From making $6/week selling worms to making $110M+

0:00 So You went from selling worms to how much money does NFX have under management now? Uh close to 1.6 billion. Yeah. Does that blow your mind like blows my mind. Blows my mind. What are the traits of a Savage Foundry speed. School taught you what time looks like, and now you think this is how the world moves. You're you're wrong. Your speed bar is wrong. So if I'm a founder, what are the most common emotional blockers slowing me down? The big one is just fear. We have these mindsets bred into us by the normies. Why is it that sort of 85, 90% of all returns in tech have come from the Bay Area? It's because the mindsets here are slightly different. So can you make me smarter as a founder? Because it seems like this is important.

0:39 Don't think of yourself as choosing a job or choosing an industry. Think of yourself as choosing a network. What do you think of people who are investing in open AI or the sort of the models? Is that where the value's gonna accrue? Yeah, I don't get it. I don't get it. I think they're making a big mistake and what do you think is the juiciest kind of opportunity, whether you're entrepreneuri or an investor. There is gonna be opportunity and I feel like I can rule the world, I know I can be what I want to I'm putting my all in it like my days off. Can you tell your high school story? Because when I was doing my research, it looks like

1:15 James. Harvard, Princeton, uh Exeter. You know, like you went to the top high school, the top college, the top business school. Yeah. So I just thought you must either come for money. Or just prestige alumni something, but I guess you were telling me before before we started that's not the case. Yeah. So I love the phrase you say you said they got me out of the mud. I I love that you said that. Yeah, they plucked me from from the mud. I I uh grew up on the dirt road in New Hampshire, about a mile from the nearest paved road. My mom was a music teacher, my dad she made about seven bucks an hour, and my dad was a uh a carpenter. Sometimes she was a a hostess at a at a nearby restaurant. And um we had twelve cats and two dogs. We just we lived in the middle of nowhere. And I would sell worms to fishermen who would be fishing nearby. That was my first job when I was sick. Now my first job my first startup was when I was six and they would come by and they'd need worms to go fishing.

2:04 And so I would dig them out from under the apple trees that were nearby and and put them in the uh empty cat food cans that we had in the house and uh sell them for fifty cents. And uh I would make, you know, six bucks a week during the summer because they would come up the driveway and I would just sell them worms. And then I went on to do all sorts of other businesses. But what happened was in sixth grade, I got beat up by a guy named James Cody. I hope he's doing well, but he was kind of brutal. I'm sure he did not have an easy life. Right. Uh because he was making my life hard too. And uh and when as my friend Lance Casey picks me up off the ground.

2:35 Uh he said, Don't worry, James, we're gonna go to prep school. And I said, What's prep school? And he said it's where the smart kids go. And I said, Do they fight there?

2:42 And he said, No, they don't fight there and I said, Well then I want to go there. Uh because I'm I'm a small guy. I still weigh a hundred sixty five pounds. I mean, as as my sons call me, who are all now taller than me, they call me uh victim weight. Dad, you're still victimweight. So so anyway, fighting wasn't my forte. And so uh I went home to my dad and I said, You know, I want to go to prep school and he's like, How did you hear about prep school? And I said, Well, Lance told me. Now, Lance's dad was like the local surgeon, and Lance was half Iranian and half Italian, and you know, the kids kinda picked on him too, and and whatnot. So Um, he and I were sort of bonded together, and and that really changed my life. And so my dad figured out that I needed to take these S S A T tests, so I took the test and then

3:20 And then I applied and and they let me in. And I we didn't have any money, so they just paid for it. So Exeter paid for it. And so that that really set my whole life off in a different direction. And I, you know, I had, you know, uh used clothes from Goodwill and everybody else had fancy clothes and you know, but and everybody was grinding. We just grinded. And so by the end of my junior year I'd skip out of the first two and a half years of Princeton engineering. So At the end of that of of the high school they said You know, you can uh you can choose Harvard Princeton or Yale because you've achieved all this stuff. You built a hovercraft that went thirty five miles an hour, you're clearly an engineer. You know, pick which one you want to go to. And uh I said, What's the furthest place from here?

3:59 So I have been assisted by the whole system all the way along. And uh, you know, people talk about beat their chest and say I'm a self made man and it's complete bullshit. Like most most of us are function of A sixth grade friend. Who put us on a completely different path. Right. And you went from selling worms for fifty cent uh making, you know, fifty cents a worm to how much money does NFX have under management now? Uh close to one point six billion, yeah. Does that blow your mind like blows my mind. I've written here a bunch of kind of like

4:33 The greatest hits. So these are some of the big ideas that you've shared with me. Let's see. Your life on network effects. So the NFX.com website is the second most popular VC website in the world. And Andreessen produces a lot more content. They've got like six hundred people, you know. Right. We have ten people. But we're the second most popular and the most popular blog post was called your life on network effects. Can you do the quick explainer? So for somebody who doesn't know what network effects is.

4:58 Every new person who uses your product. Makes the product. More valuable for the other users of the product. And the great example is Twitter. The more people who are tweeting, the more valuable Twitter becomes for everyone, Facebook. Microsoft operating system. More people using Microsoft operating system, the more it's more valuable for WordPerfect to build their software on top of Microsoft so that more people can use it. And the more people that are using WordPerfect, the more I can share my WordPerfect. Um you know, file with other people. So these are all network effects. So If you look at the top

5:29 You know, uh seven companies in the world in terms of market cap. Five or six of them have network effects at their core, and that was not true. thirty years twenty years ago. Uh and so Most of the big things that

5:40 dominate our life, whether it's Comcast or whatever. These all have network effects businesses. And so We study them, we invest in them. We have spent the last twenty years becoming sort of the world's experts at them. We've identified seventeen of them. They're mathematical principles. Right. And in talking these through with Eric and others, he started to get these wide eyes, like, Oh, that affects how I'm dating. Oh, that affects where I should live. That affects what happened to my dad. That and I was and he was realizing that the analysis of networks and the network topologies and Network dynamics.

6:14 was actually really applicable to how we live our lives. Give me a simple example. So where is besides business How does network effects work in my life, dating, parent uh you know, friends. The simplest and most relevant is where you choose to live. So a city is a network. Right.

6:31 And If you choose to live in a city You are choosing that network. And so basically what the article says is don't think of yourself as choosing a job or choosing an industry or Think of yourself as choosing a network. Okay.

6:43 My company is a network, who I hire into my network. Which journalists I get to write about, I bond that person into my network. Right. Which investors I bond into my network. Right. So we think of everything once you start thinking of everything as networks, like the whole world looks a little bit different to you. Where should I go to find a spouse?

7:01 Well, think about your network. When you get married. You're joining her network. Right. And she's joining your network. You're gonna have to have Christmas and Thanksgiving or whatever with her parents. Forever. Right. Like and what your life on network effects does is it breaks it down into seven phases of your life.

7:17 Where you are basically Choosing a network. And and it'll have a really big impact on how your life plays out. Let's pull another card, see what we can. Okay. Savage Founders. Yeah.

7:29 So uh so you know look, I've been a founder four times and then the fifth time is starting a venture firm. So I have been my a founder myself and I've invested in I don't know, three hundred uh different companies over the years. And the thing that keeps coming up Is that in order to do something extraordinary You have to be relatively savage, which means you have to be very fast, you have to be very competitive. And You you tend to have to be pretty aggressive and and you just can never can never stop. And a lot of people say, oh, they need to be mission driven, but that gets confusing with that word. Or they need to have had childhood trauma. And that that's that may be true for some people, for sure. But in the end, we use the word savage just because

8:09 You just go for it every day. You know, it's like you wake up every morning and you're listening to Bring Me to Life and you're just, you know, you're cranking. Um and and that sort of thing. And that's that's what we look for in founders and that's who I like to be. And that's who uh I like hanging out with. And who what are the traits of a Savage Founders? So you so I think people would immediately gravitate towards like maybe hardworking or determined, things like that. So the number one thing that it it rolls up into is speed.

8:35 So you could you could lay out 16 characteristics that you're looking for, but all of those lead to one thing, which is speed. And so if we measure speed when we're meeting with the founders, That's the main thing that determines and and if you look at their speed over the next five, six, seven, eight, ten years when we're working with them. That's the main thing that determines their success, is that now To get to speed, you typically have to Push out people who aren't fast.

8:56 So you're end up firing a lot of people. Um who aren't willing to sacrifice. Uh, who don't enjoy, you know, type two fun, the fun that you look back on and you suffered, but you look back on it as if it was fun, right? Type one fun, fun in the moment. Yep. Type two fun, look back on it. Is that it? That's right. And type two fun is is you're suffering through the whole thing, but but at the end you look back and realize it was fun, like staying up for a hackathon for three straight days and then winning the hackathon. Right. Like That's fun.

9:22 Um you know, not sleeping very much for Eighteen months. But then it succeeds and you've got this giant company is really cool. That's you look back and you're like, I wanna do that again. Right. You know, uh you think about uh women giving birth. Like it's type two fun. Like and they look back and like I wanna do that again. So You know, uh I think that that's a that's a main character, but it rolls up to speech. The other thing is that

9:43 You can't Be afraid. Of pissing some people off. Like and the people who Aren't afraid of it.

9:51 Of just saying what they're thinking or having a different view and not pleasing everyone in the room. Right. Those people end up doing a lot better. 'Cause they see the world differently. They're not. They're not scared. They we can measure their their personality type actually. If you look at the best personality test in the world. It's called a five factor personality test. McCray McCosta, nineteen seventy two, North Carolina, right? This is the best test in the world. And one of the attributes is agreeableness or disagreeableness.

10:15 That's a scalar, one of the five scalars that they use is agree. If you are disagreeable, You end up doing better as a an entrepreneur and a founder and as a creator. Because you don't have this need to please everyone all the time. And but it's simple things like, you know, I remember I went out on a date with a girl when I was a teenager and she asked three or four times to get ice cream from behind the counter. You know, and I'm like at some point you just got to buy the ice cream, my friend. You know, I was getting a little upset because I'm more agreeable and other people were more she was just very disagreeable. Right. She was great. It's just a personality trait. And so those sorts of things

10:47 end up showing up in Savage Founders. I think about that within founders we've invested in too. It's like They have these Almost rough edges that are and and they have Things that they believe that they're gonna do and they don't really care if you think it's nice. They don't really care if you think it's right. They believe it's right. Yeah. And that's kind of all that matters and whether they uh whether uh ninety nine percent of people would agree with them or not, doesn't matter. And those people might not end up having great friends.

11:12 Yeah. They might not have a normal, peaceful life. But they're gonna potentially do something extraordinary. And as a venture investor, we have to look for that. And in general I've tended to surround myself with people who are both extraordinary and nice. Like yourself? But

11:26 Other people don't Don't really care. So You know, like more of a Peter Thiel type or whatever, where he's just like I just want the truth. I d I don't care if I break people's beaks, you know. Right. Who comes to mind? Savage Founder because You know, I have this theory that you don't know

11:39 What? A level twelve. Like on a scale of one to ten, you don't even know what twelve looks like. Then you meet someone, they break your frame. You say, Oh, I thought I was already ten out of ten hard work. And then I met David Goggins. Yeah. I realized, Oh I don't know the first thing about this, I'm a seven. That's what a level twelve is. Yeah. Yeah, yeah. Who kinda broke your frame as like Wow, that that's the real savage founder. Yeah. I mean a couple of people like, you know, think about the Poshmark CEO.

