Steve Jurvetson on 20 Years of Friendship with Elon Musk

Oh gosh, that makes me blush to hear you say that. But my short story is I’m a geek at heart. Way back when I studied electrical engineering, computer design. I even started a PhD in that field. Worked in chip design, software at companies like Apple and NeXT and HP. And about twenty five years ago, I sent a resume in cold over the transom, as they say, to Tim Draper, who was running a small early stage venture friend called Draper Associates that had $26,000,000 under management at the time.

And it led to an interview, led to being hired in one of those rare events where there was no prior connection or any sort that I had to the venture world. And I joined what was called Draper Associates. The venture industry per year has grown 25x since then. So 25x in twenty five years was a very different world today, course, but it was a boutique pre internet era. So personally, I guess I’ve gone through a bit of a random walk of technology, business, technology, engineering, and I really found my dream job.

I didn’t know about it prior. And as I’ve been doing this now for twenty five years, I couldn’t imagine doing anything else. It’s such a great place to learn about the future and to learn about the frontiers of technology.

Yeah. It’s a wonderful hardening of the soul and of the spirit in a variety of ways that were not something I would have predicted. For example, I lost about 90% of my net worth in the .com crash. And I just wrote it down. I didn’t sell. I didn’t think about the timing of selling. And the thing that allowed me to go through that is I had just come off the .com boom. And so I made what was easy money, if you will, as an investor in that sector.

It was like shooting fish in a barrel, frankly, in late ’90s or at least the mid to late nineties. So I had pledged and my wife had pledged to give everything away to charity. And so when we rode that roller coaster down, it didn’t feel like our own personal net worth was evaporating. It was the future charitable donations we’d be making. So to make a long story short, I weathered through that, held on the public stocks at least that I held at that point, came back, and I took a different view, adventure in general, sort of the long term view, not the, Oh my gosh, there’s so much stress and anxiety about thinking about the timing of exits.

And I sort of shifted coming out of that crash to not worrying about exits at all. In fact, I’ve never sold a single share of anything I’ve invested in as a venture capitalist. But that was around that time period that that perspective sunk in. The other thing maybe more tactical is I saw how venture funds would go through their own individual and then collective process of acknowledgement of a downturn and the lagging effects that occur and the long wave cycles that occur in venture, where the commitment of capital is over many, many years and the feedback loops are very long.

And so you get these long wave oscillations and boom and bust in early stage and in late stage. And it was very similar, in fact, like the DRAM capacity building and chip industry, which also has long feedback cycles. And I sort of realized, oh, wow, okay, we’re going to have a period for at least a year or so where no one really recognizes that a major downturn has occurred. Financings will still occur. It’s business as usual. And then there’ll be a collective shift to tending to our own portfolio internally.

In other words, oh boy, we better reserve the cash we have to keep the companies we have in our existing portfolio alive. And everyone collectively does that. And then no longer invests in each other’s opportunities for following rounds. And the whole industry goes through a self amplifying spiral of inward focus and retraction from the forward looking stance. So to make a long story short, I saw these time lags. I expect that we’ll see that again where things will feel just like you see it in the public market this time, as if nothing’s happening.

And then slowly but surely over the next year, this will all unravel and you’ll have a period of scarcity. That being said, I’ve also seen what I read about and analytically could tell you that many good companies are founded during a recession, during a down market. I could say that, but I actually felt it and witnessed it firsthand. For example, two thirds of the Dow Jones Industrial Average companies were founded during a recession, right, or major recession or depression. It’s just a better time to start a business.

It’s a better time for the culture of the firm that you’re building in a startup. It’s a healthier environment when capital is scarce and you iterate with customers, not chasing the next financing round. So, basically, there’s no better time than down market to look for new entrants and new opportunities, yet the whole industry is gonna pull back at exactly that moment.

That’s a really good point. I’m speaking for myself as a venture capitalist that holds a portfolio of stocks. As a entrepreneur who’s heavily invested in one company, your advice is spot on. You can do a better job as a manager if you’re not operating from a place of fear. And if you can take 10% or so off the table and sort of cover your nest egg, if you will, or your ability to live in Silicon Valley, if that’s where you’re based, for example, and not fear for family or what have you, people are more creative, frankly, when they’re not fearful.

And removing the element of that is important. By the way, if you think about some of the structures in a lot of venture term sheets, things like back in the nineties, often did participating preferred. It’s a technique of trying to align the risk tolerance of investors with startup companies. An investor should be more risk seeking than the entrepreneur. In other words, I can withstand the complete loss of an investment more easily than they can withstand the complete loss of their baby, their startup that they devoted so many years and hard work into.

And so you’ll find these terms that sort of rebalance that equation more towards the way the venture capitalists wants it, which is go for it, roll the dice. Here’s a thought experiment I sometimes use when I was teaching the Hotmail case at Stanford, which is imagine you present it to any entrepreneur in any business. And imagine, by the way, they’re the typical entrepreneur, let’s say an immigrant or someone who doesn’t have a reservoir of prior wealth, and the vast majority of their personal network is tied up in their startup, in the paper value of their company.

