SPEAKER_02
Let's say everybody's selling a banana. You can't say I'm a 5x better banana you instead You should come out and say I'm an apple and not everybody's gonna watch your apple But a hundred percent of the people who prefer apples are gonna want what you have

SPEAKER_00
I feel like I can rule the world. I know I could be what I want to I put my all in it like no days all on a road. Let's travel never looking back

SPEAKER_03
All right. Yeah, Sean this I was playing this pop podcast pretty good How'd you feel?

SPEAKER_01
It was good. It was like we showed up. No no context like what are we gonna talk about? Do I need to do I need to talk about Bitcoin? Do I need to have something smart to say about Bitcoin? Cuz I kind of just you know, I Believe I buy I hold right.

I'm like a monkey in this space I'm not like, you know, one of these experts but um, but we talked about solo biggest solo capitalist solopreneur and Some of the different kind of like things around that so I thought I thought it was actually pretty good conversation Ben was there and he goes like I liked this one because I feel like everything you said in this was Something new that I had never heard you say before he's like whereas, you know Once you listen to somebody for like hundreds of hours You kind of hear the same greatest hits over and over again. He's like this felt like new stuff

SPEAKER_03
Speaking of listening to us for hundreds of hours or listening to you at least we had a good episode We just interviewed this guy named Mike Maples. Mike was pretty cool So Mike is a little under the radar, but he started this thing called floodgate, which is a really big venture capital firm But really fascinating guy. What what all have they done? They've done lift twitch

SPEAKER_01
Twitter cruise Octa which is like a giant enterprise company that's public. So yeah, bunch of bunch of big winners that he was an investor in pretty early consider

SPEAKER_03
One of the best venture capital firms there is so real insightful guy. He kind of had a hint of biology a little bit I mean, he was like real high IQ. I've been using the word high functioning He's like a real high functioning.

Yeah, I functioning Southerner

SPEAKER_01
He had this disarming way of talking because he's got this, you know, kind of like it was a southern or Midwestern accent Yeah, and you know, very very relatable likable guy But then the things he was saying each one was like, you know, like sort of a bullet into, you know of an idea of an insight and he definitely had like a few refined ideas of where he thinks the puck is going and I appreciate that. I like that. He gave us basically these four waves He's like, you know, I believe these four inflections are happening right now And that's gonna create a bunch of opportunity and that's what I look for is like How is the world changing and then what's what's gonna be new because of these inflection points? Yeah

SPEAKER_03
I was taking notes the four things are blockchain cloud office America next the cloud culture for consumers So those are like the four things and we went into like we didn't actually go into each one entirely But he talked a little bit about each one and we delve we went deep into cloud office He talked about the opportunities there. I thought it was great. What do you think? I loved it?

SPEAKER_01
I love the way he had some phrases for things I thought at the beginning he was like a little bit too intellectual for me I was like, okay, wait, where do I go with this? But it was interesting, but I didn't know how to attach it to like a Concrete idea and then I thought about you know, that was maybe the first 25% and then the next 75% I thought were fantastic where Yeah, came down to earth and also he has these this is kind of amazing way of talking. I'm kind of jealous You are like that. I know but I because I because I try to be like that when I see somebody who's really good At it.

I'm like, oh shit. You're good at this thing. Most people don't even care about this thing He had these little phrases coined terms for either himself or his fund or his philosophy or his mental models and You know, he'd be like, you know startup is like a jazz band not a marching band And then he was explaining the analogy and then he was like he was like I want people to

SPEAKER_03
Choose not compare which is hard to understand but once he explains it then it's like oh, that's actually a wonderful mental framework

SPEAKER_01
It's like that a condom song where it's like, what does it mean? It's like, I don't know what it means But it sounds provocative and that's all I felt with a lot of his things was like effort I was like and immediately interested I leaned in when he would say one of those phrases Even though my brain hadn't figured out exactly what it means yet and then he would explain it So anyways, I thought it was really good and super nice dude. I really thought he came in. He's so humble And and very likable.

So I don't know great episode. I liked him a lot. I agree and he offered to come back

SPEAKER_03
I couldn't tell if like when guys are being nice I'm like, well if you have time, let's just keep going I could tell if he was being kind. We'll have to have him back on. He was awesome, right?

SPEAKER_01
How did you feel about when you hit him up for some intros there? Was that smooth? I thought it's pretty smooth. Yeah, you gave him the opportunity to be a hero and if not it was totally okay

SPEAKER_03
Yeah, I asked him I'm gonna start asking every guest that the the question I'm gonna start asking is Who do you think would be an awesome guest like who would be good for those podcasts? And then what do you think's the best way to get in touch with them? Right?

SPEAKER_01
And then they have that opportunity to be like, yeah, just reach out. He's a nice guy or Yeah, let me just shoot one note right now. I'll tell them.

I'll intrigue you guys I thought that was a great angle. I know I wanted to call it out because people listening They get this sort of behind the scenes of as I heard you say it. I was like, oh Smooth guy Sam

SPEAKER_03
Wow, we didn't get the kill on this time, but we got I I feel as though We've built enough rapport with him. I can I'll email Mike and maybe he'll help he'll hook it up But yeah, he did a good job While you're listening to this podcast, you're probably doing something else too. It's cool We get it when you're having conversations with your customers.

The same is probably true for them They're messaging their teams are mentally planning date nights So growing conversations beyond the moment can be challenging So HubSpot helps you go beyond the moment by connecting you and your teams giving you access to the same exact data and helping you see the full Customer picture with powerful tools that connect marketing sales ops and service HubSpot's powerful CRM platform powers you and your teams to transform your Customer's moments into extraordinary customer experiences learn how HubSpot can help your business grow better at HubSpot.com There we go. So Mike, do you um, I was connected to you because my friend my good friend Noah Kagan was like Get a hold of this guy.

