The AI Divide: Who Wins and Who Gets Replaced — ft. Bill Gurley

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Today's number, a hundred thousand.

I'm already laughing.

Today's number, a hundred thousand dollars.

That's how much a German tourist suit New York City chainless talk is number one,

two physical entities from Spicy Salza.

Ed, how did Hitler rise to power?

How?

He brat out the worst in people.

I don't know why I find that so funny.

Get a brat worst.

He brat out the worst in people.

We're probably going to say he brat out the vast in people to sort of get a brat worst.

Brat worst.

Listen to me, markets are bigger than what you have here.

It's a structural change in the world.

If you should cash, it's trash.

Stocks look pretty attractive.

Something's going to break.

Forget about it.

Okay, true story.

I just saw a told a very funny but very dirty joke.

And the team wouldn't let me do it because we have Bill Gurley,

a famous venture capital song.

So fucking VCs continue to ruin my life.

Anyways, what are you up to?

Just got back from Vegas.

Oh, how was that guys weekend?

Guys, we can batch the party.

It was awesome.

We did a lot of gambling.

Played a lot of blackjack.

Played a lot of crops.

Lost a lot of money.

Yeah, but we're supposed to do.

We stayed at the when we said at the encore.

We had dinner at Zuma.

Let's just pause right there.

You entitled spoiled bitch.

When I was your age and I would go to Vegas,

I would stay at the Golden Nugget downtown with my friendly Lotus.

We would make sure we saved $5 so we had enough gas to get home.

And there was, and we would eat twice the whole weekend,

both times for $9.99 at the Golden Nuggets.

All you can eat buffet.

And then we would bet all night long

at these $2 blackjack tables.

And that was it.

That, and by the way, it was amazing.

But now there was no wind.

There was no Zuma.

We did it right.

We bold out.

And yeah, it was a good time.

It's like Jimmy Carr says that people don't realize how fortunate they are today

to just be able to take a hot shower.

You are literally constantly taking a hot shower.

And I'm worried you don't appreciate it.

And I was clear.

Do you think Ed really appreciates how fortunate he is?

No comment.

I'm not taking sides on this one.

Claire, you're also part of this entotal generation.

Claire's a little bit older.

Your 28, is that right, Claire?

I am 27, 28 in June.

Oh, you're both 27 now.

Claire, where did you do this weekend?

Slept a lot.

And I went to art fair, made some purchases,

bought a couple of photographs.

One of my favorite things to spend money on is art.

So that was my big event of the weekend.

Oh, I had, I had friends over for Shabbat dinner Friday.

So that was nice.

Oh my god.

Claire wins.

Let me get this.

Ed goes to Vegas.

Wait, hold on.

I got a toloom and buy Molly from a woman in the bathroom.

And Claire goes and buys photography and has Shabbat dinner.

Okay.

Yeah.

Claire wins.

Claire wins.

I think we're doing it right.

Should we get out of the show?

Let's do it.

Let's get into our conversation with Bill Gurley,

general partner at Benchmark Capital and author of the new book, Running Down a Dream.

Bill, so good to have you on the show.

A lot of people have been interested in having you on.

I'm glad we have you on today.

You are a legendary investor.

But I want to start with your book,

Running Down a Dream.

It was based on a talk that you gave at UT Austin.

And it's essentially your advice to young people, your career advice.

Let's just start with what is your career advice to young people?

What do you talk about in the book?

I had this moment in my life almost 10 years ago where I was reading biographies,

a lot of biographies.

And I noticed a throughline through some of them.

I'm a former blogger as a venture capitalist.

I look for patterns and ideas and this thing kind of synthesized for me.

And all of these people started at the bottom wrong.

And all of these people were working in fields.

Your parents would probably tell you not to go into.

I think at the single synthesis of the whole thing,

is that if you can find something where you have just immense curiosity

that you end up in this learning loop that's self-reinforcing and almost all the people we

profile have our lifelong learners, like just constantly learning in their field.

And when I decided to turn it into a book, a couple of bunch of people noticed

the presentation James Clear was one of them that reposted it.

And that's part of what pushed me to go do the book.

But we probably studied 100 more biographies.

We went through all the academic literature.

We talked to Angela Duckworth and Adam Grant and Daniel Pink and all the people

that are known in the field got a lot of help from all of them.

And so there was a lot more work to it.

And we also did a study with Warden about people and whether they end up in a job

that they're happy with or not.

And so there's a lot more synthesis, a lot more data in the book that relates to that.

People should go read it if they want the full story.

But if you could tell us what are a few of the main things that you saw across every successful person

you profiled, curiosity, it sounds like is the big one.

Are there any other things that you noticed?

Yeah, I mean identifying something that you have that much curiosity about is difficult

and it's not easy.

And Angela Duckworth six years after she wrote grit said if she were doing it over again,

she had said grit was half passion, half perseverance.

And she said many kids we've taught to persevere, especially with the state of the kind of resume

arms race that goes into the college application.

But then they burn out.

And the thing is if you find something that you have this fascination with and

then that lifelong honing goes forever.