And you say, Hey, I’m going to offer you a bet. Imagine as a thought experiment. You can flip a coin. Heads, your company goes up in value 10x. Tails, it goes to zero. Do they flip? It’s an interesting question based on where they start and inevitably they stop flipping. Once they’re at a billion dollars, it is a bit of an unusual entrepreneur who says I have a billion to zero. I don’t need 10,000,000,000. I really don’t. Whereas at a portfolio level, given the percentage ownership, most venture firms would say keep flipping.

That is a good financial bet to make. You should always flip that coin one more time. And if you think about that framework or rubric, that’s often what’s going on in the underlying tension sometimes between certainty, risk taking, M and A offers that come in early for a company’s life and investors may be like, ah, don’t take it, build the business. And sometimes it’s so tempting to take the security. And so back to your point, a secondary or some form of partial founder liquidity can help relieve that and get people on the same page and say, let’s let’s go for the dream.

Let’s go for the big opportunity and not worry that if you stumble, it’s gonna be ruinous.

I will answer that question, but I first want to commend you that that is exactly the right mental leap to make, which is that is why this whole thesis is why venture firms say we want to invest in visionary founders. We want to invest in missionaries, not mercenaries, the way John Doar or somebody famously said. Why we want to invest in people that have a hallucinogenic optimism, as I described, Severe, the founder of Hotmail. You want someone who’s so deeply tied to their mission that they don’t think about sort of the common logic of what’s the best financial decision in the moment.

And so that’s why we look for that personality type in founders because it correlates to this exact thing, although they’ll keep flipping. So how do we look for it? I like to ask every entrepreneur somewhere towards the end of the first pitch meeting, what does the company look like in twenty years? And I gotta tell you, I get responses all over the map. The worst is they look at me with incredulous eyes or even laugh at the question. That’s the worst. Next. You know, like, that’s not a company you wanna invest in because they don’t have any image of where they’re gonna be in twenty years.

They’ll flip the company and be on to their third startup by then. So the sort of arbitrage seeking opportunists get weeded out easily by that one. The true company founders that we want to bet on have the most rich answer to that question, more rich than anything they pitched. It’s almost as if it’s a relief someone finally got them to talk about what really matters. It’d be as if you could ask Elon in the early days of Tesla, what does the company look like in twenty years?

And he tells you how every vehicle will be electric. Every vehicle, not just cars, but boats and buses and trains. And it’s an inevitability. And that is the founding vision of the company. Right? Or colonizing Mars for SpaceX. Right? It’s arguably a tough thing to pitch when you haven’t yet built a rocket. And yet, that’s really where his mind is at from the beginning. Right? It’s all about the Mars program. So the folks who are out to make a difference in the world that we want to invest in, the people for about whom one day history books would be written,

So that in a way is the focus of what I try to do. In other words, if I was to say, what is the skill set that I’m trying to hone? What is it that I do as an early stage venture capitalist? It’s trying to figure out market timing. So backing up for a moment, I believe at a absolutist level or an objective level, market risk is the worst kind of risk. Meaning, if you don’t know if a customer’s gonna like the product intuitively or logically or provably, you don’t want to invest in that.

So this is why we avoid gaming. Turns out gameplay is super important. Doesn’t matter how good you’ve sketched out, you know, what the game’s gonna look like until you actually build it, devote most of the cost of development and have final gameplay to play, but you actually know if it’s a hit. So these are the hits driven business as they’re famously called venture. Most of entertainment and what have you would fit this. Like, I could never do Hollywood or even pretend to be a film producer or a label for that reason.

Now market timing on the other hand is an art. And I’ll give you simple examples could be, okay, back to the electric vehicle example, it is inevitable that all vehicles will be electric. If you look far enough in the future, no one will debate this point. And I’ve done this with oil industry executives and others. You’re like, Oh, they can get really bogged down in the weeds of what’s happening today, next year, the next five years. You ask them to look out fifty years, they’ll still be in denial because they don’t really believe things could change that fast.

And maybe they’re right. If you look at five hundred years, there’s no freaking way we’re gonna be drilling oil out of the ground and burning it in engines that are less than 20% efficient. It’s just it’s absurdity. Similarly for settler agriculture versus slaughtering animals for meat. Same thing for autonomous driving versus human drivers of vehicles. Just look at five hundred years and you know that’s the endpoint. Now it is, of course, very debatable how you get from here to there, the market timing. And this is where you can totally miss out.

Right? You could have made the same maybe observation about electric vehicles in the 1980s and you would have been wrong by a few decades for a variety of reasons as to whether the time is right. Okay? So it is inevitable. There is a market for electric vehicles. I guess maybe to be fair, that wasn’t obvious in the 80s. The moment you sat in a roadster or any Tesla product, you have this experience good. You can tell from the first moment, Oh, this is the inevitable future.

Same for the autonomous driving stack. When I first experienced that with Google, when that was the Wave O Division, it’s like an epiphany. Okay. So when you have these epiphanies, you then have to scratch your head about the timing. And to do our job well as an early stage venture firm and as an investor, I have to catch an industry on the cusp of a transition. So if it’s still got a lot of technology risk and no one understands how the technology works or whether it will work, that’s a little early.

