The Pomp Podcast - #1025 Keith Rabois On The Critical Thinking Crises That’s Underway

Episode Date: June 29, 2022

Keith Rabois is a General Partner at Founders Fund, A member of the "Paypal Mafia" and has helped build and invest in multiple billion dollar companies. This audio podcast was pulled from my live event with Keith Rabois at Showfields in Miami, Florida. In this conversation, we talk about the frameworks around critical thinking, including how it's done, changing your mind on closely held beliefs, and the downsides to having so much conviction. We also discuss the macro economy and other current events such as Covid, gun control, Bitcoin and geopolitics. To see the full video interview of my chat with Keith, go to my Anthony Pompliano YouTube Channel. ======================== BCB Group is the leading payment services partner for the digital assets industry. BCB Group provides payment services in 30+ currencies, FX, cryptocurrency liquidity, digital asset custody and BLINC, which is BCB’s free, instant settlements network for the BCB client ecosystem. Find out more by visiting bcbgroup.com/pomp ======================= Brave Wallet is the first secure crypto wallet built natively in a web3 crypto browser. No extension required. Store, manage, and grow your portfolio, get NFT & multi-chain support, and more.    Download the Brave privacy browser at brave.com/Pomp, and click the wallet icon to get started. =======================

What's up, everyone? This is Anthony Pompliano. Most of you know me as Pomp. You're listening to the Pomp Podcast, simply the best podcast out there. Now let's kick this thing off. Keith Raboy is a general partner at Founders Fund. He previously had a number of investments in companies that went on to become multi-billion dollar Goliaths of industry, and he served in executive roles at PayPal, LinkedIn, Slide, and Square. In this conversation, Keith and I talk about critical thinking, how to do it, what's the actual process, when you should change your mind, and what exactly is the downside to having so much conviction and being optimistic. Keith and I also talk about a number of different current events, from

gun control, to geopolitics, to Bitcoin, and the current market downturn. I really enjoyed this conversation with Keith, and I hope that you guys enjoy it as well. Before we get into this episode, though, I quickly want to talk about our sponsors. This episode is brought to you by FTX US. FTX.US is the safe, regulated way to buy and sell Bitcoin and other digital assets. You can trade crypto with up to 85% lower fees than top competitors. There are no fixed minimum fees, no ACH transaction fees, and no withdrawal fees either. FTX.US is also the only leading exchange that supports both Ethereum and Solana NFTs. Download the FTX app today and use referral code POMP to earn these free crypto on every trade over $10. The more you trade,

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No extension required. With BraveWallet, you can buy, store, send, and swap assets, manage NFTs, even connect other wallets and dApps, all from the security of the best privacy browser on the market. Whether you're new to crypto or a seasoned pro, it's time to ditch those risky extensions. It's time to switch to Brave Wallet. Download Brave at brave.com slash pomp and click the wallet icon to get started. Again, go download Brave at brave.com slash pomp and click the wallet icon to get started. This episode is brought to you by BCB Group. With a dedicated focus on institutional payment services, BCB Group provides business banking, cryptocurrency,

and foreign exchange market liquidity for many of the world's largest crypto-engaged financial institutions. BCB business accounts allow businesses to load fiat currency and cryptocurrencies for payments, operations, and trading purposes. BCB's clients can trade FX and cryptocurrencies quickly and at scale with market-leading value. BCB's Blink Network is the European crypto industry's first instant settlements network and one of the first real-time payment networks of its kind to allow free real-time transactions across fiat and digital currencies. BCB's vision is to empower the global financial revolution through sustainable and innovative banking. You can find out more by visiting bcbgroup.com slash pomp today. Again, if you want to learn more, go to bcbgroup.com

slash pomp today. Anthony Pompliano runs Pomp Investments. All views of him and the guests on his podcast are solely their opinions and do not reflect the opinions of Pomp Investments. You should not treat any opinion expressed by Pomp or his guests as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his personal opinion this podcast is for informational purposes only all right uh what is your resting heart rate uh it's 46 today which is lame why it should be 44 that's a great place to understand keith or boy um why is health diet berries all this like like why do you spend so much time on it and what has changed over the years around your health or diet uh in your life

So it's a function, I mean, truthfully, it's a function of vanity, life extension, and performance, and they're all related. Like, you can't disambiguate these. Some things are around, like, how do you live longer, like, have more lifespan, so to speak, when you can be active. Disadvantage of getting old is you start thinking that way. Second thing is definitely aesthetics, like vanity. Like anybody else, I just, like, am conscious about it. And the third is pure athletic performance and competing with people and competing for various things. So, for example, resting heart rate, mostly around life extension.

Two-minute recovery is definitely around life extension. Other things are designed for other purposes. Barriers just happens to be the most efficient way to do it. So I'm generally pretty busy. In one hour, I can do everything I need for all three goals. And it's the only time probably during the day that I put my phone away, which is a pretty big accomplishment. Maybe day and night.

I'm usually pretty good at putting – we do two day nights a week. I'm usually pretty good at putting my phone away. So are you optimizing for longevity or you're optimizing for all three of them? Pretty much all three. Like, for example, if you were optimizing only for lifespan, you'd probably never drink alcohol. You can debate this whether you should have, like, a glass of red wine once in a while. But, like, I actually do drink alcohol. So, obviously, I'm not totally optimizing that way.