And it's just really hard to find.

And I have a number of examples in the book that I borrowed mostly from other people that have

written books in the career space on trying to identify that thing.

But if you do, then then you have just this immense kind of learning machine that goes on,

where I like to say if one way to test if you're really in that lane or not,

would you would you study about your field at night instead of watching Breaking Bad?

Like does it compete with with what you would consider to be free time activities?

Because for most of the people that are really on top of this thing,

if a new article pops up, it's something they want to consume right away.

And some people would think of it as work doesn't require energy.

In fact, I think it emits energy when they're able to think about this thing that they love so much.

And so that's really the foundational block.

After that, I'm a big believer in peer groups, which is something I don't think a lot of other

people had really explored as much. And so finding people that are on the journey with you at

the same time and embracing them. And we have some incredible examples in the book of people that

did that early on and went on, the whole group went on to success. I think a lot of our learning from

how to think about your career climb comes from zero-sum games, comes from athletics and that kind

of thing. And so some people come in sharp elbowed. And there's no reason to. There's tons and

tons of winners in any career path. And peers can be super helpful along the way. We added a

chapter that wasn't in the presentation about going to the epicenter and probably have gotten some

of the most positive feedback about that. There's a lot of reasons why a human would be afraid,

for instance, to go launch their film career in LA or to just up and move to Silicon Valley.

But I really think that I could go into detail. I think there's just tons of reasons why that's

going to maximize optionality for the individual. And then lastly, the last principle, there's six

principles in the book, has to do with having a give back mindset from the very beginning.

And I think that there's a self-reinforcing loop that happens when you do that.

What would you say to the people who take your views, take the knowledge, take the lessons?

But then they say, well, AI is here now. And if we've got AI leaders telling us that

half of entry-level white collar work is going to be wiped out in the next one to five years,

something that we have literally heard from people like Daria Amadeid and other AI leaders,

that the rules of the game have just entirely changed now. If there were things that worked for you

in your career, and we know that your career was a massive success, well, maybe it's not

going to work this time round. What would you say to those people? There are a number of people.

I think there was a Gallup poll survey in 2023 that said 59 percent of people were,

they used this word quite quitting, but I would say, you know, ambivalent about their job or

indifferent. They're not engaged or passionate about their job. And to me, those are the ones,

and unfortunately, it's a really big group of people that are most at risk from AI.

If you think about it, the rote best practice of yesterday is exactly what's in the models,

right? It's studied the best practice within the textbooks, and it's put it in the models.

The thing that's not in there is the stuff that's on the edge, you know, the creativity,

the ideation of trying to understand the nuance in your field. And that kind of artisan mindset is,

I think, part and parcel with these people that are fascinated by what they do. They're just

constantly studying on the edge. And in some ways, I would say people with high agency

that are really fascinated about what they do, their life is accelerated by AI. There's

the people that you meet where they go, you won't believe what I did today. I got Klawbot to do this.

You know, I've met a lot of what I might call local entrepreneurs who run businesses like,

you know, storage facilities and whatnot. And they're like, oh, I needed the third location.

And I asked it to map the city. And what intersection was best? And they're like bouncing off the

walls, you know, hyper excited about how their life's going to be easier with this solution. And so

I think the answer is if you're high agency and super curious, it's an accelerator. But

the unfortunate reality is I'd say the vast majority of people and at least in the US aren't in

that place. Which seems to, for those people, if you're not curious, if you're not enthusiastic,

if you're low agency, it's probably an accelerator to the downside, which seems like it will widen

the gap even more. It certainly would seem to me that you'd be more at risk in that case. Like

ambivalence becomes a bit of a problem. And the other thing that I would say, which is not

something that's necessarily in the book, which is the best way to inoculate yourself against

AI risk is to be the most AI-enabled version of yourself you can possibly be. And so to know in

your field what it's capable of. And even just you can be more prescriptive. Let's say there are 30

people in your role at your company. Let's say you're the one that knows the most about what

AI can do in that functional group. You're the least at risk. Like you're the one they're going to

talk to about how to get leverage. So the worst thing you could possibly do would be to be

skeptical about AI and angry about AI and to have blinders and not even try and play with it.

That's good to see you. I have a story about how we actually met. And I'll use that as a lead

into a question because I don't know if you've listened to the part, but it's basically an excuse.

It's basically an excuse for me to talk about me. So from 92 to 2000, I felt like I was

at Sandhill Road pitching some nice white dude every week, every week. And in 99, I was starting

a knee-comers incubator in New York. And it was backed by Goldman and JP Morgan and Maveron.

And I thought I need a Silicon Valley investor. And I met with a guy named Andy Rackliff.

Yep. And he said it was either late 99 or early 2000. He said, I want you to meet one of our new

partners. And I rolled by and I shook your hand. And I'll allow you to remember thinking was

this guy is taller than me sitting down. And I think we met for like 10 seconds. But that was

back in literally late 99 or early 2000. I think you just joined benchmark. Anyway,

I haven't been back to Sandhill Road in 26 years. If I were to go back now as an entrepreneur

and try to raise money, how has the business changed? How have the entrepreneurs changed?

