This Week in Startups - PrayingForExits on the state of VC, ZIRP fraudsters, revolutionary product launches & more | E1717

Episode Date: April 11, 2023

The man behind the anonymous accounts “prayingforexits” on Instagram and “@mrexits” on Twitter joins Jason for a jam-packed episode. Topics covered: what founders can learn from Logan Roy (2:29), what recent ZIRP fraudsters have in common (21:39), where GPT-4 ranks in terms of revolutionary product launches (31:28), AI’s impact moving forward, the state of VC (1:02:29), and so much more! (0:00) Jason kicks off the show  (2:29) Succession, Logan Roy’s mentality & winning (9:22) Purpose-driven CEOS (20:07) Orgspace - Get $2000 in credits at http://orgspace.io/twist (21:39) ZIRP fraudsters (29:56) Issuu - Sign up for free or get 50% off an annual premium account by using promo code twist at https://issuu.com/podcast (31:28) Revolutionary product launches  (42:24) Brilliant.org - Get 20% off an annual subscription at http://brilliant.org/twist (43:52) AI’s impact moving forward (1:02:29) The state of VC (1:18:51) Mayor Jason FOLLOW PrayingForExits: https://twitter.com/mrexits FOLLOW Jason: https://linktr.ee/calacanis Subscribe to our YouTube to watch all full episodes: https://www.youtube.com/channel/UCkkhmBWfS7pILYIk0izkc3A?sub_confirmation=1 FOUNDERS! Subscribe to the Founder University podcast: https://podcasts.apple.com/au/podcast/founder-university/id1648407190

Happy Monday, everybody. We've got an amazing show for you today. That's right. I have the honor, the privilege of being joined by the anonymous VC praying for exits. Mr. Exits and I kick off the show discussing Sunday's episode of secession. Spoiler alert, spoiler, and our appreciation for Mr. Logan Roy and his just absolutely cutthroat winning mentality. We discussed the mentality of entrepreneurs today five months into this downturn, this incredible tech-depress. and collapse. Then we discuss my working theory regarding the backgrounds of techs fraudsters from Elizabeth Holmes to Sam Bankman-Fried, Doquan, and everybody in between. I have a theory about who's committing white collar crime today. Then we talk about where GPT4 ranks in terms of

revolutionary product launches like the iPhone, Uber, Tesla, etc. And then the impact of AI moving forward and being the arbiter of taste. And is that a defensible enough? We wrap up, chopping it up about the current state of VC and the challenges for fun managers, both first time and later stage ones, as well as different regions in the Middle East like the kingdom, Saudi Arabia, getting involved in backing venture firms. Finally, he asked me a probing question about mayorjason.com. It is going to be a great show, so I want you to stick with us. This week in startups is brought to you by OrgSpace. If you're a startup and you aren't building a performance culture, your competitors will eat your lunch.

Get $2,000 of credits on ProP plans with a 30-day free trial atorgSpace.io slash twist. Issue is the all-in-one platform for creating and distributing beautiful digital content. Get started with Issue today for free or sign up for an annual premium equipment. count and get 50% off when you go to issue.com slash podcast and use promo code twist. That's I-S-S-U-U-U dot com slash podcast and use promo code twist. And brilliant.org is the best way to learn math, science, and computer science interactively. Try everything Brilliant has to offer for a full 30 days and get 20% off an annual subscription at Brilliant.org slash twist. All right, everybody, it's Monday. There's a lot of news that's built up. It's been a crazy,

let's call it, five quarters since the market came apart. And one of the great prognosticators, one of the great commentators is an insider. And he runs two social media accounts, Instagram and Twitter. On Insta, it's praying for exit. Just spell it all out. And then on Twitter, he's Mr. Exits. He's been on the program a couple times. We don't normally have people who are anonymous. Come on, but I love praying for exits, Mr. Exits, Insights, because he's an insider with a venture fund, he invests in companies, and he's a little freewheeling. Welcome back to the program, Mr. Exits. Thank you for having me, and that was a great intro.

I need to probably get that clipped or something and carry that around with me. It was a good one. Thank you. You have my permission to TikTok the heck out of it. I know that you're, I never want to docks anybody, especially the pseudonyms. But I get the sense you're not part of Gen X. You're part of a younger generation, correct? That is true.

So we have a great back and forth here because I grew up with boomers ahead of me. You grew up with the Gen X, so we get like a nice little view of the world. I want to start, hey, by the way, it's Monday. Spoiler alert here. If you haven't watched The Session yet, go watch it, and then fast forward this five minutes. But what an episode last night, huh? Does Mr. Exist watched The Session? Yeah, yeah, I watched Succession.

It was a great episode. There's a lot of Logan Roy to draw inspiration from this week, and, yeah, super excited to hit the ground running and close some deals. Exactly. And if we were to look at the philosophy of Logan Roy, when you look at it, for you, what's the key to what we can learn collectively from Mr. Roy? Well, I think that this is something that, you know, has its positives and negatives. But one thing that is pretty admirable about Mr. Roy is that, you know, work and getting the deal done comes above all else. I think that there's very much a certain point in everyone's career where that should be the case. You know, maybe when you have a family and children like Mr. Roy does, that might, you know, maybe you should take the backseat at that point.

But I do think that there's things to be drawn of when you're building something important. You probably have to prioritize in the way that Mr. Roy does. And so I think that that's important. I agree with you. And it was characterized so well in, I think, the last episode, when he's, you, when he's, you. he made a visit to his children at karaoke. Yeah, that's a good scene. It's such a great scene because they're at a karaoke bar trying to figure out how they're

going to screw up the biggest deal of his career that will set him up in his late 70s, it seems like, for even more success, right? He's looking at this deal as in his 70s as a stepping stone. And there, and he comes to the realization that his children, his own offspring, are just not serious people. And he just tells them outright, you're not serious people. And this to me was a key, key aspect to what we can learn for Mr. Roy, which is take it seriously. If you're working on something important, be serious people. Put the effort in.

Don't be a goofball. Take it serious. Now, you are correct. from episode three, when we look at it, you know, closing a deal or going to your son's wedding, you know, he makes a decision, closing a deal is more important ultimately. Because his kids are not serious people. Now, this is as cutthroat as it gets. And maybe they're trying to show us, like, how far you can take this in the wrong direction.

But I do think we all could use a little more seriousness when it comes to business. Yeah, I agree. I think that if you're working on something important, there's no other option but to take it seriously. Because, you know, if you're not taking it 100% seriously, there's somebody out there that is and you're just losing at that point. And it really is. Like, we've lost this concept of what will you do to win? This is something the industry in a ZERP, a zero interest rate with a zero interest rate program at work where money's free. people were not really concerned with winning, were they?

They were concerned with raising money, get the next round, the status, the B, the valuation, but not actually looking at, am I winning? Yeah, I think that's a fair point. And I think that, or maybe the goalpost of winning moved for some people, instead of actually like building long and enduring and important businesses, the goalpost became sort of like this egocentric stroking of like, you know, look at the public perception of how great, what I'm doing is as opposed to the underlying actual value that I'm providing to the world and to my investors and to myself.

So I think that's well said, Mr. Exit's because the ZERP, the zero interest rate policy, led to a lot of people getting funding. And funding not because their business fundamentals were so strong or they were so impressive like Logan Roy, but because there was money sitting around. and if you're a capital allocator like you and I are, well, the capital needs to go somewhere. It would be a shame to just sit it in a bank account, so we might as well deploy it. And hey, this company does not yet have funding. We'll put it to work here.

Now, there's a lot of really good concerns, growing concerns, old-timey word for businesses, that are not able to get money. And so now everybody is getting stronger. Everybody is getting more focused, and focused on what matters. Is that what you're seeing in the market, Mr. Exits? Yeah, I think that there's that adage that floats around every now and then when, you know,

times get tough, which is, I forget the exact quotation, but it's like hard times, built strong people, strong people build softer times and softer times build weak people, and it just goes in that cycle. And it seems like, you know, zero interest rate phenomena was that time of sort of soft people coming into the market. Everything was easier. everything was a little bit more quote unquote free. And so now I think that you're seeing the cycle switch back to the point that, you know, real

businesses need to be built. You're not going to get anything handed out to you. And even on your best day, there's going to be a lot of headwinds, you know, facing whatever it is that you're doing. And so you have to just be on your A game at all times. You got to bring your A game. And this, you know, to quote Peter Thieless, memetic theory, you know, this one where he was sort of obsessed with René Girard, that everybody is just copying each other and trying

to get status and playing status games. That was a little bit too much of that and just a lot less focus on business fundamentals. Hey, how much did you spend? How much did you make? And how obsessed are customers with your product and product market fit? It's actually been delightful over the last five quarters to watch a return to the time I started investing, which was right after 2008 and 2009, when Uber was founded. and Airbnb was founded.