He's pretty interesting and I'd known about you as well because Tim Ferriss lived near me and was a friend of mine and He told me that he's like there's like two people or three people whose advice I listen to when it comes to investing One is Naval the founder of Angel list So is Scott Belsky who started Behance and is now probably gonna be the CEO of Adobe and three was you And and I was like that's kind of interesting You know, I I have not really heard of Mike too much You know, you're kind of you kind of you kind of keep a low profile and I looked it up And so you start floodgate which eventually you guys have mess it in like Twitter Twitch lift all types of amazing stuff, but We so we have this podcast show tonight. It's pretty popular You know millions of people listen and all we do is this brainstorm interesting ideas And so we thought you know, we got to get you on to come and talk about some stuff. And so here we are

SPEAKER_01
Let's give it a shot. Why not? Thanks for having me and by the way, I've listened to your podcast a bunch of times I remember the episode with the with Kevin sister from Instagram is one of my favorite ones So I forgot what's the exact name starting starting greatness are staring starting great starting greatness. Yeah starting great

SPEAKER_02
It's it's it's kind of a labor of love, you know, I Some of the people that work at floodgate occasionally we'd have some hallway conversation or in a meeting They're like dude, I wish we could have recorded that right so so in many ways the the guests not only help with the the content but but we're trying to help help the some of the key ideas of starting greatness come alive through the Voices of the guests because I think there are some some counterintuitive lessons of starting a great startup They're not obvious to people

SPEAKER_01
Right and you have a you have a good voice and then be your intros are great on the pod You know it always has like I don't know how much time you spent on that But the intros are great compared to us we put where if we're sort of famous for we barely do an intro Like you'll be 10 minutes in and be like who the hell is this guest and then you know Sometimes at the end we do the sort of Irish goodbye where we're like, okay, that's it We end it we go about our day and so people have like started making fun of us making shirts about the the Irish goodbye because they're like Dude, I also hate saying goodbyes. It's it's you know the hate the unwind of a conversation I like how you guys just leave and And so that's that's kind of our thing But what we want I guess we're gonna start with we could talk about kind of like all the great stuff you've invested in But I guess I'm more curious about what's get what's got you excited now What space is what trends are you seeing where you're like, huh? I don't fully I don't fully know what's there, but there's enough there for me to be interested

SPEAKER_02
Yeah, and it might be kind of a good segue into how I think about What the next big thing will be because there's this there's this thing that I say to founders Which is very in count. It's very counterintuitive. I say if you want to start a great startup don't try to think of a startup and and the reason for that is that great startup founders are like time travelers and they they get out of the present and they Visualize different futures that are a breakthrough that break free from the present and when you try to think of a startup right now You tend to orient yourself in the world of the present And so you tend to come up with incremental conventional ideas rather than Breakthrough ideas that sort of change the arc of the present to a different future And so and that gets to the areas that I'm interested in so what I what I encourage founders to think about are What are the inflections? What are the waves of change? They're gonna be so massive that It's gonna allow an entrepreneur to change the subject about the future because on some level these waves are the gathering power It's like all the power of the ocean when you surf you you got to catch the right wave to have a chance to do great things and It's these waves or these inflections They allow the entrepreneur to wage asymmetric warfare on present Only with big inflections does an entrepreneur go from being Disadvantaged to incumbents to having a fundamental advantage vis-a-vis incumbents And so then in terms of the areas that I'm interested in I tend to go with the inflections and so One inflection I'm interested in obviously is the blockchains With crypto.

I think that that if I was starting a startup today, that's probably where I would spend most of my time another another area of interest for me is The transition from what I like to call office culture to cloud culture And so in the past the cloud was sort of more of a delivery mechanism and a business model for application software, but now what we see happening is that The you know Microsoft office literally is a metaphor of the office and it's files and memos and file drawers And that's what our desktop looks like but now people You know, it's it's not the editor that matters as much anymore as the comment system in the versioning It's kind of more like GitHub meets knowledge work And so, you know, when you when you have cloud culture rather than office culture You can take advantage of a lot of arbitrage time arbitrage talent arbitrage Geography arbitrage, you know that very Tim Ferriss, you know, we talked about him a little bit earlier and then the other thing that I'm interested in is What I loosely refer to as America next and so on some level I think that 2020 was the first real year of the 20th century or 21st century and why is that I think that There were a lot of issues that people were paying lip service to a lot of stagnation that people were paying lip service to And I think that 2020 help people understand our military needs to become more agile and more tech forward that are Research in drugs and drug discovery that our ability to get Life-saving remedies to market faster. We need to take seriously. There's just, you know, China as a geopolitical Challenger and so as a result, I think that There and you know now people talk about build back better But I just believe fundamentally the United States the Western world are going to decide they need to invest for real in Tech forward infrastructure and then on the flip side of that they're going to realize our infrastructure is vulnerable to Cyber hackers and ransomware and things like that whether it's organized by rogue gangs or nation states So so those are I'd say those three areas plus also I'd say cloud culture applied to consumer which some call the metaverse But those are those are the main things that I'm chasing right now and you know, obviously I have a lot of colleagues as well at floodgate So we you know, we go after cybersecurity and cloud infrastructure and other things But the areas that I described are the ones that I'm most accurate most actively going after that for that cloud office one

SPEAKER_03
What what products are you looking at that excite you?

SPEAKER_02
Yeah, so I'll kind of give you an example. So one company I'm involved with is called Almanac and It allows teams of people to create documents But like if you think about it, this has already happened in code and in design So in code you had GitHub and in the past you just had code snippets that you shipped around and had some version control But GitHub made code social and you could branch and fork and you know Collaborate as a team at the center rather than as an afterthought and then Figma did the same thing with design, right? So Figma and so so what what we believe is that in a world where you have a lot of people that are What we believe is that in a world where talent can live anywhere in the world It's gonna matter more that you write things down and get consensus And part of how you get consensus is you have a paradigm that's not office centric in documentation But it's cloud centric and so, you know, why shouldn't you just like it hub be able to branch and merge and fork Documents and be able to within that one document Know every version of that document that every ever existed and everybody's and you know, if somebody forks it and uses it Let's say it's an employee handbook if somebody uses it for their next company. Why not want to know that as well? And so But but that's just one of many examples of where I believe that in the future you're gonna have all these different products that Presuppose that people will collaborate, you know, what else do I think will happen? I think people will say if it can go in the cloud, it should if it can be asynchronous It should because if I put things in the cloud and make them asynchronous I can take advantage of all those different forms of arbitrage to run my company better Whereas if I'm a meeting centric culture, I have to be in the room where it happened when a decision got made And I just think that that's an outmoded way of thinking about things in today's world

SPEAKER_03
What so Sean and I are similar or almost the same age we or we are the same age we Like when we started to work, I mean we use Google Docs right away But you're a little bit older than us and like that would that was you'd probably didn't you I mean That was kind of kind of interesting to you right when that when that first came around So when you say like what needs to be in the cloud in my head. I'm like, wait, are you kidding me? Isn't everything already like that?

