AI transcript
0:00:02 (upbeat music)
0:00:10 – Hello, I’m Guy Kawasaki.
0:00:12 This is the Remarkable People podcast,
0:00:16 and we’re in the business of helping you become remarkable.
0:00:19 So we scour the globe for the most remarkable people,
0:00:23 and we found a remarkable person named Mike Maples Jr.
0:00:26 And in the prelude, we were just discussing,
0:00:28 he and I go way back.
0:00:30 In college, he read my books,
0:00:32 which is kind of a disturbing thing
0:00:36 when people tell you that they read your book in college,
0:00:39 and now they’re way out of college.
0:00:43 But anyway, so he is a venture capitalist today.
0:00:47 He’s the co-founder of a leading Silicon Valley seed fund
0:00:51 called Floodgate, and he has invested in companies
0:00:54 like Twitter, and Twitch, and Okta.
0:00:57 He’s really one of the pioneers of seed capital
0:00:59 in the mid-2000s.
0:01:02 So with no further ado, Mike Maples Jr.,
0:01:04 welcome to Remarkable People.
0:01:07 – Hey, thanks Guy, and I’ve been looking forward to this.
0:01:09 I think I’ve probably known you much longer
0:01:11 than you’ve known me, because I got to know you
0:01:14 somewhat through your books when I was in college.
0:01:17 – Wow, like I said, that’s kind of a double edged sword.
0:01:20 Well, as long as you don’t think that I wrote Rich Dad,
0:01:22 Poor Dad, I call that a win.
0:01:24 So I’m easy to please that way, Mike.
0:01:26 – Yeah, yeah.
0:01:29 The ones I really remember in my formative years
0:01:31 were The Macintosh Way,
0:01:34 and then the other one was Selling the Dream.
0:01:36 And I think in Selling the Dream,
0:01:40 I was actually at Kepler’s bookstore when you launched it.
0:01:42 I probably have a signed copy.
0:01:43 And one of the aspects of it I remember
0:01:46 is I think it had the Macintosh product introduction plan.
0:01:48 – Yes, in the back.
0:01:50 – So at the time, I was a young product manager
0:01:53 at Silicon Graphics, and you didn’t really get trained
0:01:55 in marketing back in those days.
0:01:57 And so everything I knew about marketing
0:01:59 is just what I read in marketing books.
0:02:01 That was an actual introduction plan.
0:02:03 I was like, “Hey, man, I could really learn something
0:02:04 “from this.”
0:02:08 And then reading your books led me to Regis McKenna
0:02:09 and some of his work.
0:02:11 I always thought that he had some really good ideas
0:02:12 around relationship marketing
0:02:15 and how do you evangelize ideas.
0:02:17 Yeah, so I feel like I’ve probably known you,
0:02:19 hopefully I don’t seem like a stalker,
0:02:23 but I’ve known you since you were CEO of ACIAS.
0:02:24 – Wow.
0:02:26 – Man, you’re going back.
0:02:28 You’re going back so far.
0:02:29 I was young.
0:02:31 (laughs)
0:02:35 So I loved your book and I see so much stuff
0:02:37 that I agree with in your book.
0:02:39 And let’s start with something very basic.
0:02:43 Your book is all about getting these inflections
0:02:46 and getting insights from the inflections
0:02:48 and turning it into ideas.
0:02:51 So let’s start with a definition to help everybody.
0:02:55 What exactly do you consider an inflection?
0:02:59 – Yeah, so an inflection is a change event
0:03:02 that’s actually external to a startup
0:03:04 or any business for that matter.
0:03:08 And it allows a startup capitalist
0:03:10 to compete by changing the subject.
0:03:13 So what I like to say is that in startups,
0:03:15 better doesn’t matter
0:03:18 because business is never a fair fight.
0:03:19 And if you’re a startup,
0:03:23 you have to have some form of weapons
0:03:25 to wage asymmetric warfare on the present.
0:03:29 You have to turn the incumbents’ greatest perceived strengths
0:03:31 into their biggest weaknesses.
0:03:33 And the way entrepreneurs do that
0:03:34 is they harness inflections.
0:03:37 They use inflections to bend the arc of the present
0:03:39 to a radically different future.
0:03:41 And by doing that,
0:03:45 they deny the premise of the rules of competition.
0:03:47 They show up seemingly out of left field
0:03:50 and now all of a sudden they disorient the incumbents.
0:03:53 Airbnb did this in hospitality
0:03:55 and Twitter did this in blogging and communication.
0:03:58 But nobody ever when they saw Airbnb said,
0:04:00 “Well, how does that compare to Four Seasons?”
0:04:02 And nobody when they saw Twitter said,
0:04:04 “How does that compare to WordPress?”
0:04:07 It stood alone as an entirely new thing.
0:04:09 I like to say better doesn’t matter when you’re startup
0:04:11 because if you’re better,
0:04:14 then the customer’s gonna have an alternative
0:04:15 to your startup.
0:04:17 And why would they pick your product
0:04:19 when you’re 80% likely to go out of business?
0:04:20 They’re only gonna pick your product
0:04:23 if it can’t be reconciled with anything
0:04:24 they’ve ever seen before.
0:04:25 And if they say, “Oh my gosh, where have you been
0:04:26 all my life?”
0:04:29 And so the way that the founder achieves that goal
0:04:31 is they harness inflections.
0:04:33 They use the power of inflections to offer something
0:04:36 that would seem unthinkable before the inflection happened.
0:04:38 – But Mike. – Yes.
0:04:43 – Do inflections cause companies to succeed
0:04:47 or do companies cause inflections to succeed?
0:04:49 Which way does it flow?
0:04:51 – Yeah, so I like that question
0:04:54 and it is one of these kind of recursively existential
0:04:56 questions too, right?
0:04:58 And the way I internalized it was,
0:05:01 I was like, okay, what should founders care about?
0:05:04 And what I thought was, okay,
0:05:08 founders need some type of a power to change the subject.
0:05:11 And so when I think about an inflection,
0:05:13 whether the founder caused it or leveraged it,
0:05:16 what matters I think from the founder point of view
0:05:17 is three things.
0:05:21 One is just what is the specific empowerment?
0:05:24 Does it offer something that can provide a 10x benefit
0:05:29 or something radically unique that’s never been seen before?
0:05:31 Or is it just an API call that got added
0:05:33 to Stripes API list, right?
0:05:36 So like a good example of an inflection would have been
0:05:41 it was empowering was the iPhone 4S had a GPS chip in it.
0:05:43 And you could have had the idea for ride sharing
0:05:45 before the iPhone 4S, but it wouldn’t have mattered
0:05:47 because you couldn’t have implemented a system
0:05:49 that embodied that idea.
0:05:52 But now all of a sudden you have a GPS chip in the phone,
0:05:55 you can locate riders and drivers with an algorithm.
0:05:57 So that’s an example of something very empowering.
0:06:01 The second thing we wanna see in an inflection is,
0:06:02 who does it empower?
0:06:03 Who cares?
0:06:05 And in the case of the iPhone 4S,
0:06:08 a lot of people care ’cause a lot of people have smartphones.
0:06:11 And so the potential surface area of the empowerment
0:06:13 is very high because if you believe
0:06:15 that smartphones will keep happening
0:06:17 and they’ll keep having GPS chips in them,
0:06:19 then potentially that’s hundreds of millions
0:06:21 if not billions of people someday.
0:06:25 And then the third aspect of the inflection is,
0:06:27 I call it the empowerment conditions.
0:06:31 And so we’ve had nuclear power since the ’40s,
0:06:33 but we haven’t built a nuclear power plant
0:06:35 in the United States since the 1970s.
0:06:37 And so just because you have a power
0:06:39 doesn’t mean you’re gonna use it or be allowed to use it.
0:06:41 And there might be political factors,
0:06:43 there might be trust factors,
0:06:44 there could be a lot of reasons
0:06:47 that people don’t decide to adopt it.
0:06:49 So those are the three things I look for.
0:06:50 What’s the magnitude of the empowerment?
0:06:52 Who does it empower?
0:06:54 And under what conditions will people decide
0:06:55 to take advantage of it?
0:06:58 And under what conditions will they decide not to?
0:06:59 And if you can get all three of those things
0:07:02 going your way as a founder,
0:07:05 now it’s kind of like a rock and David slingshot
0:07:06 against Goliath, right?
0:07:09 Now you have something that you can bring to the party
0:07:11 that changes the subject.
0:07:14 – When I read your book and I read that concept,
0:07:18 I thought to myself, oh my God, this is such a high fence.
0:07:23 In a sense, you’re saying that every successful startup
0:07:27 either caused or significantly jumped on an inflection.
0:07:31 And I gotta tell you, I see a lot of startups
0:07:36 that I would hardly affiliate them with truly an inflection.
0:07:39 So are you that tough?
0:07:41 I mean, if somebody shows up at flood gate
0:07:45 and they just have something better, better,
0:07:47 do you just throw them out the door?
0:07:48 – Well, I don’t throw them out the door.
0:07:50 I wish them well, right?
0:07:52 But what I say to them is, look,
0:07:55 do you want to pursue an idea that has outlier,
0:07:58 unbounded upside potential or not?
0:08:01 And if you’re not harnessing an inflection
0:08:02 in your startup idea,
0:08:06 you’re competing in somebody else’s sandbox.
0:08:09 So the mistake most startups make is they say,
0:08:11 I want to go after big market.
0:08:14 And that makes sense on the surface
0:08:17 because big markets have lots of customers and revenue.
0:08:20 But the problem is that the founder often unwittingly
0:08:23 buys into a context, which is the market
0:08:26 as it’s defined as the market.
0:08:28 And if the market’s already defined,
0:08:30 then somebody’s defined it.
0:08:32 And that person has the advantage over you
0:08:35 because they get to define the discussion that occurs
0:08:37 and they already have the advantages of the incumbency.
0:08:40 And so therefore, it’s kind of like
0:08:41 if you’re competing over territory
0:08:43 that’s a tiny little municipality
0:08:45 and an already discovered thing,
0:08:47 you’re not gonna have as big of an upside
0:08:49 as if you’re Lewis and Clark mapping
0:08:51 the Louisiana Purchase territory
0:08:55 and discovering the undiscovered land.
0:08:58 And so I’m not interested in the total existing
0:09:00 or total available market.
0:09:01 I’m interested in the total future market.
0:09:04 I’m interested in a product that defines a future market
0:09:06 because it harnesses these inflections.
0:09:08 And so I just say to a founder, hey, look,
0:09:11 I’m not for everybody, but that’s what I’m in it for.
0:09:14 I’m trying to find startups that harness these inflections
0:09:17 in unconventional ways to create a product
0:09:20 that radically changes how people feel and act.
0:09:22 And to me, that’s where the startup wins
0:09:24 is when they do that.
0:09:25 There’s two ways to look at the future.
0:09:26 Do you believe it’s gonna be a new
0:09:28 and improved version of the present?
0:09:31 In which case the incumbents are gonna usually win that.
0:09:33 Or do you believe that the future is not gonna be able
0:09:35 to be reconciled with the present?
0:09:37 In which case the startup can win.
0:09:40 And by the way, you work for a guy who’s the master at this
0:09:42 and he did it even in a big company.
0:09:45 So like Steve Jobs, when he comes back to Apple,
0:09:48 everybody says, hey, you should license the Mac OS
0:09:51 and run it on Intel and you should have a clone market
0:09:54 just like Microsoft and IBM do and all this stuff.
0:09:56 Jobs didn’t do that.
0:09:59 Jobs always found a way to change the subject.
0:10:01 With the iPod, he found this inflection
0:10:03 in the sense of a tiny little hard disk
0:10:06 that he could put into a music player.
0:10:09 And with the iPhone, he waited until the technology was ready
0:10:11 that the touch screen was good enough
0:10:13 and that the power in the phone was good enough
0:10:16 that he could put Mac OS in a phone device.
0:10:20 But Jobs never competed by being better at something.
0:10:23 He always competed by showing up
0:10:24 with something radically different
0:10:26 and helping the rest of us understand
0:10:28 what was important about it.
0:10:30 And he did that by harnessing inflections.
0:10:32 He just naturally knew how to do that
0:10:34 because he knew that was his weapon
0:10:36 to sort of change the discussion.
0:10:39 – So let’s talk about what I consider
0:10:42 maybe the biggest inflection certainly in my career.
0:10:45 And I might argue in the history of mankind,
0:10:48 which is artificial intelligence.
0:10:53 And it seems to me that, you know, I use chat, GBT,
0:10:58 I use Claude, I use Perplexity, I use four or five LLMs.
0:11:01 And for the life of me, I cannot tell you why
0:11:04 I use one or over the other.
0:11:08 If you were to talk to the CEO of Claude or Perplexity
0:11:09 and you would tell them like,
0:11:12 listen, you’re just doing something better.
0:11:14 Maybe your model is better or something,
0:11:16 but you are not fundamentally changing.
0:11:19 How does Perplexity or Claude compete
0:11:22 against Gemini in Google?
0:11:26 I just don’t see how they differentiate.
0:11:27 – Yeah, it’s interesting.
0:11:30 And I love this question because it highlights
0:11:32 a real challenge I think right now,
0:11:35 which is yes, you want an inflection,
0:11:37 but you also want to have an insight.
0:11:39 It’s not enough to just have a powerful idea.
0:11:41 If a whole bunch of other people have
0:11:43 that same powerful idea,
0:11:47 then the opportunity gets somewhat competed away.
0:11:49 You want to be non-consensus and right.
0:11:51 So if we go back to the example of Lyft
0:11:54 and then we can relate it to AI, I suppose,
0:11:57 the iPhone 4S had an inflection
0:12:02 in terms of empowering people to locate riders and drivers.
0:12:06 But the founders of Lyft and Uber had to have the insight
0:12:07 that, oh, that means you could create
0:12:11 a transportation network that has network effects.
0:12:14 And that’s where the creativity of the founder comes in.