What an amazing time. Travis and Joe Jebia and, you know, these kind of folks. These are serious people. They took the business seriously. What are you seeing on the ground, Mr. I? I said, are people taking the work seriously now, or are people still effing off? I think that there's a lot more seriousness to the industry as a whole right now. And I think that that's predicated on the fact that, you know, the bar has been raised on all sides to,

you know, being able to continue to do your work, whether you're an investor or an entrepreneur. You know, the minimum viable product that gets you funding on either of those, uh, quantums is becoming a lot, it has to be a lot better than it was in the last few years. And I think that that's largely because you're kind of seeing the tourist investor. And these are people that I deem to be, you know, people that were just kind of in it for the last couple of years who, you know, thought that this was something that was interesting that they should pursue. just because everyone else was doing it. Okay, back to memetic theory, right?

People thought being a VC is cool. If I don't have a fund, I'm not cool. Yeah, or if I don't, if I'm not an entrepreneur, I think that there is like this perversion of entrepreneurship that it's like, you know, it should just be something pursued just for the sake of pursuing it versus you have a meaningful change that you want to enact in the world. Unpack that for a second. Unpack that for a second.

What happens when people just do it for the status as opposed to the purpose? Well, I think that you, it's much easier. It's far more flippant, right? So it's like you don't necessarily take it as serious as somebody, like the people who are willing to, you know, live and die by this idea that they want to put out there in the world. Somebody like, you know, somebody I'll look at that like is like Brian Armstrong, right? You know, he was, these kinds of people are so dedicated to shaping the world in a way that they believe it should be shaped that they're willing to go through sort of like brimstone and fire to be able to get there. Whereas people are doing it just for the status. once the status doesn't, you know, become real,

it's far easier to push over and far easier for them to sort of fail, I would say. It's a very interesting point. And the name check of Brian Armstrong at Coinbase is a really good one. A couple of weeks ago on the program, I was looking at all the headwinds. And I don't short stocks because I'm like a positive person. I like, you know, making bets for a decade or two and seeing where it goes. don't really like the concept of shorting things,

just emotionally or, you know, aesthetically even. Like, it just feels like so negative. And I was looking at all of the headwinds against Coinbase. And I said, if there was ever a time I would make a bet against a company in a sector, it would be now in Coinbase. However, when we did our analysis, bet the jockey kept me from pulling the trigger

because I just said to myself, you know what Brian Armstrong too much pride too much purpose too much performance right three P's there he is just too dogged and this is too important for him that you could ever bet against somebody like Brian Armstrong which is exactly what I said on CNBC a decade ago in these dipships were betting against Elon and shorting Tesla and I was like the guy just landed two rockets at the same time pick another person to bet against like there's a there's a thousand other CEOs with publicly traded companies, why would you pick, Sluuteman, Elon Musk, or even Brian Armstrong, you know, a relative newcomer here, really just doesn't make sense.

Yeah, I think it's hard to bet against somebody who's like really trying to build their life's purpose. And I think that we sort of alluded to it that a lot of people weren't really building towards their life's purpose in these last few years. They were building towards some level of status that they believed was important to them that they wanted to achieve. But I think that people, yeah, like you said, Elon or Brian Armstrong. their actual reason for being here on this earth and continuing to put out a high output of work every day is because they really believe that their life is meaningfully important or like an aspect of their life that is meaningfully important is to change the world in a meaningful way. And so, yeah, it's hard to bet against those kinds of people because they tend to just keep going and going and going.

Who else do you got in that camp of the purpose-driven, let's call it, CEO. Who do you got in the purpose-driven CEO? We'll do our little purpose-driven CEO lottery here. You pick one, I pick one. Who do you got next on your list? Next, I mean, it's, you know, it's probably not the, probably a pretty obvious choice, but I think Sam Altman's got to be up there, especially not only what he's doing with Open AI, but also like Helion Energy and even World Coin to a certain extent.

I think that definitely a very purpose-driven guy. Yeah. You know who I just started thinking about when we started saying purpose-driven is, the founder of Starbucks right who Howard Schultz I don't know if you saw him

you know getting into it with Bernie's yeah with Bernie Sanders is just so obvious that the guys come back to Starbucks what every 10 years somebody runs it he comes back and fixes it and he he got everybody

free college health care universal health care and double triple the minimum wage, depending on where you're located, or much more than the minimum wage, I think in some cities that have the $15 one. And then I'm watching Bernie Sanders criticize him with his four, five houses, whatever Bernie Sanders has, his lake house. I don't get a lake house. And Bernie Sanders, I'm just thinking, is complaining about raising the minimum

wage, getting everybody universal health care, and providing free college, right? This is Bernie Sanders' basic platform in life. He's accomplished none of it. Yet he's got a bunch of of houses. And then Howard Schultz has created hundreds of thousands, I don't know, maybe millions of jobs over the years, collectively. And he figured out a way in one of the lowest margin businesses ever running a cafe to get people the three things that Bernie Sanders is not able to provide in a lifetime of service. Bernie Sanders is old. Maybe you could speak to Mr. exits and give us some, you know, pump us up here, about the power of capitalism. Yeah, I think capitalism is one of those forces that effectuates the most meaningful types of

change in our society. I think that the reason that we have great pharmaceutical drugs that cure really unfortunate diseases is because of capitalism. I think that the reason that a lot of the most, you know, important aspects of pushing our society forward happen as a function of capitalism. And I think that that's because inherently as human beings, we are intrinsically tied to reward mechanisms. And I think that there's no better sort of reward mechanism than capitalism. Obviously, there are places within capitalism that, you know, people get rewarded for things that maybe provide a little bit less value to the world as a whole. But I think that by and large, you know, to the victor go the spoils and in the victor in this case are people that are really

making meaningful impact on the world, even if it's something as small, to your point, as a cafe. There's ways that you can leverage things like that in the vein of capitalism to be able to effectuate change, such as raising the minimum wage or providing, you know, health care to people and et cetera, et cetera. So I think that capitalism is the probably most important driving force of what makes a good democracy, a good democracy. And once we lose that, you know,

We've seen many examples in society and in history where, you know, the things quickly fall apart after that goes away. Yeah, I mean, your airbag and your car. Yeah. The solar panels, Starlink, internet writ large, I mean, so many things out there. It could be even nonprofits at times, a Wikipedia here or there on the margins, but it just seems like this capitalism is the greatest operating system. capitalism plus democracy remains the greatest operating system, especially as we watch things like China just kind of give up on capitalism and then try to rebuild it again, it seems. Bezos, right? There's your purpose-driven CEO.

What are the chances he comes back? What are the chances? Bezos comes back. Yeah, I think that every great entrepreneur, when they've built something that is very intrinsically tied to them. You know, when they start to see things fall apart, and you're even seeing this to a certain extent with like Google, for instance, right? Oh, yes. This whole AI, you know, narrative started to come to the forefront. You saw what Larry and Sergey were willing to do,

which is basically, you know, open up their code base and start getting after it again. And I think that, you know, once you've built something that's so important and enduring in the world, if you start to watch it wither away, you have this sort of emotional and parasocial bond to it that refuses to let you like those people are born winners and I think that they refuse to let themselves fail when they have the opportunity to not do so

and so yeah I think that there's a very high chance that if Amazon you know starts hitting more road bumps that he comes in and starts to rebuild the amazing company that he built in the first place I know Sergey Brennan's back I got a number of sources who say he's back back in the office, you know, doing code commits. He's engaged.

