know who the guy was that came in and robbed the place. So now you can actually see in real time, effectively almost in slow motion, what happens when a drug, a molecule that's designed, binds to a protein, is sitting there in the cytoplasm, gets metabolized by mitochondria, causes the cell to emit hormones, and a protein then reacts

with another protein. We've never been able to see that before. This reminds me, Josh, of a phone call that we had, about a 15-minute phone call last summer, which was probably the most information-dense 15-minute phone call of my life. And you had this amazing riff on the power of tools. You said, imagine a world where Jimmy Hendricks existed, but the electric guitar did not, where Babe Ruth existed, but the baseball bat did not, or where Steve Jobs existed, but the microchip did not. And I'm hearing you, and what you're describing is a tool. And it's fun to imagine that this science fiction microscope that captures security video footage of drugs interacting with ourselves could allow some genius in five, ten years to develop a breakthrough drug

that would previously be impossible to conceive of, that you are building an electric guitar that we will later place in the hands of a pharmaceutical Jimmy Hendricks. So now that we have people with a sense of who you are, what Lux is, I want to get your big brain on the news of the year, which is that tech is getting its butt kicked

in the stock market. Stocks have been punished. The NASDAQ right now is down 14% this year, that Tesla, Facebook, Meta, PayPal, These companies are down 30, 40, 50% in the last two months. Josh, what do you think is happening? And why is it happening now? On tech stocks broadly, I have been wrong for the past two or three years,

prophesying, predicting, in my general default cynical stake or skeptical stake, that the end was nigh and that the current turn would come, and I've been wrong. So, you know, broken clock might eventually be right twice a day. I've been wrong for the past few years, anticipating that the excess of excesses, the abundant speculation, the mass retail participation, the availability of participation in part because of increased margin now at all-time highs, meaning people borrowing stock and borrowing money to invest in stock. Last seen at these levels at the last two major crises of 2007-89 and 99-2000, we're all at all-time highs. Compounded by people being home, sports being canceled,

not being able to gamble on athletics and instead gambling on stocks, the echo chamber of social media and a social proof that whatever was going up would continue going up, exacerbated by the positive feedback effect that belief in it would further increase the valuations of these companies. None of it was predicated on fundamentals. And so, you know, you saw this first with Peloton, I think in a significant way. You've seen it now with almost every major tech company. At the time that we're talking now, we're just maybe a week or two away from the fact that Facebook had its largest, or really the market had its largest ever one-day loss of value in a company.

excess of $225 billion. And notably, within a day of that, you had Amazon with the market's largest single-day gain of in excess of $119 billion. And so what that tells me, and then added another moment, which was snap down 24% in one day and then up 50% the next, there is just mass volatility. Now, what that, to me, is suggestive of is that there are structural changes afoot in the market. For the past 10 years, you have had a rise of passive indexation, meaning people were investing in indexes, in ETFs, and arguably, that's a form of quant trading. When I say that, what I mean is dollar in, algorithm just says buy, buy indiscriminately, whatever is in that index.

If it's market cap weighted, if it's value weighted, whatever it might be, just dollars came in, stocks went up. Well, on the downside, what happens? Dollars come out, stocks are going to go down in some cases indiscriminately. Just to jump in here. So it sounds like your stock theory has three parts. Number one, this was going to happen eventually. The level of speculation, retail gambling, meme stocks, getting bit up by bored people sitting at home, things were just getting too weird.

And the market was becoming a little bit like a late game janga tower. It wasn't a matter of if things were going to fall down, but when. Number two, once that Jenga tower started to tumble, once the market started to fall, whether it's because of inflation or anticipation of interest rates going up, the amount of passive trading, of algorithmic trading, accelerated the decline of stock prices after years of accelerating their increase, which frankly tells me that, like, after years of irrational exuberance, we might be seeing a little bit of whatever the opposite is, irrational doom. Number three, though, you're saying we're also seeing a revenge of fundamentals.