But, like, generally speaking, optimizing for the middle of how do I live longest, be as high-performance as possible, like, mentally. So I optimize my sleep. We were talking about Mateo just briefly, but I've been optimizing my sleep for like 30 years, like literally eight hours sleep basically every day, and then reverse engineer everything around that. So it's a combination. So we're going to talk about a bunch of topics that some of them are very down the fairway. Some of them will people will leave scratching their heads being like, what are these guys talking about? But part of why I want to start off talking about fitness is there's a mental clarity that comes with being fit, with eating healthy, et cetera. or is there anything that you do specifically for the mental clarity

or the ability to think better, make better decisions? Well, sleep is definitely the number one variable. If you're going to change anything in your life, if you change your sleep, you're both going to live longer most likely, but you will definitely think smarter, act smarter, have a better personality. I used to remember when I was an executive at Square, I'd present, you know, I'd actually run the board meetings at Square, and I had this board member, some of you will know, Mary Meeker was on my board,

and she would observe after a couple of years that she could tell how much sleep I had the night before a board meeting because my vocabulary would suddenly shift and I would use like less elegant words. And usually before a board meeting, my adrenaline would be running so my sleep was mediocre. But the fact that she could notice this and I actually knew the sleep differences and she was picking up on it, it was just evidence of how you act differently when you haven't had a perfect night's sleep. Obviously, there's great studies done with the Stanford basketball team about free throw shooting and three-point shooting that really make it clear that elite trained athletes, Stanford basketball team historically has been

pretty good. So if you can add 10 percentage points to free throw percentage by sleeping an extra hour, that's like amazing. You could train for the rest of your life and not add 10 percentage points to your free throw percentage or like similar comparable percentages to threes. So that was very eyeopening, but I was already pretty dedicated to sleep. So when we think about how to think before we actually talk about specific topics, uh, you're trained as a lawyer. I think you practiced for like maybe three days? No, I was dumb enough to practice for three and a half years. My friend Peter Thiel practiced for three months and four days. And he still introduces me as this is my greatest character flaw. He's like, literally, he'll be like, oh, Keith is obviously

incompetent because it took him three years to figure out what I figured out in three months. True story. Actually, he's done this several times. I have no doubt that's a true story. What did the legal training though, from a how to think standpoint, like what do you attribute you that you took away from it well there's a way of thinking that you learned as a lawyer and some of it's very valuable across all disciplines some of it's very narrow the the part that you do develop a hierarchy of thoughts and an organized mind one of the ways you can tell is if you ever date somebody who goes to law school you will see his or her mind change before you everybody who has who dates somebody through law school notices the change in like how their significant other

starts to think so that that's really useful you do learn a little bit too much of what they call issue spotting so when you get graded in law school the the primary driver of your law school exam grade is how many of the potential issues can you identify things that could go wrong and then can you resolve them meaning discuss how they would most likely be resolved by a court of law the problem with this so it's a very good general exercise like of avoiding risks in life but it leads to a little bit of overthinking because every everywhere you go everything you see all you do is these problems it's like problems still left problems to the right it's like that song Joker still left, you know. So you start thinking like everything that can go wrong, which really

doesn't help you, certainly not as an entrepreneur or investor. Like when people pitch me with a new investment idea, it's obvious what can go wrong. The hard part is what can go right. But so that part doesn't translate as well. And then the part that also translates relatively well is, you know, I've been involved in a lot of financial services, heavily regulated areas with IP issues or like healthcare with lots of legal issues. And being trained as a lawyer allows you to navigate stuff for yourself is rather than outsourcing it to some black box. And so I like things that have perceived legal and regulatory risk because I don't outsource the diligence to other people. So when you think about that pathway to becoming an investor or an entrepreneur,

are there certain operational roles or certain investment styles that lend itself? If you have been trained as a lawyer, you're more likely to be better at operations or marketing or a venture investor or hedge fund investor. How do you think about the overlap coming into investing in business? A global statement is I always believe that you should invest in things that you have an asymmetric advantage in. So the earlier in your life

you figure out what your asymmetry is, the easier it is to sort of magnify that, amplify, double down on it. So if you're a lawyer, per my point, I love things with legal risk, like maybe the most obvious example of this is when YouTube first was started. I knew the founders from PayPal.

We'd worked together at PayPal and I met them at a barbecue or I met one of the three, ran into one of the three at a barbecue and I asked them just casually like, hey what are you up to just like you would you know do you sort of introduce yourself to any friend at a barbecue and he said oh i just launched this new company and it's like well what's it called and it's called youtube.com and i said okay what does it do and he basically is

like sharing videos blah blah i asked him three questions um literally as we're in line to get a drink like literally like in line to get a drink at my friend's place and at the end of those three questions i was like i need to invest can i invest he's like don't you want to see the website and And at the time, this is like 2005 or 2006 or something, we didn't have basically computers in our pockets. And so he goes to the host, this guy named Mike, and says, hey, can we borrow your computer? And so we go off into Mike's bedroom and for the next hour, he shows me every single video on YouTube, which was very painful, but he did allow me to invest.