Larry Page, unsure. I don't have any firsthand reports of, hey, we saw Larry Page in the building. Supposedly he's got a great beard and a head of hair, but I think they got a, somebody's got to go get him off his island off the beach and get him the haircut, take him to the barber, tight is right, you know, a little buzz cut, clean shave, and walk him into the office. Larry Page there as well, the one to punch. Okay, running a startup.

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Do you need more people? Do you need different types of people? Are you doing this kind of granular planning? Are you being this thoughtful? Well, you should. be. Okay? You can plan for everything from the hypergrowth that we're all trying for, or regrettably the rifts that sometimes we have to do. And anything in between. And here's the best part, twist listeners can get $2,000 in credits on org spaces pro plans with a 30-day free trial at org space.io slash twist. That's org, svea-c-e-o slash twist. Go try it out, prepare your company, and just be sophisticated because when you want to go raise money or you want to hire great people, they're going to appreciate that you've done this.

Try orcspace.io slash twist today and get $2,000 in credits. Hey, I got a theory for you. I'm watching all these frauds. I don't know if you've been watching them. Last week, this is Frank Founder, accused of lying to J.P. Morgan, creating four million customer accounts. She had like 300,000 real ones or something,

but she created like 4 million fake ones with a data science. Tiss, they sold it for 175 million. Jamie Diamond Of course you had Elizabeth Holmes Sam Bankrun Fraud Carolyn Ellison Doquan from Terraluna You had the kid from OpenC

Remember the head of product He was front running the NFTs Parker Conrad to a lesser extent Still a great entrepreneur But did some He seems to be the one who learned his lesson He was doing a little bit of insurance fraud Allegedly

No not allegedly I think he's convicted right the SEC find him. When, with the Zeta Fitzhift's disaster, when we look at all these, I found something in common. Want to take a guess at what it could be? All these people have in common. I'd love to hear.

It seems like an interesting, disparate group of people. All right. Let me see if we can guess this. Where did Elizabeth Holmes go to school? Stanford, I believe. Correct. Where did Sam Bankman-Fried go to school? I don't know if you remember this.

Where's parents teach? It was parents taught at Stanford. Okay. And where was he educated? Do you remember? Was it MIT? It was MIT, correct. There you go.

Carolyn Ellison. Right-hand lady. In her case, her parents were econ professors at MIT, but she went to Stanford. Got it. Charlie Jervais, whatever, Frank founder. U.Penn. parents were father worked at a hedge fund mother was a life coach

uh do kwan Stanford there you go uh this kid Nate chastain from open sea front run it Harvard Parker Conrad Harvard

Harvard and I don't even want to go into boomers like Trump from Yale or Jeff Skilling from Enron a bit going to HBO just as recent cohort they all seem to have an Ivy League trail and parents who seem to have also gone to the Ivy League

and have some privilege. So my theory is these are nepo babies these are, we need a word, nepo babies means like nepotism babies. We need a word for Ivy League babies. These are Ivy babies.

Right? Parents went to Ivy. Ivy League School. They went to Ivy School. These are kids of privilege. And these privileged Nepo Ivy babies, I believe, think the world owes them something. And like Logan Roy's kids, they are never enough to their parents' success. And so they're not serious people, but they want to be serious people. So when things get hard, instead of doubling down and figuring it out, and going through the pain and suffering of success and what that entails, i.e. failure and getting your ass kicked and handed to you regularly, they cheat. They take a shortcut. What do you think of my theory?

I mean, I think that broad strokes, you're probably right on point. The only person that I would probably push back on is Parker because I think that what he's building with Rippling is actually a very meaningful and great company and what he accomplished in the SVB bank run for bridging the gap for a lot of people's payrolls, I think is super important. But I think that to your point, all the other people that you've mentioned, yeah, I think that like the sort of nepo baby thing plays to a good tune here because I think that a lot of these types of people feel as though they're owed something by the world. And so, you know, they're willing to cut corners to achieve the thing that they feel like

they are owed in a lot of instances. And because they have this deep-seated feeling that, hey, you know, I'm like, I'm the main character of this all and, you know, I'm important and people should pay attention to me, et cetera, et cetera. They're willing to go to whatever length they can to basically prove to themselves that that is true. And yeah, to your point, I think that, um, going, like having sort of a cushier life maybe up into that point, uh, probably prevents them from like really actually feeling the hard times

and instead taking shortcuts to get out of them. I think your Parker, I think that's well. said, they will take the shortcut. They feel the world deserves something. The world owes them something. They deserve this success. I think Parker is such a great exception there. He, I put in another bucket. I think he's so smart that sometimes smart people believe the world is there to be hacked, right? And he falls into the Zuckerberg camp of being, let's say, move fast, break things,

cynical version, reckless. But that hacker culture of, hey, this insurance test that people have to take is stupid.

Why do they have to sit there and press the next key? I'll just make a Chrome extension to do that. We'll get people through this faster. It's so dumb. I'm going to, I'm going to bend the rules here.

If I get caught, I'll pay a fine, I'll beg for forgiveness, but I'm just going to zip, zip, zip and get it done. And he has that reckless hacker abandon. that can lead to faster, greater success.

Some might call it like Zuckerberg or even YC kind of aesthetic of... Travis, to a certain extent, was a great example of that too, right? Yeah, I mean, I would probably put them in the same bucket where Travis said, it's wrong that people can't pick the hours they work. It's wrong that there's a limit on the medallions. That's just pure corruption. I'm going to break it. Now, the fundamental nature.

of trying to overturn what you believe are unjust systems in society is you better be working primarily for the people and on a secondary basis for yourself, like a distant second. And I think that's where Airbnb and Uber and Lyft kind of got away with it, let's say, or we're successful is because there's so many people rooting for it. Like, I can't get a cab in Brooklyn. This is cheaper. I'm poor. I can't afford, you know, it's basically I'm either taking the subway, I'm waiting an hour for the subway, or I get to take an Uber for six bucks. I'm, this is awesome. Whereas with Parker, when he did his little hack, it was kind of for him, right?

It was like, hmm, I'm going to just get my people through insurance certification quicker, right? And so I think that's a very subtle difference, but I try to explain this to founders. Like, I'm not saying break the, I'm not endorsing breaking the law, but if you're going to reinterpret laws and you're, you're going to reinterpret laws, and you're going to try to bend them to your will, let's say, is a generous way of putting it. You better be on the right side of consumers. That's just my little piece of advice. Yeah, I think that's fair. But I do think that it's like a very inherently, inherent part of kind of like the Silicon Valley ethos is that, you know, by and large, most people start a company because they feel like they know something that other people don't.

Yeah, they have a secret. Yeah, they have a secret that, you know, they feel like it is not. that can create a lot of value but is not being shared in the world. And I think that there's a bunch of different ways to get there. And I think that the framework for how people feel like they can get there is definitely wider than it's ever been, just in the sense of, you know, like hacking culture, et cetera. But yeah, to kind of like the original point that we were sort of discussing here, I think that leads to people willing to cut corners in ways that maybe people wouldn't have in the past.

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Let's move on to our next subject here. I want to get your thoughts on AI, the potential and the panic kind of going on here. GPT4, when I was getting ready, having my coffee, and I was thinking about my theory about fraudsters and Ivy League parents. I literally just asked chat GPT4, make me a table. individual of the white collar criminals of all time give me their name give me their crime

give me their alma mater boom all of a sudden it's doing all the work for me now what I love about chat GPT4 is that it is so confident while it's typing the answer to you in real time and I don't think it has to type it in real time

just a small little observation here I think that's a device because bar just boom snaps out the answer. I think I have it type it out so you think that it's more trustworthy than it is. And the absolute utter confidence in which chat GPT4 spuse absolutely complete utter bullshit and nonsense combined with absolutely scary levels of insights and truth is extraordinary to me. And I'm wondering if you've played with chat GPT4 specifically 3.5 a bit. and what's your take on this

phenomenal achievement in quickly answering questions but also the utter confidence in which it spews complete nonsense and lies and Sam Maltman and the team over there's ability to release this product and not give

two sh** if it is sputtering is spitting out utter complete wrong answers because it's a baby we're just experimenting here. Your thoughts. I'm an active user of chat GPT and actually the whole open AI stack. You know,