SPEAKER_01
What specifically for example, there's there's startups that are doing like virtual office So they're like great everybody's remote. You have all these advantages remote. What do you miss out on you miss out on being able to socialize and get to know each other and build trust Outside of you know, the water cooler that what you the conversations that used to happen in the break room So there's these crazy startups that are saying basically like like online town and stuff like that that are like here's a virtual office You can literally walk around you can bump into people I don't know if any of these work right, but they're like taking stabs at trying to move the like physical office into the cloud To Sam so it's not just docks are in the cloud But hanging out is in the cloud right but when into co-workers in the hallways and cloud

SPEAKER_02
Yeah, and the problem with most cloud offerings today is that they're basically Rehosted office culture right so like zoom zoom is a meeting, but it's a meeting online. It's not like it's asynchronous in any way It's not it you're just rehosting the meeting rather than redefining how work happens now with zoom you can take advantage of The geography arbitrage I suppose so that is a good thing But you're not able to take advantage of time and talent arbitrage as easily but like like what I what I believe ends up happening at the limit is in office culture everybody has a job description and And what I think in cloud culture, you know people have already talked about this But this idea of jobs to be done theory and so like when you think about it all of us don't just have one job All of us do a whole bunch of jobs like if you take even a very simple example Let's say that I work at a flower shop. I might type things into the computer to manage customer records I might take reservations in orders.

I might some parts of the day arrange the flowers Well, when you really think about it the principle of comparative advantage would suggest that any parts of that any of those jobs to be done That could be done asynchronously or in the cloud you should try to do that if you can because then you could take advantage of labor arbitrage time arbitrage and geography arbitrage and then if I'm a great flower arranger That's what I should be spending my time on is the thing that I'm really good at and so what I think cloud culture lets people do at the limit is Broadcast their comparative advantage to the world and And get paid by the network for giving the network what it wants So I think that it'll you know the reason I call it cloud culture as well is who says everybody has to work at a company Right like people said that robots are going to eat the jobs, but I think that's precisely the opposite of what's true I think that software is going to Reduce the need for people to think they need to work at companies because it's going to all the things I would have had to possess To have a job, but I'm not going to need those things anymore By working at a company I'm going to be able to have all those things in software on my own and so I think more and more people are going to people are going to realize that really there is a Aggregate of jobs that people do and all of them could be thought of as like almost like a derivative that could be assembled in different ways and then move to the cloud or you know, let you specialize and I think that that'll over time Change the fundamental culture of how teams work

SPEAKER_01
Tell me if I'm misunderstanding this But I think one thing that you just said in there is that this idea that one person belongs to one firm is potentially now an outdated and you know suboptimal Idea that instead you said like a user basically contributes to the network and gets paid for that contribution to the network And so one person might belong to multiple firms And you know firm might change so so what does that look like? You're the time traveler. Yes, let's say we fast forward 10 years Smart guy like me. Well, how does my like today, you know, my company got acquired by twitch.

I got a day job at twitch You know great. That's that's you know, something I do and I know before

SPEAKER_02
Thanks for your efforts there by the way I mean we we monetize that a little while ago, but thanks for your efforts

SPEAKER_03
Of course anything I do for you by the way a VCC we monetize that is a wonder that's a really cool flex

SPEAKER_02
Okay, so then what 10 years from now so like maybe maybe I should Start from the beginning there. So what do I think is really happening, right that underlies all my investing? I basically believe that starting around 1850 We had centralized means of production mass distribution mass production and what that allowed us to do is to create the modern corporation But in 1870 there was no accounting. There were no org charts None of this stuff that we take for granted as a company really existed But mass production mass distribution had a tendency to to centralize things Because you got supply side economies of scale and mass distribution allows you to get things out to people I think what started to happen Probably in the late 70s early 80s with the microprocessor is now the economy is animated by mass computation and mass connectivity and those two those two attributes tend to Decentralize the means of production and so you know, I think we've moved from River Rouge plant for Ford Model T's to personal 3d printers in the future And I think we've moved from peak centralization of three TV networks in the late 50s early 60s to now anybody can be their own publisher or media company that goes direct and so There's a lot of very basic assumptions.

We have about companies. They're just 150 year artifacts of time like somebody in 1820 Wouldn't recognize a normal company of today. There weren't any companies more than 20 people in the US, you know in 1820 hardly maybe a few spinning looms of the hundred people But so what I believe is now the idea is that the social contract between a person and a big company People assume that it's not gonna that it's gonna persist.

I think it's gonna be radically different. So in the in the 1900s, you know, you had People wanting to be at a company for a very long time and you had large country companies because The coordination advantages of having a large organization at scale with supply side Economics was valid and created abundance. Then the same happened with the military then the same thing happened with the government media all of our major institutions, but now I think the pendulum is swinging in the other direction towards a Worldwide network where everybody on the network every individual is a note on that network and every individual Has a note on that network has a comparative advantage and they get they get paid by the network when they give the network what it wants And that's true for money.

It's true for jobs. It's true for everything in my view

SPEAKER_03
Are there examples of startups now that are executing this?

