Alex Danco – Scarcity, Abundance and Bubbles - [Invest Like the Best, EP.121]

I know firsthand how complex the tech stack is for asset managers, and seemingly every new tool and data source makes the problem even worse, adding more complexity, more headcount, and more risk. Ridgeline offers a better way forward, one unified platform that automates away all that complexity across portfolio accounting, reconciliation, reporting, trading, compliance, and more, all at scale. Ridgeline is revolutionizing investment management, helping ambitious firms scale faster, operate smarter, and stay ahead of the curve. See what Ridgeline can unlock for your firm. Schedule a demo at ridgelineapps.com. Hello and welcome, everyone. I'm Patrick O'Shaughnessy, and this is Invest Like the Best. This show is an open-ended exploration of markets, ideas, methods, stories, and of strategies that will help you better invest both your time and your money. You can learn more and stay up to date at investorfieldguide.com. Patrick O'Shaughnessy is the CEO of O'Shaughnessy Asset Management. All opinions expressed by Patrick and podcast guests are solely their own opinions and do not reflect the opinion of O'Shaughnessy Asset Management. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions. Clients of O'Shaughnessy Asset Management may maintain positions in the securities discussed in this podcast. My guest this week is Alex Danko. Alex is a member of the Discover team at Social Capital, has a background in biology, and has written about all things tech and business. While Alex is only 30, it seems like he has spent decades thinking about all the topics that we discuss, from changing business models to railroads, to the shift from products to functions, and the rise and fall of asset bubbles. I hope you enjoy this wide-ranging conversation. So Alex, we're going to kind of go all over the place. I've heard you before. I've read a lot of your work. We will cover some of the same topics, but hopefully explore a lot of new ground as well. Probably good framing is just your day job. Describe what it is that you do on the Discover team as social capital, and then we'll kind of transition into current investment opportunities, bubbles, scarcity versus abundance, all these kind of interesting topics. Sounds great. Thanks again for having me.

I work at Social Capital, a Silicon Valley venture capital firm and mission-driven business out in Palo Alto, although I live in Toronto where we are right now, so I make the trip back and forth on a fairly routine basis. But at Social Capital, I work on a team called the Discover Team, along with my colleagues Jay Zaveria and Nicole Englehart. And we do something that I just think can only be described as really fun and very challenging, but that I'm very lucky to get to do, which is we try to, rather than see all the companies that are coming in and look at a whole bunch of deal flow and try to triage through companies and pick winners and manage them, we sit down and think, let's start with a problem we want to solve and then go from there. We literally have a list of 40 hard problems. It's in a Google Doc. I'll put this in the show notes if you have show notes. It's literally a list you can go onto it and says, here are 40 problems that we are interested in building solutions for by 2045. Give two examples. Sure. Is the air we breathe clean? How do we know if the air we breathe is clean? Do we know that right outside this is safe for us to read? How do we know? And we have a company called Aclama in our portfolio that's working on this, for example. Can we create, grow, and eat food that is more nutritious and more safe for us in a way that still creates a safe and durable and resilient food industry for everybody and food ecosystem for everybody? So all sorts of problems that really have to do with kind of the basics on Maslow's hierarchy. So what we do is we say, we'll start with an area. So right now we might look at something in, typically these are very hard technological areas like synthetic biology or in deep into technical infrastructure. We really like companies that are building sort of the guts down below where nobody has heard or seen of this stuff. And then say, okay, what is the one company we should help make? What is the one company that needs to exist? We can't find it. And we feel like it's just urgently needed over the next many years. So we'll go look for that company. We will go to spend a lot of time learning and I think developing a respect for these complicated industries and developing a respect for the complexity. I think this is very important for entrepreneurs and investors if you are tackling somewhere like the food industry or healthcare or education or anywhere where there are just layers and layers of complexity. And if you walk in sort of blindly saying, I'm going to go disrupt something, right? I'm going to go create a great business.

You will miss out on, I think, a lot of both the challenges that are going to hit you, but also some of the opportunities there that just take spending a lot of time with people and really digging in your fingernails. Then once we've spent a bunch of time doing this, we will go try to find one particular entrepreneur or one particular company that's early in its life cycle and say, we want to back you. We want to help go build this. We have a process where we will experiment around ideas. We'll commit small amounts of money to do experiments, usually around, can we pull off this technical risk? Can we build this technical thing? If we do, then it'll be worth something. And if it's not, well, it won't be worth anything. And we'll know because the lights won't turn on when we turn on the switch. What's the turnover like on that list of 40 ideas? And how do you determine if something gets on that list? I'm a big believer that... It's all about asking the right questions now. Answering seems easier and easier. So how do you source that list? How does that come to be? It's a great question. So we're always opening to changing our list if we think of more urgent problems that we decide are worthy of joining the list and maybe bumping something else off. But I think the essential characteristic of our list is that we try our best to not include the answer in the question. So an example of, I think, a bad question for this would be, how can we use 3D printing to build cheaper houses? It's like you've kind of created a leading question for yourselves. Instead, you might want to ask something that at first is more general. How can we make sure that nobody is priced out of living? And thinking about it in those terms, although they're very broad and they're very open, may lead you to some counterintuitive ways to think about the problem that you may not have appreciated before. Off the top of your head, I'm curious, if you had to name what you think is the hardest of the 40 problems right now, or the one that at least that you're struggling with the most, what would it be? I'll give you two different answers. So amidst the problems that we are actively working on and actively doing work, you know, some of the problems in biology that we're tackling are very, very hard. I'm a biologist by training. That's my background. I love biology. I think that we are entering, about to enter this golden age.

of creating new biology businesses that are going to do an unbelievable amount of work and create an enormous amount of value. But man, it's hard, right? It is harder than software, right? It is much harder than software. So a lot of those particular challenges are tough. Aside from that, in terms of problems that we honestly are not even tackling right now because it's just not how we've been spending our time just because they're problems that are honestly going to be around forever, something that interests me a lot personally is housing. I think housing is just one of those very tough issues where there are no easy solutions. And a lot of the classic villains that we point our fingers and say, well, that's the problem. The problem is, you know, the mortgage interest deduction or the problem is this particular way rent control works or whatever it is. It's like every problem we can point to is like there for some very entrenched in real reason. You can't casually go in and say, oh, well, the problem is X and I'm going to go disrupt it with my software company. So say more about housing. So what intrigues you about the problem? What have been some of the interesting findings aside from this kind of entrenched interest, which is kind of always what you see with housing? I'll answer sort of by starting with something that I've changed my mind about recently, and I think this is a good way into this. I was raised with my peers, and I grew up in Vermont. I grew up on the East Coast, you know, and I think an audience that is familiar to many of your listeners and many of the people we spend around, where we really love the idea of big cities. We love density. We have a particular coastal viewpoint around what is good. And the counterpoint to this is the suburbs are bad. I definitely had this kind of anti-suburban bias for no real reason. It was just there growing up. The suburbs are soulless. They're cookie-cutter. They have no form. They have no livelihood. They are something that has negative characteristics to them. I've since come to appreciate that the suburbs are actually incredibly important to the way that North America works in particular and to the dynamism of this place.

I think Toronto is a fantastic example. If you look at Toronto, where we're sitting here, it's one of the most diverse cities of the world. It's a magnet for immigrants and for entrepreneurship and new people who are coming to Canada to build their life. Do you think they're coming downtown where you have to buy into something that is already expensive? No, unless you're independently wealthy. It's like if you want to get established from very little, you have to go to where things are cheap and to where your people are and to where you can get a foot in the door. And that's the suburbs. The reason why I'm talking about the suburbs here is because when we think about housing, housing and especially the land on which it sits is a really problematic sort of good in the sense that it's what I would call positionally scarce. The price of land, for the most part, unless you're talking about natural resources or something like that, which we're not, basically just has to do with what other people consider the price of land to be and who you are near and who you are closer to and who is in your way and things like that. I think if you went back 100 years, we had this setup for cities where it was easier back then to move people than it was to move goods. people could walk or they could take horses if you had a horse. But for the most part, people could carry themselves around, whereas goods could only be carried by train or by boat. So because of that, the industry had to be where the railroad lines were, which is at the center of town. And then people would either walk to the factories where the jobs were, or if you were wealthy, you could take a carriage or you could take a train in from farther. So you had this characteristic where the closer you were to the factory, land was more expensive because it was more productive, but also it was less desirable to live. And if you were rich, you could afford to live somewhere far away because you could pay to go that extra distance. Then something interesting happened with the car and also, I think more importantly, with the truck. When trucks came about, it became easier to move goods than it was to move people. They both became easier, but the real transformation was with goods. What happened was that factories, you know, where we make things, like what we do with things, moved out into the suburbs.

where land was cheap, where a price per square foot wasn't so high because you no longer needed to be near the railroad line in the center of town. You could be out by the highway. So you got this big inversion where a lot of the jobs sort of moved out and decentralized out from the center. And a lot of people, a lot of the attractive places to live sort of also spread out with them. And then we got a similar kind of relationship where where you lived was not this acute hyper-concentration downtown either, because now it was nice to live out, and the downtown sort of emptied out. Had some really significant social problems. But now, this is a roundabout way of answering your question, we're getting back to this third point, which is we have this reinversion again, where we have all these new class of jobs, like these creative class jobs, like Richard Florida calls them, where if your business is creating new forms, not just new forms of art, but if you're a lawyer, if you are a startup person, if you are an accountant, if you are in anything, you have to be around where other people are. The downtown now becomes a very desirable place to live again. And we have another complicating factor, which is now there's lots of traffic and lots of problems with this. So what we've all gotten to with this, this is a roundabout answer of saying, in the past, whether it was 100 years ago before cars or 50 years ago at the beginning of cars in the suburbs, there was a negative feedback dynamic at play, which was... You want to live close, but you also want to live far. And living close was good, but it was expensive. Or living far was less good, but it was cheaper or whatever. Now we are having this positive feedback effect, which is the closer you are, the more expensive it's going to be. So if you have less money, you get pushed farther out. And then you are literally sitting behind people commuting. So you get something called commuting inequality. People are literally paying with their time. And I think that's actually quite...

