What Venture Capital Will Look Like in the Future

Episode of My First Million with Sam Parr and Shaan Puri.

Transcript

Note: This transcript was auto-generated from YouTube captions. It may contain errors and lacks speaker identification. A full Gemini audio transcript will replace this.

Kind: captions Language: en if you want to bet on the future of humanity and where a lot of growth is going to come from investing in technology is the way to do it yeah i feel like i can rule the world i know i could be what i want to i put my all in it like no days off on the road let’s travel never looking back all right this is one of the best episodes i think we’ve done in a long time i’m going to tell you everything that we talked about but first spotify just has this like new feature i want to see how great it is so basically if you’re on spotify go to pull the app up look at it look at our my first million page and you’re going to see a little bell do me a favor hit that bell i want to see if you’ll be notified when we have our next episode i want to see if this thing works if it does work sign up click the bell and then tweet at me tell me if it works and i’ll like give you a retweet or something like that in exchange for clicking it but click that for me and let me know if it works so today’s episode i think is one of the best episodes we’ve done in a very very long time we talk about the amazon liquidation business i’m actually going to record myself buying from one of these websites it’s a fascinating business where they sell you a bunch of return stuff but it’s packed in a mystery package we talk about fake data there’s this new company called tonic that’s selling fake data to help you test your stuff crazy fascinating business and then my favorite topic is this guy called harold alphon he’s the billy of the week this amazing billionaire that started a shoe company and eventually gave away most of his money but incredibly fascinating we talked about a few other stuff like like how tiger global’s making all this money in the future of vc that’s pretty fascinating but my favorite part was the billy of the week check it out and by the way on your phone you’re probably listening to this on your phone go to spotify click that bell i think they just released this recently someone was telling me about it tell me if you get notified like send like a like click the bell and then just send me a screenshot when the next episode comes out and tell me if it works the sampar on twitter i wanna know if this works i’ll retweet you if you um send it to me all right enjoy the episode okay so what did you think about the remit episode i thought it was pretty good i thought he does a good job like i guess i always break it up into two categories how how interesting is the stuff you’re saying and then how interesting are you at saying it so he was like i thought he was very interesting in how he says things like he bri he brings energy he is not afraid to like call something stupid like you know he brings a little bit of that flair that you need for something to be fun um in terms of the info i thought it was pretty good i think um yeah we talked a lot about courses and i just think not like we are interested of course because we can make courses that might be successful and so and he already does that i don’t know how many other people really care as much about how much we nerded out about it but i don’t really care because i wanted to know it and so it was usually good uh let me tell you really quick about this book i’m reading it’s called empire of the summer moon have you heard of this no but it sounds very uh it sounds like a teenage girl book no it’s about the comanches the comanche indians do you know what the comanches are no what is that all right so let me this is just a quick break how much time do you spend reading i feel like every time you get on the pod you’re reading a different book are you reading like four hours a day what’s happening i when i say reading it’s audio books and i could do at least one a week so wow like yeah like if i exercise if i go for a walk i’ll listen to it so and i listen to it at like 1.2 speed so like a 10 hour book ends up becoming like eight hours and so i could do that in a week easy is this a problem for you when i listen to an audiobook and it’s read by like a professional narrator i just hate it and i can’t get into it but when it’s the author reading it i’m like okay i’m kind of down with that is that a problem just for me because it seems like most are professional narrator professional voice over actors or whatever they call them it’s actually is a huge problem for me so i do two things the first if i find a narrator that i like i go oh oh you find their other books that they’ve read yeah so if i find it sorry my phone was going off if i find it like who’s your favorite narrator like some random guy who nobody’s ever heard you’re like yeah craig smith ron chernow ron chernow is a great author he’s he wrote titan he wrote house of morgan i’ll go and read books uh he gets he has a great narrator that i like the second thing so if i find a narrator that i like i’ll go and i’ll read uh something that they’ve done the second thing that i do is i think more celebrities should narrate books so i just read this amazing book i loved it it was by john steinbeck it was like part fiction part not fiction and it was read by lieutenant dan from forrest gump okay you know come up his name’s gary rizik or resign or something and it made the book so much better so lately i’ve been trying to find books sign i don’t even know how to say his name sinus is his name i want to go and find books only by like certain celebrities that i know and that makes the book more fun so i actually no way and and you know what’s funny i always think about this sometimes it’s like the reason i don’t like i don’t really read like self-helpy business books that much anymore and the reason i don’t is i found this one author that narrator narrated literally like 200 like self-healthy books and i looked at what he was doing now and he like still wasn’t doing much i’m like well if this [  ] read all this stuff that it should have worked like you would like oh you i thought you were gonna say they all sound the same but you’re saying this guy read all these books and he’s still you know an average joe so [  ] it doesn’t work yeah like i looked up like how much he charged to read a book i’m like dude what the heck like you’re making like 50 grand a year and you just read yourself yeah what what the hell is going on so i’m reading this book right now called empire the sun of the summer empire of the summer moon it’s about the comanche indians the comanche indians was like 20 000 indians in america but they were like in the colorado and west area but when you think of indians like you stereotype as like um like when i am in my head i have this picture of like the pilgrims and the indians coming together and then eventually the white people like mess them up so the com the comanches were badass so they were just like normal they were kind of normal they weren’t like that particularly special but then they got a hold of horses in the 1500s and they mastered horses so much so that a comanche on a horse what they could do is they could get they could be riding the horse lean to the side so you can’t see them and then pop up and shoot 20 arrows faster than one person could fire one bullet and then reload it and fire another and they were wild they were wild wild wild they didn’t even have the word surrender in their language like it wasn’t a word and uh this is great i’m now that’s my criteria now when i what do you look for in founders when you invest could you have been a comanche indian right are you a comanche or not i want to comanche you as a founder that i’m investing they’re crazy these guys were like were bad to the bone and a lot of stuff they didn’t do was like great like like in their in their culture it was okay to torture and kill captives and they would kidnap people and so they’re wild but the whole story is about the history of them and then also it centers around they kidnap a family or they like take a family like a white family and they kill most of the family but they keep this 12 year old girl and they end up like raising her and she marries the chief and she gives birth to someone who eventually becomes the chief and the white people america after like 25 years get her get her and they think that they’re saving her and they bring her back and she’s like no i want to go back and they’re like no look lady you don’t know what you’re talking about you need to be here and she’s like no no no like that they’re my family now and so out of protest because she like inherited these like these like um you know these values of toughness she was like fine and she’ll see starved herself and died it’s it’s the craziest book i’ve been reading you’ll you’ll have to read it’s called the community i can tell you right now i’m not gonna read the book definitely not gonna read the book but i loved that story and i feel like i already got the win i feel like if i go in and read it now i’m gonna do a whole bunch of work and not really get that much more out of it than i already have i’m so happy with what you just gave me well i got like on this kick where i was reading about navy seals and i was like all right who else is badass and then i got to the comanches so is it because you met what’s her name’s husband and he’s an ex-navy seal 100 yes i met him the other day he’s awesome okay great that’s good um all right we have a lot to go through uh this is gonna be interesting i could what do you want to start you want to start with harold uh no let’s save him for a little bit later uh let’s do some cool ideas i have a couple you have a couple i think um you want to go first you want me to go i want you to okay which uh let’s start with this okay i think this one is as one of the more interesting ideas it’s kind of random so i’ll start with that it’s pretty [  ] random but um it’s this thing called tonic fake data and so i’m trying to chase this guy down because i really want to invest in this company now after i heard about it so my so i have a cousin i got a couple cousins that are in tech i got three i think three or four