The Prof G Pod with Scott Galloway - Emerging Technologies and China’s Crackdown on Tech — with Josh Wolfe

Episode Date: August 5, 2021

Josh Wolfe, the co-founder of Lux Capital, joins Scott to discuss his thoughts on the tech regulations coming out of China, and how investors should be thinking about them. He also discusses the sectors he’s keeping tabs on, including space and the metaverse, and the ones that he thinks are over and underhyped. Follow Josh on Twitter, @wolfejosh. Scott opens by having a conversation with Pascal Gauthier, the CEO of Ledger. Ledger is building a hardware wallet for crypto assets — and full disclosure — Scott’s an investor. Pascal explains the technology and shares his thoughts on the crypto space. Follow Pascal on Twitter, @_pgauthier. Learn more about your ad choices. Visit podcastchoices.com/adchoices

Join Capital Group CEO Mike Gitlin on the Capital Ideas Podcast. In unscripted conversations with investment professionals, you'll hear real stories about successes and lessons learned, informed by decades of experience. It's your look inside one of the world's most experienced active investment managers. Invest 30 minutes in an episode today. Subscribe wherever you get your podcasts. Published by Capital Client Group, Inc. Support for PropG comes from NerdWallet.

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cards, savings accounts, mortgage rates, and more. NerdWallet, finance smarter. NerdWallet Compare Incorporated. NMLS 1617539. Episode 89. The atomic number of actinium. The Berlin Wall fell in 1989. True story. I am married to a German and every third Tuesday I dress up as Poland and she invades me. Not sure I was going with that. Go, go, go! Welcome to the 89th episode of the Prop G Pod. In today's episode, we speak with Josh Wolfe, the co-founder of Lux Capital, a firm that invests in emerging science and technology ventures. I had dinner with Josh and his wife

and Andrew Osorkin and his wife. The only reason I mentioned that we had dinner with Andrew Osorkin and his wife Pilar, quite frankly, it's more impressive than Andrew, is because him being a celebrity and me having proximity to celebrity makes me feel powerful and important.

And my insecurity motivates me to tell people that. Anyway, the thing about Josh, I'm intimidated by Josh. I'm not, I don't think I'm intimidated by very many people. I resent a lot of people and I hate a lot of people. Maybe that's because I'm intimidated by him. I don't know. I'll figure it out. I'll figure it out. But Josh generally intimidates me because as you'll see from this interview, I feel as if when I'm talking to Josh, I'm like an Intel 286 chip and he's the Pentium 11,000. The guy just thinks at a faster cycle rate than almost anyone I've ever met. Anyways, we talked to him about investing in emerging science and technology ventures. Josh shares his thoughts on tech regulations coming out of China and how investors should be thinking about the macro is there. He also discusses the sectors he's keeping tabs on,

including space and the metaverse, and the ones he thinks are over and under hyped. Okay. Okay. Before we bust into our conversation with Josh, we're bringing in Pascal Gauthier, the CEO of Ledger, a hardware wallet for crypto assets. And full disclosure, I'm an investor, which is why I wanted to hear from Pascal. Pascal explains the technology and shares his thoughts on the future of crypto. So with that, let's get started. Pascal, where does this podcast find you? This podcast finds me in Geneva, Scott. Thank you for having me.

Geneva. Geneva. So give us the headline news, the kind of history, background, competitive positioning of Ledger. Sure. I'll make it snappy. So, you know, if you look at your credit cards, you have, you know, a chip on your credit card. The chip and pin technology is actually a French invention. And it's, you know, hardware security technology that's been invented to protect

secrets. What's on your credit card is actually not protecting your secrets, but it's protecting your bank secrets. But we use the same technology basically to now protect your crypto secrets. So what you have inside the ledger is a chip very similar to what you have on your credit card. And it's been designed to protect your crypto secret because in fact, when you own crypto, what you own is a cryptographic secret that only you possess and that you cannot share because if you share a secret, then by definition, it's not a secret anymore.

And so the protection of that secret is paramount to the usage of the crypto, to the ownership and to the usage of the crypto. So at the heart, that's what Ledger technology is. It's a chip and pin technology adapted to this new crypto world and the protection of your secrets. And a Bitkom Conan is what you refer to as cold storage, meaning that you can conduct transactions linked to the Internet, but then you pull it out and effectively it becomes totally secure. There's no access to it. Is that accurate? Yeah, correct. I mean, call storage comes from

the fact that very early on, engineers working on those problems and or the community of crypto holders understood that it was a very bad idea to leave those private keys on a phone or on a computer because phones and computers are not designed for security. And the latest Pegasus exploits is a good indication that you should never leave on your computer and on your phone anything that has value because people can access it very easily. The cold storage was basically this idea of taking your private keys sort of offline and not leave them on a computer or on a device that is connected to the internet

because as soon as it was connected to the internet, there was this idea that a hacker could sort of penetrate phone or say phone or say computer and then take away your private key from you. And so this is why you needed to store it on an offline device and that's what the Ledger Nano is. But equally, the problem then became, how do I transact? Because, OK, it's offline, but how do I connect it back to the web without losing the private key or without the private key being hacked at the moment of transaction? And so our devices do the two things. So when you're not using the private key, it's safely secured into your device. But also equally, at the moment of transaction, the hardware will always protect the private key, so it's never fully exposed to the internet, and so therefore, it's not hackable.

And do you see your competition as other hardware or as Coinbase platforms or as legacy financial institutions, who do you see as your biggest competitive threat? It's a big question. There are the competitors of today and the competitors of tomorrow. I think the market is evolving, so we believe our competitors of tomorrow would be the Coinbase, the Square, Apple, Samsung. Interestingly, the space is evolving into this combination of software and hardware. I think, you know, Square probably understands it best right now than anyone else because they've just announced that they were going to launch a competitive product.

And they understand and they come from, you know, sort of more of the financial background and transactional background. And they understand that, you know, these two technologies at some point will merge, you know, you have the transactional software on one side and the secure hardware on the other side merging to sort of deploy a worldwide value proposition. If you read what Coinbase have said recently, they said, okay, you know, the custodian is all good and well, and, you know, they created a great business. But they also agree that going non-custodial for them is important if they want to become a global player. Because non-custodial is less regulated. And so, therefore, it's technology that you can deploy at scale everywhere in the world versus regulated custodians that are much harder to deploy. And, you know, you need to do it region by region.