0:12:16 And now it’s obvious.
0:12:18 Now people are like ride-sharing, of course.
0:12:20 But at the time, it seemed crazy.
0:12:22 Like, who’s going to get in a stranger’s car?
0:12:23 They’re like, nobody’s going to do that.
0:12:24 That’s crazy.
0:12:27 Just like, who’s going to stay in a stranger’s house?
0:12:28 That’s crazy.
0:12:30 And so most of the great startups,
0:12:33 they have to have an insight because
0:12:35 if human beings are conditioned to like things,
0:12:37 and so if everybody likes your idea,
0:12:40 it’s too similar to what they already know,
0:12:42 which means it’s too much of an incremental improvement.
0:12:45 It’s too much competing on better versus different.
0:12:46 So the best startup ideas I’ve seen
0:12:50 have this quality of most people don’t like it at first
0:12:51 or don’t think it’s going to work
0:12:54 or they think it’s irrelevant.
0:12:56 But there’s a small subset of people who are like,
0:12:58 oh, my gosh, where have you been all my life?
0:12:59 I’ve seen the light.
0:13:00 This is amazing.
0:13:01 You want that.
0:13:03 You want to be non-consensus and right.
0:13:04 It’s not enough just to be right.
0:13:06 You have to be non-consensus and right.
0:13:10 So when I back to perplexity and Claude and these guys,
0:13:12 I don’t really think of them as startups
0:13:15 in the way that maybe you and I think of startups.
0:13:18 The way I think of perplexity and those guys
0:13:20 is I think of them more as like small versions
0:13:22 of big companies.
0:13:25 And if I think about those companies,
0:13:30 they’re not really trying to, in a capital efficient way,
0:13:34 create some asymmetrically radically difference.
0:13:36 They’re partnering with the big tech companies
0:13:38 to create scalable technology.
0:13:40 And I think it just happens to be
0:13:44 that right now, small versions of big tech companies.
0:13:47 But I don’t think of chat GPT and Claude and those guys
0:13:49 as like startup capitalists.
0:13:52 I think of them as probably someday a large division
0:13:53 of a big tech company.
0:13:55 We just don’t know which one yet.
0:13:58 In a sense, even though what they do is so exciting,
0:14:02 it sounds kind of boring when you put it that way.
0:14:03 I think what they’re doing is great.
0:14:06 I just don’t think of them as startup people
0:14:09 in the same way that I thought of the Lyft guys
0:14:10 or the Twitter folks, right?
0:14:12 I think of them as more like back in the day
0:14:14 when you’d have these joint ventures
0:14:17 between IBM and Apple or when you’d have big companies
0:14:18 spinning off divisions and stuff like that.
0:14:20 I think of it as more like that
0:14:23 than I think of it as classic startup capitalism.
0:14:28 – So with all this talk about the entrepreneurs,
0:14:31 the true entrepreneurs who are creating
0:14:34 or writing this inflection point,
0:14:37 I guess my big question for you, Mike,
0:14:41 is how do you separate the nutcases
0:14:42 from the pattern breakers?
0:14:45 Because at the time you hear some of these pitches,
0:14:48 you must think these people are nuts.
0:14:50 And then five years later, you say,
0:14:51 “Oh, they were so right.”
0:14:53 So how do you figure that out?
0:14:55 Who are the nutcases and who are the breakers?
0:14:57 – Yeah, and it’s funny, like some books
0:15:02 are born of experience and competence and expertise.
0:15:06 This book that I wrote started more out of embarrassment,
0:15:07 right?
0:15:08 I had passed on air bed and breakfast,
0:15:10 which became Airbnb.
0:15:13 And I would have made like thousands of times of money
0:15:15 if I’d done it.
0:15:17 And then I noticed that 80% of my exit profits
0:15:18 had come from pivots.
0:15:23 So Twitter had started as a podcasting company called Odio.
0:15:25 Twitch had started out as a terrible idea
0:15:27 called Justin.tv.
0:15:28 And so I’m looking at this and I’m like,
0:15:30 “What business am I even in here?
0:15:31 What am I doing?
0:15:32 Am I just throwing darts?
0:15:35 Should I just retire before I get exposed?”
0:15:36 And what I started to realize was
0:15:38 that these startup ideas that were working,
0:15:40 they were harnessing inflections
0:15:42 and they were non-consensus and right.
0:15:44 Now, here’s the tricky part,
0:15:45 and it gets to your question, I think,
0:15:48 which is when you’re non-consensus and right,
0:15:51 you don’t know that you’re right at first.
0:15:52 You only know that you’re non-consensus.
0:15:55 If you knew you were right, it would be too obvious.
0:15:57 And so the less obvious it is,
0:15:59 the less you can know for sure that you’re right.
0:16:03 So on some level, you have to try the idea.
0:16:04 You have to decide,
0:16:07 I don’t know if I’m 100% right yet,
0:16:10 but this is a non-consensus area that’s worth pursuing.
0:16:14 It’s worth my energy and time to figure out.
0:16:16 And if I’m not 100% right, I might pivot.
0:16:19 So how do you tell the difference?
0:16:21 What’s the right kind of crazy?
0:16:22 What’s the wrong kind of crazy?
0:16:25 The question I like to ask is,
0:16:27 is this from the future?
0:16:28 And I think William Gibson,
0:16:31 the cyberpunk author was right when he said
0:16:32 the future’s already here,
0:16:34 it’s just not evenly distributed.
0:16:37 For example, when Mark Andreessen worked
0:16:41 on the Mosaic browser at the University of Illinois,
0:16:44 he was in a supercomputer lab with a really fast network
0:16:45 and powerful computers.
0:16:49 His idea of what networks were gonna be
0:16:52 was a better version of the future
0:16:54 than Microsoft’s top-down or AOL
0:16:57 or the US government or AT&T or Time Warner’s view
0:16:58 of a tops-down network.
0:17:01 I think that the way you know
0:17:04 that a non-consensus idea is worth pursuing
0:17:07 is the authenticity of the founder
0:17:09 to that future that they’re pursuing.
0:17:11 I think that if you’re living in the future
0:17:13 before other people,
0:17:15 and you’re harnessing powerful inflections
0:17:17 before other people,
0:17:19 the odds that you’re gonna build the right thing
0:17:22 are much higher to be correct.
0:17:24 And so that your intuition about what to build
0:17:26 is far more likely to be right.
0:17:28 And so that’s what I really look for is,
0:17:31 I wanna know is this founder living in the future
0:17:33 for the rest of us?
0:17:36 Are they intrinsically motivated by that future?
0:17:39 Are they just pursuing what they think is hot?
0:17:43 And do they have insights about what to build
0:17:47 because of their authentic obsession with that future?
0:17:51 And I believe that that causes you to be more likely
0:17:53 to build the right thing,
0:17:55 but it also makes you more credible to early believers.
0:17:57 It causes other people to say,
0:18:00 hey, I agree that this guy Kawasaki guy
0:18:02 with this asius relational database here,
0:18:04 I think he’s noticed something
0:18:05 that others haven’t noticed.
0:18:07 And I wanna join that movement.
0:18:10 And I remember this from when you were a founder.
0:18:14 I think in your database at fourth dimension,
0:18:15 tell me if I’m wrong about this,
0:18:18 but your contacts, you would have a tag next to them.
0:18:21 And one of the tags was like true believer.
0:18:24 And Joe Lemont, my roommate college,
0:18:26 you had tagged him as a true believer.
0:18:29 And so that’s like these early startup markets
0:18:32 are animated by belief, not utility, right?
0:18:35 People buy from startups for aesthetic reasons,
0:18:36 not practical reasons.
0:18:38 And they do it because they co-create the future
0:18:39 with the founders.
0:18:42 It’s the early believers that do that with the founders.
0:18:45 And it’s the belief in a different
0:18:48 but aesthetically superior future
0:18:51 that drives people to move the present
0:18:53 to a different future together.
0:18:55 And so that’s what I’m looking for, right?
0:18:57 I want the idea that’s not consensus,
0:18:59 but I wanna believe that the person comes
0:19:02 by the idea honestly, that they come by it
0:19:06 by authentically pursuing a future that I can get mine.
0:19:08 (upbeat music)
0:19:27 – So today in artificial intelligence,
0:19:32 do you have any examples of this non-consensus
0:19:36 kind of inflection idea?
0:19:39 – Yeah, so I’d say that AI has been really challenging
0:19:42 for me because I see inflections every week,
0:19:46 but somebody shows up and says I have this great idea.
0:19:49 And I’m like, I would totally use that product,
0:19:52 but I don’t know why there’s not gonna be 10 just like it,
0:19:54 which means it doesn’t have enough of an insight.
0:19:57 So I’ll give an example of one that I think does.
0:20:00 So I’m involved with this company called Applied Intuition,
0:20:04 and they make autonomous vehicle simulation software
0:20:09 and software-defined platforms for the car companies.
0:20:12 And so let’s say your General Motors or Porsche
0:20:15 or you’re one of these big car companies,
0:20:19 Tesla has a software-defined car and you don’t really,
0:20:21 and you don’t really know how to build it,
0:20:23 and you don’t really know how to,
0:20:26 the electric vehicles are more like a software platform
0:20:30 architecture versus a supply chain with a bajillion suppliers
0:20:33 that you’ve all done business with for 50 years.
0:20:36 And so Casar, you and I started this company
0:20:39 with some friends of his from Google.
0:20:41 And so they’d grown up in Detroit.
0:20:43 Casar had worked at General Motors
0:20:45 after graduating from undergrad.
0:20:48 Then he went to Silicon Valley, was at Google for a while,
0:20:50 worked on the Google Maps team,
0:20:52 knew all the guys at Waymo.
0:20:56 And so he can go to the CEO of a company like Porsche
0:20:59 and say, hey, if you wanna have a software-defined car,
0:21:01 I’m your only path to getting there.
0:21:03 You don’t have the internal talent.
0:21:06 I have the best developers in the world
0:21:07 tackling this problem.
0:21:11 And you can only get this talent if you do business with me.
0:21:14 And now is Sam Altman gonna release a new version of chat
0:21:15 GPT that does that?
0:21:17 No, right, because he’s not in the business
0:21:19 of creating software-defined cars.
0:21:22 Those are examples of businesses I like
0:21:24 because it involves deep technology,
0:21:29 but it involves a multidisciplinary approach.
0:21:30 You have to not just be good at the AI,
0:21:32 but you have to be able to speak the language
0:21:33 of the car companies.
0:21:36 And you have to be able to implement systems
0:21:38 at global enterprise scale
0:21:41 and help the customer reach the promised land.
0:21:44 And it’s very strategic to these car companies.
0:21:45 They know they have to move in the direction
0:21:47 of being a software-defined car.
0:21:50 And so that’s the kind of stuff I’ve been seeing lately
0:21:52 that I get excited about.
0:21:55 But what if somebody says there’s only 25 major car companies
0:21:56 in the world?
0:21:59 How big is the market, Mike?
0:22:00 Yeah, and in that case,
0:22:03 you have to be able to get giant contracts, right?
0:22:05 You have to have individual customers
0:22:07 in the hundreds of millions of dollars
0:22:09 to make that business work.
0:22:10 But you can, right?
0:22:12 Bosch doesn’t have that many customers in the car industry,
0:22:15 but they probably do about $50 billion a year
0:22:16 selling to the car companies.
0:22:18 And so if you become the complete answer
0:22:20 to something that company cares about,
0:22:22 you can do pretty well.
0:22:25 But companies aren’t just gonna give $100 million
0:22:27 to just some bozo, right?
0:22:29 They’re not gonna give you a giant contract
0:22:31 unless they think you can really do the job
0:22:32 and you’re the only guy that can do it.
0:22:35 And so you have to have a particular set of skills
0:22:38 that people buy into, or it’s gonna be hard.
0:22:41 I don’t wanna really catalyze PTSD in you,
0:22:43 but can you discuss the cases
0:22:46 where you had a false positive?
0:22:49 In other words, that you thought someone was a pattern breaker,
0:22:52 but after all, didn’t?
0:22:54 Oh, sure, in fact, it’s most of the time.
0:22:57 My business is very strange.
0:23:01 Warren Buffett, I’ve heard him say rule number one,
0:23:02 don’t lose money.
0:23:05 Rule number two, don’t forget rule number one.
0:23:08 For me, rule number one is don’t pass on Airbnb.
0:23:09 If I had been wrong about Airbnb,
0:23:11 I could only lose 100% my money.
0:23:12 But if you’re right,
0:23:15 you can sometimes make a thousand times or more.
0:23:18 Buffett talks about his margin of safety.
0:23:22 What I care about is my margin of asymmetric upside, right?
0:23:24 I care about how big could it be
0:23:26 in the rare event that it works.
0:23:28 So I have this really weird way
0:23:30 of coming up with an investment thesis.
0:23:33 I’m like, okay, given that it’s 80% likely I’m wrong,
0:23:36 how big does it need to be if I’m right?
0:23:39 And if it can’t be big enough,
0:23:41 no matter what the odds are,
0:23:42 I just can’t invest in it
0:23:45 because I have to get paid for the risk I take, right?
0:23:47 I’m taking crazy high risk.
0:23:48 And so I’m like, you know,
0:23:51 unlike say Buffett who never wants to lose money,
0:23:53 I’m saying to myself, okay,
0:23:57 given that it’s 80% likely I’m gonna lose money,
0:24:00 in the 20% case, how big does it need to get?
0:24:02 Which is just a different way of showing up in the world, right?
0:24:05 It’s a different way of thinking about success.
0:24:10 So I don’t look at risk as the chance of success or failure.
0:24:12 I think of risk through an expected value lens.
0:24:15 I’m like, okay, in the 20% case it’s right,
0:24:16 how big does it need to be
0:24:18 to be a good expected value bet,
0:24:20 even though it’s risky.
0:24:23 – What if at the moment of making an investment,
0:24:25 it’s really not an assessment
0:24:28 of how big can something be
0:24:32 because you don’t know what this company’s gonna pivot to,
0:24:33 right?