cousins that are in tech one of them my cousin samir he tweeted this and i think his tweet literally has two likes which is just a shame because like there’s actually like an amazing twitter thread i’ll i’ll retweet it right now so people can go see it it’s on my twitter feed now um but he’s like you’ve heard about big data but what about fake data you ever heard of fake data i had never heard of this so he’s like check out this company called tonic fake data and uh they grew about 600 this last year and uh and he starts to like tie some things together so he’s like you remember when hbo had that thing where the intern accidentally sent an email to every subscriber and um it’s because you know they were doing a test of a like some software system the email system or whatever it is but when a developer’s doing a test they have to input some dummy data right some information um and and so typically like you know a developer will just kind of like make it up it’ll be like first comma last name you know like they’re just trying to get through the task quickly so they’re just like inputting fake data you know just from their head and so you know if you think about this at kind of like a bigger level let’s say you’re testing um you know you’re uber and you’re tr you have a new feature in your app and so he gives us example basically like let’s say your uber and you are releasing this new thing about notifications um and so you there’s like this process of quality control testing right so they’ll they’ll have they’ll try to like okay sign up as a new user and try it okay let’s say you’re already using log out log back in pretend you got a new phone right there’s all these like if you have a product that has hundreds of millions of users that are living normal weird lives there’s all these random different paths a user can take and you kind of need to test your product through each and so um and so there was a guy this is kind of the famous thing is there was a guy who he had logged out of his account on his wife’s phone but even when he logged out she kept getting the notifications because of just this like the developer didn’t test the feature properly of this use case you go to a new phone you log in you accept notifications then you log out you’re still getting notifications somehow and so which we did all the time i would walk around be like hey who here at the office has an android let me see it real quick right yeah yeah yeah exactly who’s got an android okay i think we tested all of android it’s like dude there’s like 200 models of this thing it’s like 2 000 models you think you just tested android because you know the one guy who’s an android bro like you know used it for a second so what happened with this uber guy is uh his wife got a notification that he was going somewhere or like you know your ride is ready or whatever and she’s like wait he’s supposed to be at some other place and she found out he was cheating he ends up suing uber 47 million dollars because you know why found out about this left-hand blah blah the cheater sued uber which is hilarious and so uh he’s giving all these little examples i don’t know if you’re one or not it’s not in the thread i’ve done more than so so he gives another example let’s say here’s the last example it’s 2008 um the financial system was crashing banks are failing and banks owned at that time if you remember like the subprime mortgage crisis they had basically on their books a whole bunch of mortgages that they needed to get rid of and so they needed to sell them super fast because they were like they were at risk of going bankrupt and so they they set up a call center that any real estate investor or buyer could call in and make an offer on one of the mortgages they had because like an auctions like you know closing you know final sale everything must go was that was the idea and so they hire palantir the big data company that peter thiel started and they say hey come up with a recommendation engine that will figure out what offer we should accept because we don’t have time to like vet each offer as they come in it needs to be quick like a garage sale type of decisions of like hey i’ll give you two dollars for it will you take it yeah go go ahead take it uh everything must go and so um so the developers were like okay we need to like test our recommendation engine for like should we or should we not accept the offer but they couldn’t use the data because the data had like all this personal sensitive information right it’s a person’s name credit score their income their address like it was too much information the bank couldn’t just give it to palantir and say hey use this real data to figure out what offers we should and shouldn’t accept and so what they did was the developers went to the bank’s office they go inside the building and they looked at the data and they said okay we understand we can’t take this data and use it for our models but we can replicate this so like the way a mannequin is a replica replica of a human body or whatever they did that to the real bank data system of all these mortgages and so they created a replica that would have the same like let’s say distribution and outliers and whatnot but it was all dummy data it was all fake data and so they’d use this they go back they create this thing uh they create the model it’s all successful it all works so what happened is i think the guy from palantir took the spot i think he’s for ex palantir he spun out he is and was like i’m going to create this yeah ian co i’m going to create this for any business because busi businesses need to be able to generate fake data sets to test all their scenarios from like the uber example show me all the things that users do all the all the different like they do this step and this step and the step and this step cool i need to be able to simulate those steps um accurately and so what they do is they basically say all right people are pretty sensitive about privacy and data nowadays you got gdpr so companies can’t be using digi using their data for these things or giving giving data to other groups for it so tonic fake data can basically analyze your data create dummy data and then let your developers or other developers use that data those fake data that fake data that mirrors the real data and so i thought this is like such a niche problem that you would only understand if you’d ever been through this but then once you’ve been through it you’re like [  ] this solves a big problem that they have no other way to solve and i love this this is the opposite of a guy who can code makes a to-do list app or makes a music streaming you know like a playlist generator based on the music you like right those are the ideas everyone has that everyone can do this is an idea no one has that pretty much no one could do and so i’m like dude i’m like super bullish on this idea and i love this i love this and especially now with machine learning with machine learning you need a lot of input data to make recommendation engines better well how do you do that how do you get more data well you can simulate or create fake data that mirrors a small sample of real data so i just think it’s awesome it goes on two big mega trends privacy and machine learning and i just loved that i had never even thought about this this is amazing how are they doing i think they’re doing well they raised some money he said their group 600 in 2020 he what he does my cousin does is he basically helps people do what he did like uh you’re interested in tech but you’re not a programmer or a designer i’ll help you get your first sales job inside your cousin yeah so he went he went and worked at sift science this like fraud detection like machine learning thing similar story by the way ex facebook guys who are dealing with the spam problem at facebook spun out and created science so if you have any platform they’ll help you fight fraud and spam and uh using the same stuff that facebook was building internally they exported that idea that’s my old import expert framework and so he was the he was like a you know just like a what they call sdr like a sales development rep basically just spam cold emails all day and uh and then you kind of work your way up become a manager what’s he do now he teaches people how to get a gig so he’s basically like yo you want to break into tech and get a sales job like cool most people don’t know how to how to interview for this or how to like do well with this so he takes you for one month he tells you here’s a bunch of good companies like that you haven’t heard of tonic fake data they need sales reps they have a great product it’s a technical dude really i’ll help you i hope you understand it and i’ll help you get do the job interview well and i only make money once i place you and so he’s like a one-man recruiting firm right now for this i think it’s kind of a awesome idea i don’t know i think he’s just getting started so i think he’s got like you know five people at a time right now per month that he’s helping get jobs like very boutique at the moment i’ll give him a shout out so his twitter handle is samir underscore joehr unfortunately no one’s gonna know how to spell any of those things but if you go to my twitter feed you’ll see i retweeted his tweet just now and i said that’s great i i i samir is more interesting almost than than tonic i i i always thought you’re gonna say than me well he might be you’re pretty interesting but this guy sounds great too i’ve always thought that you should that that job that your cousin’s doing samir is doing that that could exist for all types of positions because i’ve had when when i was just breaking into silicon valley and living there and i i would have so many people email me and they would say which company should i apply to and for this role or that role i’ve always i always thought that that could be a cool service that’s so cool that he’s doing that and he’s got to take a cut like a like a percentage of their first year’s earnings yeah it’s like if i help you get this job then i get x x thousand dollars i don’t know i don’t know what his pricing is exactly but i get x thousand dollars but hey you just got a job that’s you know 85k base plus bonuses whatever like are you cool paying 4k to this guy to who got you that job like