So if you look at the Square strategy and or the Coinbase strategy, I mean, we're all pointing into the same direction. Talk about hardware wallets and NFTs. Do you see that as a big growth area? Yeah, I think, you know, we think about NFTs and we think about, you know, we think about Web3. So, you know, the Web3 is the web to exchange value and NFT is part of Web3. But interestingly enough, like, you know, there are many things that will be Web3 is the web to exchange value, and NFT is part of Web3. But interestingly enough, there are many things that will be Web3. And typically, email is quite broken right now. If you think about Web2, in terms of security, there are many things that actually don't work. And again, the latest Pegasus exploit is the zero-day, zero-click exploit,

where basically the only thing I have to know is your phone number, then I can access your phone without even you clicking on anything. That tells you that all these Web2 products and hardware hasn't been designed for security. And so I think something is going on where you need to have secure email. And email in the blockchain

is an interesting value proposition, for example. Not for every email that you're going to send, don't get me wrong. If I send you an email to say, hey, Scott, are you in town? Let's get a beer. We don't care to put this on the blockchain. Now, if I send you a $10 million contract value

and it's an offer and I want to make it clear to you that it's an offer, then I probably want to put that email in the blockchain. And so we're certain that it's me who sent you the email and that my offer is final and solid. That's an interesting use case. And so if you think about Web3, whether it's the tokens, whether it's the Bitcoin cryptocurrencies, whether it's CBDCs, whether it's NFTs or any other form of token or any other form of blockchain usage, all of this will need a Web3 enabled device.

And so I think NFT is a big opportunity for Ledger. But similarly, I think that many other things that are coming into space are very interesting. And, you know, Web2 is about to be revolutionized. Do you take a view or what is your view on various coins? Do you think we'll see a consolidation and there'll be two or three big winners soaking up 98% of the market capitalization? Or do you think there'll be as many coins as there are startups? You know, coins, it's interesting. The way that I look at this is you know all of these are

public blockchains the sort of rails to exchange value and in the end as long as you can swap that value it doesn't really matter how many coins they are so in reality there could be an infinity of coins uh you know you can you can think that any airline could have uh its own coin like you know you you win like air miles. And so you could have like Air France, you know, air miles, and that's actually a coin. And then you could, you know, swap it very easily for a Starbucks coin and so on and so forth. So, you know, my view is coin is one thing.

Protocol is a different thing. So my view is that there will be, you know, 10, 20, I mean, there will be certain numbers of like winning protocols that will be, you know, the protocols on top of which coins would be built. I mean, if you take Ethereum, for example, Ethereum is one protocol, there are hundreds of coins being built on top of Ethereum through ERC20 and or various other subset of the Ethereum protocol. And so if you think in terms of protocol, I don't think that there will be thousands. If you think in terms of coins

built on top of those protocols, I think there will be a thousand or more. Pascal Gauthier is the CEO of Ledger. Previously, Pascal worked as a venture partner at Mosaic Ventures, a London-based venture capital firm focusing on Series A stage companies. Pascal is also non-executive chairman of Kaiko,

a financial data website on Bitcoin. He joins us from his home in Geneva. Pascal, thanks for your time and stay safe. Thank you, Scott. We'll be right back for our conversation on emerging technologies and China's crackdown on tech with Josh Wolf. The Capital Ideas Podcast now features a series Thank you. their career trajectories? And how do they find their next great idea? Invest 30 minutes in an episode today. Subscribe wherever you get your podcasts. Published by Capital Client Group, Inc.

Support for this show comes from Constant Contact. You know what's not easy? Marketing. And when you're starting your small business, while you're so focused on the day-to-day, the personnel, and the finances, marketing is the last thing on your mind. But if customers don't know about you, the rest of it doesn't really matter. Luckily, there's Constant Contact. Constant Contact's award-winning marketing platform can help your businesses stand out, stay top of mind, and see big results. Sell more, raise more, and build more genuine relationships with your audience through a suite of digital marketing tools made to fast-track your growth. With Constant Contact, you can get email marketing that helps you create and send the perfect email to every customer,

and create, promote, and manage your events with ease, all in one place. Get all the automation, integration, and reporting tools that get your marketing running seamlessly, all backed by Constant Contact's expert live customer support. Ready, set, grow. Go to constantcontact.ca and start your free trial today. Go to constantcontact.ca for your free trial. Constantcontact.ca. Welcome back. Here's our conversation with Josh Wolfe, the co-founder of Lux Capital, a firm that invests in emerging science and technology ventures. Josh, where does this podcast find you? At the moment, I am in Sagaponik, just on the outskirts of New York City. Where are

you? I am in Soho. So, yes, we're both New Yorkers. So, curiously, I think the biggest story or the one that's not getting as much attention as it deserves is gaming, tutoring, ride-hailing day, whatever you want to call it. It appears that China has decided that social well-being cannot be subservient to economic well-being, and they have cracked down hard. Curious to get your thoughts here. Yeah, the first thing is, I think nominally the story, the narrative, is that this is, you know, protecting the kids, and this is about video games. It's not about video games. It's about the Vi games, the VIEs. And, you know, the thing that people have to remember is a few things. One, if you are an investor in Chinese companies, Tensa and Didi and Ali, you don't actually own anything. This isn't like the US. You don't have a claim on assets of these Chinese companies. You don't get to make any demands on management. You don't have an equity stake. You have no governance influence, rule of law contracts, all the enforcement that we would

depend on the US government or SEC. You've got Chinese courts and you know how they're going to rule. And you've got this bigger risk, which is China can change their mind at any time, which they've done. So you basically had a casino bet that's loosely tied to underlying equity. So that's the first thing that people have to go. Now, if you want to go full Mel Gibson conspiracy theory, you know, this may be much more about shielding the books and the banks, the state-owned banks and the dealings between these various companies and the CCP. And you've seen this heavy hand, right? This is not an invisible hand. This is an overt visible hand of taking U.S. and foreign investors, capitalizing new tech, and then new tech in China, helping to bail out old Chinese state-owned enterprise. And that's been going on for a decade. We've lost the touch with the narrative of this,

but I think it's all becoming evident right now. So I don't think that there's any moral overpinning here that this is really about the tutoring industry or this is about video games. I think it's a reassertion of control broadly by the government. And I think it's probably a redirection away from what we've considered tech, which I really don't think is tech, which is basically getting people to buy stuff online and delivery and e-commerce and social. And you're going to see a shift to hard tech, semiconductors and electronics and the things that are basically important for geopolitical supremacy. Do you think, so is this a buying opportunity? Is this chill going to continue and China's withdrawing from the global innovation economy around some of the stuff we were talking about? Or is this a buying opportunity?