0:24:35 So when you talk about Justin TV,
0:24:40 you couldn’t do an analysis of how big Justin TV would be,
0:24:44 but when Justin TV pivoted to Twitch, then you could,
0:24:47 but that wasn’t at the point of investment.
0:24:50 So how do you factor in the pivots?
0:24:52 – Yeah, and so the way I do it is,
0:24:55 I like to say, I don’t wanna study
0:24:57 the total addressable market
0:24:59 for the reason that you mentioned, right?
0:25:03 What I believe is that companies that harness inflections
0:25:04 define new markets.
0:25:07 And I can’t size a future market, right?
0:25:09 Future hasn’t happened yet.
0:25:11 So what I need to do is it reminds me in physics,
0:25:14 you have potential energy and mechanical energy.
0:25:18 And what I’m looking for is a future potential market.
0:25:21 And I believe that big future potential markets happen
0:25:23 from powerful inflections.
0:25:26 So the more powerful the inflection is,
0:25:29 the more capacity it has to change the future.
0:25:32 And the more capacity it has to impact the future
0:25:33 in a broad way.
0:25:36 And so what I do is I take a leap of faith.
0:25:40 I say, based upon this inflection, based upon this insight,
0:25:42 and based on the founders’ authentic match
0:25:44 to the future they’re pursuing,
0:25:46 I think the odds are in my favor.
0:25:50 I don’t have to know exactly how the dots will connect.
0:25:53 I only have to think that the odds are highly probable
0:25:56 that the founder will find a way to connect those dots.
0:25:57 I love this job saying,
0:25:59 you can only connect the dots looking backwards.
0:26:01 And I think that’s what he was getting at, right?
0:26:06 You’re pursuing opportunities that are ambiguous,
0:26:09 but that doesn’t mean they’re not a risk worth taking.
0:26:11 And so you’re betting on the founder’s ability
0:26:15 to navigate their insight to the right product proposition.
0:26:17 To the example that you gave with Twitch,
0:26:18 JustinTV is a terrible idea,
0:26:20 but they navigated the idea to Twitch,
0:26:22 which was a great idea.
0:26:24 But the inflections, the underlying inflections
0:26:26 were always there from the very beginning.
0:26:28 – Now, what about false negatives
0:26:31 where you turned down somebody and they turned out great?
0:26:33 What have you learned about why you made
0:26:35 false negative decisions?
0:26:37 – To me, those are the biggest errors in my business.
0:26:40 Passing on air bed and breakfast at the time
0:26:41 was a terrible idea.
0:26:43 I’ve passed on other good ones too.
0:26:45 We passed on Pinterest early.
0:26:49 We passed on a company called Anaplan, passed on Figma.
0:26:52 And so whenever we pass on these,
0:26:54 in fact, whether I saw them or not,
0:26:58 I keep this database if I call them 100 bag or startups.
0:27:01 So I have this list of a little over a hundred companies
0:27:02 and I study them.
0:27:05 I create a time capsule of what it looked like
0:27:07 at the seed round.
0:27:10 So I have the seed deck from Pinterest and Dropbox
0:27:13 and Airbnb and all these companies.
0:27:14 And I look at it and I say to myself,
0:27:17 okay, where was the signal?
0:27:20 What was the thing that would have told you to say yes?
0:27:24 And why did I have a failure of imagination and say no?
0:27:27 And with Airbnb, my failure of imagination was,
0:27:30 I thought people aren’t gonna want to stay
0:27:31 in a stranger’s house.
0:27:32 That’s crazy, right?
0:27:34 And it was around the time that Craigslist killer,
0:27:35 I was like, somebody’s gonna get killed
0:27:36 in one of these things.
0:27:38 And it was a screwed up meeting.
0:27:40 Brian couldn’t get the site to work in our meeting.
0:27:42 He had a room full of cereal boxes.
0:27:44 He was trying to sell me Obama O’s
0:27:45 and Captain McCain Crunch.
0:27:48 And so that’s the other thing I learned
0:27:50 is sometimes the pitch doesn’t go well,
0:27:52 but that doesn’t mean it’s not gonna succeed.
0:27:55 So I try to go back in time.
0:27:56 The other thing I’ve learned, Guy,
0:27:59 is that even the founders misremember how to happen
0:28:00 a lot of the time, right?
0:28:01 And so when it works,
0:28:04 everybody remembers the stuff they knew
0:28:05 and the good decisions they made.
0:28:08 But a lot of times they know things that weren’t so
0:28:10 at the time.
0:28:13 And so you have to be almost like Joe Colombo detective,
0:28:14 right?
0:28:16 You do a forensic analysis of what it looked like
0:28:17 at the time.
0:28:19 And then you got to ask yourself,
0:28:21 do any of the frameworks that we use
0:28:23 to evaluate these things,
0:28:25 would they have been useful here?
0:28:26 Would they have caused us to say yes,
0:28:28 or are we just breathing our own fumes?
0:28:31 Do we believe a bunch of stuff about what’s true
0:28:32 in the world that just didn’t true
0:28:35 or doesn’t capture the reality of this situation?
0:28:36 That’s what I try to do.
0:28:40 I try to go back in time and really understand it.
0:28:42 There’s a lot of things you can do to understand it.
0:28:44 You can look at the initial seed pitch deck
0:28:45 and you can say,
0:28:47 is that what the product ended up being?
0:28:49 Or did it end up being something different?
0:28:51 How long did it take for them to get to a million revenue,
0:28:53 10 million, 100 million revenue?
0:28:54 What caused that?
0:28:56 What kind of business model was it?
0:28:59 What was the defensible mode that they created?
0:29:02 You could start to kind of look for the signals
0:29:04 that would have clued you in that,
0:29:06 “Hey, this is a bet we’re taking.”
0:29:09 – I have not done what you just described
0:29:14 in any form as organized or rational or careful as you,
0:29:16 but my conclusion,
0:29:20 the more I am in Silicon Valley and around tech startups,
0:29:24 my conclusion is coming to that the older I get,
0:29:25 the less I know,
0:29:27 and I could almost make the case
0:29:29 that you should just invest in the stupidest things
0:29:31 that come across your deck
0:29:34 because that’s the ones that’s gonna succeed.
0:29:37 I cannot figure this out.
0:29:39 I would have never invested in,
0:29:40 as you say,
0:29:41 you’re gonna let a stranger stay in a house,
0:29:44 you’re gonna let a stranger rent your car,
0:29:46 you’re gonna let a stranger ride with you,
0:29:48 you would get in a stranger’s car,
0:29:50 get in a stranger’s house,
0:29:53 you would take a stranger’s tour or rental.
0:29:56 I would do none of those and look at that.
0:29:59 I’d be zero for three right there.
0:30:00 – Yeah, it’s tough, right?
0:30:02 And it’s a humbling game for sure.
0:30:04 And the other thing about it,
0:30:07 guy is like massive success is one Airbnb away, right?
0:30:11 You get one of those every 10 years, you’re really good.
0:30:12 It is a humbling game,
0:30:16 but like for me, it’s just so darn interesting, right?
0:30:19 We know a whole lot about business now,
0:30:20 but a hundred years ago,
0:30:23 there were no org charts and there wasn’t accounting
0:30:26 and there wasn’t corporate strategy as we know it.
0:30:28 There wasn’t Michael Porter Five Forces,
0:30:30 there wasn’t any of this stuff.
0:30:32 All that stuff had to be figured out.
0:30:34 And I think we’re at the beginning of infinity
0:30:37 of really understanding startup capitalism.
0:30:39 And so I just think a startup capitalist
0:30:40 is a different type of capitalist.
0:30:44 They don’t create value by persistently compounding
0:30:46 an advantage like a big company does.
0:30:50 They create value by doing something radically different.
0:30:51 And that’s another way to show up in the world
0:30:53 and be valuable.
0:30:56 And so I just think there’s so much to learn about that.
0:30:58 When I think that just like there’s a process
0:31:01 for building a great company that’s a going concern,
0:31:05 I think that there are processes and patterns
0:31:07 that can be understood about what it takes
0:31:10 to create a great startup that changes the future.
0:31:12 And there’s so little that’s known about it.
0:31:14 So we’re having this conversation right now, right?
0:31:16 It seems kind of random, right?
0:31:19 It seems like trying to predict the weather or something.
0:31:21 But to me, that’s what makes it so interesting
0:31:23 is it’s so hard to figure out
0:31:25 that it’s worth trying to figure out.
0:31:28 – I tell you, Mike, as I get older and older,
0:31:30 my strategy is get lucky,
0:31:34 but get lucky is not a good strategy.
0:31:35 – That’s pretty good sometimes.
0:31:40 – So I’m gonna take you down a rat hole
0:31:42 and you can tell me we don’t wanna go down this rat hole,
0:31:45 but you have the data to know these people
0:31:46 better than most people.
0:31:51 So I look at the current Mark Andreessen,
0:31:56 the current Elon Musk, the current Mark Zuckerberg.
0:31:59 And I ask myself, what happens to these people?
0:32:01 These people started off trying to make the world
0:32:05 a better place, democratizing, computing,
0:32:07 freedom of information, all that.
0:32:10 And now they turn into these MAGA people
0:32:13 and you got any thoughts about what happens?
0:32:17 Is it age or is it when you start being worth
0:32:19 a billion dollars or more or something just happens in you?
0:32:22 What happens to these people?
0:32:23 – Let’s see.
0:32:26 So I’m gonna tread carefully on the political questions.
0:32:27 – Why?
0:32:29 – But I mean, I guess we could talk about it some.
0:32:33 But one thing that I’ve observed in a lot of these folks
0:32:36 is that they tend to be disagreeable.
0:32:39 When you think about it, a startup
0:32:41 is a fundamentally provocative act.
0:32:43 It’s a disagreement with the present.
0:32:46 You’re showing up as a founder and you’re saying,
0:32:49 hey, the way you think the world is, I’m challenging that.
0:32:52 The way you think the world is, that’s not how it’s gonna be.
0:32:53 It’s not gonna be about taxis anymore.
0:32:54 It’s gonna be about ride sharing.
0:32:57 It’s not gonna be about cars with drivers.
0:32:58 It’s gonna be autonomous vehicles.
0:33:00 It’s not gonna be gas, ice cars.
0:33:02 It’s gonna be electric vehicles.
0:33:04 Yes, I am gonna start a company
0:33:06 that blasts rockets into outer space.
0:33:08 Even though my competition is the US government
0:33:11 and they have an infinite supply of money that they can print.
0:33:14 These people tend to be disagreeable.
0:33:16 And by that, I don’t just mean being a jerk.
0:33:19 They tend to just be willing to disagree.
0:33:23 Justin Kahn, before he started Justin TV,
0:33:25 he started a calendaring company
0:33:28 and Google launches a Google calendar.
0:33:31 And Justin decides to sell the company on eBay.
0:33:33 And I was like, I didn’t even know it’s possible
0:33:34 to sell a company on eBay.
0:33:36 Full distinct for $250,000.
0:33:38 Some of the disagreeableness is just the willingness
0:33:42 to be unconventional in how you pursue your ideas
0:33:43 and your mission.
0:33:47 I think that Elon is naturally disagreeable.
0:33:48 There are aspects of disagreeableness
0:33:50 that people don’t like,
0:33:52 but if you make the diamond,
0:33:54 not have the properties of the diamond,
0:33:56 it won’t cut glass anymore, right?
0:33:57 I think that most of these people
0:33:59 who create these outlier results,
0:34:01 they’re not normal people.
0:34:03 And they’re not normal in ways
0:34:05 that change the world for the better.
0:34:06 And they’re not normal in ways
0:34:08 that some people may not like.
0:34:11 But like Elon said on Saturday Night Live that time,
0:34:13 he’s like, I blast rockets into outer space.
0:34:16 I’m trying to change humanity.
0:34:18 Did you expect me to be a normal chill dude?
0:34:19 He’s just not gonna be.
0:34:21 That’s not who he is.
0:34:24 And so I’ve kind of learned that these people
0:34:26 don’t end up fitting neatly into a box
0:34:28 that you wish they would fit into.
0:34:30 And I imagine that you’ve known some founders,
0:34:33 you knew Steve Jobs way better than I ever would have.
0:34:35 But I imagine there were things that Steve did
0:34:38 that probably maybe you wish he didn’t do.
0:34:39 But it is what it is.
0:34:41 It comes with a territory.
0:35:02 I wanna end up with kind of a,
0:35:05 just like a quick series of questions.
0:35:07 I’m assuming that many entrepreneurs
0:35:08 are gonna listen to this podcast
0:35:11 and your legitimate successful VC,
0:35:14 they probably would love to be in front of you.
0:35:16 So just some quick questions,
0:35:19 very tactical and practical for an entrepreneur.
0:35:21 So question number one is,
0:35:23 how do people get to a VC?
0:35:26 Do they like send out 2,000 emails?
0:35:28 But how do people get to you?
0:35:31 The best way is to get a referral
0:35:33 from somebody that we respect.
0:35:36 And people tend to trivialize that discussion.
0:35:38 So people tend to say that just means
0:35:40 that whoever has the best network wins
0:35:42 and there’s gonna be certain people
0:35:45 who get excluded from being entrepreneurs.
0:35:46 But there’s a reality guy,
0:35:49 which is if you’re starting a startup,
0:35:52 you have to convince people to join your movement.
0:35:55 And if you’re sitting out there in the future by yourself
0:35:56 and nobody joins your movement,
0:35:58 that future is not gonna happen.
0:36:01 And so to me, it’s not a function
0:36:03 of how well connected you are.
0:36:06 Getting an intro from someone I respect
0:36:10 is a function of your ability to persuade somebody credible
0:36:12 that your future matters.
0:36:14 And that other people are gonna wanna join you
0:36:15 in that future.
0:36:17 And so, yeah, something could come over the transom,
0:36:19 but how am I supposed to know?