The revenge of profit margins, the revenge of value investing, the revenge of unit economics. What were those words? Profit margins? Unit economic. This is an ancient Greek term that actually hasn't been used for many generations in the stock market. Yes. Here's my long bet for you. If you could get copies of Seth, Claremont's margin of safety. If you can get Charlie Mungers, you know, or the book about Charlie Munger, poor Charlie's Almanac, if you can get, you know, Buffett's letters, those things I remember went in like super scarce value as everybody rushed out, you know, post dot com crisis in 0102. And they started, you know, went from these 50 basis point, 1% declines on a daily basis,

which is what we're seeing now. I think we might be March 2000, going for an 18 month period until October 2001, where, by the way, many companies dropped 80% in value. And they dropped slowly because that was the slow decay of people's belief being shaken from them. So, yeah, go back to you, yes. Profit margins in unit economics. I want to get to your philosophy of the world in just a second, but I actually just want to pin you down on the prediction that we are back in 2000, right, in addition to the nihilism.

I want to pin you down on the 2000 prediction. In 30 seconds, what's the biggest similarity between right now and the dot-com crash of the early 2000s, and what's the biggest difference? Biggest similarity is some of the composition of the investors, retail investors, first-time investors, people that never experienced loss, people that thought markets could only go up,

people that never saw layoffs and riffs, and just wild, abundant speculation of the kind that was highly correlated by which everything was going up at one. Today, you see the same sort of thing, whether it's crypto, meme stocks, high-tech stocks, growth. The main difference is interest rates. Interest rates then, you know, were three and a half going up to four and a half. You had the Y2K, you know, boom bust.

It was sort of a non-event. But you had Greenspan that began tightening and arguably in hindsight at the wrong time. Interesting. So similar dynamics with retail investors and irrational exuberance, but a little bit different because inflation rates are significantly lower than they were 22 years ago. Interest rates much lower so you can argue there's irrational. You know, what else are people going to do with their money? The classic Tina, you know, there is no alternative.

And I would say, you know, there are companies that have real fundamentals and real sales this time, whereas the main metric last time, which in hindsight, of course, was laughable, but, you know, was eyeballs and clicks, and those things didn't necessarily correlate to monetization. You still have a ridiculous number of companies that have gone public in the past two years that have no sound business. And I do think that there will be a mass shakeout. And I think the next wave that we're going to see in markets public and private is consolidation, just a wave of M&A. Interesting. All right.

to your philosophies in addition to we are all going to die. We've spoken a few times and look, cards on the table, I am just a huge sucker for great frames, like great, memorable ways of thinking about the world and the future. And I truly think that, like, the Joshua Frame Store is one of the best frame stores that's out there. Like, you have the Tiffany's of Frame Stores, just some really compelling philosophies that I think investors can learn from. I think writers, entrepreneurs, marketers, artists can learn from. And I want to walk through, four of my favorite frames that I've heard you spiel about on podcasts or at dinners. So first, you have a very sophisticated two-word question to figure out what the next big

thing is. What are those two words and why? Well, just before Warren, you really do need a PhD to understand this. So I'm going to try to simplify it, but here we go. What sucks? What sucks? That's it. Every entrepreneur that has ever started anything looks around and basically says, huh, that sucks. You know, there's got to be a better way to create a car. There's got to be a better elevator. There's got to be a better zipper. There's got to be a better way to wheel a suitcase. Whatever it is, everything around us was somebody looking at something and say, that sucks, I can do it better. Now, the beautiful thing about that is they were driven, you know, some sort of chip on their shoulder or whatever it was to basically make their name,

make their wealth, create status. Whatever that human forces, that pushes that, it's just an absolute inevitable. And for me, I literally ask everybody like, what sucks? And they're like, oh, you know, I just discovered this problem. I can't believe this, this, this thing existed that way. How do you develop your what sucks muscle, right? Like, there's lots of people. I go online. I go on Twitter. People are complaining all the time. They're complaining about the world all the time. But like I, like I sometimes say, they vent rather than invent. They complain and complain and complain, but the solution aspect of that equation never comes into the picture. And so I wonder how you can train yourself to be a venter who is also an inventor.

