Ashraf Rizvi: Digitizing Gold | SALT Talks #254

“Gold has acted as a tremendous store of value for thousands of years. The problem is it hasn’t been functional. Gilded takes physical gold and makes it mobile, digital and usable.”

Ashraf Rizvi is the CEO and Founder of Gilded. Ashraf is responsible for the strategic direction and day to day running of Gilded. He has over 20 years of executive experience as Founder, Managing Partner and Global Business Head. Prior to founding Gilded, Ashraf was the Co-Founder and Managing Partner of SummerHaven Investment Management, a commodities management firm overseeing nearly $2 billion in assets for retail and institutional clients including endowments, foundations, and family offices. For over 13 years, Ashraf was a senior leader at UBS holding a variety of roles in New York and London including Global Head of Commodities Trading, Global Head of Metals, Global Head of Emerging Markets FX and Global Head of Credit Repo. Previously, he was Head of FX Options Trading in New York for Credit Suisse.

As a second generation immigrant, Ashraf Rizvi discusses how childhood experiences like seeing the fees and inefficiencies associated with remittance payments influenced the creation of Gilded. Rizvi explains the process of moving physical gold to the blockchain and the vast benefits it offers. He describes the current wave of tokenization and blockchain-enabled finance as the fourth revolution, noting its global impact because of the mobile devices’ ubiquity.

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MODERATOR

SPEAKER

Ashraf Rizvi

Chief Executive Officer & Founder

Gilded

FULL BIO

Anthony Scaramucci

Founder & Managing Partner

SkyBridge

FULL BIO

TIMESTAMPS

0:00 – Intro and background

4:38 – Founding Gilded

8:10 – Moving physical gold to the blockchain

10:22 – History and value of gold

14:31 – Mechanics of Gilded

20:10 – Crypto vs. gold

22:30 – Gilded for Good and its positive impact

25:35 – Sustainability and lower environmental impact

28:10 – Tokenization of asset classes

32:10 – Gold’s performance and the fourth revolution

36:11 – Conclusion

EPISODE TRANSCRIPT

John Darsie: (00:12)
Hello everyone. And welcome back to SALT talks. My name is John Darsie. I'm the managing director of SALT, which is a global thought leadership forum and networking platform at the intersection of finance, technology and public policy. SALT talks are a digital interview series with leading investors, creators, and thinkers. And our goal on these talks is the same as our goal at our SALT conferences, which we're excited to resume in September of 2021, September 13th to the 15th here in our home city of New York for the first time.

John Darsie: (00:44)
But our goal on these talks and the goal that we have on these conference series is to provide a window into the mind of subject matter experts, as well as provide a platform for what we think are big ideas that are shaping the future. And we're very excited today to bring you a SALT talk with Ashraf Rizvi. Ashraf is the founder and CEO of Gilded and is responsible for the strategic direction and day to day running of the firm. He has over 20 years of executive experience as founder, managing partner and global business head.

John Darsie: (01:15)
Prior to founding Gilded, Ashraf was the co-founder and managing partner of SummerHaven Investment Management, a commodities management firm overseeing nearly 2 billion in assets for retail and institutional clients, including endowments, foundations and family offices. For more than 13 years, Ashraf was the senior leader at UBS, holding a variety of roles in New York and London, including global head of commodities trading, global head of metals, global head of emerging markets FX and global head of credit repo.

John Darsie: (01:45)
Previously he was the head of FX Options Trading in New York for Credit Suisse. And prior to that, he was a senior trader at Susquehanna Investment Group. Ashraf earned a Bachelor of Science in economics from the Wharton School at the University of Pennsylvania. He also served more than 15 years on the undergraduate board and the Europe, middle east and Africa board at the Wharton school.

John Darsie: (02:06)
Hosting today's talk is Anthony Scaramucci, who is the founder in managing partner of SkyBridge Capital, which is a global alternative investment firm. Anthony is also the chairman of SALT. And with that, I'll turn it over to Anthony for the interview.

Anthony Scaramucci: (02:17)
Through all these SALT talks, I'm surprised you haven't mispronounced my name once, just to give it to me a little Darsie.

John Darsie: (02:25)
Tony Scaramucci. I'll go with that one next time.

Anthony Scaramucci: (02:27)
You're going to do something like that, okay.

Anthony Scaramucci: (02:30)
Ashraf, you got an amazing career. So I want to start there. Let's go to the amazing career. You come out of school, what's the first thing you do?

Ashraf Rizvi: (02:40)
Well first, I'd like to say thanks a lot for having me on Anthony and John. I'm looking forward to the conversation. So, undergrad out of Wharton. Decided to start my first business venture right out of school with a number of colleagues. We started trading in Philadelphia, grew to New York, Chicago over the years, and it was a great learning experience. We were trading FX derivatives. It was a phenomenal time in the marketplace and we had a great opportunity to learn and grow as individuals.

Ashraf Rizvi: (03:12)
And then ultimately, ended up at Susquehanna where we got the opportunity to trade in a bigger environment over the counter. Was involved in the early days of the ERM breakup. And of course, the demise of Sterling on Black Monday as well. So it was a great learning experience and a great opportunity to learn what it was like to be an entrepreneur.

Anthony Scaramucci: (03:32)
Okay. So I'm going to stop you there because you got a lot of young listeners. When you say the ERM breakup, what you're referring to is the exchange rate mechanism that dissolved in 1992. There were short positions put on. One of the most famous ones was Stanley Druckenmiller and George Soros, where they were shorting the pound, because they knew that the Brits wouldn't be able to support the pounds valuation and they would have to accept some level of devaluation.

Anthony Scaramucci: (04:02)
I think it's a good point because you have a lot of history with this. We've been devaluing our Fiat currency since 1971, August of 1971. The US government under Richard Nixon's orders took the US dollar off the gold standard, $35 an ounce. Today, I guess it's around $1700 or so.

Anthony Scaramucci: (04:23)
And tell us why all of these things are important and how they lead up to and are the precursor to you being the founder of Gilded.

Ashraf Rizvi: (04:37)
So I think the story really starts at that, I view it as my entire life. I feel like I was getting ready to do something like Gilded. And I point to maybe a few things. So one, the extensive experience in the financial markets. So having lived through that breakup of ERM, Black Monday, being involved in the financial markets, whether it was dealing with central banks, high net worth clients, family offices, institutional clients who want good money management, all of these, I think, contributed to what I've been able to do.

Ashraf Rizvi: (05:16)
I think also the other part that was very important is that I had the opportunity to start two different companies that were successful. One right out of school that we just touched on. Another that was started during the great financial crisis, that grew to manage a few billion dollars in commodity assets. And then there's also a personal touch to it. So I'm a second generation immigrant. My parents are originally from India. They moved in the 60's. I grew up in a small town in Iowa, so classic Americana. And I still remember, my parents used to send money back home to their family and help them be successful in difficult economic times in the 70's. And I remember my dad telling me about the fact that the gold price was, as you touched on, $35 an ounce back then. The rupee was seven and a half to the dollar. Today it's 74.

Ashraf Rizvi: (06:10)
And so, what we're looking at is a world where we've seen currency debasement. The dollar has become less valuable. The rupee has become less valuable. All currencies have become less valuable. Their purchasing power has shrunk tremendously. From 1971 on, the dollar has lost 95% of its purchasing power. And you know that, we all know this. If you go to the store and you buy eggs or milk or anything, you know that it costs a lot more than it used to.

Ashraf Rizvi: (06:41)
And so I think this is really what's driving the push now more than ever for things, assets like gold, which has served as a tremendous and a historic store of value for thousands of years. The problem is, it hasn't been functional. And so what Gilded really does, is we take physical gold and we make it digital, mobile and usable, which is really about making it functional. How can we make it operate like money without all the negatives of money, which is that, there's the general currency debasement across the world, the big issuance of debt and spending, which ultimately is going to be hard to pay back. And so here's something that we can use that's stable, supportable and something that can hold its value over the long term.

Anthony Scaramucci: (07:32)
So let me rephrase it, just so as I know that I have it, and maybe John could also help me with this. You are basically a warehousing gold. And so you're going to then digitize it over the blockchain so that people can own portions of the gold that you're warehousing. They're buying it from you. Do you think that that goal then would trade differently than just spot price gold in the marketplace? Or do you think that the fact that it's been enhanced by a digitalization or the digital model, the blockchain, makes it more valuable?

Ashraf Rizvi: (08:11)
That's a really good point, Anthony. So I think it makes it much more valuable, in the sense that it becomes functional. And so by that what I mean is, that you get all the benefits of owning the physical asset. So first, what's the benefit. One is that it's your title and it's your property. And so if we think about the fractional reserve banking system, you don't have that. When you deposit money, when any of us deposit money in a bank account, it's no longer your money, it the bank's money, and they give you an IOU.

Ashraf Rizvi: (08:40)
When you have securities or other assets often that you hold, they become the custody of some other party at the end of the day. And you have counterparty risk. Let's think about the great financial crisis. You might have securities at an institution that could go under. In our case, in Gilded, it's not us who are the custodians, it's your property, it's your title. It's sitting in a Brink's vault, fully insured, audited, both for the quality of gold, but also that it's audited that you are holding is immutably stored on the blockchain.

Ashraf Rizvi: (09:10)
So you get all of those features, but you also get the additional feature of the fact that we can make it functional. So in certain countries such as India and middle east and Turkey, we already have product where you can send it to someone else instantaneously. You can own the entire bar. You can own a partial bar and it's still your property, your title. We aim to launch in the US soon. We have to get some regulatory approvals that allow us to be able to do the send functions, but we'll be able to at least allow you to be able to buy and hold and store, so that you have a better store value. So that's really where I think the value proposition is, is that it's your asset, but it's a functional asset, rather than what a lot of people remember it to be as a very expensive paperweight.

Anthony Scaramucci: (09:57)
Okay. So the non-Bitcoiners out there, the Bitcoin skeptics or the crypto asset skeptics, they should like this, right? They're getting the best of both worlds. They're getting a material money, hard currency. However you want to describe what gold has traditionally been over the last 5,000 years. And they're getting the convenience and the portability and the transferability of the blockchain.

Ashraf Rizvi: (10:22)
Exactly. So I think our core vision is about freedom from Fiat. And as you know, Anthony, gold has served as freedom from Fiat for 3000 plus years. It was the original money. It served as the foundation for money for thousands of years. And up until 1971, it backed pretty much all the currencies through the US dollar, which ultimately was tied or pegged to various other countries currencies. Since then of course, we've really floated freely. So, that I think is an important part of it.

Ashraf Rizvi: (10:57)
Of course, the vision is to make it digital, mobile and usable, as we've talked about, and really make it functional. And so I think for investors, I like to think of it as freedom of choice. Depending on what it is that you want, if you want that physical asset, as well as the digital component, I think we're a great place for you to go. I think it's all also valuable in the sense that we know that gold is pretty stable. The price isn't moving a lot on a day to day basis. It's it's not a get rich, quick, fast. It's about stay rich quick for a long period of time. And protect your wealth, store your wealth. And do it in a safe, secure way, but also have the ease of use where we can use a mobile device to be able to access the marketplace and to have the benefit of the liquidity of the entire gold market, which is huge. On a daily basis, trading close to $200 billion a day, which makes it roughly the fifth largest currency in the world.

Anthony Scaramucci: (11:58)
And listen, I'm a Bitcoiner, but I'm also, have a huge amount of respect for gold. I think you've had 5,500 years of history, if not longer. If you go back to the tombs, Egyptian tombs are all layered in gold. So obviously it's had value. It's held value throughout generations, throughout world history. So tell us how you're going to create demand for this. What is the audience that Gilded is going to be attracting?

Ashraf Rizvi: (12:29)
So I think the great thing about this product is that, I think the audience is everyone. So whether you're an individual, investor, whether you're a hedge fund asset manager, pension fund, institutional client, corporate, or even a government, you're a target audience for us at the end of the day.

Ashraf Rizvi: (12:47)
Why? One, store of value. Everybody's looking for better stores of value. Gold is a great store of value. It has served that purpose, as you just mentioned for thousands of years. And people know it, they trust it and it's quite stable. So that's most important, is, let's take that store of value that we know and let's make it functional. Let's make it do things that you can't do with it if you just buy the brick and put it in your safe deposit box or in your house. Let's make it movable.

Ashraf Rizvi: (13:22)
So in other words, let's offer the ability to send it to other people. And so in the US, we hope to be able to offer that in the coming months once we have regulatory approval. We're already doing it in other countries. Let's make it possible to earn a yield, yield enhancement product. Let's tie it perhaps to a credit card or debit card. Let's make it possible to take a loan against that physical gold. It's your property, it's your asset. So you can take a much higher loan than for example you can with the securities markets for an ETF or something like that. Let's make it pledgable as collateral. So if we can make it pledgable as part of repo or other factors that, other mechanisms that can allow you to access liquidity. All of these become possible when we digitize that asset, which are not possible when it's just a physical asset, as has been for thousands of years.

Anthony Scaramucci: (14:20)
And tell us about the fees. And how do you get access first of all? Do you need to go through your digital app or are you going to be on people's platforms? And then what are the fees?

Ashraf Rizvi: (14:31)
So the fee, there's really three layers of fees and it depends on what you use. So first the fee is for onboarding. So you buy the asset and now you've got it in the vault and you get all the benefits of having that. So there's a small fee for that, typically 1%. And now you own that physical asset at the end of the day.

Ashraf Rizvi: (14:53)
A second fee is if for the storing, the validation, the audit of both the gold, the blockchain of your respective ownership, and that's typically 50 to a hundred basis points, depending on the size of your holdings. And so here, it's applicable, as I said, for the retail client all the way to a corporate or government. And the nice thing is, if you're sending gold to another party, it's free. So you can think of it as a super highway, in that, once you're on the highway and you have access to the asset, now you can and move it freely, 24/7 [inaudible 00:15:33] So those are the two primary fees.

Ashraf Rizvi: (15:37)
A third fee is, in the event we offer you a premium type of service or additional service such as a loan or a yield enhancement product, or a ability to pledge as collateral, then we may do a revenue share with the party who helps us facilitate that. But for typical, for most people, it'll be the purchase and then the storage and validation. And I'd like to just point out Anthony, which I think is very important is that, compared to if you did this yourself, or you did it online or bought the physical asset yourself, these fees tend to be considerably cheaper than what you would be paying if you're doing it by yourself.

Anthony Scaramucci: (16:21)
Okay, very informative. How is the gold secured from a physical and cybersecurity perspective?

Ashraf Rizvi: (16:29)
So that's something of course that's very important to every investor. And you know this Anthony, from what you do is that, safety of the assets for the clients is paramount. And so we do a number of things here. So one, first of all, the asset itself is sitting in a Brink's vault. Brink's has more vaults than any other facility in the world. They have them everywhere. We have Swiss based Brink's vaults. We can also store in New York, London, various other cities and countries around the world.

Ashraf Rizvi: (17:01)
Fully insured by Lloyds of London. Audited, physically the gold is audited within the vault, that it exists and it's the real thing. And of course, auditing of your holdings and the blockchain in which it's kept, which is Hyperledger. So it's a permission blockchain. So full KYC/AML compliance. So we're very sensitive toward the regulatory side.

Ashraf Rizvi: (17:25)
And then from a cyber security perspective, we're leveraging Microsoft Azure, AWS major cloud service providers, which have built in significant cybersecurity. And then we're also focusing on it through other vendors. And also on protecting your PII, where we segregate that and split that from anything we store in the blockchain. So your personal information is retained completely separately.

Ashraf Rizvi: (17:51)
And so all of these things are very, very important. But of course, one of the most important things here is, you own the physical asset. Somebody can't steal your digital part, and then that's it. You still always have the physical asset and you also have the right and the ability to take physical delivery if you want.

Anthony Scaramucci: (18:10)
When are you launching in the US, Ashraf?

Ashraf Rizvi: (18:13)
So we're hoping to go live here on beta, early beta, here in the next few weeks through the Apple store and through Google Play. And I believe that by SALT we'll be in the marketplace. And then we're waiting for a approval from regulators for cross border activity. And so what that means is, that we have to get certain money transmission license, et cetera, which we've already in the process of applying for. And that will allow us to make it possible for party A to send to party B instantaneously, 24/7.

Ashraf Rizvi: (18:48)
We do have that ability to all already do that in India and various other countries that we're operating in. I'll just point out that the US is a little more complicated because that activity is governed on a state by state level. And so you have to tackle each state independently. There's no way to do it at the country level. And some other places you're able to do that.

Anthony Scaramucci: (19:15)
Before I let you go, I got to ask a question. John Darsie's going to take over here in a second. He's going to, of course, try to outshine me. And the good news is, I know he is at his house right now, and I only live two miles from him. If he tries to outshine me Ashraf, I'm going to run him over with my car sometime this afternoon. So that's just a threat, John. So you can report that to the local police.

Anthony Scaramucci: (19:39)
But before I bring John in, who will ask [inaudible 00:19:43] questions, of course, what do you say to the crypto people? What do you say to Bitcoiners, people in the space of Ethereum? What's your reaction as a advisor, as a business person? Should they be selling their crypto to own Gilded and gold? Should they own some of it? Both? What do you say?

Ashraf Rizvi: (20:11)
Well, first I'll start by saying, we're not crypto, and we're not a stable coin, and we're not part of the Frank [inaudible 00:20:18] banking system. So that's first thing, in that, we're providing you the ability to own that physical asset, and then making it digital, mobile and usable. That's item one. And the second thing I think I would say is that, we're about freedom of choice. People have an interest in non Fiat assets. And I think gold has been the original non Fiat asset for thousands of years. And I believe it'll continue to exist. And we can make it more functional than it has ever been before. And that's what the objective Gilded it is.

