5 Startups That Looked Dumb—Until They Were Worth Billions

Transcript from https://podmenti.com/t/817dcf688e5cfc71

The the headline here is
They made the investment. So it's not like they passed. They made the investment and their best case scenario they wrote was four hundred million.
as an exit value. Four hundred million, and now it's a hundred and forty billion.
I feel like I can rule the world, I know I could be what I want to
I put my lawn in it like a day song. On the road, less travel, never looking at it. Let me uh tell you about something that I've been thinking about, and I thought it was really cool, and our friend Sheel.
Just shares the best stuff.
The most interesting man on X.
I know actually. He he does uh a lot of amazing stuff, but he shared something but
And so I gotta give him credit, but basically I saw this Jeff Bezos quote and I wanna know what you think about it. And he said something where he said, um
I think it's generally human nature to overestimate risk and underestimate opportunity.
And then he went on to say, and so I think entrepreneurs in general would be well advised to try and biased against that.
The risks are probably not as big as you perceive. The opportunities may be a lot bigger than you perceive.
And so
Uh, the interviewer was like, You seem really confident. And he goes, Well, you call it confidence, but maybe I'm just accepting that human bias and I'm trying to compensate against it.
And I thought this was interesting. I've been thinking about this. I I I saw this like weeks and weeks ago. And every time I've been thinking, I'm like
There's so many businesses or opportunities that I see where I'm like, I can't believe that that thing is that big.
And I myself
Fight this as well. And
Where I think this thing can't be that big. You know, I think I've said this multiple times, uh for different products that I said that will never work and it becomes huge. And even Jeff Bezos, by the way, he
fell victim to this. I there's this one quote where he was like driving packages. He he says, When I was driving packages to the post office myself and taping up and typing up all the listings, I thought
Maybe if I'm lucky, maybe this can be a hundred million dollar revenue company someday.
And so like everyone has this, but I saw this amazing thing where it was Sheel sharing
a memo from Bessemer. So Bessemer is a V C. I think they're
A fantastic VC, but they're a a big VC.
So they created uh this part of their website where they release
Old memos and if you don't know what that is, a memo is where whoever wants to invest into a company who works at a V C, they make a memo justifying their thoughts.
Then typically the partners like agree on it. They're like, Yeah, that was a persuasive argument. We're on board.
And so they did a cool thing where they released
The memos from past deals.
And they had this amazing deal.
Or this amazing memo on Shopify. And this was when Shopify was raising five million dollars at a twenty million dollar valuation. The company was doing five million in revenue.
And I want to show how bad.
Bessemer who
It's a professional VCU. I th I
think they have tens of billi in uh under management.
I want to show how bad they are at predicting stuff.
So they said
This is straight these are quotes from the m the memo.
They said in two thousand ten.
Uh Shopify had a hundred and thirty two million dollars in GMV.
Which would put Shopify in the top fifty online retailers.
And so at the time, that is how small.
uh the category was. Let's uh let's say the other numbers because that sounds like a big number, right? So they had five thousand uh they had ten thousand customers total.
And they were doing five million of revenue themselves. So the five million of revenue, that's the company's revenue.
And then all the shops on Shopify, their sales total was one hundred and thirty two million. Right. Now
Do you know how many you know how many customers they have? Do you do you actually know how many they have now?
I know that they add more than ten thousand paid customers every week now. I think there's m there's multiple million customers.
They have multiple million and I believe so the company is now worth a hundred and
Thirty billion, I believe.
uh at one point two hundred billion. I believe they do something like
close to a trillion dollars in GMV.
So I can't even tell you what that math is. Yeah, they're probably doing this amount like the one thirty two.
Million, like every hour. Like an hour. Every hour. Yeah.
You're saying we underestimate the si the upside of of these things. We we underestimate the market size and the the the headline here is
They made the investment. So it's not like they passed. They made the investment and their best case scenario they wrote was 400 million.
as an exit value.
And so four hundred million and now it's a hundred and forty billion.
They said if all things work out, we think in four to six years.
This company could sell for four hundred million dollars.
Right. And we will twenty X.
Our money.
Something like that. Uh fifteen X our money.
Obviously that's wrong. The company's worth a hundred and thirty billion dollars. But they had all these other stats that were wrong. And in the memo, they even have updated
Quotes.
So the person who wrote the memo will give you an update and he wrote in w the memo, he goes
A few months after we invested.
Oracle had acquired.
wanna Shopify his competitor for five hundred million dollars. And I remember emailing Toby
Who's the CEO of Shopify about how great it would be if someday
maybe we can achieve that outcome. But I thought it was just a little bit too aspirational. And then
He has this other line where he goes, um
Some of the other uh employees and advisors at Shopify when we made our investment, they thought to themselves, you know
I think like this company at best is gonna be worth around fifty million dollars. And so
the associate at Bessemer who made this deal, he goes, Look, Toby
These guys are saying fifty million dollars. Can we put something in the contract that says
You're not allowed to sell the company for less than fifty million dollars because this guy was like
That's all it's gonna be worth.
