How I Invest with David Weisburd
00:46:41 · Jack Selby, David Weisburd
[00:46:41] S1: Whether it's the circular trading or the valuations, the multiples. I mean, the list goes on [00:46:46] S0: and on. Because two things could be true at once. One is 90% of companies could be overvalued, and also the expected value of the vintage could still be high. I think that's what a lot of investors are trying to grapple with what... They get that all these pre revenue companies can't be worth under a million dollars or a billion dollars, But they also are unclear, I think, whether there's gonna be another $1.02, $3,000,000,000,000 company in the batch. And I think probabilistically, it's it's probably very pessimistic to assume that the first three years of AI produced two arguably $3,000,000,000,000 companies, and now we're not... Now it's game over. No no more trillion dollar companies.
00:47:24 · Jack Selby
[00:47:24] S1: I respectfully disagree because I think there is an angle where AI enables companies to be built much more cheaply, achieve revenue much more quickly, get to good outcomes much more quickly, and generate good, if not great venture capital returns without the fixation of, oh, I have to go build an extra trillion dollar company. Because I think people are so caught up in the zeitgeist of SpaceX and Anthropic. These are once in a generation, if not once in a lifetime type companies. And the idea that they come around with any sort of regularity, I think, is ludicrous. And we have to move away from that because if that's what you're pitching, you're again pitching something that's outrageously improbable that you're gonna find at an early stage, and then the duration is gonna be very extended. And that's a poor combination. And so that's why I I fundamentally disagree with that kind of perspective. AI, again, those two things being equal, is an amazing tool, but what about building great companies that don't have to be trillion dollar outcomes? That is a mentality that is totally lost in Silicon Valley. And, again, I I love Silicon Valley with its audaciousness, and it's actually to give give to give fairness. It's the one aspect of my geography where I invest noncoastal that I'm the most envious of Silicon Valley. This is probably my biggest challenge. Like, when I meet that entrepreneur in Milwaukee, is he or she... Are they going to be able to work their tail off and get me to one of those minimum $500,000,000 type outcomes? Because oftentimes, he or she will take my money because they think venture capital is special or sexier, whatever it may be, and they're gonna work their tail off, go through blood, sweat, and tears, all these near death experiences. Like, okay, Jack. We're gonna sell this widget for a $100,000,000, five or seventeen years out. Say, no. No. No.
00:49:07 · David Weisburd, Jack Selby
[00:49:07] S0: And that's because on a relative basis, they'll be one of the richest people in Milwaukee. [00:49:10] S1: And god bless them for being the wealthiest person in Milwaukee, but that's not what my money's for. Like, I have to have that minimum $500,000,000 type outcome with my first fund in order for my math to work. I don't have to find a trillion dollar company, but I have to have that minimum $500,000,000 outcome. And too often, have found, and this is going back to the analogy of me being a talent scout, I have to make sure that my entrepreneurs are sufficiently grandiose when they take my money. Like, buddy at Greylock coined this phrase that I've stolen. You have to have equal bits, grit, and grandiosity. Grit, I've got all day long in Milwaukee and Cincinnati and Phoenix. What I often have to be much more on the lookout for is the grandiosity piece. [00:49:49] S0: Reminds me of a Jason Lemkin tweet, which I think it was during COVID where he said, in San Francisco, I'm unhappy but productive. Outside of San Francisco, I'm happier but less productive. Therefore, I will stay in San Francisco. So I I think there's something to that. There... There's this memetic copying where, sure, you might have $20,000,000, but if your neighbor has a $100,000,000, now you're suddenly unhappy. And people generally look at this as as a negative in terms of happiness, in terms of productivity, it's a very positive kind of capitalistic type drive that that leads a lot of these submarkets like a San Francisco.
00:49:49 · David Weisburd, Jack Selby
[00:49:49] S0: Reminds me of a Jason Lemkin tweet, which I think it was during COVID where he said, in San Francisco, I'm unhappy but productive. Outside of San Francisco, I'm happier but less productive. Therefore, I will stay in San Francisco. So I I think there's something to that. There... There's this memetic copying where, sure, you might have $20,000,000, but if your neighbor has a $100,000,000, now you're suddenly unhappy. And people generally look at this as as a negative in terms of happiness, in terms of productivity, it's a very positive kind of capitalistic type drive that that leads a lot of these submarkets like a San Francisco. [00:50:21] S1: In an ideal world, like, I would love it when young entrepreneurs go to the Bay Area right out of school from one of these noncoastal places and then move back. And so they've been infected. [00:50:30] S0: They could see what [00:50:31] S1: They've been infected by the grandiosity in Palo Alto. Yeah. But they didn't they didn't stick for whatever reason, and they moved back to Phoenix Milwaukee or Cincinnati or Houston. [00:50:39] S0: That's the best model? [00:50:41] S1: With our first fund, we saw kind of an equal split between folks that had done some version of that and then just homegrown entrepreneurs. But I certainly look for it. And because if you've been in Palo Alto and you've seen that work ethic and you have that grandiosity and you just kind of learned how things work, and you can then come back to one of my geographies at a more reasonable price for me as an investor, you bet. That's a great combination.
00:51:01 · David Weisburd
[00:51:01] S0: Yeah. That... And you see this across all of finance. Philadelphia is famous for bringing New York New York City transplants, and it's a model that works. So that... Seeing what greatness looks like, it's one of those things that you lock in. It's one of my thesis around the PayPal Mafia, around your friends, is that just seeing that early on, seeing what hard work looks like, seeing what intelligence looks like. There's so many different degrees to all these things. You have to lock that in to see the gap. Even with podcasting, I I had Jason Gallican. It's, like, episode 10 or so. And I immediately just saw the skill gap between us. I'm like, holy crap. This is both incredibly humbling and that he's, like, 10 x better than me and also incredibly motivating because I see, like, I see I see the the path to that. Another friend of ours, Eric Anderson Mhmm. From Alloy. He's been my mentor for seventeen years. I I met him at at Dartmouth. And when I met him, I'm like, holy crap. There's a gap between us. And, like, I need to figure out, like, what he does, and he's one of these other people that wakes up at 04:30AM and and just just grinds. And it... And now he started $4,000,000,000 plus companies. But just seeing that gap is such, I think, not only powerful, but such a necessary component to greatness.
00:52:10 · Jack Selby
[00:52:10] S1: Totally agree. I totally agree. And that's... Again, to give it fairness and balance and having spent a lot of time in Silicon Valley, just the the grandiosity, it... It's just... It's inspiring. And I think, honestly, it it... It's what makes... Not to be corny about this, but it... What... It's truly the superpower of The United States. Like, we are such a risk on culture, and Silicon Valley takes it to the nth degree, It's a great thing. And that it inspires the rest of us. And, again, I just want my noncultural entrepreneurs to have a little bit more of it at times.