So I was early with, let’s say, quantum computing seventeen years ago when I first joined the board of D Wave. Fast forward fifteen years and maybe the time would have been a little better. I think I was also early in aesthetic biology, but I was probably just right on electric vehicles, probably just right on space with both SpaceX and Planet Labs and smallsats in general, and with what I called cellular agriculture again, like growing meat in a vat instead of killing an animal. And so I see my job as not picking so much the best company of an industry because frankly, I’m trying to invest in things that don’t even have an industry yet in the startup domain.

But try to pick the right industry sector that it will go through a disruptive change, right? So like agriculture, aerospace, automotive, and figure out the timing. The timing would be, okay, when will technology risk get resolved? When will the sort of customer experience good, let’s say for Tesla, be such that the banker types and the later stage investors can actually see that it works and not have to do it on a leap of faith? Another example could be like nuclear fusion. For twenty four years now, actually twenty five years, I’ve been waiting on the sidelines to invest in nuclear fusion because it was a science project.

I mean, it’s just capital intensive science project, right, no matter how you look at it. And we finally found one out of MIT that turned it into a pure engineering exercise. They can make a magnet of a certain strength, boom, they will have a nuclear fusion reactor and no one in the industry disagrees with that. So to make a long story short, that’s what I try to do. Resolve market timing by getting in just before it’s obvious, because if it’s obvious, it’s too late. And yet do it in a way that within two or three years, the later stage investors will start to agree with me where they would disagree prior.

So when I used to do venture debates, I would actually debate these five year horizons all the time with the Churchill Club locally. And it was amazing how almost all venture capitalists disagreed with me when I first invested. So like Tesla, I remember famously Peter Thiel just saying it’s a bankrupt idea. The battery technology will never scale. Batteries will never improve. EVs will never work. And I was like, wow. And that was just before the model s. I mean, literally a week before the model s shipped.

No. It’s exactly right. And it relates to timing. It’s that intuitive sense of, can I sell this to them when it comes time for the Series B or whatever the next round is to our investment? And that sometimes that’s related to getting the timing just right. Like in the case of SpaceX, they actually had a rocket finally succeed after we invested. And that changed everything in their relationship with NASA and contracts that they had. Other times, it’s a sales effort on my part, which is there are a group of following investors.

Even though there’s a dearth of them, I completely agree with the premise of the question that, like, the venture industry has an abundance of herd mentality investors in what I call the crackof.com investing consumer internet enterprise software, where everyone has the same strategy and they don’t seem to scratch their heads that they all have the same strategy, but somehow think they’re just gonna out execute everyone else, right, either through the personal networks or what have you. And it’s just bizarre. And there’s a real supply and demand imbalance in all the other meaningful companies that are now changing every other part of the economy.

Which by the way, let me just mention one thing that I’ve seen over twenty five years. When I started in venture capital, there were like three sectors. There was software, semiconductors, and life sciences. And that was it. You could wander off and invest in automotive. A 100% of those investments went belly up. You can invest in restaurants or whatever. You didn’t make money in anything else. That’s all there was. Today, almost every industry is becoming an information business, a software infused re engineering of the physical product into a services and software layer.

Think aerospace, automotive, agriculture as examples, like construction, I think what have you. It’s gonna ripple through every part of the economy. It’s like this incredible array of opportunities. Anyone who’s in the venture business saying, I’m a domain expert. I’m only investing in X as an industry sector. I think that’s a very fragile and brutal strategy over the time span of decades. That might work if you pick the right sector and you have a good run, like the semiconductor investors of the eighties did. But eventually, semiconductor investing got out of favor and enterprise software went out of favor for quite while.

If that’s all you know and that’s all you’re ever gonna know, you’re gonna have dry periods. It’s not a great strategy as an individual venture capitalist. And some firms make up for it by having diversity within the firm, but as an individual, I think it’d be better if you were in fact continuing to surf the frontiers of new areas and learning new sectors that are adjacent to your prior areas of expertise. So this follow on investor thing is one where I cultivate these contacts. I try to find them, but sometimes they’re corporate investors.

Sometimes you won’t find the traditional folks that will do these things in the early days. So we’ve had a lot of corporate follow on investment. But when it goes well, it goes remarkably well. Just one example, SpaceX and space in general. So we invested in two, exactly two space companies, Planet and SpaceX. They raised $1,100,000,000 in 2015, and that alone was double all venture capital in the space sector combined forever, meaning prior. All prior years combined times two. Just those two companies. And it’s just grown like crazy since then.

There have now been over three sixty venture firms that invested in space. They’ve invested in 200 nearly identical small sat launch companies, for example. It’s the herd mentality. It’s like, wow. I actually never seen anything like it as I have in the space sector of just like everyone seemed to wanna have an investment in that area. And like, it didn’t seem to matter that there were 200 others just like them. But I digress. So the main point is it can go very well when you get the time right because you get good entry economics.

And then there’s a sea of capital usually when there’s some visible success. So just like Netscape was for the Internet, SpaceX was for space, Tesla was for electric vehicles and autonomy, you have a whole raft of fast follower startups and investors jumping in moments later. And so what we need to do is have moved on to the next sector by then.

It’s something emotionally in me says it matters, but I think that’s only because I can’t help myself. There’s no logical reason why entry price should matter as much as it does, but I do find that I’m inherently just I just can’t help myself. It’d be kind of like, I can’t play chess poorly than my best ability. I’m not particularly good at chess, but you can pick any game. But your question is actually right analytically, which is if you look at the power laws of portfolio returns in an early stage venture fund, both within the fund and across multiple funds, it is unbelievably consistent from across firms.