Now the point of the story though is when I started telling other people about the potential opportunity to invest with me, because back then I couldn't write a big enough check myself I needed other people every single person talked to their lawyer friends and every single fund was like terrified of the legal risk And so I just walked through my favorite funds at the time the legal diligence myself I just said here's what people can tell you and here's the right answer and blah blah blah and you know Not surprisingly we were able to convince a very good fund to go invest But like if I didn't understand IP loss, I happened to have been partially an IP litigator There's no way that I would have been able to do that, A, with confidence and enough

credibility to convince a very large VC fund, but B, would I have known the right answer myself? Almost surely not. Kind of funny anecdote to this is there was one part of the law that I forgot. So I graduated law school a long, long time ago and had quit a few years before this. There's a slight part of law around music licensing that works very differently than standard law and certainly IP law because Congress passed a statute in like 1914 or 1910 or something where every time music plays in the background, there's a statutory fee.

So it's one of the few things that doesn't have a market price. And I sort of forgot this part because it doesn't generally conform to normal principles of law. So when YouTube did eventually have some legal risk, it was only because of the background in music being played in the background of the videos that caused a problem. They never had IP risk around the actual videos, which is what everybody was paying attention to. But I sort of forgot that. Now, we passed the statute of limitations, so I can tell the story.

What were the three questions that you asked? Is it coded in Flash? It was the number one one. There's a reason for that. I'd been waiting for three years to find a company that found it on Flash. So my friend Max left. Why? Well, so after he left PayPal, I went to work sort of part-time with my friend Peter Thiel.

And Peter said, go down to Mountain View and figure out the future. And what he meant is, go talk to Max. Max loved him. And so I was like, okay. So I called Max. I'm like, Peter's dispatched me down to Mountain View to meet with you to figure out the future of technology. Max is like, okay, whatever. So we sit down, and he starts, you know, he's like, I can't really predict the future, but blah, blah, blah.

He's like, one thing that is kind of cool is this thing called Flash. And I had no idea. I had heard of it, but no idea why. So he explained to me all the magical properties in 2003 that Flash had and that someone would take advantage of it, particularly around commerce, but here's what it could do that other people weren't realizing. So I'd been looking around, scouring the universe to find some way to invest in Flash, and then I realized as he was talking about videos that Flash was actually a pretty good application of that.

Second question was around whether it was long-tail videos or he was targeting professional videos, and he said long-tail videos, which led to some of the legal analysis but made me more interested. I always am interested in long-tail stuff. Still I'm interested in long-tail stuff is the guys from open store here. No, and then third the question was We had a well we had a PayPal product that internally We called X click for the web what that really was was an HTML button you can embed in your eBay listing and that's what led to the viral adoption of PayPal back in the day and

So I said are you gonna be able to do something like X click for the web? And he's like, yeah, that's the whole plan so Fully embedded flash video that could be embedded anywhere and it would lead to ideally the same adoption As PayPal and it actually turned out to be the case pull it back to the website You mentioned PayPal how much of it is like nurture verse nature? Do you got the right people into that business? Versus you guys had some magic potion and got everyone to be really smart and go on to be super successful afterwards I think it was mostly that Peter and max deserve a lot of credit for hiring people

so Peter hired most of the non-technical people knocks basically hard all the technical people and they assembled a critical density of talent and then that became self fulfilling meaning the derivative people that were hired were probably comparable and you know you get a critical density talent all sudden things that are unsolvable become solvable I don't think you I mean there was definitely lessons I learned today specifically abstracted from those days and those people but fundamentally came down to their hiring skills last question I have about kind of history PayPal obviously is now not only very

known that story but everyone went on to do such great things that I think a lot of not everyone there's there's 254 people there you know probably about 20 names 20 people went on to do great things but I think a lot of young founders look at that they're like wow that was just like amazing business on a scale of like you guys had your shit together too was a complete shit show internally where were you on that scale it was a complete shit like well one easy example that is we had three CEOs in four months so usually you don't have three CEOs in four months unless things are going pretty

catastrophically wrong. The other empirical data point is in August 2000 we had a burn rate of $10 million a month and $30 million in the bank in the middle of the complete internet bubble

collapse. So that's a real problem. But it was always kind of a mess. It was kind of a fun chaotic mess. It was intentionally chaotic that once things started working, Peter came back his interim CEO after we fired Elon Musk, September 25th, 2000. And within a couple months, it was clear that the, you know, first derivative and second derivative were good or better. And then, you know, things did work, but it was always, always a mess. There'd be like all these random

things that you thought everything was okay. And then boom, you know, get slapped in the face with some very pleasant surprise. So in November, I was mindlessly scrolling on Twitter and I saw somebody chirp at you and say, are you calling the top? And you responded. It was October 18th, by the way. And you said yes. And I said to myself, they better hope to God he's wrong because he'll never let them forget. So by the way, it wasn't a random person. This is, it was Ari Levy of CNBC. So he's a pretty well-known journalist. And I think it was the day of the top. It was exactly the day. It was off by a couple hours. So they have not forgotten because they keep bringing it up. Describe why you thought it was that. And a lot

of it, I think, came from the 2000 kind of bubble bursting and kind of what the historical overlay was. So, yeah, I mean, a lot of people had this view, including a lot of my colleagues at Founders Fund that I've been, let's say, cracking a whip on recently, that things just go up and to the right. And it's only a question of time. Like every company will be worth more money or more value over time, whether it takes one year, two years, three years, or five years, so that you could pay any price for an investment, let's say, because eventually you'll grow into that. And that was logic. Over the last 18 months, Peter and I particularly internally were like, this market is going to collapse. Here's why, blah, blah, blah. So internally, we'd been debating