Ashraf Rizvi: (20:58)
I think for all investors, whether it's individuals, hedge funds, asset managers, pension funds, governments, they need to have a variety of assets in their portfolio. And I think there's a place for all sorts of different assets, whether it's stocks or bonds or gold, or digital gold in our case, or crypto. And that's ultimately up to the users. But at think we occupy a different space. I don't think we have conflict with crypto or, stablecoin or Fiat for the matter. I think we just offer a different solution that can be helpful to people, help ultimately in their store of value, protect their life savings and be non-correlated assets to stocks and bonds, which when they tend to sell off, gold tends to shine very brightly. And so there's a very important place that it serves. And I think we can make it more functional than it has ever been before. And that's the whole mission behind Gilded.

Anthony Scaramucci: (22:07)
It's a great message and a great product. I'm going to turn it over to John.

John Darsie: (22:14)
Ashraf, it's great to have you on here. We look forward to having you at SALT as well. What is Gilded for good? And how do you see that part of your business or the initiatives that you work on? How do you see that developing over the next five to 10 years?

Ashraf Rizvi: (22:30)
So Gilded for good is something I'm really excited about. I think it's an opportunity for me, after having done so many things in Wall Street to really, to do something that can make a positive impact on society. And so how can we do that? So I think there's many ways. So one, let's look at my own personal case of my parents sending money back home. Remittances, $600 billion market average fee that people are paying is 6% to send money back home to their loved ones. We can make that cost at least less than 50% of that. And so here's an opportunity where we can have a positive impact.

Ashraf Rizvi: (23:09)
Second, is think about the billion people on the planet who are unbanked. The financial system has not served them well. We're already in conversations with various firms that, how can we allow these folks to be able to complete the KYC/AML process and able to hold that asset that they want, which gives them store value and be able to plan for their financial future.

Ashraf Rizvi: (23:38)
Third. The hundred dollar bill is the most laundered instrument in the world. Gold is second and art is third. By holding that gold in a vault and having it digitized and traced, it means we can take a certain amount of that asset out of the system where it can't be laundered. And we know exactly who's got it, where they're keeping it. And that's good, whether it's from a CRS or FACTA perspective, but it's good from a government regulation perspective as well.

Ashraf Rizvi: (24:11)
And we can also make an impact on the environment. Most of the gold that exists in the world, 200,000 tons is already been taken out of the ground. That's 80% of all the gold there is in the world. That only leaves 20%. 1% comes out per year. So we by re-refining existing gold or using gold that's already in a vault, we can reduce the burden on the environment by not moving it. We're not consuming hydrocarbons. We're not putting it on a plane or on a truck. It's just moving from, let's say, me, to Anthony, or it's staying in our possession, it's staying in a vault. Very low energy usage. And so I think all of these are ways that we can have a positive impact on society.

John Darsie: (24:57)
The sustainability piece was another interesting piece to me. There's a lot that's been made in the cryptocurrency world about Bitcoin, the energy that goes into Bitcoin mining. Oftentimes Bitcoiners, they retort to those accusations as well. Mining precious metals and transporting precious metals and the entire security ecosystem that exists around safeguarding fiscal assets, that uses a lot of energy as well. How do you think that Gilded and these types of technologies are going to disrupt sustainability questions around gold and precious metals, and what's your view on that sustainability piece?

Ashraf Rizvi: (25:33)
I think that's a great question, John. I think the key here is that there's a big [inaudible 00:25:40] cost. As I said, 80% of the gold is already out of the ground. And it's sitting in really, three or four places. Really three main places, but four in aggregate. So one, half of it is in jewelry. 25% is in bars and coins. And 20% is in central banks. And then the balance is basically in functional applications, like yours and my iPhones or Samsung devices or laptops, computers, various other in industrial applications.

Ashraf Rizvi: (26:15)
And so that's already out of the ground and we've already paid the cost of that. We don't need to pay an additional cost. Now we're just storing it at the end of the day. And that's a relatively low cost to exercise. And as I said, relatively small amount of the gold comes out. That part is a dirty business. And I think the mining companies are doing a better job of addressing that, but it's not something that we have to maintain on an ongoing basis. Once you take it out, you put it in a vault and stays there. So I think that's very important.

Ashraf Rizvi: (26:45)
And I think the other thing is, there is a benefit to society if we can cut down on illicit and [inaudible 00:26:51] activity. That's positive for society. And so whether it's the hundred dollar bill, or a bar of gold, or art that's [inaudible 00:27:00] illicit, anything that reduces that, or can reduce things like human trafficking or child labor, all of these, these are all often associated with various instruments that people are using in order to be able to get paid so that they can't be traced. And so this is something that we can clearly cut down on, and I think that's a positive from a social good.

John Darsie: (27:24)
So your career that I read at the beginning of this SALT talk, you're steeped in financial markets. You've been involved in FX markets, commodities markets, you're a markets guy. And we had another group on for a SALT talk recently. The CEO was talking about how he thinks of eventually, there's a world of crypto, there's a world of FX, there's commodities, there's the traditional stock market today. He thinks that with the rise of blockchain and other technologies, that those markets, that the lines between them are going to blur.

John Darsie: (27:57)
Would you agree with that sentiment, that you think that eventually there's going to be tokenization blockchain technology that applies across all kinds of different asset classes? And what do you think the implications of that are for how financial markets operate?

Ashraf Rizvi: (28:10)
So first I think is, about asset classes. And so I agree with you and your previous speaker that, I think lots of asset classes are relevant to any portfolio. That's modern portfolio theory, goes back to in the 1950s, Harry Markowitz. And so what do we want? We want asset classes that generate positive returns that are non-correlated. That's the goal of every, whether it's a hedge fund manager, pension fund, individual, everybody desires that. Well, I think whether it's stocks or bonds or gold, they all fit that bill, in that they generate positive returns, non-correlated. And I suspect your prior speakers touching on the same point with crypto, or even whether it's wine or art, think there are many assets that fit these bills. So they're relevant from that modern portfolio perspective. So I would agree with that.

Ashraf Rizvi: (29:12)
The second part of the question is related to blockchain. So I have to admit I'm a huge fan of it. And I suspect you and Anthony are as well for a lot of reasons in that, we both share this common experience of managing money as a fiduciary for other people. And we've all had to deal with the fact that we have data, whether it's about our individual trades or managers, et cetera, that we have to retain. And then our auditor has that data. And then the exchange has that data. And our administrator has that data.

Ashraf Rizvi: (29:46)
So all these different parties have to get this data in order to perform their function. And so I remember that this was an enormous exercise. You have to validate it, you have to reconcile it. With blockchain, we all have the one set of data, which is the source of truth. And we can all share that. What a powerful solution that is for any financial firm and for anybody that, whether it's my data, my auditors can have it, other parties that I work with have it. And we all know have the exact same thing. I think that's a really powerful thing, and it's going to be huge in the financial markets.

John Darsie: (30:28)
The last question before we let you go. Over the last decade or so, obviously cryptocurrencies have been on fire. If you look at percentage appreciation of those assets, from very fringe pieces of technology, to now somewhat mainstream, especially if you look at things like Bitcoin and Ethereum. Gold during that period hasn't performed as well. Anthony actually did a recent debate with Peter Schiff on gold versus cryptocurrencies. As Anthony said, he's not a gold bear per se, but it was just an intellectual conversation around the future of alternative stores of value.

John Darsie: (30:58)
But I think gold in the context of something like cryptocurrency obviously doesn't feel as technologically forward or advanced as this new world of blockchain digital assets. Do you think companies like Gilded are going to help transform the image of gold and potentially help gold rebrand itself and potentially drive better performance over the next decade? Or do you think it's more of something you're just trying and get people access to what you think is a very stable store of value and insurance against a lot of craziness that happens in the world?

Anthony Scaramucci: (31:29)
But Ashraf, just to iterate, before you answer the question. In that debate with Peter Schiff, I was just talking about the virtue of Bitcoin. He thinks Bitcoin is worthless. And so I'm just saying to him, it's not worthless. Here are the properties of why it isn't worthless, but I have a tremendous amount of respect for gold. I'm trained as an economist like you, and I understand the value that gold has had in our civilization for millennium. And, and so therefore I have a tremendous amount of respect for gold. It's not a debate with me, whether about gold is going to exist or not. I think it's more about will Bitcoin be here. I believe it will be. But go ahead. Answer the question.

Ashraf Rizvi: (32:08)
I agree. Let's start at the basic level. So first it has been a store of value for thousands of years and has been a good store of value since it's really been separated from government control, which really starts in 1971. And as I said, 8% a year for the last 50 years. And I think you touched on and a key point there, John, which is that, that doesn't mean you get 8% every year. It doesn't mean you get three quarters of percent every month. It's not a financial instrument, like a T-bill or a T-bond, or a corporate bond at the end of the day. Of course, there you take a different kind of risk. Maybe you don't get paid at all. And they default.

Ashraf Rizvi: (32:47)
So you get the asset, you get the return from the asset over long periods of time. But over shorter periods of time, there may not be any return or it could even go down. So it's similar to currencies, for example. And so I think the last 10 years we've seen that. It has been pretty flat. But if we look at the last 20 years, since the beginning of the millennium, gold has rallied 9% per year, and it's done better than stocks and bonds. Also, if we look at the bigger picture, 1980s, 1987, dot-com bubble, great financial crisis, 2020 COVID, in each of these cases, these were stress events where stocks and other risky assets fell tremendously. In most cases, 30, 40, even 50%. Gold in all of those cases went up. This is part of portfolio exercise. And this is part of more modern portfolio theory. And this is why people should own the asset.

Ashraf Rizvi: (33:47)
With regards to the other thing that you touched on, which is bringing it into the 21st century, I think we're living in the fourth revolution. That's where we're at. The first one is really about the UK. And the second one of course is about Detroit and mass production. And the third one is largely about Silicon Valley and technology. This fourth one, I think most people believe is a global phenomenon.

Ashraf Rizvi: (34:20)
And so here's an opportunity where we can impact people on a global basis by leveraging technology and leveraging that most ubiquitous devices, which is a smart phone or a mobile phone, which most people on the planet who are over 10 years old, possess. And so now we're making it possible for them to access this store of value that they'd like to have, own it, as their property, their title, and have it stored way in a safe, secure way, and be able to do it from their mobile phone. And they can log in, create account and make a purchase in just in a matter of minutes from anywhere. That I think is about bringing it to 21st century. And that's, I think, where the world is headed is, that more solutions and products will be all about ease of use and access to what people desire and want. And here we're making it digital, mobile and usable.

John Darsie: (35:16)
Well Ashraf, it's a pleasure to have you on. What you've built is a fascinating innovation. Again, that you just touched on, that it's bringing something that's been a store of value for thousands of years into the fourth revolution that's going on here with digital assets. So congratulations on all you've built and continue to build. We look forward to seeing you very soon at the SALT conference in New York. We're very excited. In the New York post, we have Eric Adams, the mayor of New York confirmed his attendance recently, reaching an olive branch to the business community in New York, as new Yorkers are very excited about that. And everything related to the conference. We have a great lineup, including yourself. So thanks for joining us. Look forward to seeing you soon.

John Darsie: (35:55)
Anthony, you have anything for Ashraf before we let him go?

Anthony Scaramucci: (35:57)
I'm just letting you know, I'm going to invite you back on SALT Talks if you digitize those Muhammad Ali signed gloves behind you, and you offer me them up in an NFT, which I'll gladly purchase. Those are some hot gloves Ashraf.

Ashraf Rizvi: (36:11)
Well, look, John and Anthony, thanks so much for your time. I really enjoyed the opportunity to have the conversation. Again, just wrapping it up. Gilded, where it's all about making physical gold digital, mobile and usable. And really making that asset functional like money and being able to offer all the different services that people want and desire. Whether it's being able to borrow against it, create a return, be able to do it on a easy to use mobile application. And so that's what we're really excited about. Our vision of course, is about freedom from Fiat. And I want to thank you for your time and I really enjoyed the conversation. And I'm looking forward to participating in SALT.

John Darsie: (36:51)
Thank you Ashraf. Thank you everybody for tuning in to today's SALT talk with Ashraf Rizvi from Gilded. Just a reminder, if you missed any part of this talk, or any of our previous SALT talks, you can access them on our website at salt.org to view all of these episodes that we've done over the last 18 months on demand.

John Darsie: (37:07)
We're also on social media, @SALTConference on Twitter is where we are most active. We're also on LinkedIn, Instagram and Facebook as well. And please spread the word about these SALT Talks. Again, we love educating people about innovative companies, innovative ideas and Gilded is certainly on the frontier of FinTech innovation with what they're doing around gold.

John Darsie: (37:27)
But on behalf of Anthony and the entire SALT team, this is John Darsie signing off from SALT Talks for today. We hope to see you back here again soon.

The Future of Healthcare & Education | SALT Talks #249

“I really believe Abu Dhabi is going to give us a window into the future… Geographically, it’s so well situated.”

Welcome to the first episode of the Emerging From a Post-Pandemic World series, presented by ADGM. Abu Dhabi Global Market (ADGM) is an international financial centre (IFC) located in the capital city of the United Arab Emirates. Established by UAE Federal Decree as a broad-based financial centre, ADGM augments Abu Dhabi’s position as a global hub for business and finance and serves as a strategic link between the growing economies of the Middle East, Africa and South Asia and the rest of the world.

Michael Moe and Jim Mellon discuss their companies’ efforts to improve education and health care, respectively. They describe the advancements in each industry and how they will transform society while solving some of the world’s biggest challenges. Moe sees education innovation as a huge economic driver, particularly in the Middle East where it will power the region’s knowledge economy. Mellon emphasizes the importance of first improving quality of life before extending lifespans and predicts the mass adoption of meat alternatives that will address persistent health issues and climate change.

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MODERATOR

SPEAKER

Jim Mellon

Chairman & Co-Founder

Juvenescence

FULL BIO

Anthony Scaramucci

Founder & Managing Partner

SkyBridge

FULL BIO

TIMESTAMPS

0:00 - Intro

7:55 - American education system

8:55 - Healthcare and education in the Middle East and beyond

11:29 - Longevity and anti-aging advancements

12:57 - AgTech and food chain transformation

20:43 - Education as an economic driver

24:45 - Economic incentives driving AgTech, BioTech and education

30:08 - Education as an equalizer

31:31 - Quality assurance in education

35:35 - Non-linear education timeline

37:00 - Juvenescence, metabolic switch and restructuring society around longer life

43:02 - Intermittent fasting and biological breakthroughs

45:42 - Making education and healthy living more engaging

52:00 - Democratizing and reimagining education and healthy living

56:27 - Abu Dhabi as a global center

EPISODE TRANSCRIPT

Anthony Scaramucci: (00:49)
Welcome back to SALT Talks. My name is Anthony Scaramucci, I am the founder of SkyBridge Capital, a global alternative investment firm and chairman of SALT, a global thought leadership forum encompassing finance, technology, and politics. SALT Talks is a digital interview series with the world's foremost investors, creators and thinkers. Just as we do with our global SALT events, we aim to empower big, important ideas and provide a window into the minds of subject-matter experts. We are excited today to bring you the first episode in a new series of SALT Talks with our friends at Abu Dhabi Global Markets regarding new paradigms in a post-pandemic world. Co-hosting today's talk with me is my dear friend, Mark Cutis, the chief executive officer of ADGM, which obviously stands for Abu Dhabi Global Markets. ADGM is an award-winning international financial center located on the beautiful Al Maryah Island in Abu Dhabi.

Anthony Scaramucci: (01:53)
We hosted our inaugural SALT Abu Dhabi Conference at Emirates Palace in 2019 and are excited to bring that event back to the UAE in the coming months. On today's SALT Talk, we will be hosting a conversation about new healthcare and education. This is very applicable and important for the post-pandemic world. These are two of the most successful investors and entrepreneurs, Jim Mellon and Michael Moe. Jim, Jim Mellon is a British entrepreneur, investor and philanthropist with a wide range of interests. Through his private investment company Burnbrae Group he has a substantial holdings in real estate as well as private and public companies. Jim's investment philosophy is underpinned by a careful analysis of new industries, or major shifts in markets. Most recently has focused on investments and businesses in healthcare, biotechnology and Ag tech. His recent book Juvenescence mark the beginning of a rush of capital into the nascent field of aging research, and also led to the formation of the company Juvenescence with his partners.

Anthony Scaramucci: (03:06)
Juvenescence is a leading biopharma company in the commercialization of therapies to slow stop and reverse aging. More recently, Jim authored the book Moo's Law, focused on investment opportunities in the new agrarian revolution and fields of cellular agriculture. Jim co founded agronomics to invest in a portfolio of leading companies in the sector and is its largest investor. Jim sits on the board of trustees of the Buck Institute for Research on Aging, and of the American Federation for Aging Research AFAR. He's a trustee of Biogerontology research... Excuse me, let me say that again, he is a trustee of Biogerontology Research Foundation, and an Honorary Fellow of Oriel College at the University of Oxford, where he established the Mellon Center for Longevity. And Jim also sits on the advisory board of the Milken Institute's Center for the Future of Aging. And I might add, Jim, you're going to be a really good friend of mine because I expect to keep this hair and my face unwrinkled. So I'm really looking forward to spending more time with you Jim.