dangerous and problematic because this is a tendency to reinforce over time. That's fascinating stuff. So then talk about that from an investment perspective. So if this is a problem, which you played out nicely in sort of an evolution of housing, where does the investment component come in here? And how do you think about the spot in this that will create an attractive return? So if you want to look at what is the... biggest trend for what is going to matter for how we are laid out the way that we are. It's the way that transportation is changing. So everybody talks about driverless cars, right? What is going to happen with driverless cars? It's like, well, you know, they are going to happen. They're not going to happen on the schedule that we necessarily want. And they're not necessarily going to look the way we want, but they are going to happen. So we should get used to that. And so it's funny. I was just talking with David Perel on his podcast the other day. We came to a similar topic, which is what are they going to look like? And what is it that they're going to be carrying? I would suggest, this is my belief, that driverless cars are not really going to be cars at first. They're going to be trucks. As in, they're not going to be moving people. They're going to be moving stuff. And the impact that they're going to have is going to be similar to what the impact of the truck was, which is it's going to be easier to move stuff to people than to move people to stuff. So a generation ago, this meant at the scale of factories and of production, now it can move one order of magnitude smaller to the order of consumption of individual things, whether we're talking by drone or by little delivery carts or whatever it is. We are getting one order of magnitude smaller in terms of how we can be laid out in terms of everything that we consume. Now, where is this going to be good for and where is it going to be bad for? Well, it's going to be incredible for the suburbs. Driverless cars are going to be a fantastic thing for the suburbs. And in my opinion, that's a good thing because the suburbs... are where a lot of the real life force of our cities are coming from now. They're where first-generation immigrants are. There are people who are building new businesses for the first time. Not startups that are in fancy downtowns, but I mean the real small businesses that are the lifeblood of North American cities are all in the suburbs. And I think a lot of the surplus of autonomous vehicles and a lot of the incredible value that's going to get unlocked is going to be in these low-lying, decentralized belts around the city.

The converse of that is that if we're not careful, driverless cars are going to absolutely destroy what make downtowns of cities work. If transportation just gets so much cheaper, it's like, well, it's immediately going to clog everything. Induced demand is, I mean, you can argue about where induced demand does and doesn't apply. Like if you make transportation cheaper, do you just fill up the lanes of the highway? You know, sometimes it depends. And again, people say, oh, well, we'll fix policy, right? Benedict Evans from Andreessen Horowitz has a very smart opinion, I think, that says the real impact of driverless cars is it moves transportation from circuit switching to packet switching. I think that's very clever, but I think it... It assumes that the civic infrastructure and government and the way that things are locally run can adapt to this in some meaningful period of time during our lives. And that may be true somewhere like China, where you can actually just write legislation and put it in place and then say, OK, starting tomorrow, this is the way that our city is going to work. You're going to have a hard time with that in North America. When you target a company that is trying to do something interesting in this space, have you been able to do so? That seems like a really hard challenge. I'll tell you one company that is a really interesting company that's doing exactly this. And I'll say, I'll ask you this. Do you know what Travis Kalanick is doing right now? Yeah, so it's the kitchen thing, right? So it's cool. Cloud Kitchens is the first branded business of this thing. But the general company is working on something called, I think it's City Storage Systems. It's like some super boring name that's boring on purpose, right? It's like the job is basically just to figure out this new relationship between transportation, retail, and real estate. And the first expression of this is a business called Cloud Kitchens, which is, hey, the nature of food is changing with this new relationship of it's easier to move things to people than people to things. If you are a restaurant owner, why should you pay for a front of house and for staff and for expensive square foot on the storefront? No, rent a kitchen and then have drivers for Uber Eats send this thing out from your place out by the highway. Really brilliant. What a rearrangement. I read about this a couple weeks ago. Well, it seems like it's going to work, but again, a hard coordination problem, I'm sure.

I want to hold biology off a little bit because hopefully we'll spend a good amount of time there given it's your background and talk about some of the frameworks that you've established for where we are in sort of the technology cycle and what has changed about the past that's relevant for investors in the future. Not just technology investors, but sort of all investors thinking about where competitive advantage will cluster. And your writing is some of my favorite on this topic. So maybe begin by talking about your idea of abundance versus scarcity. Obviously, this is a key driving factor. in moats, in profitability, and in all the things that investors care about. So start by laying out your framework for those ideas and what's changed. Big topic. Yeah, it's a lot. Let me order this for you. So we should start by contemplating this idea of scarcity. Scarcity is really fundamental to all aspects of business, particularly if you – the way that I do is you think about what businesses do is they provide access to something scarce for people who want that. We call customers. Now, if you're providing something that isn't scarce, well, then you're not doing something that's particularly useful, probably, and you're probably not going to make very much money. Actually, that's not necessarily true. You could be providing something very useful, but you're not going to make very much money. Your gross margins are going to be small. You're going to be operating at razor thin margins. You're going to face intense competitive pressures because there's nothing scarce about what you're doing. There's no moat. If you look at scarcity in the world, you can say like, well, how is it that we can overcome scarcity? One way we can do it is we can incentivize people through business formation, through markets, through the establishment of saying, I would like to go do work to deliver you this scarce thing and you're going to pay me money. We figured out trade. We figured out this idea of I'll work on my scarce area of expertise and you work on your scarce area of expertise. And then we can swap using money. Human civilization is sort of these progressive ways of us figuring out how to more effectively manage scarcity. But I think, at least from our purposes today, one of the most important ways that we conquer scarcity is technology. Technology is what allows us to transform something that is scarce into something that is abundant. Technology is like electricity or any sort of steam power or oil power meant that horsepower could go from something that was very expensive, it was very scarce, to something that was abundantly available and in many ways almost too cheap to meter.

The printing press, let's go way back, the printing press, and then the telegraph and the telephone and now the internet took communication, something that was very scarce. There was a lot of friction associated with me talking to you if you're in New York and I'm in Toronto, into something that became trivially cheap. Computing took math and the ability to do logical calculations and perform rules-based operations on things from something that was relatively expensive to something that is now trivially cheap. This is important because In the past and in the present, but if you look at the impact of technologies on areas of scarcity, what happens is we get this cycle that is repeated over and over throughout history of some resource that was previously scarce and around which many businesses were built, becoming abundant through the deployment of this technology. And then there's a period of all this new fruitful innovation, happy chaos where nobody really knows what's going on, but we try new things. And then something interesting happens, which is new scarcity reemerges around some new point of friction. Maybe it's around distribution. Maybe it's around something else. The example that I like to give is one that's out of Taleb's book, Black Swan, Giacomo the violinist. The story goes, you know, in 19th century Italy, there is this job to be done that people have, which is I would like to be entertained. And if I want musical entertainment, the only way to do that is to hire a professional musician to come to my house. So long as people like entertainment, Giacomo, the violin player, will always have a steady job. And there are only a handful of violin players in the town. So so long as there isn't a huge number of people who show up, he's got a good gig. Then something happens, which is recorded music happens. This new technology that says, hey, what used to be scarce, you know, the ability to play music. is now abundant. You can copy discs at zero marginal cost. You can distribute them. We'll get to distribution in a second, actually. But all of a sudden now, the townspeople have this great option, which is they say, hey, I can get a record from anybody. It's really cheap. I don't have to go to Giacomo. I can go to the good opera singer in Milan. I can go to somebody else. So this is great for consumers. They get all this consumer surplus out of this. They get a great deal. Prices come down. Quality goes up.

It stinks for Giacomo, though. He is facing this new kind of existential competition. To him, he had never had to face before. So you might ask, like, okay, well, what is the new scarcity that's emerging? Well, a new scarcity emerged very predictably, which is around distribution and around curation and the ability to figure out if anybody could record and get their music in front of you, who actually will. And that's how we got record labels. New point of friction emerged around distribution, around curation, around finding artists, around putting them in front of you that endured for the next 100 years only to be sliced up and repackaged with the internet 100 years later. And now instead of what used to be like the old record companies that sort of peaked up in the 90s that faced again this existential threat of their own with the internet of like, oh, distribution now became. Briefly free with Napster and with Kazaa and all those, you know, like – Kazaa. Kazaa, Morpheus, LimeWire. I remember them all, yeah. Yeah. And then we got re-bundled again into things like Spotify where now it's like instead of paying for individual packaged albums, I pay a subscription for streaming for everything. And really what I get out of Spotify is the curation. Fascinating history and change, and it highlights the need for, I guess, new businesses to identify points of emergent scarcity. You've written a lot about how the normal distribution is no longer as relevant for people's buying choices and for businesses that are going to be successful. So talk about the change from a normal distribution to this pointy business versus utility business idea that you've laid out. There's something important to realize around friction, which is anytime that we face friction in our lives, which is all the time. we face lots of choices about whether we want to spend our scarce money or our scarce time going after this thing that we want. And the more friction there is, the more factors are probably going to go into our decision. And let me give you, so the example that I give is, let's say that you are, if you live in a small town and there are relatively few options for musical entertainment, I'm going back to this music thing again, because I used to be in a band, so I know this is part of my old life. There are relatively few options and a band comes to town.