12:01 Right. Um he Was So determined, he was constantly revisiting his flows, he was constantly rebuilding the product, he's constantly changing his mind. You're running a very complicated marketplace product. You have to abandon what you were doing six months ago and do something brand new. It's a very difficult business to run. And he did it for like 11 years and exited for billions of dollars, right? Shatter. He's an amazing guy. But he's also a nice person. You want to have lunch with him. So he's he's in that boundary layer, which which I really appreciate. Right. A guy like Khan Gunet, who nobody knows yet, he's the CEO of Firefly, which is those videos on top of you've got six different businesses you're running inside of that. It's a very difficult business to run. He went through COVID, he lost ninety five percent of his revenue. He had to adjust to that.

12:43 Um because no one was on the street to show ads to. And so he's survived. They're now profitable. Big company. Everyone's gotten out of the space except Tim. he's gonna win the space. Right. People will tell his story later. But yeah, just Savage Founder. And you said it all rolls up to speed. Yeah. But you've also said something which is speed is not what you think.

13:01 Yeah. What does that mean? I actually don't know what you meant by that. So most people think speed means you're working eighteen hours a day. It's not that. It's about an emotional flexibility that allows you to abandon what you were doing before and do the right thing going forward. It isn't speed On your original idea. It's speed toward

13:21 Success. And that isn't typically what you most ideas don't work. You know, I always say I've eighty-three ideas a week, and every three weeks I have a half an idea that's good. I mean it's literally that volume of ideas. the difference between what's a good idea and what what doesn't work. And it's okay that most things don't work. And the flexibility to move toward what will work is what speed is. And it's mostly your emotional tenor.

13:45 And it's how you manage your network around you. It's how you manage your spouse to let Him or her know what's about to come. It's how you manage your employees so that they know, look, we're going to iterate this. We're not going to iterate this twice. We're gonna iterate this 28 times. You know, that's where Snap came from. I think it was their twenty-seventh app. Like Is that true? Well what was the something like their story, yeah. I I don't know their story in detail, but I I understand that it was many, many uh attempts before Snap actually worked. And if you look at, you know, our gaming company that we did, it was our seventh game that finally worked. If you look at my first company, it was our twenty seventh test, which finally got vi you know, viral. You have to prepare everyone around you for all the changes.

14:25 Which ends up producing speed. So Stan and I have never failed. We've never lost a dime for anyone. We've always made people money for the last 25 years because We had speed toward the goal of success, not speed toward the original thing we were gonna do. And and so we got out out of our own way emotionally. And so I actually have this lecture I give in private about all the emotional barriers you are putting up in front of you. Yeah. causes you to go slowly and you think it's fast because school taught you

14:52 what time looks like. And then maybe you work for a big company to get a good brand like Google or Microsoft or whatever, and now you think this is how the world moves, you're you're wrong. You your speed bar is wrong. And you've got to you've got to raise your speed bar Hey, quick announcement. So, Sean here, I wanted to tell you that I'm doing a free CEO boot camp. Why am I doing this? I'm doing this because Over the last 15 years, I've been running my company and I've found a few things, not a lot, but a few things that are incredibly helpful that I kind of wished I had learned earlier. That nobody really seems to teach But have been incredibly helpful for me.

15:24 As a CEO of my business, totally free, no obligations, just doing it for fun. So if you're a business owner out there and you want to come to this thing, it's on April 16th. The link is in the description below. And I'm teaching something that I found in a book that I read in a bathroom. I was in a bathroom once and I read this book called The One Minute Manager. And as somebody who hates managing people, But wants all the benefits of being a good manager. This book was incredible for me. It's this book called The One Minute Manager, and I stole this one framework from it, and I'm going to teach it to you. at the event and I'm gonna do live QA with people while I'm there. It's gonna be a lot of fun. Tot. You should come if you want. It's in the description below. I have a thing on here. I think it's called the Is it the uh

16:02 Art of unlearning. Yes. Is that what you're talking about? Like you're taught things, you learn things, but then as an adult There's almost like These I don't know five, seven things. I have to unlearn these things. What are those? And this is the I mean, there's so many things. It's about speed. It's about um you know the emphasis on human communication relationship versus the actual product. Like everyone focuses on a build this and do No, dude, you've got to talk to people. You've got to talk to your customer, you've got to think about that communication. We have these mindsets that that get

16:29 bred into us by the normies. And if you want to do something extraordinary, you have to get out of those mindsets. I mean, why is it that sort of eighty five, ninety percent of all returns in tech have come from the Bay Area? It's because the mindsets here are slightly different. From New York and London and LA and other things. Yeah. And as a result

16:48 Things just happen a lot faster. And things happen a lot better. We should say that again. So you're saying The world of technology, which is open to everybody to compete. Yep. Everybody's aware of it. We've all got phones everywhere on earth. And you're saying eighty five percent of all of the ver returns, all the money that got made. Yeah. Comes from this.

17:03 I'm how many square feet uh how many square miles is just like seven million people. Seven million people in the Bay Area. Yeah. And eighty five percent of the returns happen here. Yeah. You gotta ask yourself why, right? And what you're saying is One of the things is there's a certain mindset, a certain way of doing things, a certain speed of operating that is different. Yeah. And those are all just assumptions and mindsets we make. Right. But the it's literally an order of magnitude you can go faster.

17:27 than you think you can. And once you understand that, once you set your speed bar that way Then life opens up for you. And that's what Savage Found. They realize it. Mike Cassidy's the founder. He was he was the original speed guy. I don't know if he was Mike Cassidy. Mike Cassidy is a guy who founded Fire. He founded um the direct hit, the one of the first search engines. He sold it for five hundred million after five hundred days. He's he's done, I don't know, four or five businesses. They've all worked. He ended up at X for a while doing Loon. And he's just he taught me about speed. He was the one who originally figured it out in the nineties. He's like tell you what he what did he say? He's like, You don't need to take, you know three months to raise money and get an office and all that stuff, you can do it in four days. I can raise money in two days. And I can get an office in a half a day. And I can hire my team in three days.

18:12 And I can have my product out in two months. And everyone else was taking two, three, four years. Right. He was literally doing it two, three, four months. Is this a shoot for the stars in your land on the moon situation where okay, even if he doesn't do it in two days, he does it in five, but five is way better than the default five months. That could be it. Yeah. That could be it. I have a a couple of st stories. So sometimes I hear these stories about, you know, Elon built the Colossus data center in Hundred and twenty two days. Normally it's two years for permitting and then and you hear these stories and it's like wow.

18:40 That's pace, that's speed, but it's also a little bit like Well I'm not building Colossus. So it's almost distant from me, but I'll give a like another story. We have a buddy, I think you might know him, Sulli Ali. He we were advising a company. The company was like, We really need to raise money. Desperately need to raise money. It's like, Okay, we'll be on the let's get on the phone now. And they're like, Okay, uh we don't have it ready yet. So you just told me you desperately need help. Let's go. So we get on a phone call. And we say, just give us what you got for so far for the pitch. Yeah. And they give it to us.

19:07 And um We give him some feedback? And they're like, Oh wow, this is really, really useful. Um and so Sully goes, Great. Um, how long do you think it's gonna take you to make these changes? Like, well, we'll reach back out next week and really want like so thankful for your help. Wanna see what happens. He goes, Next week I thought this is important. Like it is important.

19:25 He goes cool. Like I think you could probably make get these changes done or most of them done, eighty percent of them. In the next few hours. So let's talk again by lunch at three PM. By lunch. Yeah, exactly. So he was like, We met at eleven, and he's like, We're gonna meet again at three. Yeah. And I just didn't even know that was like a norm. You could do that. Especially externally to someone else's company be like Why are we not having two meetings today? Why not? Why not do two days? And as soon as I saw that, my own speed bar got raised because I realized like something that was almost an invisible wall really wasn't real. Yeah. And I could change that. I could make that the that small difference in my own speed pace. Right. So most people think of speed as process or standups or schedules or Kanban board.

20:03 It isn't. It's your own emotional mentality. That's what speed is. You're saying there's like this list of emotional blockers. So if I'm a founder, what are the most common emotional blockers slowing me down from being higher speed? The big one is just fear. Here. Fearful of getting it wrong. Because you were taught all through growing up that getting the answers right on the test

20:22 Got you love. Mm. got you appreciation, got you status. Got you into the right college. And

20:29 In the real world that's just not the case. You're just gotta like like Elon, just blow up the rockets, blow up the rockets, blow up the rockets until the rockets don't blow up anymore. Right. And and so his H his speed bar is what you see.

20:41 Right. And so he has broken through into a completely different realm. The one that Mike Cassidy has always lived in. Right. And there's just a few of us living in that realm. And so much as possible once you live in that realm. Of your mind. Yeah, you could now that you say it, you can see it everywhere. Like Doge, they set a target, which was Doge will wind down in two years or whatever. He's like, We don't need the full term.

21:01 Why would I take the full term? Two years we'll be done. We set a date from that was like the first thing he did was set a date. Right. And people burn out. And people like, Oh, I I worked there for four years, got my equity and I'm gone, man. I never want to do that again. It was miserable. Uh, they look back and you know what they talk about at Thanksgiving? Well, when I was working at Tesla when I was working at SpaceX, like it's the most amazing time of your life. You talk to people who are in World War Two and they're like, What was the best years of your life? During the war. We were together, we were bonded, we had a mission. We did the You know, so this is type two fun.

21:29 And and going fast is part of that. You have this diagram. I thought was pretty cool. Yeah. the technology window. You have actually like two little things here. So you have This one which is the Technology window curve. I hadn't seen this before. Yeah. And then you have

21:45 This kind of uh historical thing. It's like railroads. The technology was in a window was open for forty years. Cars. twenty five years, radio, twenty four years. And so you ha and now AI, eight years so far. So far. So can you make me smarter as a founder?'Cause it seems like this is important because Timing is everything. Being early is the same thing as being wrong. Yeah. Being late is the same thing as being wrong. So getting the being knowing where you are in the window seems important, but I've never really

22:12 Yeah. Uh you know, as I said, I went to Harvard Business School and I lecture at Stanford and lecture at Berkeley and MIT and and I've never seen anyone teaching this, and it was really surprising to me. And basically what you realize is that most big interesting World changing companies.

22:29 Are a result of riding a particular technology wave. So if you think about the railroads, the giant railroads, Southern Pacific Railroad, which transformed America, they leveraged a new technology, which was Railroad technology. Both the steel for the rails and the the steam engines and all the stuff that came with that technology. And that That window in the United States was open for only forty years.

22:51 If you were and that was between eighteen thirty and eighteen seventy, if you were trying to start a railroad company. In eighteen eighty. You got your ass kicked. Right. And they all wanted to be rich and famous like the people who had been building it the forty years earlier, but they couldn't anymore because the technology window had closed ninety percent. It was just closed. You you wouldn't even think of starting a railroad company today. Pretty obvious.