really was pretty hands-on with it i think people will make that trade every day of the week plus the companies will pay a placement fee like once he establishes himself a little more like they already are playing recruiter fees of 20 000 per person so they will happily pay him once he builds his name a little bit but it’s not super scalable i don’t think he cares he’s just like dude i just want to make money and i don’t care like making 20k a month would be effing sweet and if i could just do that with my bare hands and not have to like run a whole business and have a big team great i’m going to do that and i kind of think that’s actually pretty smart i’ve got a buddy who um was a executive recruiter for years and we he eventually needed to he was like i want to start my own thing and i was like i’ll hire you i’ll be your first client i was his first client in his first 18 months he’s done close to a million dollars of sales wow just from recruiting a one-person recruiting of course he has like 10 years of experience and he’s been doing it for so it’s not like it’s just like he just popped into it but recruiting is an amazing business it’s a really good business for uh uh like if you have a one to three person shop i think you could kill it it’s pretty ridiculous uh yeah of the of the like agency service-y type businesses headhunting executive recruiting executive placements seems to be like one of the best if you’re gonna go into service that’s like one of the best service industries to do yeah i completely agree what’s uh amazon liquidation because you’ve been talking to jack about it i saw the messages you’re hollering at them well i just start to pay attention right this is one of the one of the the meta lessons of listening to this podcast right you listen to this podcast you should start seeing business as everyone right like your cousin comes up to you you’re saying hello but you’re looking at everything that they’re wearing and you’re thinking oh what’s this [  ] what’s that brand i’ve never heard of that where’d that come from what is this thing you’re wearing on the wrist uh and so you start to like see businesses everywhere you go you go to the i told you the story i was at the dentist he’s doing a cavity thing i’m looking at his monitor wondering what software is that oh who’s selling software to dennis is that that looks at the x-rays that it’s like this looks like it’s from 1980 like that’s probably that’s probably like a super successful business because they didn’t have to update their software that’s how i know it’s that good on business whenever i drive by a library a university or a church or a uh school and i see someone it’s named after someone i’m always looking them up on wikipedia i’m like right right where did this come from because if you if you have a library named after you you’re a baller and we have uh the ability of the week i’m going to talk about this week is exactly that so all right so anyways the idea is you see business everywhere so same thing happens with ads now every time you see an ad it’s not this annoying thing to scroll by it’s like huh who are you that you can spend money to get in front of me are you making money who what is this business so i saw this ad on tick tock that was basically like it was somebody receiving at their doorstep not a package but a pallet of packages like a normal person was like so excited to open their door and they like you know like you see it like a shipyard like a palette of boxes just taped up and they were all like a mismatch of boxes it wasn’t even like it didn’t look good so i was like what’s that and he said get a palette of amazon there’s like amazon liquidation get a pallet of amazon goods for like ten dollars that’s ridiculous ridiculous like claim and uh the one the one that i was looking at well do you remember what the service was called okay so so look up this this url charming so c-h-a-r-m-i-n-g charming z-r dot shop right so you already know this is some [  ] drop shipper [  ] who is doing this this is not a long-term brand they are investing into charming charming er got shot shop okay uh okay okay so yeah so it’s like a drop yes it’s just [  ] they’re just trapped right okay like the crappy leggings that you see on tick tock so look in the thread that me and look at the thread that me and jack and you are in and look click that exactly so this says huge value backlog picking liquidation package 9.99 and then you see these giant like from an amazon warehouse packages and it’s basically returns uh and you can get like the medium value you get the large you get the super large this is a super large one which i think is or the whole thing which is what the picture is of is 60 60 so 60 for the whole thing and so here’s what it says uh if you just scroll down their site and you know it’s good because look at this it has like the flashing yellow and red text so like this is some again drop shipper [  ] who’s like i’m gonna optimize this limited stock it’s flashing red he goes in the united states and europe amazon ebay and other e-commerce platforms have too many returns and there’s no redundant warehouses to accommodate those returns therefore as a top liquidation company we’ve collected these returns at a very low price and put them repackaged into pallets for sale some of the packages in the pallets lack the outer packaging like there’s no box um some of them and the functions are normal and do not affect the use at all this is why we can sell these at low prices and it says this is a mixed palette of amazon bulk which is also like junk there’s just a whole bunch of random things and it’s like you get what you get and you don’t get upset you know that’s the only thing listen to their sizing it’s medium large and super large with three fire emojis by the way and the picture is like a palette wrapped in plastic it looks like a like a nintendo and like an oven a coffee maker do we have to by the way right okay 5 to 14 businesses yeah we need to do that by the way you want to grow the youtube channel here’s a stunt that becomes a youtube video that’s i ordered an amazon liquidation thing for 60 bucks here’s the unboxing of my liquidation so i don’t know where you’re at if not if you don’t want to do it i’ll do it but uh but we should do this and film it and i think i think you’d be great at this your american pickers days are going to come back in handy here all right so let me just tell you a few other hilarious things oh customer service guess what his customer service email is sam what is it is it is it help at a help desk at charming’s easy shop no is it sub service is it returned no is it like big baller 69 yeah speed arver speed of villa 96 gmail.com oh my god this is awesome did you saw a facebook ad for this tick tock i’ve been getting tic tac ads for this thing like crazy i bet you this guy’s found some arbitrage where this is hitting on tick tock and he’s just he’s advertising or retargeting me at least because i’m seeing quite a bit of it but there is this market and so i i mentioned this to jack because jack who is our clever friend jack smith who just finds [  ] like this before we do typically he’s he’s always like into interesting stuff so he had told me about this like a year ago he’s like yo there’s this amazon liquidation thing you should check this out and i was like what what is that and then he sent me something that was actually like the high class version of this so uh so a blue lot yeah so bluelots.com so that’s the yc version of this i don’t think it took off what they were doing was they were taking these pallets these liquidations and they were just listing them for like an instant auction like a live auction it’s like the retail price of these items would be 500 you can buy it for 14. go like just like buy now and they’re just basically taking junk i think on kind of consignment and flipping it and so this is like a flipper business of liquidations that i don’t really know anything else about i just thought this was funny and interesting and i don’t know what do you think about this so let me tell you what i would do i wouldn’t do it the way the blue lot’s doing it so there’s this company that we wrote about in 2020 it’s called it’s it’s called unclaimed baggage that’s all it’s called and right what it does it’s based out of i believe alabama scottsboro alabama it has like 200 employees it was launched in 1970 by a guy named hugo owens when he launched it basically the idea was he made a deal with the local airport and it says any luggage that has been there for like 30 days or whatever it is you know we’ll take it off your hands and they just have a huge store and you and they also have an online store but they have a location it’s like a warehouse that you can go and buy all the stuff and all the stuff that’s in it and i believe he’s crushed it and so it kind of looks like um kind of you know like remember like ross stores or like uh marshall yeah yeah the stores where it’s like it’s not high quality [  ] it’s mostly crap but you can find some gems but it’s like just there’s stuff all over the place you know and it’s like fun it’s kind of fun like you go there and like i don’t even know what this thing is but like this bluetooth speaker i don’t need it but i’m going to buy it i’m going to buy it right um that’s what i would do with this is i would have a massive store and just sell this stuff i wouldn’t do it online um i would do it 100 in person in a cheap area where it’s relatively low income and i would have tons of stuff and by the way by the way the unclaimed baggage thing it says uh cool bags get lost uh and then 99.5 percent of them like get back to their owners but then it says less than 0.03 are never claimed and so they made an agreement with all the airlines it says with uh says we will kind of give these bags a second life we’ll take it off your hand so you don’t have these bags unclaimed bags are just sitting here and we can resell um we can resell the items that are from it they say only about a third one third of the unclaimed items can be resold they go through like a kind of a qa process that says and they have about 7 000 uniquely discounted items for sale each day where where they got from from unclaimed baggage and then they have like an online store and they they clean