I mean, if you look at Alibaba, it's basically kind of has Amazon-like growth and dominance and trades at a P multiple of 20 versus 60. Is this a buying opportunity or is this a signal, do things get worse from here? Well, again, anything you're buying, you're buying the geopolitical risk of China, which is now being increasingly assertive and very dominant. So, you know, this is not looking at Amazon versus Facebook versus Uber in the US. I mean, this is just a whole different game. And I think it's one that's being skillfully played. I mean, we're playing checkers, even as retail investors, you know, participating in markets here versus, you know, these guys playing generational

go. SoftBank, you know, which you've covered extensively, is actually a really interesting piece here because, you know, very famously, they invested famously, they invested $20 million in Alibaba, came in domiciled. That $20 million 20 years ago with a 25% stake goes to $134 billion on paper. Now, what are they doing? Okay, so if you want to measure, should we be investing in stuff? They're not selling, right? They took a $10 billion margin loan a few years ago. Then they took an $8 billion Alibaba back margin loan another two, three years ago. And now you've got pullback in the shares. Soft banks can come under renewed pressure just when we thought that they sort of came out of this first hype cycle curve and they're recovering. And so what started a few years ago with a year and a half ago,

two years ago with Jack Ma, I think that this is much bigger. I think it's much more dangerous. I think people are massively underappreciating the geopolitical game that is happening here, and I don't think it's about the stocks. I think it's about a resurgent CCP that is going to be a dangerous competitor peer to contend with. So it has echoes of what MBS did where he invited all the sheiks or wealthy families to the Ritz-Carlton and then said, this is your prison unless you give us X amount of money and kind of acknowledge that we're in charge. This feels somewhat similar. I guess the question is, it strikes me that it would be unusual for China. Okay, so they've clearly like yanked hard on the choke chain here. They've said, okay, we look at the U.S., we're not going to have the type of overrun of tech here.

We're just not going to endure it. But do they really want to shut down access to global financial markets given that they have to figure out a way to continue economic growth? I mean, that's the biggest threat to the ruling party. And I'm putting forward an investment narrative, and that is there's macro risk here, but the chill, there will be a thaw. I don't see the CCP deciding to permanently kneecap these guys. I think they've wrapped them really hard on the knuckles, maybe even taken off a finger. But what is your view from here? I'm a buyer. I think they've wrapped them really hard on the knuckles, maybe even taken off a finger. But what is your view from here? I'm a buyer. I think that these companies have taken such a hit, and it's hard to time the bottom.

But I just can't imagine that the CCP would want to kneecap its innovators. Well, a trillion dollars of equity value, you know, has paralleled that kneecapping. And, I mean, that's, you know, you're not talking about 5 billion or 10 billion, a trillion dollars across these things. And so I really think that they basically, you know, and this was like decrees overnight, right? I think they basically said, this is the way that our capitalism is going to work. This is the way that our capital markets are going to work. And so as long as you understand the game you're playing, and you understand that as a casino bet, absolutely, these companies will continue to grow. I mean, these companies, you know, we talk about, and I'm sure we'll touch on defense, you know, military industrial complex was like this taboo term in the

U.S., you know, since Eisenhower. Military civil fusion is an overt, you know, CCP's mandated policy. All these tech companies are entirely complicit with everything that the government wants to do. And if you're, you know, totally comfortable with that, you'll continue to see growth. But it's really going to be basically a bet on the CCP. Now, would I bet against the CCP? Absolutely not. Do I think that China is going to be ascendant world power and surpass us in many ways? Absolutely.

So if you want a unlevered bet on that with a high degree of risk about CCP changing its mind at any time, you know, then sure, be along, but understand the risk you're taking. Yeah, there's real risk. So let's talk about Lux Capital and what trends you're following and investing behind. Well, China plays into one of these, but you've got this backdrop of venture capital, right? So you've got this once cottage industry that was a handful of boutique firms over time, and then you'd have generational succession, or you have some new firm and some new sector come along. And then you've had this complete blurring of capital markets, right, from the big global macro funds and the tigers and the co-tos to the soft banks at all. And it's just this total blur and free for all.

Late stage firms going early stage, early stage firms going later. Provincial firms going global, global firms going into local markets, seed stage, everybody. I mean, everybody is an investor, right? And arguably for innovation, that's a good virtuous thing. More things get funded than should. Most of the stuff is going to fail. Eventually, we'll see a downturn and a correction. I've been saying that incorrectly every year for the past two years. And I'll keep saying it until I'm blue in the face for another few years. we continue to bet on the long-term trajectory

of just cutting-edge science and technology. So give us some examples. Like cutting-edge science and technologies. Be more specific. What areas are you excited about? Things that are coming

straight out of science fiction. So you think about some of the companies that we've sold or exited recently. We were early investors in a company called Control Labs. This is a brilliant scientist, engineer. He happened to be the guy who co-invented the internet explorer

from Microsoft, was Bill Gates' right-hand guy for a decade. At the age of 33, decides to go and get his undergrad at Columbia and then spends the next eight years getting a PhD in neuroscience. I find my way to this guy and become obsessed with what he's building, which is also along a big thematic approach that we have, which is trying to identify directional arrows of progress. Okay. You find a directional arrow of progress. You don't know what the entrepreneur is. You don't know what the technology is or who the company is, but you know that this is the way it's trending. And in this particular case, we step back and said, okay, there's this thing that we call the half-life of technology intimacy. 50 years ago, you had a big ENIAC computer. You go up to it,