and it's $20 cover. Do you go or not? Well, you're going to probably weigh a bunch of factors. You're going to say, well, I could use that $20 for something else, or I could do this other thing, but I might like to go. Do I like this music? Do I like the people that are going? Do I like this bar? There will be many factors that you will weigh. If you live in a big city, though, and a band comes to town, you will probably not notice unless it is exactly the band you care about. So there's a big difference here between if there's a lot of friction associated with getting this thing, I'm going to consider lots of variables. As friction goes away, I will consider far fewer variables down to basically just, is this exactly what I want? Yes or no. Now, where I'm going with this is, this is a really interesting driver of, at least in my opinion, I had this sort of idea. This is the series of posts you were talking about. around this little theory I have about how the tech industry got to be organized the way it is with very differentiated companies sitting on top of a very, very undifferentiated utility technical stack, right? Which is we look at this today, you know, if you look at almost all startups, not all startups, but almost all startups. share almost all of their technical DNA. They share the same go-to-market techniques. They hire from the same pool of engineers. They raise money in the same way. In a lot of ways, we'll get to this in a second, they are, you can treat them as kind of all the same. Now, how do we like, except for one particular point of differentiation, at least facing the customer, which is what is it that you were specifically offering me today? Now, we look at this, we say, well, of course it's that way. Why would you want to build your own tech stack? you know, from the very beginning. There's no reason you would do that. What's available to you is so powerful and so cheap and so abundantly available, you would be a fool to start all the way on your own. And that's true. But we got there over many, many, many iterations of this cycle that I think is, I think you can look at Moore's Law as an illustration of how we got this. And I'll get back to this idea of normal distributions in a second. But if you look at this question of sort of how do we get to this point of very pointy businesses, very, very differentiated businesses on top of very utility infrastructure, we say,

If you think about Moore's Law, this sort of idea, this hallowed thing in the tech industry that everybody understands, right? Moore's Law was a hell of a drug. Computing just gets cheaper every year. That's just what happens. Every year, we can expect the total amount of power available to us to double per constant dollar or whatever, whatever, two years, whatever it was. Something unbelievable that is not supposed to happen for 40 years, and yet it did. Now, why? You know, it's tricky. You can't really call it a law because there's no law of nature or even law of business for that matter that says that this will happen. This is an anomaly. How did this happen? What Moore's law essentially was is it said, hey, here's a piece of hardware, right? This hardware is not going to be an IBM purpose-built application-specific integrated machine that is very heavy on performance. This is going to be a... Cheap, affordable, generally programmable and underpowered but flexible chip called the Intel 4004 or the 8008 or any of these chips that came after it is generally programmable. You can write whatever you want on top of this and you can treat this chip like an abstraction. It'll just work. Sometimes it'll break, but you can treat it like a little black box. So on top of that, we started writing things called software. So we write a software program that says, I can just trust that the computer below this will work and then we'll see what happens. So what happens? Well, we push it until it broke. First thing we try to do is we make an application that will put too much demands on the performance of the underlying thing. But what you do is we say, there's demand for this. So what that drives you to do, the chip maker is to say, well, we better make better chips because look, it's breaking our demand. It's too much. So I make more chips and I have to accommodate more different types of software because they're all coming in. We try all these different things. So the chips get better. And then what do we do? Well, we break them again. We immediately make more software that will drive the chips to break, right? To have too much performance demands on them. This is why if you project all the way forward, it's like computers get better every year, but they still always seem to be breaking all the time, especially printers for some reason. It's like no matter how many turns of performance we get, we will always take that much performance and then one more. That's just the nature of building these things because it's so cheap to do so. It's so trivial to write a new piece of software relative to the cost of developing hardware.

making my way back to this normal distribution thing. But if you look at this, this sort of cycle of Moore's law of saying, in general, if I present an abstraction to you, what this will mean is it will say, I am incentivizing you to develop very specific applications on top of this, knowing that you have this generally powerful backend resource available to you, where you are better off not building that backend, and I am better off not trying to build anything for any particular customer. We are each better off if we agree to this bargain. Now, what this will do over many, many cycles and many iterative developments of saying, you are going to make something very specific and very purpose-built that's going to overpower my hardware. And then I'm going to have to make even more general and even more useful hardware. And this turns over and over and over again from previous iterations where performance meant an Intel chip that could run faster in your box to now it means Amazon EC2 compute cycles get cheaper and cheaper with every iteration, right? It's the same idea of saying, if I just trust that what is underneath me will continue to get less and less differentiated in a more general purpose platform, I can become more and more specific with what I am building. What this does is, again, we're saying, so more specific, more pointy stuff on top of more utility infrastructure means that it has an important implication for the customer, which is it makes my switching costs go down and it makes my cost of commitment go down. I, as the customer, you know, think about in the past, let's say enterprise software, for example. In the past of enterprise software, if I agreed to buy into Oracle or something, enormous switching costs, right? Just titanic switching costs. Now, if I'm starting out with some free database that runs on top of Amazon Cloud, yeah, they're still switching costs, but they're lower. The friction to me of committing is going to be less because I can just buy a much more pointy, much more lightweight solution, knowing that other ones will be there too. What this does is, so it decreases the friction around my consumption and it turns my consumption patterns into more, is this exactly what I want? Yes, or no, else, yes. Yes, else, no. This is exactly what I want.

What that does is it in turn increases all of our consumption and increases more demands on the platform to become more undifferentiated and more general purpose. So we have a virtuous cycle, right? We have a three-sided loop that is a positive feedback loop. Customers become more frictionless in their decision-making, which drives the underlying platforms to be more general purpose, which drives these solutions to be more pointy, which in turn makes friction go down. It's a really interesting loop. This has implications for investors, obviously, because the classic example of first you described the hardware platforms, and then there became sort of everyone was a software platform, Uber for X, Uber for Y. And most of those companies failed. So maybe like the pioneers of platform building, maybe we can use platform and utility somewhat interchangeably. I like actually light and heavy business. That's the term that I like using for these. But sure, you can call them platforms. Calling them platforms is actually fine because it gets at something interesting. In terms of a lie that we hear very often get told in Silicon Valley by startups, it's like every startup pitches themselves as a platform. And you can especially tell that they're not really real about this when they say we are a very differentiated platform. Oh, really? So I just want to make sure we tie off this notion for investors of what used to be a normal distribution for these frictions and everything else and is now like either I get exactly what I want or I say no. So it creates opportunity for businesses to solve a very specific use case. But that probably also then sounds like a link. limited upside. So when you're in, especially venture style investing, where the trope is always, you need to invest in things that could be a hundred billion dollar company or a $10 billion company. Does that orphan from the venture standpoint, the pointy business? Okay. So I think that's the right way to phrase it because we are starting to see, like we have in technical eras before, a bifurcation between these small businesses and these large businesses. Let me give you another historical example, which is the railroads, which are very analogous to today's internet giants in all sorts of ways. I've written about this before. Think about Union Pacific as like the AWS of its time. If you wanted to settle the American frontier and you wanted to build a new town, this is a little bit like saying, I want to build a new company. Am I going to cut down my lumber and build everything from scratch? No, you're just shipping it on Union Pacific. That's just the way it's going to be. And they turn town building into a much lighter exercise that could sit on top of the railroad's heavy infrastructure. Why this matters is...

If you look at those sorts of patterns, which is, first of all, there was a scarcity. The scarcity was around distribution of people and things in movement. Railroads turned that scarcity into abundance. Now, the cost of moving over land went from expensive to being relatively cheap. So what happened? We got a bonanza of settlement around the frontier, among many other things. And we saw this explosion of new smaller businesses and smaller towns and smaller institutions and establishments that could ride on top of the railroads that could do something at a much smaller scale than you otherwise would have need to. And simultaneously, a huge bonanza of these enormous companies, the railroad, that drove all this financial innovation. They drove the way that the stock market worked to evolve, financing them and dealing with their booms and bankruptcies and all this stuff. So you had these two kinds of financing that started to separate from one another. On the one hand, you had these enormous railroad with network effect businesses where you could speculate on them, and they led to bubbles, and they led to these large things, somewhat similar to the venture capital aspect of having to bet on very, very large network effect businesses. And then simultaneously, you had... The rise of these smaller establishments that led to, honestly, I think the most important financial innovation of that cycle, which was things like credit unions, establishments that existed to finance and learn how to support these much smaller, but now much easier sorts of establishments to build. So if you look today at the venture world, we are once again seeing the split off between, on the one hand, let's look at the venture world where we have these trends towards larger and larger funding cycles, larger and larger investments, the soft banks of the world pumping these $100 million checks into companies trying to be these enormous platforms. And at the same time, we're seeing this new category of entrepreneurs that are really of the let 1,000 flowers bloom on top of this. They can't raise venture capital. But there's a Toronto company called ClearBank. that you may have heard of that is solving exactly this type of problem of saying, here's a new type of entrepreneur. We would love to be able to do something like equity financing in them. They don't want straight bank debt. That's not really right. But they don't want venture capital either. They want somebody to be able to bet on them using the fact that building these types of internet native

low friction distribution businesses have become much cheaper. Surely we must be able to finance this in a new creative way. And they're figuring it out. These are two very different worlds, but they couldn't really exist without the other. Yeah, fascinating, the bifurcation. Talk about the emergent forms of scarcity today. So if business people... founders, startups, investors in those startups are obviously trying to tap into some new source of scarcity. You hinted at it earlier, the idea of in the past, really the notion of scarcity being driven by the supply side, but maybe now it is going to be driven by the demand side. And we've touched on some of this already, but maybe package that up in terms of what investors should be looking for in terms of emergent scarcity. This is a clever way of looking at tech that I think is the difference between people inside versus people outside. A lot of people outside tech, when they think about what makes a company a tech company, they naturally think about products. This is a tech product because it has technology inside it. When we talk about tech, we're not really talking about products, we're talking about distribution. This is a tech company because it distributes thing in a technologically advanced way. So if you look at all of these big tech giants, really they're all distribution companies. Oh, Google is a tech company because it's a tech product. Really, it's a way of distributing ads to people in a very, very advanced way. That's what gives them their power. It's all these new ways of creating lower friction around distribution and them being able to claim this new spot of friction. If you look at startup financing in general, if you look at the entrepreneur who comes to the venture capitalist and you say, I am seeking your funding. I have a proposal for you. I say, I propose that the world right now is arranged in a certain way. Here's the way that this industry works. Here's the way that, let's go disrupt the corporate lunch cafeteria business together. It's currently made of here are the players in it, here are the supply chains in it, here's what people currently pay, here are all the gross margins they get. I propose that we can use the internet to disrupt this and rearrange all the different building blocks where we can get rid of one player, we can cut down the margins of player two and three, and we can rearrange it in such a way where the total friction is lower.