How has the companies that are the winners changed? Like give me a vision of Sandhill Road

and the dynamics and the underpinnings in 2000 and then fast forward it to 2000 and 26?

The industry has only systematically gotten more competitive through my entire career. And it was

more competitive when I joined than it was 20 years before that when it was very olicopic.

And it's way more competitive now as I move away from the venture industry. And

that competitive dynamic in its current form has resulted in really, really big checks going into

any company that looks like it's breaking away. And most of those rounds now are done preemptively,

meaning the company didn't decide to go out and raise money. There are investors with billion

dollar funds who may not have that bumper sticker on their car who are calling saying, please,

please take my money. And that's just a very different reality from when I started. And today,

you'll read about a $300 million series B. The numbers were very small back in those days.

I mean, these companies were going public with one or two million a quarter in revenue and

and not having raised that much money like $20 million or something today. Every company that

is being identified as a winner is ingesting for $500 million minimum before they even think about

going public if they're ever going to think about that. So it's institutionalized in a way.

So much similar to what happened to the private equity industry 10 or 15 years ago.

There are cycles of mania. And obviously that time frame you were talking about was a peak cycle

in that way. And certainly one could argue things are manic today for a lot of different reasons.

I think the big theme here is the money has gotten unbelievably big in a way that it wasn't

before to the point where this is something that Scott and I have discussed on our show. And I

believe it's something you talked about too. Companies don't really need to go public anymore. At

least that's not what we're seeing with open AI. That's not what we're seeing with anthropic.

We're seeing these ridiculous rounds. We're seeing a series L rounds. We're seeing companies

raising at $800 billion dollar valuations like these are insane numbers. And I try to think about

why has this happened? And what are the implications of this? It seems as though the institutions

and the most moneyed individuals realize that there are a lot of gains to be had in the venture

market. And so they poured into that market. And it has resulted in going incoming at the expense

of say retail investors where the way they would get into a great company like Amazon or Apple,

as you say, who went public it for low evaluations. I think I'm like a billion dollars when I went

public. They had that opportunity early, but they don't have that anymore. That's something that I

worry about. I wonder if it's something that you worry about too. I do worry about it quite a bit.

And there's a number of I mean data points. So the number of public companies in the US is less than

half of peak. And so we've really had a fall off in the number of companies that are actually public.

Partially you could blame that on just of a bureaucratic creep. And I would say kind of a legal

creep, right? The number of like weird derivative lawsuits that are allowed are part of what

causes it to be expensive to be public. There was another thing that happened. There used to be a

shareholder threshold that would force you to go public. And there were a number of companies that

literally had to file as a result of that mechanism that has been whittled away and taken down.

And then I'd say more, if you're going to point to finger more directly, I would say the late-stage

funds have come up with a pretty clever premise, which is if they can intercept those growth years

that used to be in the public markets and keep it for themselves in an oligobic kind of way,

there's only a handful of these really, really big funds. Then they get that growth,

they get to steal that economic upside, maybe steal the strong word. But simultaneously with

telling the founder, you don't ever need to go public, they'll go around to the LP community,

the endowments and foundations and say, look, these companies are no longer going public. If you

want exposure to those growth years, guess you need to give money to me. And so it becomes self-reinforcing

and that's what's been happening. I also, one other thing that I think, the venture industry used

to go through these periods and cycles where it would get reset and people would learn that you're

taking too much risk and you'd get wiped out from like, oh, one to oh eight, the number of

venture capitalists got cut in half. I think we were headed towards a correction like that coming

off the zirp years, the zero interest rate period. And right when it was about to be a correction,

this AI wave took off and the money just flowed back in. So it's almost like I felt like we missed

a bit of a correction and there's just risk seeking dollars everywhere. The thing that would

cause it to stop is if somehow the money ran out, there was fear of a endowment tax causing a

liquidity crisis at some of the foundations, Harvard and Yale, I think got into the secondary

market last year. And so there was, you know, a sign that, oh, wait, this could cause a liquidity

crunch. And I think there's a reasonable argument, by the way, that both the commercial real estate,

the venture capital and the p marks are all too high at all of those endowments and foundations.

But that's a, that's a, that's a whole another story.

We'll be right back off to the break. And if you're enjoying the show so far,

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We're back with Profty Markets. What do you think would happen? How would a correction

play out? Are you worried that we are maybe about to face one in this market? I know there are

concerns in the private credit markets. There were seemingly concerns about AI that there was a

bubble. Now that's slightly dissipated. We're seeing the value. We're seeing these incredible tools.

What are your thoughts on the possibility of a correction? What would it look like?