you pull some plugs and levers and you're physically standing up to this monolith. 25 years, first half-life, now you've got a desktop, you're tickling the keys, you touch the back of the computer, you know, the beige box. Next half-life, 12 and a half years or 12 and a quarter years, now you've got a laptop, it's physically touching your thighs. I mean, you can see the trend and the pattern here, the stuff's getting closer to you. Then six years ago, you got your iPhones, the dominant form, and then the iWatch and iPods with compute and AI and voice recognition inside. The undeniable directional arrow of progress and all those things is computing is getting closer and closer and more intimate with you. So we hypothesized,

hey, voice is already here. You've got Siri, Alexa, and Google now. Gesture is going to be the next thing, mostly siloed to Xbox and PS4 and my kids playing Dance Dance Revolution. But if I could just gesture at computers, sort of like a sorcerer's apprentice, walk into a room and just make a little gesture to turn on the lights or change the Spotify song or swipe, you know, from a clap on a clap off. You got it exactly right. I fall in, I can't get up straight out of TV. But this is out of sci fi. And sure enough, this guy's developing this at Columbia starts his company control. We fund it, Google funds it, Amazon funds it. Facebook buys it. Now, we try to stave them off. I tried moral suasion and financial suasion. In the end, Zuck, as part

of his playbook for Ready Player One and the future of the metaverse that he's now co-opting, this is a key piece of it. And it's important, actually, because Facebook has always had to rely on Apple or Google to access your eyes, right? I mean, effectively, they're the gatekeepers to the screens. And so they're really going to push into hardware so that they can figure out ways to make consumers, and I don't believe it's going to be VR, but to make consumers beholden to them to be able to access the Internet and the metaverse or whatever it might be. So that's one thing, brain-machine interfaces. Another thing, and this is interesting as it relates to China, is we've got two competitions.

You've got a hard power and a soft power competition. Hard power, I think you're going to see a big reversion of pure interest in defense-related companies. I mean, this was the roots of Silicon Valley. You know, we always think like, you know, Silicon Valley is a bunch of vineyards and orchards and all these brilliant nerds that are, you know, halting and catching fire in garages.

Livermore Labs. Yeah, it's just not true, right? But Silicon Valley Tech as we know it was really rooted in 40 years of electronic warfare. Post-World War II in the 40s and the 50s, you've got U.S. government funding, you know, universities to do research on weapons technology. And it was Fred Terman was the Dean of Stanford. He's encouraging grad students and professors, go spin your research out into startups and sell those products to defense contractors. The first IPO out of Silicon Valley, 1956, it was a company called, uh, Varian, which sold microtubes, uh, microwave tubes for, uh, uh, military applications. Uh, year after that,

you've got Fairchild Semi and that, you know, is born out of Shockley and Bell Labs. And it's really considered like a pioneer of today's Silicon Valley. And its first contracts were all through the military. And they built the ships that sent US astronauts to the moon and built the missiles that armed the US in the Cold War. And like, you know, you were talking Livermore, Lockheed, which was almost non-existent, you go back, they set up shop in Sunnyvale, they get a contract to build all the submarine missiles for the US, and then they go from zero employees to 25,000, zero to 25,000 in four years. Okay, so this is the roots of Silicon Valley. It was rooted in defense. And we've completely forgotten that when we think about Silicon Valley today as Facebook and Google

and Instagram and Snapchat and Clubhouse and Amazon. I mean, it happened to coincide with this zeitgeist of anti-defense, you know, for the past 20 years. So I think we're going to see a reversion to that. We've got a company, Anderle, that is exclusively and unapologetically focused. Hey, we're going to make the best hardware and the best software to be able to provide and sell to the men and women on the front lines of wars, as well as our allies around the world. And I think that's a really important technology trend. So that's the hard power trend. And that touches everything from direct military defense,. It already is. You've got launch capabilities. You've got materiel and satellites that are going up for communications, for imagery.

Now we've got a company called Varda that's actually manufacturing things up in space in low gravity. So space has a new race that's on. And it's at a time with this geopolitical pressure where, you know, Russia used to be an ally in space, you know, notwithstanding any conspiracy that you had about any software failures of their recent attachment to the ISS and spinning it out of control for two minutes or so. They've pulled out of the ISS. When we said, hey, we're going to go do a lunar base, do you want to do it with us?

They said, no, thanks. We're doing it with China. So there's this tri-party conflict that's happening now between US, Russia, and China in space. And it's going to be a huge boon for startups that are selling technology to do pretty much everything that you can imagine in space. The second piece of that, that's all the hard power stuff, is the soft power piece. And soft power historically came from the Olympics. I'd love your view on it, but my view is no longer relevant. Movies and our greatest exports and music and culture, and then competitions. And the competitions were the Olympics. It was chess. It was these great

things, but it was also science. It was prestige, people winning Nobel prizes. So we've got a whole theme at Lux that we call the tech of science, which are what are the instruments, the microscopes, the software that's letting scientists become more productive in this race? Because I think that that is going to be the huge soft power push. So we're looking at these big macro themes and then trying to find the crazy cutting edge stuff that's at the edge of those themes and finding the entrepreneurs to fund them. So let's talk a little bit about space, because I look at, I think it's difficult to sort of crudely just call it all space and you need to bucket it into, and there might be different ways to segment it. I think of space hauling, basically putting satellites and other stuff into space, space exploration, so

