How I Invest with David Weisburd
00:24:07 · Jack Selby, David Weisburd
[00:24:07] S1: Sure. And there's a degree of efficiency, I think, in the approach, but they prefer to ride their bikes or at most drive their cars to their board meetings and not have to get on their g five and fly to Milwaukee. And that's fine, but therein lies the opportunity. [00:24:18] S0: You're obviously Jack Selby, and you have this reputation. You worked with Peter for all these years, and still... I feel like you still have to have these arguments day in and day out. What's the best counterargument to your thesis? [00:24:31] S1: The best counterargument is that no one has done this successfully in putting up solid top decile numbers yet, and that's what I'm trying to do. So it's difficult to disprove that. [00:24:43] S0: In other words, interesting theory, but show me the proof. [00:24:46] S1: That's right. And so no one has done it. This is hard. Raising money for a noncoastal venture fund is hard. There's a, you know, there's a phrase called the flyover states. It's pejorative. It exists. I'm acknowledging it. It is what it is, and I'm not saying all investment sentiment is dictated by the coasts, but I would be naive to say that it's not to some extent. And so when I sit down in a fancy boardroom here in Manhattan and I look across, you know, at the CIO and I try to convince him that there's some smart people that actually live in Milwaukee, I often get looked at as if I have three heads. That's the reality. But I acknowledge it, and it's just part of the job.
00:24:46 · Jack Selby, David Weisburd
[00:24:46] S1: That's right. And so no one has done it. This is hard. Raising money for a noncoastal venture fund is hard. There's a, you know, there's a phrase called the flyover states. It's pejorative. It exists. I'm acknowledging it. It is what it is, and I'm not saying all investment sentiment is dictated by the coasts, but I would be naive to say that it's not to some extent. And so when I sit down in a fancy boardroom here in Manhattan and I look across, you know, at the CIO and I try to convince him that there's some smart people that actually live in Milwaukee, I often get looked at as if I have three heads. That's the reality. But I acknowledge it, and it's just part of the job. [00:25:23] S0: Speaking of tropes, one of the biggest tropes today is in a post AI world, everything changes, and funding changes, strategy changes, hiring changes. How does a strategy change or evolve in a post AI world?
00:25:23 · David Weisburd, Jack Selby
[00:25:23] S0: Speaking of tropes, one of the biggest tropes today is in a post AI world, everything changes, and funding changes, strategy changes, hiring changes. How does a strategy change or evolve in a post AI world? [00:25:40] S1: AI has become so ubiquitous, so pervasive. So even in the noncoastal geographies where I invest, I see it as an ingredient in the recipe of basically every single company I look at. And I'm pleasantly surprised by that, and it's happened more quickly than I would have probably originally appreciated. But I think at some point, we're going to stop talking about AI as an independent dynamic or component. It's gonna... I think very similar to what the Internet was in 2001. It was just so pervasive at that point. Everyone just assumed the Internet was involved in almost every aspect of business, and in this case, your question, venture capital. So I think if we're not there... We're there yet, I think we're very close. [00:26:16] S0: But in terms of team construction, so you could argue from both sides of it. You could say, well, because of AI, now the 10 x engineers are a 100 x, and now you have to be in San Francisco for the network density. Or you could argue the exact opposite, which is now because you could build a $10,000,000,000 company with 15 people, there's certainly 15 great engineers in Milwaukee. Yes. And you don't even need anyone to move.
00:26:44 · Jack Selby
[00:26:44] S1: I'm certainly in the latter camp. Right? And so I think you can build companies with more efficient rosters, smaller teams to be precise, and you can get to outcomes that still generate very good venture returns. I'll give you an example. So I was speaking at some MIT event earlier this year, and the guy next to me, not to name his name, but he made a preposterous statement on stage. He said, you know, venture is going to evolve to finding the next trillion dollar company. And so there were gasps from the audience like, oh, wow. That's such a bold idea. It's a terrible idea because it is so self unaware about what has been going on in the venture capital industry. So to be precise there, what has been going on is that the industry has done an exceptionally poor job of generating returns, of actually getting money back to the pockets of their investors, DPI. And so when you sit on stage at MIT and say, well, no problem. These billion dollar companies that we've been trying to build and get money back to, good news. We're gonna go find trillion dollar companies. And so is that more probable? No. That's even less probable. So this again goes back to the analogy of finding Elon Musk at age 24, and you think that makes the duration longer? You bet it does. So investors are gonna tolerate, again, the improbability of you finding the next Elon at age 24 and, what, wait thirty years to get money back?
00:27:58 · David Weisburd, Jack Selby
[00:27:58] S0: There is a level of absurdity here. I had sitting where you are sitting, Matt Harris from Bank Capital Ventures. Mhmm. And they've had... I think they're on their eleventh fund, and they're almost always top quartile. But they haven't had a fund returner. They haven't had a power law outcomes. And several of their LPs are upset about this versus realizing kind of on a on a sharp ratio, it's it's a much better strategy than if you were relying on these kind of power law returns to to drive the portfolio. [00:28:25] S1: Yes. I'd be very happy. You know, speaking from my college endowment perspective, we'd be very happy with mass returns. [00:28:30] S0: I wanna go back to the early PayPal days. I mentioned, you know, just the unbelievable people that are in the PayPal Mafia. Sometimes when we work with somebody day to day, we just learn these lessons much more viscerally than you would from from a podcast or from from a clip or from a tweet. What are some lessons that you took away from there that's really driven you in your career? [00:28:53] S1: Work ethic, I would say, more than anything else. You were just surrounded by people that were literally working twenty four seven. You know? And it started at the top with [00:29:01] S0: Elon. Does that mean? Like, nineteen hours a day? [00:29:03] S1: No. You, like, you email Peter Elon at 02:00 in the morning, they respond to you within ninety seconds. And so [00:29:09] S0: Does that mean that they just slept with their phone by their
00:29:09 · David Weisburd, Jack Selby
[00:29:09] S0: Does that mean that they just slept with their phone by their [00:29:13] S1: It means they're working almost around the clock no matter what. And so I would do that because I was, you know, managing the international operations. So I was often, you know, in our offices or Tokyo or in Singapore or London and so forth. And so I'd be emailing them at all different kind of crazy hours of the night depending on where they were usually back in in California. And so it just... It enforced a mentality or a work ethic to just be on, so to speak, twenty four seven, three sixty five. And so that might sound basic, but that was shared by essentially the entire management team. And so... And this goes back to what we talked about earlier. Like, we were just dealing with different fire drills at all times. And so having that kind of manic energy of this is just... This is the default of how we have to do that if we're gonna be successful because there's a near death crisis at at every given moment. I think that has probably served me well over the years. What else? One of the management traits that Peter brought to bear is that if you find someone who's not a fit, you have to just rip the Band Aid off and move on. And so... And that's something I have not always been good at. But having seen that with Peter and has reinforced over the years, I think that's a very important lesson. [00:30:21] S0: Quickly? Immediately? [00:30:23] S1: Almost as soon as you know that it's not a fit, because you usually cannot reborn.