And Toby was like, dude, I'm not agreeing to anything like that, but I'll I'll give you a handshake offer. I promise you I won't sell until at least seventy five million dollars. And so it's just funny that this is like
How small the
Best of the bet, presumably, you know, top one percent.
are thinking about different opportunities that today are so obvious to us, but back then were really hard to predict.
So I have a bunch of
Follow ups on this because this is a subject I've literally been thinking about. I'll tell you, I'll tell you why I was thinking about this simultaneously, but let me first just uh let's start with a little bit of humbling. So
Um here's a list of products.
That I was totally wrong about, meaning they were already working. So forget the scenario of ah, that'll never work.
But like
Yeah, that's working, but that's probably small.
Probably niche.
Okay, so here's l uh products that I personally was wrong about over the last fifteen years.
Um
Calm and all the meditation apps.
Might
Buddy Alex was doing it. He was in my peer group. He was in our mastermind group and I was like
That's cute you know, that's cute. Like I hope, you know, I I don't really understand what you're doing here. Maybe you'll make some some money, it'll be like a job. I I didn't really fulfill it.
Bu like Meditation's now like a m like there's multiple meditation apps that are billion dollar companies. That seemed
Implausible at the time. He was also really successful already.
Yeah, and yeah exactly. So
So
I didn't doubt him. I thought he was awesome.
And I didn't even think like it wasn't gonna work. It's like oh it'll work, but it's just small. It just seems like a suit too small of a market. Okay, other markets I thought were too small. On Snapchat, my username was like has the word test in it still to this day because I was like, Yeah, cool, like, but this is never
gonna be a thing. And I mean this is just like a goofy kind of sexting thing. How big is the market for that?
Another one, Airbnb. So
I met the founder of Couch Surfing before I heard about Airbnb and we s we hung out at my office and I was like wow, couch surfing, what a
Crazy idea. Go sleep in someone else's
Just go sleep in their house and they're in the extra, you know, couch or or air air mattress that they have.
Um
All right, cool. So Airbnb comes out and I'm like wow.
Great, you're trying to be couch surfing.
How ambitious of you.
And um I think couch surfing topped out at like fifty million dollars or something like that.
Uh like it may maybe it was max like a hundred or two hundred million.
And
Yeah.
Air B today is a like a hundred billion dollar company. So I I I read that
I think in America.
one out of every thirty dollars
Spent.
on travel is on Airbnb.
That's a cool stat.
I like that. It's insane, right? It's insane. I want to absolutely insane. Yeah. In America.
Yeah.
for every entrepreneur on average is spent listening to our podcast. I bet there's like a m number like that that's true, right? Yeah, like they said it in like one of their pitch deck. But it's just absolutely astounding that
You and everyone else, me too, thought that
It was just couch surfing, but it's just it's not ten times better.
It's not a hundred times bigger.
It's
Ten thousand times bigger. Uber was another one. Uh black Uber was like black car limos. I was like, Cool, rich people in San Francisco, who takes black cars? Small idea. I don't understand why.
You know, the founder of uh
of stumble upon is like doing this, but okay, whatever. I guess rich guys just lose touch and they just start working on niche things that nobody nobody's gonna be too niche.
Another one musically. I remember we were uh at the office trying to build social products and
Morgan, this guy who worked with me, he was like, Hey, my daughter loves
making these lip sync videos on Musically.
And uh it was actually even maybe even a different thing besides musically, but this uh the idea of like
You record yourself on video and then there's music mixed in and you're kinda lip syncing and dancing.
Uh you make the little dance videos.
And I was like, Okay, cool, Morgan, but can we get to work now? Like we're trying to build the next big thing here. And like, you know, stop distracting us with this. And uh
You know.
Has anyone ever just like showed you a briefcase full of cash and then you like accidentally kick it into the gutter? That's what that's what we were doing.
Um okay, so those are things that I was totally wrong about.
Well hold let me tell you one more. Alex Lieberman shared a DM that he got from the founder of Cursor. So Cursor is a company that in two years or something like that grew to
Ten billion dollars. And
The guy emailed Alex Lieberman.
Asking for advice or like what I should do. It
Left it on off.
Yeah.
Hey, we all miss. Uh in fact Bessemer has a part of their website called the anti portfolio. Have you ever seen this?
No, they were the first BC, I think, that did this. So they created if you go best murderer, uh bvp.com slash anti-dash portfolio.
It's basically just us honoring the companies we missed. And it's just like Airbnb, Apple, eBay, Google, like it's all the companies they
had the opportunity to invest in.
The past for varying reasons. Um, and they just like humble themselves with this. So this is like the this is the opposite of the, hey, let me show you our memos of how smart we were.
Um, this is like, you know, the other side of the coin.
And crazy, man. For any anybody who's like worth a damn in business, your your anti portfolio is gonna be much bigger than your portfolio.
Which is
Just a bizarre situation. If you're any good
If you're if you're any good and you're in the game for any like decent amount of time, your anti portfolio is much bigger.
Part of this is underestimating the size of markets.
And the other there's many things here. The other part is
Not understanding math.
Because ten thousand times or one thousand times whatever
That's actually that's really hard.
And so like
To put it in really simple terms, I remember
working with financial a uh my financial advisor and and they
There was like this
line item for two hundred fifty thousand dollars.