But the new place of friction is me, and that is what allows me to collect some money and therefore you being my investor. Would you like to bet on this and arbitrage the state of the world today versus the state of the world tomorrow if we can pull this off? If we can do that, then there will be some investor upside for us that is discontinuous and non-obvious, right? You can potentially make attractive profits there. That's really the job of the capitalist in this case is to say, Before there was a window that was closed. There was no real opportunity to make attractive profits. But now the window's open because some new tech trend, something that was scarce is now abundant. Something that was full of friction is now no friction. And I think most importantly, because of that disappearance of friction, consumer behavior is going to change. It's going to go from these normally distributed, I have to consider many variables, to this bifurcated distribution of yes, else, no. So if we look at this and we say, okay. Where should we go looking for new pieces of scarcity? Because without this new scarcity, if you don't have a concept of what is the new scarcity you're going to claim, then you're basically just saying, I'd like to go ruin the profitability of some industry and return all of that into consumer surplus and then leave no one with any business profit. It's a very altruistic mindset of you. And it's what some people accuse companies like Amazon of doing, although that's not what they do. But nonetheless, I think there's a big upsetness of people in the community. It's like, oh, all you do is you just go destroy all the profit and the ability of anybody to make any money here except for at enormous scale and in soulless ways. Hyper-efficiency. Hyper-efficiency. It's like, no, no, no. If you look at these, it's like these tech companies are not built on the premise that there will be hyper-efficiency only because there will be some new incredible inefficiency that they will own. You have to have a concept of what this is. And if you look at sort of what categories of emergent scarcity to look for.

I think, again, if we sort of look at the general trend of what happens when the distribution of something goes from being scarce to being abundant. So again, we can look at one of the big impacts of the railroads was before the railroads, it's like if I made shoes, there was only one shoemaker in the town. And if you wanted shoes, you had to come to me. And maybe there was a second shoemaker that gave me competition, but we'd find some equilibrium. With railroads, all the shoes could get made in one town in Massachusetts. This is Bill Janeway's example. You should read him on this. He's very good. All the shoes could get made in Lowell, Mass. in one giant factory, and they could get distributed relatively abundantly in train cars. Then what happened? Shoes then ended up in a department store having to compete against everything else in the department store. And what ended up mattering is this new kind of scarcity, which was placement in the retail environment, right? You got to think these concepts like shelf space, which should be unheard of beforehand. You think, why are shoes competing against appliances and against popcorn and whatever? It's like, well, that's where we are. A new form of scarcity reemerged. That had much more to do with the customer and their attention and their wants and their needs. That had more to do with sort of curation and placement and this new choke point that was the retailer's ability to influence what you buy by virtue of what they put in front of your face when you walk into the store. Do you think that this idea of choke point is maybe a simple way to just describe all business strategy that you're effectively trying to build or take hold of a choke point? It sounds very rent-seeking, like not value creative, but at the same time. by definition, almost a moat is like persistent pricing power over something, which almost has to be a choke point. I think the way to get away with this and for people to not accuse you of rent seeking is to find a way to arrange it so that the consumer is not the one paying the rent. And this is where we get to the strategy of most of these big modern tech companies today, which is what they have done is that they have all through various ways figured out some way to use Ben Thompson's language to.

aggregate all of the customers by offering them some fantastically useful product and then saying, because we have every customer, now we can force the supply side to pay the rent as opposed to the demand side. We can say, Amazon can say to the consumer, I promise you, or Google can say to the consumer, I promise you, you will never be the one who has to pay the economic rent. It's like if you stick with Gmail or if you stick with Amazon Prime or if you stick with any of these businesses, we promise you that every vendor that you get through us will be the one feeling the pain, not you. Do you think that we're going into a period of – I'm thinking back to examples like IBM's dominance for such a long period of time where you had sort of the same technology incumbent companies that tended to be massive. They tended to be the utilities, if you will, and that – battle is sort of over. Like we know what our utilities are and it's going to be incredibly hard to compete for a startup to compete on a broad scale with the Amazons of the world, the Googles of the world. And so for like, let's say, you know, you seem like similar age to me, like let's say for the rest of our investing careers, that those are basically like the players and we should stop trying to invest in the next Amazon or something. That's a good question because if you look at some of these I think Amazon in particular is a great example in that they are constantly mutating and growing new Hydra heads and reinventing themselves in this, honestly, at a terrifying rate. You're thinking, how can we compete with something that simultaneously has the discipline of a retailer, that is used to the margins of a retailer, but that is operating a web services business at the gross margin of AWS, and that consistently is building new stuff on top of it? I think, you know, part of this is this idea of if you look at inside Google or inside Amazon or inside Apple or any of these big giant companies, or, you know, an even better example would be these Chinese super networks like WeChat, right? Or Alibaba that do everything, right? They do these massive things. What they are is they are, I call these super networks, which is what they do is they start with one product that's very compelling, Google search. With that product, they develop a big backend that has to feed it. The Google Borg and everything that powers Google, all this technology that they have there.

And then they use that to sort of build the next product and then build the next product. And each of them reciprocally feeds back into this amount of data usually, but also other stuff that accumulates and accumulates and accumulates and creates this very... formidable competitive moat around this whole family of products, so long as there is actually something tying all these together. This is not the same as a conglomerate, right, that shares a common back office. It is not the same as, you know, looking at the previous generation of General, or with that Onion article, it's like Yamaha CEO pleased with production of motorcycles, alto saxophones, electric keyboards. It's like, this is not like that. Gmail is deeply tied to Google search. Amazon's third-party retail efforts are deeply tied to their ad business and their financing business and even AWS and even their, you know, Bezos has this line where it's like, we make Emmy-winning shows and Oscar-winning movies because they help us sell shoes. Who knows how direct that relationship is, but I'm sure it's there somewhere. I believe them. They all sort of create this way where it's hard to chip away at any one thing because they can make more. Before we get into some more of the specifics around... what then looks attractive for investors today if it's going to be incredibly hard to compete with these huge tech companies. So you're deploying capital, trying to earn a return. I want to talk about bubbles first. And I know this is a topic that is a favorite of yours and you've thought about a lot. You mentioned Bill Janeway once already. So maybe talk about some of his thinking on this topic as well. Talk about what your view on the utility of bubbles is and kind of when they're good and when they're bad. I like to classify bubbles into two kinds of bubbles. You might be tempted to label these as good bubbles versus bad bubbles. But I like to think of it as there's one kind of bubble that happens because everybody for a little while believes that the future is going to be different. There's another kind of bubble that happens when everybody believes that the future is going to be the same. So you should be thinking, well, is one equity bubbles and the second credit bubbles? Yeah, kind of. That's more or less how these things go around. If you look at a credit bubble in things like real estate or things like debt or things like whatever, it's when everybody collectively is like, this party will keep going.