I've used Dolly and a few of their other products as well. I think that it's pretty much a seminal addition to like my productivity stack. I tend to ask it questions more often than I ask Google questions. And I realize that there are some nuances to the way that the model is set up such that it doesn't have the most up-to-date information and can sometimes, you know, be a little bit off the mark when providing answers to very specific questions. And so Google is always like a backup sense check for me just to make sure that, you know, I'm getting the right information. But I think overall, the large majority of the reason that, you know, answers are a little bit off is because, you know, these models are relatively new. And they have to have some level of consumer feedback to be able to weight them in the right direct. And so I think that without, I think that, you know, it's kind of like a necessary evil to put out an unfinished product out there into the world simply because, you know, to be able to like provide the relevant information for these models to be successful over sort of the long tail of time. It requires this sort of human to AI interaction. And so, yeah, I think that maybe it could be, there could be a sort of more pro-eastern.

active disclosures about how, you know, these models aren't perfect and everything that you see here shouldn't be taken is 100% factual information. But I do think that, you know, putting it out in this sort of semi-finished form is important for the next versions of GPT that are apparently building themselves. Let's have a candid conversation here, the genius of this product launch. I was thinking about the greatest product launches of all time. Now, I'm not talking about the greatest technological innovations. I'm talking about specific products with a name on them, right? And I was just rattling off the top of my head what I thought were some of the great product launches of all time. Now, some products fail, some products succeed, like you could take the sidekick or the Blackberry that, you know, nobody's using those anymore.

But I just thought, ChetGPT4, 3.5, that whole sort of collection of things that they launched over the year, this is going to be looked back on as one of the top 10 to 20. It's definitely going to be in the top 20. Product launches of all time.

I also put up there a number of other ideas. What for you, what are some product launches you think will look back on 20 years ago that are more meaningful or less meaningful. More meaningful or less meaningful, okay. Ultimately, like, and as a product launch,

which were more impressive, because, you know, the obvious one that comes to mind is when Steve Jobs held up that iPhone. When he held up that iPhone, the world changed, right? And you knew it at that moment that the world had changed. So I think for a product launch to be truly meaningful, you have to, as consumers,

believe, hey, the world has just changed. I felt that way with Uber. I felt that way with the Sony Walkman. I felt that way with the iPod. Back in the day when I was a kid, I felt that way about the IBM PC. I felt that way about my Atari 2600 in 1878. I felt that way about Microsoft Windows when I first played with the 3.1. What products or services that when you used it for the first time, you said, this is super meaningful?

And then compare and contrast to the moment you use chat GPT, I think 3.5 is the one that really got people in now four. I think that the thing that I would draw the most parallel to is the Apple iPhone, but more specifically the App Store that associated with the... That came in like the third version, I think, or something. Correct. Yeah, yeah, yeah. And so I think that the App Store was like this seminal thing where it created this application layer that everybody could tap into. And many of the, you know, most seminal founders that we've talked about on this podcast thus far, you know, have built something on that application layer. And those are the things that have been these. enduring companies over time in history. And so I think that what I really loved about chat CBT and, you know, once they opened up the API, I think that was like two or three weeks ago at this point now, even though it feels like a lifetime.

I think that that is the biggest parallel that I can draw because I believe that the application layer on top of chat GBT and these LLM models broadly is going to be the sort of seminal way that humans interface with AI. And I believe that that's going to be the thing that, makes AI the most accessible and important tool for us moving forward in the same way that, you know, none of us could probably imagine living our lives without applications. And so, yeah, and then also, I mean, I think that the first time I used Windows was Windows 95. And so, yeah, I really remember how having like a clean operating system with a variety of

different tools within that operating system, you know, really changed my own life as well as the life of my family, et cetera. And so I think that there's also some parallels to be drawn there about how, you know, using chat GPT and broadly artificial intelligence as its own operating system becomes like a really meaningful way to participate in the future. So the fact that it's a platform in addition to the fact of just how impressive it is is part of this. And I think when a great product is launched, the ripple-on effect, right? You throw the rock in the pond and you start to see a lot of ripples. And chat cheap G4 has those ripples. Okay, plugins. Okay, 3.5 to 4. Okay. The API. All of these ripples that are occurring, all of these

new startup founders building on top of it, that's when you can tell something is a big product launch, because the ripples, this is my theory here, and I'm developing it with you, Mr. Exits, and it's a privilege to have you on the program to develop these theories. The ripples of, the ripples of of the App Store and the iPhone. The iPhone being launched, you know, in 2008, that was launched, I'm sorry, July 2008 is when the App Store came out. But it was only six months before that, that the first iPhone came out, right? And so there's something about when these things launched that there's just other shoes to drop.

Uber had that too, because you had Uber Black and Uber X, and then you had Logistics and Uber Eats, right? Like, it just kept going. Netflix. It was just something about like, what? I can watch anything I want on demand. It's just kind of blew people's mind. And just watching Uber come to each city, or Airbnb come to each city,

had that same ripple-like effect, right? It's just like it's changing every city it goes to. L.A. became a different city because Uber arrived. The boroughs of Brooklyn and Bronx and Staten Island, shout out. Like, it just changed everything. I think it's a very interesting concept we're coming out here. I also feel like the Roadster, then the Model S, were also just colossal launches where people are like,

I don't have to go to a gas station. Yeah. And I think to your point, things like the digital service providers like Netflix, Spotify, etc. We're also these kind of meaningful shifts towards, you know, like the streaming culture. You know, YouTube, I think what I would also place into this category, you know, like the effect that YouTube has had on just educating the next generation of people.

You know, most people figure out how to do things. these days via some small video on YouTube. And then, unfortunately, given, you know, its ownership structure, it seems like TikTok is now becoming this for the new generation where I read some statistic that X number of like restaurant searches are now done through TikTok as opposed to something like Yelp or, you know, figuring out how to build a model airplane or whatever. These people in these next generations typically go to find this via short form content. And so, yeah, I think that those are also.

meaningful sort of, I guess, ripple contributors if we're going to, you know, put that label on them. My number one use case for TikTok is to save food recommendations by city. So I have a New York, I have an L.A. I have a San Francisco. I've got a Tokyo. And I just save the clips there. And I haven't done it yet. But my plan is to check some of those and just use it as a starting point for things I might want to try when I'm in a city. Because people are just doing a really great job of, and I don't know which ones are paid and bought and sold or whatever. So I'm sure there's some of that going on, just like Yelp reviews. But it's sort of like when Yelp photos, and I can see people talking about specific dishes, you know, which is kind of how I make my decisions

on restaurants. I'm not going to a restaurant as much as I'm pursuing a specific dish. And I'm trying to find the best one of that. That's just my foodie sort of culture there. If you're listening to this podcast, you clearly have an interest in startups and technology, but do you have the skills and knowledge and need for a career in tech. And if you do have those skills, are you still learning and growing? Because everyone in tech knows, if you're not building new skills geared towards the latest platforms, well, you're falling behind. And right now, that platform is AI, artificial intelligence. AI isn't just the future. It's the present. We see that happening. We're talking about it every day on this podcast. And to be part of the tech revolution, you need to

understand the core concepts behind AI, you know, things like neural networks, machine learning. These are complex terms. You can guess what they are, but why not go learn about these concepts at brilliant.org? This website helps users learn math, science, and computer science interactively. And right now, they feature some amazing courses geared towards AI, like an introduction to neural networks, 15 lessons in that one, and search engines, which includes 20 lessons on the core idea behind search engine technology. So here's your call to action. You can try everything Brilliant has to offer for a full 30 days by heading.