I love your framing there of venting and inventing. You know, some people here are complainers, but I think for the vast majority of the team at Lux, we're listeners and you're going around and listening to people vent and say, that sucks. And so we're constantly asking the question what sucks, but somebody else has basically said, not only does this suck, like, I'm motivated to like to fix this. Now, I can assure you that there are people that are so frustrated and angry by customer service that they have figured out AI ways to like, I'm going to replace every customer service person here. There were people so frustrated by, you know,

the one percenters that were using their black cars and like everybody should have access to this, that a guy decided, hey, we're going to create this thing called Uber, right? And then you launch this competition. One of the beautiful things about these things when they work is people look back and are like, I can't believe it was ever that way before, you know. And so there's a complacency that we have with the way something works, the social proof of seeing everybody else just using it. and then somebody stands out from the herd, you know, they're the black sheep that is either so

emotionally riled up that they're like, I'm just, I'm literally going to like change this industry that they go and do it. And our job is to find those people, whether they're trying to shorten how long or how much it costs for discovering drugs, whether they are trying to, you know, invent faster transportation and do vertical takeoff and landing, you know, flying cars, whether they are trying to invent a brain machine interface. Somebody is always out there just basically saying, like, that thing sucks, and I'm going to make a better version of it. All right. So frame number one is what sucks. Frame number two is a little bit more sophisticated. I guess it's four words rather than two words. Science fiction, science fact. What is this frame?

What are some examples? Why is this important? You know, I grew up on escapist science fiction as a kid. I grew up in Coney Island, Brooklyn. I just, I love science fiction. It was the future. It was what was possible. It was the epitome of, you know, of change and technology. And the amazing thing, by the way, of course, and I believe this is true throughout all history in everything we've ever done in venture capital, I am extremely, as you can probably tell by my voice, like, ebullient and optimistic when it comes to science and technology. And yet, I am also very cynical or skeptical when it comes to human nature, because businesses change, markets change, technologies change, but human nature is a constant. So every story, you know, it's the same

Shakespearean drama, different setting, you know, more or less gravity, different clothing, but it's the same human dramas, but the technologies change and they solve different problems. And every technology that somebody invents in science fiction ends up creating new problems for new technologies, you know, even further in the future to solve. And that's just the history of it. We started cataloging this and it became sort of amazing. And at first, I have to be honest, it was sort of just like, huh, that's sort of funny. Like, look at all the stuff we funded that has come out of sci-fi. But over time, it actually became a playbook. And I will tell you, we are not the only ones. So you look at pod racing from Star Wars. We backed a guy, Nick Kortowski, who started this company

drone racing league. And it literally looks like it's right out of science fiction, you know, with these people racing drones wearing first person view goggles, doing these hairpin turns, flying these things at 100 miles an hour. It's just wild. You look at 3D printing and 3D scanning. I mean, straight out of science fiction. There was this old Michael Douglas movie called Disclosure, not a particularly great movie, but a very cool scene that I've captured where he scans himself and enters this virtual reality world. Again, going back more than 25 years ago, 3D printing itself is basically Star Trek's replicator, being able to to look at some of the designs even of the aesthetics of Motorola StarTac, you know, came straight

out of Star Trek's tricorder. And so there's all kinds of inspiration between these things, drones, satellites, space, rockets. Many of the engineers that are working on these very hard problems were absolutely inspired by something that they read or saw as a kid. And so I always say that either our scientists are becoming way more creative because that gap keeps shrinking between sci-fi and sci-fact, or our sci-fi authors are becoming less creative. I have think our sci-fi authors at the moment for the past 10 years have had a little bit of a bias towards a dystopian future, less of an optimism. And they've also been caught by the zeitgeist about climate. So like every major sci-fi movie today is about, you know, climate catastrophe.