23:13 But then you look at other technologies like cable. And that was open between like 1970 and 1984. Only a 14 year window during which all the cable companies that were meaningful were created. Anybody who tried to do it afterwards got their ass cake. Same thing was true in consumer internet. Once we looked at it. Mm-hmm.

23:32 Uh you know, it it opened in nineteen ninety four. Because remember, in ninety three, nobody used software. Right. No consumers, no small businesses, no enterprises. We had some AS four hundreds running around and it was all on prem software and blah blah blah. But it was it was very small. Suddenly we now have four billion people using software. And that was because of the browser and the internet and TCPIP. That opens up and between ninety four and two thousand thirteen it was a fantastic time.

23:56 to start companies in the consumer software space and invest in them. From C or C. In two thousand fourteen, the window just closed. You can look at the number of unicorns created in two thousand from two thousand fourteen to today, and it's it's really small. It's like Discord. TikTok.

24:12 You know, um Starlink Chat G B T, there's like Ten of them. Mm-hmm. In the West. versus how many you know, during the the previous let's say ten years you might have ten X, that's fifteen a year. Right.

24:23 And so what we haven't been talking about is that the technology window closed. Like it closes for every technology w you know window. If you look at automobiles, same thing that all the automobile companies that we know of were started between ninety uh eighteen, ninety eight and Nineteen twenty eight.

24:39 Until Tesla. When the underlying technology window opened around lithium batteries and electric engine, and now we have two interesting companies, Tesla and Riven. Okay. So This this opening of the technology and the closing of technology window is very predictable. We don't know how long it's gonna be, sometimes forty years, sometimes it's eight years, like with cell phone networks in the United States, which is just eight years.

24:59 But The the phases of it are very predictable. And there's just six phases in it. And and you can see it. And so once you see that once these six phases. Yeah, once these six phases. The first phase is just it's a hobbyist. is really interested in the hot in the in the technologies because of fun. Right. Geeks, basically. And this is kind of like the uh what the nerds do on the weekend we'll all do in ten years type of thing. That's right. What was a toy before is now a big thing, that kind of idea. And then there is the the second phase is the status and money. Where suddenly Some geek.

25:28 Makes a ton of money and Gets status. And then now everyone's interested. Oculus sells to Facebook. And everybody now can understand it because The the the abnormal people, the savage people are probably just hobbyists. But normal people are money and status seeking. Right. Right. So they can understand money and status. I want that. How did he get that? Or how does she get that?

25:49 I want that. So that's when the knowledge. What's going on over there with those with that internet thing? Podcasters like us start talking about it, bloggers start talking about it. There's c conferences pop up about the AI wave and agents and all this. We're sh we're diffusing the knowledge now. More people are getting in on the secret. That's right. And then you get uh a lun tons of competition flow in, a lot of investment money comes in, teams form, everyone can understand the idea because the knowledge is diffused. And so five or six people get together and start a company and then they get funded, blah, blah. And then the incumbents arrive. The incumbents arrive because they've found the network effect. They had a better management team. They raise more money and crush the other people. Something happened to give them their defensibility. Right. And they establish themselves as the incumbents and then they just squeeze down. And it does the window closes. If you want to watch an interesting, beautiful dramatization of what this looks like, watch the movie Tucker.

26:39 With Jeff Bridges. Okay. It's a story that I think the the movie came out in the nineties. It was about something that happened in nineteen fifty two, and it shows you what it's like to build a car company in nineteen fifty two. Okay. You just get your ass kicked by the incumbents. There's nothing you can do. There's nothing you can do. And so we see this pattern over and over again, and I think it's very important for us to the windows. Due to the technology, underlying technology, and it closes because the winners get network effects and their flywheels spinning so fast that even if you're hard working and you're super smart and you got great design and great engineering, you can't compete with a network effect once it really kicks in. That's right. And it could be a network effect, it could be an embeddedness, it could be Uh a scale. Or it can be a brand. Those are the four defense abilities in the digital world that now exist. So it's a quick example of each of the four. So like uh let's do a simple brand. So a brand network effect would be something like Ford.

27:33 people just keep buying their Fords'cause they're loyal to Fords even though You know, the toy trucks might be better. Um You have a brand effect around Nike. Obviously. I mean, I feel a certain way when I wear it. Right. You know. I I project something. Everybody knows what it means when I wear Nike. So There's sort of a a knowledge network effect, but we we still call it a brand effect. It's quite close to a network effect, it's just in the mind.

27:59 Yeah, those exactly. So those have brand effects. The network effects are the most powerful because They're really unstoppable. And look at Facebook. I mean, they're now one and a half trillion or something. And um Mm-hmm. The more people there, the more valuable those those networks are. Instagram, WhatsApp, and Facebook. That's classic network effect.

28:18 You've got embedding like Oracle. They in they embed that software in your operations. it you're gonna retire before you rip that stuff out. Right. You're just they charge you twenty five percent more next year, you're gonna pay. Right. There's nothing you can do. Well or the birthday alarm. They're trying to get rid of Oracle back in the day and uh

28:37 It took us like a year and a half. Of of the of the worst work that every engineer hated just to get off our Oracle dependency. And how much was it worth in the end? I don't know. So that's an embedding and then scale would be something like Walmart. It's just So many stores, so much buying power. They can buy cheaper, they can sell cheaper. Everyone just goes there'cause it's always gonna be cheaper there. Where does Mr Beast fit in as a you ca as a content creator, right? Like is he's kinda scale, basically he gets

29:04 He gets paid the most, so he invests the most, so he has the biggest kind of set productions. He can give away the most money, which creates a lot of scale effect. That's a scale. It's a scale effect and it's a very weak one. Yeah. No, he's very vulnerable. Yeah. Just like BuzzFeed was very vulnerable and wasn't going to go anywhere. And uh why why is that? So explain more there. Well, because he's in what's called the fresh produce business, which is he has to keep producing fresh produce and putting it on the shelves and then it has a it times out. Uh and he's not building any network effect. He's not building any embeddedness. It's just you're you're consuming his stuff on YouTube and other channels. They have the network effect. Right. Um and and he's just He's playing blackjack at the blackjack table and as I've taught my sons, you don't wanna be playing blackjack, you wanna be the house. And what would you do if you're a content creator then? How would you if you're Mr. Beast right now?

29:47 How do you not? You think about how to create a network effect. You think you think you go and learn about the seventeen network effects and figure out which ones you could build. Right. Uh I would go for um So like he's got this chocolate brand now, right? Selling feastables and he literally told me he said something great. He goes Uh we he to us to Walmart. Yeah. So we got into Walmart, which is like a heart, once you get there's embedded, right? He's like, I have shelf space now. Yeah. It doesn't matter if you make another chocolate brand, I have shelf space. Yeah. And he goes, I sell this color of blue. He's like people don't even he's like, I just need to keep showing this color of blue and I'm need to sell this baby blue thing.

30:20 As yeah, that's that's my game. She sells this dark brown color and I sell this baby blue color. Yeah. Yeah, and and he might end up building a brand. Around that chocolate. Right. Uh, but it'll take years and it'll take hundreds of millions of dollars and Um it's not clear that'll happen.

30:37 Right. What's an example of somebody who you think has been clever about this and done it Um whether they're a content creator or something else where Maybe Most people in their industry would have done something that's a bit of a w doesn't have network effects. But somebody figured out somebody who was a little bit smarter or stumbled into something figured out a way to do it with network effects.

30:57 I can tell you a a funny story about where it should have happened and it didn't, which was Dana Carvey asked me about What should I do at Dana Carvey.com? And I said, What you should do is you should get Robin Williams and one other guy, and the three of you should create the stand up comedy website. Like for for that niche of YouTube. Right. And then you guys judge every week who's the best and have contests and whatnot. And I said you create and each of you own thirty three percent of the company, you raise some venture capital and then you sell it for a billion to whatever. And I explained all this to him and then at the end of the hour and a half he said, Yeah, so what do I do with Dana Carve.com? Like he just he just couldn't get out of

31:33 I had the same conversation. I went to uh husband and husk become a friend and a he was on the podcast and he was he was asking me afterwards like what you what would you do? Yeah. And I asked him, I said, What uh comedians say they all sell their specials to Netflix. And they're super happy, like we got the bag, right? Ten million dollars, twenty million I don't know what Netflix plays, but let's just assume it's tens of millions of dollars for Dave Chappelle or whoever. But it just makes Netflix's Network effects super strong, right? Like so they might make ten million, but Netflix is gonna become a multi hundred billion dollar company in the process. Right. But it comedians could, especially if you get Louise K and Chappelle, you could theoretically say if we just put our content here. Yeah.

32:08 We own the network where all the comedy content is. And that's a much more valuable thing to own than this special. Yeah. Um but it was kinda the same thing. It was like Yeah, but they're throwing a big bag at us. And also, um Yeah. I want my stuff to be seen. That's you know, if I go there I get distribution. If I go h if I try to make my own thing, I'm giving up distribution. I don't know if it's worth it. That's right. But somebody if somebody played that long game, I think that would be very good. That's right. And that is all network bonding. And that is all network dynamics, and that is exactly the game, and very few people think in that way. Like a vampire attack, like Saudi Arabia tried to suck off some of the PGA guys and and create a new golf thing, and then they ended up merging back, or the US FL back to the vampire attack. A vampire attack is when you go into a network and you try to suck out the blood from

32:51 what makes that network work. Okay. And you you essentially try to create your own network effect. on your platform by sucking out the energy that had been developed on their platform. So was it smart what Saudi Arabia did and the live tour was that like did they execute it well or w what's what's your takeaway from it? I didn't follow it that much. It looked like it was only a two year effort and then they they collapsed after two years. So I don't know that it was perfectly executed, but it is the right idea. Right. It is the right idea because they were being told by the they're you know, they're trying to improve their brand. Right. Everyone's ratchet up the status of their own brand, whether it's Saudi Arabia or whoever.

33:28 And uh they they were trying to borrow off the PGA and the PGA was putting all these restrictions on them and they were they didn't have a uh a free operating field. You know, they were it's like they were on IOS and they were like, Well I don't wanna pay thirty percent to you. Let me do my own thing and they tried it and then it's just hard. It was an article on on uneffects dot com, which people should read. I think it's one of the better articles, but it might not be as read as it should be. It's called network bonding theory. It's a little bit boring title, but I wonder why people didn't work bonding theory. It's it's and it explains it uses Messi as an example. Uh uh within the social within the soccer networks and how much he makes for the whole networks. So what what's the story there with Messie?

34:08 In the it was funny because this was before he went to M uh Miami. Right. Um I said um you know PSG offered to give him That's much a month of money and some tokens,'cause they were doing these like crypto tokens. And uh They still aren't paying him enough. Like everyone was outraged at how much they were paying him. And I said, They're still not paying him enough because he moves the licensing for TV rights and he moves viewership and he he is gonna bring so much more attention to the French soccer system so that every comp every um game that Messi plays around the French system is gonna be watched

34:47 three or four times more by the world than it would have been last year. Right. And the value to them of that is Way more than they're gonna end up paying him. Right. And so you look at Tiger Woods, if Tiger Woods plays The PGA makes about one and a half billion dollars more per year. And if he's not playing, it's like

35:04 These nodes in these networks. And so if you could get Tiger to go over here and you could get this and this and that, if you did the right vampire attack, you could actually create a higher status, better thing. Right. But it's literally about measuring the nodes and measuring their effects and then having a strategy for the order in which you get them, what you compensate them with. Right. You can compensate them with money, you could compensate them with titles, you can compensate with status. Whatever they want. Figure out how to compensate them. And that's what the article walks through is all the different ways you can compensate people to come to your network.