0:36:21 How am I supposed to know how good they are?
0:36:25 I’ve gotta find some way to validate
0:36:29 that their ideas about the future make sense
0:36:30 to credible people.
0:36:32 And by the way, it doesn’t have to be like Reed Hoffman
0:36:34 or Mark Andreessen that makes the intro.
0:36:37 It could be you’re living in a certain future
0:36:39 in synthetic bio,
0:36:42 and it’s a scientist who’s very credible in that area
0:36:44 is like this is one of the most amazing things
0:36:45 I’ve ever seen.
0:36:49 And so I just need some signal from the future
0:36:53 that’s valid, that validates the idea and the insight.
0:36:55 I’d say that’s the key thing.
0:36:59 If your insight is starting to get traction,
0:37:01 that should be a solvable problem, right?
0:37:02 There should always be somebody credible
0:37:05 who embraces the idea, who’ll make the intro.
0:37:09 So I’d say that that’s the primary thing that we look for.
0:37:11 – Okay, next question.
0:37:12 What do you want in the pitch?
0:37:15 What’s the content of the pitch?
0:37:18 – Okay, yeah, so I’ll give some super tactical advice on that.
0:37:22 All things being equal, I like to say slide number one,
0:37:26 say what you do as if I know literally nothing.
0:37:29 You don’t say we’re Airbnb,
0:37:34 we’re a marketplace for unused residential housing space.
0:37:35 I don’t know what that is.
0:37:38 That’s jibber jabber jargon.
0:37:40 What you want to say is something like,
0:37:44 we’re Airbnb, we let you read an extra room in your house.
0:37:46 And here’s why that’s important.
0:37:49 A lot of times you’ll get a pitch
0:37:53 and your 10 slides in, I don’t know what the startup does still.
0:37:56 And that’s hard to process, right?
0:37:58 And I’m sympathetic to founders on this front
0:38:01 because they get advice, they get bad advice.
0:38:03 They get advice that says millennials are a thing,
0:38:05 put that slide up front.
0:38:08 Marketplaces are a thing, talk about marketplaces.
0:38:10 And I’m 10 minutes in, I don’t know what you do yet.
0:38:14 So slide number one is what do we do is if I know nothing?
0:38:17 Slide number two is what do I know
0:38:19 about the future that’s not obvious?
0:38:22 Is really your chance to convey the insight?
0:38:25 Slide number three is anything impressive
0:38:28 that’s happened so far objectively?
0:38:32 Customers, patents, letters of intent,
0:38:37 just some proof that people in the world care about this thing
0:38:40 and that they’re joining the movement and signing up.
0:38:41 What I find is that the founder
0:38:46 can get those three things right quickly, 10 minutes in.
0:38:49 Now the venture capitalist is leaning forward.
0:38:52 Now, it’s funny, I think we rift on this earlier.
0:38:56 What happens too often is founders get bad advice.
0:38:59 And so they create what I like to call a Franken Deck.
0:39:01 And so what happens is they’ll pitch their advisor
0:39:03 and the advisor wants the best for them.
0:39:05 They’ll say, hey, VCs love marketplaces
0:39:07 ’cause they have network effects.
0:39:09 Don’t say you rent an extra room in your house.
0:39:12 Say we’re marketplace for residential real estate
0:39:15 ’cause marketplace, hot network effect,
0:39:17 those are the real estate big.
0:39:18 Okay, put that in there.
0:39:20 And then the founder say, oh yeah, you’re right,
0:39:21 okay, I’ll do that.
0:39:23 And then they’ll say the other thing is
0:39:25 this is an appealing service for millennials.
0:39:27 So you should have a few slides up front
0:39:29 that talk about the importance of millennials
0:39:31 and handcrafted experiences, all that stuff.
0:39:34 And you haven’t talked about the total available market yet.
0:39:35 So you ought to talk about that.
0:39:37 You need a few slides on that.
0:39:39 You need a few slides on the real estate market,
0:39:41 residential– – You need AI in there too.
0:39:43 – Today you’d say you need AI.
0:39:46 And so then what happens is you go in
0:39:50 with this deck of 20 slides and you pitch somebody
0:39:54 and the VC passes partly ’cause they don’t know what you do.
0:39:57 And then they give a reason in their pass note
0:39:58 for why they passed.
0:40:00 And it’s like, oh man, there’s another objection.
0:40:02 I better have a slide that counters that objection.
0:40:04 And so before you know what you have 30 slides,
0:40:07 each of which is designed to anticipate
0:40:09 and counter an objection.
0:40:11 And what I like to say to founders is
0:40:14 the only people that matter are the people
0:40:15 who believe your insight.
0:40:17 If a VC doesn’t believe your insight,
0:40:18 they’re not gonna invest.
0:40:21 There’s no way to overcome their objection.
0:40:24 They’re not gonna invest no matter what until it’s proven.
0:40:27 What you wanna find is the subset of people in this world
0:40:28 who believe what you believe.
0:40:30 That’s true of customers, it’s true of investors,
0:40:32 true of early employees.
0:40:35 Don’t waste any urges of energy on anybody else.
0:40:37 And the problem with the Franken Deck is
0:40:40 the person who was ready to believe doesn’t know what you do
0:40:45 because they got confused by just how convoluted
0:40:46 the pitch was.
0:40:50 And that person was gonna be much more likely to say yes,
0:40:51 if you just show up and say,
0:40:54 we let you rent an extra room in your house,
0:40:57 you’re gonna be able to do this because Facebook Connect
0:41:00 lets hosts and guests know who each other are
0:41:02 and people are used to online reviews
0:41:03 and everybody’s connected.
0:41:06 Millennials want these kinds of experiences and all that.
0:41:08 That’s the conversation you need to have
0:41:10 with the person who’s prepared to believe.
0:41:12 And the person who’s not prepared to believe doesn’t matter
0:41:14 because they’re not gonna do anything anyway.
0:41:16 And so their opinion doesn’t matter either.
0:41:18 This is the important point.
0:41:20 The source of their objection doesn’t matter
0:41:22 because they’re not gonna join your movement.
0:41:24 Only those who are prepared to join your movement
0:41:27 have valid input about your strategy.
0:41:29 And that’s really important I find,
0:41:31 is to say, hey, I’m only gonna spend time
0:41:34 with the people I think are ready to move with me
0:41:38 and I’m gonna bias my feedback collection
0:41:39 to what they say.
0:41:42 – I gotta tell you Mike, I gotta believe
0:41:44 that many entrepreneurs listening to this,
0:41:47 their heads are basically exploding
0:41:51 because they’ve been hammered and I gotta take feedback.
0:41:54 I gotta check off all the boxes and I gotta do all this.
0:41:57 And basically you’re saying you got them in three slides
0:41:59 and if you don’t get them in three slides,
0:42:00 you’re never gonna get them.
0:42:03 So just cut your losses, stop wasting time
0:42:07 and go find somebody who does believe the three slides.
0:42:10 – I think so and some people may disagree with me here,
0:42:13 but when you think about it, it’s inspiring.
0:42:16 When you realize that great ideas
0:42:20 are usually disliked by most at first.
0:42:21 By the way, that’s true of everything.
0:42:24 That’s true of Euclidean geometry.
0:42:27 It’s, you know, Copernicus, when he says the sun
0:42:29 is at the center, not the earth,
0:42:33 the pope puts him under house arrest and says,
0:42:35 hey, maybe you ought to change your opinion about that.
0:42:37 A lot of the great ideas in human history,
0:42:39 you know, people when Einstein proposed
0:42:40 the general theory of relativity,
0:42:43 they’re like, this guy sounds like he’s smoking weed.
0:42:47 That’s one of the most abstract, crazy things I’ve ever heard.
0:42:52 And so most great ideas are heretical at first.
0:42:57 And actually, if most people don’t like your startup idea,
0:42:59 that’s a positive sign.
0:43:03 If everybody liked your startup idea, it’s too incremental.
0:43:06 When you realize that, it’s inspiring, right?
0:43:09 When you realize, hey, given that most people
0:43:12 are gonna dislike my idea, who cares about them?
0:43:13 They don’t matter.
0:43:16 They’re not creating the future, I am.
0:43:19 I and my early believers are gonna create the future.
0:43:21 They’re not gonna have a say in it.
0:43:23 And so I need to go find who those people are
0:43:25 and not waste a single urge of energy
0:43:27 on anybody who’s not those people.
0:43:29 And so what we wanna do is we wanna find the people
0:43:32 who say, oh my gosh, where have you been all my life?
0:43:33 This is amazing.
0:43:36 I can’t wait to join your call to adventure
0:43:38 and go do this with you.
0:43:39 That’s what you’re looking for.
0:43:42 And the people who aren’t ready to accept your call
0:43:44 to adventure, their objections don’t matter
0:43:47 because they don’t apply to your adventure, right?
0:43:50 Only objections that matter are the objections
0:43:53 from fellow believers because they help you see the future
0:43:54 in a more clear way.
0:43:59 – Mike, I have more questions,
0:44:02 but there’s no question I’m gonna ask
0:44:05 that’s gonna elicit an answer that is a better way
0:44:08 to end this podcast than what you just said.
0:44:10 So we’re gonna (laughs)
0:44:11 – Okay, I like it.
0:44:14 – I call this the casino theory
0:44:16 and I often apply it to surfing.
0:44:20 So I’ll tell you the casino theory of surfing and podcasting.
0:44:23 So sometimes when you go to Las Vegas
0:44:25 and you have 50 bucks in your pocket,
0:44:29 you go to a casino and you bet it on blackjack or craps
0:44:33 or whatever and just magically you have $500.
0:44:37 So my casino theory is that most people have that $500
0:44:40 and they keep playing until they lose it.
0:44:42 But if you’re smart and you got lucky,
0:44:45 you got 500 bucks, you walk out, right?
0:44:49 You quit gambling, you walk out with the 500.
0:44:51 So the casino theory of surfing is
0:44:53 after you caught a great wave,
0:44:54 don’t try to keep catching waves,
0:44:56 you’re just gonna get disappointed.
0:44:58 And the casino theory of podcasting is
0:45:01 when you had a great answer like that,
0:45:02 you don’t ask more questions,
0:45:05 you just quit now and you end the podcast
0:45:07 ’cause that was a great answer
0:45:09 and all these entrepreneurs are on the world.
0:45:11 They’re putting pieces of their brain back in their head
0:45:14 because you just said something that’s contrary
0:45:16 to what they’ve heard for the last two years.
0:45:20 So that’s the way to end this podcast, Mike.
0:45:22 – All right, I appreciate your taking the time guy
0:45:24 and it’s great to see you
0:45:26 and congrats on all the success you’ve had
0:45:30 and many types of ways and scenarios, right?
0:45:34 You’ve been a polymath when it comes to the tech industry.
0:45:35 It was great to see you.
0:45:38 – I wish I could say that I caused
0:45:42 or really capitalized on inflections
0:45:47 as much as some of the stories that you wrote about.
0:45:49 And actually, if I think about it,
0:45:50 at the start of my career,
0:45:53 I got on the Macintosh inflection
0:45:54 and at the end of my career,
0:45:56 I got on the Canva inflection.
0:45:58 And I gotta tell you, in both cases,
0:46:01 I consider myself lucky, not smart.
0:46:02 – Yeah, and it’s interesting.
0:46:04 Probably you don’t wanna sell past the order
0:46:06 like what you said, you wanna end on the right note.
0:46:09 But the other thing about this surfing thing is,
0:46:11 if you go after the right waves,
0:46:13 you only have to be right once.
0:46:15 And so that’s the way I look at it,
0:46:17 is you wanna pursue opportunities
0:46:19 where you only have to be right once
0:46:22 because you’ll be spectacularly right.
0:46:24 The only way to really lose in entrepreneurship
0:46:26 is to lose your time.
0:46:28 Pursuing something that you realize
0:46:30 in hindsight wasn’t worthy of your talent and time.
0:46:32 And so we wanna go after ideas
0:46:35 that are waves that are worth surfing.
0:46:36 Because like you said,
0:46:38 if you catch the ideal wave, you did it.
0:46:39 – Thank you, Mike.
0:46:42 That was just a remarkable interview.
0:46:43 I’m Guy Kawasaki.
0:46:46 This is remarkable people and all you entrepreneurs
0:46:50 who just had all your myths exploded.
0:46:51 I empathize with you,
0:46:54 but better you hear it now from Guy and Mike
0:46:56 than you hear it two years from now
0:46:59 after all these rejections and disappointments.
0:47:02 So that’s how to be a remarkable entrepreneur.
0:47:05 I wanna thank the rest of the remarkable people team.
0:47:08 That’s of course, Matt as a Nismar producer,
0:47:10 Tessa Nismar researcher,
0:47:14 Luis Magana, Fallon Yates, and Alexis Nishimuro.
0:47:16 We are the remarkable people team
0:47:18 and we are hell bent for leather
0:47:21 on a mission to make you remarkable.
0:47:25 Until next time, Mahalo and Aloha.
0:47:30 (orchestral music)
0:47:32 This is remarkable people.
0:00:10 – Hello, I’m Guy Kawasaki.
0:00:12 This is the Remarkable People podcast,
0:00:16 and we’re in the business of helping you become remarkable.
0:00:19 So we scour the globe for the most remarkable people,
0:00:23 and we found a remarkable person named Mike Maples Jr.
0:00:26 And in the prelude, we were just discussing,
0:00:28 he and I go way back.
0:00:30 In college, he read my books,
0:00:32 which is kind of a disturbing thing
0:00:36 when people tell you that they read your book in college,
0:00:39 and now they’re way out of college.
0:00:43 But anyway, so he is a venture capitalist today.
0:00:47 He’s the co-founder of a leading Silicon Valley seed fund
0:00:51 called Floodgate, and he has invested in companies
0:00:54 like Twitter, and Twitch, and Okta.
0:00:57 He’s really one of the pioneers of seed capital
0:00:59 in the mid-2000s.