In eighteen years. And I was like, Griffin.
What is this, man?
He goes, uh well that's I just baked in like college expenses.
Uh and I was like, but I'm not gonna pay for all four years up front.
Or or you think we're gonna have triplets. What's the deal here?
And he was like, No, I just took the trailing twenty year growth rate of college education and I assumed that they're gonna go to like a top seventy five percent like cost school and I just
applied that number to the to the future.
And that's just what it came out to two hundred fifty thousand dollars a year. And I was like, I it's just it's it's really hard to understand what like five percent growth is per year or whatever it is.
And a really good way to understand this, though, that I'm trying to like get beyond the math is
I'm been really obsessed with Thrive.
So uh Josh Cushner. And one of the reasons why I'm into it is you hosted this event.
And we had the founder of Oscar come. You had um
Mario come and I thought he was I thought he was like the most impressive smartest guy there.
And so I I was like going down the rabbit hole. I'm like, all right, you partnered with Josh Cushner and Josh Cushner is now leading all these amazing things. And Josh Cushner recently invested in open AI at a two hundred and fifty billion dollar valuation, which is astoundingly expensive. That's just that a number's hard to comprehend.
And someone was questioning Josh Cushner.
And he was like what I learned was
in the real estate days, you know, his parents are real estate tyco tycoons in New York City.
He was like
I've learned that you can't really
Over
spend on Park Avenue real estate. So Park Avenue is on the Upper East Side. That's where like the Louis Vuitton store, the Tiffany store, he was like
There's just been so many examples where someone said in the fanciest part of New York City that this building is way too expensive. But when you buy the best
Typically, it's never too expensive. Like there's always gonna be someone in ten years who wants to pay more for it. So my logic is I'm gonna find the park avenue.
Uh
Startups.
So open AI.

And I'm willing to spend
what people think is it a crazy amount of money. I don't care about the valuation because I just think that those will outperform those uh the other ones. And I've been really trying to like embrace that, even though it's very challenging to like actually do that. This is Michael Saylor's argument about Bitcoin.
So his his argument about Bitcoin is basically that
Of all the digital assets.
Bitcoin is digital Manhattan.
And there's only twenty one there's only twenty one million uh million blocks?
That's that's the real estate. That's the land.
You want to get as many of the twenty one million as you can at basically any price because this is digital Manhattan.
And over the next hundred years, that's all that's gonna matter is basically like how much of that did you own.
V you know, not I shouldn't say that's all that's gonna matter, but
Basically
You don't look for the third best thing, you buy Manhattan, right? Like you don't go try to figure out what's gonna be the seventh thing because it's cheaper right now. Like no, the the move is always you buy the Manhattan thing and you just plan to hold it for the long haul when you know it's a scarce rare asset and like
That's the whole thing with crypto is like
There's it's a scarce rare asset.
Which is conceptually that is way easier to understand than one thousand X.
Uh, you know, like'cause I see Manhattan real estate. I'm like, yeah, this is like bumping, this is great.
Then it goes to the next stage, which is having the courage to believe that your opinion is right.
Yeah. And so like for example, someone like you who's who's in the Bitcoin or was or is in the crypto industry and you do believe in it, it's like, well, if you believe believe that to be true, why aren't you borrowing every dollar you can to do it? And that is where uh courage comes into play. And that's really hard to buy into this concept. So I say I buy into this concept conceptually.
But I'm not.
truly acting on it, at least not in uh not not in a hundred percent type of way.
There's also other factors. So for example
Uh I have a very funny goal. My last goal on my like
You know
uh annual goals.
Is just call it just says avoid ruin.
Because my life is great.
And so actually like one key thing at all times is avoid ruin.
Like do not do extremely dangerous things, take care of my health.
And don't make disastrously risky financial investments.
Yeah, like
Even if I believe, even if I have conviction, even if the upside is there.
I really just don't need to I just don't need to risk ruin at any given time. I think it's the the Kelly criterion. Just do not risk ruin. Keep yourself in the game.
Is always important. So like you don't need to borrow every dollar even when you have conviction, right? There's like there's But I think that's what separates uh
Not all the best, so I don't think Buffett has ever like risked
Uh, you know, he famously has said, uh don't risk what you have for what you don't need or something like or don't risk what you need for what you don't want, or I forget exactly the quote where but it's like risking needlessly risking things. Yeah. But
My brother John, who I'm visiting in Missouri, he's not into startups and he was like, Why do you why are you still doing this? Like, why don't don't don't risk anything? I was like, Well, I don't really risk anything. But he's like, But do the really successful like the Elons risk everything? And I was like
A lot of them I think do.
I think that like there are like the
Ten out of ten, the best of the best, the crazy Elons of the world.
I think that when they say I was sleeping on couches, I think you don't really want to believe that because
Their friends are billionaires or whatever. Yeah.
Yeah, it's a really nice couch. But I've been around enough of these like crazy crazy like
One percent of the one percent, the freaks amongst the freaks.
Some of them I actually do think.
Don't
Avoid ruin.
Correct.