I mean, I always give credit to Carletta Perez who wrote this book that says that

bubbles follow waves that are real. So I disagree with this idea that it's either a

bubble or it's real because that's when you say, oh, there's a bubble, people go, oh, you don't

believe in AI. Now the fact that it's real causes people to get rich quick and when people get rich

quick, charlatans and speculators flood in and things get overheated. I think that certainly has

happened. I don't have any crystal ball to predict what would cause it to reverse. I think the

circular deals are horrific. I don't think the auditor should have approved them and I think

whenever you eventually have an unwinding, they're going to make it worse because they won't be

sustainable. You shouldn't be able to move cash from your balance sheet and create revenue on your

income statement. I just don't think that should be okay. But they're all doing it. Every single one

of the big players is doing it. What would one of those big players say when you make that

point to them? Because this is a point that some people have been making, especially in financial

media, the circular deals where Nvidia will invest in a company and the company pays them back.

But your voice holds more weight in those rooms. And I'd be interested to hear how they respond

when you say it. I explain the type of deals without naming a company or industry. I just explain

the structure of them to chat GPT and I would encourage anyone to go do this, like it's an exercise

anyone could do. And it immediately started talking about World Common and Ron, like unprompted

by me. I just said, what do you think about these types of structures? You can go back to the very

first deal, which was Microsoft and OpenAI and there were credits involved. So you get equity for

credits and then those credits are used to run workloads on Azure. That is cashless revenue

for Microsoft. Just think about it. There's zero cash flow whatsoever. And they're booking revenue.

That's just, at the very least, it's very low quality revenue. And I don't know why the

auditors didn't get in front of it. I suspect when and if there is a reset, they're all the sudden

become awakened and they'll change the rules and it won't be allowed in the future. But it's bad,

it's bad accounting, like it shouldn't be happening. And it's unfortunately happening across

the spectrum, like all of the major players are doing it. And to put you ask, what do they say?

I mean, people have asked them. They say, well, it's not material. And I say, well, if it's not

material, you shouldn't do it because it's causing concerns that I think is hurting. People

understand why the Nvidia multiple won't go higher. I think it's the circular deals.

Like if they're not material, don't do them. And then you'll be better off.

But I do think from the very beginning, I think Nvidia has been concerned about customer

concentration. And there's an odd amount of distrust is a strong word, but there's a lack of

trust amongst all these big players. Everyone's working with everyone's competitors.

Where do you think that comes from? Because it sounds like what you're describing is a culture

in the tech community where this is normalized. And it has gradually become more and more normalised

the more that we have seen it. And I would add to this list, these sort of acquisitions that on

fake acquisitions where you just you have a contract with a startup and then you hire the

employee. It's what Microsoft did with inflection. And it's basically an acquisition. And it seems

to play into the same dynamic where you're kind of skirting around the rules. What is driving that?

I think that second thing is a different dynamic. I think that has to do with getting around

regulatory approval and in the long window that that has. But I agree. Once it becomes

kind of normal, then the competitor, imagine if you're in you work in AWS or you work in

in the Google Cloud business and you see that Microsoft deal and then you see them announces

yours growing 35%. And you've got pressure on yourself to compete in that market. You're going

to go do the same deal and they did go do the same deal. That's exactly what happened. They all

did the same deals, which seems to be like the exact recipe for a bubble where you're all chasing

the same fake thing, which is fake revenue. Or is that an unfair way to put it? You don't necessarily

have to call it fake. You could call it like souped up revenue, right? Especially like in the

Nvidia case, they are giving money to a lot of nascent startups. Actually, the thing that Nvidia did

that's probably most questionable is so they propped up core weave. Once again, expand the

competitor's set. But then they wrote a contract with core weave with said, if core weave ever

has extra capacity, we'll buy that capacity, which presumably helps it get more debt financing,

that kind of thing. Boy, I don't know how you could sit there and say, well, that's a normal way

to do business. And if the market's so hot, why do you need to do all this? Like, what's the point?

But I do think it's become normalized. I think your words are perfect. And it's going to stay

normalized until it's not. So let's go back to 2000, early textios, chambers,

Meg Whitman, Jeff Bezos. They were sort of seen as jobs, kind of modern day heroes.

And it's much different today. Now I would describe the perception of textios as their bond villains

minus the charm. They're generally seen as having a victim complex, not being good for America,

being so obsessed with shareholder value that they're willing to compromise the well-being of

the commonwealth. Do you believe there's a fundamental change in the character and complexion

of textios now versus say a quarter century ago? Or is it a perception problem?

Yeah, I don't see anything that I would say is wildly different in the personality. It's

our characteristics of the leaders. I've listened to you guys talk about this fear mongering that

comes out of anthropic. I've never seen anything like that in my entire life.

And I think you guys mentioned this, but the polling on AI fear in China is like 20% or something

like that. And it's like 80 here in America. And I don't know of another reason for that other

than some of the doom's, doomerism is loudest within the community itself. And that starts

some of the founders. Yeah, and it's starting to have ramifications for the industry.