0:01:02 So with no further ado, Mike Maples Jr.,
0:01:04 welcome to Remarkable People.
0:01:07 – Hey, thanks Guy, and I’ve been looking forward to this.
0:01:09 I think I’ve probably known you much longer
0:01:11 than you’ve known me, because I got to know you
0:01:14 somewhat through your books when I was in college.
0:01:17 – Wow, like I said, that’s kind of a double edged sword.
0:01:20 Well, as long as you don’t think that I wrote Rich Dad,
0:01:22 Poor Dad, I call that a win.
0:01:24 So I’m easy to please that way, Mike.
0:01:26 – Yeah, yeah.
0:01:29 The ones I really remember in my formative years
0:01:31 were The Macintosh Way,
0:01:34 and then the other one was Selling the Dream.
0:01:36 And I think in Selling the Dream,
0:01:40 I was actually at Kepler’s bookstore when you launched it.
0:01:42 I probably have a signed copy.
0:01:43 And one of the aspects of it I remember
0:01:46 is I think it had the Macintosh product introduction plan.
0:01:48 – Yes, in the back.
0:01:50 – So at the time, I was a young product manager
0:01:53 at Silicon Graphics, and you didn’t really get trained
0:01:55 in marketing back in those days.
0:01:57 And so everything I knew about marketing
0:01:59 is just what I read in marketing books.
0:02:01 That was an actual introduction plan.
0:02:03 I was like, “Hey, man, I could really learn something
0:02:04 “from this.”
0:02:08 And then reading your books led me to Regis McKenna
0:02:09 and some of his work.
0:02:11 I always thought that he had some really good ideas
0:02:12 around relationship marketing
0:02:15 and how do you evangelize ideas.
0:02:17 Yeah, so I feel like I’ve probably known you,
0:02:19 hopefully I don’t seem like a stalker,
0:02:23 but I’ve known you since you were CEO of ACIAS.
0:02:24 – Wow.
0:02:26 – Man, you’re going back.
0:02:28 You’re going back so far.
0:02:29 I was young.
0:02:31 (laughs)
0:02:35 So I loved your book and I see so much stuff
0:02:37 that I agree with in your book.
0:02:39 And let’s start with something very basic.
0:02:43 Your book is all about getting these inflections
0:02:46 and getting insights from the inflections
0:02:48 and turning it into ideas.
0:02:51 So let’s start with a definition to help everybody.
0:02:55 What exactly do you consider an inflection?
0:02:59 – Yeah, so an inflection is a change event
0:03:02 that’s actually external to a startup
0:03:04 or any business for that matter.
0:03:08 And it allows a startup capitalist
0:03:10 to compete by changing the subject.
0:03:13 So what I like to say is that in startups,
0:03:15 better doesn’t matter
0:03:18 because business is never a fair fight.
0:03:19 And if you’re a startup,
0:03:23 you have to have some form of weapons
0:03:25 to wage asymmetric warfare on the present.
0:03:29 You have to turn the incumbents’ greatest perceived strengths
0:03:31 into their biggest weaknesses.
0:03:33 And the way entrepreneurs do that
0:03:34 is they harness inflections.
0:03:37 They use inflections to bend the arc of the present
0:03:39 to a radically different future.
0:03:41 And by doing that,
0:03:45 they deny the premise of the rules of competition.
0:03:47 They show up seemingly out of left field
0:03:50 and now all of a sudden they disorient the incumbents.
0:03:53 Airbnb did this in hospitality
0:03:55 and Twitter did this in blogging and communication.
0:03:58 But nobody ever when they saw Airbnb said,
0:04:00 “Well, how does that compare to Four Seasons?”
0:04:02 And nobody when they saw Twitter said,
0:04:04 “How does that compare to WordPress?”
0:04:07 It stood alone as an entirely new thing.
0:04:09 I like to say better doesn’t matter when you’re startup
0:04:11 because if you’re better,
0:04:14 then the customer’s gonna have an alternative
0:04:15 to your startup.
0:04:17 And why would they pick your product
0:04:19 when you’re 80% likely to go out of business?
0:04:20 They’re only gonna pick your product
0:04:23 if it can’t be reconciled with anything
0:04:24 they’ve ever seen before.
0:04:25 And if they say, “Oh my gosh, where have you been
0:04:26 all my life?”
0:04:29 And so the way that the founder achieves that goal
0:04:31 is they harness inflections.
0:04:33 They use the power of inflections to offer something
0:04:36 that would seem unthinkable before the inflection happened.
0:04:38 – But Mike. – Yes.
0:04:43 – Do inflections cause companies to succeed
0:04:47 or do companies cause inflections to succeed?
0:04:49 Which way does it flow?
0:04:51 – Yeah, so I like that question
0:04:54 and it is one of these kind of recursively existential
0:04:56 questions too, right?
0:04:58 And the way I internalized it was,
0:05:01 I was like, okay, what should founders care about?
0:05:04 And what I thought was, okay,
0:05:08 founders need some type of a power to change the subject.
0:05:11 And so when I think about an inflection,
0:05:13 whether the founder caused it or leveraged it,
0:05:16 what matters I think from the founder point of view
0:05:17 is three things.
0:05:21 One is just what is the specific empowerment?
0:05:24 Does it offer something that can provide a 10x benefit
0:05:29 or something radically unique that’s never been seen before?
0:05:31 Or is it just an API call that got added
0:05:33 to Stripes API list, right?
0:05:36 So like a good example of an inflection would have been
0:05:41 it was empowering was the iPhone 4S had a GPS chip in it.
0:05:43 And you could have had the idea for ride sharing
0:05:45 before the iPhone 4S, but it wouldn’t have mattered
0:05:47 because you couldn’t have implemented a system
0:05:49 that embodied that idea.
0:05:52 But now all of a sudden you have a GPS chip in the phone,
0:05:55 you can locate riders and drivers with an algorithm.
0:05:57 So that’s an example of something very empowering.
0:06:01 The second thing we wanna see in an inflection is,
0:06:02 who does it empower?
0:06:03 Who cares?
0:06:05 And in the case of the iPhone 4S,
0:06:08 a lot of people care ’cause a lot of people have smartphones.
0:06:11 And so the potential surface area of the empowerment
0:06:13 is very high because if you believe
0:06:15 that smartphones will keep happening
0:06:17 and they’ll keep having GPS chips in them,
0:06:19 then potentially that’s hundreds of millions
0:06:21 if not billions of people someday.
0:06:25 And then the third aspect of the inflection is,
0:06:27 I call it the empowerment conditions.
0:06:31 And so we’ve had nuclear power since the ’40s,
0:06:33 but we haven’t built a nuclear power plant
0:06:35 in the United States since the 1970s.
0:06:37 And so just because you have a power
0:06:39 doesn’t mean you’re gonna use it or be allowed to use it.
0:06:41 And there might be political factors,
0:06:43 there might be trust factors,
0:06:44 there could be a lot of reasons
0:06:47 that people don’t decide to adopt it.
0:06:49 So those are the three things I look for.
0:06:50 What’s the magnitude of the empowerment?
0:06:52 Who does it empower?
0:06:54 And under what conditions will people decide
0:06:55 to take advantage of it?
0:06:58 And under what conditions will they decide not to?
0:06:59 And if you can get all three of those things
0:07:02 going your way as a founder,
0:07:05 now it’s kind of like a rock and David slingshot
0:07:06 against Goliath, right?
0:07:09 Now you have something that you can bring to the party
0:07:11 that changes the subject.
0:07:14 – When I read your book and I read that concept,
0:07:18 I thought to myself, oh my God, this is such a high fence.
0:07:23 In a sense, you’re saying that every successful startup
0:07:27 either caused or significantly jumped on an inflection.
0:07:31 And I gotta tell you, I see a lot of startups
0:07:36 that I would hardly affiliate them with truly an inflection.
0:07:39 So are you that tough?
0:07:41 I mean, if somebody shows up at flood gate
0:07:45 and they just have something better, better,
0:07:47 do you just throw them out the door?
0:07:48 – Well, I don’t throw them out the door.
0:07:50 I wish them well, right?
0:07:52 But what I say to them is, look,
0:07:55 do you want to pursue an idea that has outlier,
0:07:58 unbounded upside potential or not?
0:08:01 And if you’re not harnessing an inflection
0:08:02 in your startup idea,
0:08:06 you’re competing in somebody else’s sandbox.
0:08:09 So the mistake most startups make is they say,
0:08:11 I want to go after big market.
0:08:14 And that makes sense on the surface
0:08:17 because big markets have lots of customers and revenue.
0:08:20 But the problem is that the founder often unwittingly
0:08:23 buys into a context, which is the market
0:08:26 as it’s defined as the market.
0:08:28 And if the market’s already defined,
0:08:30 then somebody’s defined it.
0:08:32 And that person has the advantage over you
0:08:35 because they get to define the discussion that occurs
0:08:37 and they already have the advantages of the incumbency.
0:08:40 And so therefore, it’s kind of like
0:08:41 if you’re competing over territory
0:08:43 that’s a tiny little municipality
0:08:45 and an already discovered thing,
0:08:47 you’re not gonna have as big of an upside
0:08:49 as if you’re Lewis and Clark mapping
0:08:51 the Louisiana Purchase territory
0:08:55 and discovering the undiscovered land.
0:08:58 And so I’m not interested in the total existing
0:09:00 or total available market.
0:09:01 I’m interested in the total future market.
0:09:04 I’m interested in a product that defines a future market
0:09:06 because it harnesses these inflections.
0:09:08 And so I just say to a founder, hey, look,
0:09:11 I’m not for everybody, but that’s what I’m in it for.
0:09:14 I’m trying to find startups that harness these inflections
0:09:17 in unconventional ways to create a product
0:09:20 that radically changes how people feel and act.
0:09:22 And to me, that’s where the startup wins
0:09:24 is when they do that.
0:09:25 There’s two ways to look at the future.
0:09:26 Do you believe it’s gonna be a new
0:09:28 and improved version of the present?
0:09:31 In which case the incumbents are gonna usually win that.
0:09:33 Or do you believe that the future is not gonna be able
0:09:35 to be reconciled with the present?
0:09:37 In which case the startup can win.
0:09:40 And by the way, you work for a guy who’s the master at this
0:09:42 and he did it even in a big company.
0:09:45 So like Steve Jobs, when he comes back to Apple,
0:09:48 everybody says, hey, you should license the Mac OS
0:09:51 and run it on Intel and you should have a clone market
0:09:54 just like Microsoft and IBM do and all this stuff.
0:09:56 Jobs didn’t do that.
0:09:59 Jobs always found a way to change the subject.
0:10:01 With the iPod, he found this inflection
0:10:03 in the sense of a tiny little hard disk
0:10:06 that he could put into a music player.
0:10:09 And with the iPhone, he waited until the technology was ready
0:10:11 that the touch screen was good enough
0:10:13 and that the power in the phone was good enough
0:10:16 that he could put Mac OS in a phone device.
0:10:20 But Jobs never competed by being better at something.
0:10:23 He always competed by showing up
0:10:24 with something radically different
0:10:26 and helping the rest of us understand
0:10:28 what was important about it.
0:10:30 And he did that by harnessing inflections.
0:10:32 He just naturally knew how to do that
0:10:34 because he knew that was his weapon
0:10:36 to sort of change the discussion.
0:10:39 – So let’s talk about what I consider
0:10:42 maybe the biggest inflection certainly in my career.
0:10:45 And I might argue in the history of mankind,
0:10:48 which is artificial intelligence.
0:10:53 And it seems to me that, you know, I use chat, GBT,
0:10:58 I use Claude, I use Perplexity, I use four or five LLMs.
0:11:01 And for the life of me, I cannot tell you why
0:11:04 I use one or over the other.
0:11:08 If you were to talk to the CEO of Claude or Perplexity
0:11:09 and you would tell them like,
0:11:12 listen, you’re just doing something better.
0:11:14 Maybe your model is better or something,
0:11:16 but you are not fundamentally changing.
0:11:19 How does Perplexity or Claude compete
0:11:22 against Gemini in Google?
0:11:26 I just don’t see how they differentiate.
0:11:27 – Yeah, it’s interesting.
0:11:30 And I love this question because it highlights
0:11:32 a real challenge I think right now,
0:11:35 which is yes, you want an inflection,
0:11:37 but you also want to have an insight.
0:11:39 It’s not enough to just have a powerful idea.
0:11:41 If a whole bunch of other people have
0:11:43 that same powerful idea,
0:11:47 then the opportunity gets somewhat competed away.
0:11:49 You want to be non-consensus and right.
0:11:51 So if we go back to the example of Lyft
0:11:54 and then we can relate it to AI, I suppose,
0:11:57 the iPhone 4S had an inflection
0:12:02 in terms of empowering people to locate riders and drivers.
0:12:06 But the founders of Lyft and Uber had to have the insight
0:12:07 that, oh, that means you could create
0:12:11 a transportation network that has network effects.
0:12:14 And that’s where the creativity of the founder comes in.
0:12:16 And now it’s obvious.
0:12:18 Now people are like ride-sharing, of course.
0:12:20 But at the time, it seemed crazy.
0:12:22 Like, who’s going to get in a stranger’s car?
0:12:23 They’re like, nobody’s going to do that.
0:12:24 That’s crazy.
0:12:27 Just like, who’s going to stay in a stranger’s house?
0:12:28 That’s crazy.
0:12:30 And so most of the great startups,
0:12:33 they have to have an insight because
0:12:35 if human beings are conditioned to like things,
0:12:37 and so if everybody likes your idea,
0:12:40 it’s too similar to what they already know,
0:12:42 which means it’s too much of an incremental improvement.
0:12:45 It’s too much competing on better versus different.
0:12:46 So the best startup ideas I’ve seen
0:12:50 have this quality of most people don’t like it at first
0:12:51 or don’t think it’s going to work
0:12:54 or they think it’s irrelevant.
0:12:56 But there’s a small subset of people who are like,
0:12:58 oh, my gosh, where have you been all my life?