this pretty consistently with incredible clarity. Both Peter and I argued this at an offsite last summer and then strongly argued it about a week before. So one of the reasons why I went already asked. We had conducted an off-site in San Francisco about a week or two before, and I'd made the strong case internally that we should stop investing, period. There's nothing that's priced appropriately. So my brain had been chewing on this. It wasn't kind of a random response. That said, the lesson of 2000 was things that go this way also go this way. And the specific reason things collapsed in 2000 was the Federal Reserve raised interest rates six times from mid-1999 to early 2000. And what that did was it caused technology stocks to

collapse. Collapse by 90%. So I was like, well guess what? If the Fed raises interest rates six times, technology stocks are gonna collapse by 90%. This is like a law of physics. We had actually used this slide, a version of this slide, which I've actually tweeted recently, in our LP presentation of Founders Fund the last two years. So we've been internally talking to our LP saying eventually interest rates have to go up. When interest rates go up, technology stocks will go down. We can talk about why that is, but it is actually inevitable. And so the reason why that specific timing came to be is, for a long time, many people, myself included, have been talking about

publicly, Jack Dorsey, et cetera, that we've been going through inflation in the United States. I started tweeting about inflation in January 2022. Oh, sorry, maybe actually 21, but yeah, 21, sorry, getting the years confused. But everybody was... The government, the current administration and their supporters were in denial about that we're in inflation and that we're suffering inflation and there's all these excuses. It's like transitory, blah, blah, blah. You should see the reaction to my tweet about we're in real inflation and everybody's like,

it's transitory. I'm like, no, it's not transitory. That's the stupidest thing ever. But basically, all the excuses were starting to decay over the last year. And by October, even the transitory people ran out of logic to argue that it was transitory. So I was like, basically, what's going to happen is eventually when the excuses go away, the Fed and everybody else is going to realize we have actual inflation. When they have actual inflation, the technology stocks will start going down.

And so that's basically what happened. So there was one press conference, I think the White House press secretary basically gave up on the transitory line. I was like, okay, all hell is going to break loose. And that was right around then. And that's why I was like, okay, well, you don't have to discount the probability that people figure this out anymore. So I don't want to spend too much time on macro, but they say inflation is 8.6% now. The Fed, when it was 7% back in December, was still conducting quantitative easing. They hadn't raised interest rates. Just what's your general take in terms of

maybe incompetence, ignorance? How do we get here? And then how much confidence do you put in their ability to navigate a, I think they call it a soft landing now. What do you think that I'm looking for? Soft landing, euphemistic for recession, like moderate recession. Moderate unemployment, moderate recession. No, there's an old paper from Milton Friedman in 1972

that you all should read. Basically, Milton Friedman argued among many things, but this probably is number one Nobel Prize winning contribution, is that a federal central decision maker, whether the Federal Reserve or some other institution, will always get this wrong. They will always raise rates when they should be lowering them

and lower rates when they should be raising them. Basically, the lag is too great, so that leads to consistent oversteering because you're basically amplifying the problem by the time you act, but then it makes the problem worse. So the best thing to do is to do nothing in his view, and it's a very well-argued paper. So this is a classic illustration of that. But right now, I don't know.

All I can do is go shopping. So this is what I've told some of the people here before. just go to the grocery store and if the price of your groceries is going up every week we have inflation if they start settling and being stable then you know we're fine and then when they start going down again we'll have deflation which is not necessarily a good thing but in any event groceries are still going up as far as i can tell the craziest thing to me is uh i don't know why i did this but one day i went deep down the rabbit hole of how they calculate inflation oh yeah yeah that's there's 466 people who are employed by the bureau of labor statistics and they go into the

grocery store and they're giving a printout and they make sure they find the exact Campbell's soup tomato with no salt. And there's like an 11 page document to make sure they have the right one. And then they punch it into a device. So yeah, so when we were starting Square before we launched, we wanted to build a true inflation tracker. So because we had all these goods and services, obviously, sales in real time, price adjustments, basically in real time. And so when Jack started tweeting about inflation, hyperinflation, I was like, he's looking at real data. He's not making this stuff up. He's not a macro. He's not being a macro thinker. He's actually seeing the data. And so it was so obvious from the square data that we had real inflation

in early 2021. Well, it's not just the price and point of sale stuff. There's also payroll data. Like he kind of has a full 360 view of the economy to some degree. And I think that it does beg the question. So we have, I don't know, we can call it like an analog version of price collection versus even if you look at apartment.com or Zillow, Opendoor, like all of these real-time data points and sometimes 100 million data points. Well, they don't use real-time data. So here's the funny thing. There was just a Twitter thread about this this morning.

So you talk about leasing. The methodology really matters. So if you say what is the rate of inflation on rental prices, you can calculate it two different ways, and you'll immediately see the difference. One is across all leases in the United States. The other is leases signed in the last three months. Guess what?

One is up like 41% and one is up 6%. Guess which one actually tells you where you are? I can only imagine. When you start to think of the geopolitical landscape, there's a lot of blaming of inflation on the Putin price hike and other excuses that have been invented recently. But I don't know if you saw, I think Putin yesterday or today gave a speech and in it, he basically said, hey, this is exactly what's happening. He talked about the monetary expansion. He talked about the U.S.'s sanctions and how that drastically reduces people's trust in keeping their foreign currencies and reserves with the U.S. system. How much do you think about things outside of the tech industry or the business industry when it comes to geopolitics, inflation or other things that could be like macro or external shocks to the system? Well, I don't think this is a macro shock. This is pretty simple.