So you can aggregate all early stage venture. You can do all early stage venture within a given firm like DFJ or Future Ventures or within any given fund. In all of these scales of analysis, there’s like one company that matters that equals the returns of every other company combined. And then number two on the list oftentimes is the same. In other words, it equals everything below it combined, sometimes even number three. And if you plot that on a piece of paper, like, wow, what do you make of this?

So that’s one thing that you start to realize that if you made a routine error of entering 2X too high, but you pick the right companies, then that 2X too high doesn’t matter. The entry price is irrelevant. What’s much more important is betting on remarkable people and picking the right industry sector. Right? Finding that thing that’s on that market timing transition that I mentioned. And you’re also right that you have to be playing a game where you’re looking at monumental change. Right? You can’t be looking at pluggers that are just trying to make some middleware more efficient or make ad matching a little better for Google or what 90% of startups frankly are doing in the enterprise software space.

It’s just ask yourself thirty years from now, who cares? Will a history book ever be written about this company? If not, it’s not in the game that we’re talking about. The ones I’m talking about, SpaceX achieves its mission, humanity becomes a multiplanetary species. This will go down in the greatest hits of evolution, like the opposable thumb and like the neocortex. Like, this is like literally on that shortlist of accomplishments of humanity. Or if we get off oil and gas forever and save Earth from suffocating from emissions, Right?

And not to mention hundreds of millions of people every single year from particular emissions alone. In China alone, that’s like hundreds of millions of people and their health is being ruined in a way that they’ll I think the way that play out, but it’s just astounding the health impacts of oil burning cars that we just took for granted that we had to do that. Or if we get off slaughter. Right? The some I’ve said, I think it was a guy who wrote Sapiens A Yuval Harard.

Yeah, exactly. Who’s like, you know, the way in which we slaughter animals will one day look back as one of most horrific things of humanity. It’s kind of mind blowing. It’s almost something you can’t turn an eye to. You can’t go visit a slaughterhouse. And I’m a big meat eater or have been. I’m trying to reduce my meat consumption, but I’m not speaking like a personal zealot. It’s just obvious once you get to the other side and see the inevitable future that you’re not gonna have to raise animals in horrible conditions and then kill them for your food.

That’s That gonna be one of the most important changes for sentient life forms on earth and the well-being of more than just humanity. So, yeah, let me not get on my soapbox too much, but to say that that’s what gets you out of bed in the morning. It’s like, it’s not to make money. It’s not to make the world a little bit better in some incremental way that’s like a whatever. It’s to shift the playing field, to make a difference in energy, in food, in the built environment, in transportation, and the social social fabric of reality.

Yeah, I think so. Especially for the kind of investing that we’re talking about here again. I don’t wanna be, by the way, sound too disparaging for the mainstream venture markets. My point is just it’s being well served by the mainstream venture market, which is ten year funds, focusing on short wins than the internet and what have you, and two to three year pops really making the IRR happen when you get lucky. That’s fine. And God bless them. But for what we’re talking about today, you’re exactly right.

In fact, I’ve been on a variety of companies’ boards for between fifteen and twenty years when they’re successful. In fact, when Neo Photonics went public, they had over 3,000 employees and I had been there longer than any of them, which is a whole another story. But yeah, so we took that into account account when we were forming Future Ventures. We made it a fifteen year fund instead of ten years. We debated making it an Evergreen Fund, which is a structure that Sutter Hill in the early days and some others have pursued, but it has some complexities and you have to explain it to LPs in a way that doesn’t really fit all their models as easily as a normal fund structure.

Structure. So we went from 15. We just figured, Hey, we’ll just do that because we know that that’s what we’re focused on. We know that RLPs are going to buy into that. And I can also point out that every venture fund I’ve ever been involved with back in my former employer went out to a full fifteen to seventeen years and one’s still going at seventeen years. It’s like none of them were done at ten. And in fact, at the ten year mark was some of the greatest gains.

If you look at, okay, at the ten year mark, where was Tesla? Where was SpaceX? And there were many, many billions of dollars, hundreds of billions of dollars of value creation still to come. God, I just realized that there’s hundreds of billions of dollars of value creation still to come at the ten year

That’s a good point. You know, it’s strange. I would have thought that the loss ratio should be a lot higher, that there’s just whenever you go earlier, whenever you have tech risk compounding on top of all the other usual risks, you know, team and market and what have you, but it hasn’t played out that way at large. So if I think about synthetic biology, while there were a lot of flame outs, we didn’t tend to have that many. In fact, the whole clean tech category, which was a huge investment thesis of mine for probably a good six, seven years, it didn’t really end up being a big smoking hole.

That same thing in that, actually, I think I know the answer is starting to come to me. Why has it worked out this way? A cleaner example I can tell you is from the internet. So in the nineties, starting in ’95, we were doing 80% internet investing at DFJ. So it was almost everything. We were known as the internet firm. And in fact, strangely in ’95 to ’96, we did a third of all internet investments for the entire venture industry, not in dollar amounts, but just sheer number of deals.