0:12:59 I’ve seen the light.
0:13:00 This is amazing.
0:13:01 You want that.
0:13:03 You want to be non-consensus and right.
0:13:04 It’s not enough just to be right.
0:13:06 You have to be non-consensus and right.
0:13:10 So when I back to perplexity and Claude and these guys,
0:13:12 I don’t really think of them as startups
0:13:15 in the way that maybe you and I think of startups.
0:13:18 The way I think of perplexity and those guys
0:13:20 is I think of them more as like small versions
0:13:22 of big companies.
0:13:25 And if I think about those companies,
0:13:30 they’re not really trying to, in a capital efficient way,
0:13:34 create some asymmetrically radically difference.
0:13:36 They’re partnering with the big tech companies
0:13:38 to create scalable technology.
0:13:40 And I think it just happens to be
0:13:44 that right now, small versions of big tech companies.
0:13:47 But I don’t think of chat GPT and Claude and those guys
0:13:49 as like startup capitalists.
0:13:52 I think of them as probably someday a large division
0:13:53 of a big tech company.
0:13:55 We just don’t know which one yet.
0:13:58 In a sense, even though what they do is so exciting,
0:14:02 it sounds kind of boring when you put it that way.
0:14:03 I think what they’re doing is great.
0:14:06 I just don’t think of them as startup people
0:14:09 in the same way that I thought of the Lyft guys
0:14:10 or the Twitter folks, right?
0:14:12 I think of them as more like back in the day
0:14:14 when you’d have these joint ventures
0:14:17 between IBM and Apple or when you’d have big companies
0:14:18 spinning off divisions and stuff like that.
0:14:20 I think of it as more like that
0:14:23 than I think of it as classic startup capitalism.
0:14:28 – So with all this talk about the entrepreneurs,
0:14:31 the true entrepreneurs who are creating
0:14:34 or writing this inflection point,
0:14:37 I guess my big question for you, Mike,
0:14:41 is how do you separate the nutcases
0:14:42 from the pattern breakers?
0:14:45 Because at the time you hear some of these pitches,
0:14:48 you must think these people are nuts.
0:14:50 And then five years later, you say,
0:14:51 “Oh, they were so right.”
0:14:53 So how do you figure that out?
0:14:55 Who are the nutcases and who are the breakers?
0:14:57 – Yeah, and it’s funny, like some books
0:15:02 are born of experience and competence and expertise.
0:15:06 This book that I wrote started more out of embarrassment,
0:15:07 right?
0:15:08 I had passed on air bed and breakfast,
0:15:10 which became Airbnb.
0:15:13 And I would have made like thousands of times of money
0:15:15 if I’d done it.
0:15:17 And then I noticed that 80% of my exit profits
0:15:18 had come from pivots.
0:15:23 So Twitter had started as a podcasting company called Odio.
0:15:25 Twitch had started out as a terrible idea
0:15:27 called Justin.tv.
0:15:28 And so I’m looking at this and I’m like,
0:15:30 “What business am I even in here?
0:15:31 What am I doing?
0:15:32 Am I just throwing darts?
0:15:35 Should I just retire before I get exposed?”
0:15:36 And what I started to realize was
0:15:38 that these startup ideas that were working,
0:15:40 they were harnessing inflections
0:15:42 and they were non-consensus and right.
0:15:44 Now, here’s the tricky part,
0:15:45 and it gets to your question, I think,
0:15:48 which is when you’re non-consensus and right,
0:15:51 you don’t know that you’re right at first.
0:15:52 You only know that you’re non-consensus.
0:15:55 If you knew you were right, it would be too obvious.
0:15:57 And so the less obvious it is,
0:15:59 the less you can know for sure that you’re right.
0:16:03 So on some level, you have to try the idea.
0:16:04 You have to decide,
0:16:07 I don’t know if I’m 100% right yet,
0:16:10 but this is a non-consensus area that’s worth pursuing.
0:16:14 It’s worth my energy and time to figure out.
0:16:16 And if I’m not 100% right, I might pivot.
0:16:19 So how do you tell the difference?
0:16:21 What’s the right kind of crazy?
0:16:22 What’s the wrong kind of crazy?
0:16:25 The question I like to ask is,
0:16:27 is this from the future?
0:16:28 And I think William Gibson,
0:16:31 the cyberpunk author was right when he said
0:16:32 the future’s already here,
0:16:34 it’s just not evenly distributed.
0:16:37 For example, when Mark Andreessen worked
0:16:41 on the Mosaic browser at the University of Illinois,
0:16:44 he was in a supercomputer lab with a really fast network
0:16:45 and powerful computers.
0:16:49 His idea of what networks were gonna be
0:16:52 was a better version of the future
0:16:54 than Microsoft’s top-down or AOL
0:16:57 or the US government or AT&T or Time Warner’s view
0:16:58 of a tops-down network.
0:17:01 I think that the way you know
0:17:04 that a non-consensus idea is worth pursuing
0:17:07 is the authenticity of the founder
0:17:09 to that future that they’re pursuing.
0:17:11 I think that if you’re living in the future
0:17:13 before other people,
0:17:15 and you’re harnessing powerful inflections
0:17:17 before other people,
0:17:19 the odds that you’re gonna build the right thing
0:17:22 are much higher to be correct.
0:17:24 And so that your intuition about what to build
0:17:26 is far more likely to be right.
0:17:28 And so that’s what I really look for is,
0:17:31 I wanna know is this founder living in the future
0:17:33 for the rest of us?
0:17:36 Are they intrinsically motivated by that future?
0:17:39 Are they just pursuing what they think is hot?
0:17:43 And do they have insights about what to build
0:17:47 because of their authentic obsession with that future?
0:17:51 And I believe that that causes you to be more likely
0:17:53 to build the right thing,
0:17:55 but it also makes you more credible to early believers.
0:17:57 It causes other people to say,
0:18:00 hey, I agree that this guy Kawasaki guy
0:18:02 with this asius relational database here,
0:18:04 I think he’s noticed something
0:18:05 that others haven’t noticed.
0:18:07 And I wanna join that movement.
0:18:10 And I remember this from when you were a founder.
0:18:14 I think in your database at fourth dimension,
0:18:15 tell me if I’m wrong about this,
0:18:18 but your contacts, you would have a tag next to them.
0:18:21 And one of the tags was like true believer.
0:18:24 And Joe Lemont, my roommate college,
0:18:26 you had tagged him as a true believer.
0:18:29 And so that’s like these early startup markets
0:18:32 are animated by belief, not utility, right?
0:18:35 People buy from startups for aesthetic reasons,
0:18:36 not practical reasons.
0:18:38 And they do it because they co-create the future
0:18:39 with the founders.
0:18:42 It’s the early believers that do that with the founders.
0:18:45 And it’s the belief in a different
0:18:48 but aesthetically superior future
0:18:51 that drives people to move the present
0:18:53 to a different future together.
0:18:55 And so that’s what I’m looking for, right?
0:18:57 I want the idea that’s not consensus,
0:18:59 but I wanna believe that the person comes
0:19:02 by the idea honestly, that they come by it
0:19:06 by authentically pursuing a future that I can get mine.
0:19:08 (upbeat music)
0:19:27 – So today in artificial intelligence,
0:19:32 do you have any examples of this non-consensus
0:19:36 kind of inflection idea?
0:19:39 – Yeah, so I’d say that AI has been really challenging
0:19:42 for me because I see inflections every week,
0:19:46 but somebody shows up and says I have this great idea.
0:19:49 And I’m like, I would totally use that product,
0:19:52 but I don’t know why there’s not gonna be 10 just like it,
0:19:54 which means it doesn’t have enough of an insight.
0:19:57 So I’ll give an example of one that I think does.
0:20:00 So I’m involved with this company called Applied Intuition,
0:20:04 and they make autonomous vehicle simulation software
0:20:09 and software-defined platforms for the car companies.
0:20:12 And so let’s say your General Motors or Porsche
0:20:15 or you’re one of these big car companies,
0:20:19 Tesla has a software-defined car and you don’t really,
0:20:21 and you don’t really know how to build it,
0:20:23 and you don’t really know how to,
0:20:26 the electric vehicles are more like a software platform
0:20:30 architecture versus a supply chain with a bajillion suppliers
0:20:33 that you’ve all done business with for 50 years.
0:20:36 And so Casar, you and I started this company
0:20:39 with some friends of his from Google.
0:20:41 And so they’d grown up in Detroit.
0:20:43 Casar had worked at General Motors
0:20:45 after graduating from undergrad.
0:20:48 Then he went to Silicon Valley, was at Google for a while,
0:20:50 worked on the Google Maps team,
0:20:52 knew all the guys at Waymo.
0:20:56 And so he can go to the CEO of a company like Porsche
0:20:59 and say, hey, if you wanna have a software-defined car,
0:21:01 I’m your only path to getting there.
0:21:03 You don’t have the internal talent.
0:21:06 I have the best developers in the world
0:21:07 tackling this problem.
0:21:11 And you can only get this talent if you do business with me.
0:21:14 And now is Sam Altman gonna release a new version of chat
0:21:15 GPT that does that?
0:21:17 No, right, because he’s not in the business
0:21:19 of creating software-defined cars.
0:21:22 Those are examples of businesses I like
0:21:24 because it involves deep technology,
0:21:29 but it involves a multidisciplinary approach.
0:21:30 You have to not just be good at the AI,
0:21:32 but you have to be able to speak the language
0:21:33 of the car companies.
0:21:36 And you have to be able to implement systems
0:21:38 at global enterprise scale
0:21:41 and help the customer reach the promised land.
0:21:44 And it’s very strategic to these car companies.
0:21:45 They know they have to move in the direction
0:21:47 of being a software-defined car.
0:21:50 And so that’s the kind of stuff I’ve been seeing lately
0:21:52 that I get excited about.
0:21:55 But what if somebody says there’s only 25 major car companies
0:21:56 in the world?
0:21:59 How big is the market, Mike?
0:22:00 Yeah, and in that case,
0:22:03 you have to be able to get giant contracts, right?
0:22:05 You have to have individual customers
0:22:07 in the hundreds of millions of dollars
0:22:09 to make that business work.
0:22:10 But you can, right?
0:22:12 Bosch doesn’t have that many customers in the car industry,
0:22:15 but they probably do about $50 billion a year
0:22:16 selling to the car companies.
0:22:18 And so if you become the complete answer
0:22:20 to something that company cares about,
0:22:22 you can do pretty well.
0:22:25 But companies aren’t just gonna give $100 million
0:22:27 to just some bozo, right?
0:22:29 They’re not gonna give you a giant contract
0:22:31 unless they think you can really do the job
0:22:32 and you’re the only guy that can do it.
0:22:35 And so you have to have a particular set of skills
0:22:38 that people buy into, or it’s gonna be hard.
0:22:41 I don’t wanna really catalyze PTSD in you,
0:22:43 but can you discuss the cases
0:22:46 where you had a false positive?
0:22:49 In other words, that you thought someone was a pattern breaker,
0:22:52 but after all, didn’t?
0:22:54 Oh, sure, in fact, it’s most of the time.
0:22:57 My business is very strange.
0:23:01 Warren Buffett, I’ve heard him say rule number one,
0:23:02 don’t lose money.
0:23:05 Rule number two, don’t forget rule number one.
0:23:08 For me, rule number one is don’t pass on Airbnb.
0:23:09 If I had been wrong about Airbnb,
0:23:11 I could only lose 100% my money.
0:23:12 But if you’re right,
0:23:15 you can sometimes make a thousand times or more.
0:23:18 Buffett talks about his margin of safety.
0:23:22 What I care about is my margin of asymmetric upside, right?
0:23:24 I care about how big could it be
0:23:26 in the rare event that it works.
0:23:28 So I have this really weird way
0:23:30 of coming up with an investment thesis.
0:23:33 I’m like, okay, given that it’s 80% likely I’m wrong,
0:23:36 how big does it need to be if I’m right?
0:23:39 And if it can’t be big enough,
0:23:41 no matter what the odds are,
0:23:42 I just can’t invest in it
0:23:45 because I have to get paid for the risk I take, right?
0:23:47 I’m taking crazy high risk.
0:23:48 And so I’m like, you know,
0:23:51 unlike say Buffett who never wants to lose money,
0:23:53 I’m saying to myself, okay,
0:23:57 given that it’s 80% likely I’m gonna lose money,
0:24:00 in the 20% case, how big does it need to get?
0:24:02 Which is just a different way of showing up in the world, right?
0:24:05 It’s a different way of thinking about success.
0:24:10 So I don’t look at risk as the chance of success or failure.
0:24:12 I think of risk through an expected value lens.
0:24:15 I’m like, okay, in the 20% case it’s right,
0:24:16 how big does it need to be
0:24:18 to be a good expected value bet,
0:24:20 even though it’s risky.
0:24:23 – What if at the moment of making an investment,
0:24:25 it’s really not an assessment
0:24:28 of how big can something be
0:24:32 because you don’t know what this company’s gonna pivot to,
0:24:33 right?
0:24:35 So when you talk about Justin TV,
0:24:40 you couldn’t do an analysis of how big Justin TV would be,
0:24:44 but when Justin TV pivoted to Twitch, then you could,
0:24:47 but that wasn’t at the point of investment.
0:24:50 So how do you factor in the pivots?
0:24:52 – Yeah, and so the way I do it is,
0:24:55 I like to say, I don’t wanna study
0:24:57 the total addressable market
0:24:59 for the reason that you mentioned, right?
0:25:03 What I believe is that companies that harness inflections
0:25:04 define new markets.
0:25:07 And I can’t size a future market, right?
0:25:09 Future hasn’t happened yet.
0:25:11 So what I need to do is it reminds me in physics,
0:25:14 you have potential energy and mechanical energy.
0:25:18 And what I’m looking for is a future potential market.
0:25:21 And I believe that big future potential markets happen
0:25:23 from powerful inflections.