SPEAKER_02
Yeah, so in the early days our investments were in these pure play networks Twitter, Twitch Companies like that. What does that mean? Sure play a pure play network would be you're not really reimagining a part of the economy So like Twitch was a whole new thing that you could argue that Twitter's had a big impact on the media But but that wasn't the thesis when we invested but then we started to get interested in this idea of well perhaps every sector of the economy is going to be reimagined around sort of the the micro means of production and so rather than economies of scale it's going to be local economies of algorithmic computation and Networks that span the globe and so why did we invest in Lyft? Lyft was a more modern way to think about getting a ride than taxies taxis are a centralized command and control tops down dispatch driven technology Lyft says hey Riders and drivers can advertise their presence in real time on a network and algorithms will form an ad hoc connection so it's kind of like this return of the invisible hand and Now all of a sudden the invisible hand is done by algorithms rather than You know kind of in the good old days of people trading fur for a musket or something like that But like it's you know, that's what we see happening time and again, you know, Ohm connect is another board. I'm on they're trying to Create incentives for people to use less electricity, but but they're basically Applying the ideas of software to find networks to Subtracting energy that homes use during certain times of the day and so I believe that every you know What is Tesla really? Tesla is a car company that's animated by network capitalism not industrial capitalism, right? They've it's a software to find car.

It's updated over the air it leverages machine learning It leverages network effects with all the sensors in the network to help it self-drive better Apple was a network capitalist centric phone compared to like Nokia which thought we need to sell the best widget And so in sector after sector of our economy the companies that are software defined at their core I believe software to find network-centric companies at their core are going to keep winning and they're going to keep displacing the companies that think of Computers as the thing that you did to make your industrial thing go faster So, you know Burger King isn't a software to find network even though it has computers It uses computers to say how many hamburgers did I sell today? But it doesn't use computers to reinvent food in any fundamental way and the companies that we're investing in are Companies that leverage network capitalism to reimagine reinvent markets from beginning Damn big idea. Oh, that wasn't that may be a little bit out there, but that's kind of

SPEAKER_03
It's such a big idea that it's hard to How can I make this more practical for myself and the listeners of someone interested in this field? All right, everyone today's episode is brought to you by imperfect action hosted by Steph Taylor It's a podcast on HubSpots podcast network the audio destination for business professionals Imperfect action is a bite-sized online marketing podcast for business owners So join Steph Taylor as she answers all your business marketing questions that deep dives into the nitty gritty of online marketing content marketing social media marketing and Marketing for strategy for business owners a few recent episodes include some of the biggest mistakes you can make with your launch Another one is why growing your audience feels so hard in 2022 and another one is five ways to make content creation less consuming So check it out. It's called imperfect action. You can look it up wherever you get your podcasts

SPEAKER_02
Yeah, and so the way I would say to make it more practical if you're a listener is the tendency is to say What's my career? Path going to be but through the lens of the 20th century, you know, I'm gonna I'm gonna make a progressive set of steps and I'm gonna You know, I'm gonna get rewarded as I Do the things that I seem to need to do in society But I would argue that it's more important in today's world to figure out a what am I awesome at or Maybe not even one of my the best in the world at but what is my what am I best at among all other things? I'm good at what am I best at and then what does the world value and then what am I passionate about? And it's like the intersection of that set of things is where you want to develop your talents because Over time that's where your comparative advantage will be the highest and that is where the network will pay you the most for Contributing to the network, but I think sometimes it's useful to not think of not just what company Do I want to join or what set of companies should I join my career instead? You should say the entire world is a network. Everybody is a node in that network How can I be the best version of myself as a node on that network? How can I create the most possible value for that network so that I'll get Recognized by it and paid paid for the value that I deliver. So how do you do that? So let's say let's take you for example

SPEAKER_01
so let's say you look at the world this way as it's a giant network and And you're trying to have your comparative competitive comparative advantage. So what's your comparative advantage?

SPEAKER_02
Yeah, I would say that my job is to be the very best partner for a Superambitious founder in the zero to one phase So right like if you look at my podcast people say, hey, why don't you have this guest? Why don't you have that guest but starting greatness is all about zero to one awesome startup super ambitious What was it like before they succeeded and there's power? There's addition and subtraction, you know, like sometimes by Saying what you're not for but like niching down You're very powerful to the people who care about your niche because people say where have you been all my life? And so what you're trying to do is find that set of like-minded co-conspirators For the niche that you've really chosen to be great at and and not get preoccupied with the fact that you can't do it all Right, you're you're way better off understanding What you can just stick the landing at and and and develop your talents so you can do it even better and better through time

SPEAKER_01
And today floodgate is more like a traditional firm, right? It's like a company kind of like let's say current world slash old world, right? You have you have a brand you have multiple employees You have a central fund you have your LP base sort of static and then you're investing in a specific let's say set a criteria of companies Whereas The way you're describing things it sort of feel like correct me if I'm wrong It sort of sounded like in the future what you 20 years from now what you might have done instead of set up floodgate is you would have set up I don't know You know a one-person investing fund yourself or like a Dow or something like that basically a trust that's gonna invest in a whole bunch of things on the network and And you wouldn't need this structure of of a fund with employees and with all these different things So would you if you didn't have this already set up and you're setting it up for the next 20 years Would you have set up your investing differently than you did with a kind of traditional VC fund?

SPEAKER_02
Well, I I like the way we're set up because I think that when you're when you're investing in these crazy risky startups too early Way too early or legally ambiguously too early It's good to have friends and it's good to have people to run ideas by but we have a very I'm not say I'm not sure our point of view works for everybody so I don't even think a startup is a company right so I think a startup is the capabilities and talents of the founders and Their insight about the future and what you're what you're betting is on two things One is that their insights right and two is they're good enough to navigate the idea to a great product someday But like Lyft started a Zimride and Twitter. They couldn't decide whether to call it voicemail 2.0 or TWT TR Twitch started as Justin dot TV Octa started as sasher and so like what do you do with the fact that? 90% of your profits come from things that started out different and so my theory on that is The way to succeed is to realize that a startup isn't a company at all and that it's it's the insights in the founders and you're You make fun of your ability to predict what they're going to come up with that is false precision to even try But instead where you should be precise is can these people do the job and is this is this?

SPEAKER_03
Powerful enough breakthrough insight you um you I believe it's your partner. I looked up who the top Venture capitalists were I think it was your partner. What's her name and Miracle? Yeah, yes, and is I Looked at like CB Insights 2020 2019 2018 2017 I think she was in the top 10 sometimes number two or three and many many many of the years Consistently you just showed me a sign or a thing of dollar bills with Steve blank You know who's like Godfather of Silicon Valley saying everything Mike does turn into money you uh wish What what makes you guys great? What makes you able to spot these interesting opportunities? I?