I just don't think that's wise. I don't think I don't think a lot of them are very wise. I think they're great achievers and but they're not necessarily I don't think they're wise and I don't want to do that, but don't you agree with that though, that like have you who have been doing it? Some people do definitely take it to that extreme, right? Like uh
There's there's levels, right? So like Buffett actually has been very concentrated at many times. I think it's you know recently had fifty percent of his portfolio just in Apple stock, right? So like that's a very concentrated thing and he believes in concentration.
But concentration is not the same thing as like, you know, risking ruin in a way.
Even somebody like Elon.
You know, the ruin for him isn't losing his money.
Because
He's a money making machine. He is a achievement machine. At any given time he could have
Even if he had lost it all through
SpaceX and Tesla and whatever.
He'd be rich again in ten years. And I think he knows that deep down too. Right. So like the risk of ruin for him might be reputational.
Right. There's a great leaked email where open AI is talking about um
their path forward. And this is like when this is when Elon eventually got like sort of kicked out slash left the project.
of OpenAI, right? He's a co-founder. He put the first 40 million of dollars in.
Uh but along the way they realize they need a lot more money.
And the leaked email basically shows the brainstorming that they were doing. Sam Altman
Greg and Elon.
And basically Elon's idea was
So they all came to the realization, holy shit, this is like this kinda works, but we need way more money. Like this is gonna need way more money to train these models. Like
We're talking
hundred million dollars plus just for a single training run.
Like let alone operating the company operating the business from uh operating the the the project and paying all the salaries. And now it's for what, like servers or something like that? Like uh literally the GPUs and the compute and the electricity to train one model. And then you're not gonna stop there, you're gonna train a better model, right?
So once they realize shit, we need a hundred million and we're a nonprofit, this is not gonna really work. Who's gonna just
Elon's giving us this, but like are you Elon are just gonna give us like billions? That's probably not gonna happen.
But that's where this is going.
And so when they realize that, they're like, We need a way forward.
So Elon's suggestion was
Let's make open AI a part of Tesla. Tesla will be the commercial machine.
And then we'll take some of that profits as R and D and put it into open AI. We'll fund it that way.
Now, Sam and Greg didn't like that because they're like, Well, yeah, but then like you control everything and we're just kinda like your little bitch, and we don't really love that idea.
So what if we uh and they were exploring other ideas. So they had a Microsoft idea, which is what they ended up doing.
So he's like, Microsoft is really interested in giving us, you know, like
you know, potentially like um you know multi billions of dollars.
Uh and free compute.
But then you know, we'd have to work out a deal of what's a different Microsoft. And then Elon basically replies being like ew like
Lame being a part of Microsoft. You know, that that was like in in his reply, basically.
He's like, Why not Tesla?
And then Sam Altman, then there was like a email that referred to Sam has been exploring the idea of an ICO. So to do a token launch.
And like what if we find like it was during the crypto like heyday, and they're like, ah, I guess like you could just raise a ton of money for kind of nothing, like a promise.
Um if you just do it ICO.
And Elon's reply is basically like
Uh
I am like I am against the ICO. It is like I think reputa reputationally disastrous, and I will not be a part of the project if you guys pursue that path. Like I will take my name off this project because
Even if that would succeed, I just do not like I don't think the risk is worth it.
And so it's interesting, right? Because like the guy's willing to risk, you know, certain things.
All of his money.
But not necessarily others, right? Like you you may not always
There may be other risks.
It's weird that well, not weird. I mean it's just like intriguing that he thinks the ICO thing is the risky thing, but not like the political thing or not like the political things. Initially he was saying I won't
endorse a candidate and I won't be
Donating to him. That was his initial stance. Cause same thing. It's like the Michael Jordan.
You know Oh, you'd like my opinion on this?
Sorry, no comment. Republicans buy shoes too. Yeah. And like one of the great lines in in in you know in in history.
And so
Additionally, Elon did have that stance. He got pushed over the edge.
You know, due to
a a number of factors that maybe only he can truly describe. Some people think it's because
his companies were getting like overly regulated and he just was like, We can't do SpaceX and Tesla if there's this much regulation. Some you know
people were basically pushing back on h on, you know, uh capitalism or attacking him. So like, you know
It's unclear what all the motivations were of why he decided to then throw his weight into it. But when he did, he throws all his weight into it.
But he initially did not want to take that risk.
'Cause it seemed unnecess you know, you take you only take as much risk as you see necessary.
What what's cool about Elon is once he sees it's necessary, he's willing to do it. Whereas most people
We'll still dilly dally or hesitate to do it.
Which is the gap that I was talking about. You know, it's like uh courage is a hard thing. And then I also th but I also think that we underestimate
How different
The outliers are in terms of personality.
to the normal people.
And so what I mean is is
You and I are
Live on coasts.
We are work in a weird tech world, it's pretty fringe.
Um
But then there's people that are
Fifty times that.
So for example
The Collison brothers have stripe. I'll hear like their opinion on things.
And I it even to me, I'm like, wow, that's just like way different. That's like he's so out there in terms of how this framework or how you believe that it's just so logical and you totally buy into that, that's really challenging for me to understand.
But imagine to someone who
It's
right in the mean. Like just like of understanding how different
the different people are in terms of their thinking.