35:33 I have a real world example of this. When I was at Twitch Microsoft tried to do a uh Microsoft YouTube, they're all trying to do a vampire attack on Twitch. So Twitch was the number one gaming network. for watching people live stream video games and the number one streamer was Ninja. So Microsoft came out and they offered him something twenty, thirty million dollars come to us. He might have been making six million or seven million a year on Twitch. Yeah. I don't I don't know. These are hypothetical numbers, but like some they offered more than he was making by like a cup, you know, two or three X. Yeah. So he leaves and it's code red inside Twitch. And there's the there's some people who are like We, you know, we have to keep the integrity, you know, we have to keep our community. We can't let them just poach our streamers. We have to fight. And then there's the finance people were like, that doesn't make any sense. That's too much money. And then there's people who are like, I think if we lose too many people, at some point there's a critical mass where people will leave Twitch. How do we solve this problem? And finance people wanted to use the finance tool.

36:25 The community people wanted to make an impassioned heartfelt argument. And you know, there's other people who are the strategists who were trying to make an argument about like, hey, there's some tipping point. We don't know where it is. But there was some math. There was like you said, there's like this is a mathematical principle. And so one thing, one of the ways that we looked at it was For every viewer, forget the streamer, for every viewer, how many channels are they bonded to? You use the word bond. Yeah. So it's like They come every every week and they're watching three channels, four channels, five channels. Yeah. And it turns out if you just take one of those channels out, they'll just swap to another channel, no problem. But as soon as they lose a certain number of channels in their bonded network, they'll just go wherever that is. And so strategically, if one of those other companies had figured out.

37:06 Which network of streamers to go after? Not the l ranked list, because they would take Ninja, who's a Fortnite streamer, but they wouldn't take the other Fortnite streamers. They would take this other guy who plays this other style of content. Yeah. And their fans didn't overlap. Yeah. So it was very ineffective. Whereas if they had gone and been like all right. These fifteen streamers are all part of they're all core to network. All the clusters each other. A cluster. A cluster. Yeah. If and i they may not look like they're the biggest, but there's a that would have created the tipping point. But they didn't have the data or the know how to describe. Beautifully described. That's exactly right. Yeah. That's a great story. That's that's a perfect example of network bonding and how you can do the math on it and and you have to think about it right, or you're gonna waste all your money and time. Right. Which is what they did. All right, let's take another one. So what do we got here?

37:48 Language first. Uh yeah. So it turns out that Look. The way I look at it, there are five things in the world that kind of explain everything. Okay.

37:59 Well one of them is language. One of them is networks. Like if you look at network dynamics, like why do rulers rule? H what's going on with Trump? What's happening with elections? These are all network dynamics. And if you study networks, you can really understand all that. Energy is another one. Which is Who has the oil? Who needs the energy to live because our our bodies are just absorbing energy and expending energy and countries absorb and expend and households absorb and expand. You can actually understand the entire world just by studying energy and energy flows. Um, but one of them is language. Language and mindset. What do you mean by language? So what about English or more specific than that? More specific. So um there's a guy named George Lakoff that people should study. He's a uh semiologist over Berkeley. And he was the one who found out that

38:46 The Republicans in the seventies said look We are never gonna win another election unless we change the dialogue in this country in the United States. So they went around and they created a three ring binder and they created language. They said when we talk about tax, we're gonna talk about not tax cuts, tax relief. Because we're gonna use the word relief because we're gonna imply that it's a disease or a sickness. Right. No one's gonna be thinking that's the opposite of stress, relief. Right. What are taxes you stress you out. Right. And so so they went through and for every subject, they developed They thought about the language they were using. And then they took, they printed tens of thousands of these three ring binders and they went all around the country and they took every Republican, they say, use these words.

39:28 Everyone use these words and we will turn the situation around. And that was that was just Like eight years or six years before Reagan got elected. And It was very, very effective.

39:40 And George Lakoff is like, Hey Democrats, you guys have to start thinking at this level and he's been streaming this. He's a professor and then a consultant and he's got his own institute and c and co and I think he's retired now, but Um You should study. Everybody should study, whether you're Republican or Democrat, doesn't matter. Like this is the way the world functions. It functions on language. And You have to notice that game being played. Like

40:04 People were like, oh, we're going to build a product and then we'll market it. I'm like, no, dude, pick the word. First. And then figure out what the product does behind the word because the word has a promise to it. So in in Silicon Valley, I feel like

40:18 You described it well. People think name of your company doesn't matter. Just pick one. It's fine. Yeah. Oh look, Google, it's random word. Don't worry about it. So people think names don't matter. Yeah. And people think Marketing and language comes after you build a build a great product and then at the right before it gets out the door we'll slap a few labels on it, write a description. That'll be enough.

40:38 You believe the opposite. So you believe names really matter. Yeah. And that language really matters. Could you give me W why names matter? Very practically. It lowers your cost of user acquisition and increases your lifetime value to actually give you the business that you want. So we were building a game. We knew we wanted to build uh a particular type of role playing of um strategy game.

41:00 And we had to decide what to call it. So we test it out. Names. We we went onto Facebook, we spent two thousand dollars on ads saying wars of Mars, wars of space, wars of Atlantis, wars of Uh the Amazon. Wars of Egypt.

41:16 And we tried all these different places. Like where were we gonna have the wars? And the number one click through? Lore mud. It was Atlantis.

41:24 Hm. And so That's so funny. When you just said them, immediately when you said Wars of Atlantis, I was like that like my my pick would have been that one to the five you just said. So that works. And so so then we said, Okay, we know it's gonna be in Atlantis. Now what is it? Is it gonna be Amazons of Atlantis? Is it gonna be Realms of Atlantis? Is it gonna be Wars of Atlantis? Is it gonna be Dragons of Atlantis? We did another twenty of those and we spent another two thousand dollars. And the number one click through was well the number Number one click through is Amazons of Atlantis, but we knew what people were clicking for. They were looking to look at You know.

41:54 Girls, girls' drawings, drawings of girls. So we discounted that and we said, What's number two? Number two is dragons. So we're like, all right, that's the game. Dragons of Atlantis. Right. And we knew we would lower our click through rate or our our cost of click through by seventy five percent. Right. Which would give us a massive advantage over the other gaming companies that were buying ads on Facebook at the time. And so We then told the game developers. It's gonna be Dragons, it's gonna be in Atlantis. And And so then the game rolled from there. Right.

42:21 And And then the end we were doubling every day and in in the year two I think we did Hundred twenty million revenue. I mean it's you know, we merged with Cabam. And then and then um and then and then the c company grew like crazy. I think we were fifty five percent of their revenue when we merged. I don't know, it's like crazy. Yeah. By the way, language is one of the ultimate network effects, right? Yeah. English.

42:40 Why why are people in India and China studying English? Because it's English is a more valuable language. It has a higher market cap because more people speak it, especially in markets that matter. Um you know, you can't go to New York if they don't speak English. So Uh I don't know Mandarin today, or you know, I don't know Swahili, but if ninety five percent of the world spoke Swahili, I would have to learn Swahili. It would be the most important thing I could do in my life is join that network of Swahili because That would that's where all the the value is. So well said. You had said something about language too, where you said It's not just about

43:13 You write. language that will describe it to your customers, first you're You figure out the words because you're describing to yourself what you should be building. And it basically gives you clarity as a product builder. Do you have any stories or examples that kind of drive that home? Yeah, we had a we had a company as uh uh I don't know, two decades ago, we had a a product that was allowing you to store your digital photos. Digital photography was new and we're like store your digital photography Photographs here.

43:38 And people would come, but not very many people were coming because it wasn't a multiplayer game. I store them there, I retrieve them there, single player game. So I said, Okay, guys. We're just gonna change the homepage to say share your photos. And I just changed the name I changed the word on the homepage. And my team said But James, our product doesn't let people share photos.

44:01 We're lying to people. That makes me really uncomfortable. And I said, So fix it. And so three days later they had figured out how to Put in Feels that allowed you to share your photos. And

44:15 Within six months we'd registered forty seven million people virally. Forty seven million. Yeah, back when there was like eight hundred million people using the internet. So it was extremely viral because we changed the word. Wow. You also had a lot of virality with tickle. Yeah. Tickle's an interesting name first. And then um you had a lot of virality there. Do you have any good tickle or viral stories? Yeah, so I I

44:37 I learned about the importance of words In part because The first name I had for the company was E mode, which none of you can know how to spell or know what the hell that is. And When I changed the name to Tickle

44:49 In the middle of it. Uh my board. Almost wanted to fire me. Uh the entire engineering team Threatened to quit.

44:57 They came to me and they said, We're all leaving. We don't want to work for a site that sounds like a porn site because you're changing this name to tickle. And um Everyone was against it. And I knew everyone would be. So

45:08 the process of deciding on the name, I picked the two most language savvy people I knew in my company, and it was just the three of us who decided, and then we announced the change. We did not let anybody else a little bit like the Luka Doncic. Right. Um trade. Yeah, it's just if you want to get something done, you gotta kinda keep it close to the chest because you know people will be against it and they'll want to complain and whine and do all the things they do. So We did it.

45:30 And the traffic Went up thirty percent. In a week. And We had gotten an offer for forty five million as a company, uh, when we

45:41 When we were called emo, and then six months later we got an offer for a hundred and ten. Mm. So it literally doubled the value of the company by changing it to a good name that was spellable or memorable. Interesting. Fun to talk about. And so I learned, wow.

45:54 You can double the value of your company by having the right name. And so that then led me down to watch more and more language and then learn about George Lakoff and all that kind of stuff. And so we had to use that Language ability for our viral past. We were in the fresh produce business at Tickle. And we didn't have a network effect initially. And so we had to reinvent the growth channels every three months. Explain what it was. Tickle was a site where you could take self assessment tests. So think the first buzzfeed. Okay, so we were the first people to put

46:23 Self assessment tests on the internet. Is that a fancy way of saying personality quizzes or personality quizzes. Yeah. Yep. And um we had, you know, five PhDs on staff and It was it was legit. And you weren't trying to make something silly. You actually wanted to make like kind of Myers Briggsy type of stuff. You could actually learn something, maybe meaningful about your yourself, your character, your how you're wired, so that you could make better life decisions. Yeah. Uh yeah. That was kinda what you wanted to sell, it's not what the market wanted. What the market wanted was something like which breed of dog are you? Or who's your celebrity match. Right. Or which Victoria's Secret Panty are you. You know, that kind of thing.