Mars, space tourism, Virgin Galactic, and then scientific exploration where we start growing different organisms in space. It strikes me that each of those has different upside or different risks and different potential returns for investors. And I won't bias this conversation. I think some offer extraordinary returns and I think some are ridiculous and shouldn't be public companies. Do you have any thoughts around which segments of space you think offer the biggest opportunity or are you just bullish on the whole thing and say, this is something you just want to be in? No, I think you're right, first of all. And if you take it from the first piece, which is, let's say, launch, okay? And I've sort of colloquially joked that if you want to figure out the playbook for space, go back 150 years and look at the

railroads and just turn them vertical. You had people that were laying down hard capital equipment, CapEx, huge indebtedness, laying down rail, and then you've figured out competition over locomotives and engines. Then you're exploring and then you're creating way stations along the way and sources of commerce and then ultimately communication lines that parallel those and on and on. Okay. The launch capability is going to be the most expensive. They're raising and burning billions and billions of dollars. They're heavily dependent on government contracts and they'll adjust to the public, save for, say, Bezos, who so far has done it out of his own pocket. I am very critical of Elon as it relates to Tesla and his relationship with the truth in that company. I'm far less critical on SpaceX,

partly because it's run by Gwynne Shotwell. But it is truly doing things that we haven't done as a country. They are. And what they're doing, most importantly, is, again, directional hour of progress. They are lowering the cost per kilogram, the dollar cost per kilogram to launch things into space. That opens up, it democratizes the ability for one of our companies, Planet. Planet was a three guys that liked to launch rockets in the desert. And they said, hey, what if we go and launch, you know, we always hear the story about how the Apollo mission had more, we've got more computational capability inside of our smartphones than they did in this Apollo missions. What if we

actually launched a bunch of smartphones into space? And about 10 years ago, they did that. They launched three of them. They call them Alexander, Graham, and Bell. That became the early basis for this company. Now they've launched hundreds and hundreds of satellites that are actually doing important work capturing, whether it's the Uyghur concentration camps in China, whether it's productive silos that are being developed for nuclear missiles, whether it's measuring commerce and activity inside of parking lots and shipping lanes and all that kind of stuff. That in turn is being sold to hedge funds. We have another company called Orbital Insight that's taking that imagery, processing it, running AI and ML to look at patterns of life and changes over time on a temporal basis. So the first thing you have, very expensive,

arguably monopolistic or oligopolistic is the launch capabilities. Billions and billions of dollars required. They lay you down the infrastructure. If you wanted to make an analogy, a loose one, it would sort of almost be like global crossing for the internet, right? Laying down the hard CapEx stuff. In that case, obviously, the trust guys ended up doing much better than the growth equity investors during that round. This time, I think Elon's smart enough to be able to continue to raise money, whether it's a public company, you know, or it has lots of spinoffs, which I think is more likely to be the case. You know, I think it survives and does phenomenally well. You're going to have other launch competitors. So you've got Rocket Lab, you've

got Relativity, which was one of ours. And so there'll be competition. What's that going to have other launch competitors. So you've got a rocket lab, you've got relativity, which was one of ours. Uh, and so there'll be competition. What's that going to do? It's going to continue to drive the price down. You drive the price down, you create more, more availability for payloads, new people launching all kinds of stuff. So you start with imagery because that's something that you could sell for profit, right? Hedge funds, supplemental Intel agencies, governments, corporates, they want to figure out what's going on on the ground. Uh, and then, you know, other places want to prevent you from figuring out what's going on on the ground. Satellite communication. Yes, Elon's got Starlink. Key thing he's missing is antennas to be able to capture these things on the move. We and Bill Gates funded this crazy company called

Chimeta that makes these flat panel antennas with no moving parts. And they're going to be global, both for military and first responders and the rest of the world. So you sort of see it goes from launch to satellite capability to communications, and then ultimately to manufacturing. The space tourism stuff to me, totally irrelevant as a primary product, the byproduct of some of the stuff that might come off, sure. But otherwise, I think, you know, it's an attempt to capture people's minds. I actually don't think that young people really care that much about space tourism the way that like a prior generation or two did. I actually don't think that young people really care that much about space tourism the way that like a prior generation or two did.

I think it's going to be some of the sexier stuff. And the sexier stuff to me is more of the Bezos view of space than the Musk. Musk is let's get off planet, let's go to Mars and colonize. Bezos is let's take all of our dirty shit off of Earth and manufacture it outside of our atmosphere and bring it back down.

Amazon Prime, same-name delivery, but coming from space, I buy that vision. Coming up after the break. These two ideas of the mirror world and the metaverse are really important. The mirror world is basically saying we're going to have a layer of reality that's closer to augmented reality that's going to be capturing all the information around us, making it machine readable, and adding value to your everyday. The metaverse is, you know, our kids are already in it. I mean, Roblox and Minecraft. Stay with us. Hey, it's Scott Galloway, and on our podcast, Pivot, we are bringing you a special series about the basics of artificial intelligence.

We're answering all your questions. What should you use it for? What tools are right for you? And what privacy issues should you ultimately watch out for? And to help us out, we are joined by Kylie Robeson, the senior AI reporter for The Verge, to give you a primer on how to integrate AI into your life. So, tune into AI Basics, How and When to Use AI, a special series from Pivot sponsored by AWS, wherever you get your podcasts.

Hello, I'm Esther Perel, psychotherapist and host of the podcast, Where Should We Begin?, which delves into the multiple layers of relationships, mostly romantic. But in this special series, I focus on our relationships Thank you. This is a special series from Where Should We Begin, sponsored by Klaviyo. Let's talk about exploring new worlds here on Earth. Specifically, earlier you mentioned the metaverse. Why is it worth paying attention to?

Well, you know, I hate this term because I love it. And I love the term because it's a brilliant one that captures the sort of infinite possibilities and the counterfactuals of people to imagine things. I mean, we live in a fictional world today, right? I mean, we simulate our experience through Hollywood movies and the best fiction and literature, and now we get to visualize it and explore worlds that we never could have. I also like Kevin Kelly's term, and the reason I hate the metaverse world, by the way, is because Zuck has now co-opted it, right? We're going to be the metaverse company as he does. So there's something that suddenly has this evil valence and tinge to the metaverse. But I like Kevin Kelly's sense of the mirror world. And so to me, these two worlds, these two ideas of the mirror world and the metaverse are really important. The mirror world is basically saying we're going to have a layer of reality that's closer to

augmented reality that's going to be capturing all the information around us, making it machine readable, and adding value to your everyday. So, you know, the trivial thing you might already experience if you wear an Apple Watch or you're traveling about 3D space, it tells you to make a left or a right or a turn or whatever with a little haptic tap. That's going to become much more rich and visual, particularly if you're wearing very simple goggles or glasses. I think that today's glasses are cumbersome. I don't actually really believe in VR. I think it massively underestimates people's willingness to submit to a 10, 20, 30 minute duration