Very few books are talking about nuclear energy, right? Like it's just like that to me is the answer to climate. But we'll get there. There's a corollary here. There's a corollary here that I want to ask about because, you know, another trend through the history of technology isn't just First, we imagine it in science fiction, and then we actualize it in science fact. But also this interesting trend where we invent things for minorities, for people with disabilities, that gives them the ability to go from disabled to abled. But then that technology is adapted to help people go from human to superhuman. So you think about something like optics technology in the 1400s and 1500s.

Optics tech helped the visually impaired read when Gutenberg's printing press was proliferating all these different things for people to read. But then Galileo takes the same technology that plays with curved glass to magnify objects on the other end of that curved glass, turns it upward, kind of the opposite of ACON therapeutics, upward at the moon, and then uses it to see objects far away in space.

Are there other examples you can think of where people move from, where that which is built to help people go from disabled to abled helps other people go from human to superhuman. Totally. And you nailed it. You know, Vince Scherf, who you talked to, he was hard of hearing. And part of the original design of ARPANET was even thinking about people who were hard of hearing

to be able to communicate through visual text. Arpenet being the precursor to the Internet, that the, yeah, Defense Department built. And then text to speech, speech to text. You know, as a kid, I had the Franklin, you know, what was it, speaking spell. that started as a handicapped assistive device. When you look at wheelchairs, the Segway itself really was originally designed by D. Kaman with this idea of having this quad wheelchair that could actually climb stairs. There's a social component here too, which I think is very interesting.

And it started with, you know, in the early 80s the Disability Act, people, you know, basically advocating for design and technological inclusion and improvements. One of the most amazing things that I think people take for granted in this current era of instant on e-commerce and now robots delivering things, you know, on sidewalks, curb cuts. Curb cuts. This was such a simple thing, but curbs used to not have that little ramp dip. Well, you know who the main beneficiary of that over the past 30 years since that became a law are moms pushing strollers, okay?

The second greatest beneficiary is every single one of us who benefits from our daily deliveries that are coming from Amazon and Whole Foods and all our other places that are delivering with the guys that are pushing these giant carts up and down New York City and elsewhere. And now you have robots that are able to actually navigate. street corners and cross streets, all because, you know, of something that started with disabilities. So huge fan of this idea of the adjacent possible, you know, this idea from Stuart Kaufman. Say a little bit more about what that is, what the adjacent possible is.

Because that's an idea that did it emerge from the Santa Fe Institute, but then also I think Stephen Johnson wrote about it in his book, where great ideas come from. But it's a fun idea at the sort of frontier of science and tech. idea of the adjacent possible? Well, drawing on what you said originally, which was, you know, an idea taken for one intent ends up getting used in another unintended way. One of my favorite examples, a lot of things come from early adopter industries. Gaming is a big one. And so video games, because, you know, it's silly, it's trivial, people are tinkering, gets in the hands of lots of people. Three-D depth sensing cameras, really saw their first major expansion with huge

volumes, declining price points, so it got a cheaper, it became more available, with Xbox and and PS4 and Dance Dance Revolution and these, you know, 360 cameras where kids are in front of them and they're dancing and showcasing. It turns out that that camera inside, one engineer that we backed in a company called Matterport, now a multi-billion dollar public company, but at the time it was like a $10 million, you know, little tiny thing, no revenue, he said, what if I took a bunch of these little 3D depth sensing cameras from an Xbox or PS4 and actually put them in a camera, pressed the button, had them do a 360 whirl,

and be able to capture physical spaces around us. We said, okay, well, that could be sort of cool. Fast forward, we get into COVID, and the entire real estate industry, with no house showings, with no ability to, for people, suddenly, and this thing went from, you know, not so great quality to just incredible high-resolution photo quality, is like the tool that became indispensable.