to Brilliant.org slash Twist to start your free trial. And for a limited time only twist listeners will get 20% off an annual subscription. I'm an investor in the company. It's a brilliant company. And I really want you to try it. For you and your company, for kids, college, everybody in between, everybody should get smarter. Let's all get brilliant together. Brilliant.org slash twist for 20% off today. Let's move on to jobs. Lowest unemployment. of my lifetime and yours, since you are a bit younger than me. And then

this constant narrative, all the jobs are going away because of AI. We need to pause AI, yada, yada. I think the pausing of AI was a ceremonial, you know, signature. I don't think anybody expect that to actually happen. But there is going to be some thought here as to what happens

to writers, copywriters, illustrators, etc. I'm wondering if you think this is going to move at the same pace it's going, which is to say a blistering pace. And when chat GPT5 comes out and Dolly 4.0 comes out and all of these other tools keep and tools that are not yet launched happen, are we going to see a swath of jobs? And let's say millions of jobs because if it's hundreds of thousands, it's not going to be meaningful to anybody other than the people losing their jobs. It's not going to be meaningful on a society level because we do retire jobs at some pace. But are we going to see millions of jobs

go away because of the advancements in AI in the coming years, short to midterm, two to five years? I think two to five years will see sort of like the indicating factors of how deep this really goes. And my assessment of it is that this will probably go pretty deep. And I think that it's because of the sort of go back to what you were just saying, the ripple effects that we don't necessarily understand at the forefront of what's going on. And so, for instance, you know, like, I think that a significant number of the employed people in the, in the country right now are literally truck drivers. And so how do these artificial intelligence models improve self-driving capabilities such that, you know, that doesn't become as much of a necessary function anymore? I think that what is

scary to me is how quickly AI is developing itself. And I think in that self-development, it's going to start to find all of these pockets of inefficiencies that we sort of take for granted as jobs in this current market and find ways to basically, you know, I think that back to the point of capitalism, the sort of performance of capitalism is making sure that you are getting the most money back for money invested, right? And so I think that artificial intelligence in sort of promoting the capitalism will find all of these pockets of inefficiencies that we just took for granted as regular jobs that we couldn't imagine our lives without. And that will take a meaningful toll on the labor force, especially when it comes to unskilled or semi-skilled labor.

When we look at the concept of surplus elites, we can dovetel it with this conversation. The rich tech companies were so rich that they hired, let's call it indiscriminately, they hired in order to have an option on talent to keep talent from working at other places, Facebook and Google being, I guess, the top examples of that, but Amazon right behind them, Twitter right behind them. And as we've seen with Elon cutting some very significant over 50% of the jobs at Twitter. And listen, the existing Twitter regime was talking about cutting a third. So it's not like he did something that they weren't planning on doing already.

He just did it to a bigger degree. Facebook getting rid of managers. People getting rid of entire departments that were involved in, you know, things that were not core to the business. Coinbase saying, listen, if you're going to work here, we have one mission, don't talk about social issues here, all of this is dovetail together. And it, I think, dovetails with this AI discussion. There are a lot of people who were in performative or non-critical roles at even tech companies, which are supposed to be the dogged, you know, focused folks. So, and then we have the work from home phenomenon occurring at the same time. Now, my theory is, you have elites demanding they can work from home. right? They're signing petitions at Apple. What they've done by doing this, by refusing to go back to offices, this is my theory, is they have sealed their own fate. Because once a manager, like myself, who was an in-person person, and I judged people for a long part of my career,

could you be at the office as long as I could? When I was an editor of my magazine, Silicon I report in the 90s, and I was there on Saturday and Sundays. When I came in on Saturday and Sunday, people knew I was coming in. And the rank and file would ask my assistant, David, is Jason going to be in this weekend? He'd say, yeah, it's going to be in. He's got two meetings. They'd make sure their asses were in those seats

when they knew I was meeting with people on the weekend. That was the culture. How much time could you put in, FaceTime, in the office? Could you get lunch with the boss after work? That was the determinant. Well, if you take somebody like me, some old school Gen Xer, and you say, hey, I'm only going to work from home, okay. And now I start hiring people in Canada.

and they cost two-thirds of what the people in the U.S. cost. And then I start hiring people in Manila or Europe, and they cost half. You just seals your fate because I can manage a Canadian or Eastern European. I can manage somebody in Manila, somebody in San Paulo, Uruguay, in Slack, and with my end-of-week, end-of-day reporting, well, then why am I paying you three times as much or twice as much? Your thoughts on how tech is going to go forward and what happens between this work-call, AI efficiency, and then people with performative jobs. Yeah.

So I'm somebody who's generally like an in-person person as well. And I think that to your point, like a lot of at least in my experience, some of the, not a lot. I would say some of the aspect of being in person was really just performative. It's like, hey, I'm willing to be consistent in my ability to show up at the place that I'm supposed to show up for the time that I'm supposed to show up. Yeah. That says a lot about your dedication to the business and a lot of instance. instances. But I do think that there is like a secret sauce that comes along with building like really strong teams in person. And I think a lot of the best companies that we've seen in,

like in history have come from like a work culture where people were really felt like they were building an important team together alongside each other in the trenches, not really disassociated. And I think that what you're experiencing sort of this disassociation from willing, from needing to have people who are necessarily American-based and moving them towards just what's more efficient for you and what makes more financial sense for you. I think that you're right to the point that it's like a very slippery slope. And once you get used to, you know, managing someone in Canada, eventually managing some artificial intelligence companion, uh, that performs, you know, some level of the same amount of work for the fraction of the cost, uh, becomes not

something that is even scary or slightly weird to you because we're almost indoctrinating ourselves to become more disassociated from the teams that we're building moving forward. I think this is kind of the key. I set up corporations for inside.com and launch in Canada. I have Canadian corporations. I set them up. Once you set them up and you start experiencing how great Canadians are and you get the Canadian currency exchange. In other words, a set $75,000 analyst, you know, senior person in Canada. In U.S. dollars is going to be 75% of that in U.S. dollars. And then they stay twice as long because they appreciate the job working for an American company.

And in Uruguay, the developer, you know, instead of being 150K is 75K and it's half price, you get two for one. And you've got, you know, some of these sponsors, like we have on our program like lemon.io and, you know, some of these sponsors that we have, they abstracted for you. They will hire the people and do all the, you know, payments and management and stuff like that. I think the world's changed and people just don't realize it yet. And, you know, you put the 10x AI layer on top of this Mr. Exits and then all of a sudden, I think we're going to see the same trend I start at the beginning of my angel investing career where startups went from being two or three million dollars to get a product to market. to being 500,000 to a million dollar

to get a product to market, and then in the YC sense and, you know, TechStar sense, it all of a sudden dropped down to $150,000 see in a product to market. I think that continues where the 10x, everybody's a 10x developer now with AI.

Yeah. And so the long tail of apps that we talked about are going to be so easy to build. I agree. And I think that that long tail only gets longer when you realize that AI is fully scalable and doesn't need to take a vacation, doesn't need to work a certain minimum amount of hours. Like if you have 24-hour development and constant engagement with the products that you're building

from the quote-unquote, I guess, virtual team that will come along with AI, I think that not only do the things get meaningfully cheaper, but they become meaningfully quicker to market as well. Yes, this is going to be the amazing output. And this is why I think job destruction, which is what everybody is planning, is going to be the opposite here in the United States. I think it's going to allow more entrepreneurs to make better products faster.

What that means is more experiments. I've been through this. I don't think that we're going to run out of ideas for apps to build. I think a lot of the, quote-unquote, silly niche apps, which is what people thought like a meditation app might be

or a working, a workout app, like a CrossFit app. We have an app called Fitbaugh that's doing incredibly well. Steasy. app, com, a meditation app. People thought,

like, when I invested in those, like, ah, there's too niche. And then all of a sudden they get to hundreds of thousands of paid members, millions of paid members.

You're like, oh, wow, it's not that niche. Well, if you can hire 10x developers and they're available everywhere around the world, well, then all those niche apps are going to be possible, and they're going to be awesome.

Like all trails. I have an app called Slopes, which is a skiing app. that tracks all your skiing and your runs and your speed. I just think we go right down the long tail of apps and SaaS services, and you have five-person teams building $10 million companies. Now, is that meaningful for a venture capitalist then becomes the question? Well, I can tell you for a seed investor and a pre-seed investor like myself

and somebody who's got an accelerator and who likes to put the first 25 to 250K into a company. It can be very meaningful because I'm investing at $2, $3, $4,000, $10 million company being run by 10 people, man, it's got a high margin. It's got a super high margin. Somebody's going to want to buy that business for $100 million, for $200 million. So I'm very excited about this future now. If you're a late stage investor, maybe you're not as excited. Your thoughts. Well, I guess the way that I would push back and I would love to understand your thinking here is what, how do you think about it if the artificial intelligence is the one that starts to pontificate on all of these pockets of value and start creating it itself? This is very interesting. I had this discussion just yesterday. I had a little

egg hunt at the house and a great entrepreneur and I were debating this. What if AI just starts making apps and they're just commoditized? And, you know, it reminds me of making movies. In that late 90s, a camera came out. I think it was the Sony VX 1000. Yeah, VX 1,000. It was a digital camera. And a guy named Wayne Wang did a movie called Center of the World with Peter Sarsguard. I was in it for a brief time, kind of playing a character like myself. Another guy guy named Bennett Miller made a film called The Cruise. And I hosted a screening for him when I was doing Silicon Allie Reporter in New York City. This $2,000 or less camera became the workhorse of digital filmmaking, Mr. Exits.