46:56 And those tests all did really well and got a lot of traffic. And so about eighty percent of the tests taken were silly and twenty percent were serious. But how did you even discover the silly ones? Like did you one day you were just like ah, let's try this at lunch, or well, how did that happen? What happened was uh we were off salary. We were running out of money. Uh we were almost dead. Is that just like the phase right before death? Yeah. Yeah. Uh Rick Rick Marini uh was my co-founder. We were living in Boston at the time, and we we were off salary for six months uh at that point. And um We uh said well

47:30 Fuck it. Yeah. You know, so we get to the fuck it moment. Uh which is always the best moment. The two most powerful words in the in the entrepreneur's dictionary. Right. You know, you get you get you get clarity finally. Uh that you're not gonna do what you set out to do, you're gonna do it what's gonna work. Right. And I said, Well fuck it. Let's just Do something that will get traffic. Because we gotta grow this thing so that we can survive. And

47:49 I had a friend who worked at an advertising agency in New York and he said if you want people to remember your ads Put d puppies? And babies in the ad. And then we watched the Super Bowl ads, and sure enough, they all had puppies and babies in them. And so I said, Hey guys, let's do a puppy test and a baby test. And they said, Really? Finally we can do something fun. They were so excited. The team was so excited. And I said, Sure. And they said, Well if we're doing those, can we do the who's your celebrity match? I'm like, Ah, fuck it. Go ahead.

48:15 And so we put up the dog test and the baby test and the celebrity match test, and eight days later a million people are trying to get on the website. Wow. It was just super what we call novelty viral. There was no mechanism for it. There was no A B testing that we did. We didn't manufacture the virality. It was novelty. Right. No the person had

48:32 Tell another friend. Show well they wanted to show another friend terribly. That's right. It was such a cool thing for them that they they had to bring it up at lunch and And you sell this company for a hundred and ten million or something like that. Um were you rich before that? Or that was like your moment to like make it? I was not rich. I had a white Toyota Corolla I bought for ten thousand dollars and we my wife and I had Two babies and we were living in a rented apartment. And was the company like really successful. You d did you think it was worth 110 million? Or you're like, holy shit, why are they offering me 110 million dollars for this? No, no, it was definitely worth 110 million. Um

49:03 It was worth more than that. Because the company that bought us was Monster and they needed our viral ability. They needed our network effects thinking. They needed all the tests we had for all the But as a standalone business, was it kind of like gonna be worth a lot or no? No. We would have had to iterate into something else. We would have had to become Yeah, we would have had to become more like uh Facebook. The problem was we'd started our social network without real names.

49:29 Right. And you you told me some story about when you sold. You're like you did something at the last hour or last minute of the sale. Yeah. Uh w what was that story? So Um We were flying to New York with the teen four of us to finally pitch the sixteen person board of Monster. They had a seven billion dollar market cap at the time.

49:49 And The night before on the red eye, I actually lower the projections. Um to be more realistic to what we were gonna do. And it freaked out.

50:00 My team. Right. They were like, dude, they're not gonna do this if we lower the projections. And I'm like, nah, we we we need to be more honest with them. This is gonna be a long term relationship. Um, these are good guys, blah blah blah blah. So in the end Um

50:13 We meet with the the sixteen person board. They decide to do it. And then we go up to the top floor of the building overlooking Manhattan, and this guy Andy McKelvey, amazing guy. At the time he was probably sixty four or something. He's or maybe sixty eight. He had he acquired two hundred and twenty companies. To build Monster. Monster he had bought for four hundred thousand dollars.

50:34 Wow. When he had bought an ad agency in Boston and they had a side project called the Monster Board. He didn't even know that he had bought it. He bought an agency, happened to buy monster. So he was just he was just generative position animal. Yeah. Just an East Coast acquisition guy. Um he had a lot of character, this guy. Um

50:55 Anyway. He says, So, you know, I offered you, you know, ninety one. Would you Is there any room to negotiate? And I said, Sure, take ten percent off.

51:06 And he says, Interesting. What do you want? I said, I want you to pay all of my employees out before you pay me, and I want you to pay my investors before you pay me. And he's like, Well, you know, I can't do that because then the people will leave. I was like, They won't leave. But don't people just stick around for money? I'm like, No, that's not why most people work.

51:23 So you wanted them to get their money first and you're like I'll uh mine will uh kicking in a year later or whatever. Is that what you wanted? Yeah. And why'd you do that? I mean that's like Crazy move. Because I felt that was the right thing to do for my for my employees and for my investors. Cause they had stuck with me over this crazy five year ride. And did you decide that like in the moment? Or had you been thinking I'm gonna do this? No, I decided that in the moment.

51:45 And And he he said, Wow, interesting. So what do you want? I said, I want to pay all all my employees. And he's like, Will you promise me they'll stay, even if I pay them out? And I said, Yeah.

51:57 And he said, Okay. Um, well that in that case I want you around a long time. Because I can see your character. Right. I can see that you're a real leader. Right, you're a match. Yeah.

52:09 And uh and he said, Okay, I want to put a three year earn out on this. Based on revenue. What about this? I said that sounds good. And in the end, the acquisition price ended up being not ten percent less than ninety one, but it ended up being one hundred and ten. Because we outperformed performed. Yeah, we outperformed. Wow. That's a great story. Yeah.

52:26 And so it was and and h had I brought if I had introduced an investment banker into this process, he would never would have Returned my email or cut walked away. This is about humans. But people. Yeah. You uh I have a picture here.

52:40 I actually met you before I met you, I met your business partner. Yeah. You and uh Stan. Stantonovsky. Yeah. He's amazing too. Yeah. And he told me a story. So when I f first time I met him, he was at my office.

52:54 I remember Michael had this uh glass table so you could drop. He had this uh glass table where you could like whiteboard on the table itself. And I had just been writing notes as he was talking and I wrote like Business bromance. And I circled it question mark because he told me you guys had been doing you've been partners for like, I don't know, at the time, maybe 15 or 20 years. Yeah. And I could just tell it was like, wow, like you mean when you see a couple at dinner and they've been married for thirty years, but they're like it's like they're on their first date and they're just having fun, they're talking, they're got their arm around each other, it's like oh man, that's what you really want, you know, when you get married. It's not The wedding day, it's the twenty years later, what if we're still at dinner like that?

53:32 Um, that's how he was kind of like talking about Yelp's partnership. And so I asked him, I said, What's the key? Like, how did you make that work? What's what's been made it what's made it work. He told me a bunch of things. Uh, I wanna hear your take on it. But one story you told me he goes when You sold a company at the time, you owned the vast majority of the company, maybe ninety percent. I think you were wealthier, you'd put more money in it. I was not wealthy, but he said you own neither of us had any money. And at the time of the sale.

53:57 you at the last minute sort of sort of like equalized it in some way. You gave him like a got it till more like a fifty fifty arrangement. And I was pretty blown away,'cause i you've You really know what someone's like when the money hits the table. Yeah.

54:11 And that's not the story you normally hear of what happened when the money hit the table, the guy who had uh had the leverage. Gave instead of took. Yeah. Um That was inspiring to me. I still remember that. That was like fifteen years ago I heard that story. Yeah. Well, look, Stan's a special guy. I mean I think he said it pretty well. He said, James turned it into a giving competition.

54:30 I think that's the That's the phrase I think that will help people understand the way he and I look at the world. Right. Turn your relationship to a giving contest. That's what he told me. Rule number one. Yep. Okay. And Look.

54:41 I think that Uh, you know, I've read a lot of Greek tragedy. I lear l the classics because I went to Philip Sexer, so I got classically trained. And you have to have a long arc. Uh and and looking at what is a good life. and what matters. And um You know, what matters is

54:58 In the end is deep friendship. Like if you work hard. Like even if you don't work But my point is The billionaire life. Is available to you.

55:08 Today. It's just in your mind. Because I know a lot of billionaires. I'm not one. But

55:14 I'm nearby. And They all wear the same socks you do. Mm. They eat the same steak you do.

55:22 They drive cars that are as safe as the car you can drive if you can drive it toward a Camry. They Have a hot shower. Just like you have a hot shower. The distance between your life and a billionaire's life

55:34 Is ninety nine percent in your mind. Uh. And so it's really not about the money. It's about the creativity. It's about the connection.

55:45 It's about the friendships. And It's even harder to make friendships once you have a ton of money because money freaks people out. Yeah. And so Just accept where you are. Like I I say, look, you can have a fun, normal life.

56:00 And live like a billionaire. You're gonna have a fun striver life. where you go and try to build something, do roll ups of, you know Basement manufacturing, whatever. And then you can have sort of a global greatness life where you try to be Elon and you try to be Steve Jobs and all that. Those are the three ways to go. Either way. You could live a billionaire life and have a fun life. And either way you can make yourself miserable with your own mindset. And so

56:26 It's up it's all it's all it's ninety nine percent in your brain. So with with me and Stan. And and with Rick Marini, who was also a co-founder of Tickle. It it, you know, and Rick and Stan and I just went to Namibia together, we're going to Turkey together. Like I'm still friends with all these people that I worked with starting in in ninety nine. I'm still friends with people I went to school in fourth grade with. I mean That's it. That's life. Right. You know, and and without that, what's the point? Without that connectivity. Uh, there there's really no point to it. What are you gonna be higher status than someone? What are you gonna be richer than someone?

56:57 It doesn't matter. Past Even a basic point. Right. And so I never wanted to covet

57:04 the whatever capital I could. I just want to make s sure something cool would happen and that I had enough to keep creating. And look I think that Twenty five years ago, people who were coming to the Bay Area were coming because they were generative. They were coming because they wanted to create. And then because so much money was made by two thousand and eight, two thousand thirteen,

57:25 It's changed the tenor a little bit here. And we're ruining the experiment. Mm. Because people are so money focused. And I I love the My First Million podcast. I I listen to it. I love you. And the only thing I would say is the naming indicates that it's about the money. And I actually think the people love your podcast.

57:45 because you deep down know it's not about the money. Yeah. Now we have to talk about money because everyone thinks they want the sickness and the power. Show up. And you know TechCrunch will only talk about your product launch as if it's with a financing. Right. Because it's talking about the money. It does get the clicks. But You You guys know that it's not about the money, that it's about the creativity and the generativeness. Right. And and the connection with people, the way you connect with each other, the way you connect with me, the way you connect I see that in your life. And so That's I think why people really listen to you, is because that's what we all really want. And yeah, there's money, but

58:19 Doesn't matter. Right. It's just gas in the tank. It's not the tank. Right, right, right, right. Yeah, the uh somebody said it well, they go

58:27 You're you're trying to go on the road trip. And you want to get in a car, you want your pals inside, and you wanna have this kind of adventure you're going on. And you need gas, you need fuel to go on the road trip. But this is not a it's not a nationwide tour of gas stations. Don't forget that. Right. Right. That's a great way to put it. I love that. I love that. Yeah. So yeah. So I I turned it into a giving competition with Stan and then he turned it right back into a giving competition with me. And uh and Rick did as well. And and uh yeah, it's been great. I'm gonna do some of the some more of these. I'm gonna do one uh that's not positive. I wanna do regrets. You had told me something when I came and hang out with you. You said you were talking about A mistake you had made. You go, I had my first success or whatever, and then you go

59:08 I kinda isolated myself. I wanted to do my own lab, partly due to ego and you know, whatever. And you started doing your own thing, and you go and you said like You drew this diagram on a whiteboard. And you were like, I was in the core, the white hot center of the network of Silicon Valley. Of Silicon Valley. I knew all the right people and they like me and I like them, et cetera. And then you were like, I kinda went over here to try to build my own empire. You're like The smart thing would have been to just Join Facebook or invest in Uber or what and you gave me a couple of quick examples. No, that's that's right. I