Anthony Scaramucci: (04:24)
Michael Moe is the founder of GSV, a modern merchant bank that invests advises and partners with the fastest growing most dynamic companies in the world, the stars of tomorrow. He's currently serves as the CEO of GSV asset management. Regarded as a preeminent authority on growth investing Michael's honors include institutional investors, all American research team and the Wall Street Journal's best on the street award. Michael is the author of several best selling books. Michael has increasingly focused recently on his greatest passion education. He is a visionary in the field of Ed Tech. He has a passion that he is pursuing for the last three decades. Today he sits on the board of directors of Coursera, Curious, GSVlabs, Course Hero, Class Dojo, Parchment, Storm Wind, OZY Media. Michael and his business partners, Deborah Quazzo created the GSV ASU summit, the world's greatest Thought Leadership Forum in the field of Ed Tech.

Anthony Scaramucci: (05:33)
And my friend Mark Cutis, I'm looking over you and telling you, sir, that you and I are the underachievers here, sir. I don't know what we're doing with our careers after reading those two amazing bios. But I turn it over to you, sir, to start the questioning. And thank you guys so much for joining us on SALT Talks today.

Michael Moe: (05:50)
Thanks Antony.

Jim Mellon: (05:50)
Thanks Antony.

Mark Cutis: (05:52)
Thank you, Anthony. It's quite a pleasure to be involved with this group of the four of us here. And I do want to say both of you are covering two key areas education, and health care, that I think in so many ways will define the new post pandemic age. But if I could just step back for a moment and say, you have amazing credentials, you've achieved a lot. But when I think of the four of us, Anthony Scaramucci, has had many experiences that will be difficult to replicate. And if we do have a moment at the end, I would love to ask him some questions of his career, particularly in the Trump administration. But in any event, I won't delve into that I'll just go straight.

Anthony Scaramucci: (06:41)
Well, first of all, Cutis it was a very long career.

Mark Cutis: (06:44)
Exactly.

Anthony Scaramucci: (06:44)
I just want to make sure everybody knows that, okay? And if you want to make me feel better, you can say it lasted 954,000 seconds. Keep going Mark.

Mark Cutis: (06:54)
Okay, but let me just put in my two cents here. You're the only person that I know, that has emerged from that administration, which hasn't really been battered. So I think at another time, we'll talk about your longevity, and your ability to essentially come out of this unscathed.

Anthony Scaramucci: (07:12)
[crosstalk 00:07:12].

Mark Cutis: (07:12)
So I want to turn for a moment to Michael, on education. And the issue with education, particularly for the Middle East is seminal. Now, before we talk about the Middle East, I want to ask you about the states. America has the best and the worst, kind of like Charles Dickens, with the best of times the worst of times. We have the best schools. And we also have massively underperforming schools particularly in our high school systems that have left behind a large swath of America. And I know that's been something that you have had close to your heart. Can you tell us a little bit about America, what we need to do in the States? And then we'll turn to your big project in the Middle East?

Michael Moe: (07:54)
Yeah, well, fundamentally, one of the biggest problems in America and this also is a problem many places in the world, is that your future is determined by how well you select your parents. And that fundamentally, is just unfair. And so we believe, I believe strongly that talent is pretty equally distributed around the world, but opportunity is not. And so how do you change that equation? How do you give everybody an equal opportunity to participate in the future? And the foundation of that is access to quality education.

Mark Cutis: (08:28)
Great. So when we talk about the region, because I think this is going to be one area yours in healthcare, that will be defining for the modern age for this area and for the world. What sort of initiatives if you can just touch upon those are you thinking about and what are you trying to do? Before we talk about why you're in Abu Dhabi?

Michael Moe: (08:52)
Sure. To back up even GSV stands for Global Silicon Valley, which is basically what we felt was a trend 10 years ago was the mindset of innovation, entrepreneurship that's made Silicon Valley such a remarkable place was spreading throughout the world. And we wanted to connect Silicon Valley with the emerging Global Silicon Valley. As it relates to specifically the Middle East, and I'm going to broaden that scope. The Middle East is a fascinating place in terms of the oil powered the manufacturing economy, where education is going to power the knowledge economy, and this region gets that. And so how do you transform a society? It's getting access to quality education. And so both the acknowledgement, and the mindset that education needs to be at the top of list of priorities is very, very clear. And so we feel that support in every kind of level of conversations that we've had and that's why we are so excited about putting a flag in Abu Dhabi.

Mark Cutis: (09:56)
So one more last question before I turn to Jim. And it's kind of a banal suggestion, but there isn't a one size fits all for education. But are there common characteristics that you think would apply to the US, the Middle East and Europe for that matter?

Michael Moe: (10:14)
Well, I think there's a key philosophy. So if you think about, one idea is that the word elite means scarcity in most parts of the world, where elite really means to mean excellence, as well as cost and quality are directly associated. So what we need to be able to do is make high quality education as at lower cost as humanly possible, if not free. So we're invested in Coursera, they have over 80 million students on their platform, 97% of them don't pay a dime. And so there's many, many, many lessons to learn from different parts of the world in different areas of where there's both opportunity and excellence. But I would say it starts with a mindset.

Mark Cutis: (10:58)
That's great. That's excellent, thank you for that. I'm going to turn to Jim for a moment. Anthony talked about longevity. And you were a member, you're still a part of The Buck Institute, which I belonged to, at one point in time. Tell us a little bit about longevity, what it means because many people have confused longevity with people becoming gnarled and living to be 110 but without a quality of life. Because I know, that's not what you mean.

Jim Mellon: (11:28)
Yeah, our first mission, and what we do, is to try and improve the quality of life in the latter years. And about 15% of people's lives at the moment are characterized towards the end of their lives by one or more severe illness. And our mission to begin with, is to try and reduce that period, which can be as long as 13 years. So rather than trying to extend life, which is our secondary mission, which I think will happen by the way. And so we are looking at aging as a central disease from which the diseases of aging cascades, all the familiar ones that we know about, like cancer or heart disease or dementia. They proliferate as you get older, so they are diseases of aging. And what we're trying to do is to address aging as a central disease, which is now possible, which in turn will lessen the burden of these diseases of aging, which are really quite dreadful and their impact on older people.

Mark Cutis: (12:32)
Great. And part of your mission also, is to help mankind change their dietary input various proteins or various ways of eating. There's been a lot of work in this area, which has applicability here, from a food security standpoint, but more importantly, you're saying to make the planet sustainable, we need to do different things in the way we grow food.

Jim Mellon: (12:55)
Yeah, I agree with that Mark. So basically, after the Second World War and led by the United States, intensive farming became the norm, that is animals reared in very close proximity and the use of antibiotics and hormones and so forth to encourage growth and to stop disease became rife. That intensive farming is not a big threat to humanity, partly because it's the biggest source of global emissions. And if you're a believer in global warming, which I am, it's something that needs to be addressed. It's about 20% of all global emissions. Partly because 80% of antibiotics go into farmed animals. And if you think about it, this pandemic is pretty bad. But just imagine if we had a bacterial rather than a viral pandemic and the antibiotics didn't work anymore, we could have... and I'm not making this up, because none of us would have thought a year and a half ago, that this would be as bad as it is. But we could have a black death on our hands where a third of the world's population died, for instance.

Jim Mellon: (13:58)
So we need to do something about reducing antibiotic usage in animals otherwise, we become more and more resistant to antibiotics. On top of that, one of the great causes of disease in the world is, frankly speaking the food that people eat. And you may have seen that Nestle admitted, their board admitted that 80% of the food, they're one of the largest food companies in the world, was bad for human health. And this is across the world basically. Diabetes has gone up from 1% in China, in 1980, to 13% today. And it's as a result of the Western diet. The food that we eat needs to change. And one way that we can do it and the technology is here is to eat plant based foods which are better substitutes than the food from intensive farming. And perhaps more excitingly use cellular agriculture, which is growing food and labs and factories to create healthy alternatives without antibiotics, without emissions without great land, use without water use, on the scale that it's currently being used. So it's a very exciting time. And there are many companies out there now with viable products.

Mark Cutis: (15:07)
Maybe you can touch upon briefly on a few of these companies that you've backed and what they're doing, particularly when they're growing meat in a petri dish exactly, from cells. So tell us a little bit about that.

Jim Mellon: (15:18)
So if I just showed you my little fingernail, and we took a sample from a cow that was equivalent to the size of my little fingernail now, was about 2.5 milliliters. The idea is that in 40 days, that little fingernails worth of sample and the cow goes back, it doesn't get slaughtered, it goes back to its field will grow into the equivalent of seven or eight cows worth of beef, about 3,000 kilos. Whereas the conventional way of growing cows would take about 28 months. And the way it works is that from my little fingernails worth of sample, stem cells, which are the precursor cells for all of us, are extracted differentiated into the cell types that you want, which are typically muscle and fat, grown in large steel containers that are called bio reactors. And this is why it's so interesting to me, because my background is in biotech.

Jim Mellon: (16:11)
So this is a biotech process. There's no genetic modification. There's no Frankenstein element to this. But the cells are bathed in the media, which is the nutrients which are roughly equivalent to what cows would get from plants. And that growth hormones, which are roughly equivalent to what cows get in nature, are introduced as well. And then you get this glute gloop that is amalgamated and creates this beef. And that can be done across all species without the use of antibiotics, no bacterial contamination. And it can also be done in materials. So some of our companies are growing leather in laboratories, cotton, cocoa. And all of these things will substitute very effectively for the Frankly speaking, poor quality food that is being offered to most consumers at the moment. And this will happen within 10 years. So I just want to make up... I'll quickly finish three predictions.

Jim Mellon: (17:03)
In 10 years time, there will be no dairy industry as we know it on the planet. None. Already plant alternatives are a huge business. And you saw that only went public quite recently. But precision fermentation is coming down the pipe very quickly. And there will be no cows producing milk in the way that we see them at the moment, within 10 years. In 10 years, 50% of the meat market will be plant based, or cell Ag based, and over 50% of the fish market will be cell based fish. So this is happening extremely quickly and will be one of the world's most transformative industries.

Mark Cutis: (17:38)
Wow. That's amazing. And I think if we step back, and I'm going to turn it over in a moment to Anthony. From the prospect of educating the masses, you mentioned 97% take Coursera courses for free to being able to change the food chain, and to provide people with nutritious food that doesn't damage the planet is amazing, and it's brave new world. On that note, Anthony I'll turn it over to you.

Anthony Scaramucci: (18:08)
I appreciate [inaudible 00:18:09]. Fascinated by the discussion. I want to ask both gentlemen, the same question in their respective fields. And this is about political will, not just in our countries, the UAE or the United States, but global political will, on things like changing the food paradigm, changing the food supply chain, but then also discussing education. And as Michael knows, in the United States, education being a big issue, I'm the product of a public school. But we have a tremendous amount of special interests in education that prevent us from making innovation. Jim, is that the case in what you're discussing as well. And so let's start with Jim, where is the political will, where the potential political unity to get these things done that you're talking about in the future?

Jim Mellon: (19:02)
Well, it's a great question, Anthony. And we're in the UAE, which imports between 85 and 90% of its food. It's one of the most food insecure countries in the world. Other countries like this would be my own country, the UK which imports 50% of its food. And so countries such as the UAE or the UK, have a natural inclination to accelerate the process of substituting the current form of agriculture. And so you're seeing a lot of innovation here forward thinking, and frankly, capital going into this into this area. So where the government's have a vested interest in making it happen, you get a bigger propellant. But I wouldn't discount the United States or European countries which have net food export as either. The US has a quite a good regime for regulating novel foods and as does Europe. And we're very surprised at the speed at which some of this stuff is happening.

Jim Mellon: (19:55)
So for instance, I can confidently predict that by the end of this year, the fish coming out of laboratories will be on the market for US consumers. Chicken is already on the market in Singapore, it's already on the market in Israel. This is the dial up phase of the Internet of this industry. But if we can pick some of the winners out of that dial up phase, we're going to do very well. But overall, I think the public is beginning to embrace this very much. And you can see that and Beyond Meat, Impossible Burger, Oatly. The enthusiasm for those companies is reflective of general enthusiasm, particularly among younger people to save the planet by changing the food system.

Anthony Scaramucci: (20:36)
Michael.

Michael Moe: (20:37)
Yeah, so just following up on that point. What's happened is it's completely well known that in the knowledge economy in a global marketplace, what you know, your education makes the difference, not only for an individual, but for a company, and for that matter, a country. You only need to look at Singapore, which has really been the model for investing in human capital for over the last 50 years, where they started their independence, the same year that Jamaica did both hit about $2,500 GDP per capita. And because of the prioritization of education in Singapore it was a big part of what fueled that success of that country, which GDP, per capita [inaudible 00:21:24] is in excess in the United States. One of the things about, back to the point about Abu Dhabi, I think that Abu Dhabi is creating what is going to be the next Singapore.

Michael Moe: (21:35)
All the pieces of fundamentals in place, including that understanding of investing in the knowledge economy, but you only need to look at places like China and India, how education is really what they view is their key strategic advantage to fit to fast forward into the future. You look at the United States, and I too went to public schools, both public elementary and high school as well as college. And the fact of the matter is, the system that's been created in the United States today doesn't work. It's rigged. You only need to look at our nation's capital, right across the Potomac River in Alexandria, Virginia, Thomas Jefferson High School is the number one high school United States, right across Washington Memorial is the worst High School in United States yet Washington Memorial spends twice as much as Thomas Jefferson. Effectively Washington Memorial gets 30,000 per kid and is a dropout factory where less than half the kids that enter that school finish at school. That's unacceptable in a country like the United States.

Michael Moe: (22:40)
And the fact that because of this whole idea of the American dream, and how education really was that opportunity to advance your cause, that doesn't exist today. 70% of the kids are born poor, or remain poor. That system isn't acceptable. I think there's great awareness, but to your point, there is a very significant entrenched status quo namely unions and other people that benefit from the old system, which frankly it doesn't work. You look at every single data point, and you look at how America is competing against the rest of the world. You got parents, you got businesses that say, we can't employ students coming out of our schools, they can't read they can't write. You got parents that see studies that show this generation of the children will be less educated themselves. You got politicians are actually seeing that it's pulling for the first time to change the dynamics. And against that you got the [inaudible 00:23:27] status quo.

Michael Moe: (23:27)
And the good news is, I think America is finally starting to see 200... The union says, give us more time, give us more money. And American people are saying 200 years is long enough, we need to change things today.

Anthony Scaramucci: (23:38)
I just want to have a follow up, then I'll turn it back to Mark. And this is a follow up again, for both of you. And I appreciate what you're saying because all of us are friends with Michael Milken. He once pointed out to me that the women's liberation movement caused people like Meg Whitman not to be school teachers, they went on to become billionaires of eBay and CEOs of Hewlett Packard. I guess what I'm wondering and this applies to both of you as it relates to incentives, human capital and human ingenuity. It seems like in Jim's business, we have that and all that Jim opined, and that whether or not that's true. But it seems like in the educational businesses, we don't have that for some reason. In terms of you look at salaries, and you look at where people are. What's your reaction to that Jim? Do we have enough incentives economically to get the world going to where you see it going? And then for Michael, how do we make those incentives better in education?

Jim Mellon: (24:44)
So I think the incentives are fairly well entrenched by the IP, the Intellectual Property system patents around the world. And that works very well in biotech and that biotech IP system has been transferred into the novel foods business. So there'll be a period of 10, 15 years of commercial exploitation, which will be the base of the price of innovation, which is a well established and US led system. The same applies on the science of longevity. The longevity science is not just for the elites, as Michael was... The elites, the wrong way of describing it, not the way you described it. But you know what I'm saying. It's for everyone, ultimately, because we live quite a long life. And so if there's 10 years of patent exploitation on some of the drugs and therapies, that biotech companies such as ours are developing. That's a relatively short space of time in human longevity. And so I think this will become available for everyone.

Jim Mellon: (25:45)
And there are already drugs and therapies out there that we can all take to make ourselves live longer. And we know that people are getting better educated about food. And they are as a result, changing their diets. And so sugar consumption is beginning to go down for the first time ever in the United States than in Europe, which is a great thing, because sugar is directly related to a lot of disease, not just diabetes, but also Alzheimers, and the proliferation of Alzheimers, as a result is going down, which is wonderful news. That is based partly on this IP system. And I'm not going to put any words into Michael's mouth. But education doesn't really have IP around it, it has passion and commitment and money and governmental will, which is a very different thing.

Michael Moe: (26:33)
So looking at, back to what incentives need to be aligned to create change, I think, frankly, a lot of change is taking place in front of our eyes, which was catalyzed in many respects by the pandemic. In fact, you basically had 1.6 billion students that were instantly put online last March, essentially, that's 20% of the world's population that was thrown in the deep end of the online learning pool and told to sink or swim, some sank, some got to the edge of the pool crawled out and will never go back in. Many flail around a little bit and all of a sudden this digital education, which should be growing at a nice rate, but only 2% of the overall $7 trillion education spend has massive acceleration. Which by the way and we all know, it wasn't perfect in terms of the quality and access and so forth.

Michael Moe: (27:22)
But I think people can start to see the future and how you can start to not have to fight this entrenched status quo. But I think also you look at the great education systems around the world where you seeing kids more effectively educated, Finland, China, Singapore, Korea. One of the big changes or big differences is just the prioritization of education, and the people going in that field are the top of their class, not near the bottom. So you look at the conversation that goes along with that. In Finland, for example it's double that, the United States, right? There's all sorts of different movements that represents the complex system like healthcare. But the good part of this is change is happening in terms of investment categories. We frankly, stay away from where the control is taken out of our hands. And so investing in, for example, charter school, physical charter schools in the United States there's better places where you can see more explosive opportunity, and frankly, where there's going to be more of a systemic impact.