so what they do is they clean the clothes before they get them they clean 70 000 clothing items a month and a million people go to the store every single year and it’s about 150 miles outside of atlanta so people are going like just for this store it’s like it’s like it’s like a sticky type of like cute thing to do i have a friend you should check this guy out on twitter he’s pretty interesting this guy’s sunny bird bird with a y he has a ret he created like a returns business he had a clothing brand and he saw one of the challenges is somebody sent something back for a return or an exchange and he was selling like suits that were like in a few hundred dollar suits or something and then what he did was he was like all right look you you uh he basically was like all right you send back the suit now i need to like get this stain off or i need to reapply the tag or i need to do this other thing otherwise this is like an unsellable item and so he like got a facility basically in north carolina somewhere and started accepting these items for him for his own returns first and started getting good at refurbishing them like reapply the label get the stain out re-steam it so it’s not wrinkly or crumbled up or like he’s like dude i can’t even explain the number of variations of how people send back the [  ] wrong and he’s like so we just had to handle all those variations and once he started doing it for himself he was like oh cool i could just make this any brand you could just if you have items like this just send them to us we’ll turn them over seven dollars per item or something like that and then we’ll like you can go resell that item we brought it back to life for you to be able to resell as new and um and i thought that was pretty interesting he’s doing well and he’s like it was just one of those like kind of messy businesses that’s like you wouldn’t i wouldn’t really want to start it but i totally think it’s going to kick ass for whoever is willing to do the work there in 2014 when i launched my first conference hustle con i was like crazy cheap and i didn’t have a lot of money and costco is famous for like taking so many returns and i bought like maybe it was a second conference but i think i bought like ten thousand dollars worth of stuff from costco ranging from tables to tablecloths to like two grand worth of soda and we didn’t end up using a lot of it and i was like let’s just return it and i returned like three to four thousand dollars worth of stuff and i was like yeah i’m so i’m so cool i’m like getting money back so big deal i’m saving and one uh it i like to this day i still lose sleep over this because i found out there the cashiers were like giving me a hard time they’re like uh looking at me funny and uh and the reason why and i kind of overheard them say it they threw all of it away oh really they just threw it right away it was like but i was like but this is like a case of soda that’s like still in the wrapper like there’s nothing wrong and they’re like our rulers would just throw it all away and i was devastated that was one of the biggest regrets that i’ve ever had is returning four thousand dollars worth of stuff that was like consumables that they ended up just throwing away like it it breaks my heart that i did that and uh so at least you have an answer to the question of like what’s your biggest regret in life you got your answer actually this should be a thing people do there’s all these questions of like oh you know what’s the best what’s your favorite movie what’s the biggest regret you ever had you know what’s what’s been a turning point in your life whatever this is random questions that you only get so often but it’s very [  ] hard to think of a good answer on the spot and so we should all just do ourselves a favor and like one day just be like all right i’m gonna i’m gonna write down my answers to all these questions and then you have them and i’ve got two because if you have a great answer in that moment you’re like a star because nobody else can one of them that’s one of them the second one was when i was in college i went to a tip a guy like i was staying at a hotel and the shuttle was driving me around and i gave the guy like 20 and he goes oh well thank you and i said oh no you need it and i meant to say like you earned it or something like that and i say oh no you need it and i was devastated i was like oh my god i’m angry that i [  ] it i’m haunted by that i said you need it and i was like oh my god that was the worst thing i could have said just to say you deserve it or you earned it is stupid already i don’t know why i was right right already bad yeah oh it’s like that those things i think about all the time i’m like what was i thinking right yeah that’ll hit you once a week and you just have a wave of sadness like that’s like the bad version of you know the flight attendant or you check in at the front desk or whatever for your at the airport and they’ll like hand you the boarding pass like have a good flight you’re like you too yeah you walk away yeah and you’re like bleep that out if people are listening to the car with their kids all right you can leave that one out so okay so i’ll tell you by the way i have a theory on this stuff which is it’s my halloween costume rule all right so so what is this there’s an art to these stories so the way you just did it was perfect which was you tell the story it does the job like you you did something regrettable but it’s not like you said like you know uh you know i hit my girlfriend back they said whoa bro like you know you’re not actually supposed to like put some dark [  ] out there or something really bad that makes you look bad like these are things that are kind of endearing like it’s endear like it’s it’s funny that you did it you made an honest mistake and then you recognize it and it still haunts you to this day oh what a good guy and we all had a laugh and i feel like i got to know you and you’re an interesting guy it’s so this happens with halloween costumes one time i went on a i was in australia it was halloween and they had a booze cruise and so we went on and i always remember there was this there was you know the halloween thing most guys dress up as whatever but most most females there’s like the it’s like okay to be kind of [  ] on halloween right they were okay to dress a certain way to like kind of like you could spice it up but you don’t want to have your halloween costume be accurate and inconvenient so i saw this one girl she came on the on the booze cruise and she was dressed up as a bushel of grapes and so she just had balloons all over her body like green balloons and so she looked like like you know like like drapes on a like she was this the vine or whatever and there’s grapes all over but she couldn’t like she couldn’t have fun on the cruise like she was bumping into everybody everybody hated her she couldn’t dance she could barely breathe it was like so hot in there and like she paid the price for having this creative and accurate looking costume and in my head when i saw this bushel of grapes girl just struggling the whole cruise she couldn’t even get off this boat she was just stuck there in her costume i was like oh the halloween principle which is like there you don’t want to be you don’t want to answer all questions accurately if it’s going to make you look bad so there’s a way to answer something there’s a way to do the game to play the game but still look good in the process i can’t believe you’re making frameworks up when you’re like 18. yeah as i’m drunk on this boost cruise this is what i was thinking about i like made a mental note never make this mistake as i saw her because i would do this i would come up with a clever idea and then it’d be like i’d have like the most inconvenient night so i i it resonated with me what rami actually said something amazing that i that it was just one line and he said when i think of copywriting it’s uh he goes uh effective not cute you remember when he said something yeah he’s like effective not cute not clever something like that yeah and and that would and i i think that’s always the best i’m like whenever i see websites that are i’m like that’s not effective it’s cute not effective be effective don’t be charming or whatever he said yeah exactly you want to do one more or you want to talk about i’m eager to talk about harold but we could do one more if you want well let’s do harold because it’s actually it actually relates to the liquidation amazon liquidation thing i’ll tell you why so okay so where did this come from this is the cue the music billy of the week is this guy harold alfond i had never heard of this guy did you know did you know this name before i wrote this here no and i added a bunch of stuff though for you okay great so let me give you kind of like the brief story and then you fill in the gaps of what you found interesting so here’s the brief story i or i’ll go backwards tarantino style last time we were on here or two podcasting or something like that we talked about universal basic income which is this idea of like every year you would just get like a ten thousand dollar check like oh why like oh so you know everybody it’s like social well social service or whatever social security for everybody including non-retired people unemployed everybody so i had said oh i heard this interesting idea and i forgot that it was chamath who had said this that i heard it from uh of a birth dividend instead which is basically giving somebody some money at birth if you if you’re a citizen the government gives you x dollars at birth and the beauty of it is it’s going to compound over 18 years so by the time you’re 18 they only had to give you a thousand it was invested in the economy and then it grows over time to this larger amount by the time you’re 18 you want to go for college you have something there so two things happened a bunch of people on twitter were tagging me saying dude i actually did this for my kid and look at this and so some guy was sharing screenshots of like i put in i think it was put in a thousand dollars or something like that and he’s like and then i added i think it was 50 or 100 a month and he showed that the balance was now 93 000 that was in this and he’s like how much how much had they invested crazy that it grew i don’t