And in that time, everybody said at Sundance, and I was hosting a panel with these type of people, and they said, you know, anybody can make a movie now. These digital cameras can blow up to film, and we could make film out of digital. So what they would do is they would take the digital print and then literally make film out of it. But then they were like, well, we'll have digital projectors eventually. Now all theaters are digital projectors, obviously. And we can take as many takes as we want. So the actors are more freewheeling.

The script can be loosey-goosey. We can film five endings because we don't have to worry about having a script. We can just improv everything. And it's going to cost nothing to edit these because you can edit it on your MacBook Pro. All of this was true. but yet we didn't see a massive proliferation of film and actors in some ways, and we did in other ways. And the reason we didn't see all these extra films companies is because it's hard to want to make a film. It didn't take into account motivation.

So could the AI just make thousands of films that are random and we could all just sort through them? Sure, I guess that's a possible future. But I think having somebody lead and want to be the figurehead, the director, if you will, the orator, is still necessary. And we'll be necessary for some time. somebody still has to want to make an app for meditation, for fasting, for skiing, for tennis players. And they're going to want to sit there and study it, build the brand. And so I don't think we're even close to the AI wanting to go out there and just populate the app store. I think you still want to have somebody being the curator, the director.

It's just that you won't need a team of a thousand people to make a film. You need a team of 10. That's what I think our lifetime will be about. Yeah, I get that. And I think that, like, one of the most defensible things in the face of AI is being the arbiter of taste, you know, like, um, AI can provide to you a lot of factual information, but having a level of taste and culture is something that's uniquely inherent to human beings at this current point in time. And so I do see that as being one of the most defensible things. I would say the, the sort of pushback that I would have on your, um, sort of parallel lines drawn between the film industry is that one thing that the film industry is that one thing that the film industry is that the film industry is that one thing that the film industry. was hampered by large, by and large is distribution, right? Even when these cameras came out, if you wanted your film to be seen, you still had to get it picked up by a certain distributor who would allow it to be played in movies, etc.

I wonder, and the thing that I sort of pontificate on is what happens when distribution is completely open and everybody is on a level playing field with distribution, including the AI, and the AI can go and parse large swaths of data and say, hey, you know, there's a bunch of skiers out there that don't really have an app that suits their purposes very well. We've looked at the data behind these apps and we've looked at the data behind how many people are skiing and how much money is being spent on the ski industry as a whole. And we realize that there's this large gap between what skiers have available to them as an application layer to be able to enjoy their experience more versus what's currently on the market.

What are the things that we could do to fill that gap? And then the thing that becomes sort of, I guess, something to think about for me is that they have unlimited distribution to be able to put that in the hands of as many people as possible, given the tools that we have available to us. And so, yeah, I just wonder if open distribution makes this a little bit more of a challenging premise. It does, because there was this concept that the great stuff will rise. And in some cases, they do. Open platform like podcasting on Open Standards or YouTube, which is open to almost everybody. You have to be a little bit of a slave

to the algorithm, but it's free and anybody can post any length video up there. TikTok, Instagram, you know, you have gatekeepers. They could kick you off, of course, but you do have a lot of options there of where to put your content. The app stores, it's a duopoly, but you can still get it out there.

With rare exception, will you be stopped? It's probably, and maybe a little bit of taxes on the margin if you want to make money. But certainly it's a lot more open than the studio system, or getting your software in a box on shelves at Comp USA, which was how software was distributed before the app stores. So it's going to be a brave new world. I think we've hit on something here,

which is the or tour. The person, the director, the conductor, still has to be, you know, in some position of taste making and refinement in this. Did you see the movie, Tar? I did not. Oh, well, this. is your homework. You have to see him. Mr. Exits is going to love Tar. I believe this is going to be right up your alley. It is about a true, true, true. And here is all you need to know about our future by the philosopher king, Mr. Rick Rubin. Do you play instruments? Barely. Do you know how to work a soundboard? No. They have no technical ability. And I know nothing about music. You must know something. Well, I know what I like and what I don't like. And I'm

I'm decisive about what I like and what I don't like. So what are you being paid for? The confidence that I have in my taste and my ability to express what I feel has proven helpful for artists. Your reaction, Mr. Exits. I think that's a great parallel. And Rick Rubin is somebody that I look up to quite a lot for the meaningful additions that he's made to the music industry through a variety of different. genres. But yeah, I think that that goes back to the point that I was making that I think that the arbiters of taste, people who have really understood at an inherent level what society and

culture needs, those are some of the most defensible people in the world. And I think that that is going to be the last thing that AI disintermediates is the ability to be an arbiter of taste in the truest form that reaches people at a human level. I think this is just so on point as to where we're going. And shout out to my guy Rick Rubin. He sent me his book with a very kind Nodnet, and he's a big fan of All In. And I'm going to go hang with him. He said, hey, let's hang.

I think that would be an interesting conversation. I would really love to have him on All In. I've got to talk to my besties because we have a no guest rule right now, no guests. But I think we should make an exception for Mr. Rick Rubin. Let's wrap here as we talk about VC funding right now. I could give you a ton of statistics. Just to tee this up, global VC funding has dropped 50% over the past 12 months. It was $76 billion in Q1, or it is $76 billion of this year.

That's down 53% from 2022. and two major fundraisings in that account for 20% of the total. Open Eye raising $10 billion from Microsoft and Stripe raising $6.5 billion to cover those expiring RSUs. In other words, pretty dark out there. It's pretty thin. Without those transactions, Q1 would have been the worst quarter for VC funding since 2018. Take a five-year step back, basically, six-year step back.

Tiger Global, major investor in both VC funds and startups, is reportedly exiting the market. They're trying to sell their positions in VC. funds in the secondary market. So it's all coming apart. And then it's created a bit of a vicious cycle. All of these funds were, all of these venture funds, or venture firms, we're creating multiple funds.

Crypto fund this, growth fund that, early stage this, seed stage this, yada, yada, classic fund, etc. But all these funds are not doing distributions, no distribution. Then they ask for more capital calls. And then they have fewer distributions because the market's still on the floor. And then all these TVPI markdowns have to happen. LPs are balancing, the balance sheets are just totally out of whack. But they're asking for more commitments to funds to do more capital calls.

And the LPs have said, no mas. I can't take it anymore. They're tapping out. So VCs are looking for international LPs and the kingdom, Saudis, their public investment fund, listed all of their VC firms last week on their website. This is something that LPs never do. They don't feel any obligation to tell people we're invested in these firms unless maybe they're doing a PR campaign, which the Saudis obviously are doing.