Michael Moe: (28:28)
So I think, again ultimately, capitalism does work. We can talk about contemporary capitalism, which is going to be a modification of that. But the fact of the matter is, you're seeing a wave of entrepreneurs that are coming into space, you're seeing amazing ideas. And you're seeing venture capital that is coming into the education space that is about 20x, of what it was 10 years ago. And that's because the growth is happening. You now have 40 unicorns in Ed Tech. People couldn't have imagined that five years ago. And so there's a bunch of different pieces that all add up to a big piece. And I think this wave is happening in a major way. And when I say it's such a big change, we had before Corona BC, and now you have AD, after the disease, and effectively the future is accelerated to the present.

Anthony Scaramucci: (29:18)
I think it's a good point. I just want to cap it off, because I worry about this, given the neighborhood I grew up in. I grew up in a blue collar neighborhood. My dad was a crane operator, so we had a hourly wage. But we felt very aspirational. There is stuff going on in the UK here in the United States, where blue collar families that were once aspirational, feel desperation. And the goal politically has to be from a policy perspective, to reach those people. Now they'll become less populistic, if you will, if that's even a word. I'm channeling my George W. Bush, Mark Cutis, less populistic. They'll become less nationalistic. And so hopefully we can figure out good policies to do that for these communities.

Michael Moe: (30:08)
Well, I think what you're seeing, again, there's all these different... there's all this anger out there, there's all these people that are creating different movements. And if you boil it down, they're angry. What they're angry about is they don't feel like they're participating in the future. And the system is rigged.

Anthony Scaramucci: (30:26)
Exactly.

Michael Moe: (30:26)
And you know what? They're right. The system is rigged, and they aren't participant in the future. And this goes back to the foundation, how you fix that is through providing access to quality education, like you had through your public schools, like I had through my public schools. But far too few kids, I mean, fewer and fewer are getting that type of opportunity. And that doesn't work. That's not sustainable.

Anthony Scaramucci: (30:48)
We certainly agree. I'll turn it back to Mark. But I appreciate the insight that you provide.

Michael Moe: (30:55)
Thank you.

Mark Cutis: (30:56)
Michael, I want to turn to you one more time on education. And you mentioned, bringing the full bearing of the capitalist system to seek new solutions, to make a difference, and to democratize education. And I think everyone will agree and everyone will nod their head, but tell me, how should we address the potential for shysters, and people who come in to this space, and I won't refer to the last administration and the universities that they fomented. And that caused a lot of problems. But how do we address those issues? And I'm not suggesting more regulation. But I'm asking you, how do you think we should be thinking about that to protect people from being sold a bill of goods?

Michael Moe: (31:40)
So one of the biggest reasons that you're seeing change happen faster in education, which historically was very slow to change, is because the internet not only provides access, but it provides transparency. And so I think there are a number of education operators that I can think of that basically, were really good at selling things, but weren't that good at actually delivering the goods and delivering quality. Less mean exposed. The information travels so fast. And you can see what goes on with artificial intelligence, you're getting real time results in what's going on in school. So it's no longer kind of after the fact to say, "Oh, my God, nobody learned anything in this classroom." Where they had this tutor, and this tutor didn't help me at all. That's just the transparency I think is extraordinarily important. I think is a waste of the financial lens of what we're seeing because this industry is getting so much attention, right. And there are very sophisticated people involved. They're just much more scrutiny-

Mark Cutis: (32:41)
So greater transparency and scrutiny?

Michael Moe: (32:42)
And scrutiny. And because now everybody gets the fact, what's the purpose of education is to give people the knowledge and the education, the learning they need to be successful. Or whatever that's defined as. And now you can actually measure it, we call that return on education. And that we think the companies that actually are going to create the biggest investment returns are the ones that create the greatest education returns. And that type of alignment, I think creates huge acceleration for what is already happening very fast.

Mark Cutis: (33:13)
But we've seen what's happening now with technology, and the new administration is looking at ways of curtailing the power of these large technological giants. Do you think we're ever going to get to that point where it'll be a similar situation? Because if you're referring to an unfettered space where it's open, then you're expecting civil society to harness the bad players. And you're suggesting that with artificial intelligence and with transparency, those issues will be addressed? Is it possible that we'll create another large operator in the space?

Michael Moe: (33:49)
So, heretofore there is no... Despite the second largest industry in the world spending nearly 10% of GDP, there was no large education companies. You got to scratch your head and say, why? Well, there's a number of reasons we could talk about if of interest, but much of that has changed. And you're seeing [inaudible 00:34:07], BYJU in India has gone from nothing to valued at $16 billion today. You have companies like Coursera, which basically was a freemium model [inaudible 00:34:18] in the public market, six, seven billion. So I believe you're going to see many, many mega cap education technology company. And again, all that with success comes not only scrutiny, but same when you get network effects, which are happening in this business where you get a disproportionate gain to the leader in the category. More scrutiny or more regulations ultimately happening.

Michael Moe: (34:46)
You see which is now happening in China. Where in China some of the two largest education companies in the world were in China, and they've gotten destroyed over the last several months, because the Chinese government has said, what they're saying is that kids are studying too much. I don't really believe that's the real message. So now there's concern about what the future of these companies that are providing tutoring are, TAL and New Oriental.

Mark Cutis: (35:09)
Interesting. So you've also talked about kids going to university that perhaps they're better served, not going straight to university but experiencing different jobs and getting into the job sector, doing something different than the traditional out of high school into college into the workforce. How do you see that potentially developing?

Michael Moe: (35:33)
I think people need to reimagine education. There are certainly some people, they're not going to go through a traditional route. But there's many other people that are going to get knowledge and get skills from other ways, which could include jobs. And what we've got today is you no longer can go fill up your knowledge tank [inaudible 00:35:53] and drive off through life. You're going to continually need to be learning things on an ongoing basis. Some of that might come from your occupation, some of that's going to be coming from online learning, some of that's going to come from games. There's just a number of ways that you're going to be able to mix and match and really create what I call a knowledge portfolio that allows me the future opportunities. A small part of that is going to come from traditional education. I think there's going to continue to be brick and mortar schools that educate a bunch of people. But this ongoing learning, which is the huge market, is going to happen a variety of ways.

Mark Cutis: (36:25)
Thank you. If I may, Jim, I'd like to turn to you for a moment, you have a great company Juvenescence. And it has this breakthrough metabolic product, which is called Metabolic Switch, as you know, in this region, in the GCC 30 to 35% of the people have metabolic diseases. Tell us a little bit about that. And also, if you can weave in some takeaways as to what we should be doing after this program, because that's also I think, will be useful to our audience.

Jim Mellon: (36:57)
Okay. Well, so Metabolic Switch is part of the consumer division of Juvenescence. And it's a very different market to the one that we're traditionally in, which is pharmaceuticals and regenerative medicine. So we hired people from Weight Watchers as an example from Vitamin Shoppe in the US to head up the launch. And it'll be followed by several other products that will be good for, for instance, the next one is Spermidine, which is good for your metabolic health, sorry, your mitochondrial health. But what we're trying to do is to get products that are scientifically proven, and this one comes out of the Buck Institute, which you know very well. And not just some sort of quackery that sold in a health food shop. And so Metabolic Switch puts you into a state of ketosis straightaway and it keeps you there for 10 hours. And you don't have to go through the ketogenic diet, which most people can't tolerate, because it's too difficult to do. So it's a great substitute for willpower actually.

Mark Cutis: (38:01)
So you don't have to go through the ketogenic diet?

Jim Mellon: (38:03)
No, it does it for you.

Mark Cutis: (38:04)
Okay, maybe you can explain that to us.

Jim Mellon: (38:06)
Yeah. So it basically is, it induces ketosis through its mechanism. And in the same way, as if you went on a ketogenic diet, but without you having to watch what you're eating, basically. So it's fantastic for this region. And actually, we would love for it to be, once we're fully embedded in the US to be commercialized in this region as well, because it will have a very positive effect. One of the problems is that it tastes absolutely horrible. And so they're working on new flavors to try and make it palatable, because it's a breakfast drink that you drink in the early morning. But there are things that people can do today, the statement of the obvious, don't smoke, do some exercise, not too much exercise, eat healthfully. People know all about that. But that won't keep you alive, any way above your normal lifespan, which is around 85 for the developed world.

Jim Mellon: (39:06)
But I do think, Mark that in 20 years time, children will be born with a life expectancy of between 110 and 120. And then we have to rethink the world. And that will happen because about 20 years ago, the human genome was unveiled and the key pathways that cause us to age, they don't determine us to die, but they cause us to age can now be manipulated. So all of them have been proven in mammals and in some cases in human beings, to enable us to live a little bit healthier and a little bit longer. So one key thing that I'm not advocating this as a medical practitioner, but you can go into a pharmacy here and get Metformin. Metformin is a frontline diabetic drug, but it has been proven empirically and in very many studies, it's been around since 1957, to be safe and to be anti cancer, and to be anti Alzheimers and to keep you alive longer, and it's a generic drug. So it's available to everyone, it costs cents.

Mark Cutis: (40:07)
It's been around for a long time obviously.

Jim Mellon: (40:08)
It's been around for a long time. Many millions of people use it. So that's one thing that you could do today.

Michael Moe: (40:15)
[inaudible 00:40:15]

Jim Mellon: (40:16)
What you're doing, and you look great, by the way. The last thing I'll just say, as a little soundbite is I completely agree with what Michael is saying. The paradigm at the moment is we assume we're going to live to 85 or 90. And if we make it to 65, maybe a little bit longer. So that paradigm is you're born, you learn, you earn, you retire, and you expire. That paradigm needs to be ripped up, thrown away. And that's why what Michael is doing is so important, because as he said, education is a continuum, you won't be... You said fill up your tank of gas and 25 you're on the road. You have to continuously reinvent yourself. But you also have to think, first of all, how are we going to finance our lives? We're not going to be able to retire at 65 years old, governments will not be able to support that. And secondly, how you're going to occupy your life, it's like waking up in the morning, with 36 hours ahead of you, instead of 24 hours.

Jim Mellon: (41:13)
We need new structures, we need new ways of building relationships. And this is going to happen very, very quickly. So as I said, within 20 or so years, life expectancy at birth is 110 or 120. Will humanity be able to cope with it? I hope so I believe so.

Mark Cutis: (41:30)
That's quite the challenge. Please.

Michael Moe: (41:31)
I was going to say, reminding me, you talked about the treatment, the taste, the side effect it tasted bad. That's one of the issues which historically education, it tasted bad. And so you find the entrepreneurs that are really succeeding, some of them might advise you, if I would advise you, this was amazing. [inaudible 00:41:49] $16 billion market [inaudible 00:41:51], we serve you broccoli, but we put chocolate on it. And so they don't tell you put chocolate until learning. We have a concept called Hollywood meets Harvard, how do you make education entertaining and engaging? How do you create great professors to be stars, right? In all in a way that you're going to learn more, it's going to be more, it's going to make more of a difference.

Mark Cutis: (42:11)
But that will be different from... That will be an evolutionary process, because you mentioned, for instance, Korea, in Asia, where they subject the children to very long hours of studying. And the idea is rote education, right? And then you pass the test, and in many other countries too. That will have to evolve. And we'll have to, as humans will have to go to a higher level to begin to appreciate this.

Michael Moe: (42:34)
Absolutely.

Mark Cutis: (42:35)
This is the world of I guess that Peter Diamandis talked about, the world of abundance, where we're going to have infinite resources. And then we're going to have to spend time thinking through this is what you're referring to. I want to ask you, again, a very basic question. You mentioned Metformin, how about intermittent fasting for the people in the region who have these metabolic disorders? Do you think if they practice intermittent fasting, eating within these time, windows of six to eight hours, it can actually help them?

Jim Mellon: (43:03)
Absolutely. Absolutely. We have plenty people in the longevity industry, who do use intermittent fasting, including the guy who advocates Metformin, more than any other my friend Nir Barzilai from Einstein University in New York. He's also a practitioner of intermittent fasting. So absolutely. But these things will not keep you alive to the 110, or 120. It's the new therapies that are being developed now, that are based on biological change. Because all of the gains in life expectancy that we've had in the last century or so which is roughly double our life expectancy, have come from environmental gains, they haven't come from any fundamental biological change. If we took someone from 1900, and put them around us today, they'd live just as long as us, but in those days, they lived to 47 years on average.

Mark Cutis: (43:51)
Exactly.

Jim Mellon: (43:52)
So environmental change has been the key driver. The next stage of longevity increase is biological. And that's happening very quickly. The science of longevity is catching up with the aspiration of just about everyone to live a longer and importantly, healthier life.

Mark Cutis: (44:09)
Great. One more basic question. You also mentioned that not too much exercise. And in this region, there is this tendency for a cohort of young people to really work out hard and also to get pumped. How do you see that?

Jim Mellon: (44:26)
Well, all they have to do is to watch as I did last week, the match between Denmark I can't remember what the other team was. And the young guy collapsed with a heart attack on the field. That's the danger. Use drugs that are enhancing drugs, do too much exercise and you put tremendous strain on your organs. You certainly won't live longer as a result of doing that. So don't do it.

Mark Cutis: (44:54)
That's categorical. Thank you. On that note, I want to turn it back to Anthony.

Anthony Scaramucci: (44:58)
Well, it's interesting the exercise category people don't realize that but particularly as you age, you got to have moderate exercise because otherwise you'll, you'll hurt your kidneys actually. But I want to ask you both something for the common person. So let's start with you, Michael. I want to educate my seven year old, he's tied up on his phone, and he's tied up on his Nintendo Switch, and he's got a PlayStation, and an Xbox. Just kidding, he doesn't have all those things, but you get the point that I'm making. So what do I do as a parent, to break that stronghold? And to get them to start thinking more about the entertainment aspects of education?

Michael Moe: (45:43)
Well, I think that's it. Find things, put chocolate on the broccoli. Games is going to be an important way that people learn things, especially young people going forward. You look at Elon Musk and Mark Zuckerberg both learned coding because of the games that they played. It's finding things that they want to do, as opposed to being forced to do. But also say, as a parent being engaged. One of the most important things for student's success is having an adult that has really taken an active role in their learning. And in fact, in I see some of the most successful schools, and that can be in very difficult situations. It's required to have at least a parent that's really on top of it, [inaudible 00:46:28]. And kids like a parent that's curious.

Anthony Scaramucci: (46:32)
And so the same sort of question for you, Jim, what do we do to get these kids... Obviously, can't bring the Oreos into the house or the Coca Cola. We saw Cristiano Ronaldo do that with the Coke the other day, drop $4 billion in market cap of the company. But what are some of the simple things that parents can do for their children to get them thinking about longevity and health?

Jim Mellon: (46:59)
I was shocked to see that 70% of 18 year olds in America are obese. That is unbelievable. There were almost none in 1950. One of the key reasons for that is the corn sugar syrup, which was subsidized and remains subsidized by the federal government in the United States. And food companies have been living under an umbrella of price protection for far too long. So yes, there's a parental influence. But parents can't monitor everything in the supermarket, they haven't got the time to pick out the best foods necessarily. But what I would say and I think this is really important in the year of COP26 and talking about global warming, with Joe Biden at the helm there, is that carbon taxes should be levied on conventional food producers that do damage to people's health. That should be a universal phenomenon. And it's great for governments because they all need money at the moment. But at the same time, carbon credits should be used to promote alternative protein and food producers to make alternative foods more commercially palatable for people to buy.

Jim Mellon: (48:13)
And so it's the parents I can't really say anything about except that most parents want the best for their children. But when faced with a panoply of rubbish in the supermarket, isn't it best just to get rid of that rubbish and subsidy with good stuff?

Anthony Scaramucci: (48:31)
Well, listen, I think it's, it's spot on. I think one of the problems though, is if I took you to the local diner here, the plate size in 1950 was this and the plate size now is that. And people they've created habits for themselves, myself included. Trust me, I have many nights of self loathing when I know I've overindulged. But I guess it's also education, isn't it, Michael? Isn't it an educational thing as well, in terms of creating these habits? Isn't the health component that Jim's talking about part of your education story?

Michael Moe: (49:10)
Absolutely. Again it's knowledge economy, and it's how people obtain knowledge to give them an opportunity to participate in future and health is obviously fundamental to that. I think it's made a difference, or at least has made a difference with many people I know, when they put the calories of a food on the menu. All of a sudden you're aware of it, gives you some information, you say holy cow, that's not worth 1,200 calories to eat this sandwich. It's just being informed and again, that we're in a world of infobesity, there's so much Information. So how do you create signals amongst that noise? How do you create crisp ways for people to obtain that knowledge? Because there's so much information out there that it's hard to know what's good and what's not. I just listened to my friend Jim, he tells me, no.

Jim Mellon: (50:01)
No.

Mark Cutis: (50:01)
I can just jump in for a second. I think the challenge of the modern age is not that we follow the elites is that the common man has to take responsibility for himself and herself. And this concept of infobesity, everybody knows that you shouldn't be eating that way. Honestly, everyone knows, no one is shocked. But they have chosen to eat that way, just the way people have chosen not to take the vaccine. So ultimately, as we go into the next, the New World, we're all going to have to be much more responsible for ourselves. The state will have to help people who try, but it's very tricky because we don't want the state to be heavy handed. And I think this is going to be an evolving political problem.

Michael Moe: (50:45)
Yeah. And, by the way, going back to a previous question, I don't want to imply that I think it's also... The secret to getting kids to learn is to give them corn syrup, right? I'm saying that creating things, ways to learn things that they want to do. You look at Roblox, Roblox has a $65 billion market cap. Kids love doing that and they're learning stuff, right? It's a creator economy. And that's the type of thing to think how you integrate that with obtaining real knowledge that can help you be successful is how I think about that.

Mark Cutis: (51:22)
Absolutely.

Anthony Scaramucci: (51:22)
Mark, if you don't mind. I have one last question for both.

