Josh Wolfe: The Tech Imperative – Invest Like the Best

Check out the Invest Like the Best Episode Page & Show Notes

Key Takeaways

  • The ability to tell good stories is a superpower
  • The best stories convey meaning in a clever, memorable. and unique way
  • The most valuable words in investing? – “It will rot your brain”
    • “Whenever those words are uttered by a parent, it basically predicts the next $10 billion industry”
  • In the world of investing, look carefully for directional arrows of progress and then ride them
  • Technology is becoming more intimate with the human body
    • Technology is conforming more to us, instead of us conforming to it 
  • Good technology increases our humanity
  • The gap between science fiction and reality is getting smaller

Books Mentioned

Intro

Lowering the Cost of Capital

  • “A low cost of capital is like a tractor beam for the future – it’s like pulling 20-year far-out projects into these 20-month frenzied projects”
  • There are two ways to lower the cost of capital
    • State-driven:
      • China is is very good at getting roads/bridges built very quickly
    • Story/narrative-driven:
      • Elon Musk is very good at rally people, painting a narrative, and getting people to believe in it
        • The result:
          • Human capital – people who want to work for him
          • Financial capital – people who want to support him
  • “Lowering the cost of capital lowers the slope for someone to join on a project”

The CEO Checklist – What Every CEO Needs to Be Doing

  • Nail down the strategy for the company
    • Decide what the company will/will not do
  • Deliver the capital to pursue that strategy
    • You need to be a good storyteller – “If you can’t tell a story, you can’t persuade investors to join you, and in turn – you can’t deliver the capital”
  • Recruit people
    • “Being able to tell a story and galvanize people into movement is a super powerful trait”
  • Communicate the hell out if things – both within and outside the company
    • The more consistent the message, the more powerful it is
    • A good measure of the effectiveness of an organization:
      • If you ask a senior leader what the organizational strategy is and they give the same answer as the CEO
  • Hold people accountable

The Elements of a Good Story

  • What makes a good story?
    • It’s memorable
    • It might have a surprise ending
    • It’s easy to repeat
    • It makes you feel smart because you might be able to share it at a dinner conversation
  • The best stories convey meaning in a clever, memorable. and unique way
  • How do you get good at sortytelling?
    • Read a lot
    • Watch a lot of movies
    • Talk to a lot of people
  • “Narrow and novel creates interest”
    • A story about something specific, while being unique, results in engagement

Innovative Business Models

  • Josh gives the example of a company called Turbochef 
    • It was a fast-cook convection oven (but it was really expensive at ~$4k – so they couldn’t really sell direct to consumer)
    • They decided to focus more on selling to sub shops, specifically Subway (who was trying to compete with Quiznos)
      • How did they get Subway to buy? – By getting Coca-Cola to fund the purchase for Subway in exchange for their soda contract (meaning Subway wouldn’t sell Pepsi) – how clever?
  • Josh took this same model and helped one of the companies he invested in – Latch (who makes an expensive door lock which you can operate remotely, but it’s too expensive to sell direct to consumer)
    • Latch decided to focus more on selling to people constructing new buildings (right now, they’re actually in 1 of every 10 new buildings being built in the U.S.)
    • They did a deal with Walmart (who wants to compete with Amazon, who purchased Ring – the remote, video doorbell system)
      • Walmart now outfits thousands of buildings with the Latch system
        • They don’t really get into specifics here – it sounds like Walmart uses the system to facilitate their deliveries into residential buildings

The Different Types of Tribes

  • There are 4 different tribes of people in an organization/culture (the idea originated from the book Eleven Rings by Phil Jackson, who in turn got it from Tribal Leadership)
    • Tribe 1
      • People who have the mentality that life sucks
      • They’re very bitter
      • This is usually a very low percentage of people in an organization (~2%)
    • Tribe 2
      • People who feel like victims
      • This accounts for ~20% of an organization
      • These are the people who just can’t wait to leave work, go home, and crack a beer
    • Tribe 3
      • These people have the mentality – “I’m great, you’re not”
      • These people silo information
      • They are uber competitive – they’re fighting for promotion and status
    • Tribe 4
      • These people have the mentality – “We’re great, they’re not”
      • They’re internally collaborative, externally competitive
      • It’s all about getting people to bond over a common enemy (which can be a goal/mission or a competitor…some exogenous threat)
    • Tribe 5
      • People who have the “life is great” mentality
      • They’re usually entirely mission driven

The Big Internal Debates Going on Within Lux Capital

  • The first is judgement-based:
    • One argument is to be super disciplined about pricing investments
    • The other side originates from something Marc Andreessen once said – “It doesn’t really matter what price you pay because there’s only 10 companies that matter in any given year and you want to be involved with those companies”‘
      • But the problem – you don’t know which companies those will be
  • The second is value-based:
    • It’s centered around the morality of what Lux funds – for example:
      • Should they be funding tech that can be used for the military (whether ours or someone else’s)?
        • Many people at Lux (and other venture funds) don’t want to help develop tech for the Trump administration
      • Autonomous vehicles
        • On one hand they probably reduce road deaths, but what about the lack of organ donors this would result in?