If you look at Hayminsky and the financial instability hypothesis that he had that was unknown for a while and then became very popular in 2007, 2008. But he says, look, if you look at the phases of a credit bubble, you have these three phases. First is like the conservative phase where I am only willing to lend you money if you can pay back both my interest and my principal out of your operating profit. It's very conservative. That goes on for a little while. We're all making money. Everything's fine. So then I loosen up my standards. And you come back to me. You want another loan. You say, hey, I need another loan. You show me your business. I can't pay back my principal, but I can pay my interest. And I look at that and I say, that's fine. At the end of the loan, we'll just roll it over. We'll do a new one. But that's fine. Everybody's still making money. It's all fine. Then you come back to me for the third loan. You say, hey, I can't make my interest payment. Would you like me to give it to you in the form of more debt? You can take it in kind. That's when you know you start having some problems. You see too many PIC loans. You should maybe run for cover. But nonetheless, this idea is sort of phase one, phase two, phase three of these steps where you say when everybody is paying their interest with more debt, that's when you know it's like, all right, it's about to blow. Again, the reason why these bubbles perpetuate is because everybody sort of collectively believes for all these psychological reasons that reinforce each other that the future is going to keep going the way it is. The music is not going to stop. And real stability, right? Real stability. Price stability or whatever. Exactly. Now, if you can contrast this with the second type of bubble that we get much more often in tech or in crypto with Bitcoin or with any of these other more interesting types of asset classes that are more future-oriented, where now the future is not this party is going to keep going. It's I've seen the future and I believe. I've seen the future and it's the World Wide Web. I've seen the future and it's the railroads, whatever it is over all these times, where now what's being swept up is this story of

You have to invest now because this particular asset class is going to be some massively important part of the future, and it's going to make so much money, and you have to get it now before the price goes up. Very different kind of bubble. But there's an important similarity here that I'll get to with those type of bubbles in the venture industry. If you're starting a business, particularly if it's a weird business. Actually, let's say if you want to start a conventional business and you want to say, I want to make a restaurant. Everybody kind of understands what restaurants are. You go to the bank and you say, I want to loan. The bank says, sure, I'm willing to finance this business if I can see that this loan is sufficient for you to get to operating profit so you can pay me back. I look at your plan and I say, hey, this is good. I can understand this. We can do business together because I can understand as the banker that I can finance you in one shot. This is fine. But instead, if you come back to me and you say, I have this wild idea. There is currently no railroad today between San Francisco and Los Angeles. I bet you this railroad would make a ton of money. It's a kind of uncharted territory in there. I don't really know what's in the middle, but I bet you this is a good idea. I need $10 million to get started. So I look at you and I say, Patrick, your business model looks great. I can't find any problems with this, but I can't fund you. So you say, why? And I say, well, I look at this and I say, $10 million is not enough money for you to get to profitability. Like we both agree it's not, right? You're going to need more money, right? I look at this and I say, I am taking on this risk, which is I know that I have no hope of seeing any return unless you go back and raise more money later. Now, how is this any different from our loan situation before where I say, I know for any hope of getting any interest payments being paid back, let alone my principal back, you're going to have to borrow more money. This is tricky, right? We're at a bit of an impasse. If I had a guarantee that you had a future lender lined up.

then maybe we would do something. But you probably don't because you're doing something very risky and very new and very strange. You're creating something that doesn't exist before. So no future lender would agree to lend to you if I won't agree to lend to you. We have this problem. And this problem in general is something that you could call coordination failure. If the present and the future could coordinate with one another, we'd be able to find a discount that makes sense. But we can't. I can't talk to the future and I can't know what you're going to do because you're doing something that's unprecedented, right? You're deep into the territory of entrepreneurship here. Unless we are able to find a way for me to finance you in one shot, which is probably going to be punitively expensive for you if you're trying something really ambitious. Or you're going to have to scale back your plans and make your railroad only go from San Francisco down to like Sunnyvale or somewhere like that. So we're stuck. It is a big barrier on our ability to do these audacious new types of problems where there is no blueprint. Unless, unless we're in a bubble. Now in a bubble, this problem goes away. Now why does it go away? Well, it goes away because I have a real reason to invest in you now if the price is going to be higher tomorrow. All of a sudden, the railroad asset class is booming and the stock prices of these speculative railroad companies being hyped up by promoters are going up and up and up with every passive week. I have an urgent need to invest in you today, which is the price is going up. I can sell it tomorrow for a higher price. Of course I need to do this. So this fear of losing your capital and fear of being out overexposed gets replaced by FOMO, right? Just becomes, if I don't do it now, somebody else is going to do it and I'm going to feel like a sucker later. What this does is it solves this really important... coordination failure problem of figuring out what the discount is by creating a negative discount. It just says like, nope, the discount is going to be replaced by hype. That is how we are going to do this. So what we've effectively done is said like, so long as you can create this environment where everybody is willing to suspend any rational calculation for whether these investments are sound, we can unlock a lot of money. We can unlock a lot of resources and people's time and people's attention into going and building the future.

And traditionally, it's like we have either needed either major financial bubbles or large-scale mission-driven government spending, which again, so it's different in the sense that it's not this whack irresponsibility, but it is similar in the sense that it is money that is invested that is decoupled from real financial return, right? It's like you need those in order to break through this initial barrier of There's no way I can finance this with multiple funding rounds if you're building something that is new and unprecedented and has never existed before. Do you think it's true that equity bubbles specifically are almost always oriented around the utility or platform side of the ledger? I think a lot of the rhetoric is around that, but not always. I mean, look at the dot-com bubble, right? Pets.com, right? It's Webvan. It's like, these are not platform businesses. This is, oh my goodness. I guess I mean like the origins of it, right? That there's sort of this like, there's this laying of a new utility layer that creates the seeds. There has to be some compelling story with a real element of truth to it for why something fundamentally has gone from being scarce to being abundant, right? Without this, there will not be a reason for a large enough people to temporarily lose their minds. So as an investor then, I'm sorry to keep trying this back. No, no, no. That's always my lens and my bias. Talk about some of your favorite bubbles historically and maybe what we might learn from them. And then also prospectively, you've talked about some of the signs, but bubbles by definition are bubbles because they suck everybody in. So there's a psychology element. But what are the best ways to identify and avoid bubbles? So I'm 30 years old. I've only really lived my professional career through one. genuine bonafide bubble, which was Bitcoin the other year, right? Which was a whole lot of fun. Just to watch and to see this spectacle happen of like, you can sort of see it happening. I remember thinking at one point, you know, looking at the price of Bitcoin steadily going up every day and thinking is like, is this what compounding looks like? You know the meme of the guy in the cartoon with the dove, the butterfly is like, is this a blank? It's like, is this compounding?

No, no, that's not compounding. This is something else, right? This is the absolute speculation. But sort of looking at this and saying, like, it's hard to stay neutral here. He kind of forces you to have a point of view about this, which is to say, like, well, do I believe or not that something really special has happened in this underlying layer? of figuring out something about trusted computing. And it's like, have we actually used cryptography to solve this important problem? And if so, is this actually a real infrastructure layer for the way that trusted computing and the way that businesses is going to work? Now, what actually happened in 2017 was we got this sort of idea around ICOs, right? This idea of like, hey, we found product market fit for cryptocurrency. It's called gambling. Right? It's like, we absolutely found a product market fit there. It's called, my neighbor bought Ethereum when it was $10, and now he's not my neighbor anymore because he bought a bigger house. I need to get some of that. It's the classic Buffett and Munger. Bubbles happen when people see their dumb neighbors getting rich. This is exactly kind of what happened, right? So all the telltale signs are there. And if you look back, you asked about some of my favorite bubbles. It's like, I think a lot of people have heard about the South Sea bubble as being one of these big sort of original ones. Look up the Mississippi bubble, which was even bigger, right? Yeah, it's like even bigger, even worse, even more hilarious. I think that has to go down as greatest bubble of all time. That's the goat, right? It's got to be John Law. He's the LeBron of bubbles. So if you're writing about bubbles in a pretty deep way right now, which I know you are, what are the most challenging ideas that you're wrestling with within the topic? So a lot has been written on bubbles, and there's famous examples, obviously. Maybe what are some of your favorite nuances around bubbles that you've found? Okay, so... I'm going to go directly to the hard question. This is a question that I've grappled with for a long time. And I think the more you wrestle with it, the less satisfied you are with anything you know, which is, is Silicon Valley today a bubble? This is a difficult question because there are a lot of compelling reasons on both sides of the argument that you could support. It's a real Rorschach test. You could say like any prior you have can be amplified by something I can bring to this argument.

If you think about bubbles as crises of undifferentiation, if you look at, say, well... What happens in a bubble? Well, a bubble is what happens when everybody briefly becomes the same. We all want the same thing. We all go build the same thing. We all temporarily throw in our lot into the same project, competing against each other as being very, very similar. And again, that is a good thing often because sometimes we cannot tackle projects unless we temporarily all become alike and start pulling in the same direction. The problem, though, is that similarity breeds conflict. You know the idea is like we don't really fight because we're different. We fight because we're the same. And then we invent differences in order to justify why we're fighting, but it's not the real cause of the fighting. Bubbles are a great example of crises of undifferentiation. And what happens when a bubble bursts is... It's bad and it's horrible and lots of things die and lots of people lose all their money and you have this big act of violence. But that does a very important function, which is it restores differentiation, brings the peace back. And it sort of brings us back into this new era that can now return to stability. Now with this new thing probably that has been built, which is the groundwork of this infrastructure has been laid. I think more importantly. Lots of new people have been brought into the industry that now has a founding culture. It has ideas. If you look at this idea of what did the 1999-2000 bubble make in terms of infrastructure, it's like, well, we laid a lot of cable. We made a lot of software backend. But most importantly, it made a lot of software engineers. Then had to go find things to do. That's really important. But going back to this idea of differentiation and undifferentiation, have you read Zero to One, Peter Thiel's book? It opens with – it has this big idea, which is like competition is for suckers. Competition is bad. You want to be as differentiated as possible. Undifferentiation only causes destruction. Scarcity again. Scarcity and abundance again. Well, so we'll get there. It's like that is definitely a very compelling thing to say. But then the next chapter, he says, what if 1999 was actually good because temporarily we all came together and realized we needed to build the future and we kind of lost our minds. We lost it in a very productive direction.