Yeah, there's level there's levels to this. Um, it there's levels to everything. There's levels to intelligence, there's levels to crazy, there's levels to risk taking, there's levels to all that.
that is pretty hard to comprehend until uh until you get closer and closer and closer to that edge and you realize like, oh, what I thought was level ten was not level ten, it was seven. And there's that this is what ten is, right.
Just imagine what Brian Johnson the extent Brian Johnson goes to for his health.
There are people who live, you know, thirty miles in my radius here.
that are doing that in just ways that they're just not publicly broadcasting at, but not in just health.
They'll do it in finance. They'll do it in their obsession over a specific technology in a lifestyle choice that they make, whether it's
you know, a polygamorous lifestyle or it's a
You know, the extent to which they delegate, extreme delegation.
Like w we were laughing when we were hanging out with Mr. Beast and he had a r he had his runner outside. It's like wait, so you got kind of like a personal doorcash guy that just waits around in case you need something?
But like
Yeah, there's that.
Like there's a lot of people that have these like lifestyle quirks where it's like, Wait, you
Peter Tiel, when he flies to a a place, has a mattress
shipped that hotel so that he gets the right sleep'cause that's his favorite mattress.
And he just actually some hotels store the Peter Teal mattress in the lobby.
Or like in their like storage facility in case he's gonna come because
That's his demand.
It's like yep, there's people that do that.
It's like oh wow I thought I thought taking my sleep seriously was like wearing this whoop band.
I guess there's levels to this, right? I guess there's like an infinite level number of levels to this.
It's a Honda Civic versus a NASCAR, or it's making the J V like
I was telling my brother he was like
He was comparing me to someone and I was like, I don't think you understand.
I'm
Yeah.
one of the best on J V.
At a big high school.
And these guys are Olympians.
Like this that is the gap. The the you know, I think um the guy from uh you told me this story about um
the redhead basketball player of the Celtics. What's his name? Scalabini. And he was like he was like joked as being the worst NBA player.
But he would go to like uh you know
Blacktop games and just crush everyone. And he was like
You don't understand that
I'm closer to LeBron than you are to me.
Yeah. And that may th th that's sort of like what we're describing here.
You wanna do something else?
Well I do I have one other thing, but I wanna go back to the market size thing'cause I have I have something that I think is a pretty sick example of this. All right. So
There is an amazing
story about this from Uber. So I remember when I was living in San Francisco.
Uber had like just come out.
I think I moved there in twenty twelve and that was like it was all pretty new then. And I think Uber that was such a fun era. That was such a fun era. Was it yeah, that was like you know, our version of like the dot com boom, right? It's like mobile. It was mobile exciting.
And so
I remember getting in my I got there and my friend who lived in San Francisco was like, Yeah, here, our ride's here. And then we got into the stranger's car and I was like, What the hell is this? And it was actually a sidecar, which was a the third company after Uber and Lyft that just died. It didn't make it.
I remember Uber started getting it like a pretty hip investment.
And it just seemed pretty crazy. And it just kept getting crazier and crazier. They would raise it like, you know
First it was tens of millions and h hundreds of millions, then billions of dollars valuation.
And I remember reading um
This Bill Gurley blog post that really changed my thinking.
And the blog post is called
How to miss by a mile.
Is the name of the blog post.
And Bill Gurley Gurley was one of the early believers and early investors, right?
Yeah, he's oh he's a legendary V C and now retired and he was
one of the main investors in Uber. Um and like, you know, famous at the end, like, you know.
They ended up kicking Travis out and the you know it got it got messy at the end. But he was
One of the early and and biggest believers.
Okay, so basically he talks about this guy, um, I don't know how to say his name exactly but it's
I think it's Aswath Dhammarad Dan or something like that. This guy's just like a he's a well known
thinker on valuations. He's a professor at NYU Stern.
And he teaches like you know
finance and and economics there.
And so he had w wrote an article that said Uber is not worth seventeen billion. This is when Uber raised at a seventeen billion dollar valuation.
He was right, by the way. Uber was not worth seventeen billion. It's actually ten times more than that. But he was making the opposite argument. He was like
I think Uber is vastly over um overvalued.
And Bill Gurley sort of breaks down this argument and this totally changed my thinking and how you think about startups. So
What he said was he goes
Uh, this professor just did this wrote this art article and I wrote this blog post and it seems really well thought through and he's a very like you know respected expert. And I you know, I don't mm I'm not saying anything about the guy, but I think his analysis is wrong.
And he starts with he goes the funny thing about
Any analysis with hard numbers like this.
is that it gives you a false sense of security. And he talks about like anyone who's in math knows the difference between precision and accuracy. Precision
would be, you know, oh wow, you've you've really forecasted this down to the second decimal.
And accuracy is like
Yeah, but it's just wrong. It's precise, but wrong. Uh it's not it's not on target.
He was basically saying he's like th he makes two arguments. So he makes one argument about the TAM, so the total addressable market of the
of the t of of what Uber's market potential is.
And then market penetration, so how much of it of it Uber will get.
And he basically is like he goes, the TAM mistake is the mistake of thinking that the future will look quite like the past.
But the arrival of a new product or service will have a non zero impact.
on the overall car for higher market. So he goes basically
It's a new offering. It's got new levels of convenience, new price points, which will open up new new use cases.