A number of data center projects has been stopped. There's this weird situation where

and there was an article yesterday, I think, where half of the AI community is funding like one

set of lobbyists do a super PAC in the other ones on the other side. And they're like thrashing

amongst the regulators. I mean, prior to SBF, I've never seen a startup worry about regulation

this much from the very beginning. And now we're seeing it again here. It's pretty foreign to what

and I gave a speech a few years back about regulatory capture. And I said that the reason

Silicon Valley works so well is it's so far away from Washington. These guys are rolling around

in it. So just along the lines of public policy, there's been a bunch of new tax proposals. And

some specific to California, specifically the well proposed wealth tax has gotten a lot of

attention. And then there's a narrative that if these taxes continue to go through, there's

going to be an enormous exodus out of California. Do you sense or see personally amongst your

peer group and exodus? Because today, I don't think there's a lot of evidence of it. The people

with the most options in the world. Zuck's moving out. That's that. That's the only question I have

is why did I leave? But when you're there and you're rolling with these people, do you think it's

a real issue or do you think it's over in Florida? Well, I think Silicon Valley is going back to

the chapter of my book or go where the action is, is an incredibly special place to be an entrepreneur.

And the amount of learning and mentoring and partnering and your ability to jump from one job to

the other, it's like no other place on the planet. And it'll take a lot to upset that apple

cart. I have a bit of a fresh perspective on the tax issue that comes from spending quite a

bit of time in China over the years, which is one of the things China has done to kind of reach

the level of success they have is the provinces competing with one another. And I went back and read

a bit about like John Adams and the Federalist Papers was talking about state versus state competition.

I wonder if the best way to think about this is to shine a spotlight on what policies are

working in certain states and what policies aren't working in certain states and almost amplify

the different approaches to see what what is best practice. I mean, as an example,

not everyone knows this, but in Austin, Texas rental rates have fallen for four or five years in a row

while it's one of the fastest growing cities in the country. And so I happen to know people that

fought for the NIMBY policies that were changed here. And that's an example of a policy that

appears to be working. A lot of people like to talk about housing prices and a concern. And

they pass policies where like government builds buildings for $500,000 a unit or something.

And there's no proof that works. And so I like this idea of like state versus state competition.

It's such an interesting point. The way that politics has played into the AI story, especially recently,

in contrast with your previous point, which was your view on Silicon Valley and Silicon Valley

success is it was very, very far away from DC. These were very separate worlds. And it does,

you bring up this point, it's got me thinking like it does seem as though the worlds of Silicon

Valley and Washington are starting to kind of mesh into one another. And we're even seeing,

many tech executives, tech investors, David Sax would be an example moving into Washington,

taking up positions in government and the two are becoming intertwined. I just naturally have

like an uneasiness, I guess, about that concept. But I'm not exactly sure why. So I'd be

interested to hear what you make of that. Why is that happening? And what does it mean for the future?

I mean, I share that unease with you Ed. But it comes from a place of, there was a phrase,

I think Andrews and Horace used a lot called little tech. And what they mean is the two-person

entrepreneur. And there's this idealism that many of us that have lived in Silicon Valley and

practice venture capital love to believe that two people on a PowerPoint can create a new idea

and become disruptive and create this huge company and economic wealth and whatnot.

If every new category is immensely regulated, that kind of goes away, because you need people

with connections you need. And part of what you're talking about is crypto, which got started

without it, but now is heavily dependent on whether or not regulation goes a certain way.

Many venture capitalists have gotten comfortable with funding military equipment companies,

which wasn't a thing ever during my career as a venture capitalist. That requires connections

and approvals and spending tons of time at the Pentagon. So there's these new areas there.

And now AI, where very young companies are begging for regulation, which is not anything I've

seen in my career either. So I agree that it's happening. It makes me uneasy because I like to believe

in this more idealistic world than one where who you know matters to get a startup off the ground.

And there's places in between. I think the fact that I can earn 4% on my circle stable

coin, via Coinbase is awesome and disruptive to a heavily regulatory captured finance industry that's

been that way for 50 years. And there's a battle that's, you know, there's an article out today

where the circle stock is down because there's a draft that wants to make it illegal for them to

pay that yield. So that's one where I've kind of in the middle, like I think the bigger regulatory

captures is the actual banks and not crypto. I think stable coins could be wildly disruptive. But

once those stable companies become big, will they turn around and use regulatory capture against

the next one? Probably. I think regulatory capture in the US is a huge problem, unrelated to

whether Silicon Valley is a part of it or not. Yeah, it sounds like we probably all agree that

what is best is for a market where the disruption is readily available and it's frequent

where that can happen. You can have a new guy enter the scene, burst onto the scene and then create

real disruption, create real value. And when you look at the most valuable companies in the world

today, it's like they're all kind of the same handful of companies and they're all acquiring the same

talent in the AI space. I mean, I guess the new players are open AI as an example. But then you

look at the shelves of open AI, Microsoft being one of them who owns a significant portion of

their profits. It's like it all seems to be the same handful of players. And I guess the next question

becomes how do you address that? Like if we want to create a world, especially in the venture

capital industry where young, new talent can succeed and they can take on the big players like

meta, like Microsoft, how do you actually create that environment? A skeptic would push back on

you ahead and say open AI and entropic, you know, came out of nowhere and they're already huge and

and someone I think could even make the argument that they may have done to their host,