What if that was actually good? Hold on a second. But last chapter, you were saying that undifferentiation is bad because it's only destructive. But now you're saying that 1999 was good because it helped us build the future. Hold on. 1999 was a lot of things, but what it was not was differentiated. It was a bubble. We all briefly became the exact same and sort of collectively entered this hallucination of saying we're going to go build the future in this particular way. You're led to leave. There is something that we're not getting here. There is this deep conflict that we're going to need to untie that I think when you do gets you into really this sort of dark heart of how startups work. This idea of like, on the one hand, undifferentiation and competition is sameness is terrible. But on the other hand, it's really good. It's like, well. Remember earlier in our conversation when we threw out this idea of like, what if startups are actually pretty similar? If you start a software company and I start a software company, maybe you target one customer and have one value proposition and I target some very different customer and have a very another value proposition. Maybe you're a consumer and I'm enterprise. But in all the internal ways that count, we are absolutely competitors. We compete for the same money in the same term sheets with the same safe notes from the safe investors. We are competing for the same engineers who are going to work on the same backend problems who use the same engineering frameworks and who demand the same employee equity compensation. We're going to be graded on the same rubric, which is, what is your monthly growth rate? We are, for all intents and purposes, our internal value proposition, not to customers, but to the people that matter inside of Silicon Valley is, I am a lottery ticket. Who wants to buy me? We are all basically essentially alike. Now, furthermore, if we go back to our pointy and utility theme, it's like we are going to be built on top of the same tech stack. I'm not going to go reinvent everything underneath me, and neither are you, because the returns to being pointy on top of this undifferentiated mass is too great. In all the ways that count, we are alike, except for one. We can get to this in a second. The one...

true source of differentiation that is recognized in Silicon Valley is founders. Founders are rightfully seen as being unique and special, but we'll get to that in a second. But the fact that we are all alike does something really important, which is it cross-validates what we are doing, and it makes the friction of jumping on board much less. If I go into an employee and I say, hey, you want to work with us, we're taking this go-to-market approach, we use this software stack, we use this, they look around, they see every other startup doing that too, and they say, okay. You don't second guess everything because everybody is cross-validating everyone else. Everybody is cross-reinforcing everyone else. However, the more similar we are, the more we are going to compete, the more we are never going to be on this cross-collision. So you get into this real kind of conflict internally in your mind, which is – so it descends from this concept from Gregory Bateson in psychiatry actually called the double bind or the memetic double bind, which says, I love you for copying me because it validates me. And I hate you for copying me because it makes us competitors. And crucially, no escape route is possible except working harder. The only way out is through. Right, the Red Queen idea. Red Queen's race, exactly. Now, what's important about this is so this gets to this deep, deep neurosis that we have in Silicon Valley that is closely related to bubbles, which is idea of... We celebrate differentiation. We have all this rhetoric around the uniqueness and the specialness and the weirdness of specific people and things and ideas in Silicon Valley. But what really makes the place work is the fact that everything is so similar. The similarity drives this cross-validation that brings down the costs and the hesitation of doing everything. And the similarity creates this competitive drive that drives people in startups to work insane hours and work very, very hard because their peers are fighting with each other and you have too, right? It creates this culture of intense competition and very intense company building and future building in this crucible of undifferentiation. Now, undifferentiated conflict can't go on forever. Eventually, what happens? Some companies die. It happens all the time. And then when it does.

we have this very important ritual that we do around failure, which goes something like this. If you look at early civilizations that had to deal with these crises of undifferentiation all the time, right? Because back then it meant real violence, right? People actually killed each other. Many of them had this ritual in common that varied in form, but all had the same basic idea, which was human sacrifice. This is like the Girard idea. This is Girard, right? It's the human sacrifice. It's like the rituals basically all went, the community is sort of in this crisis of undifferentiation. Everyone's the same and it creates conflict. What you do is first everybody acknowledges this undifferentiation and this crisis. Then we channel all of this into some poor surrogate victim who can be chosen kind of at random, and then we kill them. And then what we do is we celebrate the fact that peace and differentiation has been restored, even though we did not actually do anything to solve the real conflict. But for a while, we all kind of pretend we did. It's like this release valve gets opened a little bit. It's like a salve for the community. And then we move on. Now, look at what happens in startups, in Silicon Valley culture. When a company dies, not a company that's being scapegoated, so not a Theranos and not something like that, but just a regular company that was well-regarded that got eight fistfuls of venture financing and is now dead because this happens. First thing we do is we say, oh, another really promising company bites the dust to venture back crucible of competition. How? That's a shame. Then what we do is over the course of the day, we slowly strip out all of the details of the company. We strip out what specifically they did, what specific steps they took, any particulars, and we just sort of refer to them. The headlines that get written say, startup who raised X million dollars dies. That's it. What we're doing is we're sort of ritualistically taking away their individual identity and replacing them with this idea of competition, which we then condemn. We do two things at once. Privately, we think, well, it's probably a good thing that this company has died so that other companies can live and can sort of exit this crucible of undifferentiation and can claim this scarce resource and can be sort of like stand on their own financially, sustainably, and can go do something useful. It's like one day if Uber dies, then Lyft can go actually be profitable. We think, well, it's a good thing because now this company is sustainable and vice versa.

But publicly, we do the opposite, which we say, is venture capital killing companies? Do VCs kill promising startups? Should we take less money? And there are a couple people, you know, like the base camp guys have like built this fantastic brand off of like, you know, saying bad things about VC every time this happens, right? There's a whole little dance we play. And then finally, we close off the ritual at the end of the day, which is we announced to nobody in particular that Silicon Valley is a place where we celebrate failure. What all of this does is it does something important, which is it recreates the magic of the bubble, which is this crisis of undifferentiation that unlocks all this creativity and all this competition and all of the frenzied company building, which is the good part of the bubble. while simultaneously kind of keeping it in check by periodically making sure that the deaths of companies are not seen as a sign that the bubble is bursting, but rather interpreted by the community as a restoration of undifferentiation and like an exhalation of a little bit, right? It's very, very cultural, but it matters a lot because it creates this continuity that takes us away from these like huge inflating bubbles and then big crashes and creates this stability that is necessary. for the Valley ecosystem to develop. So there's this interesting idea in the social capital annual letter that something like, probably an estimate, but something like 40 cents on the dollar of VC funding is ultimately becoming revenue of Facebook and Google because it's going towards paid customer acquisition. And that just seems like a completely unsustainable, ridiculous notion that investors, let's say it's Texas teachers, or I don't mean to pick on them, some generic investor is giving money to a VC who's giving money to a company who's spending 40 cents on the dollar on Google and Facebook. It gets worse than that, which is now you have some of these venture-backed companies. I think Airbnb was one example where it's like they had all this surplus cash that they didn't know what to do with, so they put it back into their own VC's funds. It's like turtles all the way down. I'm not sure how you would recursively unpack what the total fees and carry are paying off of that. It's like you get a Xenos paradox of how many. So given how much you've thought about this, what do you think the future is then for Silicon Valley or tech investing specifically in the next, I don't know, five to 10 years?

Sure. So one of the most under-talked about trends, first of all, everybody talks about what's happening on the VC side with funds getting bigger and rounds getting bigger and SoftBank has ruined the industry dynamics with their $100 million minimum check size and whatever. It's like, oh, there's too much money, too much money pursuing larger and larger deals. But meanwhile, remember, as we're getting this bifurcation into all of these smaller sub-venture scale businesses that are now making amazing things and actually making real things for consumers. And I think... That is one of the most underreported and exciting trends for me is sort of this idea of like this carpet of flowers is blooming along the forest floor. And that is what actually creates jobs and actually creates an employment and actually creates probably the most amount of real actual. dividend return to shareholders who are in the form of like these small business owners. If you look at, you know, in 1920 or whatever, you're like, what is the future of electricity? Previously, like big utilities. It was like, if you look at the electricity wars, like this is exactly what's happening. It was like Con Edison versus whoever are dueling with like the AC versus DC standards. And it's like, what is going to happen with the future of electricity? It's like, you know, look at cloud wars. It's like, what's going to happen with this investment? It's like, well. The long-term thing that happened with electricity is like everything kind of collectively calmed down. And then this new reality emerged, which is it benefited small businesses enormously. Because previously, like if you wanted to have a lot of power, right, if you wanted to have energy in wherever your place of business was, you needed to be at the scale where you could afford like a coal plant or a water power wheel or something like that. Now, any small businesses can go connect to the grid and then turn the lights on. That's kind of what's happened now. I want to close with some ideas on biology, but first we've kind of hinted at or touched on so many little pieces of advice for those that are building businesses that are investors, et cetera. These are all useful ideas, finding scarcity, differentiation, all pointy businesses, et cetera. I want to make sure that I don't miss any. Bits of recommendation that you might have for business builders, whether they be a small local suburban business or a huge tech business. One idea that comes to mind, maybe to jog your memory, is this idea of us hiring functions and building functions. So maybe functions first and any other kind of closing thoughts in this chapter of the conversation about advice for business builders.