So there was no way that anybody that was designing a depth-sensing camera for Microsoft Xbox or PlayStation, Sony PlayStation PS4, ever thought, hey, this little fun thing that we might use, almost like the old school Nintendo power glove or something like that, was going to be used as a multi-billion dollar product in the real estate industry. So we're always looking for those adjacencies. How is something in one domain going to be seen by somebody else who might have that inspiration of something sucks and then reach into that other guy's domain and pluck it and reapply it? And I think that that is the essence of most innovation, all new. things come from combinations of old. The more old stuff we have, the more probabilistic it is that

can be combined in new ways, and often super surprising ones. Frame number three, this one is just three words, but they're three words that sit on top of slightly more complicated ideas. This is your Twain-Fitchgerald-Schopenhauer theory of the future. Tell me what the Twain-Fitzgerald's Schopenhauer theory of the future is. I'm a voracious reader, very intellectually competitive. I get information anxiety when I find out that somebody didn't know something. But I love Mark Twain. By the way, I learned the term information anxiety from you. And I love the concept of information anxiety, especially as it compares sometimes with like status anxiety that some people I think in conversations are status anxious. How do I be right? And then other people are information

anxious. Oh, I might be wrong. I can learn something and then become right. And I just think it's, I think it's a lovely idea to think about how you can be fruitfully anxious if you're informationally anxious rather than status anxious. So that's my little sidebar. But please continue with Mark Twain. As a further sidebar, you and I hit it off because you're a voracious writer and reader. And, you know, there's people like Michael Mobison, one of my partner, Sam Arbussman. Like, every time you talk to them, there's just like this super pro-social positive, like, what are you reading? And they have like 10 books, you know, fiction, nonfiction, old books, new books. Whereas other people I might be like, hey, what are you reading?

Ah, I have no time to read. Like, you know, can't hang. Okay. So these three words, Twain Fitzgerald and Schopenhauer, each is a famous author. And each of those famous authors has a renowned quote. And each of those quotes, to me, dictate where you should spend, not your money, but the most valuable thing you have, which is your time and your attention. So let's go through each of the quick quotes. Fitzgerald's quote was, the test of the first rate intellect is the ability to hold two opposing ideas in your head at the same time and still retain the ability to function. So this to me are front page newspapers. This is the front page of newspapers where it's the thing that everybody is talking about. You might have a debate about it, but it's really well

known. So there's no scarcity. There's no rare ideas. It's going to be relatively efficient pricing as relates to stocks, but everybody's paying attention to it. This might be things like gold. Gold is a shiny piece of metal. Gold is nothing but a shiny piece of metal in an otherwise fiat world, or gold is this great store of value. Somebody might say China is this great engine of growth and the future of humanity and it's going to be the number one GDP. Or somebody might say China is nothing but lies, damn lies, and government statistics, and Chinese government statistics. Somebody might talk about the Olympics, and somebody might say they're not important. But things that just like everybody's talking about tend to have low value, particularly for those of us that have information anxiety.

And so when I read the newspaper, I'm actually looking not at page A1 or A2, and I actually try to read the physical newspapers or at least the digital replicas of them because there's value in that. I will look at like C-22, where the editors have decreed that a little small inch in the bottom left of the page is not that important. important, and then I have a differing view of the magnitude and the importance of that information. So that leads to the second quote, which is Twain, which is it ain't what you don't know that gets you in trouble. It's what you know for sure that just ain't so. And so where is their certitude that things will continue as they are, and if they don't, the consequences are going to be really bad. So this is your sort of classic Nassim Taleb, you know, story of the Turkey, where every day the turkey goes. And from the time it's born, it's fed, it gets fatter and fatter and fatter. And it would presume, rightly, linearly, that life is really good. And then all of a sudden, Thanksgiving comes and chop off with its head. And so same thing happened with the housing market. Housing prices could only go up. And then all of a sudden, boom, you know, massive housing crisis. Same thing, probably today. You have an entire generation that has not seen a downturn in 14 years, a true downturn. So the average person that graduated college, 21, 22 years old,

is today 36 years old. The average person in their mid-20s today was 10 or 11 years old back then. There is a mass generational amnesia, which is par for the course of people who have not seen a downturn believe that stocks can only go up, Tesla can only go up, growth can only continue until it doesn't. So that's a twain situation. The third area is Schopenhauer who said that talent is hitting a target that nobody else can hit, but genius is hitting a target that nobody else can see. And that is really what we do on a daily basis. We are trying to find those entrepreneurs who, often with arrogance of the highest order, say that this is the way that the world should look, this is the technology that has to be in everybody's hands, and then we go and back her or him in doing that.