what Microsoft did to IBM. It's not clear to me that owning a piece of the thing

protects you against disruption, right? And there's a chance that they've already

birthed these two companies into a place where they're going to turn around and be disruptive

to the people that gave them the money. I think that's possible. If you separate those two things

and just look at maybe the mag seven pre AI and look at how big they got, I've talked to a few

people in the policy, in the public policy world that look at that type of problem. And I do

kind of think that breaking stuff up is the better alternative to trying to regulate them,

because when they regulate them, you know, the incumbents help write the regulations. I think

it just further in sconsism. There was a period where they broke up AT&T and disqualified

their patent portfolio and that birthed all kind of innovation. I think that had Microsoft not

been under threat in the late 90s, you may not have seen Amazon or Google or a lot of companies

you may not have seen. If they had been allowed to push through the browser the way they had moved

up the app stack. And they were certainly capable of it. But they got, they got, there was kind

of a ring fence put around the browser. So if we believe network effects are something or making

these companies too big and you want to do something, and I'm not arguing you have to, but you want

to do something. I think the dismantling, doing something abrupt in one time that changes the

field is better than trying to, you know, say prove to us you're not like the people try this with

Google all the time. Prove to us you're not favoring your own products over the competitors

in Google search. Like there's the ability to enforce that over long run is very difficult.

What happens when you make that claim in Silicon Valley? Because I feel like it's been people

have pushed for it. But it's been shut down because it's, it's, it's too much. It's overbearing.

You can't just come in and break things up. Like how do people in Silicon Valley that the leaders

in the decision-makers react when you suggest that that might actually be a good idea?

I mean, I don't think they talk about it a lot. The people that that are sitting in the positions

of power at those big companies are obviously going to push back and tell you how competitive

their world is and say, you know, if you're, if you're soon to are you're going to say, look,

opening eyes, competing with search, like they just came out of nowhere like this is highly

competitive. I don't know that you're going to get any unique insight out of them. But look,

the point of there's a concept in an economic theory called pure competition and there's a

Wikipedia page on it. But the idea is that if you have like capitalism thrives when you have

pure competition and marginal revenue goes down to marginal cost. And if we have companies that are

that are extracting excessive rent for extremely long periods of time and have really, really high

margins, it's indicative. I would argue that this, I don't think you're going to get a lot of other

people in Silicon Valley that would be willing to say this, but it might be indicative of market

failure rather than market success. We'll be right back and for even more

markets content, sign up for our newsletter at profgmedia.substac.com.

This is advertiser content brought to you by Virgin Atlantic Ed a couple weeks back. I got you a

birthday gift not to pair myself on the back, but it was a pretty good one. It was indeed. You

surprised me with Virgin Atlantic upper-class tickets to London. So tell us all about it. It was

pretty incredible. From the moment I entered that upper-class cabin, I have to tell you I felt like

a VIP. Anything I needed to drink, snack, assistance with the seats. Flat seats. Flat seats.

Flat seats. Exactly. Had the four-course meal, got my champagne, very delicious, enjoyed the food.

And the journey home. The journey home was great. I went to the Virgin Atlantic LHR Clubhouse.

That's the Heathrow Clubhouse. Heathrow Clubhouse was awesome. Got myself a coffee.

Headed over to the meditation pod that they called the Somadome. Kind of felt like a sort of spaceship

where you relax and think nice thoughts. So I did that for a little bit. Then we went over to the

wing, which are these acoustically sealed booths where you could do some work. You could even record

a podcast. I didn't do that, but maybe I should have. It was a very enjoyable experience.

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credit karma app. We're back with Profty Markets. When you think about an ecosystem, well I'm

going to ask more specific question. You're not necessarily your best investment but your most

of famous investment is Uber. And Autonomous is getting a ton of attention right now. And I said on

on pivot that I thought the biggest winner in and I'm talking your book a little bit here. The

biggest winner and Autonomous may not be Waymo. It may be Uber. I'm curious. I would love to just

get your recognizing, I don't know if you've sold out your shares, but recognizing you're going

to have a bit of a bias here. Break down for us who you think is someone who's been early to the

game, not an Autonomous, but in ride hailing. Who do you think the winners and losers will be an

Autonomous? Well, I think it depends heavily on whether or not there is demonstrable differentiation

at different levels in the stack. So all things being equal, I would say that the network effect

of the Uber system, which is what I think led to the wild success, is would stay intact.

If there were one vendor in Autonomous that got so far out in front of everyone else,

then that person's going to have the ability to disrupt up to a certain level. And so the peak

from the difference from peak to trough every day is about 4x. And so it's pretty easy for a Waymo

to compete in the first 25% of a market. As you try and go up, you'd have to ask yourself

questions about how active you want and utilization rates that you want, because you can't

really build a fleet to peak if you understand what I'm saying. And so we'll see. I mean,

obviously what Dara is doing is running out and partnering with every AV vendor possible he can.

The approach that I had been pushing for, which didn't play out, but was one where you would

actually embrace open source ideals around the Autonomous stack as many places as you can,

because if that piece of the stack is more of a commodity, then the network will win. There's

just no doubt about it. So distinctive professional advice around what industry to go into.

