Invest Like the Best with Patrick O'Shaughnessy
· Patrick O'Shaughnessy
[00:00:00] S0: This is my second conversation with Josh Kushner, founder and Managing Partner of Thrive Capital. I recorded this conversation with Josh back in October after we published the Colossus cover story about him and Thrive. Given the overwhelming spread of that story, we decided to create some breathing room between it and this conversation. Josh started Thrive in 2011. The firm now manages approximately $50 billion with a very small investment team. What makes Thrive different is how concentrated they are and how involved they get with the companies that they back. In this conversation, we cover the iconic investments that defined Thrive: Instagram, Stripe, GitHub, and spend a lot of time on OpenAI. Josh explains how Thrive thinks about investing today, and the three categories that they're currently focused on. Josh also talks about how he built the firm, why they keep the team so small, and what he's learned from A24 about enabling artists to create their best work. He shares the personal stories that shaped him, including his grandmother's experience surviving the Holocaust, and what he learned from Stan Druckenmiller, Jon Winkelried and others at formative moments in Thrive's history. Please enjoy my great conversation with Josh Kushner. When we first did this, I think a lot of people knew you and a lot of people knew Thrive, but it's changed a lot since two years ago. I saw a survey recently where some recruiter profiled, I don’t know, hundreds of people and asked them where they wanted to go work, which venture firms – and Thrive was number one, and it had more than two times the votes of the next highest firm, which was Sequoia or something like this. I know you hold this in two lights. Tell me about how it's felt over the last two years and how Thrive itself has changed since we last did this.
· Josh Kushner, Patrick O'Shaughnessy
[00:00:00] S1: A lot has changed, and in many ways, so much has stayed the same. We're building a company, that company just happens to be Thrive. The company has a product, and it is to invest and be the most meaningful partner to those that we're fortunate enough to partner with. But with that dimension in mind, we are constantly pushing ourselves as far as we possibly can to make ourselves better. External validation can distort even the most disciplined minds and just as we have ignored critics in the past, we guard ourselves against the lure of praise. Having the types of individuals that we've had at the firm that have had the capacity to truly think independently is what has gotten us to where we are today. But it’s really important that we ignore the noise, keep our heads down, and have a collective responsibility as an organization to make sure that anyone who joins is doing so with that same independent thought. I think Thrive is a very small percentage of its potential. I feel like we're just getting started. [00:00:00] S0: What is it like to run an investing firm where entrepreneurship and entrepreneurial people define the culture? It feels much more entrepreneurial of a culture than an academic investing type culture. Maybe say a little bit more about why that's the case and why you cultivate that.
· Patrick O'Shaughnessy, Josh Kushner
[00:00:00] S0: What is it like to run an investing firm where entrepreneurship and entrepreneurial people define the culture? It feels much more entrepreneurial of a culture than an academic investing type culture. Maybe say a little bit more about why that's the case and why you cultivate that. [00:00:00] S1: I remember vividly getting a call early on in the days of Thrive where a very prominent endowment passed on Thrive because they said that I was too much of an entrepreneur. I think in the earlier days of Thrive, we felt shame in that. We almost felt like we had to hide our ambition within Thrive. I was told that investment managers building investment firms were not meant to be ambitious. [00:00:00] S0: Do you think that that comment, you hear that sometimes amongst allocators, LPs maybe – is that the problem with ambition is that it means scale of assets and scale of assets means eroding returns? Is that the thing underneath that endowment’s comment? [00:00:00] S1: The ambition of Thrive has never been around the scale of the assets that we have. I think we're just very focused on the input orientation of what we're doing every day. “Do we have the best culture? Do we have the best process? Are we creating the best possible product for our founders?” I think for us, focusing on a particular number will ultimately lead to the wrong outcomes. We're not looking to write these very meaningful checks, it was very much in service of the opportunity. There will be moments in time where the opportunity does not exist to write very large checks, and we won't.
· Josh Kushner, Patrick O'Shaughnessy
[00:00:00] S1: The ambition of Thrive has never been around the scale of the assets that we have. I think we're just very focused on the input orientation of what we're doing every day. “Do we have the best culture? Do we have the best process? Are we creating the best possible product for our founders?” I think for us, focusing on a particular number will ultimately lead to the wrong outcomes. We're not looking to write these very meaningful checks, it was very much in service of the opportunity. There will be moments in time where the opportunity does not exist to write very large checks, and we won't. [00:00:00] S0: The distortion you mentioned earlier of praise. Now everyone wants to work at Thrive. How do you protect against the inverse problem? How do you make sure that you still select for the same kind of people that got you here?
· Patrick O'Shaughnessy, Josh Kushner
[00:00:00] S0: The distortion you mentioned earlier of praise. Now everyone wants to work at Thrive. How do you protect against the inverse problem? How do you make sure that you still select for the same kind of people that got you here? [00:00:00] S1: One of my favorite books is Meditations by Marcus Aurelius, and he has this incredible concept early on in the book about this idea of the “same man”. You should be the same man in both good times and in bad times. And one of the things that I'm most proud of, of the organization that we have, is that people were somewhat unfazed over really a decade and a half of being criticized for our strategy, the construction of the team, the size of the team, some of the types of investments that we made, the size of the investments that we made. We feel very grateful that these things have worked out and people have paid attention to them, but also not to be taken away by these things and to continue to keep our heads down, have humility. It's really important that as an organization we continue to be open-minded to the idea that some of our convictions might not be right. Humility and self-awareness are the most important characteristics of any organization, any individual. And I think it's important that we just continue to think of every single situation with an objective lens. [00:00:00] S0: How do you interview people differently – if at all – to make sure you're not getting people that are there because it's Thrive, a cool brand, versus the type of person you love, when you personally are doing the interviews?
· Patrick O'Shaughnessy, Josh Kushner
[00:00:00] S0: How do you interview people differently – if at all – to make sure you're not getting people that are there because it's Thrive, a cool brand, versus the type of person you love, when you personally are doing the interviews? [00:00:00] S1: We still look for the same things. I really want to understand who people are, where they come from, what motivates them, what drives them. What they feel like they owe the world as a result of what their experiences have been. How grateful they are to be in the position that they are in. I was interviewing a candidate about six months ago and they said to me, “Why is everyone at Thrive so driven and so motivated?” And my quick off-the-cuff comment was, people are either first generation at Thrive or from the most hated state in the country, New Jersey. I think there's this incredible chip on people's shoulders at the firm. Insecurity is the greatest driver of innovation. It's the greatest driver of progress. It's the thing that jumpstarts everything, but it can't be the end goal. If that is the place that you're operating from in perpetuity, it's a very dangerous thing because it's a never winning game. There can always be more. We've done a very good job of building an organization of people who come from certain places or have certain backgrounds who feel a sense of responsibility or gratitude for the positions that they're in. But also at the same time, if you're operating purely from a place of, “I have something to prove to the world”, just at least speaking from personal experiences, the world doesn't actually care.