So we literally were a third of the market. And so you might think when the dot com crash came that we’d have this massive wipeout in our portfolio. But if you aggregate all of our losses from every loser that we did in the internet, it was much less than SoftBank loss than a single investment with buy.com. I remember like, wow. And so the takeaway was we were still pretty well diversified. We had a lot of smaller bets, not these concentrated ones. And now that my purview is much broader, the diversification is broader than every force.

If you look at our existing portfolio companies, it’s underground tunnel digging with Boring Company. It’s psychedelic science to help with mental illness. Like, wow, those are completely different. It’s synthetic meat growing cows without the animal. It’s analog chips to do neural networks. It’s companies building lymph nodes synthetically, you know, three d printing organs. It’s SpaceX with rockets. It’s obviously very different. I don’t think there’s systemic risk across that portfolio. And there’s sort of a stage element, which we’re finding that there’s companies that are doing quite well, but are still, as you said, neglected by mainstream venture capitalists where we can invest at relatively reasonable valuations, even though they’re farther along.

It might be a Series B or it might be what have you, but they haven’t broken out yet. They’re still in product development. They’re still building their first product success. And so it’s not always like this mental model of a seed check, which is probably 80% of what I’ve done. A seed check when there’s two or three people, no product, no prototype, just an idea and a dream. That’s what I typically focused on. But refining can actually find some projects that are far along, like The Boring Company or some of other ones I just mentioned.

Yeah. I think my relationship with money changed when I had kids. And I reflected on my own upbringing. I was not wealthy growing up. My parents were both immigrants from Estonia and came to The US without much in their back pocket, but at least enough to live, but not really any wealth. And yet I grew up and I had the privilege of going to private school and to a really awesome university where I got to see all different types of backgrounds in terms of wealth. And I didn’t know of any role models, and I still don’t, where kids came into wealth and then had the fire in the belly to make a difference and had happiness and meaningful lives.

It’s like very rare. I mean, I can sort of think of one person more or less, I think, in my entire life history where if they knew they had money from their parents, they ended up having a happy life. Let’s just put it like that as a filter. And so I thought, I don’t wanna wish that on my kids. And I had to think about a will. I was forced to have a will and a living trust for the first time. Mean, forced to meaning this responsibility of a parent.

Got to think about what about babies if you die. Right? And then it sort of was obvious to me. I want to give it all away. I’m not going to give them some arbitrary number of amount of money that will grow based on how I do in my job. It’s like, no, let’s start from first principles. What does it cost to go to college and just live, but not be rich and just leave them that fixed dollar amount? And then everything else will go to charity.

And then as wealth has accumulated now, it’s like 99% of everything I own is pledged to charity in my will. And I’m gonna give away as I’m living, of course, but at least if I get hit by a bus, it will be as I intended, which is to charity. Now I think that is important on many different levels for society and as an individual. I think it leads us to be better stewards of our capital and of sort of the future and what matters. I think it lends to happiness, as I mentioned.

You can go through the vicissitudes of market crashes and not have it affect your psyche quite the same way. And you don’t have to make sales decisions. By the way, when I said I never sell, I’m donating to charity. So where do these shares end up? Over time, they’re all going to charity. I don’t actually sell them for cash. I don’t have to worry about market timing in quite the same way. And that’s remarkably liberating. It allows me to be a long term bet with a company to look an entrepreneur in the eye and say, I’m doing this in the long haul, maybe even longer than you in most cases.

And it helps you make the right decisions on what matters and the long term repeated game dynamic of business that like, it’s not about short term opportunism and cheating someone out of something. When I say cheating, mean, not literally, but proverbially. It’s not like the zero sum game kind of thing. And I also find that I I’m attracted to the kinds of entrepreneurs who think the same way. A number of the companies like Planet has flat three baked in from the beginning. They were almost a benefit really close in their formation.

And I find that the entrepreneurs that I’m most attracted to are those ones who wanna change the world for the better. The money they make is a byproduct of that. And I think they like working with investors who think the same way. It certainly leads to less friction in conversations when short term can trade off versus long term, which by the way, I think in general in a startup, having a vision, a mission, a purpose that’s understood by every employee is super valuable and value creating from startup to public company and beyond because everyone in the company understands how to prioritize even as the organization scales.

So when you’re at a 10 person company, you can get everyone coordinated through brute force. When you’re a thousand person company, if you don’t have a mission, people will debate endlessly. Should I do something that maximizes this quarter’s profit or this year’s profit or this decade’s profit? And if instead you know your goal is colonizing Mars, you inherently get people on the longer term perspective and pulling their ores in the same direction around timeframes because inevitably you can mortgage your future for some short term opportunism.

And this is the tumult you see in so many big companies who really don’t have a vision purpose or mission. They’re just quote, maximizing shareholder value. That’s like the worst goal for a company. That’s like almost paradoxically guaranteed to minimize shareholder value in technology and business for sure. And so I think that personal view towards money is echoed in some of the best entrepreneurs. And it comes back to your earlier question. How do you find the entrepreneur who keep flipping the coin? And by the way, there’s never perfect information on the coin.

You may believe it’s a fiftyfifty and a 10x return, but you don’t really know. And that’s even more complex. Right? So when you find the people that aren’t frozen in fear in that game and instead are like, I’m here for a different reason. Let’s go change the world.