know i don’t know all the details but he was basically saying like yeah i did this for my kid and you know it was a great idea for me and um i thought okay that’s interesting and so then i saw that somebody somebody goes yeah it’s like harold alfond and main i say okay i don’t even know what any of those words mean what are you talking about so i google it and basically there’s this guy harold alfond he was kind of like a shoe mogul basically he he uh he started off as a shoe boy working in a shoe store i don’t know what the job title is but he went from like shoe boy to manager then he left and him and his dad buy a factory they buy a factory shoe factory and they flip it in three years to a larger company and then he goes and he buys another factory called the dexter either like the place is called dexter or something like that but it’s like the dexter shoe factory something like that and he becomes he becomes a a private labeler so he’s making the shoes that are being sold in jcpenney in sears and a bunch of other like uh department stores nation nationwide and so that that grew pretty fast as he became their their shoe provider and uh and then he says all right it’s i’m so worried like if jcpenney cuts me off or they’re always putting price pressure on me because they know i’m they’re they’re my big customer like screw it i’m going direct so this guy hires a sales force creates a public facing brand called dexter shoes or whatever and takes it like kind of nationwide himself starts to be successful but the thing that’s interesting is or there’s two things so his business story gets interesting because he actually ended up inventing the outlet store which is similar to what we were talking about with the liquidation thing so in any factory he knew this because he owned factories in any factory not 100 of the shoes are like up to snuff up to the standard right so what do you do with the like non first grade shoes that were made uh he’s like you either throw them away like you mentioned or you would sell it to you called like a jobber i don’t know what that means but you’d sell it to a jobber for a dollar he would go mark it up and sell it for five dollars somewhere he’s like hey that’s pretty good like 5x uh why don’t i just do that myself a job is typically it’s just a company that distributes so it’s a they have shelf space at kmart and they just need to fill it gotcha gotcha okay exactly so so what he did was he’s like i’ll create my own and so he creates this this kind of signature look this log cabin looking store and he’s like this is where you can go get the stuff for cheap because these are the the kind of like refurbished or not quite like kind of odd size slightly imperfect and so he creates an outlet store he’s so he creates the concept of outlet stores it gets really popular other brands start to see that oh wow this guy’s like he’s turning his waste into revenue uh his cost into into profits like okay we want to do the same so they start opening up stores right next to his off the highway and so that’s how you started to get these like fact uh what do we call like outlet malls where you would get a bunch of different stores all putting their outlet stuff together here and so that was kind of like one of his inventions anyways he ends up selling the company to berkshire hathaway so he sells it to warren buffett uh for 433 million dollars in an all stock deal of berkshire and i think you added some notes here but all i know is that later on warren buffett apparently said like you know this was one of the worst investments i ever made so why did he say that what i added there was basically when he bought it i think he bought it in the 80s when he bought it he said it’s this business is amazing he and he wrote dexter i can assure you needs no fixing it’s one of the best managed companies charlie charlie and i have ever seen in our business lifetimes he’s as a business jewel he goes when i go to work i sing there’s no business like the shoe business he thinks he’s excellent um but what the issue that happened around that time is basically uh cheap international stuff started coming into coming into america and he said something like he goes well cheap imported shoes from low-wage countries started coming um but someone forgot to tell the dexter’s managers and their workers about that and they just forgot to address it and so over time he he predicted that i was going to make about 120 150 million a year in profit after a handful of years he ends up losing tons of money he merges it with burlington coat factory or at least tries to and eventually it goes it it goes it’s done and the a big problem was that harold started the company in a small town in maine where basically 2 000 people worked and at this point they were mostly older people and buffett was like well we just lost all this money it was a horrible he goes if you look at the guinness book of world records it goes down it’s the worst deal ever but the worst part is now all these people are all out of work and they pretty much are too old to learn a new trade and we and they’re screwed and so he calls it one of the worst deals of all time the quote was we lost our entire investment which we could afford but many workers lost a livelihood that they could not replace uh okay good good good guy warren buffett all right so so okay this is where okay harold hof harold uh alphon now has a bunch of money a bunch of berkshire stock berkshire stock continues to appreciate over time so he he sold it in 1993 berkshire has just continued to grow and grow and grow uh over the years so anyways i think he owned one over one percent of berkshire hathaway stock wow that’s kind of incredible because i don’t i don’t know what berkshire’s market cap is now dan check check virgin market cap now but he sold it an all stock deal so whatever that 433 million was worth if he held uh it ended up being worth a hell of a lot more so what’s interesting is like you said the guy’s in maine and what he decided to create he starts giving away so he starts giving right he’s like okay i’m gonna uh live you need a new library i’ll fund it the the university of maine you need a football field i’ll i’ll uh i’ll fund it berkshire hathaway 640 billion uh and by the way dan check what it was in 1993 when he sold i want to see how much it’s grown so he starts giving away one thing he decides to do is he says you know education is the most important thing i didn’t get to go to college just because of my what my opportunities were i want to make sure everybody has that opportunity i think it’s one of the greatest opportunities you could have so he creates uh a pledge where he says i will give 500 to every baby born in maine on their kind of like birthday you know when they’re born that in a 529 account right so this like special kind of like tax advantage saving account if you open up your account i’ll put 500 in by the time they’re 18 that will have grown uh over time they’ll have appreciated um and so he starts doing this and at the beginning he does it for like you know whatever 300 people then a few thousand people so now life is let me just break down some of the numbers here so 60 million dollars has been given away to babies in maine for their college tuition uh that’s 117 000 babies that have taken him up on his offer for free money uh statewide so it’s a it’s the largest statewide college savings program is sponsored by this one dude and his like family trust i suppose families the families because they open up the account they can kind of like his he was big on matching so everywhere he gave he wanted the recipient to match in some way whether it’s money or effort or you have to do something rather than just give so in this you had to open the account which was a bunch of people weren’t doing that before this and the second thing was you can then match the 500 that goes in because you realize it’s a good idea and so here’s the basic math if you had just if you just took the 500 by the time you’re 18 it’s about 2 000 right so it’s gone up about 4x in the 18 years but if you contribute 50 a month it’s 25 000 by the time you’re 18. and that 25 dollars or so the 50 a month that’s like achievable for many many families and then if twenty five thousand dollars it like can pay for for you know state college tuition and whatnot give you an education and so i kind of love this i thought this was a baller move to like build up your hometown and he’s given away 500 million dollars just in maine across various programs i thought that was pretty remarkable the foundation has a billion in assets so they give away about five oh sorry six to eight percent a year of their total assets and i think his son is like a senator in maine right i think like that’s right grandson uh so the family is i mean i guess they’re legends in maine that’s pretty baller this makes me want to like get wealthy just for that reason are you gonna go back to st louie and do a little something or what i don’t know i’ve been out for so long but did you you can make a big donation to belmont you’re belmont’s finest alumni did you um i’ll put you in the spot did you donate anything to the haiti thing or the afghanistan or any other cause this year uh we did the a bunch of stuff for the wildfires which i don’t know if that was this year or not uh and then the other one was uh charity water we try to support i don’t know if we did it this year or not um and then the last one uh sonia if she sees anything that’s like for like animals or like it’s like she’s a vegan so she if she sees the animals or like distressed somewhere she really wants to give and so we’ll give a little bit there but we’re not big givers i was actually we were talking about this the other day it’s like we have this idea like my wife really wants to open up an orphanage in india this has been her dream since we were dating she’s been talking about this like she wants to have like if you go to india you see these like tiny tiny kids on the street begging it’s like heartbreaking so she wants to open up an orphanage where you know they can kind of have a place and not be on the street and uh and i told her i was like you know like i feel like we made it and she’s like no like when we really make it i was like you know that time will never come