to be in these things. We're still social primates. We wanna be connected to each other. I just think that that's gonna add an interesting layer. The metaverse is, you know, our kids are already in it. I mean, Roblox and Minecraft and, you know, any sort of, I mean, you could argue Zoom itself. You know, I'm talking to you through Zoom. I'm not looking at you, right? You and I sit and have dinner together. We get to kibitz and have some drinks

and talk and whatever. There's a different je ne sais quoi of the cadence of our conversation. Instead, I'm looking at a simulacrum of you. I'm looking at a bunch of bits that are transmitting, you know, nearly at light speed through fiber optic cables, but it's not you. And so I just think we're slowly, you know, experiencing this bit by bit, pun intended. And eventually, the real and the unreal start to blur. And that to me is one of the really interesting opportunities. You know, who's going to be doing it better? Who's going to be producing the really good content on top of the layers?

Who's going to be ingesting reality with ever higher fidelity? And you see this as well. There are companies, we just took one of our companies, Matterport Public, you know, they started off the shelf 3D cams, the kinds that like Microsoft, Xbox used. Then they said, wait a second, what if we do this in an array of these cameras and rapidly capture 3D spaces? So, okay, great. Who cares about that? Well, it turns out real estate. And real estate is now booming because particularly during COVID, you couldn't go and visit houses. People wanted to buy a house. You take a Matterport, you're zoomed into the metaverse. You get to navigate like you were playing Doom 3D, going upstairs, downstairs, perfect pixel high fidelity. So that kind of stuff you

can see not just incrementally, but step change is going to keep getting better and better. And I think it's going to become more widely adopted until we're not even calling it something like the metaverse or the mirror world. It just is. Can you think of any technologies that you think are underhyped or overhyped? Well, overhyped for sure is quantum, quantum anything, quantum flapdoodle. You know, I'm on the board of the Santa Fe Institute. Murray Gelman is one of the founders there, and heG and quantum. Why do people invoke quantum? Because it's one of those terms that embodies something that's like just over the edge and also has a huge amount of ignorance arbitrage. People don't understand it.

And so when you talk about it, you sound like you're sort of smart. You don't want to sound stupid by saying, you know, but the reality is we've had nothing so far from quantum computing that a supercomputer can't do. I'm not convinced that it's something that is going to be relevant. I was just riffing earlier today, there was some headline that I've seen probably printed every week or month for the past 30 years, you know, will quantum computing reveal consciousness? No, right? We take one thing that we don't really understand with great resolution consciousness, and we take another thing that we don't understand quantum computing, we put them together into this like spiritual mumbo jumbo metaphysical flap doodle so quantum overhyped almost everything

that's been funded so far has been fraudulent and everything else has some weird milestone that nobody else can sort of reference Lee referenceably care about like you know we just got 300 nanosecond quantum bit entanglement and people like oh like, oh my God, that's amazing. And then you ask them, what does that mean? And they're like, we don't know. So quantum overhyped. Underhyped, I really do believe that AI and biotech, you know, when you look at where AI has gone, it started with, you know, speech and text, and then you started to see it in pattern recognition and photo recognition again today. Like I find it amazing still, whether it's surfacing old memories on Google or, you know, being able to just type any number of descriptors and pull up old kids'

photos, you know, that still feels sort of magical. Then AI went into more sophisticated things. And DeepMind honestly has been, I think, doing a good and relatively ethically positive job on this. But the recent news that they have with AlphaFold, which really is an extension, if you think going back. And interestingly, both of these technologies came from the gaming world, which is one of the great tenets I love. Both of these technologies being AlphaFold and Folding at Home, both came from gaming. The thing that I love about gaming, anytime an adult says, it'll rot your brain, which they typically do with gaming, it always presages the next $10 billion industry. Now, of course, gaming itself became huge, but the offshoots of gaming, right? I already talked about Matterport doing 3D scanning, taking these Xbox cameras and assembling

them. Now, the same things that when we were using our Xboxes in massively parallel ways, or our PS4s to do folding at home to try to decode how a protein actually folds, AlphaGo or AlphaFold from DeepMind is able to, from the called Lego parts, predict what the structure of a protein is going to be. Now, humans have figured out using pretty cutting edge microscopy techniques, about 200,000 of those. Alpha Fold was able to predict, you know, not only the ones that we've already discovered, but another 200,000 or so, and they'll be able to do millions and millions more. This, to me, is a really big deal because it compresses the time.

It would have taken decades to be able to predict protein structure. Now, protein-protein interactions will be the next thing. We've got a bunch of companies that are focused on that, trying to figure out how the protein goes from its base components into the actual structure, the function that comes from that, moving parts inside of a protein. All of those things are going to become quite literally, if you take the space analogy, the targets to figure out how a molecule locks onto a protein and then tweaks it and ultimately creates some effect, which is what we call drugs. And that's a whole another area where the scientific instrumentation

to be able to let us see inside of a cell in real time and see what's happening is just going to be absolutely magical. That's a technology we never had before. I've equated it to looking at a security footage cam of 7-Eleven. And you look at 7 a.m. and you look at 3 p.m. and you see that the store was ransacked. And you have no idea what happened in between. You just had a starting photo and an ending photo. That's most of what the imagery we do today with drugs or cells is. We found a Nobel Prize winner, Eric Bedzik, who was actually looking out to the stars and had this crazy technique to change the resolution. And if you flip it, instead of looking out to the celestial outer reaches, you look at

the inner space of cells, you can actually get below the diffraction limit of light, which is insane, which means that you can see subcellular structures in real time. You can look online and see the videos of this. This is what he won a Nobel Prize on. We decided, hey, let's start a company around this guy that can sell these machines. Well, we recruited another amazing guy, Robert Kijan, who was the head of Howard Hughes Medical. And he in turn recruits this incredible guy who ran all of Merck R&D, Roger Perlmutter. And both of them say, yes, geniuses,

except we're not gonna sell these microscopes. We're gonna keep them proprietary so that we can discover drugs. That became a company called Icon, E-I-K-O-N. And it's absolutely incredible. Now you're looking at that 7-Eleven security footage and you see every second of what's happening in the cells. You introduce a drug into the cell, you see how it's metabolizing, how it enters the nucleus. And I just think that those kinds of insights are massively underappreciated. The AI and the instrumentation that's going into science is going to be a big, big deal.