It’s a tough question. His mom gets asked this a lot. He’s asked this a lot. So let me first amplify and agree with the question, which is I think he’s perhaps the greatest gift of the American dream living right now. You know, by the way, immigrants who America specifically dreamed the American dream and built incredible companies in multiple industries that haven’t faced new entrant for decades and have become some of the most important drivers of change. Let’s just be modest at this point, just say drivers of change in a bunch of unrelated industries.

So it does beg the question, what is it? So first he would say, well, I think about problems from a first principles perspective with a physics training. And some of the that entrepreneurs, by the way, do have that perspective. I would also put Planet Labs CEO in the same bucket, where if you’re trained deeply in physics, you do think about a first principles approach, not where we are, but what should be possible. So again, this couples beautifully with this vision or the vision, this framework, shall we say, of looking at five hundred years and then chaining back to the present.

Elon does this inherently better than anyone I know, and there’s parts of it that are just magical to me, and I don’t know how he does it. So for example, okay, we need to build a rocket to get to Mars. Oh, shoot, we need to make these rockets come back from Mars. We don’t have fossil fuels on Mars. Right? They don’t dinosaurs or whale. So we gotta shift to methane. And, oh, by the way, the whole rocket gets better when we do this even for Earth applications.

I could go on and on about these interesting things that were motivated by something big and audacious that none of his competitors had as a motivation that got him to overcome the inertia and the activation energy of doing something bold, like making the rocket booster reusable. Right? Every SpaceX competitor was like, that’s hard. It probably won’t work. Why would we bother? And you kind of need to if you’re gonna have thousands of ships to Mars and you wanna bring the cost down a 100 x. You can’t do business as usual.

So having something that’s driving you that’s different from your incumbents and being able to convey that vision clearly openly. Right? It’s not like a sheltered vision. He publishes and states openly for the world to hear, here’s what we’re doing, here’s our master plan. And despite having it be public, no one else executes because they just think it’s such a bold I mean, a variety of reasons, but I digress. Let me come back to him. So the thing I’d say that he’s done across all the companies I’ve seen is he takes his software engineers.

I mentioned physics. That’s like, in a sense, first principles. Like, okay, the rocket shouldn’t cost as much as it does. There are no patents at SpaceX. You just bend metal and make this incredible product. But you have this systems engineering and you have this software layer where all the value resides. Same with Tesla. The value resides in the systems engineering and the software, not a given patent, not a given core piece of low level technology. And you motivate people like crazy because they want to see this vision succeed.

Now that’s sort of on the engineering side, him as a product architect, him as a visionary of how an industry would shift. But he’s also in a sense got a design, a sense of beauty, a sense of what’s right in product. And this is something I also saw in Steve Jobs. And in both cases, I would describe it as a visceral, I mean, just a deep visceral agitation from what is a visual noise of imperfection. So if something’s wrong, like jobs would just be like, oh, this is shit.

This is crap. I’m gonna have a hard time articulating exactly why it was crap. Musk does a much better job. But there’s something that triggers almost like a low level pattern recognition cortex circuit that says, this is just wrong. This can be better. And I think Musk does it many different layers of abstraction. Like lately, he’s been saying quite a bit about the best part is no part. The best product is a simpler product. It’s somewhat of an echo of getting rid of the buttons on the phone for jobs or making the keyboard simple for the Mac and not all these ridiculous function keys.

There’s something about a drive to simplicity that is inherently compatible with the shift to code from a physical thing. The physical thing becomes a vessel for code. Right? A car is an AI on wheels. The rocket is an autonomous vehicle. That’s where the value is. It’s not on the metal. It’s not really what drives it over the long run. Twenty years from now, it’s all gonna be about the software layer and minimizing the physical thing is what gets you there. So that’s all sort of on the mental capacities.

Guess I’d also say, just to add a third different bucket, is he has an incredible ability to focus on what’s important, yet tightly couple it to the future vision. So it may seem like he’s all over the place because he’s got multiple companies, but that makes you focus. You can’t get distracted with things that aren’t the mission critical thing for the company at the time. And let me just leave it as a generic at this point to say this has been one of the areas I’ve been most impressed by is unlike myself, who’s in sort of a learning stance and interested in so many things.

And that’s why I think I’m better suited to be a venture capitalist and an operating manager. Can I see what the what I would not do well is this no? We have to make x y z work. We have to get, let’s say, Falcon Heavy to fly before we move to how do we terraform Mars. You know, like, we’re just not gonna put energy and engineering resources into something that’s too far ahead of where we are today if we can’t get the current thing working. So

I think that is a good analogy. And also, by the way, Jobs and Musk both were CEOs of multiple companies, and it allows you to avoid time wasting meetings that you just rather not go to. So imagine as a thought experiment, you’re the CEO of one company and you have a holiday party. It’s not like you just skip it. That would be weird. But if you’re a CEO of two companies, you can easily skip what would be a time wasting holiday party because you you got better things to do.

And people always don’t have to double guess that you didn’t prioritize the holiday party. It’s like, oh, you probably have something more important to do at the other company.