we should just start giving now proportionally whatever we can give now and then like when the time comes that we can open up a full orphanage great it will already have been like doing the thing it’s taking some suffering away for some people and so we were literally just talking about this so i don’t really give either i we gave um low digit thousands to the haiti and afghan stuff and that was like a big that was the biggest donation i’ve ever made right um maybe sorry it was it might have been two grand i think one thousand each and i tip that that’s new we don’t ever do that and i realize that’s a huge mistake that is such a huge mistake and i think it’s a huge mistake for for one major reason two major reasons one it makes you feel so good to do that even you know no one has to know but i guess i’m breaking that rule i’m telling a bunch of people but um the second thing it can giving away money i think will make you earn more so john rockefeller was famous he actually gave 10 of his income every single year starting at age like 12. like the year he started making money he always gave it away we talked to uh we we joke about mormons they do this a ton a lot of christians they do tithing i guess that’s 10 i don’t know how different other i don’t know how other religions do i’m sure each religion has like their version of this we should totally give more and we don’t and it’s kind of messed up but it is i think it’s wrong um i i like kind of convinced myself i’m like well if i i’ll just tip a lot which is like kind of [  ] but it’s not entirely [  ] but it’s half [  ] we should totally give more we don’t give nearly enough um and so that’s cool to read the story whenever i read these stories i’m like i want to get wealthier just to do this there’s a guy who um what was the guy’s name in san francisco and there was this amazing article what it was called the billionaire who gave it all away you know what i’m talking about his name was patrick um uh uh patrick feeney i think is his name patrick feeney um let me look it up so anyway his name’s chuck feeney so he created the basically the stores that you i’m going off of memory i read this book a while ago he’s 90 years old he currently lives in san francisco i i’m reading this uh billy of the week on him chuck feeny i remember you brought up feeny the billionaire who wanted to to die broke and is now and did it basically and he’s now worth two million dollars at his height was he the one somebody wrote a book called die with zero or something like that yeah that’s a different that’s a different topic but it’s also good but basically the idea is like a lot of people wait to give all their money away this guy did it when he was live his name was chuck feeny he basically created when you’re if you uh go to china and you’re not china heated japan if you’re on your way back from japan you can go to the duty-free shop uh he basically he basically invented that and now he’s got a bunch of duty-free shops they’re they’re quite famous i can’t remember what they are but his uh it was cash flowing like crazy and so at its height he had something like it was multiple digit billions i believe eight billion dollars and that’s how much he’s given it away so he’s given all of it away except for two million dollars and he currently has an apartment in san francisco that costs him four or five thousand dollars a month and that two million is all he’s got left crazy fascinating i remember reading about him and i was like i want to get rich just to do that so pretty cool but like a lot of people when they start making money i’m like oh i don’t know that you know yeah i don’t know what what is the thought there is some thought that like kind of like blocks you but what i can’t even put my finger on it’s not like i can say well i’m thinking about it this way but that’s the wrong way it’s like i don’t i think i’m just not thinking about it or i’m i’m thinking about it and then it kind of becomes a heavy topic because i think i should do more and then i feel guilty and then i just move on with my life and i just do nothing i distract myself you know i don’t want to blow up his spot too much but the guest we just had on ramit i’ve heard stories i’ve heard that he is a very good giver oh yeah i i like hearing how people give i have a friend who uh as soon as he made a bunch of money gave a ton of laptops away and i thought that you know there’s like a there’s something really cool about when you give somebody a knowledge engine or or like a monetization engine it’s like you know it’s sort of like a teach amanda fish thing but you’re not teaching anybody anything you’re just giving them a tool that if used well can generate like kind of an infinite number of returns and so i like that idea of like you know whether it’s microlending or it’s or it’s uh you know that what was that project where they dropped a tablet off do you remember this they dropped a tablet off in the middle of africa with no instructions and did you know what i’m talking about so i might butcher some of the details they ran this experiment they left an android tablet which i think had like nothing like kind of like nothing on it i think it was like a wiped reset thing maybe it was just like the boot sequence and they just left it in this like village in africa and uh and then they came back like a year later like the whole village had learned how to use this comp how to use the tablet they had like found it booted up got an operating system on it had apps it was like running it like they had like learned all put all these education games on it or whatever it was like yeah dan just linked it here i didn’t remember the exact story so i guess it’s ethiopia so a box a box of zoom tablets was dropped off in ethiopian village to kids who had never seen a computer before and by the time they came back they had not only taught themselves how to use it they were like modifying the android operating system on it to like work better for themselves it was kind of this like really inspiring story it was almost so inspiring that i’m like all right is this a little bit of [  ] or what like i kind of don’t really care but i like that i think that’s that just shows how much power there is in such a simple act yeah i think it’s great we should have we should organize something for like our listeners to like yeah we should do something via the pod let’s give some let’s give something fun via the pod well the way that we gave to the afghanistan i think we only gave him a thousand dollars so it wasn’t like that big of a deal but the guy his name is saul uh s-o-w-s-o-l space and then orwell is his last name he owns uh examined.com he just tweeted out that he was gonna do this and he was like i’m gonna give away he’s like i vetted this i know where the money’s gonna go to for this i know exactly what’s happening you if you trust me then you’ll then you can trust that this is gonna be good and he raised four hundred thousand dollars off a couple tweets um and that was pretty amazing uh yeah and it sounds badass so we’ll have to do something like that uh i think there’s a lot of work to vetting in haiti sarah’s you know haiti had this massive earthquake you know about that yeah yeah and my mother-in-law is from haiti and she’s got this brother so my my my mother-in-law’s brother yeah no my brother yeah my uncle i guess he is a haitian immigrant and one and when the another earthquake happened what he did was he got all of his friends to donate a little bit of money collectively added up to like a hundred thousand dollars so he had a hundred thousand dollars uh maybe he had two hundred thousand dollars something like that um a lot but not enough that it’s like too much and he took a hundred grand in cash and one dollar bills and five dollar bills and then he hired a private plane and they bought tons of toilet paper paper towels and peanut butter they flew into haiti they gave out the peanut butter and gave out the toilet paper and then he had all this cash and he’s like dude they just needed money to buy [  ] and like do us currency was good so i just started giving everyone five dollar bills so anyone i could find i would just give him five dollar bills and then he goes and then we stayed there for a day and we gave it all away and then we just came right back and i was like that’s pretty baller that’s pretty great uh and so i don’t know something like that it’s inspiring to hear so we’re gonna have to do something about that if somebody’s listening to this and they have a good idea of a way for us to give that i would say is what my hope is that it’s kind of like in line with the values of the pod like if you listen to this you kind of know what we’re all about what we respect like i respect that kind of like tab giving tablets to people who never had a computer before i think that’s kind of amazing and so if you can think of a good way for us to do this where you kind of you know where the money’s going you know it’s legit you know that this is going to like actually help people um definitely hit us up hit us up on twitter or whatever give us ideas can we go a little bit over can i have can i there’s one something you want i have a lot of stuff on here did you see i did a ton of research on a variety of different stuff and you totally overlapped with a lot of my stuff scroll down look at all that stuff i’m not gonna get you at all it’s like so much work that i put in we’re gonna have to get to it next week but can we wrap up with the theory of of the future of venture capital because i’m curious what your opinion is is why you’re saying this is that one of the things you research or you want me to spiel i want you to tell me your opinion so i was thinking about this um so basically i was like all right venture capital i think is a great place to be because i think technology is driving a ton of progress so you basically technology is the way to do it that’s pretty clear to me all right within that how do you perform well so i was thinking about all right you have venture capital venture capital is kind of changing and people like to talk about this so here’s my theory why i think it’s changing because uh like a there’s just new like the secrets out that you should be investing in in technology so you have like soft bank coming over