They want to get more involved. So let's talk about the state of being a fund manager. What is the state of fund managers today? And then how do we work out of this indigestion? Mr. Hex's. Yeah, I think that the state of being a fund manager today is pretty tough. I think especially at the seed stage, which is where I play out and I know where you play at as well. You have all of these entrants that we're typically doing sort of later stage stuff,

but realize that that game isn't a winning game right now. And so we're moving earlier along in sort of the funding cycle to be able to participate in things that they feel like are a little bit more fairly priced and present larger upside. You see even some of the largest hedge funds and crossover funds in the world starting to participate in deals and doing stuff out of Y Combinator, which historically wasn't necessarily a thing. So I think that that's one thing. The second thing that I think is that the LP market is very, very fragile right now, to your point, a lot of especially like domestically on the endowment side, the foundation side, etc. A lot of those types of entities are experiencing the denominator effect right now where they're over indexed to venture capital and haven't really seen. the markdowns yet, and so are kind of in a gray area as to what their total actual venture exposure is at the current point in time. And so, you know, a lot of them are waiting to to basically come on into funds, either on follow-ons or new funds, until they get that sort of accounting sorted out. And then even internationally, I think that, you know, Saudi had

been, I think that a lot of people, especially the most discerning managers, saw the writing on the wall and made their trips to Saudi, you know, six months ago, almost a year ago in some instances. And so I think that Saudi is very, very conscious, and not Saudi, but the region in general, is very, very conscious that they're one of the last games in town. And so even there, you know, whereas they would be willing to take flyers on maybe some less, you know, less well-known funds in the past. And, you know, I've been visiting that regions in sort of 2015, 2016, so it's been interesting to see the shift. But I think that, yeah, like now all of the best, you know, the PIF and Mubadla, et cetera,

all of these, you know, governmental funds and quasi-governmental funds now have exposure to the best funds in the world. They're in Andrescent, Sequoia, Founders Fund, thrive, et cetera, et cetera. And so even there, the bar has become extremely high to be able to, you know, get any of their money. And they're inundated with requests such that it's hard if you're a new manager, to even get in a meeting over there because they're already dealing with the best exposure in the world. And so to really hop over that bar and, and, you know,

become interesting to them has become a much, much higher hurdle. So that's how I've been seeing it. Yeah. And it does seem like, uh, it's, we're going to see a lot of these first time fund managers,

maybe two funds in, uh, they're not going to be able to raise funds. And so I think, or are they going to raise very modest funds? The folks who started investing in 2018, 19, 20, 21, 22, that five-year period, those vintages, I think, are going to be super challenged, especially if people didn't take, speaking of exits, any chips off the table. If you were marking up your fund two, three X every year for two years and you had a five, six, seven, eight X fund, which some people, who I was even an LP in were telling me that we had an eight X fund. And I'm like, wow, we have an eight X fund.

maybe we should return 2x now, but they didn't. Now I think those 8x funds are going to be 2x funds now, or 3x funds, or maybe we'll just get our money back, which is fine. If you're an LP, I'm in 20 funds. I'm okay with some of them being just, I made a bet, and I didn't even double my money. I just got my money back, or I got half my money,

or I triple my money, whatever it winds up being. You know, I'm going to do a blended portfolio against the 20, but what do you think of some of these newer funds during that? window of the last, the third act, let's say, of the boom cycle. Are they just going to quit? It's too hard. Game on the field too hard? Yeah, I mean, I'm interested to see where it happened, what happens. I think that the venture capital industry in that sense shrinks quite a bit. You know, you had a lot of these funds basically doing all different types of strategies all over the place, some in crypto, some in elsewhere.

And I think that, you know, like the net new funds to the ecosystem is probably going to shrink quite a lot. And I think that even if you're a great manager over the last couple of years on paper, you're going to find it quite hard to continue to be able to do so. But the sort of like kind of carmic irony of all of this is that I do actually genuinely believe that 22, 23 vintages are going to be quite good, especially because you're experiencing this sort of anytime there's this like paradigmatic shift, right, where, you know, App Store, for instance, when the app store came out, There were all of these amazing funds in the years after that where, you know, they took advantage of this shift and were able to capitalize on some really meaningful additions into the world as far as interesting companies go. And I think that you're going to see the same thing here off the base of AI.

I think that you're going to see a lot of companies that are leveraging it in interesting and unique ways that will be able to provide value. And I think that, you know, the large enterprise companies at the world have yet to position themselves very well against AI. or 4 AI unless you're like Microsoft or, you know, Google, et cetera, a lot of these companies are kind of been caught wrong footed in this instance. And so I think that there's a lot of exit opportunities actually for good AI companies moving forward to be able to, you know, see some distributions if you're on the venture side. So I think that 23 and 22 vintages are actually going to be meaningfully interesting.

But yeah, if you're a new manager, it's going to be really tough to get that ball over the line for that. paradigmatic ideal uh these will be ideal vintages i'm seeing it now in my own portfolio i am making a lot of 25 000 bets on two or three developer product managers who need a friend and family check just to incorporate and try to get into an accelerator i'll make those quick 25k bets in one meeting try to make a hundred of those this year put 2.5 million on the streets just letting people get in business and then put 250 in the best 20 of those uh for another $5 million,

it's a nice, nice little portfolio you can build very quickly right now because people are afraid to write those first checks and everybody's trying to fix their existing portfolios and work out

some, you know, semblance of a return for those previous portfolios, which is noble to do. But man, I am meeting with so many great founders right now at reasonable valuations

with the notable exception of YC companies, a lot of hand-wringing there, 15, 20, $25 million dollar valuations for companies without customers yet or maybe just MVP's. Your thoughts on the two time of your hand-wringing. I know you're early in your venture career, but how do you look at, even in a market like this, outrageous valuations coming out of YC?

Yeah, I mean, I think that that's not, the onus there isn't necessarily on the companies, but more on the institution. I think that YC kind of pushes people that direction. And that's totally fine. they're willing to set whatever valuations they believe that the market can bear. But I think that that's indicative that the market is still willing to bear some level of inflation, especially at the seed stage, specifically because it's become, to my point earlier, a much more competitive game, right?

You know, you have a lot of funds that weren't necessarily doing seed before that are now trying to get in. And so they're willing to pay to play in that instance, especially when they don't have like a history or track record of really spending a lot of time there. So, yeah, that's, I think that it'll be interesting to see how those valuations end up playing out. But for the time being, it seems like that's just kind of the new standard. It's very interesting to me, people complaining about it. Here's what I'll tell the people complaining. I did a whole episode on this, but I'm interested in your reaction.

If you don't like the valuations that you see at Demodin, whether it's TechStars or My Accelerator, launch accelerator, or Ycombinator. And mine, I advise people to just clear a market quickly at a $5 to $12 million valuation. standard to not try to go for 15 or 20 and do some unnatural exercises because you could get an evaluation trap where when you raise your next round, there's no way to go up and you have no lead investor. So you're kind of trapped, right? And maybe even having to have a down round. And now you're unintentionally putting yourself in a in a debt spiral where people have to get warrants or something and it just gets messy. Like when your contact, I little have people contacting me right now saying, we're raising at 15, 20, 25. We'll give you a

you a side deal, J-Cal. We want you on the cap table. We'll give you a better deal than everybody else. And I'm like, do people have MFN and their side letters? You know, it just gets, it gets so messy. And I'm like, I just don't want to be involved in messy on a cap table. Putting that aside for a second, I'll get your reaction to that in one minute. A very easy strategy for the dentist or the new fund manager who's at a YC demo day and objects to the $20 million dollar valuation is to do three meetings a day over Zoom for 30 minutes each, 90 minutes of work. Let's say you put it in another 90 minutes writing your notes or setting up those meetings or even an hour or two. Okay, it's a five-hour day. Do a five-hour day meeting three companies a day,

hour and a half for each company, two hours for each company, whatever it is. Let's say two hours for each company, six-hour day. Do that for, I don't know, let's say 60 days, and you will now have 180 companies you've met with. And those 180 companies will be non-YC demo day companies at a $5 to $12 million valuation, pick the 10 best, and, you know, over that six-month period or four-month period, make your 10 investments, but do the work. If you're going to a sorting mechanism like YC and they charge you triple the valuation of non-YC companies, well, you get to screw around for the other five months of the year and go skiing or whatever you want to do, and then just have them be your outsourced workers,

and you're just putting money to work without any thoughtfulness or any actual work. So you pay the price. Am I crazy or on target, Mr. Englands? Yeah, I think that, I mean, YC has a history of presenting game-changing companies to the landscape, and I think that a lot of the best entrepreneurs

are inherently attracted to YC simply because of the pedigree and the types of companies that it's showing. shown to put out there into the market in the past. But I do think that, yeah, to a certain point, there are a lot of funds out there that just rely on Y Combinator's ability to pick and choose and attract great founders, such that they don't have to go and do that themselves. However, this kind of goes back to a little bit to what we were touching on earlier, where it's like, you know, being the arbiter of good curation will consistently provide you more value than not

being able to do that. And so because you've built a brand name around being a good curator, there, it becomes meaningful and, you know, people are willing to pay for that good curation to a certain extent. Yeah. And listen, they have invested in 4,000 companies, right? And they've had maybe 70 unicorns or something in that range. And the unicorn would represent a 25x, 50x, something in that range, return if you were investing at a $20 million valuation.