Another quick related area, scientific labs are going to be automated. I mean, the same way that we have AWS and we look at the shift from CapEx decisions of everybody trying to build out their own server farms to go into AWS or Azure or Google Cloud, and that became an OpEx decision. The same thing is going to happen in science. Biotech labs, big pharma are going to take significant portions of their R&D budgets. And instead of having these labs, or instead of going to these real estate companies like Alexandria Real Estate Equities that are by Cambridge and Route 128 and La Jolla and Scripps and San Fran, South Bay, they're going to go to these cheap electricity places in the middle of nowhere that are basically labs that are run by robots. And the scientists will be freed from their white

lab coats and their wet benches. And they will be sitting on the beach in the Bahamas, just like a musician might. And instead of pulling up Pro Tools or Logic or GarageBand and mixing the instruments on their iPad, they will be pulling up, you know, centrifuge to titration robot to this speaker, and they will be setting instruments the same way that we use these iPad-based tools to run science in the future. And I think that is massively underappreciated. And so I'm just curious to get your take on a few categories. Well, let's go back. The difference between being a visionary, I've always thought the line between sometimes being a visionary

and fraudulent is your next round of funding. I always thought, what would happen if Elizabeth Holmes had raised another $100 million and registered some progress around that machine,

I forget what it was called. Anyways, do you look at any, I won't say individuals, but do you look at any companies right now and think they're bumping up against that line of just kind of, it's starting to feel very, very shaky.

It feels like we've reached pretty far into the barrel with a lot of the SPACs and how just this, it feels like we're surfacing a lot of sediment right now. Well, one, 100% correct. The line between visionary, who sometimes can be delusional, and somebody who wittingly knows that they are lying is so thin. And by the way, the best con men or women, the best liars, you know, they lie to themselves. And so it's hard for us to even detect that they're lying, right? And so that's another theme, by the way, that technology plays into, but I'm obsessed with, which is the arms race between deception and detection of deception. You know, naturally women are better at it than men. Technology can play a role. Technology also dupes us, but it's a fascinating thing. It's, it's, it's found in everywhere from sports and

business and military and technology, of course. So if, if Elizabeth would have continued to, to, you know, raise money and, and by the way, some of her backers, right, Tim Draper and other people are true believers to this day, right? That she wasn't conning them. It's a very painful thing to recognize. You know, we, I would say that when the cost of capital gets low, it's like a tractor beam for the future. And you take these far out 20 year projects that become these 20 month frenzied ventures. And that's sort of a good thing for society because 99% of those things will fail from the detritus. Things will get picked up. They become the combinatorial fodder for the next thing. Progress continues. As old friend Jim Surowiecki said, in greed and avarice lies the hope of progress. And I've always loved that. We're also, fortunately or unfortunately, because of all

of that, in the golden age of fraud. And so I'm friends with a lot of short sellers, and they keep me honest. And you look at the balance sheets of these companies. And, you know, again, I mentioned before that I'm very skeptical and critical very publicly of Elon as it relates to Tesla. I mean, there's no doubt in my mind that the games that have been played there over the past 10 years, you can't deny, look, he's making real cars. You know, the fan following is something that you, it's religion. You never want to really bet against it. But the accounting shenanigans that people have been able to get away with and sort of fake it till you make it, get the money and then cover it up. I just think, you know, not just that company, but many companies right now, it's like, you know, when the tide goes out, everybody's going to be, there's going to be a naked orgy of fraud. Yeah, it feels the way.

By the way, I said exactly that when the stock was at $50. But I do agree. I put together a prediction stack every year, and one of the predictions that I'm feeling better and better about, and I haven't officially made it, is I think SpaceX is going to be worth more than Tesla within five years. Oh, I agree. I thought actually the two companies would merge.

It'll be interesting to see what the legal result of the SolarCity bailout acquisition is. But I got to say, despite or notwithstanding my criticism, he has done a masterful job. Not one that I respect because in the way I respect Bezos, and I know we might differ about that because I think Bezos has been a great capital allocator. He has been perfect.

Oh, I agree. But you cannot argue with Elon's effectiveness and being able to persuade people, capture money, the ledger domain, the misdirection. I mean, it is like the prestige, literally. It's the modern prestige. Storytelling. Totally. It's become kind of the core competence of CEOs, raise cheap capital and then pull the future forward and make it a self-fulfilling prophecy. So, I'm curious to get your thoughts on the crypto space. Look, I think this is another area where there's got to be a shakeout of all

the fraud and the pumping and the hype. I am worried about a few different things here. Obviously, you know, ransom, very big deal, very big problem, massive dog whistle invitation for huge regulation. You know, there's no doubt that you're going to see something like $10,000 limits, which also probably means that you're going to see an abundance of $9,999 transactions in crypto. Gensler, I think, is just coming out this week and is talking about SEC is going to be looking really to protect the little people who I think are being exploited. Now, in the same way that a company isn't a fraud, and as long as they raise their next money, nobody's really being

harmed as long as these things keep going up. But when they start levering and then all of a sudden there's 50% or 70% drawdowns, it's a big deal. The other piece of this, though, which is more on the conspiratorial side, good friend Mike Green has outlined this very well and to a lot of criticism, but it's also reached some of the highest levels of government, is looking at things like Tether and the relationship, again, with Tether and certain foreign sovereigns, their ability to use that to print dollars. It's just a messy mess. So if you want to speculate, for sure, I own Bitcoin, I own Ethereum, I own more of the latter than the former. I do it as a speculative justification so that I can criticize some of the people that are just absolutely hardcore purists. And I think that eventually we will see digital US dollar, there will be much more sovereign control. And I also think that you're going to see a continued bifurcation on the currency side between China and the US, just as you're seeing a cultural, geopolitical, military, internet bifurcation between these two cultures. And there's nobody that wants crypto more than China. I mean, the complete means of surveilling every transaction and doling out credit and social credit correlated to it.