0:25:26 So the more powerful the inflection is,
0:25:29 the more capacity it has to change the future.
0:25:32 And the more capacity it has to impact the future
0:25:33 in a broad way.
0:25:36 And so what I do is I take a leap of faith.
0:25:40 I say, based upon this inflection, based upon this insight,
0:25:42 and based on the founders’ authentic match
0:25:44 to the future they’re pursuing,
0:25:46 I think the odds are in my favor.
0:25:50 I don’t have to know exactly how the dots will connect.
0:25:53 I only have to think that the odds are highly probable
0:25:56 that the founder will find a way to connect those dots.
0:25:57 I love this job saying,
0:25:59 you can only connect the dots looking backwards.
0:26:01 And I think that’s what he was getting at, right?
0:26:06 You’re pursuing opportunities that are ambiguous,
0:26:09 but that doesn’t mean they’re not a risk worth taking.
0:26:11 And so you’re betting on the founder’s ability
0:26:15 to navigate their insight to the right product proposition.
0:26:17 To the example that you gave with Twitch,
0:26:18 JustinTV is a terrible idea,
0:26:20 but they navigated the idea to Twitch,
0:26:22 which was a great idea.
0:26:24 But the inflections, the underlying inflections
0:26:26 were always there from the very beginning.
0:26:28 – Now, what about false negatives
0:26:31 where you turned down somebody and they turned out great?
0:26:33 What have you learned about why you made
0:26:35 false negative decisions?
0:26:37 – To me, those are the biggest errors in my business.
0:26:40 Passing on air bed and breakfast at the time
0:26:41 was a terrible idea.
0:26:43 I’ve passed on other good ones too.
0:26:45 We passed on Pinterest early.
0:26:49 We passed on a company called Anaplan, passed on Figma.
0:26:52 And so whenever we pass on these,
0:26:54 in fact, whether I saw them or not,
0:26:58 I keep this database if I call them 100 bag or startups.
0:27:01 So I have this list of a little over a hundred companies
0:27:02 and I study them.
0:27:05 I create a time capsule of what it looked like
0:27:07 at the seed round.
0:27:10 So I have the seed deck from Pinterest and Dropbox
0:27:13 and Airbnb and all these companies.
0:27:14 And I look at it and I say to myself,
0:27:17 okay, where was the signal?
0:27:20 What was the thing that would have told you to say yes?
0:27:24 And why did I have a failure of imagination and say no?
0:27:27 And with Airbnb, my failure of imagination was,
0:27:30 I thought people aren’t gonna want to stay
0:27:31 in a stranger’s house.
0:27:32 That’s crazy, right?
0:27:34 And it was around the time that Craigslist killer,
0:27:35 I was like, somebody’s gonna get killed
0:27:36 in one of these things.
0:27:38 And it was a screwed up meeting.
0:27:40 Brian couldn’t get the site to work in our meeting.
0:27:42 He had a room full of cereal boxes.
0:27:44 He was trying to sell me Obama O’s
0:27:45 and Captain McCain Crunch.
0:27:48 And so that’s the other thing I learned
0:27:50 is sometimes the pitch doesn’t go well,
0:27:52 but that doesn’t mean it’s not gonna succeed.
0:27:55 So I try to go back in time.
0:27:56 The other thing I’ve learned, Guy,
0:27:59 is that even the founders misremember how to happen
0:28:00 a lot of the time, right?
0:28:01 And so when it works,
0:28:04 everybody remembers the stuff they knew
0:28:05 and the good decisions they made.
0:28:08 But a lot of times they know things that weren’t so
0:28:10 at the time.
0:28:13 And so you have to be almost like Joe Colombo detective,
0:28:14 right?
0:28:16 You do a forensic analysis of what it looked like
0:28:17 at the time.
0:28:19 And then you got to ask yourself,
0:28:21 do any of the frameworks that we use
0:28:23 to evaluate these things,
0:28:25 would they have been useful here?
0:28:26 Would they have caused us to say yes,
0:28:28 or are we just breathing our own fumes?
0:28:31 Do we believe a bunch of stuff about what’s true
0:28:32 in the world that just didn’t true
0:28:35 or doesn’t capture the reality of this situation?
0:28:36 That’s what I try to do.
0:28:40 I try to go back in time and really understand it.
0:28:42 There’s a lot of things you can do to understand it.
0:28:44 You can look at the initial seed pitch deck
0:28:45 and you can say,
0:28:47 is that what the product ended up being?
0:28:49 Or did it end up being something different?
0:28:51 How long did it take for them to get to a million revenue,
0:28:53 10 million, 100 million revenue?
0:28:54 What caused that?
0:28:56 What kind of business model was it?
0:28:59 What was the defensible mode that they created?
0:29:02 You could start to kind of look for the signals
0:29:04 that would have clued you in that,
0:29:06 “Hey, this is a bet we’re taking.”
0:29:09 – I have not done what you just described
0:29:14 in any form as organized or rational or careful as you,
0:29:16 but my conclusion,
0:29:20 the more I am in Silicon Valley and around tech startups,
0:29:24 my conclusion is coming to that the older I get,
0:29:25 the less I know,
0:29:27 and I could almost make the case
0:29:29 that you should just invest in the stupidest things
0:29:31 that come across your deck
0:29:34 because that’s the ones that’s gonna succeed.
0:29:37 I cannot figure this out.
0:29:39 I would have never invested in,
0:29:40 as you say,
0:29:41 you’re gonna let a stranger stay in a house,
0:29:44 you’re gonna let a stranger rent your car,
0:29:46 you’re gonna let a stranger ride with you,
0:29:48 you would get in a stranger’s car,
0:29:50 get in a stranger’s house,
0:29:53 you would take a stranger’s tour or rental.
0:29:56 I would do none of those and look at that.
0:29:59 I’d be zero for three right there.
0:30:00 – Yeah, it’s tough, right?
0:30:02 And it’s a humbling game for sure.
0:30:04 And the other thing about it,
0:30:07 guy is like massive success is one Airbnb away, right?
0:30:11 You get one of those every 10 years, you’re really good.
0:30:12 It is a humbling game,
0:30:16 but like for me, it’s just so darn interesting, right?
0:30:19 We know a whole lot about business now,
0:30:20 but a hundred years ago,
0:30:23 there were no org charts and there wasn’t accounting
0:30:26 and there wasn’t corporate strategy as we know it.
0:30:28 There wasn’t Michael Porter Five Forces,
0:30:30 there wasn’t any of this stuff.
0:30:32 All that stuff had to be figured out.
0:30:34 And I think we’re at the beginning of infinity
0:30:37 of really understanding startup capitalism.
0:30:39 And so I just think a startup capitalist
0:30:40 is a different type of capitalist.
0:30:44 They don’t create value by persistently compounding
0:30:46 an advantage like a big company does.
0:30:50 They create value by doing something radically different.
0:30:51 And that’s another way to show up in the world
0:30:53 and be valuable.
0:30:56 And so I just think there’s so much to learn about that.
0:30:58 When I think that just like there’s a process
0:31:01 for building a great company that’s a going concern,
0:31:05 I think that there are processes and patterns
0:31:07 that can be understood about what it takes
0:31:10 to create a great startup that changes the future.
0:31:12 And there’s so little that’s known about it.
0:31:14 So we’re having this conversation right now, right?
0:31:16 It seems kind of random, right?
0:31:19 It seems like trying to predict the weather or something.
0:31:21 But to me, that’s what makes it so interesting
0:31:23 is it’s so hard to figure out
0:31:25 that it’s worth trying to figure out.
0:31:28 – I tell you, Mike, as I get older and older,
0:31:30 my strategy is get lucky,
0:31:34 but get lucky is not a good strategy.
0:31:35 – That’s pretty good sometimes.
0:31:40 – So I’m gonna take you down a rat hole
0:31:42 and you can tell me we don’t wanna go down this rat hole,
0:31:45 but you have the data to know these people
0:31:46 better than most people.
0:31:51 So I look at the current Mark Andreessen,
0:31:56 the current Elon Musk, the current Mark Zuckerberg.
0:31:59 And I ask myself, what happens to these people?
0:32:01 These people started off trying to make the world
0:32:05 a better place, democratizing, computing,
0:32:07 freedom of information, all that.
0:32:10 And now they turn into these MAGA people
0:32:13 and you got any thoughts about what happens?
0:32:17 Is it age or is it when you start being worth
0:32:19 a billion dollars or more or something just happens in you?
0:32:22 What happens to these people?
0:32:23 – Let’s see.
0:32:26 So I’m gonna tread carefully on the political questions.
0:32:27 – Why?
0:32:29 – But I mean, I guess we could talk about it some.
0:32:33 But one thing that I’ve observed in a lot of these folks
0:32:36 is that they tend to be disagreeable.
0:32:39 When you think about it, a startup
0:32:41 is a fundamentally provocative act.
0:32:43 It’s a disagreement with the present.
0:32:46 You’re showing up as a founder and you’re saying,
0:32:49 hey, the way you think the world is, I’m challenging that.
0:32:52 The way you think the world is, that’s not how it’s gonna be.
0:32:53 It’s not gonna be about taxis anymore.
0:32:54 It’s gonna be about ride sharing.
0:32:57 It’s not gonna be about cars with drivers.
0:32:58 It’s gonna be autonomous vehicles.
0:33:00 It’s not gonna be gas, ice cars.
0:33:02 It’s gonna be electric vehicles.
0:33:04 Yes, I am gonna start a company
0:33:06 that blasts rockets into outer space.
0:33:08 Even though my competition is the US government
0:33:11 and they have an infinite supply of money that they can print.
0:33:14 These people tend to be disagreeable.
0:33:16 And by that, I don’t just mean being a jerk.
0:33:19 They tend to just be willing to disagree.
0:33:23 Justin Kahn, before he started Justin TV,
0:33:25 he started a calendaring company
0:33:28 and Google launches a Google calendar.
0:33:31 And Justin decides to sell the company on eBay.
0:33:33 And I was like, I didn’t even know it’s possible
0:33:34 to sell a company on eBay.
0:33:36 Full distinct for $250,000.
0:33:38 Some of the disagreeableness is just the willingness
0:33:42 to be unconventional in how you pursue your ideas
0:33:43 and your mission.
0:33:47 I think that Elon is naturally disagreeable.
0:33:48 There are aspects of disagreeableness
0:33:50 that people don’t like,
0:33:52 but if you make the diamond,
0:33:54 not have the properties of the diamond,
0:33:56 it won’t cut glass anymore, right?
0:33:57 I think that most of these people
0:33:59 who create these outlier results,
0:34:01 they’re not normal people.
0:34:03 And they’re not normal in ways
0:34:05 that change the world for the better.
0:34:06 And they’re not normal in ways
0:34:08 that some people may not like.
0:34:11 But like Elon said on Saturday Night Live that time,
0:34:13 he’s like, I blast rockets into outer space.
0:34:16 I’m trying to change humanity.
0:34:18 Did you expect me to be a normal chill dude?
0:34:19 He’s just not gonna be.
0:34:21 That’s not who he is.
0:34:24 And so I’ve kind of learned that these people
0:34:26 don’t end up fitting neatly into a box
0:34:28 that you wish they would fit into.
0:34:30 And I imagine that you’ve known some founders,
0:34:33 you knew Steve Jobs way better than I ever would have.
0:34:35 But I imagine there were things that Steve did
0:34:38 that probably maybe you wish he didn’t do.
0:34:39 But it is what it is.
0:34:41 It comes with a territory.
0:35:02 I wanna end up with kind of a,
0:35:05 just like a quick series of questions.
0:35:07 I’m assuming that many entrepreneurs
0:35:08 are gonna listen to this podcast
0:35:11 and your legitimate successful VC,
0:35:14 they probably would love to be in front of you.
0:35:16 So just some quick questions,
0:35:19 very tactical and practical for an entrepreneur.
0:35:21 So question number one is,
0:35:23 how do people get to a VC?
0:35:26 Do they like send out 2,000 emails?
0:35:28 But how do people get to you?
0:35:31 The best way is to get a referral
0:35:33 from somebody that we respect.
0:35:36 And people tend to trivialize that discussion.
0:35:38 So people tend to say that just means
0:35:40 that whoever has the best network wins
0:35:42 and there’s gonna be certain people
0:35:45 who get excluded from being entrepreneurs.
0:35:46 But there’s a reality guy,
0:35:49 which is if you’re starting a startup,
0:35:52 you have to convince people to join your movement.
0:35:55 And if you’re sitting out there in the future by yourself
0:35:56 and nobody joins your movement,
0:35:58 that future is not gonna happen.
0:36:01 And so to me, it’s not a function
0:36:03 of how well connected you are.
0:36:06 Getting an intro from someone I respect
0:36:10 is a function of your ability to persuade somebody credible
0:36:12 that your future matters.
0:36:14 And that other people are gonna wanna join you
0:36:15 in that future.
0:36:17 And so, yeah, something could come over the transom,
0:36:19 but how am I supposed to know?
0:36:21 How am I supposed to know how good they are?
0:36:25 I’ve gotta find some way to validate
0:36:29 that their ideas about the future make sense
0:36:30 to credible people.
0:36:32 And by the way, it doesn’t have to be like Reed Hoffman
0:36:34 or Mark Andreessen that makes the intro.
0:36:37 It could be you’re living in a certain future
0:36:39 in synthetic bio,
0:36:42 and it’s a scientist who’s very credible in that area
0:36:44 is like this is one of the most amazing things
0:36:45 I’ve ever seen.
0:36:49 And so I just need some signal from the future
0:36:53 that’s valid, that validates the idea and the insight.
0:36:55 I’d say that’s the key thing.
0:36:59 If your insight is starting to get traction,
0:37:01 that should be a solvable problem, right?
0:37:02 There should always be somebody credible
0:37:05 who embraces the idea, who’ll make the intro.
0:37:09 So I’d say that that’s the primary thing that we look for.
0:37:11 – Okay, next question.