There's a let's see, there's only two variables that lead to inflation. You have a a fairly finite amount of goods produced and over time It's not finite but at one point in time a fixed point time today this week Maybe next month there's only a certain amount of variance to how many goods there are That's all the goods that can be bought by everybody in the world or everybody the country and when the government prints more money There's only one thing that can happen There's more money chasing the same number of goods guess what the price has to go up like this is so basic it's like basically so where you're going with this by the way i actually think all life kind

of works this way that there's a couple fundamental principles and once you understand them the world just makes common sense it's like you know newtonian physics and stuff like that what's another example um like another example of how this applies to wrestle well i oh let's see yeah this was another one a good one i stumped keith or boy everyone no it's just like i have so many of these like it's like simple it's basic simple rules like i did tweet once i was actually pretty popular, surprisingly popular tweet that like the easiest way to be successful is just forget all this stupid stuff in the world. If you didn't know anything, you'd probably be more successful. I was going to ask you at the end, but I'll ask you now, uh, are you going to put your kids

through traditional school or how do you think about educating them so that they don't have to unlearn things later? Good question. They're 11 months old. So starting to think about it, they're not ready for homeschool yet. Although we are interviewing educators to start like indoctrinating them. I've taught, I've actually taught a little baby boy, like my favorite expression which is no no no but really good at it i guess how do you think about the legacy education system and is it net positive net negative like do you see specific things that should be changed or fixed there that would have a drastic impact yeah i mean homeschooling has been the greatest success of policy in the last 40 years anywhere on the planet so 40 years ago

there's about 78 000 i think kids that went they were homeschooled last year there was 5 million that's where the world's going and the reason why is some of it's ideological like people that are opposed parents are opposed to what they're being their kids are being taught um zoom sort of unlocked a lot of that exposure because suddenly you could like watch what your kids are being taught a lot of parents are like barfing like oh my god i didn't realize they were doing that all day um second though is one size fits all education makes no sense if you want your kids to be successful you need to allow them to grow at their own pace and challenge them to grow at faster and faster paces and you know a school a traditional school room just is not organized that way so

keith has no clue that i'm going to ask him this um i want to do an example of how you critically think about topics and i figured i'd find something that was complex enough uh but also not uh leave you completely out to drive live magic tricks basically um gun control has started the easy stuff and then build from there cool well the reason why i think it's an interesting one to kind of talk through is there's an emotional element to it, right? There's obviously people who get hurt, die, and that emotional component can make people mad, can make people sad, all this stuff. There's also kind of a constitutional element to it and people's rights. Then there's also a federal level, a state level. There's like this individual responsibility

versus dependence on the government, you know, pretty simple problem here. So how do you think through not necessarily what is the answer but like how do you think through coming to a conclusion as to where you would stand on an issue like that yeah so it's it's a good it's a good example um so one thing i would do is i tend to like to contrast things either before or after or in multi-states like so like to take data from point a and compare it to point b and you kind of just did this with covid which is a popular thing to do the reason what one of the reasons why we moved to Miami was all the policies of San Francisco made no sense to us like everything San Francisco and to some extent California was doing were completely irrational we're just like we just

woke up and said we're not wasting our lives this way and we're moving you know etc so the good news was Miami and Florida were an open laboratory where you could compare different policies around masks and vaccination and indoor outdoor weather all this stuff and so basically just take that experiment there's a you know the framers of the constitution sort of framers of the country basically how this like clever phrase turn a phrase called laboratories of democracy and that the whole point of having 50 states was that you got 50 different policies and see what worked and what didn't work and without that actually you have one unified policy that you're running one experiment at a

time which isn't a great way to learn so I always start that way and there's great places good books to read like I also like books about why I actually built maybe the first library in Miami because it custom-built library I was like none of the homes here seem to have built-in libraries I need a built-in library it took me six months but I have one but so I go back to like books interesting books what's it what's one just a job on gun control John Lott who's a I think still a professor at the University of Chicago wrote a series of books about gun control you know there's critics and debate it debates about the quality you know the research but it's it's it's a pretty good start

and then you can read all the critics of different studies and different chapters if you want to but it'll give you a good introduction and then the other thing to do is actually there there's a lot of data that you know sometimes the world is getting a lot better than people realize there's a couple there's two really good books about this but about how the world's better than people realize and one thing about gun violence particularly is when i was growing up the gun violence was like probably an order magnitude worse than it is today in the united states like your chance of being murdered with a gun was like about 10x depends where you live in the but like new york city for example where i was growing up it was at least like basically 10x

more likely that you'd be murdered with a gun than today so to some extent you also have this like comparison set of like what problems you're trying to solve what risks are real what risks are very real then we have this a little bit with covid too like if you really cared about the risks of covid are you changing everything else in your life like your chance at certain ages of dying by drowning was significantly greater than your chance of dying by covid your chance of dying in an auto accident at certain ages was significantly greater than chance of dying by covid but people didn't stop driving the joke i think is always um there are states that want to leave the united States or if you go to those states, they may talk about it. California at one point, somebody

proposed to break it up. Texas, I saw an article recently that there's people who are always talking about it. Florida, it just happens to be kind of on the edge and people think it could go underwater or float away. How do you think about the state experiment today? Is that what we need to put more emphasis on? Or do you think that there's actually a healthy balance between kind of federal government and state experiment? I think the experimentation in state level is great in education you're also seeing that where there's some ideas here that are going to become popular there's you're seeing starting seeing competition now around policy like city city by city policy like why are we all moving to miami because the city here has different policies than