59:37 You know In two thousand and five. six when I left Tickle after the acquisition. Um I wanted to just build more stuff. And I had this great guy, Stan, who I just loved

59:50 living in his brain. Right. And he seemed to love living in my brain. So we just were happy to get an office and live in each other's brains and build stuff. So we created an incubator and we build twenty four different products over the course of three and a half years. And we had so much fun. I we were just spending my money, my post tax money. And um Um We had a blast. And we we were so creative. Every day it was we were doing eight different experiments, you know, on the internet to see what would happen. And in the end, we came out with three companies. from that that ended up working and making people money and raising venture and all that stuff. But we did it in a way where

1:00:25 As my friends told me later, we didn't know how to be helpful. We didn't know should I send you deals to invest in? Should I come work with you? Should I send you people to hire? Should What should I do? Right. What and and so our structure of the incubator

1:00:42 Wasn't super network. It was Creativity centric. It was isolated a little bit. And that was a mistake. And had I gone and worked at Facebook and learned more about that ecosystem, or had I gone and um become a venture guy or or opened up a shingle to say, Yeah, I'm doing this, but I also want to be investing on the side. I wanna make twelve, fifteen, twenty investments a year as an angel and I can be helpful and

1:01:08 I didn't do any of those things. And that was just a mistake. I just had have four kids in thirty-seven months and my wife and I were moving houses and you know, my parents were my mom uh got dementia and you know, we were busy. There's excuses, but I didn't have the clarity. And as a as a mentor, I would suggest to people think again about the network. Go back to my life on network effects. Think about everything you do as how does this affect the people and the network connectivity that have or don't have going forward. One of the things you said there, you were like

1:01:37 Uh you told me you go, you got to create your API. APIs uh people who don't know it's basically like you know you'll say you make a website If you want other other developers to other engineers to be able to like make their product compatible with yours. You put out documentation, you say, Hey, here's what I could do. If you ask me this question, I can give you this information, I can give you this data. If you know, Twitter has an API. Hey, you want to see the tweets? Here's the tweets. You want to see the most trending ones? Here's the trending ones. That's what I can offer you. And here's what I want back. You know, here's the things I'm working on. If and I maybe I can tap into your API.

1:02:10 And so you were like, you need it sounds like what you had at the time was just a fuzzy API. People didn't know how to plug into you. They didn't know where you could help. They didn't know how you wanted to be helped. Um but you were in a creative mode. And That stuck with me because I was like, Oh, I do the I have the same problem. I need to to make it clear where what am I trying to do? Yeah. Uh because actually when you help people, there's a lot of goodwill that's built up. People love to help you back. But not if they don't understand what game you even play and what you like to do and what your What your dreams are and what you what you're great at, your superpowers. Yeah it's all fuzzy. And I think making that less fuzzy was one of my big takeaways from it. Yeah. Yeah. It's a great idea. And you know, I think that the Bay Area, more than other cultures, is a non zero sum thinking environment. Right. It's one of our Key traits. And that's

1:02:53 foment that's that's furthered by this idea that Here's what I can help you with. Right. And and here's how you can help me. And what do you think about people who leave California, leave San Francisco because they don't want to pay taxes? I think it's short sighted. Uh look, anyone can move it's very sensitive, very emotionally sensitive to people about their choices about where they want to live and um

1:03:15 You know, if you don't like it here. Or somehow you feel like everyone's smarter than you and therefore you feel bad every day'cause you have low status and whatever, like go get a therapist. Don't like don't move out of the state just because you're feeling bad all day. But a lot of people don't like it. Uh for whatever reason. I I can't imagine why, but they don't. And so they'll leave or they'll think I can go be a big fish in a smaller pond somewhere else.

1:03:38 Um, but generally they're moving because their husbands mother is nearby and they can help raise the kids. There's a network we call it network gravity that pulls you away from from the Bay Area. And you just have to fight all the network gravity and just go there and be in that ecosystem. And if if I can earn You know, twenty times more here. And pay thirteen percent extra tax versus New Hampshire or Florida. Then isn't that worth it? Right.

1:04:03 And and if I'm not smart enough and good enough. to earn twenty times more or even Two times more. Uh, then yeah, I should leave. If I'm you know, if I'm not good enough to play in the NBA, I shouldn't be in the NBA. Right. But this is the NBA. Right. And so the thirteen percent tax on being able to play in the NBA is nothing.

1:04:20 Yeah. Yeah, I remember you said that because at the time, I think this was like Covid times or something. Like tons of people were moving and they were moving not for not because they didn't like it. They're moving because they were like, ah, why do I if I can work online anyways, might as well just be somewhere else. Uh I'll save 13%. And I remember you just being like, That's insane. Like if you if for that reason 'Cause one idea, one. One comment. One comment, one serendipitous conversation, one brunch you go to. You used to host these brunches, one connection there. Has paid itself off, you know, many times over. And that that that definitely reinforced that. Um

1:04:54 For me. One of the things I want to ask you about is you You've been early. To a lot of Big things. You wrote a blog post about Bitcoin before Bitcoin. Yeah. You were in social gaming before social gaming really took off. You were in social networking before Facebook was invented. Right.

1:05:10 So my natural question is what's next? What do you see around the corner? Yeah, yeah, yeah. We also got into uh Tech Bio in two thousand sixteen. which is software-driven biology, and we also got into AI in 2018, which wasn't quite as early as kind of Vinode with with OpenAI and Elon, but it was pretty close. Um, yeah, I mean, so what's next? A lot of things is next. This is what's interesting about the current time. Um, there is gonna be opportunity in in robotics that hasn't existed before. There is going to be opportunity I mean, we're just we're just seven, eight years into the tech bio thing, and that's gonna go that window will be open for thirty years. We're gonna learn so much about DNA and what's going on there. And then AI is gonna touch everything. Uh and so I think that AI has created a whole new set of consumer experiences. I think the window there will be open for three to four years for people it hasn't even really started. I mean, we're we're writing a a

1:06:01 A blog post. about consumer AI stuff and it's hard to find interesting companies. Like you've got AI Dungeon and you've got, you know, Volley and Character AI. You've got like Fifteen or twenty, but You don't have fifty. Right. Interesting consumer attempts. And we're waiting.

1:06:18 So consumers back. Yep. Uh Tech bio. Yep. Uh robotics. Yep. Those are three. Yep. Space continues. I think the space window's still open for another three to five years. Uh but it'll start to close here soon,'cause remember SpaceX started twenty years ago.

1:06:33 And and services. Services, services, services. Anything that's a service like my accounting firm or my tax firm or my um But now with AI. But now with AI. But now with AI. So I think that PE firms?

1:06:49 And startups are going to grab AI and go in to transform all the workings of corporations, but also service firms, banks. Right. Everything that's a service to you as a consumer is going to be transformed by By AI. Faster, cheaper, better, easier, in ways we can't imagine, completely rethinking it. Um, and so I I would encourage people to think through what are services businesses in my area.

1:07:15 That I could bring AI to And Lower the price by thirty percent. Mm-hmm. And just take market share. What's an example?

1:07:24 A good example would be, you know, architecture. Contracting. Building building houses. Uh long hair. Like, what can you do for my lawn? So let's say there's a lawn care place uh lawn care business near me that's making a million dollars a year profit, guys ready to retire. Yeah.

1:07:40 I think okay, I could buy that business today, yeah, at a fair price. Yeah. But I know that with AI, I'm gonna be able to do what? I'm gonna have a robo kind of receptionist. Yep and uh so I'm not more sales. And I'm gonna go around with a video camera and the video is gonna notice what all the plants are. So to catalog the entire I can now produce a beautiful thing for this owner that he never saw or she never saw before. I don't know what every plant is, I don't know what their water amount is like AI is gonna give me X ray vision for their landscaping and allow me to Provide them a service.

1:08:12 been able to provide before. And um I can schedule stuff more easily. I can then all the customer service stuff goes to AI. Uh, and I provide a much better service. So you could either charge more for the high end clients because you can do something better, or you could charge the same and give them a better service, or you could charge less. Right. And just take market share. Right now with AI, there's like a fog of war. If all these companies are all competing to the death Billions and billions of dollars getting invested.

1:08:37 And it's unclear. Who's gonna win, where's the value gonna accrue? And I think from If I was gonna if anyone was gonna have an answer, I would wanna hear yours, because you think about network effects, which is the thing that kind of ha creates the long term defensibility value for these companies. So What do you think of people who are investing in open AI or the the sort of the models? Is that where the value is gonna accrue? Yeah, I don't get it. I don't get it. I think they're making a big mistake. And in two thousand twenty-two, when we first started writing about this, we actually came out and said it on our blog post, which is

1:09:05 AI is going to be like water. You are going to get free unlimited AI processing on your CPU, on your phone, within three to four years. Th there's no doubt it's going to free. Mm. Uh in the same way that I can use my phone. I don't have to pay anybody anything to use my phone. Um on you know, for hours a day. And

1:09:23 I don't understand why everyone's plowing so much money into this because it's so clear that you're gonna have open source Whether it's three months, six months, or nine months behind. When you're actually thinking about defensibility, you have to think about ten, twenty, thirty years. Right. So it doesn't matter. The open source is gonna end up just Taking over. And you're gonna be able to do it on CPUs. So both NVIDIA and

1:09:45 All of these giant L M companies who are spending all this money on training We're gonna Go to zero eventually. Mm. And that's why That's why NVIDIA is trying to get everyone to use CUDA, because that's their operating system level that locks people into their software, which is more of a Microsoft that's it's an operating we call it a platform network effect. They're they're trying to force a platform network effect while they have the hardware that everybody wants. Right. So that they can be durable long term. It's smart. I get it.

1:10:11 We'll see if it works. And the same thing with open AI, like I don't get it. Like I don't know why everyone's plowing money into it. I think it's crazy because they have to move up to an operating system layer where there's a platform network effect, or they have to move up to the application layer where there are network effects. Because otherwise, Deep Seek or The twenty deep seeks that are coming are gonna We're gonna Not cause them to get any revenue. So I don't know what's going on. Uh I'm not sure why people

1:10:35 Don't see it that way, but I've seen it since twenty two, and everything I'm seeing now teaches me the same thing. I mean, Deep Seek was obvious. And look. The w ninety I don't know what the percentage is, but let's say ninety six percent of all the Processing in the world is still CPU. And these models will start working on CPU in the next twenty four months. And then what do you do with the NVIDIA chips and why do you need these huge clusters and but I don't know. So it's gonna be I I I think people are making a lot of bad bets. There's gonna be a lot of money lost. And one of the arguments is uh

1:11:02 Oh, but we have the data. You know, maybe. Elon's uh we have the X data feed. That's gonna make our model better. Yep. Chamath has come out and said, Oh, it's all about who owns the data. Yeah. Yeah. What's your message to Chamath? I just think that's wrong. I just think it's wrong. I can synthesize your data, I can steal the data, I can cobble together different data sets to approximate the data. And as we know, if you go to Google and just type in data network effects, like it the the first article you're gonna get just explains why data network effects aren't They're asymptoting.