I mean, you shouldn't take my advice on business building. But I think where we do have an interesting perspective from our point of view in Palo Alto and getting to see a lot of the new stuff that is being built is this idea of non-invented here syndrome and this realization that like... Every year, the amount of resources available to you are getting stronger and stronger and cheaper and cheaper. Don't think about this too much because if you do, you'll be like, why would I start a business this year if I could start it next year and have the same back-end firepower for less money? It's like, don't think about it too much. But you want to be in a position where you can take advantage of all of the support underneath you in a way that is as maximal as possible. So again, this sort of goes back into this idea of, If what you are doing is doing something very pointy, very specific, you're providing a service to a customer, right? You're addressing their job to be done, right? To use Clay Christensen's framework. I do think we are moving towards this world where consumers are increasingly hiring what I would call functions to do their jobs for them as opposed to buying objects or assets that do them. And I think this is an important trend for anybody who wants to go build these businesses or invest into these trends, right? value gets done for consumers and how they pay for it. So the example here would be look at Uber and look at cars. In the old days, if there is friction, it's like cars made the friction of moving around much lower, but there is still friction in the sense that you had to have one. A car costs a lot of money. And if you were going to buy a car, then it made sense to use it for everything, right? The car was a fantastic bundle, right? Once you become a car owner, once I own this car object, I'm going to use the car object to get to work and to get to the grocery store and to get to the airport and to get anywhere else I need to go. However, now what's happening is that since the friction of being able to get to any car...

has gone way down, right? Now I have a smartphone and a driver and an Uber also has a smartphone and we can connect and he can just give me a ride for a couple more dollars than it would cost me to drive the car myself, but I can just get it now, right? And get this very fast. Now, look at the relationship between me and the car has changed. I'm not hiring an object to do all these functions for me. I'm hiring one function to do an object for me. And then that function uses whatever object is available. So I'm going to call a function on my phone, which is go to airport. And then Uber is going to go find me a car and driver wherever one is available. I'll just use whichever one. So you start to shift from this mindset of a world that is populated by objects that people own and they use them to do their functions for them to now this big inversion of now a world where I have all these functions available to me and they will call on whatever object is available. I think this is pretty profound if we think about it because it just leads us to this shift in terms of One, how we consume more and more things in terms of consuming things on an ad hoc basis with lower switching costs. There's huge implications for investors in terms of what is it that you're actually going to invest into. If you look at, again, if we stay on this trend of cars for a second, right now, if you look at Uber and Lyft's moats, truly it's like their moats are around their driver networks. I cannot just start Uber tomorrow with a fleet of cars. But if the driver goes away, I could. If driverless cars actually happen on schedule and actually roll out in the way we want, where it's like, I can just kind of call any car. It's like, who's to stop Toyota and GM and Tesla for that matter of just having these big fleets of cars, these fleets of objects, right? These car objects that are financed incredibly efficiently going out and performing functions for us. This is a little vague, but I like this as a comparison. You watch baseball at all? Yeah. Do you know, okay, you ever heard of the three true outcomes? No. The three true outcomes is this fascinating paper that was written in 2000 that turned out to be utterly predictive of what would happen to baseball. This guy said, listen, baseball fundamentally is a conflict between the batter and the pitcher. Everything else is ancillary to this. And the batter and the pitcher have goals that are opposing, but not opposite. The pitcher wants outs and the batter wants runs.

And they are in conflict with one another. But sometimes, this is why you see things like sacrifice flies, right? You get something where, like, they both get what they want. The whole game of baseball is kind of like what follows from the emergent conflict between the desire for outs versus the desire for runs. And so this paper basically predicted, it says, in time, as baseball gets more and more efficient and gets played more and more perfectly, we should see more home runs, more strikeouts, and more walks and less of everything else. Two out of those three things came true. There were indeed way more home runs and there are way more strikeouts, but walks have stayed about the same. I think it's instructive why, which is walks are actually what's being negotiated between the batter and the pitcher, right? It makes sense that they're not going up or down. They vary from season to season, but walks have kind of become the scarce thing, right? It's like strikeouts will happen at some mathematical probability density function. Home runs will happen at some density function. And then walks are what is the real scarce thing, which is how you steal your runs. Now, going back to business, let's look at the supply side versus the demand side and what all of tech has done to this sort of like the wrap up theme for this. If the Internet and software has created an enormous amount of efficiency and lowered the friction and lowered all of the scarcity out there in the world and created a sort of more perfect form of competition, what does it ultimately look like? It's like who like who's the batter and who's the pitcher? Well, it's like on the one hand, you have capital. who wants to return. They have assets, and my asset might be a fleet of cars, and I want that car to provide optimal return on my bunch of assets. Then you have consumers. What they want is for their job to be done as cheaply as possible, and ideally, they want as much consumer surplus as possible. I want to get to the airport, and I want to get to the airport for as little money as possible, and I want this to be ideally either subsidized for me by a bunch of rich venture capitalists or otherwise driven down to lowest possible cost. Now, if you look at this sort of dual between the desire for the consumer to access these functions and the desire of the owner to have their assets go to work optimally, in the middle, you have this thing that is going to be fought over, which is sort of the idea of this. You can think of it as sort of the state of these networks that have to manage.

The car is going around and finding their functions. So like in Uber's case, it's like what gives Uber pricing power is surge pricing, whereas the ability to dynamically capture what is being fought over. And so long as they are in this position, it's like that is the scarcity. The scarcity is kind of this ability to take in a frictionless world, figure out how to match the this is exactly what I want is this ride right now to this place and figure out, OK, this is my moment to capture a huge amount of gross margin on individual rides. This is when people. look at Uber and they're like, is their ability to sustain gross margin over all these rides and all these cities going to maintain itself? It's like, well, so long as they own the ability to dictate surge in this thing, then yes, they are. They're absolutely going to maintain this ability to make money. I think if you look at this and then you look at across sort of all of business and the ability, all of investing into these new kinds of business, like look at Amazon. Amazon has this mighty backend infrastructure where they have assets called warehouses and called robots and server farms and whatever. that ultimately have to go fulfilling function. One consumer wants one book. I want to consume one Amazon Web Service EC2 function. I want this one specific thing as the user. Their job is to sort of coordinate and match. And again, it's like they don't actually own their warehouses probably. It's like some bank does. That bank is getting their whatever percent on their warehouse. That's fine. Amazon doesn't need to own that. What they own is this big network in the middle connecting everything together. And that is what allows them to have a phenomenally differentiated moat. That's what gives them pricing power. That's what gives them what you want to invest in. Everything that leads up to that, everything into building these platforms and building these utilities and these undifferentiated things is trying to earn shots on goal at building that. I mean, I'll definitely remember, and it's certainly impacted how I think about our business, this idea of finding points of extreme differentiation. We were actually talking before we started recording about some of the funny things I've observed about this podcast, one being the more esoteric and the longer the episodes and the more dense, the more...

listens it gets, which kind of highlights your point that if you're this like middle between differentiation and utility and broad, it's probably a no man's land. You want to actually tend toward the thing that you are the absolute best at delivering and be super specific. And also this idea of creating functions that allow people to do the jobs they want done is, I think, a powerful idea. We've gone a long way without talking about your own literal background in biology. And you mentioned at the beginning that you believe we're in a time ripe for biology-based innovation and therefore investing. So maybe highlight why is now an interesting time? Why is this an investing and business frontier? And what might we expect as people? I should put a caveat here. It may be that this time is opening up for early stage investing to be ripe to capture a whole bunch of interesting investable opportunity in biology. It may be some time before that translates into a new golden age for biopublic market companies. But who knows? I don't know. But here, I'll tell you why I'm excited about biology as sort of the next, if you want your soundbites, like the next trillion dollars of value to get created. It's like the next equivalent to like, look at how much wealth software made. Could this be the next one? Why do we care about biology? If you think about software and the internet and what makes software business models work, it's like everywhere you slice it, it comes down to this idea of zero marginal cost and zero cost of replication. So it may cost me a lot of money to make a software program, but I can then distribute that a number of times and I can run it a number of times. There's no incremental cost of doing this. So because of that, I can spend a lot of time building something very interesting, knowing that there is just a huge amount of payback that I can get from that. If you think about a cell or about a living thing, life is self-replication. That's what life is. That is self-replication that we have figured out how to do as a species and as not just our species, but as all species as life on Earth. This is a thing that emerged out of a bunch of inert chemicals. This is really cool. Life as a mechanism of self-replication should set off a bunch of early ideas. That means that if you can figure out how to do something, you can figure out how to do it at scale. Biology scales in a way that almost nothing else does.

So what this means is that although figuring out ways to engineer life to solve problems is very hard up front, if you can get them to actually do it, then you've solved a problem at scale that is beyond any of our ability to do this ever. So look at making insulin, something that we already do today. Insulin used to be something that we would have to scrape out of the pancreas of pigs and sheep and poor farm animals at great cost, a huge expense to people who are suffering from diabetes and who needed insulin. It was truly non-scalable. But if you could engineer a cell to make insulin, first of all, I can now get that cell to make as much insulin as I want. And I can make an infinite number of copies of that cell. And now, you know, well, this is actually, it's a good example. So now insulin is very cheap in every country but the United States where it's expensive because our healthcare system is really weird. So you get new emergent problems of scarcity in the way that like the American healthcare system is just impossibly layered. But in Canada, insulin is very cheap, right? In most civilized countries, insulin is very cheap. I think right now we're going through this period of time where we're starting to lay the groundwork of starting to almost forward engineer biology in some interesting ways. What I mean by forward engineer is this. Where life and where cells and where living systems differ from computers is we invented computers. We made them from scratch. We did not invent life. We are observing it and we are trying to figure out how it works from the outside in. They're like black boxes that we're slowly starting to dig into. So you can imagine a world where there's no computer science, there's no software engineering, there's no software development, but there are MacBook Pros and Intel chips and iPhones and Raspberry Pis like wandering around the real world. And slowly over time, we sort of figure out how to get them to do what we want. We don't understand why they're doing it, but we get that they're doing useful things for us. We get how to make them play memes. Then slowly we try to dig in. We figure out that there's a thing called an operating system. We figure out that there's things called files. We figure out... The logic of this a little bit. And slowly we start to say, okay, I want to try to build my own computer out of harvested parts of computers. And now we say, like, I want to try making my own thing. We're almost at the point where we can make our own computer now. So we've gotten to this point now where...