other places and you know as i saw a lot of people tweeting you know after the news this morning that citadel is moving here a lot of people are tweeting like oh well all these cities are going to have to really start competing i mean the framework around city competition is we're now all you know customers and cities have to compete for our business states have to compete for our business we're not you know basically locked down into some monopolistic you know tyranny and so that's going to change everything now at the city level where everybody tries to attract business attract you know entrepreneurs attract high-performing people on different industries when's the last time you changed your mind oh all the time um this is underrated i mean i used to be a silicon

valley elitist i was like the worst offender ever like up until like two ish years ago maybe three i remember internally even um peter would want to move founders fund outside the bay area and he moved outside the bay area 2015 i think um and he was always on this crusade that we needed to get founders fun outside the bay or not i used to think he was like crazy i'd be like you know like this thinking he's making these arguments that's what made you think he was crazy what that's what what made you think he was crazy? Yeah, well, I agreed with most of the other stuff. That's what we call a softball. I would only invest in companies in Silicon Valley. I had maybe sub 10% of my portfolio of investments was outside Silicon Valley until 2019. And then

obviously I changed pretty radically. And the epiphany, COVID obviously magnified the epiphany, but the epiphany was not from COVID. It was in February, 2020. I met this founder from Germany, from Berlin um showed up in my office and I didn't even want to take the meeting honestly like uh my colleague Matias who you know was constantly trying to force me to take this damn meeting I kept trying to cancel it he's like no you gotta take this meeting out to the meeting I'm like cancel and he's like take the meeting too anyway I show up finally I sit down three minutes into the presentation I was like oh my god we need to invest and so I was just like trying to hold on I'll come down so I was just like oh my god oh my god need to invest and so I was basically

selling the founder on like working with us the whole time. So I walk out of the meeting and Matias like taps me on the shoulder. At the time we had, we'd only worked together for like about a year. We didn't know each other as well. Um, so he taps me on the shoulder and he's like, what happened to you? It's like, what happened? Like, you know, like you barely wanted to take the meeting. And I was like, you just found the greatest founder in the history of Europe. And like, we're investing. Um, and so, but that epiphany of like the single, I sometimes call them the Michael Jordan. But if Michael Jordan is sitting in Berlin, then the epiphany was then why the hell do I need to be sitting in Silicon Valley? And why are all the entrepreneurs

sitting in Silicon Valley? Because this guy had never been to Silicon Valley before this fundraising trip. He had no connection to Silicon Valley. There was no side channel of information. The NewBank example is a little different because they went to Stanford Business School. One worked at Sequoia. So yes, they built a great and very impressive company in Brazil, but they had a lot of infusion of Silicon Valley thinking and people and networks. Christian at Trade Republic had zero. He'd learned it all sort of online and through osmosis. And I was like, great. Well, Michael Jordan's sitting in Berlin, then the days of Silicon Valley are over. I asked for questions online. Now I'm taking one of them because it was so good. When's the last time you were wrong?

Oh, yeah, I saw that one. Well, I'm wrong. I mean, the funny thing about being a VC is you're wrong all the time i'm you know like for example if i do my job really well i'll probably write 40 percent of the time that means 60 of the time i'm wrong yes but you have told me uh what is the percentage of founders that you've met just tell you just tell the i don't want to ruin it yeah so this is mostly true it's mostly true because every day like as an experiment you could screw it up. But I've basically maybe met one founder in person that I should have invested in that I didn't in like 20 years. Now that said, I've turned down a significant number of meetings that turned into good companies. So Keith basically said to me one time, he said,

out of all of the times that I've met a founder in person, I basically have never missed. And then And actually, I'm surprised that now maybe there's one. Well, there's one that's a complicated story. I actually wound up becoming an investor later, but I missed on the seed, so it cost me 100x. Small thing. But I fixed it. I realized that I made a mistake. That's fair.

We need to fix this. Actually, that's interesting. So what made you fix it, and why were you not emotionally tied to, like, I missed it, I'll just go find the next early-stage company? Well, without giving away the company, but maybe it's fine to give away the company. me. My mom actually convinced me I was wrong. This is very true. She's like, why did you pass on the company X? And I'm like, blah, blah, blah. And she's like, no, it's amazing. And I'm like, so yeah, that's actually the story I tell publicly when we announced the financing, because some people knew I had passed earlier.

That's true. It's true. It's really true. Unfortunately, she's coming to visit this weekend. I'm sure she's going to remind me. Has mom ever commented on other investments? Yeah, you want to make her on your – put her to your investment committee? Maybe. She's got a lot of free time right now. Sitting in Charlottesville, Virginia, she's got plenty of time.

But, no, she's usually more conservative. Well, that's why it was so astounding was, like, I remember when I joined LinkedIn, she's like, nobody will ever use that and put their resumes online. Yelp, like, nobody near us in New Jersey, you know, will ever use that, blah, blah, blah. So she's often wrong, but she did – this was Stripe, actually. counter trading mom. She did call Stripe correctly. Yeah. You're a counter trading mom until Stripe. Okay. Yeah. Now I listen to her much better. The last thing I want to talk about, I'm just going to call it a kind of woke-ism seems to have infiltrated everywhere. And it's not a thing,

right? It is a state of mind. It's a set of ideas, but everything from the way we work, the way that we operate on a daily basis, the things we're allowed to talk about, not allowed to talk about um just so many things in life how do you think through that problem right and that's that's actually easy okay just ignore it like i mean but if something's on the wrong side of history and just wrong the best thing you can do is like refute either ignore it or refute it or definitely don't let it affect you so like use an example you've invested in a company do you and you start to see that there is a change in the company and by your reaction i I know you've dealt with this.