And those are people that are inventing brain machine interfaces and coming up with new drugs and new microscopes and deciding that they want to launch things into space and manufacture. They are the people who see something that everybody else doesn't. And you go back to those intersecting arrows, they found the technological inevitability, that arrow of progress, and it's beautifully matched against this perception of impossibility when everybody else is like, that'll never work, or that's 20 years out. And then they've got that chip on their shoulder, and they're like, I'll show them. I love this because I am not a venture capitalist. I am not an active investor. But these ideas, I use all the time as a writer. So exploding

false certainties, that's zagging. That's writing my most red piece in the last two years about hygiene theater. Everyone thinks that this disease lives on surfaces. They're like dunking all their vegetables and soap and water when we know for a fact that the coronavirus spreads more efficiently in the air. So there is false certainty. I love the idea of bringing that which is important but not obvious into the important and obvious realm, right? That's a little bit more Schopenhauer, seeing that which people aren't paying attention to, setting that slightly askew target, and then pulling it into everyone's frame of mind. That's what great journalism does. No one's paying attention this really important thing, let's have a conversation about it.

One of the things I love about the Fitzgerald quote, about keeping two things in your mind at the same time. My wife is a PhD student in clinical psychology, and she is as described to me this theory in DBT, dialectical behavioral therapy, which is often for people with borderline personality disorder. Marshall Inhan, yeah. Yeah.

Yes, Marsha Linnehan, the American psychologist, who came up with dialectical behavioral therapy, Josh, I thought I could get something by you. Just just one fact by you, and it turns out that I cannot. So there's this lovely theory called Wise Mind, and Wise Mind assumes that the person's psychology is torn between the reasonable mind, which is driven by logic, kind of like the Star Trek data that lives inside of our brain,

and the emotional mind that is driven by feelings. But there is a beautiful synthesis that can happen, when we hold our feelings and our reasonableness side by side at the same time. And sometimes for me this is just really useful in analyzing the news. What are the facts of the case and what are the interpretations? This is something I ask on plain English all the time. But it's also so useful in life. Like imagine, for example, if you, Josh, you walk into a room, you say hello to your wife and kids

and they don't look up at you. They're still looking at their phones, they're watching TV. You might storm out of the room and say, oh, my God, My wife and kids hate me. They never pay attention to me. But then you can sit with this sort of wise mind exercise, and you can say, let me check the facts here. The facts are the case, or I walked into a room. I said hello to my family.

They didn't respond. Now I check my emotions. My emotional response is that they didn't respond because they're so, so angry with me. Now, you can hold those things side by side while also imagining other interpretations for why they didn't look up. maybe they didn't hear you. Maybe they were just distracted. And I think it's so lovely to imagine that in the psychology of our normal life

or in the analytical mode of reading the news, interpreting the news, or trying to pick the next big thing in the VC, there's this beautiful wisdom that comes from synthesizing our reasonable mind and our emotional mind. I love that. And yes, DBT is something

that I think should be taught at companies. I think kids should learn it at an early age. in whatever construct it is taught, the idea that, yes, there's two opposing ideas of sort of the emotional mind, which is your reactive mind. You know, you can think of in some cases system one or system two in a conomens sense and your analytical mind. And there are people that have natural dispositions for one or the other. I am a high twitch, fast response person. So my natural default is to assume, and I remember first time, you know, growing up Cornell in Brooklyn,