It's just, you know, that's inevitable and worrisome. But are you saying they want their own nationally sponsored digital currency or they believe crypto would be good because it undermines USD? No, any Bitcoin or Ethereum holdings in China will be converted into some digital RMB by mandate. I mean, that will be complete sovereign control over their currency. That's interesting because that's a bearish call on Bitcoin. Whereas I thought some of this stuff, and maybe I'm not thinking about this correctly, I thought some of the recent actions in China would be bullish for Bitcoin as a lot of capital feels doesn't want to be trapped and goes into Bitcoin? Well, if you take the maximalist view, nothing is bad for Bitcoin. So every time that China has come down, what do they do? They point

to something, you know, 10 years ago, what China was cracking down, they're cracking down on the miners, they're cracking down on your ability to hold it, they're cracking down on wallets, they're cracking down on... The reality is, I have no idea. I know that there are smart people, they're in the minority minority who are very talented and really focused on the technology and the protocols. And I think that those people deserve the attention and the capital and the currency that they're getting. There's all these follow on and promoters. And over time, they will shake out and the world will be better for it. So, Josh, I want to do like a hard pivot or turn left here. I met you and your wife, and your wife struck me as this incredibly impressive person.

You're obviously thinking kind of way out around in a very scientific kind of, you just feel like an engineer to me. The way you look at the world, you just look at it through, I don't know, like a cleaner lens somehow. What, as a dad, like what are your observations on parenting?

We have a lot of young men who listen to this podcast. What are your thoughts and observations and advice to dads? Well, it's interesting because, you know, we all try to put this cohesive narrative together of our life. Or I think actually, you know, relatively happy people do that, right? And we tell ourselves a story about where we came from and where we're going and what we stand for. There are these two quotes that I love. And to me, both play this role that are everything that I do professionally. And then as a dad, this mix of total humility and aspiration, Carl Sagan had this quote that was somewhere, something incredible is waiting to be known. And Eden Philpott said this thing, it was very

similar. The universe is full of magical things patiently waiting for our wits to grow sharper. Okay. So as an investor, that's what I feel like my mantra is, right? Be able to constantly look at the edge of the circumference of the unknown. I would say the lux is Latin for light. You shine a light on something on the outskirt of that light as a circumference of darkness, it reveals more and more that you don't know. And so there's something virtuous about pushing back that circumference and enlarging the circumference of the spotlight. As a parent, I can tell you with three kids, 11, 8, and 5, I am an amazing dad for an 11-year-old girl. I have no idea what to do with a 12-year-old girl. I have no idea what to do with a six-year-old boy. I have no idea what to do with a 12 year old girl. I have no idea what to do with a six year old boy. I have

no idea what to do with my middle child, the nine year old girl. So I feel like, you know, I, I, it's like a video game. I level up, I learned the rules, I beat the boss, you know, I could play it again. I got the muscle memory. And then before you know it, boom, you know, they've aged and gone to the next level and I have no idea what I'm doing. So there's a humility that I feel because every day these kids are changing. I have aspirations for them. I have certain timeless principles that I think will be there. A lot of that has to do with, you know, I want them to be empathetic. I want them to be aggressive and assertive. The one thing Lauren and I have not figured out, and you know, she runs Impactive Capital. It's an activist hedge fund. And she's brilliant on the public side. The

only thing I ever ask is like, please don't short my companies, you know, as once they go public. But I want them to be happy, of course, but I want them to be really driven. Lauren and I were both really driven. You know, she grew up in a nuclear family, but she was between an older brother and a younger brother, had gender dynamics where she wasn't the one

that was expected to be the most successful and she wanted to be the most successful and she has been. I grew up, no dad around, chip on my shoulder. I always say that chips on shoulders put chips in pockets. I like finding people who have that thing that's in them that's broken. Doesn't matter how much money or achievement they get. It's just always going to be this fire inside that's pushing. I mean, you have it, you know, others that we know in common have it. It's just, it's, it's, it's actually one of the reasons I always say people in Silicon Valley or elsewhere just to sort of make a mockery of it for a moment, but the mindfulness and meditation,

like that is great for the individual. It can absolutely give you reflective happiness. It is horrible for society. We need masses of disaffected people that want change, that are not happy with the status quo, that are trying to break out of where they're from. If you had complacency and happiness, you'd have no progress because nobody would be competitively motivated to want to change something. And I worry that the kids are growing up

with stuff and access that I never had. And so how do I engineer that sort of hardship into them? I have no idea. But that to me is like the biggest problem to solve as a parent. Any parting thoughts on any advice for young entrepreneurs? The single best thing that you can do as an entrepreneur is be able to be a good storyteller. Storytelling lets you get people to pick up where they are and move to join you on some mission of something that doesn't yet exist.

It lets investors reach into their pocket and decide amongst competing alternatives that you are the one that they want to bet on. It gets journalists and product people and customers to decide that you're for real and that they want to bet on you. So storytelling, because we are the storytelling primates, is the single most important thing that you can do. More important than getting an engineering degree, more important than learning how to model and excel, learn how to tell a great story. Josh Wolfe is the co-founder and managing partner of Lux Capital, a firm that invests in emerging science and technology ventures. He's also a columnist with Forbes and editor for the Forbes Wolfe Emerging Tech Report. He joins us from Sagaponik. Josh, stay safe. Scott, you too.

Our producers are Caroline Shagrin and Drew burrows claire miller is our assistant producer one of the things i love about claire is she's got an easy name well done claire well done if you'd like what you heard please follow download and subscribe thank you for listening to the property pod from the vox media podcast network we'll catch you next week on monday and thursday what software do you use at work the answer to that question is probably more complicated than week on Monday and Thursday. What is productivity software? How will AI affect both? And how are these tools changing the way we use our computers to make stuff, communicate, and plan for the future? In this three-part special series, Decoder is surveying the IT landscape presented by AWS. Check it out wherever you get your podcasts. Support for this podcast comes from Klaviyo.

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