And he gives a story, he goes, You know, once upon a time, AT paid McKinsey
A million dollars.
to forecast how big will the cell phone market be. They want ATT want to know, should we become like a cell phone maker, manufacturer, or like
Should we should we care about that market or not?
And
The and the McKinsey's top, you know, analysts who are getting paid, uh
predicted that the market in two thousand the year two thousand would be
Nine hundred thousand people using cell phones.
Which was less than one percent of the actual number. It was a hundred and nine million. And they were predicting twenty years out, which is really freaking hard.
Correct.
It was look, it was hard numbers. It gave you a false sense of security and so
ATT decided not to go not to invest in that area.
They ended up to make you know, once it was
Once they realized they were behind the ball and you know, actually cell phones were gonna be a big deal.
Um, they ended up having to buy the cell company for twelve billion dollars. So it's like basically a twelve billion dollar mistake. And by the way, now like
You know.
Five or six billion people have cell phones. It's like
Just absolutely ubiquitous.
Aaron Levy, the founder of Box, has this tweet where he said, Sizing the market for a disruptor based on the incumbents market?
is like sizing the car industry based on how many horses there were in nineteen ten.
And so
uh girl he's talking this. Now of course you might say well
Is this always the case? Like you can always say, Well, uh the you know
Forget the past. You're just being you're stuck in that old way of thinking that
Think about the bright future.
And
Uh of course no, that's not always true. In fact, it's probably usually correct.
That the you know, th the near future will look like the the the near past.
But the funny thing about is entrepreneurship or any tech investing is that it's a hits it's a hits driven game. So
You only need one.
And you can actually be wrong.
eight or nine times out of ten, as long as you get the one right in a really, really big way.
And that's not true in other businesses. Like that's not true in school. You can't pass a test that way.
It's not true at your job. You can't just like have one great day and then like have nine duds.
Um, like you can't do that in private equity. Warren Buffett famously was like, you know, picking stocks, rule number one, don't lose money.
Yeah, VCs lose money all the time. Entrepreneurs get it wrong all the time.
It's a very distinct difference. And so like and this is actually a distinct difference oftentimes in you and I's uh personality, which is
Buffett is predicting that the future will repeat itself and that the past is the past won't change for the future.
V C investing, tech investing.
Is doing one hundred percent the opposite.
Correct.
Both are valid games, but you have to know which both are right. You have to know they're right in their games.
And value investing, that's probably the right way to think about things. And private equity is probably the right way to think about things.
In
entrepreneurship or tech investing, it's absolutely the wrong way to think about things. You won't make any money doing the that other way.
And so uh in our business, uh yeah, I have this phrase which is that
In our business, you know, the cynics
get to be right and the optimists get to be rich.
And so it's like the cynics will be right and you get to be right.
Eight out of ten times.
That might feel good.
But the optimists are gonna be the one who get who get rich. And you have to just know that going in.
What are your uh what your employees reply to all like
Sean, I'm just asking if you want pizza or hamburgers for lunch. Can you just tell me like your order, but I have a podcast.
A great blog post. The guy who's like the the the antihero on this, like where is he now?
Professor.
He's still the faster. Of course he is. Because you know, you know skin in the game. You can never really be wrong. Um and so he
That guy had estimated the global taxi market to be a hundred billion. So anyways, uh let me zoom it in.
So I remember living in San Francisco.
And when this happened
Thurley pointed something out, which was that
In San Francisco
The taxi market size, whatever it was, let's just pretend it was like a hundred and fifty million dollars.
Uber was. Uber didn't just have some percent share of that market.
It was actually three times bigger than what the total taxi market was in San Francisco.
It was a total like market expander of a force.
And you see that over and over and over again. Any new product that's creating a new category.
It doesn't just eat some share of the existing category.
It just
explodes and becomes bigger than that thing. So let me kinda like fast forward to to
Another area that this came up. So I was watching these videos from
Sequoia. Sequoia recently had an AI event.
And my invite must have got lost, but I was able to catch it on YouTube afterwards, luckily. And so I was I think uh Darmesh was one of the speakers.
Yeah, yeah, I know. Uh again.
Yeah.
Maybe my speaker invite also was lost. I'm not not exactly sure what happened. Uh, but but it's all it's all love amongst amongst me and Sequoia. So
The very first speaker. This guy, I think it's Pat Grady. He's a partner of Sequoia.
And he has a slide on the screen. I'm gonna show you the slide. It's
Maybe.
a top five ugly slide like this might be the worst slide I've ever seen in my life.
Like
Not only is it ugly.
It doesn't even make any illegible. Like you look at this, it doesn't even mean anything. But he explains it. So okay, so check out the slide. You see this thing right here?
Yeah. So like I remember taking the ACT where it was like showed you like three shapes or three numbers and you'd had to predict the fourth one based off of the pattern. I cannot do this with this.
Okay. Exactly. So
If you look at this slide, it basically is like a bunch of pie charts, but the pie charts have no annotations, just random numbers, and then there's an arrow and there's a question mark, and it just says so what at the top.
Alright, so let me explain what this is'cause it's actually kind of insightful.