Biotech

  • China lacks many government regulations and ethics protocols, which will ultimately allow them to be ascendant in the field of biotech
  • How does Josh think about CRISPR?
    • Josh views it mostly as a tool
    • The ultimate value will come from the drug development and the novel targets people find
      • It’s like when the cut/paste feature was invented in Microsoft Word – the real value wasn’t ultimately the feature, it was what it led to
  • Josh helped fund one genetic sequencing company (we couldn’t quite make out the name, but it was pronounced “Variant”) who is focused on sequencing the DNA of rare/native populations around the world (people in Senegal, Tanzania, or the Maoris in New Zealand)
    • (Companies like 23andMe focus on sequencing whites/Europeans because that’s where the money is)
    • One interesting thing the company has discovered:
      • A certain undisclosed population that they found/sequenced actually has a metabolic rate that increases in the middle of the night
        • They must have some gene which raises their core body temperature at night
        • Why does this matter?
          • A third of the world’s population is obese
          • Imagine if you could somehow put this into a pill and prescribe it to overweight people who could take it at night to help them burn body fat

The State of Tech and Some Thought’s on Investing 

  • The gap between science fiction and reality is decreasing each day
  • The most valuable words in investing? – “It will rot your brain”
    • “Whenever those words are uttered by a parent, it basically predicts the next $10 billion industry”
      • Examples – TV, Online chat rooms, the internet, video games
      • “The video game couch potatoes of yesteryear are today’s drone pilots and robotic surgeons”

Look for Directional Arrow of Progress and Ride Them

  • “When you can spot a directional arrow of progress…it increases the probably you’ll be right about a subsector”
    • In lighting:
      • Burning flame —> filament bulb —> light emitting diode
    • In computing:
      • Spinning mechanical disks —> solid state memory/hard drives
    • In energy (more and more energy density per unit of raw material):
      • Carbohydrates —> hydrocarbons —> uranium
  • Another example – the half life of technology intimacy
    • 50 years ago a computer took up a large room
      • The way you would interact would be to flip it’s switches, and pull plugs etc.
    • 25 years ago – we first got desktop computers
      • How did we interact with them? – Mainly through a keyboard and a computer mouse
    • 12.5 years ago – laptops became dominant
      • The computer is now on your lap
    • 6.25 years ago – the iPhone
      • It’s the first thing you touch in the morning and last thing you touch at night
      • It’s near you all day long and the only thing that separates it from the human body is a thin layer of fabric
    • 3.5 years ago – the smartwatch
      • It’s in constant contact with your skin, with no barrier
    • 1.5 years ago – AirPods
      • People actually forget they’re wearing them
    • The trend –  “Technology is becoming more intimate with you and closer to the body”
      • Technology is conforming more to us, instead of us conforming to it 

How will we interact with technology in the future?

  • We’ll use something like a computerized wristband to dictate our actions (think – like a watch wristband)
    • You’ll be able to type without a keyboard – just thinking about typing
    • This wristband “thing” will act like a universal controller
      • You’ll be able to walk into a room and tap your fingers to turn on the lights
      • A different wrist/arm motion would do something different – like dictate music to start playing
    • We’ll be controlling everything by hand gesture 
    • One company is leading the charge in this area (CTRL-labs) (check out this piece about the work they’re doing)
      • Lux, Amazon, and Google have all invested

The Moral Imperative to Invent Technology

  • “I believe there is a moral imperative to invent technology”
    • Imagine a world:
      • Where Mozart existed, but harpsichord doesn’t
      • Where Hendrix exists, but the electric guitar doesn’t
      • Where Spielberg exists, but the 8 mm camera doesn’t
      • Where Bill Gates exists, but the PC doesn’t
    • “Every one of these things was an instrument for them to express a form of genius”
      • “There is someone out there today…who is going to encounter technology in the future that doesn’t exist today, that they will play as their instrument to the world and the world will be better off because of it”
  • “Technology increases our humanity”
  • In summary:
    • Invent technology so people can find their genius

What sucks?

  • Ask yourself this question
    • Based on your answer – you just got yourself a business idea
  • Another good indicator is when you discover something and you say to yourself, “Wait, what?”
    • “If you can find those, “Wait, what?” moments, it’s like a secret piece of information is staring right in front of you, but the majority of attention hasn’t turned their yet”

The Loss of Privacy

  • “I’ve given myself over to the information Gods….by and large I find I get way more optionality by exposing myself to the world”
  • There is a death of privacy going on
    • It’s a losing battle to fight
    • Give yourself over to the system for the convenience benefit
  • “Anything that can be surveilled, will be surveilled”
  • Check out the graphic novel – The Private Eye 
    • It’s about a world where everything is surveilled

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