Mark Cutis: (51:26)
Please.

Anthony Scaramucci: (51:26)
And then I'm going to let you conclude us here. We're talking about the democratization of your ideas. Both in education and in health and fitness and awareness and longevity to that common man. Mark is right, some people are making very bad decisions. But how do we make sure that everything that we're talking about today doesn't come across pedantic, doesn't come across elitist, and we can get it disseminated into those areas that they're so desperately needed?

Michael Moe: (52:00)
25 years ago, I wrote a white paper called The Dawn of the Age of Knowledge, and in that predicted or forecast the emergence of the knowledge economy and how the internet was going to change everything, and how education is going to be at the center, and how online learning was going to democratize education. Increase in access, lower the cost, and that ultimately improve the quality. The problem with that 25 years ago, not one part of the system was really ready to accomplish that, including me. John Chambers, 20 years ago, said, online education was going to be so big, it was going to make email look irrelevant. The problem with that 20 years ago, you didn't have the computer power, you didn't have video on the internet. Teachers weren't digital natives. They're digital immigrants. Every aspect it just wasn't ready, right? Today that's changed.

Michael Moe: (52:45)
And even poor kids, and again the ability. It used to be the dream to be able to provide cheap technology people [inaudible 00:52:52]. And there's some issues, but that's really not the issue. Cheap technology, whether a person's paying for... My daughter taught in most poor schools, basically in America, she said, every kid was, 100% minority. She said, every single kid had a smartphone. That shocked me, but that's what she said what the reality was.

Michael Moe: (53:14)
I don't think that's the issue. The issue really is about providing ways to not just put education, physical education online, but to reimagine how you can do this better, faster and fairer, more democratized. And by the way, that's what's so exciting, that's what gets me excited, when you see these... what I call weapons of mass instruction. So these rapidly scaling, easy to access, removing friction, from the ability to get the education or need to be successful.

Anthony Scaramucci: (53:48)
Jim, anything you want to add?

Jim Mellon: (53:52)
Yeah. I just say that an example of how we are living in better times is the fact that these vaccines would develop so quickly. This is the best example I can think of, in the olden days, it would take at least 10, 15 years to develop a vaccine. Within six months, US companies German company, a British company had developed a effective and now readily available vaccines, at least in the developed world.

Anthony Scaramucci: (54:16)
And safe vaccines.

Jim Mellon: (54:17)
Safe.

Anthony Scaramucci: (54:17)
It's important for us to [crosstalk 00:54:19].

Jim Mellon: (54:18)
Everyone should be having these vaccines. Everyone should be having these vaccines. They've done that really, really quickly. And that's an illustration of how first of all the collaborative power of the internet that Michael was talking about bring scientists around the world together very effectively. And secondly, our knowledge of biology, it's so much better than it was just 10 years ago, or 20 years ago. So I'm very optimistic that if in the last seven years we've been able to cure HIV, to cure Hepatitis C, to develop cancer immunotherapy and to develop CRISPR-Cas9, all of which are multi billion and very effective industries. What's the next seven years going to be like it's going to be even better. We should be very optimistic.

Jim Mellon: (55:02)
I feel that we're very lucky to be living in this age notwithstanding the pandemic, which will be gone quite quickly. All the good stuff that Michael's talking about, all the good stuff that you're doing Anthony. All good stuff that you're doing in Abu Dhabi. And the stuff that we're doing in our companies is just a small microcosm of all the great stuff that's being done by a collaborative humanity. Just don't listen to the noise and just let's be optimistic.

Anthony Scaramucci: (55:30)
Well, Jim, can you make me taller though? I'm just curious.

Jim Mellon: (55:35)
Yes, yes.

Anthony Scaramucci: (55:35)
Throw that in there before we... Okay, good. I'll be-

Jim Mellon: (55:38)
You're pretty tall already.

Anthony Scaramucci: (55:39)
I'll be talking to you after this SALT Talk to figure out how to do that. Again, and I expect it to be very easy. It's like a free stride-

Jim Mellon: (55:47)
It's hanging upside down for a couple of weeks. You look remarkably young, I have to say. You look the same age as your son. So that's a great tribute to you and your genetic makeup.

Anthony Scaramucci: (55:56)
That's because I'm a television person, I know how to do lighting better than anyone. That's why. Well, thank you guys. Do you have any follow up questions Mark?

Mark Cutis: (56:09)
Yeah, just one basic question. You're both here in Abu Dhabi. Tell us a little bit about that. And because you're doing some extremely exciting things that are pathbreaking. And you've chosen to be here, how does that fit into your game plans?

Michael Moe: (56:27)
So after having the opportunity to be here, a number of times and other places, I really believe that Abu Dhabi is going to give us a window to the future. And for a variety of reasons. One, we talked about before just the prioritization of going from an oil economy to a knowledge economy. But also just the smart people doing important things, but also just geographically. As this world becomes more global and more connected, which it is every day, Abu Dhabi as we know, it's a two and a half hour flight to Mumbai, it's a three hour flight to Tel Aviv, it's a four hour flight to the west coast of Africa. It's just so well situated. When we look at the power, I call it the VCIIP, Vietnam, China, India, Indonesia, Philippines, I mean, how could you be in a better place to reach these, where the world's going to be created for the future.

Michael Moe: (57:22)
And so the great leadership, of course, but the many, many smart people that increasingly are coming here. I think you're going to see the real network effects. And so we're going to plant a flag here as we said, we're going to be running money out of here. We'll be running innovation labs out of here. We're putting big conferences out of here. And we're going to be very active in helping. We hope to build this ecosystem, that I think in next 10 years, it's going to blow people away.

Mark Cutis: (57:48)
That's very exciting. Jim.

Jim Mellon: (57:50)
Well, I have not much to add to what Michael said, except I agree with it all. But I will just give you a little bit of historical flavor. When I started my career, I started in Hong Kong, where I have permanent residency as I do here as well. And I have to say, and I wrote an article about a couple of weeks ago. The minister of tourism, read somewhere that this is the new Hong Kong. This is the new Hong Kong, flat taxes easy to incorporate businesses, multicultural, very forward thinking. You just have to look around at the infrastructure as well. We are super, both Michael and myself super excited to be involved. An honor to be here actually.

Michael Moe: (58:34)
I have to ask you. What is your view of what is going on in Hong Kong right now? It's obviously quite troubling, since it will be in the new Hong Kong. Well, Hong Kong is going to be a bit replaced by [inaudible 00:58:45]. I think, again, and Singapore, which has been an interesting place. Again, I think there's so much opportunity, but what's your reaction to what's going on in Hong Kong?

Mark Cutis: (58:51)
What's happening in Hong Kong is very complex. But it certainly looks like, even to the untrained eye let alone to the professional. That there's a dramatic sea change that is underway. But for us, what we're looking at is that you have an ecosystem that we're building an ecosystem in ADGM, where the fact that you can now get golden visas, which was never the case before. The fact that you have very low taxes, the fact that the pandemic was handled very well. Because if you think about many Asian countries, they handled the pandemic very well. But then they shut down the country, so you couldn't come in and out. Whereas in the UAE, you were able to travel in and out most of the time. So if you combine that with the basic edifice of this country, which is low taxes, you have access to capital, because you have large sovereign wealth funds, you have the foundational pillars of ADGM which is common law, and a smart regulator. And you have expenses that are actually amongst the lowest in the world, particularly because of housing.

Mark Cutis: (59:54)
You're creating an environment where young motivated people who want to do things can come here. And that's the aspiration, is to create the future here. And to encourage innovation and to encourage people to come here.

Jim Mellon: (01:00:09)
And it's safe.

Mark Cutis: (01:00:10)
And it's safe. Exactly. Absolutely.

Jim Mellon: (01:00:13)
Which is a big consideration.

Michael Moe: (01:00:13)
And that's beautiful.

Mark Cutis: (01:00:15)
Excellent.

Anthony Scaramucci: (01:00:17)
All of you forgot to mention the food. So since I'm Italian, I got to throw that in there. Some of the best restaurants in the world are in the UAE. But guys, thank you so much for joining SALT Talks with us in this new partnership that SALT has with ADGM. This will be the beginning, you guys are the inaugural part of this series that Mark and I will be doing. And so we're both very grateful to you. And I look forward to seeing you in Abu Dhabi soon. I can't wait to get over there. Mark's promised me easy entrance and easy exit. Isn't that right, Mark?

Mark Cutis: (01:00:51)
Absolutely. Absolutely.

Anthony Scaramucci: (01:00:53)
I can't wait to get over there. I'm going to have Jim pick the restaurant though. So that I know that it's plant friendly, and all that other good stuff. Thank you guys again for joining us.

Michael Moe: (01:01:03)
Thanks Anthony.

Jim Mellon: (01:01:04)
Thanks.

Mark Cutis: (01:01:04)
Thank you Anthony.

Jim Mellon: (01:01:04)
Thank you Anthony.

Sergey Young: Longevity Investing | SALT Talks #245

“There are so many ethical tradeoffs we need to solve before we embrace the idea of radical longevity. We have created the science and technology to extend our lives while we haven’t created the life we want to extend.”

Sergey Young is a longevity investor and visionary with a mission to extend healthy lifespans of one billion people. To do that, Sergey founded Longevity Vision Fund to accelerate life extension technological breakthroughs and to make longevity affordable and accessible to all.

Sergey is on the Board of Directors of the American Federation of Aging Research (AFAR) and the Development Sponsor of AGE REVERSAL XPRIZE global competition designed to cure aging. Sergey is also a Top-100 Longevity Leader, who is transforming the world, one workplace at a time, with Longevity@Work – the first non-profit corporate longevity program of its kind.

Sergey Young discusses his Longevity Investment Fund, dedicated to the advancement of anti-aging and longevity research. As written in his latest book Growing Young, He lays out five buckets of behavior that contribute to living a longer and healthier life and predicts where the biggest healthcare transformations will come from. While longevity technology is rapidly advancing, Young stresses the importance of addressing ethical issues like inequality and humans’ impact on the planet if people are going to live longer.

LISTEN AND SUBSCRIBE

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MODERATOR

SPEAKER

Sergey Young

Founder

Longevity Vision Fund

FULL BIO

Dr. Dina Radenkovic

Partner

SALT Bio Fund

FULL BIO

TIMESTAMPS

00:00 - Intro

03:40 - Longevity Vision Fund

20:19 - Longevity practices- five buckets

29:17 - Health data sharing and innovation

35:57 - Ethical considerations around longevity

49:45 - Building awareness and education around longevity

EPISODE TRANSCRIPT

John Darsie: (00:07)
Hello everyone and welcome back to SALT talks. My name is John Darsie, I'm the managing director of SALT, which is a global thought leadership forum and networking platform at the intersection of finance, technology, and public policy. SALT talks are a digital interview series with leading investors, creators and thinkers. And our goal on these talks is the same as our goal at our SALT conferences, which we're excited to resume here in the fall of 2021, in our home city of New York. But that's to provide a window into the mind of subject matter experts, as well as provide a platform for what we think are big ideas that are shaping the future.

John Darsie: (00:45)
And we're very excited to bring you the latest in our series of conversations about healthcare and biotechnology with the great Sergey Young. Sergey is a longevity investor and visionary, with a mission to extend healthy lifespans of one billion people. To do that, Sergey founded the Longevity Vision Fund to accelerate life extension, technological breakthroughs and to make longevity affordable and accessible to all. Now Sergey is on the board of directors of the American Federation of Aging and Research, and the development sponsor of Age Reversal XPRIZE global foundation competition designed to cure aging. Sergey is also a top 100 longevity leader who is transforming the world one workplace at a time with longevity at work, which is the first nonprofit corporate longevity program of its kind.

John Darsie: (01:35)
Sergey has been featured as a top longevity expert and contributor on CNN, Fox News, and Forbes. He's the author of several books, including most recently The Science and Technology of Growing Young, a fantastic read that we would highly recommend that you pick up if you're interested in the subject matter. He's also the mastermind behind the online life extension platform sergeyyoung.com. Now Sergey is passionate about sharing news from the exciting world of longevity, and definitely a premier thought leader in that space. Hosting today's talk to somebody who also knows a lot about longevity research, that's Dr. Dina Radenkovic, who's a partner at the SALT Fund, which recently raised a fund to invest in early stage programmable biology companies, which we're very excited to launch. Dr. Dina, thank you so much for joining us. I'll let you take it from here.

Dina Radenkovic: (02:26)
Thank you John, and Sergey excited to have you on our SALT talks.

Sergey Young: (02:30)
Hi John, hi Dina, hi everyone, I'm very excited to be here with you today.

Dina Radenkovic: (02:36)
Well, I mean, congratulations on the new book, it's a big achievement, and it managed to cover quite a lot in this field of longevity. When is it coming out? Tell us a bit more about that.

Sergey Young: (02:46)
Yeah it was a lot of fun, at least for the last three years. It's going to be published in August 24th, and we are already number one in three categories on Amazon, longevity, aging and preventive medicine. So I'm very proud even one month before the book launch.

Dina Radenkovic: (03:03)
And well we hope that success has its own longevity, and that it maintains post the book launch as well, we have no doubts about that. So, could you maybe tell us a bit more about your book in the project? We've seen, I guess, a bit increased interest in the field and several textbooks, including for example, David Sinclair's book, have tried to explain perhaps the science behind it. Certain books like the one from Peter Diamandis, trying to focus on the new technologies that will enable the science to be delivered. Where would you rate your book? Could you give us a bit more of a flavor while we wait to get the hard copy?

Sergey Young: (03:40)
Yeah. So Longevity Vision Fund is one of the few longevity focused funds in the world. And at certain point in time, we were like the largest font in the world which is 100% focus on longevity. This is not to say how great we are, this is to say that the space and a field of longevity is just right in the beginning of its growth. And, through my work in the fund, we're looking at 200 different companies a year, which are in the field of science and technology of living longer, and then the digital health. And I thought, this is what I can share with the world. We have a lot of books with scientific background, more kind of scientific view, but not a lot of books which talk about different technologies, which going to transform our ability and give us more optionality in terms of our lifespan and health span.

Dina Radenkovic: (04:41)
Fascinating. So it's basically like a massive overview for everyone who's interested in this field of longevity and to see what's coming up. And you mentioned your fund, and obviously we want to focus on the new content of the book but, you were one of the visionaries and you definitely had the temerity to go into this field of aging, which is evolving, and it's attracting more people, and it's proving its value. But can you tell us a bit more about raising and setting up that fund? You were one of the first people to set up 100 million funds solely focused on longevity and, how did you define the investments? What was your experience there of setting up a solely longevity focus fund, and putting it in the name as well?

Sergey Young: (05:22)
Yeah. So it's been pretty difficult road. Well the good news, I've been investing for last 20 years. So in fact, I have so many full time jobs, including the job of being loving husband and father of four kids, similar to some of us on this call. And so obviously it's all went through the experience, the outcome, and the failures, and successes that I've made through my private equity investment history. So right now I'm managing multi billion dollar private equity portfolio. So in a way, it was easy. But, what was difficult is to realize that longevity is an investment tail, it's so immature, it's almost like an orphan for huge institutions.

Sergey Young: (06:11)
And having said that, I thought if I want to support the space, if I want to give a kind of help to entrepreneurs and a scientist who's going to bring in more solutions for us to be healthy in this world, I'll just set up like a small fund, rather than reading news and books, I just wanted to write my own book in terms of investments metaphorically speaking. So I thought, I'll just set up $50 million fund. So then I met one of my investors, so I raised 50 million in the first five minutes. And I'm insecure overachiever, I couldn't really appreciate something which has been given to me like in five minutes, and I think it sounds very familiar to some of our audience, so I immediately raised the bar.

Sergey Young: (07:03)
I said, okay, it shouldn't be like 50 million because it was too easy, I'll raise 100 million. And it was amazing. Again, I've been doing investments for last 20 years. But like ... so we invested in LVF One, we invested in 16 companies. Our average holding period today is 2.5 years, and we already have four out of 16 companies public, and another three will be public by the end of this year, by the end of 2021. This was the fastest transformation from private to public I've ever seen in any of my portfolio. So that's been amazing. What else? We quickly realized that because longevity is such an unknown theme for the world, regulators, investors, portfolio companies, so we adopted the approach then we took intentionally broad definition of longevity, so our definition is like, whatever increase the average lifespan and health span on earth is longevity for us.

Sergey Young: (08:12)
So we invested in a lot of proper biotech place, but with only one additional side effect, they all need to contribute to healthy and happy living on the planet. And, again, since my mission is to change one billion lives, and some people ask me, "Sergey, why it's only one billion?" And what I've done is, we are focusing on affordable and accessible version of health care and longevity, so this is one of the investment criteria that we use, this technology, this intervention, this scientific discovery needs to have a profound effect in terms of affordability and give an opportunity for at least millions of people to benefit from that initial term.

Dina Radenkovic: (09:08)
Fascinating. And I mean, we both agree that longevity is a great space to build and invest and support companies. And I think you've proven it with the success in your portfolio so we can talk a little bit about that. But let's take a step back. How was it in the beginning? I remember once we met, I think it was in London about two years ago, you told me that, "Oh I caught the longevity virus." How is it switching and telling all these people? "Oh, I'm no longer just going to manage private equity, I want to set up a longevity fund." And what made you catch the longevity virus, or get interested and so excited about the field?

Sergey Young: (09:42)
Yeah. Well unfortunately I would say, we all start to develop interest into healthy living once we hit our own barrier, our own obstacle, we receive a wake up call. So I had two and they both on the personal side. The lung cancer case with my father back in 2005, he survived, but the quality of his life is never recovered. Or, I had, well back in 2014, I had my own health case. So I had high cholesterol in my blood. This is not rare, like 40, statistically actually, 40% of the people suffer from that around the world. But I've been offered to take study in this special class of drugs every day until the rest of my life, and I was not a big fan of this idea.