So what he's saying was basically like, um, if you look at the the let's say the three most recent waves of of
Like
Tech.
So you had software, which was like I buy CDs, I put I put the CD ROM inside my CD, or I install sur s uh software on my server at our office.
That was like software one point oh.
And then two point oh was like the cloud. It was like oh the software just lives in the cloud, it's a SaaS, it's a service.
You just kinda like use what you need. You don't need the servers and the s the C Ds.
And he's like, Now we have AI.
And so he talks about like basically
The software market.
At the time when cloud came out, when like Salesforce came out, the entire software market.
was three hundred and fifty billion dollars of revenue.
Cloud.
is already four hundred billion, right? Like uh like just just like the top cloud players are like more than four hundred billion.
So basically it's like
Cloud didn't just take some percent share of the software market. It wasn't like, Oh yeah, maybe like 10% of these applications will now go to the cloud.
Or become Sass.
It was like SaaS became bigger than the entire software market before that.
Uh and it it became bigger by I think uh
Uh I don't know why the numbers here are like
Again, the Pine Tra is very confusing, but it was basically some order like it was like yeah, two or three times bigger.
And then he's talking about like AI, and he's like AI actually is interesting because AI replaces software, but AI also repla replaces labor. Like you just you don't need people to do those tasks. It's it's services and software.
And so um
He's like the labor market is basically like whatever, like ten trillion. This is some some ridiculous number.
And he's like
We don't even know how big the AI market's gonna be. Predicting that like with any accuracy would be foolish.
But it's probably a good bet.
That AI is going to be bigger than the entire cloud market today and
The labor market.
In the future.
And so um
How is the labor market? Isn't the labor market like the market?
You know what I mean? Like isn't that everything ever?
Yeah, kind of. And so you know.
In the same way that when Gurley was talking about Uber, he's like, you know
Um, it's gonna be bigger than taxis because it's more convenient than taxis.
Right. If you called a taxi, you didn't know when it was gonna pick you up, you didn't know if it was gonna pick you up.
With Uber, you got precise look, you know, you precise timing, it'll pick you up anywhere. Before taxis didn't really go to rural areas, Uber had more drivers, so it was available everywhere.
Because it was available everywhere, you had you got lower price points'cause there was more liquidity in the system.
So when it's a lower price point, maybe I wouldn't have called a taxi just to go from here to my friend's house, but if it's a eight dollar Uber, I'll actually do it.
And because you get the price points, now you get new use cases. So like people use Ubers to like
Help their
elderly parents travel or kids or like
I and the big one was basically he's like the big use case I think people are missing is that
Some people just won't buy a car'cause they'll be like, Ah, I'll Uber when I need it.
So I just don't need to own a car, which is exactly what happened to me. I sold my car in San Francisco.
'cause I was like, why would I deal with this car, parking issues getting m get broke into insurance, gas, all that.
Like
No, I'll just Uber when I need a ride.
And so he's like
It unlocked part of the rental rental car market. It unlocked part of the h car ownership market. And it once you
Calculate those, you're like, Oh shit.
This is a trillion dollar market, not a hundred billion dollar market.
And so you're off by, you know, 10 X if you had done the calculation wrong with the wrong assumptions. And so AI is gonna do the same thing because
I won't hire a person to do these little things that I'm I'm basically like telling AI agents to do in my life, right? Like
Yeah, I'll I'll build little
I build a little app for piano tracking for my piano practice or for my health tracking or I'll
Uh, you know, I don't hire a concierge doctor, but I'll feed my lab results to
chat uh chat GPT and I'll pay them to like I'll pay it to analyze all my blood results.
And so
Things I wouldn't have otherwise hired people for.
I'm willing to pay AI a little bit for it.
And so there's a new market.
J how many
Hours a week.
Are you
Consuming information.
On just staying in the know on this topic.
On AI specifically.
Yeah, we had Greg Eisenberg on the pod.
And he was telling me things.
Where I was like
I was almost I ha I found myself having fear.
I had fear of like
Oh, this is clearly the future and if I'm not like in the know of this, it's gonna come and destroy me.
Therefore I owe it to like I that's how serious it was. It wasn't like I'm missing out on an opportunity to make my business better. I'm missing out on it was like
Oh no, I gotta protect my family.
Like this is like my job.
And so I felt extreme fear over he was saying like Magnus. Have you heard of Magnus? Is that like the new Chinese uh agent platform? Yeah.
Yeah. And no G just m like manus.
Manaus. And he was explain but he had like three things where I'm like
How do I not know about this? Yeah. Like do I need to sign up to like an AI trade magazine? Like what's going on? Right. Um and his answer was horrible when I said, Greg, how do I how do you know? He's like
I just do. Or he said something like that. Or he was just like, I just hear about it. Like I was like, Well, that's like extremely not actionable for me. Thanks a lot, Dick. Uh so how are you much time are you spending learning about this topic and where are you turning to?
Look, I there's two minds about it. One
I would say
I have no risk of over investing my time in this.
I have
pretty big risk of under investing my time in this, but no risk of over investing my time.
And
Paying attention to
what's going on with AI and being able to like play with the tools.
Understand what the companies are doing, like really think through like where this puck is going.