I show up at Ithaca, Cornell freshman year. Somebody's like, hey, nice haircut. I'm like, what are you trying to say? You know, my first instinct is they're being sarcastic and snarky and they're challenging me, you know, and I'm ready, I'm girded for a fight. So some of us have blueprints where we're primed for one thing or the other. It has made me, and I wish I would have learned some of these skills way earlier in my life because I would have had less relationship conflicts in some cases. But whether it's with CEOs, board members, fellow partners, just the idea that you never go to extremes, which itself is a meta, you know, a violation of that, right? But you try not to go to extremes. It's not like, you're always this or you're never that, right?

that things are gray. And this idea of just, yeah, trying to find the wise mind in these situations, which is not the default thing. But what a beautiful way to avoid conflict and help with, you know, people that get easily dysregulated. I think it's an absolutely beautiful technique. I wish I would have learned it way younger. I want to talk about the fourth category that I had written down, the fourth frame that

you have that I think is really useful. I think of it as your triple failure philosophy. Tell me your triple failure philosophy. This is mostly a protective psychological mechanism. So let's say that this really derived, not from brilliant insight, but from my own psychological desire to prevent vulnerability and anticipate bad things. It's failure comes from a failure to imagine failure. So failure comes from a failure to imagine failure.

The idea here is if you can anticipate the things that can go wrong, whether you are an investor or an active venture capitalist like we, you are trying to throw time or money or talent to think about the things that can go wrong, prevent them from happening, and reduce and eliminate risks. I'll give you two adjacent ideas. One is that a lot of people celebrate entrepreneurs as these heroic risk takers, and I think they are the exact opposite. They are risk murderers. They are risk killers. They identify risks and they kill them. They are not jumping off of bridges and jumping out of planes and doing crazy risk taking things for the thrill. They're often identifying what could go wrong and they're eliminating them, whether that's

internally personnel, whether that's a competitor, whether it's technology. I love that. For some reason, What that reminded me of is I have a friend who's writing a book about umwelts, animals that have a different sensory appreciation of the world. So you think of a hound dog. It smells very well. It senses the world through smell. There are other animals that are extraordinary at seeing in the dark. Other animals have extraordinary taste.

What you're describing is a kind of risk-heavy umwelt. When you look into the world, you see risks. You have a taste for risks when you look at the world. whereas other people might only see the opposite. They only see opportunities. They only see sort of a polyganish gloss to the world. It's really interesting to think that entrepreneurship is not about being, having a high aptitude for risk, but rather about having a advanced taste for risk.

They know what risks are worth taking and what risks are not worth taking because they process the world by being so, but they probably, process the world so visibly through risk. I wonder if that sort of connects to you, if that connects to you. You're a personal umwelt. It does. And I'll give you two sort of adjacent things to that. One is, I sleep well when I know that my entrepreneurs, the people who are running the companies whose board I sit on, are not sleeping well, that they are stressed and worried. When they, when I say, hey, how are things going? They're like, oh, everything's fine, you know. God forbid they ever say, oh, yeah, this competition that just came into this market.

place. That's validating for our, no, nothing is validated. So when somebody is freaked out and stressed, I feel a sense of calm because I know that they're worried and I don't have to import their worry and take it on. So that's number one. I want to say very quickly, I feel this way about worry, like within rooms. Like if lots of people are freaking out about something, I don't freak out about it because I'm like, clearly the room has already reached the threshold of freak out that I think is necessary. But when I'm in a group and no one's freaking out about the fact that like we haven't, you know, whatever, made a dinner reservation in a foreign country and we might not be able to find a restaurant to eat at, I freak out because I'm like, we're not even close to the threshold of freak out that

is necessary within this group, and I need to lift us up. I'm naturally, I think, a relatively cool and collected person, but I share this theory of threshold freakouts. Well, the other component of this is I think it's the secret of happiness, failure to imagine failure. What do I mean? You know, if you're always expecting the worst, again, might not make you the most happy party person. But your threshold and preparedness for bad news is so high that when it doesn't happen, it's actually a positive thing. This is going to sound super dark. Every morning I wake up out of it. I've got three kids, 12, 9, and 6, two girls and a boy. I assume that one of them is going to come to my bedside as they do and say, Daddy, my throat hurts and I feel and there's like a lump there.