the top with the 100 million 100 billion dollar vision fund and you have tiger global do you know what’s going on with tiger well i just know that i see tiger global everywhere i believe tiger global it started a guy named chase coleman his wife was in like some uh actually documentary about being like filthy rich years ago and he uh it was a hedge fund at first it was just a hedge fund like a boring like maybe high speed trading hedge fund right yeah i have high frequency trading you got to read this subset i mean obviously not now we’re on the pod but it’s called playing different games it’s by this guy everett randall phenomenal sub phenomenal blog post about what tiger is doing and how they’re playing a different game basically what it talks about is like uh what’s the most beautiful headline by the way if you want to learn about how to package content into good stuff this is a beautiful headline it says playing different games the tiger phenomenon beautiful headlines it’s not it’s not too clickbaity either it’s like seven unbelievable things about tire no it’s like it’s it’s a it’s a this guy has a a point of view or a thesis on what they’re what they’re doing because to everybody else it looks a little bit crazy because what you were seeing was oh new funding around happens tigers in it tigers in it tigers say dude how much how many deals are these guys doing they can’t possibly be vetting and seeing this many deals this is unbelievable pace and so what he talks about is that they’re playing a different game so a normal fund says okay i raised this fund i’m going to deploy it over the next three years and that’s what i told my my investors i was going to do so over three years i’m going to find the best deals i can i’ll be super selective i want to find the best deals and then i’m going to maximize the sort of like uh the sort of return the return i’m going to get the irr he says what tiger is going to do is like i’m going to deploy as much capital as humanly possible at a 18 irr so i’m not trying to maximize irr i’m trying to maximize the gross dollars that i could shove into a pipe that will give me 18 so i don’t want to fall below 18 but i don’t want to try to get to 28 if it means i’m gonna deploy half as much money so it’s a very different game so so this happens in e-commerce all the time you have two people in e-commerce one one brand says we want to maximize our roi or return on ad spend as some people say well just call roi so they want to put a dollar in and make three dollars out and they’re and if they if they get two dollars out they feel bad if they get four dollars out they feel great and so they they spend as much as they can while they’re getting they spend like as long as they can maintain a certain like above 3x roi and they have other people that say no you know what like i’m happy as long as my roi is like yeah somewhere but somewhere above 1.5 if it’s above 1.5 all i’m gonna do is just add more money into the top of this thing i’m gonna shove more money in because i’m taking a larger number and i’m multiplying it by a smaller multiple but my base the base amount of money i’m shoving into the pipe is getting bigger so this that’s my return so you have different strategies so what are you saying was tiger’s doing this in vc they’re basically trying to deploy way more money way faster so that their and their returns look better because it’s instead of deploying it over three years and being selective they’re deploying it all in six months and so now if it comp if it starts to return it’s going to already have a faster rate of return because the money got deployed whereas the vc might have held the money for three years being selective about it and so solving the hard problem of making sure that the companies are going to collectively do eighteen percent irr well they’re sort of saying look uh if if the best guys who are selective are gonna hit 30 40 we can hit 18 just by getting we we can hit 18 by doing a lot of deals and sort of like a law of large numbers we should still get there because technology and aggregate the index is going to do something close to 18 and plus as we develop this reputation of being we are a trusted fast deal maker you want money come to tiger global we’ll get you money in 24 hours we’ll get you a lot of money you don’t have to do this whole dance with the other vcs and they’re going to debate bring you and they overpay and they’re like yeah cool what’s your what valuation you want 50 make it 60. and it’s like oh okay cool i’ll take your money so they’re getting into a lot of deals and a lot of good deals because they’re not price sensitive they’re fast and they’re aggressive and they’re building a track record because when you do so many deals they’re going to have a bunch they can point to as like yeah tiger was the one behind this winner and they’ll just sweep all their losers under the table and you don’t have to worry about that so they’ll build reputation fast too so i thought this was kind of interesting so i would say there’s a whole bunch of reasons why vc changes this is actually not even what i was talking about my thought was if you’re creating a fun today you really the winning strategies are you you play a different game which is the tiger one so that’s that’s strategy one you play by a different set of rules than everybody else i love that strategy though another example of that is uh uh when chamoth moved up market to spax so chamoth was doing early stage tech investing series a series b he’s competing with sequoia and benchmark and everybody else and then he’s like oh dude spax uh spax you know like spax weren’t in vogue until he started to make the pencil the mechanism had been around but they weren’t popularized and not everybody was trying to do a spack and then he started this wave because he’s like huh there’s a bunch of companies that want to go public i can take them public faster and get them a higher valuation and basically i can do late super late stage stuff and basically make 10x my money in one year um and so he and so he does once back he’s like oh this is amazing he hits back a then he trademarks back beast backseat spec d all the way through spack z trademark 26 of these he’s like dude this is a money printer i’m 10xing my money i’m gonna i’m going to do this 26 times if i can but the verdict’s still out on that on that strategy i believe right the sponsors the sponsors are making their money dude they make their money regardless it’s the retail investor who joins in and says i’m going to invest in in this spec they are getting a questionable return but the sponsor chamath what he’s doing so here’s the model by the way i learned this recently so i might be oversimplifying it i might have some details wrong this is i was at a dinner with somebody who’s doing a spec and i was like yo can you say who no i was like i was like tell me the numbers behind this i was like i was like are these guys getting filthy rich i feel like they’re making a lot of money doing this because just of how many they’re trying to do this must be i’m wondering it’s like it’s unbelievable so here’s what here’s how the economics of us back work you let’s say you’re chama you have great reputation so for those who don’t know what a spak is a spac is a special purpose acquisition corporation or something so it’s basically a blank check holding company so you go to the public market and you you list your spac there and you say give me 400 million dollars i’m going to take that 400 million dollars and i’m going to go find a company to to invest in and so so he goes to the public market he says i don’t know who i’m going to invest in but i’m going to invest in somebody but his reputation was strong enough that he was able to raise 400 500 a billion dollars bill ackman i think seven billion dollars or something crazy for their specs but they don’t even know who they’re gonna acquire you have a deadline you have a two year i think clock 18 months two years or something like that you have a deadline and and if you don’t pay if you don’t buy a company you have to buy it back plus a certain amount of interest yeah there’s like a warrant basically so um so so and that’s what’s happening now with specs a lot of spac investors have been sitting around waiting for the company to make do a move they’re just they’re they’re it’s like a coupon like you can basically say give me my money back and they have to give you your money back and maybe plus i’m interested i’m not sure exactly how that works so for a spec let’s say it’s a 250 million dollar spec the sponsor who’s you know a chamath or somebody in this case and he he’s not the only one reed hoffman’s doing his back a whole bunch of people are doing them uh they put down about three percent so let’s say 250 million dollar spec i don’t do public math but i think that’s about eight million dollars that they put in in their of their own capital and then when they oh everybody froze oh we’re back okay so you put you put three percent down when you find a deal and you actually do the deal you’re going to get 20 of the action so you’re putting three percent of the capital and you’re going to get 20 of the of the deal so that’s your flip right there you put three percent in you’re going to own 20 by the end of it um in addition to that there’s things called pipes pipe is basically oh i raised 400 million but i need turns out i found the company but i need 600 million to do the deal so so before it goes public somebody can come in and give you that that difference that 200 million difference you’re short and they get a sweet deal too because they’re getting they know the target they put the money in and then very quickly it gets liquid for them like you know because it go the deal ends up you know in the public markets then announced so there’s a lot of money to be made in specs right now there’s also a lot of money to be lost if you’re doing it wrong if there’s a lot of money i think to make made there’s a lot of money to be made if you are a certain couple people certainly by the way is why it’s so funny when people like chemoth and i like tomorrow i think he’s great but i think he’s a virtue signaler like i think he uh he loves to say the things that make him sound like the people’s you know the people robin hood