SPEAKER_02
Think that you know, it's funny if you if you had say Warren Buffett on your show or you know, you've had Stan drunken Miller before on your show right and When they talk about investments, you'll probably notice they talk about a few things. What's the operating history of the organization? What is their competitive moat? You know, they have a set of factors, you know That caused them to think that a company is a good investment or not What's interesting is in our world none of those mental models apply and so because the startups not a company There is no operating history. There's no moat.

They don't even have a product yet. They got no customers and so What I think we're better at than most is a understanding. That's true and be Then asking okay, so what should the mental models be right if Charlie Munger and Warren Buffett have 90 mental models And they don't apply to startup investing Well, what are the mental models for startup investing then and so we've spent years, right? Just being students of that question and you know, we probably got about 30 or so that we've developed but we try to we try to Evaluate the startup through the lens of those mental models rather than making the mistake of thinking that a startup is a rehosted company

SPEAKER_01
And it's one or two of those mental models that we wouldn't expect right like you know, I might expect somebody to say, you know We want to be in a Big market with customers really love your products like okay. Yeah, great, you know We want to be growing, you know extremely fast exponential growth. Well, yeah, it's obvious at that point I also enjoy checkmate.

So what's a what's a mental model? That's not so obvious where hundred people in a room would nod their heads and immediately say I already do that I already think that way when I when it comes to investing for me

SPEAKER_02
Yeah, so I'll just give a few examples, you know, so I'd say at a meta level We have a set of mental models about founding teams and then we have a set of mental models about insights and founding team a good example would be Jazz band and not a marching band. So in companies you have org charts You have people who want sheet music and dance steps And if you don't give that to them the organization is gonna be a chaotic mess and all screwed up and discombobulated In a startup It's more like when you go to the French quarter and you watch a jazz band there The got the lead goes on a riff and everybody else just goes with it And you'll never hear that too in the same way ever again But everybody knows that that's what they're in it for and nobody's saying hey, that's not on my sheet music You didn't say that was gonna happen. That's that's the way they like to Offer their art to the world and so I like to say when a when a startup starts it goes through this breakthrough sequence it has to have a great insight Which is something about the future that's not obvious that most people don't know and then after that they have to create a product breakthrough Where they get product market fit in zero to one and then they have to have a growth breakthrough where they get escape velocity And then and only then do they earn the right to someday be in the pantheon of companies But it's but it's wrong-headed to give startup founders big company advice at any of those stages In fact, all of those stages are different.

It'd be bad to give growth advice to an insight developer For example because it would be precisely wrong So that would be an example on the team side to me the on the insight perspective it would be Don't be market first because there is no market yet And so rather than trying to think of a startup market We want to arrive at startup markets by following inflections We want to we want to say okay cost of an AI prediction is going down exponentially How is power going to shift in the industry because of that and like what what new markets might arise that had never existed before These inflections they they power your why now so like with lift GPS has got included for free and smartphones And we believe that everybody's gonna have smartphones someday even though in 2010 only 10% did so you could say wow Now I could see a world in the future where Drivers and riders will be able to locate each other on a network and Ever and there will be a network effect because there'll be all these people have these phones You could have been right about that before then but you would have still failed Because you wouldn't have had enough people with the phones and they wouldn't have been able to find each other And so I'd say that's the other counterintuitive thing is that you can't you can't look at the company's tangible operating history because there is none What you have to do instead is imagine a world where their inflections Change the future in a dramatic way and that that you know change the rules and like all the stuff that people think is gonna happen Something very radically difference gonna happen and why do I believe this entrepreneur? What what is it that they've discovered about the world that could cause me to take that bet what you're describing is is awesome and it's like

SPEAKER_03
But but it's it's a it's a narrow It's a narrow but wonderful outlook so what you're describing about inflections and looking at the world in 20 years It's definitely about disruption and these are things that are this is what? Allows an uber or an era of B&B to go from not even an idea to a small idea to a 50 to a hundred billion dollar company These are like truly disruptive and trans transformative things, but then on the other side There's like on the podcast actually aired today Sean interviewed this guy named Brian who owns 100% of 1 800 got junk the revenue might be Four or 500 million dollars and he owns all of it So he's who knows he's probably worth two or three billion dollars and has probably a pretty calm life And he's not doing anything probably probably innovative at all I mean maybe there's like micro innovations like you know our supply chain is a little bit interesting or the way that we dispatch people is a Little bit interesting or or it could just be operational excellence meaning our website ranks number one or we know how to game

SPEAKER_01
Right

SPEAKER_03
You brand how do you? So like you're all you're what we just discussed was far on one end Do you ever look at the other side or or for your job? Do you only care about one side and maybe you just like the for shoot the shit or talk to your friends who want to get wealthy? Do you say like yeah, but this side's actually kind of interesting too? Yeah, and it's funny because we alluded to this earlier

SPEAKER_02
I don't try to be for everybody I try to be the the very best at the thing I try to be good at and so my view is that I want to go very focused on Breakthrough startups and in that zero to one phase and how they so I like to say I'm a rocket fuel salesman And I go I go to founders and I say don't take my fuel if you don't want to achieve escape velocity with that rocket That's on the launchpad because if you're not sure it's a rocket this fuel isn't gonna be good for your vehicle Right, maybe just in your scooter, right? And so like I probably don't deserve too much credit when it does escape But I probably don't deserve too much of the blame when it doesn't right? I'm just like just be clear about what I'm selling here and and people say well, you know It's not realistic that that everybody should build one of the 20 billion dollar plus exit startups of the year And I'm like and you're you're correct about that like I'm not saying that my advice or my approach is mainstream or even normal In fact, I would say it's hyper not normal But like but in that area in that area of I sell rocket fuel to people who want to blast their rockets into outer space and get Escape velocity I try to be the very best period and so like that's that's what I'm in it for so a lot of your listeners might be like Oh, that's interesting and kind of intellectually interesting, but I'm not I'm not one of those But that's okay There's lots of ways to get rich in this world and there's lots of lots of ways to succeed in business Every comes back to everybody should know what's my comparative advantage and not be preoccupied by all the things