You know, it’s funny. If you use the word incredible, it might be like saying, what’s the most incredible moment you have with your brother or your was your mom, whoever it that you said you like to spend time with. And there are many of them, right? It’s a lifetime of them. So I’ve known Elon for twenty four years. Now, you said, what’s most memorable? Yeah, there’s few. So again, this isn’t the best, but it’s certainly memorable. We’re in Texas. We’re watching this test vehicle, the F9R launch.

This was before any company had shown that you could in fact return a booster back. And just the additions of this engineering task is monumental. It’s like you’re talking about transonic and supersonic speeds of things that are the height of a three story building coming back at you under thrust and then landing vertically near where you want it to land. It’s never been done before. It’s perceived as insane by every industry observer and every competitor’s like, yeah, good luck with that. You know, you keep going because that’ll never work.

And here we are in Texas watching one of the interim test vehicles take off for the first time using some new technologies and it starts to arc over achingly. And I’ve launched a lot of rockets myself, by the way, amateur rockets. And so I’ve seen a lot of them go wrong and I can tell the Moby, oh my gosh, this is not good. And it that needs because when something goes out of parameters too far, like, it’s starting to launch horizontally, you blow it up so it won’t be a threat outside of a certain circle or radius.

So you have this enormous kaboom just, you know, not that far off the ground and when close to fully fueled because it hasn’t burned off much of the fuel yet. So it’s the biggest fireball I’ve ever And so that’s memorable. I’ve been joking about that we’re heading out to see the big kaboom. I don’t know why. Like, for the one and only time I joked about that, that that actually happened. But then it got better on several levels. So there’s little grass fires burning, debris is falling out of the sky, there’s pressure vessels everywhere.

And I’m like, and I collect space artifacts, by the way. And so I turned to Elon and I go, you know, can we head out there? And like, check it out. He’s like, yeah, we should do that. And so we drive out there and and it turns out you’re not supposed to be doing this. And we got sort of chastised for this later. But we got to do this incredible thing that we may never get to do again, which is walk amongst the rubble as it’s still smoking.

And it was astounding. So not only did I get to collect some space artifacts, which is lovely, but I got to see sort of the mind churning. It’s like, what okay, went wrong? What can we learn from this? And someone else on the board made a comment quoting, I forget who was Edison or Ford or some inventor of the past, some quote that said something like, If you’re not failing, you’re not learning or you can’t learn if you don’t fail or something like that. And Elon’s reply was, Well, considering the alternatives, I’d rather learn from success.

And so I’ve actually put that quote on a placard next to the remnants I have here in the office of the rocket pieceage and wreckage. And it reminds you, A, that failure is visible and visceral in the rocketry, that rockets are hard, as Elon says, that this engineering effort is so incredible on so many levels, and people put their heart and soul into this. And sometimes you have a failure to launch, sometimes things explode on the pad, and it makes the metaphors manifest. It’s incredible to me how he pushes through adversity, has no lapse whatsoever in the conviction that this will work in the face of catastrophic failures, and ultimately is vindicated.

It is the hero’s journey writ large, and he’s done it in all of his companies.

We’ll see.

influential on me was Out of Control by Kevin Kelly. It’s a ’95 book, recently translated into Mandarin, wildly popular today in China, so I think it was ahead of its time. But it helped set my fascination with iterative algorithms, biology, the the information systems biology, what we can learn. Kevin Kelly is an amazing writer. I like all of his books, but this one is my favorite. It’s about biological metaphors, information technology. By the way, I should just mention that if someone wants to read just a few chapters, almost as influential as Ray Kurzweil’s Age of Spiritual Machines.

But again, only the first few chapters when he sets up this framework of the, you know, hundred year version of Moore’s Law. I show that slide in every talk I give regardless of subject matter because I think it’s the most important thing ever graphed. It’s the important thing in technology business, and it gives you a sense of where the future will lie. I’d say only the first few chapters because the rest of his book, he uses then predict the future. He might be right. He might be wrong.

I think it’s better just as an analytical tool for each of us to use to think about where the world is heading given the compounding Lemoore’s law.

There have been so many. There’s lot of characters. On the positive vector, I’d say Antonio Gracias of Valor. Certainly the most value added board member I’ve sat with. And it’s incredible to me how someone who comes from a domain and a background of more operating investment management, meaning investing in industrial companies. He started in the Midwest and eventually moved more into technology with Tesla and others. This ability to roll up one sleeve as a board member and be helpful in the company in its greatest moments, whatever it might be, bringing gross margins up for a product line, helping the sales channel, whatever it might be.

I’ve witnessed how different it is from the way I operate at a board level and domain of ideas and networks, and I’m deeply respectful of it. Stepping back, would say, I think there’s a huge array of different models for success and venture. And a lot of us think that whatever we happen to be is the one and only model that makes sense. And actually there’s enormous cognitive diversity, enormously different frameworks that work. And I think it’s very different venture funds that need to be wrapped around these kinds of personality differences.

But there isn’t one size fits all, and that was very interesting and informative to me.

You know, if I could wish for something that I think may be impossible, I wish it could scale where the groups that do it well could do it 10 10x or 100x as much as they do, because I think there are many more ideas that aren’t getting funding and won’t get funding than the industry can serve. And unfortunately, you just double or triple or 10x the size of any given fund, it changes what they do. I don’t think venture firms scale at all at headcount. One of the biggest things I’ve learned in the last twenty five years is that team size is essential between two and five partners max.