At the same time, I'm not trying to drive myself insane.
So you know like
Uh, I do think there's a very unproductive version of this.
Which is the constant whiplash of
New demo, new model, new this, new that, new whatever. And so what I'm doing
It's basically like an intermittent fasting style model where it's like I
Mostly not paying attention to it.
As in, like I don't I'm not actively trying to like react to everything I see or go seek out or go read every single
thing out there could try sign up for every single tool.
What I'm doing is I'm trying to make it very useful for me. So when I have a problem, I now add it into my like sort of solution list, like
Oh, do I think AI could solve this?
So then whatever research I'm doing, it's actually like a just in time solution to a problem I actually have.
Versus
Just like the kind of like intellectual jacking off of like
Just keeping up with everything. Just like trying everything, just w wanting to know everything, watching every podcast, listening to every YouTube video. It's like
No, I'm mostly trying to like
If I have a problem, I try to see could I solve this AI? Well maybe yes, maybe no.
But that's interesting. I learn a little bit each time I do that.
But at least I'm trying to solve a problem I have.
The second thing is I am carving out three time. So like last year I told I think I told you when I did this, I did like an AI
Hack week, a think week.
Well, it's just basically said clear my calendar. The only thing I'm doing this week is just
Going in depth.
And the beauty of that is it's kinda like checking your email.
You're like if you want, you could check your email every three minutes.
And you might find a new email.
But you'll just consistently like it'll just keep p tearing your attention away.
Whereas if you just batch your email and you just check your email once at noon and once at you know eight PM or something like that.
You're totally up to date on email, but you didn't have to like
have this nervous energy just constantly doing it. And so I'm treating it more like that.
I agree with you.
It was nice to um
catch up with you. I'm getting all pumped about all the stuff. I I'm currently in um
Saint Louis, Missouri. I'm about to go to the zoo. So I'm gonna I'm gonna go to the zoo.
I'm gonna go see some family tonight.
Um, but I was happy I was able to uh
do this podcast from this hotel and potentially reach hundreds of millions or hundreds of or rather hundreds of thousands of people.
And uh
Hundreds of millions of red blood cells. What are we what are we counting here? Well, because like you just started talking about this AI stuff and I'm like literally staring out the window right now. Like
Whenever you talk about this shit, I I have notepads here and I like get flustered where I'm like
Like I sometimes I think and I'm like, What should I say next? But then other times I'm like
Oh, he's talking about this AI shit. Like what am I gonna do? What I gotta do this thing, I gotta do that thing. Like that's how I feel right now. Yeah, yeah. I d I definitely feel that. By the way, I have a couple of of
Things I forgot to say on the the Uber thing that are great. This is the funniest part of the Uber thing.
At the end of that professor's blog post, you know what he wrote after he wrote this huge like valuation.
Tear down of Uber.
He goes.
As I attempt to attach value to Uber, I have to confess, I just downloaded that but have not used it yet. I spend most of my life in in the suburbs where I go for days without seeing a taxi, or if I'm in New York, I just use the subway.
And so it's like
The experts.
Who literally like
Not only are they not betting on this enough skin of the game. Literally never even use the product.
P. S.
But what the fuck do I know?
Like that would have saved him a lot of a lot of like uh reputation there of like some great, by the way, from CEOs who underestimated their market size.
So
Yan Coom, CO of what WhatsApp. He said, We're just trying to make messaging better, not build some big business.
Sells for twenty billion.
Um

I thought I'd make a little side money and have to quit my job.
That's Sarah Blake, the founder of Spanks. Oh Sarah Blakely, wow.
female bu you know, one of the like
uh first female billionaire uh entrepreneurs of of this like generation.
Mobile gaming. So
One of the first mobile games ever was Snake on Nokia on the Nokia phones, if you remember.
So the head of Nokia Mob uh Nokia's mobile gaming division. So this guy's in charge of mobile gaming.
Here's what he said.
I think mobile games are just a small add on. It's not a real market.
Mobile gaming turns out to be a hundred twenty billion dollar market.
Here's another one.
The domino CEO in twenty ten, the year I graduated from college, he said
Delivery is a g convenience. It's not a game changer. At the time delivery was uh ten billion dollars a year uh across food delivery.
It's now, you know, more than ten times that. More than fifteen times that.
In fact, I read a crazy stat that
Some some I don't know if this is legit, but some study came out or that somebody was doing some an analysis and they said that for most local restaurants now.
Seventy percent of their order volume is uh delivery orders.
They're no longer
restaurants that do delivery. They're delivery
machines that also happen to have a restaurant table, you know, like a table to sit down on if you want. I go to restaurants all the time where I feel like I'm the only person there and drivers are c coming in and out the whole time.
Yeah.
Uh Brian Cheske. We didn't know the size of the market because we were inventing it. If we listened to market research, we would have just made a better couch surfing app. And then the last one is Elon.
I don't care about the market size. I care about if we can make something fundamentally different, because if you make something great.
The market will come.
It does sick.
This is this k this was like a little impromptu topic that turned into a whole thing. That was awesome.
I feel like I can rule the world, I know I can be what I want to
I put my all in it like my day's off On the roadless travel never looking back