SPEAKER_03
You can't be the best at so you're not even close to the guy who sees like oh wow There's a ton of really poorly run laundry stores or Laundry mats we should buy all of them and put a back-end software I mean that doesn't even kind of closely or that doesn't even even get you excited

SPEAKER_02
Well, not only that like if somebody said hey, can you give me some advice on how to grow this? I would say you should not listen to me. I don't know what I'm talking about I don't know how to do laundry mats at scale like it's not even a question whether I'm interested It's a question whether I'm competent And I'm not I'm like I'm not and I don't try to be and I Let go of the idea that I need to be you that I love I love your answer by the way

SPEAKER_01
I have something to say about that too, but I would say like You know, you've made me realize that I think one of the things that we're trying to build our comparative advantages It's like We could have this we get on this podcast twice a week and we shoot the shit either just me and Sam or bring it We're great guests like you on and we talk about everything from I think one of the most popular episodes was You know apology talking about like the future startups are cities and say wait What and you know apology will bend your brain with the blockchain and then the next episode So he's not probably the most listen to and the second most listen to is this side hustle this entrepreneur has where he's We break down his business of vending machines He's got 27 vending machines is making six figures of profit and you know He got started with very little capital and it's doesn't take rocket science or rocket fuel to do it and our listeners like the the breath of that how we can hop from blue collar We have a segment called the hillbilly side hustle which is like you know Just a blue collar kind of like a simple thing you can do all the way to okay What is you know some disruptive idea? You know, how does AI impact impact this space?

SPEAKER_02
It is it okay if we talk about biology for a minute because I think he's like amazing Yeah, so so like you know earlier I mentioned this idea of cloud culture I think biology probably has the best handle on this of anybody I talked to so like and You know, I've listened to much of what he said But like what I think happens at the limit is that all of these different cloud cultures are like their own societies Yep So right now the main main organizing principle of society is the nation state which is also an economies of scale Centric model right but if you think about it, what is Bitcoin really? Bitcoin is a society of people who care about sound money and the protocol is what enables governance and so these cloud Societies at the limit. I think look more and more like the future version of countries, right? You know, what is a country really? It's a bunch of people who decide what their boundaries are who decide who gets in the club And they have a constitution where they decide how to separate powers and how to protect the rights of individuals against the mob and the tyrant That's exactly what Bitcoin does with its protocol and just to use some other examples

SPEAKER_01
So Bitcoin is the people who have this, you know cult like belief or religious belief around sound money Ethereum is people who believe in programmable money and then you have Wall Street bets, which is like, hey Let's just middle finger to you know To the large, you know to the incumbents So how does you know David beat Goliath and we're gonna we're basically gonna screw around with them and make profits Well, we do it. That's what we're here for and we will we will assign ourselves names You know, they call themselves retards and things like that because in their culture, that's okay, right? Burning Man is a pop-up culture that happens for a week in the desert where all these people will go behave totally differently Then they will the other 51 weeks out of the year And so there's a whole bunch of these either pop-up cultures cloud cultures that all have different different virtues different Admissions criteria and and all the different pieces you just described. Yeah, and it's so interesting because it there's historical parallels, right?

SPEAKER_02
Like in the in the Reformation The Pope used to declare all the answers and then all of a sudden the printing press comes out in double-entry accounting And now Martin Luther can distribute the Bible to lots of people With in a permissionless way ironically and then not only that the merchants of Venice can trade with each other without a central authority Because they can have double-entry records and keep track of IOUs And so to me like the internet and blockchain are just so amazingly parallel to that and I think society ebbs and flows It's like when you're too decentralized for too long gets chaotic And so then then you have innovations that centralize the means of production, but then it gets to centralize and so What we're seeing now, I believe is Wall Street bets perfect example The people at the edge are saying the network should decide not the center And if you read books like revolt of the Republic and things like that You see a world where the people at the edge are starting to say about the people at the center you're illegitimate Just like people at the edge back in the Reformation started to say that about the Pope and some of the things that were happening with exclusionary, you know sort of inside or only activities and so

SPEAKER_01
And in the last two years, you know social media went from you know The edge to call it pointing at mainstream media mainstream media now is like synonymous with the fake news, right? That wasn't even a thing five years ago, right? mainstream media is now used as a derogatory description of something which is

SPEAKER_02
Kind of crazy, right? That's a big change and the important thing is like I try not to be too judgemental about it So I don't sit there and say oh those mainstream media people are no good I'm just like it's inevitable that media is going to decentralize. It's inevitable that money will it's inevitable that politics will it's inevitable that a lot of these things will and it's like Arguing for it or against it's kind of like arguing against the direction of the wind It's it's just it's it's fruit But but then back to the your listeners to me what that means writ large is if the 20th century was about being the quote-of-quote Organization man and following the rules and progressing up the hierarchy. It doesn't exist anymore now you have to be You have to take agency for your own life and own your comparative advantage and Understand that that is your responsibility as a free person in this world And if you do that you're going to be Incredibly rewarded in the 21st century, but if you wish that it's like the 20th.

I got bad news for you

SPEAKER_03
It's not going to be floodgate invested into refinery 29, right? Yeah for those Unfortunately, or I mean it is what it is a lot of our listeners are men So they don't know refinery 29 is a huge media company geared for women refinery 29.com. They were pretty big, right? They were like maybe 200 million dollars or 150 million dollars in revenue and then they sold or merged or something like that with vice, right? Yes and Vice is like a probably a billion dollar a year entity at this point with with everything they have going on Do you think that media companies like that? Given what you're saying about I mean because vices at this point even though they were new Vice and refinery 29 are probably almost like old school at this point Do you think that those style of media companies are still going to be great companies given what you've just said?

SPEAKER_02
Well, I think that there's going to be a very rich ecosystem of all types of media companies But but to me the defining new characteristic will be that media is no longer a function of the credential elites telling you what to think and That that was the real problem that we started to get in the media in my opinion is that you had a set of credential elites running these media companies of which there weren't very many and These institutions are all inherited now rather than founded and so the people running these institutions didn't really understand What made them great in the old days and so they they started to get Worse over time in their effectiveness and legitimacy and so to me the real question about media is not so much Is there one way it's going to happen versus not I think that the winners will be those that? Nitched down have a comparative advantage in the type of content that they cover and attract the attention of the people who care about that type of content and and the credentials won't define it because The the old media companies had Credential elites running them, but they also had a monopoly on distribution with the newspaper and how they how they got print Magazines out and things like that. So I think that all of that's going to change. Is there any media companies or?