We can make synthetic cells out of naturally occurring proteins and genes and enzymes and have them work, have them self-replicate, have them do things. This is not the same as forward engineering our own life. We're still a long way from that. But we've gotten to the point where we understand it well enough that we can start to get them to do useful things for us. It's like, why does this matter? Who cares? Who cares if we can mess around with bacteria in the lab? It's like, well, I think there are four things that life can do really powerfully at scale. The first is make things. You can assemble any stuff, any carbon-based stuff into more complicated and valuable carbon-based stuff. So this could mean drugs, right? Drugs are a really obvious candidate, but it could also mean things like ways of getting nutrients in food. It could be high-value materials. It could even be more conventional building materials like making synthetic wood is actually a phenomenally interesting application of synthetic biology if you're going to do building materials that can sort of soak carbon up and have desirable properties that can be like incredibly strong. You know, you think about spider silk. how incredibly strong and tough and light spider silk is. Imagine if we could get that kind of material value in everything we want. So that's really cool. Second thing is break things down. If you look at things like pollution, things like the environment, air quality, water quality, all of this horrible negative externalities we've shoved off into the world. It's like we got to go deal with this at some point. We have many, many billions of dollars worth of work to do just of cleanup in terms that people are willing to pay for now if we can give them a way to do it. Life is a great way of cleaning things up, of sort of breaking down things that are bad into things that are smaller and inert. Third thing I would say is what I call sensing. So it's like life can be very good at sensing things out in the world. If, you know, we have a company or project that we're working on that's working on sensing lead and drinking water, right? It's like have a plant where you water it every day. And one day, if your plant's leaves turn red, go check your water.

Important, right? It's really interesting. You should give that to every school district. We should give this to every home and every place where there's a tap in North America that is at any risk. They should just have one of these plants. They cost nothing once you make them. There's life. Life is incredibly tenacious at doing this stuff. Does that exist now? We're making it. Yeah. Cool. We're making one. And then fourth thing, I would say fueling. So life is very good at transforming one kind of energy into another. And I bet you the market for energy will always exist, right? I bet you that's not going away. Plants through photosynthesis are very good at converting sunlight into chemical bonds is one thing. They can convert other things too. We will always need to move energy around. We will always need to harvest energy. We will always need to do things. And we're doing great work with solar panels. We're doing great work with the way we're dealing with energy. But I am highly confident we will always have needs for fuels, for very energy-dense things. And that's something that life excels at. So the total investable market cap into this, just in my opinion, over the long run is. Titanic. Massive. Really interesting. Maybe we could close for my closing question with just one or two company examples, whether it's something you're building that you haven't talked about or written about before, just as an encapsulation of all that we've talked about. You could mention SailDrone again. I'd be curious to hear your thoughts there. I'd love to talk about SailDrone. So SailDrone is a company that Social Capital invested into in early 2016, I believe. SailDrone is just one of those companies where you think, I'm so cool. I get to work in any proximity to these people. So what SailDrone does, quite literally, they make Giant robotic drone sailboats that sail autonomously around the ocean, collecting data that is useful and going out and serving as these kind of monitors for all types of things you might want to look at in the water. So carbon dioxide, chemical levels, acidity, whatever it is you want. So that's really neat. There are these technological marvels. We had one in our office once for an annual meeting, and it's huge. These things are maybe, I don't know, 20 feet high or something like that. They're these big boats that can catch a lot of wind. They can move around very fast. You should just go Google sail drones. Just go scroll through all the images. They're magnificent looking. But ultimately, you know.

Who cares? Who is interested in robotic floating sailboat drones? Why would this be an interesting investable business? It sort of looks like a hobby. A lot of investors they talk to are like, I just don't see where any value is coming out of this. So we looked at this and we thought, okay. First of all, there already is a large budget for understanding what is in the ocean. Government through NOAA has to pay a lot of money for research vessels and buoys to go around collecting all this data. We need to know it for the weather. We need to know it for our Coast Guard safety. We need to know it for all these reasons. We have to have things out in the ocean understanding what's up. Things like commercial fisheries need to be constantly monitoring things. Oil and gas need to be constantly monitoring things. Anybody who uses the ocean right now faces this incredible dearth of information because the ocean is big and we have almost nothing in there. So what we do right now is you either hire a research vessel, which will cost unknown tens of thousands of dollars per day to staff and crew, and you're very restricted in what you can do. Or you can use buoys that are fixed in place that send weak radio signals out and you have to try to use what you've got. Or you could go hire a sail drone and say, I just want to have these boats go around and autonomously go figure out, go sail around, go capture things. You can fix whatever sensors you want at the bottom of these boats and go say like, whatever task I need to prom, whether it's oil and gas related or fishery related, go figure it out. So the market for this already is quite big. But then if you start to think about sort of an order beyond this, which is to say, we need to stop thinking about this in terms of what is an individual boat and how much value can an individual boat go create for me, which is already large. It's a very good return on investment. If you just had drones everywhere, right, the whole ocean is just sort of covered in these things sailing around, what could we now know and what kinds of very large existential risks can we start to understand and mitigate? It's like, well, let's think about climate change. You know, one of the biggest urgent concerns about climate change is sea level rise, transiently in places, things like storm surge. Think about how much investable property in lower Manhattan.

is under threat from the next Hurricane Sandy, under threat from storm surge of any kind. It's like, well, if you look at just the insurable assets here and just the sheer amount of stakes that are involved for places like New York and Hong Kong or whatever, you'd better be sure that you have the best information at all time about what the ocean is doing, especially if there's trouble going on, if there's any sort of hurricane going on or any sort of problem. And I like to think about this. Like hurricanes are actually sort of unique as natural disasters in that you have warning before they happen. You have 72 hours before 96 hours or something. You're like, all right, we need to figure out if we're covering or not, if we are going to cover our butts, right? And if you look at insurers and reinsurers are very interested in knowing. Is the disaster going to be worse than we think or is it going to be less bad than we think? I care about this on a minute-to-minute basis. You better believe that I want the best possible information. Well, if I'm a sail drone, I have the best information. What am I going to do? I'm going to say, hey, I am at a point of friction here. I am at a point of scarcity where I have the best information and I have it now. So first of all, I can say, listen. On one hand, I have this mandate to go help make sure that everybody is safe, make sure nobody is ever caught unprepared, make sure that instances where people are caught unaware of what a storm surge could do can never happen again. Not just in New York and places where we can afford it, but anywhere in the world. Let's make this trivially cheap so that disasters will happen to fewer people than before. Second, I have some pretty valuable information that I would like to sell to you. Would you like this information now or would you like to pay me X thousand dollars to get this information five minutes before the other guy? Pretty quickly, you can get into a position where they have something that's, let's just say, investable. If you look at this as this is a toy sailboat that goes around doing science experiments and rallying climate-focused people, then you might look at this as a philanthropic investment. So they've raised money from the Schmidt Foundation and other instances where people have said, oh, I could see myself supporting this as a charity cause.

That's fine. We want to support this as a business. We think they're an incredible business. So we love opportunities like that. Well, this has been obviously wide ranging and super interesting. My closing question for everybody is to ask for the kindest thing that anyone's ever done for you. Two things that come to mind, and I think something that's important from both of them is they're both from people who are much older than I am. The first example that comes to mind, this isn't the kindest thing that anyone has ever done for me, but it's the first example that popped immediately to mind is just something that was incredibly touching and fun and joyful, and I think that we need more of in the world. Recently, we bought a house. My wife and I moved into a new place several months ago, and it's sort of a classic Toronto semi-detached house out in the East End. And our attached neighbor is an older woman named Sally. She is 92. She is a force of nature. She is still actively teaching as a professor at the University of Toronto. She is incredible. And she immediately just made us feel so at home and so welcome. And one of the first things that she did, I got a phone call from her that said, hello, welcome to the neighborhood. Look forward to meeting you soon. I'm going to need some dates for you to find out when we are throwing you a party. This is non-negotiable. I just need some dates. Please let me know. I was thinking, oh, this is pretty great. And then we went. And like she threw us just a phenomenally good welcome to the neighbor party with getting everybody together, just making it so clear that we were welcomed here and loved here right off the bat. And I just remember thinking it's like this is something that I really want our generation to learn how to do better. It's this idea of it's not people that you know. It's not people that you are trying to get socially with. It's not anything where you're pursuing some sort of goal aside from. Welcome. You're one of us now. You're here. I'm going to go out of my way to make sure we do something really special. Awesome. That's really great. Love that one. Another sort of perpetual kindness in my life that I want to highlight is sort of my grandmother, my grandma from Montreal, who I think just sort of is always one of those people that goes out of their way to make sure that people are.

just having the best day they can and knows that they're thinking of them. And it's really, it's a cross-generational value. This idea that whatever it is that you're going through your life, whether it's happy times, like we're expecting our first kid and moving into a new city, or whether it's more difficult times, it's just sort of understanding that people have been there before you. People have worked through it. Like you always have help. You always have family who's there. You always have support who's there. I think that she's just somebody that I'm also unbelievably lucky to have in my life still. She's also just... Very healthy, always with us, and just a perpetual source of love in my life. Fantastic. Two of my favorite answers in one. So thank you for that. Thanks for all your time. I'll remember this conversation. Thanks. Thanks so much for having me. This has been really fun. Hey, everyone. Patrick here again. To find more episodes of Invest Like the Best, go to investorfieldguide.com forward slash podcast. If you're a book lover, you can also sign up for my book club at InvestorFieldGuide.com forward slash book club. After you sign up, you'll receive a full investor curriculum right away and then three to four suggestions of new books every month. You can also follow me on Twitter at Patrick underscore Oshag, O-S-H-A-G. If you enjoy the show, please leave a quick review for us on iTunes, which will help more people discover Invest Like the Best. Thanks so much for listening.