How do you talk with the founder? Is it an immediate identify it and stomp this out? Is it a let's coach? How do you just deal with it? No, I mean, my role as a board member and ambassador is really to be a consigliere, which is like if the founder wants to talk about it, if the founder identifies that this is a frustrating or challenging issue, then we can talk about it at length.

And I can point them in different directions, people to talk about who've dealt with this before. Here's like the pros and cons of different approaches. But, like, it's not my job to kind of fix it, like, ever. Well, I do have one job, two jobs I have to fix. Like, if I don't like the founders' funds investing, I'm going to have to fix that. And I've actually been a little slacking on that. And then, obviously, at OpenStore, it's, like, ultimately my responsibility.

All right. We're going to take questions in one second. You, Peter, Max, we can go to the line. There's a bunch of them. if you had to sum up uh one thing when it comes to critical thinking or independent thought that you all share what is that thing is it something you guys read is it a way of thinking is it's you know something that you can tie it all back to and say this is something we did that a lot of other people don't no i think there's just because all those people are very different like

all the paypal people that you named and the ones you didn't name that are you know very successful they all have different asymmetric advantages in life and they figure out how to leverage them the common denominator is that they do think for themselves they have their own views on the world so two examples there's a kind of a funny witty paragraph in zero to one that peter talk peter leads the book with which actually originally was going to lead the book if he ever wrote a paypal book but enough time was going by he basically gave it up and put it in zero to one that four of the six co-founders of paypal built bombs in high school so i didn't build a bomb in high school I was way too normal for that, but maybe now I would, but back then I was way too normal.

But that shows a certain kind of thinking. Now, three of the four, before you get too nervous, actually grew up in communist countries, so building a bomb was probably a pretty good idea, but only one of them was an American. But in any event, that kind of hiring philosophy led to people who were kind of iconoclastic, and iconoclastic people do have the tendency to think for themselves, And then they figure out what areas are they strongest and what dimensions. So Max thinks about things differently than Peter does, than Reed does, than Elon does, than Jeremy Stauffelman or Chad or whoever. But they all have figured out how to be different.

You can see Chad on Twitter. You can see some of his iconoclastic thinking. Sometimes he likes to make fun of Miami. He's eventually moving here, whether he knows it or not. Chad South Beach Hurley. All right. What questions do you guys have? Just raise your hand and we'll call on folks.

Nobody has, oh, right here. Just yell it out. So I wanted to ask you, Keith, about two sort of movements in tech which you kind of seem to keep that maybe are sort of a framework in conversation to each other and see if you see the tension and resolve it.

One is sort of the rise of people who are really working on car tech, companies like Varda, Anduril. Very picture of that kind of wrap yourself in a flag and it's kind of a rise in China. That's kind of one side. The other side you have kind of Web3, Crypto, which is rising in a lot of places,

So the question, just in case anyone didn't hear, is basically, is there tension between hard tech, Varta, Anduril, etc., And then more of like the U.S. is screwed. Let's build a different, like a scape boat, basically, with crypto, Web3, Bitcoin, et cetera. So two answers. Personally, in a founder's fund, we don't back trends. We don't invest in trends. We invest in people.

So if you read the technology manifesto the founder's fund published probably in 2014, we basically have NO1 founders. So the right founder, we find the right founder for the right problem, and we'll give them money. So we funded Varda, Andoril, there's crypto companies we funded. We bought Bitcoin directly when that was appropriate. So fundamentally, we just want to find the right founder tackling the right problem, not try to sort of predict the future. But is there tension?

I mean, ultimately, there's people probably better suited to solve different types of problems too. I'm not sure I'd be the best biotech founder, but I could probably learn parts of it. Like, for example, there is a heavy biz dev component and distribution component that I can learn. some legal in like FDA so I could learn parts and contribute but I probably am not designing molecules very well um and please don't ingest these molecules if I design them um secondly um I I also think though the best thing about technology is you get to write the future so you can believe that America is in decline and say you know what I'm gonna wake up and do something about it like think Varda and Delian um is actually like America's in decline we need to

do something about it and or like America's vulnerable we're going to do something about it So, like, technology is kind of this magic wand that you get to shape the future. You pick it up. It's like learning a code is kind of this magic wand. You want to rearrange the world, and you kind of walk through the world, and you kind of wave your wand. Let's do two or three more. Who else got a question? My question is, why does anybody over 35 years old believe in Web 3?