Sergey Young: (10:35)
So I started to experiment how I can achieve the same result, improve my health without necessarily taking medication every day. And that's it. And then the final thing, I started to push a lot of my friends and people who I know to do medical checkups, few of them discovered early stage cancer, and these days, unlike 20 years ago when cancer was kiss of death, your recovery rates, if you do a really early diagnostic of cancer can be as high as 95, even 100%, depending on the cancer type. So they all call me up and say, "Sergey, you saved my life, literally, thanks for pushing me to do this checkup, I owe you." And once you receive a few of calls like this, you're on the hook. You know I mean, you're just like, I have a bigger mission in life, I can change so many lives, and this is how this whole thing started.

Dina Radenkovic: (11:36)
Fascinating. Yeah, it's true with the new diagnostics, and you actually touched upon that in your book is that almost every cancer can be curable if discovered early enough. Okay, and then I guess, moving forward, you set up the fund, it was 100 million fund, and now we understand why it was that number and how you structure your investment. And you mentioned you already had 16 investments, a lot of them have done extremely well, I think the field has done a lot better than a lot of the skeptics thought initially. Could you tell us a bit more, you mentioned that it was obviously a very early field. And how do you pick your investments, you went for some really successful biotech firms. Tell us a bit more about that. You mentioned they all need to have a side effect to extend life expectancy, how do you assess that?

Dina Radenkovic: (12:24)
Because a lot of the companies that are get incorporated in longevity, almost feel like they need to mask as an oncology, like cancer company or a more traditional biotech because of all the implications that we have in the field of longevity. FDA does not recognize aging as a disease, they don't want to mention ... position themselves as to focus. The field is just getting moving. So. how are you picking, I guess, kind of being a pioneer and a very early stage fund with an extremely successful track record?

Sergey Young: (12:57)
Yeah. So what we've done, I mean, all you need to do is just look at statistics like, what are the reasons for death for the age 50 plus? And four killer monster diseases which are responsible for 90% of deaths after age of 50 are cancer, heart disease, diabetes, and neurodegenerative diseases. And the last one is actually breaking you. We still don't know what we don't know about dementia and scammers, et cetera. But for the rest of, for like three out of four, we have really good knowledge of like, what are the mechanism and root cause of these diseases and how we can treat them? So again, I mean just looking at the typical biotech or medical devices company, and you put it in a context of current mortality statistics, and exactly ... because, what is available to us today is, and a whole life extension strategy for the world in the last 100 years was eliminating early death.

Sergey Young: (14:09)
That's why if we look at this statistic, the life expectancy, lifespan, average lifespan on earth increased by two times. Somewhere from 40 to like 75 in the last 100 years. And this is not that we started to live longer, it was more about we were eliminating early death. Specifically like infant death or some other earlier stages of our life. But the maximum lifespan on earth was always the same. It was somewhere around 120 years, it is actually 122 thanks to this beautiful French woman who died 20 years ago. But, so what we doing is like 30% of our capital is invested into something which is relevant right now, like early diagnostic of cancer, or affordable medical diagnostic devices, or wearables.

Sergey Young: (15:12)
This is companies like Freenome, who have portfolio of cancers and use our blood tests to identify risk of colon cancer. This is super important because, in today's world to identify whether you have colon cancer risk or not, you need to do colonoscopy, and it's invasive, it's expensive, people hate that. I was delayed in my procedure for like two years, and I'm longevity enthusiast. So right now it's just, a few $100 and your blood sample and it's the same efficiency like the old invasive procedure. Or, affordable and accessible ultrasound devices. They're the size of our smartphone, the company called Echo Imaging that we invested in. This device costs like $2,000 while ultrasound device in the hospital next door is somewhere around between 100 and $200,000.

Sergey Young: (16:11)
It has the same efficiency, you scan, the holds a number of scans going to cloud, and then it's artificial intelligence pre analyze that before nurse or doctor can have access to the outcome of your ultrasound. So this is like 30% of our fund, like what we can do today. And 70% our fund is dedicated to what I call in the book neo horizon of longevity. This is the discoveries in science and breakthroughs in technology, which going to be available to us in the next five, 10, 15 years. So that's very important actually, to stay healthy now, because you need to stay on longevity breech, like Ray Kurzweil told us, for another 10, 15 years for your body and mind to be worth extending this resource in 10 years from now.

Sergey Young: (17:01)
But if you look at neo horizon of longevity, we're looking at genetic engine therapy. We're looking at regenerative medicine, in particular to organ regeneration, we all will have an ability to regenerate our organs, or to replace our organs if you want to imply here like an old car metaphor when you can replace certain parts and the life ... and the car extend its lifespan if you want. And some of this is in the field of drug discovery and drug development. I do believe that in 10 years from now, we're going to have a new special kind of drugs, which are longevity drugs or age reversal drugs, they're going to fight aging processes inside our body or in our DNA, unlike drugs that we have today which are very specific to one particular disease.

Sergey Young: (17:56)
So we trying to diversify portfolio like LVF One will have at least 20 to 25 companies in our portfolio, we right in the end of our investment period, just another 12 month remain. And literally this week, we just closed the first 100 million for LVF Two. We have a lot of interest from our LPs, from a lot of new investors so we raising the next fund, and we already completed the first call for that. So we have another 12 months to raise another 100 million for LVF Two as well. And probably final comment that, it's very tempting to look for one silver bullet solution to human health and longevity. And if you use your logic, if this would be possible, then it's either Mother Nature in the form of evolution or, talented human brains in form of science would have found a solution already.

Sergey Young: (19:00)
So it's not a silver bullet, it's going to be combination of the things that we need to influence to live longer, healthier and happier life. Well that's why a certain degree of diversification inside our portfolio in terms of technologies, geographies, different classes, is helpful.

Dina Radenkovic: (19:18)
Fascinating. Well, I'm a medical doctor by background and I certainly believe that health is very complex, and that it can ... I often get asked like, "What is going to be the single pill that's going to help us live longer, happy to 200 years?" And I tell them well, it might be a bit more complex. But you've touched upon so many things. First, congratulations on the fund and we're very happy that it's going well, your work really means a lot in the field. But you mentioned so many topics that we could just go and dive deeper. One of the first things you mentioned is this advanced diagnostics. And I think before we go and talk about the new test and the diagnostic kits, I think everyone is interested to see what did you do?

Dina Radenkovic: (20:04)
You mentioned that you were deferring your colonoscopy, you're a pioneer in this space, you're an advocate. And so, what is your longevity plan? What tests do you do? How do you optimize your own health?

Sergey Young: (20:17)
So, I'll tell you about five, our five main longevity choices. Like longevity which I put in, I call it five longevity buckets. But there's more information in the book, it's called bonus chapter, who wants to live forever quoting Freddie Mercury song, but it's about 10 things that I do, and actually the last, the bonus chapter is twice as long as any other chapter in the book. So it's just a lot of information. And this is the fascinating thing, this is why I started to do longevity and longevity investments, exactly for this moment when people try to change something now, rather than waiting for 10 years to become a healthy and happy version of themselves.

Sergey Young: (21:03)
So five buckets. One, when I have 30 seconds on longevity, I just push people to do their medical checkups every year. And I always say, this is the most important day of your life every year, as we discuss previous discussion, my wife has a little bit different view of what is the most important day within the year. But, otherwise, I'm doing my checkup every year, so I choose the place in California in San Diego, it's a human longevity center set up by Peter Diamandis, Craig Venter, so many great minds, but you can do a checkup in the hospital next door. It's not rocket science. And it's pretty standard procedure, just make sure they address to the maximum extent possible cancer, heart disease, diabetes risk. So that's your brief, this is the type of discussion you need to have with your doctor.

Sergey Young: (21:59)
And, well that's amazing, we have a lot of technology to help you to live longer, we just need to be mindful and preventive and proactive about your health race. So that's one, second piece is, I call it passive longevity award, don't do stupid things like tobacco smoking is just like, statistically, minus 10 years from your lifespan. Using seat belts in all occasions is plus two years to your life. What else? I just got a letter from my very good friend from California, she's amazing woman, entrepreneur, serial entrepreneur. So she's going to climb the mountain called K2. And this is the most dangerous mountain in the world, mortality rate is 25%.

Sergey Young: (22:47)
And I couldn't really explain that, right? Like Russian Roulette 100 or 200 years ago was six, sorry, 17% risk of dying from the first shot. But she took a risk which is much harder than this crazy exercise. So it is about responsible behavior. So the third piece is about diet. And, there's a lot of disagreement in the academic space, what actually extends your life, but there's only one agreement, reducing the caloric intensity of, or like a number of calories that you take every day by 15 to 25%, going to extend the healthy portion of your life by three, five or seven years. That's it. Well that's amazing. I mean obviously it's easier to say than to do, so my life hacks, I eat a lot of vegetables because even if I have a half of my table full of vegetables here today for the dinner, they so intense in terms of calories, so this is great.

Sergey Young: (23:56)
And it's not a lot of harm you can do to your body and mind with vegetables. And obviously it's about controlling the quality of your meat and fish. And I'm avoiding industrial version of meat and fish, it's going to be a wild fish or organic meats, so this is extremely important. Industrial meat got certain substances that you want to avoid after like certain concentration like antibiotics, growth hormones, equally bacterias. I think it was statistics for US when 70% of antibiotics is consumed by animal and by fish on the farms. Well that's ridiculous. And I do fasting, but I do a very radical version of fasting, it's 36 hours, Monday evening to Wednesday morning.

Sergey Young: (24:46)
You don't need to go that far, but just a window fasting, like consume all your food within the day, within the like six hours interval or eight hours interval, I think would do fine as well. So that's like bucket number three, diet. Four is about physical activity. We have this binary mentality or physical activity so I'm either doing like iron man or iron woman, or I'm just sitting in my home and watching football. And we don't need to be that binary. Just use your wearable, whether it's Apple Watch, Fitbit, Whoop, Garmin, it doesn't matter. Count your 10,000 steps today, because you can integrate walking into the to many activities that you do, and that's it. This is like two thirds of your physical activity agenda for the day. And on top of that, if you like yoga, you can add stretching, you can add cardio, weightlifting, whatever you like.

Sergey Young: (25:46)
And the fifth is, I call it peace of mind. And every time we talk about health, we talk about physical health. While I think the mental aspect of that is sometimes much more important. I don't want to live longer or not if I'm not healthy and if I'm not happy. So it's sleep, and my rule is eight hours in the bed, which is seven hours of sleep, and I use wearing, some of the wearables. I have plenty of wearables. Like I have glucose monitor here, all of this. I'm recreating internet of body, similar to Internet of Things and I'm an example of that. So sleep, meditation and mindfulness, because we need to decrease the level of cortisol in our blood, our body and mind were never created by the God and Mother Nature to handle all the stress that we have around us so we need just to be decreasing the cortisol, dangerous stress hormone in blood.

Sergey Young: (26:52)
And then finally, it's about sense of purpose. If you think about spiritual leaders and people who have a big mission, or a big dream in life, they always look younger, they live longer, they're more happier, so even statistically they're going to live plus five, plus seven years and they're going to enjoy the life. So it's having sense of purpose, sharing the best of you with the world, helping other people to succeed, and giving more than you take is important as well. So that's my five longevity buckets.

Dina Radenkovic: (27:28)
Wow, fascinating Sergey. Well I'm glad that you, I mean, you definitely have this big mission so it's helping one billion people live longer. And it's really exciting to people now who have that all in this big, last chapter of the book so they can find and make their own longevity practices. Certainly agree that with this kind of five buckets or however you structure it, people will live long enough in order to live longer, to wait for the new therapies, which are the ones that we've discussed like gene therapy, and epigenetic changes, and other anti aging interventions that are coming up. But I guess the one thing that might be interesting to this class, and I think you mentioned it in your book, and it's still a bit of a controversial issue, is the data that is collected by the wearables, and the data that is collected by diagnostics.

Dina Radenkovic: (28:17)
And as we convince people to switch from a reactive to proactive medicine that, their day of medical testing is the most important day and the happiest day of their life, because they're doing something very useful for themselves, we're collecting data. We both have a continuous glucose monitor on right now, we can compare our blood sugar, see how you're responding even to this conversation. But you mentioned an interesting concept that, health or data privacy will have a fight and health will win. What are the implications of this data collection? And how do we maximize the use of that data without breaking the barriers that people have about just confidentiality of their healthcare data that has, to be honest, a bit prevented organizations from all over the world from collaborating, working with each other in sharing insights?

Sergey Young: (29:16)
Yeah. Well this is a huge problem, and this is the biggest opportunity that we have in terms of changing the regulation so people are not afraid to share their health data. Because what drives your skepticism about this is the sense and fear of expected inequality when you have any kind of job conversation, or you you're trying to buy insurance. Well, that's it, this can be easy to regulated. But obviously the value of health data stored in one place, and where artificial intelligence and human intelligence can work with that, is enormous. And for some of the countries it's going to be a source of competitive advantage.

Sergey Young: (29:59)
Well, this was one of my key messages in UK Parliament. UK had this enormous opportunity to leverage the data of its citizen, obviously in a way which respect their privacy for the benefit of the nation, and the benefit of humanity. And the same thing is happening in Dubai, in Singapore, not necessarily in the US. Well, the problem is US, and I say it with a lot of love, right? US has the most inefficient and most expensive health care system in the world. We in US spend 18% of our GDP on health care. Think about UK, it's 8%, or Singapore, this is 5% of GDP. And they have far better results in terms of increasing lifespan. In fact pre COVID. Last five years pre COVID in US, the average lifespan has been decreasing in three years out of five.

Sergey Young: (30:58)
Well that's ridiculous for a developed country of this size, and the level of this success and the history. So we need to change this as well. And again, we don't need to be binary about this whole thing. And right now we really binary like, health data in hands of big tech or healthcare authorities, no. But you know what's on the other extreme? Right now, in some of the healthcare systems, 60 to 70% of data exchange is done through fax machines. Guys, when was the last time you actually seen fax machine? Are you okay with your data, your health data is transferred through faxes?

Dina Radenkovic: (31:43)
Yeah.

Sergey Young: (31:43)
No, I'm not we just under leveraged this whole thing. Like, when was the last time you was trying to collect all your health file to have intelligent discussion with your doctor? You would need to come back to any cleaning and every doctor you see, and I'm trying to make a paper copy. I have these two big files in my offices because I still don't have one electronic health record, which collects my health data even for the last 10 years. So I'm not saying we need to be really radical and transparent about this whole thing but, what I'm saying, we don't need to be so old style about exchanging the health data through fax machines.

Dina Radenkovic: (32:27)
Yeah, fascinating. I mean there's certainly a lot of implications there but I absolutely believe that we could derive so much from the data, and if we could show and demonstrate to people that their health and their lives would improve, they would give the data away for an improved service and in care facility.

Sergey Young: (32:45)
Yeah, just one other comment. So when you think about healthcare today, what are the kind of players that comes to your mind? It's hospitals, insurance companies, big Pharma as well. In 10 years time, I do believe that the largest healthcare companies on earth are going to be called Apple, Google, Amazon, Microsoft. If we will not do this through regulatory means, just by changing our policies and educating the public, and changing healthcare system, change will not come from old players doing new things, change will come from new players, disrupting the whole old system. Well that's why Apple is, and there's so many big tech companies, over investing in healthcare. Just, I think it was last year Morgan Stanley did a report saying, "Apple can do up to 50% of its revenue by the end of this decade from healthcare."

Sergey Young: (33:40)
And watch out Apple, they have a history of disrupting so many spaces, so the same change can come from Apple. And Apple Watch and so many other wearables are becoming our personalized healthcare device. It's not helping me to integrate with my WhatsApp, or count 10,000 steps a day, they would add couple of features in the next two years, and this is going to be 95% of my health data that I need to monitor every day. That's amazing opportunity but also, I would like for us to use this opportunity to the set of changes on the regulatory front, and in terms of changing the public ethics and social contracts for the benefit of everyone, rather than outsourcing this whole thing to Apple, or to Google, or to Microsoft, and then obviously enjoying this whole thing, but paying a lot of money to the big tech.

Dina Radenkovic: (34:44)
Yeah. And I think there's certainly space for new companies in this field, there's healthcare-

Sergey Young: (34:48)
Oh yeah.

Dina Radenkovic: (34:49)
... from consumerism, from paternalism, they can drive, and I think both the work we do on the investing side is really designed to support new companies disrupting the space. But I fully agree that, with the new connected devices we'll be able to do a lot more. And I like your, I mean people say futuristic, but I would like to say it's realistic, evidence based approach of the healthcare at home in the future. Perhaps you could give us a bit of an overview. I had a similar dream and people say it's science fiction, but I'm saying it's reality very soon that, you would wake up and you would have your medical devices in your home, and you would figure out what's the exact dose of vitamins and nutrients you need to take in the day. And then you're sleep monitored and you've already mentioned some of the few devices that you have, but they're advancing.

Dina Radenkovic: (35:43)
So, hopefully in a few years, you don't even need to go to the hospital, only for acute emergencies. So, I think there's a lot to do about that. And I think you actually talk about it in the book as well, and in a very illustrative way.

Sergey Young: (35:57)
It is yeah. So I have two chapters in the end, right before the bonus chapter, like what you can do today. For me this is the most important part of the book. But, so one describes our day in 30 to 50 years from now, so I'm going to define it. But the other chapter, the final chapter of the book is also important, it's called morality of immortality. There's so many ethical trade offs that we need to solve before we embrace the idea of radical longevity in this world. It's almost like, I just did a TEDx talk on that, again, it's called morality of immortality.