SPEAKER_03
Opportunities that you're looking at and you're like, oh, that's kind of interesting for us I

SPEAKER_02
Would I would say that my colleague and your co is probably smarter about that than I am, you know I and it's funny even within floodgate. I tend to stick to my areas that I'm excited about and I So there's a lot of exciting things that all that I'll miss probably

SPEAKER_01
Yeah, I'm gonna ask you a question that might be hard to answer Because it's one of those things like oh, you know, how how are you you? But you you've said a couple things that caught my attention, you know, you have these nice phrases So one is I didn't realize that I see this on your bio here I didn't realize you coined the term thunder lizards. I've heard many investors talk about thunder lizards That's something they want to invest in which is like sort of like, you know The Godzilla type companies that emerge every decade or so and like that's what you really chase because those are where all the Returns are and those are what change the world But you also said the kind of the rocket. I'm a rocket fuel salesman Yep, you are catchier than your average DC.

You are more I don't know. You have a little sort of gift there of coining these little Mindviruses these little little phrases that stick with people rather than just saying a bunch of jargon Is that a skill you learned consciously or is that just you know growing up your parents talk like that?

SPEAKER_02
I mean, where did that come from? I don't know but I guess the way I look at things in this world is You want to force a choice and not a comparison? And and so like what do I mean by that? Like you just did it again. You did it again. Yeah, exactly It's so so like like if I say hey, we're investing in particularly disruptive types of companies That's not the same as saying thunder lizards, right? And so Why is it so important? Well, if you're trying to create a breakthrough by definition it breaks free from the present So by definition it can't be compared to something in the present Because if it's comparable to what's in the present, it's too incremental.

It's too conventional And so like when I say force a choice and not a comparison I said I say to founders If let's say everybody's selling a banana, you can't say I'm a 5x better banana You instead you should come out and say I'm an apple and not everybody's gonna want your apple But a hundred percent of the people who prefer apples are gonna want what you have and like forget the guy wants the best banana There's a thousand of those people You need to waste not an org of energy on them. You need to spend your time on the people who potentially value your advantage And start a movement around that, you know earlier. We talked about markets Companies have markets that could be segmented sub-segmented and classified startups don't start ups They create movements.

They create they have a secret about the future They get early believers who co-conspire with them to create a co-create a different future and the market emerges as a consequence of the movement Succeeding but in the early days, we just have to get people moving We have to get people moving to somewhere different not better And so as a result we must for it force a choice and not a comparison and as a seed investor I have to do the same thing because there's 2,000 seed funds now And so it was innovative when they and I helped invent seed investing in 2006 but like now there's 2,000 firms and so we have to come up with some way for people to say, okay I can't reconcile the choice of working with floodgate versus Brand X

SPEAKER_01
And I think Sean and Sam writing writing checks with writing checks on the spot. That's how we differentiate

SPEAKER_02
I don't know, but I think there's a lot to be it relates to niching down I think a lot of people would benefit from the idea of How can I force a choice and not a comparison? It takes more courage and it forces you to say no to more than you say yes to But if you if you do it the right way the stuff you say yes to I like to say it's less but better is the way to think about it

SPEAKER_03
You've you've had some amazing people in your podcast You've invested in a ton of amazing companies and I bet you know just about everyone in this world of all these people that you've invested in or Did business with if you guys were put on a on a stranded island. Who do you think would come out on top? Who's the most formidable person that you've you've worked with? Oh?

SPEAKER_02
There there've been so many great people I think a lot of it would be a function of just who had the right idea at the right time, you know so much of this is just I call it a founder future fit. It's just like you know like when it when Andresa did Mozilla It was just he was the perfect person in the world at the perfect time to do that idea And so you know, it's not just how formidable as the person but it's also just Was it was the timing right and were they just the right person the right time?

SPEAKER_03
But I'm obsessed I'm obsessed with stories and I love interesting personality types Is there anyone that fits that bill of being incredibly formidable like to the point of like you think how can you be more like that person or Or I wish everyone thought a little bit more like this person

SPEAKER_02
Yeah, so I try to learn from everybody But I not never try to imitate or be like somebody else because then that that that defeats the purpose I'm that now I'm comparing myself to somebody else and so I never do that I don't believe that people should compare themselves with anybody. I think they should learn from people But I don't think they should compare themselves to others and I don't think they should have heroes

SPEAKER_01
And I think yeah, you mentioned a couple people that you've learned from you know biology being one You know Tim Ferriss said he learned from you who are some other names? You know if people listen to this and they're like you know or me right? I've really enjoyed hearing you talk during this hour I think you got a bunch of smart ideas. I want to know, you know, what's he eating? Basically, what's your information diet? What are what are your sort of some of your favorite people to follow and learn from that? You're getting a bunch of interesting information. That's not just like the rest

SPEAKER_02
Yeah, so Well, I like the the farm street blog a lot with Shane Parrish and and by the way just because I don't invest like Buffett and Munger Doesn't mean I don't study him like crazy Right because I think that when I when I read how they look at the world I'll understand what's different about how they look at the world, but I'll also connect dots that will make the difference of my world more clear I Read a ton. I probably read about one or two books a week just in general What are some of the ones that I've Read recently that I liked one. I like a lot is called the courage to be disliked By a couple of Japanese authors.

I think it's it's amazing. And so then I went down this rabbit hole of the Psychiatrist Alfred Adler who kind of came of age at the same time as Freud and young but was it as famous? But I think he's I think that Alfred Adler's ideas about Individual agency are perfectly time for the 21st century So I've been liking Everything that I can get my hands on about him And it's and it's weird because although I read a lot of books There's there's always a subset that I come back to over and over again where I try to take notes and because I try to I try to Make sure I really understand it so that I could explain it to somebody else in a really clear way So I so I like the courage to be disliked quite a bit I've been reading a lot of stuff on stoicism lately Which I find to be very misunderstood But you know, what's the misunderstanding I think that most people think of stoics as you know Emotionless Turn the other cheek when things go bad and I actually find that when you read about the stoics and There are actual philosophies in this world. They're actually quite optimistic and quite inspiring and I find that it's helpful for me to internalize so like things like some of the lessons of stoicism and some of the lessons of Alfred Adler all find myself reading those books over and over again and and and trying to make the list of things to learn and ask myself every day am I am I exercising those muscles and then there'll be other things where I'm like a friend of mine.