So, you know, if one percent of the company, maybe 2% of the companies become unicorns. Well, let's just say 2% of them, I'll be generous, become unicorns. And 1% of them you actually can exit. Yeah, you know, the question is, can you pick the 1%? And the one thing I'll tell you that's going to be challenging is that the top companies at YC, this is a secret, they'll deny it, but I know it's the truth. The top companies don't present a demo day.

They elect to opt out of the demo day. So what you are seeing at Y Combinator typically as a dentist or angel investor or seed fund going to Demo Day, and I think it's well worth going. And I think if you could be an LP in Y Combinator's venture fund, you would do it. Because I think it will be a great fund or maybe above average fund, let's say. The truth is, you may have seen all the Aces and Kings remove them the deck and taken by the YC partners and the people in their orbit. So when the next Airbnb Coinbase or Cruise or DoorDash or Dropbox go through YC, people know it. They get a sense like, hey, this might be one of the winners.

Those people raise before Demo Day. They're oversubscribed. Why? All the partners, all of the internal LPs of YC, they cherry pick them. And this cherry picking has been denied, but I know it to be true because the founders email me and say, hey, we're not going to be at Demo Day, but I wanted to meet you because you're JCal and I would like to be on the pod or just have you on the cap table because I think you're cool. And that is, I think, the danger as an investor is.

You think you're swimming in the pool with those 70 unicorns. I would think at least a third of them get taken out before they go to Demo Day. So you're not actually getting a chance to invest in this. Yeah, I feel like that's a fair assessment. Yeah. Does it mean YC is not awesome? Anybody who I invest in who wants to go to YC, I do a waiver for. So if we invest in them at $6 million or $10 million and they tell us they want to go to YC, it's not awesome,

and give them 7% of the company for 125k out of a $2 million valuation. You know what I say? Go for it. Why so you can get a better deal than me? Because ultimately when they graduate, it's going to pop up to $20 million. They're going to get $3 million, you know, and only dilute 15%, so I'll still be ahead of the game. That's my philosophy on it. I think it's a great program.

If you get in, you should go. Anything I missed on today, Mr. Exits, that is on your docket, things that you're thinking about? No, I mean, I have to hop in a little second, but I would like to hear that. about the Mayor Jason campaign? Great question. I have thought, noodleed on, public office,

because I think it would be fun, entertaining, and I might be good at it, because I would be solely focused on the top two or three issues. I need to learn a lot more about politics. I need to finish up my venture career. So I don't think it's a short-term thing,

but it's an ongoing joke because at a poker table, the origin story is we were at poker and you know the suspects and somebody said if Trump can be president Jake Al could be mayor and everybody laughed

and then somebody said I will put up $250,000 for your fund to be mayor and then somebody else said I'll put up 500 and then somebody incredibly high profile said I'll put up a million and I will introduce you at every event da da da da da so all of a sudden two or three million dollars

and funding showed up at a poker game for me to become mayor. So I did what any normal person would do is I got the domain named Mayor Jason. And thought about it and counseled with my spouse and my family. I thought, hmm, would I want to do this? I'm 52 at the time. It was probably 46 or 7. I said, I feel like I got a little more work to do as an investor. But I do think in five or 10 years, I might want to try that.

So my current plan is to learn and be vocal. And you saw me be vocal trying to get Chesa Boudin out where you see me tweet about stuff. And I'm in learning mode. I don't understand this, but I'm going to have the GrowSF founder on this podcast. I'm going to talk about how the supervisors work. And I could be mayor of Austin, New York, L.A., or San Francisco before I'm gone if I live long enough. And I think I do a heck of a job. And yeah, I might be a bit of an interloper because I've lived in a bunch of different cities. But I think I could be a common sense,

joyful mayor. I think of like mayor Koch when I was growing up. It was very joyful mayor at Bloomberg. Listen, Giuliani, before he went crazy, was pretty effective. And I think I might have a good time. It might be fun for me and intellectually stimulating. So that's my only thought on it. I'm not like making some immediate plan for it. But it's not a, it was a joke. So between an absolute joke at a poker table and absolute definitive reality, it sits equidistant between those two. Well, I'm wishing you all the best. I think that that would be a definitely an interesting thing to see. And there's no way that anybody could do any worse than what we have going for us now. So I think there's a ringing endorsement for Mr. Exits. I am backing

Jake out because it can't get any worse. And I think that's actually there's something true to that. Yeah, I think that, yeah, I think that, yeah, by all intents and purposes, you seem like you have a good grip on what San Francisco actually needs. And so, yeah, I hope that, uh, I hope that, you know, this joke turns into something a little bit more real. Here's my pitch. We are going to get one thing done at a time here.

Okay. The first thing we're going to do is anybody who's a violent criminal or who is selling fentanyl. And that's the only drug. We're going to have a zero fentanyl policy and a zero violence policy. You can't hurt anybody. You can't steal from anybody. And you can't sell fentanyl.

You can't do fentanyl on the street. That's it. We're going to work for a year or two on that. Everything else, we'll make progress on, sure. But those are going to be the non-negotiables. We'll just start with the non-negotiables. You want to sell fentanyl. You're going to jail.

We catch you doing fentanyl. You're either going to go to jail or rehab, or we're going to give you you a bus ticket home, which is what we used to do. You just give people a bus ticket home. You can't have every single junkie, down on their luck person, go to one place and then create a dystopian neighborhood for them to, you know, enable their addiction. It's much better if all of those people with addiction issues stay in their own hometown and everybody in their hometown deals with their own homegrown addiction

addicted individuals as opposed to sending them all to one place because it's got the cheapest fentanyl. This is an economic issue from everything I've learned. The number of reason to police something like fentanyl is so that the price goes up.

And if the price goes up, consumption goes down. And if the cost of selling fentanyl is you might go to jail for a year and you might have to spend $5,000 or $10,000 on attorneys, then people go find another place to sell fentanyl

or they stop selling fentanyl and they sell some other drug. And I think that's actually a pretty good path because fentanyl is a super drug, right? It's so obvious that this drug is different than every other drug. If people are taking psychedelics or doing cannabis or even stuff that's a little stronger, it doesn't seem to have the same dramatic effect as fentanyl and these crazy opioids.

I don't know. Is that too common sense to say out loud? No, I think that it's definitely needed and it seems ridiculous that you even have to question if that should be something that's allowed. So yeah, why could you say that out last? Shift on that, yeah. It is literally a super drug manufactured in China that comes in through the cartels in Mexico

and then hits the streets in like three or four major cities that allow it. I just think you have to look at it and say, well, if this drug is resulting in nine overdoses a day and all of these other drugs, you know, people are taking Molly or LSD or mushrooms or peyote or cannabis or even. cocaine or meth and they're not overdosing at this level and they're not breaking into people's homes and they're not killing people at this level. Okay, let's just look at each individual

drug and work backwards for the ones creating the most harm. Internal harm for the individual and external harm. There are people who are like, you know what? Heroin wasn't so bad. There are literally people saying like, you know, people didn't overdose at heroin at this rate. Yeah, yeah, yeah. Which is a wild

thing to say, to be honest. It's a wild thing to say. When I grew up, they were like, if you take heroin, Philip Seymour Hoffman, you're going to die. Right? Like, it's just, it's a path to death. And it's like, is it a path to death at the same rate as fentanyl? It's like, oh, no, things are not even close. This is a thousand times more powerful than heroin or whatever it is, 500 times. I mean, I guess it depends on the lot you get. So, anyway, it's, it's interesting to me. Mr. Exits, you are a great guest. I would like to encourage everybody to follow at praying for exits on Instagram. And then on Twitter, Mr. Exits. One of the great, parody accounts run by somebody who's on the inside and who does an amazing job on this program, just chopping it up. Well done, Mr. X. It's another great appearance.

Thank you, brother. I appreciate it. And yeah, I would always happy to have these conversations anytime there's some new paradigmatic shifts happening. So hopefully we can do more of these in the future. We will. We will do it every six months. I have you on the six month rotation officially here at this week in startups.

And I will look forward to us having some ramen or sushi or something. Okay. We'll see you all next time. everybody, bye-bye. Bye-bye.