What advice would you have for a lot of young people listening to the show, especially young men?

What advice, maybe on a more personal level, would you offer to your 25-year-old self?

Well, I have a hard time not reflecting on the book that I've been talking so much about in this

window, and I've come to believe that if you were pointed at something that you just have a

remarkable obsession with, and other people have made that statement, Paul Graham has this statement

about disinterested obsession, you're just going to have all this energy to excel yourself past

everyone else. It may be that that's impossible for some, like they just don't have that thing

that they're most obsessed with, but I think your job security is higher being differentiated

and being a constant learner. In almost any field, then you are picking a field because you

think the field is safe if you enter that field and you're ambivalent about whether you're making

yourself better or not. Do you have children? Yes. Any thoughts to young or any advice to young

dads? I mean, I listen to a lot of your stuff, Scott, and I agree with most of what you say,

like there is a, we've gotten ourselves in this game. This Jonathan Height calls it the resume

arms race. We're starting in sixth grade. We're so worried about the child getting into a good

school that we start overpacking their schedule with lacrosse lessons and Mandarin lessons and

volunteering at the SBCA. The kids today, their schedules are so booked relative to when I grew up

and there's not a lot of free time. By the time they get to the end of their senior year in college,

they're so tired. They're just tired of grinding that they want to just take a year off or they

just want to relax or they're really burnt out. This is part of the reason why

I tilt towards this fascination thing is it just doesn't feel like a grind. If you can get someone

in a lane doing something that they really get emotional, you hear this word flow. If that's

part of what they're doing, then I think they got a better chance of feeling fulfilled than not

having anxiety. What would be your advice to someone who is trying to seek that flow state?

They know that in order to win, especially in a world of AI, they need to be enthusiastic and have

a lot of interest, curiosity, high energy, but they can't locate that. What would be your advice

to them? Keep exploring, keep looking. Dave Evans has these stats that like five years after

college, 40 percent of people are no longer in their major and like 10 years after it's a much

higher number. I worry that we put these children through so much of a grind. They have almost a

sunk-cost fallacy that they have to deliver in that lane and it's just not true. I think being

open-minded to the notion that you can move around and explore is useful. There's a really cool

idea I stole from one of the acquired podcasts. He created a side hustle at every job he went to,

which is pretty, pretty unique idea, but when he would land, he would say, if I'm willing to work

extra well, you let me do this other thing also. He got two shots on goal, if you will, at the same

time. At Microsoft, he helped create Microsoft Garage, which was differentiating for him and

caused him to meet a bunch of entrepreneurs. He wouldn't have met otherwise. That got him into a

job at Adventure Capitalist at Maveron and he asked them as a side hustle if he could do a podcast

and you can see where that took him there. That's just one, there's many other ideas in the book,

but keep exploring, keep moving around, keep looking for it. Even in that movement process,

I think you can differentiate yourself. My final question, this is ultimately a market show where

we try to understand markets and try to get rich. You are a legendary investor. What is the

difference between a good investor and a great investor in your view? The first thing to pop to my

mind is just like being a student of the game and like studying and this is advice I have in my

book for anyone in any field, but there are a handful of investors who have read all Buffett's

letters and kind of hang on every word when Howard Marx puts out a new letter. There's a ton

of information out there about investing and people or rating today. One of the most amazing

things about this AI world is if you want to learn something, it's never been easier in the history

of the world to go learn and study. There's podcasts with people like yourselves. There's YouTube,

videos, interviews with people. You can go study, study, study. I think Toby from Shopify, someone

asked him is number one piece of advice. He just said read more books. And I really, for me, that's the

thing. The people that are best at it are students of it, like constantly studying it. And by the way,

if you have that mindset and you make a wrong investment or someone invest in a company that you

said no to, it triggers in your brain, oh shit, I've got something else to learn. And that creates

anxiety. Oh, I got to go understand why that smart investor thought differently than I did. So

that it all goes back to that like infinite curiosity in your field. Bill Gurley has been general

partner at Benchmark Capital since 1999 prior to Benchmark Bill was a partner with Humber Wimbled

Venture Partners and a top ranked research analyst on Wall Street before his investment career

Bill was a design engineer at Compact Computer. Bill authors the long running above the crowd blog

which focuses on the evolution and economics of high technology businesses. His new book running

down a dream how to thrive in a career you actually love is available now. Bill, this was a pleasure.

Thank you so much. Thanks for having me on. Thanks Bill, nice to see you.

Edward, what do you think? I'm a big fan of this guy. I think he's a legend of the game and I was kind of,

I was happy to hear him speak candidly about the problems in the industry that seem to have grown.

I just think it's always refreshing when a leader is able to kind of just be unrestrained and say,

this is a real problem, especially when he talked about the circular deals. I think the question

increasingly becomes what are we going to do about it? Maybe it's just going to be that you need a

self-correcting mechanism in the same way that it's always been. But I appreciate his willingness to

just discuss it so openly and I think his advice to young people is also great. I totally agree with

his views on curiosity and how essential that is in an AI era. What do you think? He's right about

the circular deals. The whole community has gotten so strange. I think that the community has basically

said we're over-invested. We can no longer get market returns for our LPs by doing what we're

supposed to do and that is find small companies and nurture them along the way and do the hard work.