I'll say this is a really good book I'm like gosh just read that so right, you know, that's just fun. It's great. All right.

We're coming up on the hour

SPEAKER_01
So we can we can wrap it Mike thanks for joining. This is great. Where do people find you if they want to get more? So obviously the podcast so starting greatness.

Where else should they follow to get more? Yeah, I'm on Twitter at m2jr

SPEAKER_02
Let's see where that's probably the best place. Yeah, or floodgate.com

SPEAKER_03
You're a tweet machine. I haven't found you since I talked to him years ago about you

SPEAKER_02
Okay, yeah, and if you guys want to cover any other topics happy to I know that we kind of bounced around so

SPEAKER_01
I want the next I feel like that would have been interesting one that I think we should we if you're up for we could do around to around American yeah, I think there's a bunch that's there that

SPEAKER_02
That's there that that you know, I'm gonna tell about yeah in all these themes right like I think that the idea also of you know blockchains and sort of thinking about The the future of money and how we're going to a currency governed by commons rather than fiat government is interesting I think that you know the evolution of You know, I like to say that computing Phases you had mainframes and you had PCs and you had internet and they always start with an enabling technology And they commoditize the prior so mainframes computers were expensive and then PCs computers were basically free Proprietary software becomes valuable. Okay next thing the internet Software becomes open source Amassing lots of proprietary data becomes valuable and so one way I look at blockchains are there the next wave of computing and that they're gonna probably democratize data and Control of things back to networks and then what becomes a valuable thing my my instinct is it's about governance And so there's there's like a lot of conversation We could have about that that might be interesting and then I totally agree America next all the stuff that I think is gonna have to happen and for the military to be more agile and for us to kind of

SPEAKER_01
Upgrade our thinking about stuff, you know, we're talking I'm like this is what I could be like if I could just focus on three things that I really believed in and I just stopped thinking about other shit for like two years I could have this level of clarity and an insight and you're making me want to focus which Sam and many others in my life I've ever I've tried to get me to focus before and this may be the most effective way

SPEAKER_02
Well, there's no one way, right? Like I like to be like a T right? It's like you want to be a mile wide an inch deep so that you just can Appropriate creative ideas from the world, but then I think you want to be a mile deep somewhere, right? It's like a T right and it's like that's why you read several books at a time But then you also go deep on a small number. They're truly great

SPEAKER_03
Do you who who should we invite next on this podcast? Who do you think is some of the some are some of the best storytellers and prolific idea folks? You had read Hoffman. We're trying to get in touch with him. Is there anyone else that you think is is We should invite read Hoffman and I Naval Ravacont

SPEAKER_02
You know Chris Saka is always a good storyteller I can think about that, you know the Instagrammers are fun Andy Radcliffe it probably not as famous as some some of your guests and stuff that boy is he a clear thinker Great communicator. What's the best way to get in touch with read just a coldy million you think

SPEAKER_03
Probably let's see

SPEAKER_02
Or you just say that I've mentioned you guys and that it was a good show and then I enjoyed it The people that you just mentioned

SPEAKER_03
I'll email the people you just mentioned I'll say Mike said you're the Mike said you're the guy

SPEAKER_02
I'll still you know I haven't seen as much of Chris Saka lately so I don't know if that would be as effective with him But but I think that some of the other guys would would Would recognize me pretty well. I showed up for Chris one morning he texted me said hey

SPEAKER_01
I got a film a shark tank intro. We need some bodies in the background To for my my intro and I left my job I went to where he was at nine in the morning and I filmed a I was a body double I was an extra in the background for his shark tank intro So I'll pull that favor card and be like hey Chris Now's the time to pay it back. Yeah, if you haven't had Mark Cuban

SPEAKER_02
I think he's really good And by the way on this so it's funny because you guys are using Zencaster So does Shane Harris so I was on his sorry Shane Parish and on his After he listened to the to the talk he's like there's so many up front questions. I wish I'd asked you Can we do this again and so I was like sure so we ended up having a lot of content that he kind of cut down on But like if if you find yourself in that position here, let me know I'm happy to help you make it as you know less But better right so if we can right, you know if we're going to ship a product at minus will be fucking awesome right So I love you Where are you from I was born in Oklahoma but moved all around because my dad was an IBMer and then worked at Microsoft Yeah, I feel like how old are you

SPEAKER_03
Early 53 So you're I'm 31 so you would have had to have me when you were quite young but I feel like you could you could you could be my uncle I think

SPEAKER_02
That's what the founders call me their nickname for me is the crazy uncle

SPEAKER_03
I think we kind of look the same I can tell you I thought you would have been from the Midwest or maybe the South I'm from Missouri Yep, show me state Yeah, and my cousins live in Oklahoma and fit in Owens, Oklahoma where they buck bowls I had a I have a feeling you and I we could be distance cut distant cousins. We don't even know it

SPEAKER_02
Yeah, yeah, you never know coming from Missouri and Oklahoma you'd ever know

SPEAKER_03
Yeah, I appreciate this man. This is awesome. Sean anything to say

SPEAKER_01
No, my camera died. I'm at the overheating mark, but Mike, this is great. Thank you for coming on.

I enjoyed that. That was good

SPEAKER_03
And you're in Austin

SPEAKER_02
Now I live in Marin County, so I'm in Northern California

SPEAKER_03
Oh, I thought you live in Austin for some reason

SPEAKER_02
No, I helped him though find his place. So when he decided to move I you know I used to live in Austin about up until about 15 years ago And my family's from there all my relatives and stuff and so you know I've you just the opposite of what everyone else did It seems so and everybody keeps asking me when are you gonna move back to Austin? I don't know. I'm pretty happy with where we live but You know it's pretty crazy time.

So you never know. We'll see

SPEAKER_00
Well, thanks for being here. We'll talk soon