0:37:12 What do you want in the pitch?
0:37:15 What’s the content of the pitch?
0:37:18 – Okay, yeah, so I’ll give some super tactical advice on that.
0:37:22 All things being equal, I like to say slide number one,
0:37:26 say what you do as if I know literally nothing.
0:37:29 You don’t say we’re Airbnb,
0:37:34 we’re a marketplace for unused residential housing space.
0:37:35 I don’t know what that is.
0:37:38 That’s jibber jabber jargon.
0:37:40 What you want to say is something like,
0:37:44 we’re Airbnb, we let you read an extra room in your house.
0:37:46 And here’s why that’s important.
0:37:49 A lot of times you’ll get a pitch
0:37:53 and your 10 slides in, I don’t know what the startup does still.
0:37:56 And that’s hard to process, right?
0:37:58 And I’m sympathetic to founders on this front
0:38:01 because they get advice, they get bad advice.
0:38:03 They get advice that says millennials are a thing,
0:38:05 put that slide up front.
0:38:08 Marketplaces are a thing, talk about marketplaces.
0:38:10 And I’m 10 minutes in, I don’t know what you do yet.
0:38:14 So slide number one is what do we do is if I know nothing?
0:38:17 Slide number two is what do I know
0:38:19 about the future that’s not obvious?
0:38:22 Is really your chance to convey the insight?
0:38:25 Slide number three is anything impressive
0:38:28 that’s happened so far objectively?
0:38:32 Customers, patents, letters of intent,
0:38:37 just some proof that people in the world care about this thing
0:38:40 and that they’re joining the movement and signing up.
0:38:41 What I find is that the founder
0:38:46 can get those three things right quickly, 10 minutes in.
0:38:49 Now the venture capitalist is leaning forward.
0:38:52 Now, it’s funny, I think we rift on this earlier.
0:38:56 What happens too often is founders get bad advice.
0:38:59 And so they create what I like to call a Franken Deck.
0:39:01 And so what happens is they’ll pitch their advisor
0:39:03 and the advisor wants the best for them.
0:39:05 They’ll say, hey, VCs love marketplaces
0:39:07 ’cause they have network effects.
0:39:09 Don’t say you rent an extra room in your house.
0:39:12 Say we’re marketplace for residential real estate
0:39:15 ’cause marketplace, hot network effect,
0:39:17 those are the real estate big.
0:39:18 Okay, put that in there.
0:39:20 And then the founder say, oh yeah, you’re right,
0:39:21 okay, I’ll do that.
0:39:23 And then they’ll say the other thing is
0:39:25 this is an appealing service for millennials.
0:39:27 So you should have a few slides up front
0:39:29 that talk about the importance of millennials
0:39:31 and handcrafted experiences, all that stuff.
0:39:34 And you haven’t talked about the total available market yet.
0:39:35 So you ought to talk about that.
0:39:37 You need a few slides on that.
0:39:39 You need a few slides on the real estate market,
0:39:41 residential– – You need AI in there too.
0:39:43 – Today you’d say you need AI.
0:39:46 And so then what happens is you go in
0:39:50 with this deck of 20 slides and you pitch somebody
0:39:54 and the VC passes partly ’cause they don’t know what you do.
0:39:57 And then they give a reason in their pass note
0:39:58 for why they passed.
0:40:00 And it’s like, oh man, there’s another objection.
0:40:02 I better have a slide that counters that objection.
0:40:04 And so before you know what you have 30 slides,
0:40:07 each of which is designed to anticipate
0:40:09 and counter an objection.
0:40:11 And what I like to say to founders is
0:40:14 the only people that matter are the people
0:40:15 who believe your insight.
0:40:17 If a VC doesn’t believe your insight,
0:40:18 they’re not gonna invest.
0:40:21 There’s no way to overcome their objection.
0:40:24 They’re not gonna invest no matter what until it’s proven.
0:40:27 What you wanna find is the subset of people in this world
0:40:28 who believe what you believe.
0:40:30 That’s true of customers, it’s true of investors,
0:40:32 true of early employees.
0:40:35 Don’t waste any urges of energy on anybody else.
0:40:37 And the problem with the Franken Deck is
0:40:40 the person who was ready to believe doesn’t know what you do
0:40:45 because they got confused by just how convoluted
0:40:46 the pitch was.
0:40:50 And that person was gonna be much more likely to say yes,
0:40:51 if you just show up and say,
0:40:54 we let you rent an extra room in your house,
0:40:57 you’re gonna be able to do this because Facebook Connect
0:41:00 lets hosts and guests know who each other are
0:41:02 and people are used to online reviews
0:41:03 and everybody’s connected.
0:41:06 Millennials want these kinds of experiences and all that.
0:41:08 That’s the conversation you need to have
0:41:10 with the person who’s prepared to believe.
0:41:12 And the person who’s not prepared to believe doesn’t matter
0:41:14 because they’re not gonna do anything anyway.
0:41:16 And so their opinion doesn’t matter either.
0:41:18 This is the important point.
0:41:20 The source of their objection doesn’t matter
0:41:22 because they’re not gonna join your movement.
0:41:24 Only those who are prepared to join your movement
0:41:27 have valid input about your strategy.
0:41:29 And that’s really important I find,
0:41:31 is to say, hey, I’m only gonna spend time
0:41:34 with the people I think are ready to move with me
0:41:38 and I’m gonna bias my feedback collection
0:41:39 to what they say.
0:41:42 – I gotta tell you Mike, I gotta believe
0:41:44 that many entrepreneurs listening to this,
0:41:47 their heads are basically exploding
0:41:51 because they’ve been hammered and I gotta take feedback.
0:41:54 I gotta check off all the boxes and I gotta do all this.
0:41:57 And basically you’re saying you got them in three slides
0:41:59 and if you don’t get them in three slides,
0:42:00 you’re never gonna get them.
0:42:03 So just cut your losses, stop wasting time
0:42:07 and go find somebody who does believe the three slides.
0:42:10 – I think so and some people may disagree with me here,
0:42:13 but when you think about it, it’s inspiring.
0:42:16 When you realize that great ideas
0:42:20 are usually disliked by most at first.
0:42:21 By the way, that’s true of everything.
0:42:24 That’s true of Euclidean geometry.
0:42:27 It’s, you know, Copernicus, when he says the sun
0:42:29 is at the center, not the earth,
0:42:33 the pope puts him under house arrest and says,
0:42:35 hey, maybe you ought to change your opinion about that.
0:42:37 A lot of the great ideas in human history,
0:42:39 you know, people when Einstein proposed
0:42:40 the general theory of relativity,
0:42:43 they’re like, this guy sounds like he’s smoking weed.
0:42:47 That’s one of the most abstract, crazy things I’ve ever heard.
0:42:52 And so most great ideas are heretical at first.
0:42:57 And actually, if most people don’t like your startup idea,
0:42:59 that’s a positive sign.
0:43:03 If everybody liked your startup idea, it’s too incremental.
0:43:06 When you realize that, it’s inspiring, right?
0:43:09 When you realize, hey, given that most people
0:43:12 are gonna dislike my idea, who cares about them?
0:43:13 They don’t matter.
0:43:16 They’re not creating the future, I am.
0:43:19 I and my early believers are gonna create the future.
0:43:21 They’re not gonna have a say in it.
0:43:23 And so I need to go find who those people are
0:43:25 and not waste a single urge of energy
0:43:27 on anybody who’s not those people.
0:43:29 And so what we wanna do is we wanna find the people
0:43:32 who say, oh my gosh, where have you been all my life?
0:43:33 This is amazing.
0:43:36 I can’t wait to join your call to adventure
0:43:38 and go do this with you.
0:43:39 That’s what you’re looking for.
0:43:42 And the people who aren’t ready to accept your call
0:43:44 to adventure, their objections don’t matter
0:43:47 because they don’t apply to your adventure, right?
0:43:50 Only objections that matter are the objections
0:43:53 from fellow believers because they help you see the future
0:43:54 in a more clear way.
0:43:59 – Mike, I have more questions,
0:44:02 but there’s no question I’m gonna ask
0:44:05 that’s gonna elicit an answer that is a better way
0:44:08 to end this podcast than what you just said.
0:44:10 So we’re gonna (laughs)
0:44:11 – Okay, I like it.
0:44:14 – I call this the casino theory
0:44:16 and I often apply it to surfing.
0:44:20 So I’ll tell you the casino theory of surfing and podcasting.
0:44:23 So sometimes when you go to Las Vegas
0:44:25 and you have 50 bucks in your pocket,
0:44:29 you go to a casino and you bet it on blackjack or craps
0:44:33 or whatever and just magically you have $500.
0:44:37 So my casino theory is that most people have that $500
0:44:40 and they keep playing until they lose it.
0:44:42 But if you’re smart and you got lucky,
0:44:45 you got 500 bucks, you walk out, right?
0:44:49 You quit gambling, you walk out with the 500.
0:44:51 So the casino theory of surfing is
0:44:53 after you caught a great wave,
0:44:54 don’t try to keep catching waves,
0:44:56 you’re just gonna get disappointed.
0:44:58 And the casino theory of podcasting is
0:45:01 when you had a great answer like that,
0:45:02 you don’t ask more questions,
0:45:05 you just quit now and you end the podcast
0:45:07 ’cause that was a great answer
0:45:09 and all these entrepreneurs are on the world.
0:45:11 They’re putting pieces of their brain back in their head
0:45:14 because you just said something that’s contrary
0:45:16 to what they’ve heard for the last two years.
0:45:20 So that’s the way to end this podcast, Mike.
0:45:22 – All right, I appreciate your taking the time guy
0:45:24 and it’s great to see you
0:45:26 and congrats on all the success you’ve had
0:45:30 and many types of ways and scenarios, right?
0:45:34 You’ve been a polymath when it comes to the tech industry.
0:45:35 It was great to see you.
0:45:38 – I wish I could say that I caused
0:45:42 or really capitalized on inflections
0:45:47 as much as some of the stories that you wrote about.
0:45:49 And actually, if I think about it,
0:45:50 at the start of my career,
0:45:53 I got on the Macintosh inflection
0:45:54 and at the end of my career,
0:45:56 I got on the Canva inflection.
0:45:58 And I gotta tell you, in both cases,
0:46:01 I consider myself lucky, not smart.
0:46:02 – Yeah, and it’s interesting.
0:46:04 Probably you don’t wanna sell past the order
0:46:06 like what you said, you wanna end on the right note.
0:46:09 But the other thing about this surfing thing is,
0:46:11 if you go after the right waves,
0:46:13 you only have to be right once.
0:46:15 And so that’s the way I look at it,
0:46:17 is you wanna pursue opportunities
0:46:19 where you only have to be right once
0:46:22 because you’ll be spectacularly right.
0:46:24 The only way to really lose in entrepreneurship
0:46:26 is to lose your time.
0:46:28 Pursuing something that you realize
0:46:30 in hindsight wasn’t worthy of your talent and time.
0:46:32 And so we wanna go after ideas
0:46:35 that are waves that are worth surfing.
0:46:36 Because like you said,
0:46:38 if you catch the ideal wave, you did it.
0:46:39 – Thank you, Mike.
0:46:42 That was just a remarkable interview.
0:46:43 I’m Guy Kawasaki.
0:46:46 This is remarkable people and all you entrepreneurs
0:46:50 who just had all your myths exploded.
0:46:51 I empathize with you,
0:46:54 but better you hear it now from Guy and Mike
0:46:56 than you hear it two years from now
0:46:59 after all these rejections and disappointments.
0:47:02 So that’s how to be a remarkable entrepreneur.
0:47:05 I wanna thank the rest of the remarkable people team.
0:47:08 That’s of course, Matt as a Nismar producer,
0:47:10 Tessa Nismar researcher,
0:47:14 Luis Magana, Fallon Yates, and Alexis Nishimuro.
0:47:16 We are the remarkable people team
0:47:18 and we are hell bent for leather
0:47:21 on a mission to make you remarkable.
0:47:25 Until next time, Mahalo and Aloha.
0:47:30 (orchestral music)
0:47:32 This is remarkable people.
Buckle up for a mind-bending journey into the heart of startup innovation! On this episode of Remarkable People, Guy Kawasaki goes deep with Silicon Valley’s master of disruption, Mike Maples Jr. As the wizard behind Floodgate who spotted Twitter and Twitch before they exploded, Mike shatters conventional wisdom about what makes startups soar. Forget everything you think you know about “better products” – Mike reveals why the craziest ideas often win big and why being dismissed might be your biggest advantage. Warning: this episode may permanently rewire your entrepreneurial brain!
—
Guy Kawasaki is on a mission to make you remarkable. His Remarkable People podcast features interviews with remarkable people such as Jane Goodall, Marc Benioff, Woz, Kristi Yamaguchi, and Bob Cialdini. Every episode will make you more remarkable.
With his decades of experience in Silicon Valley as a Venture Capitalist and advisor to the top entrepreneurs in the world, Guy’s questions come from a place of curiosity and passion for technology, start-ups, entrepreneurship, and marketing. If you love society and culture, documentaries, and business podcasts, take a second to follow Remarkable People.
Listeners of the Remarkable People podcast will learn from some of the most successful people in the world with practical tips and inspiring stories that will help you be more remarkable.
Episodes of Remarkable People organized by topic: https://bit.ly/rptopology
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VC pitch deck:
; slide number one is what do we do (as if VC knows nothing)
; Slide number two is what do I know about the future that’s not obvious?
; Slide number three is anything impressive that’s happened so far objectively? Customers, patents, letters of intent, just some proof that people in the world care about this thing and that they’re joining the movement and signing up.
+If a VC doesn’t believe your insight, they’re not gonna invest. There’s no way to overcome their objections. They’re not gonna invest no matter what until it’s proven.
What you wanna find is the subset of people in this world who believe what you believe. Only their objections matter. That’s true of customers, it’s true of investors, true of early employees.
Don’t waste any urges of energy on anybody else and their objections.