Every day. Every day, I walk out of the house and I think I am going to get hit by an e-bike delivery guy and I'm gone, right? And so I think that just like the sort of memento mori, the constant reminder, you know, shedding that illusion that we're not all going to die, that we are all going to die, it just makes me appreciate every single day. And so I think being risk conscious makes me happier because the very definition of risk is more things can happen than will. And most of those things don't happen. And when they don't, it makes me happy. Last thing I want to do with you, very, very quick game, if you're down for it, of overrated versus underrated? Yes.

Metaverse. Overrated. Why? Well, again, sci-fi, sci-fact. This is something that really started with Neil Stevenson. It's been, you know, basically stolen by a ready player one, Ernest Klein, and beautiful book, the first one. That is Zuck's Playbook. I mean, people on the board have said, like, this is Zuck's playbook.

And so I don't think that people... truly want to be ensconced in headsets for long periods of time. I will say the thing that I've changed my mind about is there are large groups of people, the vast majority of the world, that are living in squalor and crappy conditions and their lives are not great. And we already have people who come home after work and don't find meaning and purpose and community and feel dejected and, you know, go into social media or TikTok or movies or sports or whatever. And so there is an element of a large group of people that, you know, we will be saying, my God, you know, get out of the metaverse and get in the real world. And they will say, the metaverse

for me is better than my real world. And I think there's a social dimension there. So I'm sympathetic, but I do think at the moment it's overhyped like every technology. And the real people that are going to be developing the metaverse, I don't think it's going to be Facebook. I think it's going to be somebody else that comes along, just as Facebook came along when we were all focused on Google or Microsoft. and I don't know who they are. It's my job to find them, but I'm convinced it'll be some, you know, young junior folks that are like 16 years old right now that have a better conception and are going to go do it and, you know, become billionaires in the process. Overrated, underrated, SpaceX. Underrated. I am very publicly critical about Elon Musk as his relationship with the truth and it comes to Tesla. I think that SpaceX domestically has inspired a generation. We have started companies like or funded companies that have been started like Hey,

that's doing manufacture using robots for space, replacing the 3,000 mom and pop shops that are doing aerospace engineering and Varda that is manufacturing in low Earth orbit and Chimeta that's making antennas to beam down satellite bandwidth. All of that is possible in part because there are brilliant people that have followed Elon's siren song and call to go pursue a high expectations, very tough culture. They've done it and yeah, they've done it well. So brilliant people are coming out of SpaceX that are the next generation of

entrepreneurs. Yeah, I think SpaceX to me seems like another chapter of the story, the power of tools, right? If you think about cheap reusable rockets as a kind of tool for accessing the new frontier space, it seems to me like a tool whose positive externalities could be really, really fantastic. Last one, sorry I had to do it, overrated, underrated, NFTs. Underrated in the current form, I think they're overrated, you know, they'll be a form of our work. but I do think that NFTs are akin to satellites, by which I mean, the same way GPS came from triangulation of multiple computers in the sky that tell you that there's a blue dot or some other abstraction technologically.

There is a adjacency of multiple computers that are saying this digital artifact is, in fact, in this space and time, and I think that that's going to be an important foundational technology. Well, NFTs as satellites for art, is not a metaphor that I thought I would land on, but that's a really lovely way to put it. Again, the Joshwell Frame Store. Very happy to spend an hour shopping within it. Thank you very much, man.

And I will talk to you very soon. My pleasure. See you soon. Planning this with Derek Thompson is produced by Devin Manzi. Thank you so much for listening to this show. If you like us, follow us on Spotify, rate and review on Apple Podcast. We will be back with our second episode this week on Friday. We will see you then.