Sergey Young: (36:30)
And what I say, we have created the science and technology to extend our life, but we still haven't created the life that we want to extend. So that's important. So I'm going to be telling you all these beautiful things about human avatars in a minute, but we need to understand that, we need to start the global conversation about the future of the world, how we need to change that, in terms of closing the inequality gap, in terms of adjusting our social norms and social contracts like marriage, career, our approach to life. Or in terms of just resetting our relationship with Mother Nature. Right now, I mean you think you'll leave like 75 or 85 years, you can be irresponsible about your ecological trade offs.

Sergey Young: (37:23)
But in the future, when we all live radically longer, we're going to face the consequences of our own actions. So we need to sort it out today. Well, this was the ethical side, and I actually do believe, in 20 years from now, the biggest obstacles to use all these beautiful technologies, it's not going to be science, it's not going to be technology, it's going to be ethics and regulation. So, this is about the ethical side of it. So then, well let's take a look at the next 20 to 30 years. So how the world of medicine in our life will change. Number one, we will have a proven ability and very safe tools to modify our genes.

Sergey Young: (38:04)
So we can eliminate a lot of diseases, we can fight a lot of diseases and therefore increase our lifespan. So that's pretty clear. We're going to help people who suffer from neurodegenerative diseases to leave their highest quality life, because of the integration between human brain and artificial intelligence. And we people, we tend to be binary, it's either black or white, one or zero, so I don't think it's going to be either artificial intelligence or human intelligence, we're going to coexist, and it's all going to be very complimentary. So human brain, AI integration going to be essential part of it. We were looking at different non invasive interfaces but, seems to me that Elon Musk has his own way of building Neuralink and using actually invasive technology of electrodes to combine you with computer power.

Sergey Young: (38:59)
And this is not the last time that he was right and I was wrong, so I'm not make a prediction on what technology will win. So what else? We're going to be having options of using human avatars technologies, and actually my resolution for next year is to create the virtual avatar of Sergey Young. Because I want to change one billion lives so I need more guys like me participating in a conference, co-hosting ask me anything events, doing a lot of different things. And in 20 to 30 years from now, it's going to be okay to have a human avatar. I still don't know whether it's going to be a robotic avatar, and I actually interviewed the man who invented this whole concept back in 1980, he is Professor Susumu Tachi from Kyoto University.

Sergey Young: (39:55)
And she still call it telexistence, but we call it human avatars. So it's either going to be robotic on virtual avatar, and it's not going to be that scary, you will have an opportunity to replicate yourself in a virtual world in a controlled manner, and therefore leveraging up your efficiency, and fulfill more dreams and fulfill your mission in life. Similar to the concept of Internet of Things, it's going to be the concept of internet of bodies, we all going to be interconnected. We interconnected today anyway, but through very inefficient interfaces. So I'm using my eyes, my fingers to type the messages, my ears to listen but, it's all going to be seamless, we're going to be full of sensors.

Sergey Young: (40:45)
I'm full of sensors today anyway. But like, for the rest of the world, we can monitor ourselves. If I'm taking enormous care about my own car, I should take the same level of care, use a lot of sensors and technology to manage my most important tool, right, my body and my mind. So this is what going to happen. And we're going to have a completely new category of drugs in 20 to 30 years from now, which going to be drugs, which tackle aging at its core, rather than just trying to eliminate disease one by one. So that's just the view of the future, the picture of the future that I have. But guys you need to be careful, I'm always over optimistic, do we need to have a little bit of skeptical voices around this as well. So I'm totally aware of that.

Dina Radenkovic: (41:42)
Wow Sergey, well, again, so many points, I just want to say first that, we are really excited to be the first people to interview your avatar here at SALT so book us in straightaway, I want to be one of the first people doing that. But for sure, and I think what you mentioned is a really important topic. And Eric Topol was discussing it in his book, Deep Medicine about two years ago that actually, technology will no longer be a limiting step, but it used to be. Now we're there, we're kind of using the technology to solve problems in biology. But what will be a problem will be doctors who will ... like empathy. How do we empower the human connection?

Dina Radenkovic: (42:25)
And then the one aspect that you mentioned is this morality or immortality? And often when people ask you and you say, you work in the field of longevity, people say, "But we already have climate change and there's so many disasters, and a big population for this planet, why would we want to live longer?" They think of it as a resource limited, closed concept. So when you say that you want to extend life for at least one billion people to live to 200 years, and you've written a chapter, and you have a statistical approach that will, statistically likely to give effect. How do you deal with that? And how do you ensure and, what are the other things that we need to address? Like cellular agriculture, climate change, and in what ways so that we can ensure that this growth in human health and longevity is sustainable?

Dina Radenkovic: (43:22)
The other concept that you mentioned that I would like you to elaborate on is this idea of, when you live longer, you tend to optimize for longer term goals, this kind of stems from the Stanford socioeconomic selectivity theory of aging, right? That if we know that we're going to live only for the next 10 years, we won't care about the planet, we just try to consume all the resources. But if we know that we have 100 years left, we would trying to plan more carefully. So, how do you think we can use longevity to actually drive that innovation that is needed to make it increase the lifespan more sustainable or beneficial for the planet as well? And how do you address, because I'm sure you get similar questions.

Sergey Young: (44:01)
Yeah. So, well I do believe longevity and fighting aging processes inside our body can be one of the few unifying themes for the nations and countries, and for the world. Because inequality gap is increasing all the time, and I do believe the affordable and accessible version of healthcare is something that can unite. It's almost like part of your universal basic rights, or income, or the services mix that you you need to receive. So, few things, I obviously receive these comments a lot, so I've developed my own way to respond to that. Number one, I'm not particularly concerned about overpopulation of the planet. Because if you look at any sensible research on where we going with overpopulation, our reproductive rates in all the continents, beside African are well below two for every female.

Sergey Young: (45:05)
So, if you look at the mathematical model of population of the planet, using the status quo like where we are today, the population of the planet going to increase to 10 or 11 billion by the year 2050, and then it's going to decline to eight billion in the end of the century. China will lose 600 million people from its population, if China will not address that. Going down from 1.4 billion to 800 million. And the same for majority of countries in the world. So it's not like we have an option to extend our lives, it's our obligation, and a need to respond to this risk of decreasing population of earth, so that's number one. Number two, I'm not really concerned about resources side and my very good friend Peter Diamandis is probably the best example of speaking about this topics.

Sergey Young: (46:08)
This is just like resource limitation is our limiting beliefs, and look at the cost of renewable energy, and it's just always declining, or the cost of computer power. Or, well let's talk about food. Before we go into different like a vertical agriculture, or cell based illiberal meat, 45% of food goes to waste in US every day. From our supermarkets, from our table, from our households as well, 45%. We live in a abundant world, we just not really smart about how we using these resources. So that's important as well. So I do believe, I'm not really concerned about resources, but I do concern about the ethics of the society. I just don't think we ready for the questions that we're facing. And again, life extension and increasing the lifespan, it's happening whether you want it or not, we doubled our lifespan in the last 100 years on earth.

Sergey Young: (47:17)
And this trend will continue. And then it's up to you, whether you're waiting for the next 20 to 30 years, or you thoughtful and proactive and preventive about this whole thing, and you trying to respond to a lot of basic questions that all people ask, "How my life will change?" Will it be several beautiful mini lives? Or, what will have happen to my career? Can I have as many careers as decades in my life? Or what will happen to marriage? Will we switch to more kids raising partnerships? Two thirds of the families go to divorce today in the first three, five or seven years of their life, depending on the country which you look at. So we need to solve this problems anyway, it's not like some crazy guys arrive with the magic pill to extend our life and then we have all this disaster.

Sergey Young: (48:12)
We already have this disaster, we need to sort it out and longevity technologists and the progress in the science and technology of longevity is a great opportunity to start that conversation and our thinking process on that.

Dina Radenkovic: (48:27)
Yeah I actually like your response, I like that longevity could serve as a solution, or at least a driving force to address some of the needs and the problems that we already face, and you're right there are so many problems to address and hopefully living longer and healthier and happier will serve as some engine to help us power through these issues. And I guess Sergey just to kind of wrap up, because we could talk for-

Sergey Young: (48:56)
Yeah, forever.

Dina Radenkovic: (48:56)
... 10 hours and even longer, 200 years.

Sergey Young: (49:01)
Look I'm planning [crosstalk 00:49:01] to live 200 years so I have plenty of time.

Dina Radenkovic: (49:05)
Well I'm joining your longevity club, okay, and want to hang with the avatar for sure. So what does, coming up, you mentioned you have a new ... your fund, the portfolio has been growing incredibly well, obviously the book launch is in August, can you give us a bit of an update of the things that you're working on, excited about, you're preparing for SALT New York, covering all these ideas and advances in this longevity programmable biology space. Is there anything that-

Sergey Young: (49:34)
Yeah so what I'm trying to do is, I'm trying to build awareness about the opportunities in longevity field for as many people as possible. So I just launched my longevity video academy. And and for someone who pre orders the book, if you go to sergeyyoung.com, you can pre order the book and you can have access to this academy. As well as like 12 videos, 10 minutes each, talking about different aspects of longevity and this beautiful today and beautiful tomorrow that we all developing. I've just done a, as I said, TEDx talk on morality of immortality, so this is going to be published very soon. I'm fascinated by the ethical dilemmas and trade offs that we all need to solve for that. Again my resolution for the next year is to build a virtual avatar.

Sergey Young: (50:23)
We're going to be working as a couple, together like real me and virtual me for the next few months until he will absorb all my intelligence and can replace me, and I can double down in effort on my mission with this. I'm looking for the country to change in the next 12 months because, if you want to change your health you have like three options, one you can try to do it on your own basis, and we are really lazy on discipline as a species. Or you can work with corporation, or you can work with a government to change the whole employee base habits, or the whole kind of nation, and implement and create longevity enabling environment in certain corporate environment, or in certain country.

Sergey Young: (51:16)
So I'm in discussion with few countries and one state in US, to help them to implement this, well I call it longevity at work because I've done it with few huge corporations all over the world. The largest project I've done was changing 300,000 peoples life. It was employee base of one of the largest financial institutions in 20 plus countries. And again, this is all pro bono, I'm not really taking any money from it. But it's fascinating how you can create a longevity bubble for so many people, and they all have an opportunity to live longer, healthier and happier life. Obviously investing in a essential part, I love to support the field with the money, with our scientific knowledge, rather than just making the public statements.

Sergey Young: (52:13)
And I do hope that early next day we can launch a age reversal XPRIZE, this pro bono technological competition. We expecting two, three, 400 different teams from 50 plus countries to fly, like who can reverse aging. And we just done the largest XPRIZE competition in the history of XPRIZE foundation with Elon Musk for $100 million, to remove carbon from the atmosphere and create the minimum viable products. It's $100 million price for this pro bono competition. So I'm trying to replicate the success. And we're going to launch another hopefully $100 million prize early next year. So then a lot of beautiful minds from scientific and entrepreneurial and technological background can compete and provide solution for aging, and therefore fighting all this killer disease.

Dina Radenkovic: (53:07)
Well, fascinating. And I'm really excited about the XPRIZE, I'll hold you on to that because, we do want a lot of young scientists and people from all over the world using all their talent to fight aging. And we'll wait to hear the announcement, it's going to be like bitcoin in El Salvador, right? That we give this country that is incorporating aging with Sergey Young. So, exciting to hear what's coming up. Thank you for sharing all the ... everything you're up to Sergey, it's incredibly inspiring. You definitely getting 10 years of extra life there in terms of happiness and sense of purpose. You've inspired me as well, I think you've inspired everyone listening.

Dina Radenkovic: (53:49)
It's really exciting to have you. I can't wait to get the hard copy of the book. I think everyone will try to get it. I think we're also having it in our physical event as well as, and in New York coming up in September. And, thank you once again for your time today. This is brilliant.

Sergey Young: (54:06)
Thank you. Thank you. If I can have like a one minute closing thought. Think about this, we outsource our health decisions to so many parties, to big foot, to government, to healthcare providers, to insurance companies. And, I do think we need to take back control and responsibility for our own health, we need to be a part of this conversation. And specifically today, post COVID, I think it was a wake up call for all of us. So, again, it's time to take responsibility for our own health. And we are here to help you stay healthy and happy.

John Darsie: (54:45)
Love it. Thank you, Dr. Dina for leading the conversation. Thank you Sergey for joining us on SALT talks. And thank you everybody for tuning into today's SALT talk with Sergey Young, one of the foremost experts in longevity. He has a great new book coming out that we're excited to give out to our attendees at the SALT conference in September. It's called The Science and Technology of Growing Young. So just another incentive for you to show up to the Javits Center expansion in September here in New York. But just a reminder, if you missed any part of this talk, or any of our previous SALT talks, you can access them on our website on demand at salt.org/talks.

John Darsie: (55:18)
We post all the transcripts and show notes there as well, so a great resource if you're looking to learn about a variety of different issues that we cover. And also on our YouTube channel, which is called SALT Tube. We're also on social media, Twitter is where we're most active @SALTconference, but we're also on LinkedIn, Instagram and Facebook as well. On behalf of Dr. Dina and the entire SALT team, this is John Darsie signing off from SALT talks for today. We hope to see you back here again soon.

Justin Fishner-Wolfson: Customized Liquidity Solutions | SALT Talks #244

“Liquidity aligns incentives for bigger outcomes… People are willing to take more risk if they’re less worried about their individual financial situation. If you provide financial liquidity, founders are more interested in getting the company to later stages, so you drive better fund-level returns.”

Justin Fishner-Wolfson is a founder and the managing partner of 137 Ventures, a growth-stage venture firm founded in San Francisco in 2011. The firm has seen five portfolio companies go public since September 2020: Palantir, Airbnb, Wish, Coupang and Didi. Its largest private portfolio companies include SpaceX, Flexport, Gusto, Workrise (formerly known as RigUp) and Curology.

Prior to co-founding 137 Ventures, Justin worked on the investment team at Founders Fund. He was also selected as a Kauffman Fellow, a program responsible for the development of leaders in global innovation and the venture capital industry. Justin graduated from Stanford University with honors, received a BS in Management Science and Engineering, a MS in Computer Science, and was a Mayfield Fellow.

Justin shares some of his background that led to 137 Ventures and how he learned the importance of offering personal liquidity to company founders. He discusses his approach to venture investing and the state of different tech sectors. He talks about his early and continued investments in SpaceX and the massive transformation SpaceX-operated Starlink will bring in delivering high-speed Internet to underserved areas of the world.

LISTEN AND SUBSCRIBE

Spotify | Amazon | Google | Stitcher

MODERATOR

SPEAKER

Justin Fishner-Wolfson

Founder & Managing Partner

137 Ventures

FULL BIO

John Darsie

Managing Director

SkyBridge

FULL BIO

TIMESTAMPS

00:00 - Intro

02:20 - Background, Founders Fund and 137 Ventures

04:55 - Venture strategy

08:17 - Secondary markets

09:30 - Identifying growth stage investments

11:36 - Primary vs. secondary markets

13:02 - Investments in SpaceX, Starlink and Internet infrastructure

17:27 - Exit strategies and IPO’s

21:07 - Pandemic effects

23:34 - Technology and education equality

25:18 - Mobility sector

26:45 - Satellite-driven technology and changing the government contract model

30:29 - Public-private business dynamics

31:58 - Investing geographically

EPISODE TRANSCRIPT

John Darsie: (00:07)
Hello everyone. And welcome back to Salt Talks. My name is John Darsie. I'm the managing director of Salt, which is a global thought leadership forum, and networking platform at the intersection of finance, technology, and public policy. Salt Talks are a digital interview series that we started in 2020 with leading investors, creators, and thinkers. And our goal on these Salt Talks is the same as our goal at our Salt conferences, which we're excited to resume in September of 2021 here in our home city of New York. But our goal at our conferences and on these talks is to provide a window into the mind of subject matter experts, as well as provide a platform for what we think are big ideas that are shaping the future. And we're very excited to welcome Justin Fishner-Wolfson to Salt Talks. Justin is the founder and managing partner of 137 Ventures.

John Darsie: (00:57)
Previously, he worked on the investment team at Founders Fund, leading venture capital fund as well. He was also selected as a Kauffman fellow, which is a program responsible for the development of leaders in global innovation, and the venture capital industry. Justin graduated from Stanford University with honors, received a BS in management, science, and engineering, and a master's in computer science and was a Mayfield fellow. Today, he resides in the beautiful city of Las Vegas, the fast growing city of Las Vegas. I should add as well, he's not like all those Founders Fund guys who have moved to Miami, but he's found another great home there in Las Vegas. I'm going to be hosting today's Salt Talk, again, John Darsie.

John Darsie: (01:35)
In addition to my role as the managing director of Salt, I'm also a director of business development at SkyBridge Capital, which is a global alternative investment firm with about $8 billion in capital under management, primarily working in the fund to funds industry, but also engage in some of the secondary market investing in the tech sector that Justin has sort of pioneered. But Justin, we're very excited to have you here on Salt Talks. We like to start all of our conversations. I read a little bit about your bio, but we'd love to hear a little bit more about your background, how you decided to go to Stanford, how you got into venture capital and what you learned from experiences at places like Founders Fund that led you to start your own firm 137 Ventures.