So we're going to basically migrate upwards and they have custody of the consumer. Just the same

way Uber has custody of the consumer and then can put in front of them whatever autonomous

technology that Uber controls or the same way Apple can extract 20 billion dollars from a search

under because they have custody of the billion wealthiest consumers in the world. VCs recognize

they had custody of the relationship with the entrepreneur. So what they said is, okay, if you're

scaling instead of handing you over to Goldman Sachs in the public markets, we're going to maintain

that custody of the relationship and we're going to continue to fund you. So we're going to

essentially maintain that custody of the relationship and the returns until which point all the

returns have been squeezed out of this shit and then we'll foist our our shit on the public markets

as a last stop in the financing round. So they have migrated upstream in order to do that.

They now have to and can raise tens of billions of dollars and then put it to work and what

traditionally would be the financing ecosystem of the public markets which you have spoken a lot

about that the downside of that is that the average retail investor no longer has access to

those returns. I mean, I think when I think when Google would public it out of valuation of

just a couple billion dollars, I think. Yeah, I mean, if Alphabet started today, it would have

gone public when it was worth two trillion dollars. It would go public now. Yeah. So it's it's an

entirely different ecosystem. It's it's also incredible like most industries that as they are a lot

as it's the genie coefficient is really high and that is it's not only a small number of firms

making all the returns. It's a small number of partners at a small number of firms can

solve about deal flow. Like when I was when I was raising money, there were just two or three

VC firms. If you got a term sheet from Cliner, Sequoia and then actually benchmark was sort of the

emerging Pepsi generation. If you got a term sheet from one of those three, you took it because

what it did was it connoted your ability to raise capital further down the road because of the good

housekeeping seal of approval. Whereas when you go public, Goldman taking to public gets to a pop

but a year later no one cares who took you public. So it in it's now played out in spades. If you

get a term sheet from general catalyst, you know, you're going to take you're going to take their

money because and so as a result, they see everything. So the the aggregation in capital or the

returns of all of them clustered. I mean, there are there are so many VC funds. The kill zone and

this is true in private equity and hedge funds and the VCs, there's the Titanic iconic brands that

are able to raise this billions of dollars to get all the deal flow. There's the hyper focused

funds that do high speed frequency trading for, you know, utility stocks in Spain that are just so

focused and and then everyone in the middle isn't the kill zone. They're just getting taken out.

You know, God help you if you're a four hundred million dollar head long short hedge fund or a,

you know, a one or three billion dollar private equity fund right now that's not very focused. It's

everyone wants to be in, you know, TPG or Citadel or or general catalysts and then and there's

some tiny niche ones that are super focused and everyone in the middle is just getting crushed.

It's so interesting because part of what he was describing when you asked that question to

bill about how has this industry changed? How has Silicon Valley changed? Part of what he was

describing was this transition from a world that was predicated on the underdog, the insurgent

versus the big players and the institutions and over time slowly crystallizing into its own

form of institutional bureaucracy of a different kind sort of the transition from little tech to

big tech where we all used to be we want to disrupt, we want to disrupt, we want to take on the

big dogs and suddenly you wake up 20 years later and now we're the big dogs and it's the same

dynamic when it comes to what he described between DC versus Silicon Valley.

And his view was Silicon Valley was a great place because it got away from the regulators,

it got away from the bureaucracy. We were there was the Wild West, we were the insurgents and now

we find them all migrating back into Washington and now they are becoming part of the establishment

and so you could almost sense the cognitive dissonance in bill where he knows like this isn't who we

are this is not what this was supposed to be but suddenly in 2026 all of these players have

become their own form of institutional bureaucracy they are their own form of the big dogs and

we're all kind of sitting there like well what happened to the underdog what happened to all the

excitement about that and the disruptors coming in and he said it himself the people in Silicon

Valley don't want companies to get broken up they don't want to see that disruption because

they don't want to be disrupted they all of those companies now it's a very interesting dynamic

of power also he the other interesting point was he said he felt there was a lot of catastrophizing

around AI I was interested to yeah well good I'm glad you enjoyed it and I just want you to go

away as money from a venture capitalist and have a down quarter and see how much you think they're

great guys yeah yeah you're right I should try it I'll play that role with you but you know what this

bonus season I'm going to act like a VC I like I like I'm going to impress you I'm going to raise

a big old bonus there you go this episode was produced by Claire Miller and Alison Weiss and

engineered by Benjamin Spencer our video editor is Jorge Corti our research team is Dash Llan

is Bella Kinsel Christiano Donahue and Mia Silverio Jake McPherson is our social producer Drew

borrows is our technical director and Catherine Dillon is our executive producer thank you for

listening to Prof. you markets from Prof. you media if you like what you heard give us a follow

and join us for a fresh take on markets on Monday

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