Why does anyone over the age of 35 believe in Web 3? And at least don't use the word decentralization. Community of... I planted him. I don't know I guess Chris Dixon's over 35 so we should probably ask him he's way over 35 actually so I don't know I'm not one of the web 3 proponents I would invest in a web 3 company if I believe the founder was tackling a specific problem that he or she had insight into and I have you know funded I guess two

companies that arguably could be web 3 ish but they don't brand themselves well one definitely doesn't brand itself it's royal it's reinventing the music industry just happens to use some components but it's really reinventing the music industry for the future not reinventing crypto the other one is a more web 3o company but it was the specific founder had insights into a very unique problem So the question is about NFTs being built on top of Ethereum, being highly dependent on Ethereum, and a lot of the internet history would suggest that it might not be around

20 years. Well, I think the macro point behind NFT makes sense, which is people are going to have concentric circles of people professionally and socially that they care about in their lives that are more virtual or more digital than real world. i.e people are going to manage relationships in the real world differently than they manage relationships so like when i go out i you know care about what sneakers i wear what brand the shirt i'm wearing you know do i have an apple watch versus like a traditional watch people are going to encounter more and more people online and nfts of different types or way of

self-expression self-expression is incredibly important and is there are there going to be unique ways to express yourself online absolutely and so what what do you purchase online to express yourself that's the open question for entrepreneurs and that but it's not that's not going away that's a human emotion back to shakespeare yeah and i think the other piece of this is just uh the underlying technology almost doesn't matter right if i ask you guys what is the tech stack of google if you're not an engineer who worked at google most of you don't know right and so i think at some point it's just like can people buy what they want and if it works then it works well can you transition it too right i mean like most almost every successful company i've ever invested in

been involved in has recoded itself almost from scratch at scratch you know from scratch at some point if you have enough traction you'll reinvent like square started it believe it or not i hate to give this away but like on ruby on rails um another very famous site started php um like you really don't want to worry about that stuff too much Well, I don't think that's true. Like, if blockchain is dependent on the database, then by definition, it's meant to express. Why would it be in that place?

Well, you'll just have a different generation of, like... Well, then all the NFTs are probably worth it. Oh, that's definitely true. But, like, do people still collect the same baseball cards that they used to? To some extent. Mickey Mantle is still valuable, but, like, the values of different people change over time, too. All right.

We're going to take one more question, but quickly. what are your thoughts on Bitcoin specifically, not the other stuff? Have you changed your mind at all? So I had two concepts around Bitcoin and they're kind of directionally correct, but not perfectly correct. I don't know that anybody's been perfectly correct in Bitcoin now. For a while, there was people claiming to be perfectly correct with their Bitcoin predictions. There's actually, I'm not sure anybody who's really got it right. So I had two concepts. It's hard when things go up hundreds of percent and down 80%. Yeah, try calling both of those to the day.

But in any event, I have two concepts around Bitcoin. So, you know, in some ways, I was enthusiastic when it first started because the original T-shirts of PayPal, those of you reading the PayPal book will know this, you know, are T-shirts. I still have some at home. The world, you know, the world currency, whatever. So the vision of PayPal originally was to try to do this. And one of the reasons I was somewhat dubious about Bitcoin is I remember how damn hard many pieces of that were building the new world currency were. But the first thing that occurred to me in 2013, when I started to think about this professionally, because I didn't become a VC until 2013, was Bitcoin adoption should be inversely correlated with the rule of law. So in countries that have a predictable rule of law, there should be less adoption on a per capita basis or whatever, or per GDP or something, some metric, than in countries that have a predictable rule of law.

And you can even argue that kind of happened in the United States, like according to some people, after Trump got elected, we had less rule of law here. And you do see Bitcoin actually appreciating after the election of Trump. But the number two point that's probably more live and relevant is I believe that Bitcoin was a speculative asset in that eventually, if you could stitch, people like to speculate. People speculate on stocks, obviously. People will speculate on NFL games. Speculation is a really big business in the United States. If you could get everybody to adopt a platform on a speculative basis, could someone build an application layer on top of the network or the nodes that were built on speculation and power some fundamental utilitarian thing that was not speculation? Absolutely.

So I started saying this as early as 2015 publicly. Then basically no one's really built that application layer on top. But there's a lot of nodes that were built in this speculative era. Now, with prices going down and other, let's say, inequities going down and people have less dollars available for speculation, you may have to build on top of the nodes that are already sort of plugged in, but that's like 80 million folks. I mean, this is, if you read, what is it, Power Law, I think they talk about a lot of speculation, a lot of capital goes in, you basically build the infrastructure and then eventually do it. Last question, no pressure. I feel like scientists are extremely ambitious individuals and they feel like they have, they go beyond borders and nations, like they could, there are physicists in China that would like to work with a physicist in Germany. The question is, science started to become very political, but a huge piece of science

is collaboration, especially sometimes across borders, but if it gets politicized, how does a scientist in America and a scientist in China work together if there's this political divide? I think that was a choice that scientists in quotes made. Most scientists in history that you remember the names of were incredibly controversial in their own times. And so I think there's a certain character to the scientists who come up with the most important ideas

and then eventually bring the world with them. It's not the other way around. How do I dumb down my ideas to be approachable to everybody? That's it. All right, everyone. I hope that you guys enjoyed this. Thank you so much for your time. Real quick. Constantine, thank you very much. I think we have this place for like another hour, hour and a half. So enjoy. There's drinks upstairs. There's drinks downstairs. If you need a lawyer, Constantine's right there. Go harass the shit out of them at Reed Smith.

Yeah. One lawyer for the whole room. All right. Thank you, guys. thanks so much for listening to today's episode i really hope you guys enjoyed this one make sure you're subscribed on apple spotify or your favorite podcast player and if you're looking to try to transition to get a new job in the bitcoin or crypto industry we've got you covered head over to pompscryptocourse.com we've developed a curriculum with the top teams across the industry it's a three-week intensive training program with over 50 events packed into that three week time period. Go to pompscryptocourse.com to learn more and I'll meet you guys for the next episode.