yeah i’m a robin that i’m saving and everybody else is playing these [  ] games why don’t we do real hard work and solve real problems and and cut out the [ __ ] he’s all about that like those rhetoric he’s very good at those speeches but if you look at what he did dude you’re you’re playing the game just as hard as anybody else in my opinion you might believe you have better intentions about why you’re playing the game but like let’s be clear and i don’t have a lot of ins you’re an insider and you’re an elite you’re not the every man everyday man that you’re you’re trying he tries to kind of champion for but i can’t blame him like that’s a good strategy instead of saying i’m a rich billionaire like with insider access you know that doesn’t play over so well and i don’t know if this is true today but i think it was true i believe that his spax chamas specs are like the an aggregate of all across all of them like the most shorted stocks on the stock market maybe they are now i i don’t know i haven’t i haven’t looked at that but yeah definitely people have cooled off on on some of the because if you look eight what the thing is you look 18 months later after they do their acquisition target you’re like how how are they doing so like the typical spac curve was they list at ten dollars before they find a target they trade up to 12 13 14 15 16 right so you’re getting this return before anything has happened all right this is just like greed and then they find the target and then it either pops or it starts to shrink depending on how people feel about the target and then like 18 months where where is that stock is it at 10 is it above or is it below i think people are doing some good analysis on this i’m not super up to speed because i didn’t talk about specs today but but anyways i think one example is uh open door have you uh look at open doors stock i think that’s one of his specs uh he’s doing well now well i just look at it it’s the exact arc so you guys didn’t couldn’t see this but right sean’s uh what what’s that ark called it’s just like a like a like a standard deviation cycle yeah like a no it was like a standard deviation looking like a chart and that’s exactly what open door looks like it’s like starts small gets huge goes back lists at 10 runs up to 34 and it’s currently trading at 17 15 15 to 17. um and so you know if you were in the ten dollar bucket yeah you got it you gotta you do have gains right now so i’m not saying expects are good about i guess what i’m saying is if you’re my my main theory here was you got to do something different that’s one way if you found a different game now people are going to copy you just like they’ve written to his credit figured out that this is a good model was the first one doing it and then there’s just been a flood of spac since then everybody and their mom who can’s back wheels back right now and even startups who can’t really raise well or don’t aren’t strong enough to go public they can go public via a spec and then all of a sudden hey we got liquid great um so so there’s definitely a lot of like lipstick on the pig going on wait so we have to wrap up this segment which was vc you do the tiger thing you become like chamath or do something different and so those are one those are play a different game tiger and spacking that’s an example of playing a different game the second one is you’re the big brand so sequoia benchmark andreessen they’re always going to get the best deals or they’re going to get allocation if they want in the best deals because of their brand name and those funds are so big and you can’t even invest in them if you wanted to if you’re that seems like the hardest one to do well yeah because okay great it’s like saying start off in checkmate you know like how do i do that how do i become that brand that’s obviously that takes time but they’ll do well i’m just talking about who’s gonna do well people playing a different game then the big brands then the niche specialist so this is like i’m a vc fund focused on cannabis i’m a vc fund focused on automation and machine learning i’m a vc fund focused on let’s call it sas software like david sacks craft ventures so there’s like a whole bunch of these right vice ventures there’s they they brand themselves a specialist in this one thing you could do a media one if you wanted to and basically what happens is if you picked a vertical that works like sas is a good vertical automation’s a great vertical right um you’re gonna see you’re gonna see a lot of you’re gonna see more deals than anybody else in that vertical than a generalist because you say no to everything else that’s not this so you’re only spending your time here you build your brand there by creating a bunch of content you’re blogging you’re podcasting about why automation’s the future why self-driving cars are the future blah blah blah so those founders will come find you and then also you they’ll keep you in deals so even if sequoia or benchmark wants to do a deal the founder will add you for that credibility because you’re a specialist in that niche and by you stamping them it’s valuable and they think you’ll add value because you are more knowledgeable about this domain than anybody else so i think these specialists can do well then there’s celebrity angels that’s like naval biology same sort of thing as the as the big brand and then the last one is called venture services what are venture services are you familiar with uh tusk tusk ventures do you know what tusk adventures is no there’s this guy this guy bradley tusk he’s got a book that you might have read he was uh i think he’s like a ex washington policy guy i don’t know yeah know brad he’s like a policy guy what he got kind of known for was when uber was uber was in its early stages growing uber was having hella trouble with cities and the the taxi uh cartel and like every every market they were fighting against taxis in the cities and the people wanted them there and so they he was giving them a bunch of consulting and advice and then he got to invest and uber was like one of the best investments of the decade for an angel investor and he did that also with airbnb another group that had policy questions so any startup that had a regulatory or policy challenge which actually many do uh it was like oh we should include tusk in our round that’s what their value add is and so he had a services business that was his consulting business for for this that he built i think he owned a hundred percent of it i think it’s a hundred million dollar business and then he created a venture arm just to invest equity and get equity and also just exactly this yeah exactly the sort of policy legal regulatory lawyer basically lawyer but specifically with like public policy i think so like lawmakers more so than like drafting your shareholder agreements and so you know built this really successful services business but didn’t leave it as a service business added a venture arm to it and because of that you owned equity and things that ended up being very very valuable and a lot of uh ad agencies try doing this and they only do okay they only do okay i think that if you did it with a different a different shtick like what this guy tusk was doing then it could be interesting a lot of ad agencies that do that like even you remember red antler and all those guys i think they took a sliver of equity you you had to give them like like there was a minimum it was like 50 grand plus some type of equity right well friend of the pod andrew wilkinson he was doing this with tiny right uh i’m sorry with uh meta lab the design agency so design agency and so slack is paying them cash to design the first slack client could have took equity also or could have had an equity arm that says great let me also invest in your next round or in this round with you separately we’ll take the cash on the balance sheet that we’re making from consulting and we’ll invest it into the projects that we believe in that are in in this portfolio would have done phenomenally well but didn’t do that in his case um he used it to go buy businesses separately did you hear do you know who david cho is no so david cho and this will be the last story david cho is this kind of degenerate gambler crazy guy he’s um he when he was 18 he started traveling he had a show when vice was popular of him hitchhiking across the country it was called like david cho hitchhikes across the country and he’s just kind of this degenerate crazy person but he’s an artist and he’s like a wonderful artist a graffiti artist he’s so good at it and he’s got some amazing work and right when facebook got started david cho was kind of like a cool guy uh like a lot of people knew who he was and they wanted his work but uh you know he was hard to get so eventually sean parker hires him to paint facebook’s office they want this they want to paint this like amazing graffiti and david cho goes uh yeah you know be 50 grand and sean parker goes uh well you want 50 grand in cash or 50 grand in facebook stock and he goes well i’m a gambler give me the stock he takes a stock and it’s worth like 300 million dollars uh a few years after facebook goes ipo and it was all from this facebook uh wall that he painted and i went to the facebook office and they ended up taking down the um or they moved to a different office but they saved the wall so throughout the office you could still see the david cho painting and so he ends up he at the time when i wrote the article like four years ago it was like 200 million dollars that he made from the 50 000 worth of art now it’s way more he’s actually on joe rogan all the time he’s a crazy guy this guy david cho is nice i like it yeah basically i think there’s this model of venture services which is you know uh bobby goodlatte is doing this with design uh bain did this back in the day so you have bain and co the consulting company and then bain capital was their venture arm that they used so i think that investors who you can’t just say you know i’m good at this i’ll give you advice it’s like i think there’s going to be investors that say yeah use my like i have a company that does this as an agency as a conservative services company and then we also invest and that combination i think is gonna be 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