1:11:28 In terms of their defensibility. And they're just not that powerful. They're they're valuable to an extent. They're they're valuable to get to a threshold and to get into a range, but you know, if if if JatGBT sees what I'm typing and then gets incrementally better, the next guy behind me can't see that it's incrementally better. The increment in which it is better is too small to be perceived by the user. Okay? And so Uh I don't think that it's all about the data. And I and I think this is a fiction. that uh Google and Microsoft tell Wall Street.

1:11:57 And their employees. For two reasons. They tell Wall Street because they want Wall Street to think that they're gonna be the winner because they have the data, therefore they win. And then they tell their employees, why would you want to go be an entrepreneur? Why would you leave the the the beautiful confines of this giant company because we you know we're gonna win because we have all the data. Right. Um, there might be some applications where That's true. I I'm open to the fact that there could be some, but

1:12:20 There's very, very few. And in the end, Microsoft and Google are not going to win because of the data. They're going to win because of their scale. Right. And they're gonna win because they already have the distribution. Right. Customers already got if I type it in. Because it's already in my way. They they won the game twenty, thirty, forty years ago, and that's why they get a chance to win the game today. Not because they have the data,'cause I can get your data, dude. So buy or sell NVIDIA. I don't give advice. I don't trade uh So there's uh like our opinion. Like you know you think they're they're Oh I I g I mean opinion is that I would I would sell

1:12:55 Yeah. NVIDIA um compared to long term. I would still be a a Google and a Microsoft buyer because of the distribution. Right. Because there's going to be a tremendous value created for both consumers, small businesses, and enterprises, and they already have their hooks into them and they're the incumbents. And we are in the age of incumbents when it comes to software, and they are gonna win because of their distribution, but not because of the data. That's just a fiction. If you were the CEO of Open AI. What would you do? I would I would try to build an operating layer and get everybody to sign in to my operating layer in the same way that Microsoft has their operating system layer. And then I would create two or three applications

1:13:32 uh the way Microsoft did in the nineties. Like Office or whatever, and then I would just go buy up other companies just like Microsoft did. Just run the Microsoft playbook. The problem is that Microsoft's main product was the operating system, so they had the network effect from day one. Whereas Open AI does not have a network effect at all. Um, the the main thing they have right now is distribution and the subscriptions, but the consumers are fickle and S and Bs are fickle and they'll move off to something for ten bucks or five bucks or As long as it's good enough and maybe it'll have some other thing they like better because it's for their vertical or where do you think what do you think is the juiciest kind of opportunity, whether you're an entrepreneur or an investor. We think it's in the application layer and the operating layer. And so we are investing in things that can build network. And we're looking at verticals typically Uh where where people can get

1:14:19 Uh rapid growth and network effects so that Even after a year or two, their scale allows them to have a network effect which makes it hard for anyone to compete with them. What's an example, maybe something you invest in that you're excited about. You think has the kind of the the right architecture to do well. Oh something like an AI Dungeon, which is coming out with a multiplayer uh AI Dungeon is a um a role playing game based on AI. It was the first sort of AI gaming company, and they're still the biggest and they're still the most advanced. And um they're in our portfolio and and I work with those guys and they're gonna build out a a network effect around RPG games that are powered by AI. So so you think of gaming companies adding AI, but we were thinking AI companies creating games. Creating games.

1:15:02 Or things like a company like An Even Up, which is uh uh AI for Personal injury lawyers. It's a vertical Microsoft and Google don't want. Right. But it's still eighty billion dollars a year. They need software to help them run their business.

1:15:16 It's a great business. I saw two billboards for personal injury on the way here. Exactly. We were just talking about it, like what is this industry? Right. What are they doing with AI with it? Well they're they have to submit these three hundred page documents to the court to and they also have to evaluate the people who come in the door to see whether they should take the case on or not. A I helps them collect the data, analyze the data and then figure out what the court case would look like and whether they would actually get the money they want from this or not. Which The the judges actually like because then they're not bringing specious cases. They're only bringing cases that that

1:15:50 You know, should have some sort of compensation. Mm. Okay. There we go. So an app application layer, operating system layers, um specific verticals. Um we're also investing in some Um speed ups for the The uh overall uh tools and architecture. Dev tools. Dev tools and stuff like that, because we think that you can get distribution quickly and then build lock in the way Atlassian has done. Mm-hmm.

1:16:15 And if you were Twive again and it's Twive in the year twenty twenty five. Yeah. And you it's you, Stan, Rick, you guys are hanging out again. Yeah. What do you think you would be doing? First I would have the conversation. Do we want to have a fun normal life? A fun driver life.

1:16:31 Or a global greatness life. Right. And what's your answer? My answer is sort of um Global greatness.

1:16:38 I think that's the thing. It's just fun to play in that game. Uh to see if we Uh, take a we'd registered a hundred fifty million users when there's six hundred million people on the internet. Like That was that was touching the world. Right. It was kinda fun.

1:16:50 Uh, I think it's fun to do stuff at scale. I'm really interested in scale. Right. Things that scale are Software, media, money. a few other things. And just I like to work in those mediums.

1:17:01 But You would have to decide. Like Don't don't think that you have to be Steve Jobs in order to live a great life. Mm. Realize you can have a fun, normal life.

1:17:09 And if you're in the Gol Global Greatness game, but you seem like you're not Steve Jobs. You seem like you're happy. Like I it was one of my notes was like I love this guy's lifestyle. Like you you showed up in a and a fun shirt. Yeah. We hung out for a couple hours. You told me how you know You're like, I spend a couple months out of the year with my kids. We try to travel as much as you can. That's as many months as they'll have me. Yeah, you know, but I don't want to max that that far out. Yeah. You were writing a TV show for fun. Yeah. Like you weren't like Elon running six companies, sleeping on the factory floor. That wasn't like you didn't give that vibe, right? Yeah. You seemed like a happy You know, happy dude who had kind of like balance, but you were still scaling. So like You know, are you in that game or are you some other Yeah, I'm I'm I'm upper middle class, I'm lower upper class, sort of in that in that area, if you want. Like in the zip code. I'm on that borderland. Um you know, uh I get invited to the rooms yeah where the global greatness is happening, but I love spending time with my wife and my kids. Right. And uh that's my priority. is to have a great family life. And you know, everyone tells I look younger than I am. And I'm like, it's'cause I love my wife and I don't drink alcohol. It's pretty simple. You know? And uh yeah, we've taken the kids to hike to the ever space camp. We've sailed across the ocean. We we got attacked by orcas and our boat was destroyed. Like

1:18:21 Uh, we go snow camping in the winters uh and live in igloo's and yeah, we do all the fun stuff with the kids. Did you have to Wait till you're wealthy to do those things, or were you doing it all along the way?'Cause like I think s if I'm listening to this, I'm like, Yeah, good well Cool. You're sort of rich and retired. I get it. I want to get rich and retired, but until then I'm gonna grow. No, no, no. What I did was right after college, I moved jobs every six months and sailed across both the Atlantic and the Pacific. I learned how to paraglide, I learned how to scuba dive. I Did all the adventure stuff. I lived in Hong Kong. I lived in Beijing. Twenties.

1:18:53 Twenties. Yeah. Um, and then I realized that I wanted to do some global greatness. So I started grinding. And so I ground for three years at Battery Ventures as an associate in Boston. And then I ground Uh actually I had a lot of fun at Harvard Business School for a year and a half. Um where I met my wife. And then I um I ground in my startups.

1:19:13 But then what was interesting is once I had plenty of money, then I ground again because it was fun. It was type two fun. Yeah. It was creativity. It was generativeness. You know, and this is the thing I I love this word generative. Because If you want to understand what Elon is doing, he's just generating. He's generating tweets. He's generating kids. He's generating companies. He's he's generating just moving stuff around. And and and a lot of people here in the Bay Area, I find are like that. Not as extreme, but like Craig Donato, who Who, you know, is the head of uh revenue at Roblox.

1:19:43 That guy has generated He's like He's like Howard he's like John Galt, the guy's like terraforming the American River to create an incredible camp for him and his friends. Right. And he worked on it. He bought it for two hundred forty thousand dollars and he worked on it for twenty two years with his own hands. Right. And yet he's worth way more money than any of us need because that's what he loves doing. It's type too fun. So there's there's always been this

1:20:07 this approach to adventuring that I've had. Um and I ground And Some place for like

1:20:16 Oh no, eight years. And other than that, it's all just been You know. Pick up the adventures every minute you can, because life is short. Right.

1:20:24 You um you don't seem Ma maybe this conversation feels different, but like you didn't seem to me like you Or somebody who um was kinda like in the like a lot of people are like Elon worship camp. It's like oh I like you know, he's the North Star. And like everybody else is just some like some you know, standard deviations away from Elon. And you should feel bad about yourself for not being standard deviations closer to Elon. Yeah, yeah. Whereas like I think you s uh you're kind of in my camp, which is like

1:20:53 You admire parts of him, not all. And of the parts you admire, you sort of incorporate that into your your game or your life, you know, whether it's his speed or maybe his fearlessness. Things and things that are like unquestionably admirable. Totally. Um I'm I am curious, like who do you admire? Who do you learn from a lot? Like who's Who's kinda like Your mentor, whether you know them or you just read about them a lot, like who are the people that inspire you? Um I'm certainly inspired by what Elon's been able to do. You know, when I when I knew him in the two thousands, he he and I were in some of the same circles. He just seemed like a a a normal guy.

1:21:26 Hm, really? Yeah. He just seemed like a really generative, cool guy like Craig Denata or like anybody else. Um you couldn't have picked in a room. You wouldn't have been like that guy. That guy's gonna be the one. I wouldn't have. Oh, somebody else might have, but I I wasn't capable of doing that. And I remember in two thousand W what I admire about Elon is that

1:21:43 In two thousand seven, after the the third rocket blew up. I emailed him and I'm like, Elon The next one's gonna w I said I said, It's gonna work eventually. And when you do, it'll make it all the more sweet, man. Just keep going. Wow. And he he emailed me back like four hours later. He's like, Thanks, man, I needed that. You know, like He was in the trenches. He was putting everything on the line. You know, he's an entrepreneur, uh, doing entrepreneurial things, and that's what's admirable about him. And whether you're doing a bakery or whether you're doing a construction company or whatever, you're going through that same journey. And that was what was admirable about him is that he was clear eyed in his effort toward doing that back then and and he just keeps expanding the

1:22:23 Purview, the sort of scale at which he's he's operating. You also Had This idea for one world currency. Yeah. Before Bitcoin. Yeah. In nineteen ninety seven there was a thing called Cyber Gold.

1:22:37 And I was at Battery Ventures at the time and I was trying to convince my bosses we should take a look at this because we were gonna have software based currencies. And where'd that come from? I mean, that's not obvious. It's not a reading sci fi or No, it's just I was an associate and I was talking to companies and this guy approached us and he said, I got this thing called Cybergold, and I think that we're gonna have software based gold and it's gonna be currencies, we're gonna pay each other. And I said, uh actually sounds like Logical. That sounds like the real future. And then the second thing that happened was

1:23:06 We were a tickle a few years later. And We saw a Korean company that was selling A digital rose. Thirty two pixels by thirty two pixels or something, or sixty four by sixty four. For four dollars and ninety five cents.