If you get to seven, you’re at your limit. If get more than seven partners, IRRs and returns will plummet. And this is part of the process learning I’ve gone through over the last twenty five years. Team size is just super important, both development teams within companies and on boards. So that’s why venture doesn’t scale in my opinion. So I think there are groups that can automate the provision of capital. There’s a company called Capital that’s doing this in the debt side for companies that are more predictable, like enterprise software, consumer internet companies, where you would lend instead of using venture to grow these businesses and what might be thought of as venture rounds, but move it to the debt side.

But overall, as I live in venture, too much of it feels like a lottery, this power law that I mentioned, where there’s one winner take all in any given sector. And so it kinda circles back to, I wish more venture firms that are doing true venture capital would do true venture capital, invest in risky, change the world companies that will make the world incredibly better if they succeed. And then if they do succeed, be highly philanthropic in their own personal life. I think that coupling is super important, and I wish that was the norm.

Well, cognitive diversity is something I think you have to hire for. There’s a natural human tendency given the implicit biases that we carry. And anyone who doesn’t know what that means, like intuitively, like immediately, yep, implicit biases. I strongly encourage you to take the implicit bias test at Harvard. It’s very eye opening. So we’re all biased. We all have a deeply seated, homophily bias. We want to hire people that look like ourselves. So people with high energy, you hire high energy people. Optimists, hire optimists. Outgoing people, hire outgoing people, and extroverts.

It’s kind of spooky. And so you have to force yourself to think about cognitive diversity. For example, of all the people I’ve hired into the venture industry over the last fifteen years, there’s been a lot of them, about 85% have been women. The other was people of color and all the people that I promoted on a venture track have been women. So that alone, gender diversity, is a good proxy for cognitive diversity, but there are many others. And things like don’t recruit from your alma mater is a simple one.

Most venture firms look at like where they went to school. It’s all the same school, like, it’s the easiest path on recruiting. You hire people that you either personally knew or what the same kind of classes you went to, so you know how to judge their past experience. Ridiculous way to get diversity. But once you have a team, I think the most important thing is to obviously have voting policies where everyone’s equal and that wisdom of crowds effect can be tapped. You could kill a wisdom of crowds, meaning how can a team outperform the collection of individual talents?

How can I, and I know that I can, be a much better investor with partners than on my own? I would be a crappy angel investor compared to the job I can do with frankly junior people who I’m training and mentoring questioning everything that I’m doing. That could be a digression in its own right. But those people need to be thinking differently. If they’re just like, uh-huh, uh-huh, whatever you say is right, you’re not gonna learn from them and you’re not gonna be better as a dyad and then as a triad and as a small group.

The book Wisdom of Crowds explores this. In fact, I copied this chapter. There’s like a 20 pages in the middle of Wisdom of Crowds that describes this cognitive diversity factor and how cognitive diversity is more important than ability in the field of venture capital and ambiguous decision making, which is really important to think about, more important than expertise. And this has been shown time and time again, the diversity bonus, a book out of The Santa Fe Institute and others, should tell this story in a more updated form.

I strongly believe this. I’ve given these 20 pages to everyone we’ve ever hired at DFJ and at Future Ventures. And every time we’re recruiting, I remind people of this. So you have to focus on it. You have to overcome your implicit biases by cognitively overcoming them. Just like you may want to steal, you may want to do a violent act, but you can easily overcome that proclivity. We can layer on culture and a more enlightened mind despite primitive impulses that reside within us, the heart of darkness, if you will.

The same has to be done for implicit bias. And it’s actually pretty easy. It is just, a, admit it’s there and will never go away, and b, put

Exactly. And that’s the best thing you could have done.

Prelis Brialogic, p r e l l I s, run by this wonderful founder, Melanie Mathieu. And it just so happens a friend of mine had joined as a vice president, but we’re really obviously betting on her. And they print three d organs, which is category I’ve been watching in terms of market timing for years now. Over a decade, I’ve been watching companies that can three d print organs for an organ transplant. But what they realized is, A, they’ve built something that scales better than anything else out there.

And B, that there’s a really simple tiny organ you can print, which is the lymph node, specifically right now to build antibody therapies for coronavirus and COVID nineteen. So the best way to amplify your B cell and T cell response is to have a recreation, literally recreation of the human lymph nodes. You basically externalize your entire immune system onto a petri dish. You got hundreds, thousands of these things running in parallel. You can do it without requiring serum from humans. You just take the virus, you present it to these synthetic immune system nodes, which are human organs outside the human, and have a much more rapid, you know, thirty days antibody therapy, a much more rapid process innervation cycle than others.

But of course, that’s just obviously timely for today. An interesting bet, as Bill Gates would put it, the best bet we’ve got against coronavirus given how it’s mutating and given how long it takes to develop a vaccine. That is just the stepping stone, we believe, to the whole field of organ transplants and organ enhancements over time. So they, you know, they print optically. They do so approvably. They’ve done it for Zika virus. It’s this lymph node thing. And in theory, you could print all kinds of interesting scaffolds in in organs.

So that’s the most recent one.