1:23:19 And I was One of one of my engineers said, Hey, James, come take a look at this. And it was in Korean, so we didn't know what was going on, but we could see that there was a price on this little digital thing that I could send to a girl on this social network that they had. Right. And Stane was standing behind me. And I turned around and I looked at him. And he looked down at me and I goes, There it is.

1:23:37 People are gonna buy Pixels. Mm. This was out of two thousand, two thousand one, two thousand two, something like that. And people are gonna buy pixels because

1:23:46 It's just like buying a thing. Because it just affects your brain. You know it's all in our minds, right? And then we realized, okay, so now we're gonna have digital goods that people pay for

1:23:56 There's nothing to it. And um we got Cybergold. And and then second life comes along. So I had this funny experience. I go to a uh tech conference called PC Forum, and there's this guy there, and He's sitting next to me during a during one of the lectures and we go out and he's like, Oh show you my thing.

1:24:14 And I said great. And so he waves over these other two guys. It turns out it's Larry and Sergey. And so the four of us sit on a couch in the sun and he opens up his laptop and he's like, I've got this thing and it's a virtual world. And it's called Second Life. This out works and I'm like, So do you have a currency? He goes, Yes, we do. It's called Linden dollars. And so I said, Okay, very interesting.

1:24:37 And so he gave us this demo and it was very cool. And so I went out to him uh he and I walked outside and Sarah and Sargay and Larry went elsewhere. And um I said to him, This this is gonna be like I I said to him, the only question now is Philip. What color are the robes? Meaning I see what you're doing. You're creating a religion. Like you're you're you're moving humanity into this other realm.

1:25:00 And he was like. She's like, you really know what I'm doing. Like you you you get it at a deep level. I'm like, yeah. And so I ended up on his board with Mitch Kapoor and Bill Gurley and whatnot for five years. And secondly, I've got It got big. It was on the cover of every magazine. It it was the talk of the town. They raised it over a billion dollars from Goldman and others. And in the end, it didn't end up becoming the world changing thing. But the what what Zuckerberg is trying to do right now with his virtual world is still

1:25:29 behind What Cory Andreka and Philip were able to do with the technology in two thousand and three and four. Right. Still behind it. They have I've never seen any company That was twenty years ahead in the digital realm. And they are still that far ahead.

1:25:43 W what and what way are they ahead? The pixelation, the controls, the the the world, how the world functions. Right. The integration. Creating an actual functioning digital world. The cool thing about that was a lot of games have an in-game currency. That's not what the Linden dollars are. The people The players of the game like use the currency as a real currency to buy, sell, trade. Like at a f like

1:26:06 Full level, like it's been going for for years and years and years, right. It was like a fully baked currency, not like not just like oh I gotta buy gems to get the power up and then I'm I'm out of here, right? Like it was so multiplayer, everybody's using it with each other. People really valued it. And you could trade Linda dollar against US dollars and British pounds. Right. On open exchanges. Right. And we would manage the fluctuation of the currencies. And we had it took us a few years to figure that out us. It took them a few years to it wasn't me doing it, but I was watching them do it and I was meeting with them and learning about how they were balancing the currency. So it didn't have that many fluctuations. And so Uh we saw that. We saw all that.

1:26:43 And and you know, the way we measured the world was seven hundred sixty million dollars of GDP. And what are the number of people who are making more than a thousand dollars a month? In second life. And we would watch that chart. Like'cause it was actually people were living in there. Right. So We realize that money is just

1:27:00 completely made up in our heads. And that you can exchange it Whatever. We went off the gold standard in seventy two. There's nothing to money. It's all just in our minds. And so when you say it's all in our minds, you just mean as long as as long as we all believe it. It works. One of us doesn't believe it. There's nothing underneath it besides that. The belief network effect. It's the belief network effect. It's actually on the one of the seventeen

1:27:20 Um network effects. And Bitcoin is just purely a Bitcoin's a meme coin. Right. We just don't believe in it. It's a it's just the best mean for it, right?

1:27:29 Um it's on a spectrum. It's not A different thing. Right. The dollar is also a meme coin, isn't it? The dollar is a meme coin. Absolutely. And they just list out the reasons to believe. What what underlies the belief? Why do you believe in the US dollar? We have aircraft carriers, we have tax base. Yeah, those are all reasons. Those are more reasons to believe than Bitcoin. Right. But with Bitcoin, you can't print anymore. And that's like a negative for the US dollar. So th you just list out for every believable thing, you just list out what are the reasons to believe. Right.

1:27:55 And and they're on a spectrum. It's not it's not a different thing. So in two thousand four, I bought a URL blue dot com because I was like, we should create the world's Cybergold, the currency. Pricey domain, blue dot com. That's premium. It was It was prizing. But you believed. But I believed. I believe, and I believe in language. And I believe in naming. And all that. And so I went to Philip. I said, You know

1:28:16 We should create the world's global currency. And we should as one friend says to another. Yeah, as one friend says another. And we should call it blue because you have greenbacks like like dollars and then you have the blue currency. So you have a global currency. And so we got together every week on a Wednesday afternoon with Mitch Kapoor and Philip and me and Stan, um, and we would talk about how we were gonna pull this off. And So this was not just shooting the shoot, this was like we were planning.

1:28:41 Yeah. This is two thousand Seven? Two thousand one drunk conversation. No, no, it went on it went on for a bunch of weeks. It went on for a bunch of weeks. And the m what we had back then was BitTorrent. Right. So BitTorrent was a distributed thing where everyone had a copy or pieces of the copy of the movies and we could all share. Right. And so what we were going to create, we were going to create a torrent

1:29:01 Currency. And it was gonna be encrypted and we were going to leverage it off Linnadollar to start with. Was it gonna be an independent company? Was it gonna be its own thing? We're going through week by week we were sort of nailing down all these topics, but then

1:29:15 We came to something we couldn't figure out. Which was This create seniorage to the US dollar, which is illegal after the laws in place after the Civil War. Remember, there's sixteen hundred different currencies in the US before the Civil War seniorage just means creating a currency? Creating a currency that's above the US dollar.

1:29:34 Above meaning. Senior is essentially outlawed any currency which wasn't the US dollar. To be used. And so we knew that if we were to do it The FTC

1:29:50 Would come after us. At some point. Now remember the SCC and the FTC did shut Facebook down from launching Libra. Because Facebook was already too powerful and the government saw them as a threat.

1:30:02 And it was There was gonna be some senior age and some cryptoma. So we were right that at some point but We knew what had needed to happen is we need to have an immaculate conception. We needed to be born so that no one knew it was us. Because Philip had four kids, I had four kids. We had plenty of money. We had all of our friends. Target on your back. We like being an American. We don't wanna have to move to the Bahamas or or the Cayman Islands. We don't want to have a target on our back. We don't want the M sixteens banging on our door in the middle of the night. Uh

1:30:28 We had too much to lose. So in Had to figure out how can we do this. And not be known as the people doing it. The problem was we had talked at the lobby, at David Hornick's lobby, about one currency to rule them all. Philip and I had led a talk with about twenty people about this to get their ideas.

1:30:45 And at the end they said, Well, I guess we know who's gonna go do this. So we knew that there was twenty people outside of the room who knew we were working on this. And then eventually someone would track it back to us. And so we couldn't solve that problem of uh anonymity. Yeah. And so We didn't go forward with it. And then about a year later

1:31:05 I get an email from Philip. Saying Is this you? Did you do this? And it's the bitcoin paper.

1:31:12 Wow. And I and he was pissed. He was like Cut me out. You cut me out. And I was like, No, dude, it's not me. And in fact, we both know that of the two of us, it's more likely to be you. Is it you? And he said, No. It's not me. Wow. So so we we missed out on on creating Bitcoin. So did you buy?

1:31:31 Yeah. Of course. Of course. And I was lecturing about it. And then what happened was the next lobby I went and I led a uh a a session on Bitcoin and about thirty five people came and uh a whole bunch of people went and bought. And um six people have come up to me and said I owe my house to you. Yeah.

1:31:48 So why are you not like a hundred billionaire then? Uh you had the idea before the idea, right? Like before the price was I uh I bought a bunch, but I did buy an infinite amount. Did you have the uh I have entrepreneurial st uh stubbornness, which is when I had an idea and somebody else did it, I sort of become like egotist. I don't know, I d I want them to fail slash like I I don't invest in it. When it's like wait, I thought you believed. You want you believe that there's so much you almost wanted to do it. Yeah. I have a resistance. Yeah, I don't know if it's uh uh I I think it's creator f uh stubbornness. You want it you want to have been the creator rather than the participant. Exactly. Yeah, yeah, yeah. I have that too. I have that too. The other one I was gonna bring up was this great line you had, you go you talked about some therapy, couples therapy you dip into or something like that. And you said uh like therapy is just realizing how much of an asshole you are. Makes you a better partner for your for your wife. Yeah, totally that was great advice. Totally. No, I am I am a big fan of, as is my wife, of taking any self improvement thing that comes along. Right. Why not? What if you have to lose?

1:32:46 And anybody who's hesitant to do that stuff. Not only do I find you Not courageous. But I also think You're missing out on the fact that

1:32:56 Interpersonal relationships. is the most important thing you do in your life. It determines whether you're going to be successful at your business. Right. It determines whether you have a good death.

1:33:05 Like all the things that are important are determined by that. And yet we don't spend nearly enough time on it. Mm. You know, I I uh have a friend whose boss told her once, Oh, you don't need a coach, you're fine. Like what? She wants a coach? Like everybody should have a coach. Like awesome. Right. Like just you can always get better.

1:33:24 And I and you know, I l I learned this just in life and it's kind of obvious, but I also learned it from my wife who's The nicest person in the world. And of anyone I know, she's the person who needs therapy least. Right. And she heard about this thing landmark forum from our friends, and she's like, Oh, I want to do it. And I'm like, Why? She goes, Oh, because then I might be able to love people better. Right. And like Oh

1:33:44 That is awesome. But an attitude, right? And uh and so she and I took these five classes at the landmark forum over the course of two years. And I don't think I'd be married without it because I just hadn't been developed in the basic ways of, you know, if you go to Stanford Business School and you ask people, what's the best thing you took at Stanford, they're like touchy feely. And if you go to Harvard Business School and say, What was the most important thing you learned at Harvard Business School? they'll say lead. Lead and h and and touchy feel are the same class, basically, in the two different schools. And I find it's the same thing in the world. It's like the most important thing you learn and let people don't focus on them. You go to conscious leadership, that's a great program. You got Joe Hudson doing programs, you got Hoffman Institute doing programs. There's all these ways to just

1:34:22 Further yourself and deepen yourself and that's makes relationships like staying go easier and you can have as much money as you want or as little money as you want and still be happy as hell. Right. So what what are we doing? You know? And and and and literally on the fourth course at Landmark Forum, I'd suddenly like over my eyes. I'm like, Oh I'm a total asshole. I understand. I'm I'm you know. And all these ways I'm asshole. And unless you admit to yourself you're an asshole, how can you stop being an asshole?

1:34:50 Right. Step one of the asshole recovery program. Yeah. Love it. James, thanks for doing this, man. Long time coming. Yeah. Thank you, Sean. I feel like I can rule the world, I know I can be what I want to I put my law in it like my days off On the road less travel never looking back

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