Justin Fishner-Wolfson: (02:18)
Yeah, happy to. Thanks for having me. I mean, I think Stanford is, it is kind of the start of everything, at least for me, it's obviously a great school, but I think the fact that I ended up there is substantially the reason why I ended up in technology and venture capital. If you look back at Founders Fund, right? Peter Teal and Ken Howery, they were both Stanford alums, and that was ultimately kind of the original connection to those guys. And how I ended up at Founders Fund kind of at that beginning stage when they were making that transition to be an institutional venture firm. So it was kind of like Stanford is the nexus for a lot of things out in technology, in the Bay Area, in Silicon Valley, and so that's kind of a major reason why I ended up doing what I am doing today.

John Darsie: (03:04)
Very cool. And as I mentioned, you spent time at Founders Fund, but you've quickly identified an opportunity that you thought was too compelling not to pursue. You started your own firm, 137 Ventures. Before we get into what you do at 137 Ventures., I'd like to talk about how you came up with the name, which I thought is a very interesting backstory. So, what is the significance of the number 137 and the name of your company, 137 Ventures

Justin Fishner-Wolfson: (03:28)
The background is my grandfather used to have a seat on the New York Stock Exchange, probably not too far from your offices would be my guess. And that was his enunciator number when he was there, and so they used to signal the traders on the floor with basically a train board. And so that was how we named the firm.

John Darsie: (03:49)
Right. And then there's other numerology involved with 137 that I was reading about that you guys came up with that holds a lot of significance as well, right?

Justin Fishner-Wolfson: (03:58)
It turns out it's one of those numbers that's like somewhat interesting when you talk to engineers, which I tend to do on a regular basis, people will ask you all sorts of things like, "Oh, is that because it's fine structure constant", or other things like that. So, you talk to people and you find out more and more interesting things about numbers over time.

John Darsie: (04:15)
Right. And 137 Ventures that opportunity set that I was alluding to earlier is you provide, you're a leading provider of customized liquidity solutions to founders, investors, and early employees of growth stage, a private technology company. So, you're going to, again, early employees or founders, or even funds that have invested in some of these leading tech companies and saying, "Hey, we have a better solution for you than waiting for an IPO, or even traditional secondary market sales." So what do those sort of unique liquidity solutions that you provide look like? How are they different from traditional secondary sales? And how's your strategy differentiated within the venture world?

Justin Fishner-Wolfson: (04:54)
Yeah. And there are a lot of questions there to unpack it. I mean, at a basic level, and in this even goes back to my time at Founders Fund, we had a very clear belief that liquidity aligns incentives for bigger outcomes. And so if you look at how the industry has sort of evolved, fund size have gotten bigger company outcomes have gotten bigger. And the thing that what you don't want to have as an investor is companies sell early, right? So, if you have these really powerful compounding companies that can grow to be 10, 20, 100 billion dollar outcomes, you don't want to see them ultimately sell the business for maybe a lot of money, but not ultimately the potential of what that business could be. And the challenge you have is, as an investor, you have a portfolio of lots of companies.

Justin Fishner-Wolfson: (05:37)
And so you're willing to take perhaps more risk on any individual company. And if you're a founder of a startup, any of these potential outcomes, if there's a large acquisition, mean a lot of really life-changing money to folks. And the insight was it's not like a magical insight. It's simply that people are willing to take more risks if they're less worried about their individual financial situation. And so if you provide people some amount of liquidity by no means anything close to what they would get upon an exit, they're ultimately much more interested in getting to much bigger stages. And so you drive much better fund level returns, and so I think there's a real alignment of incentives between founders, executives, and venture investors to provide liquidity, especially as companies have stayed private for much longer periods of time than they have in the past.

John Darsie: (06:28)
Right. And do you feel, like you said, you feel like decision-making at the company level improves as people have different liquidity options. Why is that attractive for the investor set to provide those types of liquidity solutions to early founders and employees?

Justin Fishner-Wolfson: (06:45)
I mean, it varies, right? So, I mean, we've literally done business with people who are paying off student loans. I don't necessarily think it's a great use of management's time to be concerned about whether, or not they can afford to service their student loan debt. The salaries in the industry broadly speaking, aren't particularly high. People do own large equity positions, but you don't want them worried if they're going to be able to pay the dinner bill. There are people that obviously gotten married they might have a kid, they don't necessarily want to live with roommates, right? San Francisco is expensive. New York is expensive. And these are, I think, reasonable things that allow people to be more productive at work. And so I think that's a good use of time and money.

John Darsie: (07:25)
Right. And as I mentioned earlier, there's been this massive explosion in private secondary market activity. At SkyBridge, We're involved in the space, it's public. And we can disclose the fact that we've invested in a handful of growth stage fintech companies, including Klarna and Chime being examples that we both invested in our funds and raise SPVs for some of our key relationships to invest in those products. Do you worry at all that that secondary market valuations are getting more expensive and sort of taking some of the meat off the bone? We've seen IPO's sort of act as liquidity events not particularly great entry points in some cases, certainly not the case for a lot of names in the last 18 months, but do you worry generally about secondary market, private valuations getting to a point where the opportunity set isn't quite as attractive?

Justin Fishner-Wolfson: (08:17)
I mean, I think the relationship between secondary prices and primary prices, and they're highly correlated obviously, right? So, companies are raising money at some valuation that's going to affect people's perception of what the company is worth. And that's going to find its way into the secondary market. I mean, in terms of your question, I think is so therefore it's sort of broadly evaluation question, right? Are companies more expensive today than they were in the past? I think on average, that's probably correct, if you look at the multiples that people are ascribing to a lot of the companies that you're talking about, but averages hide very important data. And so there's going to be companies that are above that average, they're going to be companies that are below that average. And I think for ourselves, we're trying to find companies that are reasonably priced, given the fundamentals of the business. And you're looking for very high growth, because the one thing that, broadly speaking, makes up for valuation mistakes is very high growth because you can survive [inaudible 00:09:14] ...impression in that situation.

John Darsie: (09:16)
Right. So that's a good segue and you touched a little bit on it in that answer, but what characteristics in terms of levels of growth, levels of maturity and other aspects, do you look for when you're identifying growth stage investments to offer these types of liquidity solutions?

Justin Fishner-Wolfson: (09:32)
And most of our portfolio is growing by 100% hundred percent, or higher, right? I mean, that's a large portion of the portfolio, especially when we're making initial investments in things. And what we care about in particular is trying to identify businesses that have some kind of long-term defensibility. One of the challenges in the world as a whole is there's a lot of capital out there. And so what you don't want to have is investment in a potentially really great business, have other people notice that it's a really great business, and then have people fund those other fast followers, and compete margins away, which then will result in multiples compressing. And so we're looking for businesses that we think have business models that are defensive when you think that these are well understood concepts, network effects, information asymmetries, economies of scale, things that allow businesses to maintain their margin profile over an extended period of time.

John Darsie: (10:25)
Are there certain sectors that you think more often embody those characteristics that you've been drawn to over the years? Or is is it pretty broad and you guys cover a wide variety of sectors?

Justin Fishner-Wolfson: (10:36)
Yeah. I mean, I think we cover a very large number of sectors. I mean, obviously I think we're, well-known for the SpaceX investment, but you look at marketplaces, I mean, you could be an Airbnb, or you could be in work [inaudible 00:10:47] I mean, they're very different marketplaces, but yet those marketplaces have very similar dynamics. There's a lot of information asymmetries and enterprise businesses, right? So, for example, Gusto is providing payroll and benefits to small, and medium sized businesses, but then they're rolling out financial services for consumers who are, another name for consumers are employees of small and medium sized businesses. And so they can leverage that data to reduce the costs for people. And I think that's a very interesting value proposition. [crosstalk 00:11:17]...in a lot of different industries,

John Darsie: (11:19)
Right. And you primarily do these customized liquidity solutions in the secondary market, but you do sometimes participate in primary funding rounds. How do you determine when you want to participate in a primary round versus focusing on secondaries?

Justin Fishner-Wolfson: (11:37)
I think what we do in the secondary market is... It's more differentiated. There are fewer people who do what we do. There are obviously many people who are primary investors. So, we're more agnostic as to how we're participating is simply that there are fewer people who provide structured transactions in the secondary market. So we're happy to use that as a better wedge to get into companies that we think are compelling, but fundamentally between those two opportunities, we're not going to say no to a company that we're very excited about.

John Darsie: (12:08)
Right. And you mentioned SpaceX before. It's one thing that 137 Ventures is very well-known for when you were at Founders Fund, you played a significant role, from my understanding, in having Founders Fund increase its allocation of SpaceX, at 137 you've accumulated a significant position in SpaceX. What about SpaceX got you so excited. And what is the opportunity set in space? Obviously, we've seen a lot of public relations around space recently with Richard Branson and Virgin Galactic going up into space. Jeff Bezos outdoing him by a couple of hundred thousand feet from what I remember, but obviously SpaceX has been on fire in terms of launch the Starlink Network, as well as its NASA missions. So just what is the market? How big is it and is it more based on tourism? Is it more based on industrial capabilities, but what does the market look like in space?

Justin Fishner-Wolfson: (13:02)
I think the joke is that it's expanding, right? But you look at Bezos, you look at what brands do. And I mean, I think it's great that they're getting people excited about space. I mean, if you think back to putting a man on the moon, I think it was a great unifying thing for the country. It was an exciting thing and had a lot of really important scientific discoveries that ultimately translated into people's lives. I mean like Velcro, right? I mean like things that people don't necessarily think of, that came from these developments. So, I mean, I think it's great what everyone is doing. I mean, SpaceX for the most part is really in a different business. So, you look at launch. I mean, the things that matter in the world, it's like all the earth observation, satellites, GPS, the things that really keep modern society working like this all floats above us in space.

Justin Fishner-Wolfson: (13:49)
And so SpaceX's launch capabilities are really second to none. I mean, they've built very, very reliable reusable rockets in a way that really no one imagined even five years ago. So, I think that's been a real transformation. You mentioned Starlink they're on basically the verge of this is all going to become, I think, very clear to everyone over the next six to 12 months, that anywhere on earth, you can get high-speed low-latency internet, as long as you have power and you can see the sky, the internet will be available to you. And that's an incredible change as opposed to having to dig fiber in lots of very difficult, expensive places. So, that's just like one example of how, I mean, yes, it's about space, but really it's providing internet service. And so there's all sorts of interesting things that are going to happen from this.

John Darsie: (14:36)
Yeah. Starlink is particularly interesting to me. Obviously the reusable rockets are a massive innovation and SpaceX is at the Vanguard of so much great innovation that's taking place related to space, but Starlink has a very clear addressable market. Just how much is it going to disrupt traditional telecom? I mean, I live today in Long Island when I'm taking the Long Island Railroad home, there's long patches of the train ride where I don't get cell service. The house I grew up in, in the Raleigh-Durham area in North Carolina, we struggled to get reliable internet and phone service. There's massive swats of not just the United States, but obviously around the world. Just how big is that market that Starlink is addressing and how big can that business be?

Justin Fishner-Wolfson: (15:17)
I think the market is actually huge, but it's really not targeted towards the urban centers, right? Because they're building a network that functionally covers the entire globe, they're really going after in some sense, the places that the traditional incumbents have ignored. And the reason that they've mostly ignored them is that it's very expensive to provide service there. And so what Starlink changes is all the places that used to be very hard to provide service are now the same as any place that was easy to provide service. And so sure they're going to pick off it whatever. They'll have some customers in Manhattan, but they're also going to have customers in lots of rural geographies in the US. There are many underserved populations, whether or not it's some of the Native American tribes that have traditionally and historically been underserved by all of these players.

Justin Fishner-Wolfson: (16:03)
So, I mean, like there's a lot of places that this now becomes easy, and the market's huge. I mean, if you look at some of the data coming from the US government, there are tens of millions of Americans who don't have access to high speed internet. And we're just talking about America. Like this is a global network. So you start talking about Europe, and Africa, and Asia, and everywhere in the world can be served by this network. And so I think it's very understandable how they get to multiple millions, if not tens of millions within the next years of subscribers.

John Darsie: (16:34)
Right? Yeah. I mean, it could fundamentally change society. We've seen this redistribution geographically within the United States, and in some cases around the world of working populations and some exit us out of the Bay Area and places like that because people realize they can work effectively in different parts of the country, different parts of the world. So it'll be interesting to se how a Starlink sort of affects society in that way. But I want to talk about exits. So when you're involved in private companies, they IPO, there's often an IPO pop, or they rally in the first few months after they go public. And obviously there's a different life cycle to every investment. But as you look at exiting these positions, is this is something where you take it at a company by company basis, in terms of evaluating your exit? Do you look to have a specific plan with every one of your investments after they get public liquidity? Or how do you look at exiting these positions?

Justin Fishner-Wolfson: (17:28)
And we certainly think about things on a company by company basis, right? The facts may always lead you to kind of a different conclusion, but because we're trying to invest in companies that we think can compound for extended periods of time, the private to public transition is more of a an evolution of the company. It doesn't change the fundamental business that they're in. And so while that is an opportunity for us to get liquidity for our investors, and we obviously care about that because funds, venture is a long business. I don't necessarily think that there's something magical that happens upon an IPO that suddenly means you don't like the business anymore. It's simply a point where it's easier to get liquidity. And I think just as a vague sight of that, that I think is a little bit funny. If you think about the public markets 99.999% of all transactions are secondary. Right? In fact, the public markets kind of think primary is a weird thing, right?

Justin Fishner-Wolfson: (18:23)
It doesn't happen that often and generally, they're sort of against it when companies start to raise more money. And it's exactly the exact opposite in the private markets, right. Primary is sort of the normal, and secondary's a little weird. I just always thought this distinction was somewhat funny. And I think it's the same thing as like, when there's an IPO transition, it doesn't actually mean that anything about the company has changed, except that the shares are now easier to trade. That that's all that really happened.

John Darsie: (18:48)
Yeah. And I mentioned sort of first day pops, or recent rallies that we've seen post IPO in some big tech companies, several of which you've had exposure to, including Palantir, Airbnb DoorDash is another one that had a significant rally. And they've certainly paired their gains in subsequent months. But in your view, why are we seeing, in some cases, such volatility or such ferocious rallies, post IPO, is this a matter of bankers mispricing the deal? Is it a matter of sort of strategically creating the right size float? Or why do you think we're seeing sort of asymmetries and how companies react once they enter public life?

Justin Fishner-Wolfson: (19:27)
I think it's hard to know what the right price is and what I've realized having kind of thought about this over all these liquidity events relatively recently is the amount of information that people get when they're investing in a private company is so much larger than what public markets investors receive. I mean, if you go public, you put out an S1, maybe you do some investor meetings, you go on a road show, whatever. Maybe you're going to put out some quarterly information, but most private investors would say, "Where's the rest of the diligence packet?" Right? And while I certainly think you can be a well-informed public markets investor. I think what people are doing is they're taking earnings calls over every quarter, they're building some trend lines, they're building their own models.

Justin Fishner-Wolfson: (20:11)
And they're refining that over time. And I think to look at a company on an IPO and think that all the public markets guys are not only going to get it right, but even have all the information to get it right within a day, I mean, that seems very hard to imagine and to expect of people. So, you're going to see volatility, obviously, as over time, people understand these businesses better and better. And then I think you'll find out what the real price is for all these companies are. And sometimes the market's going to be high and sometimes the market's going to be low and eventually it will be correct, but eventually it could be awhile from now.

John Darsie: (20:43)
Right. Are there any other companies, obviously, you've been involved and exited a lot of extremely exciting tech companies. Are there any in particular today, whether it be, you can talk sectors, you can talk individual names that you are most excited about in today's market and sort of a post pandemic world. Obviously the world has been shaken up by everything we've seen in the last 18 months. Are there any sort of theses that you've grown even more excited about?

Justin Fishner-Wolfson: (21:07)
The thing that I've been pleasantly surprised that we've seen play out in our portfolio, but I think has been true more broadly is there's just been this massive acceleration of tech adoption. And so things that we thought were going to take five, 10 years all got adopted in 12 months. And a lot of the companies also that we thought had the potential to be really impacted by the pandemic, think of Flexport, right? Is global trade going to be what it was. And then it turned out that shipping was really hard, logistics were really hard. There were major constraints on the system. Prices went up, and Flexport really shined because they had much better software for their customers. They were able to get more things done. They were able to allow people to plan as well as anybody could in that environment, even Gusto, right?

Justin Fishner-Wolfson: (21:57)
Like they're dealing with small and medium sized businesses in the US, and we obviously were somewhat concerned because those were some of the most impacted businesses. But you saw relatively quickly that their business was going to be okay. They did a lot of great things to help people, help their customers apply for PPP loans, and kept a lot of people in business that I think would have otherwise struggled to deal with the government. There were some good programs, but it's never that easy dealing with the government and filling out all the paperwork correctly, and making sure that things happen. So I was pleasantly surprised with how all of our companies reacted to the pandemic, and then ultimately, broadly speaking, how they benefited from that adoption cycle that we're going through right now.

John Darsie: (22:42)
Right. We had a great Salt Talk a couple months ago with Michael Moe, obviously a pioneer and ed tech. Talking about education. You guys have a position in a company called Course Hero. We talked about Starlink in terms of leveling the playing field in terms of access to broadband and things like that. How do you think education is going to evolve as a result of the pandemic, even trends that we were seeing before the pandemic, in terms of you have this great piece of paper that's extremely valuable. And the network you built from that piece of paper at Stanford is certainly probably even more valuable than the paper itself. But how do you think, given the massive rise in cost of education, this huge differential in the quality of education you can get in certain locations, how do you think technology is going to affect that? And do you think the pandemic sort of accelerated some of that change in terms of democratizing access to quality education?

Justin Fishner-Wolfson: (23:34)
I think it's been a mixed bag. I mean, you mentioned Starlink and a lot of this stuff really is the internet, right? So Starlink bringing the internet to people that didn't have it, is so important because the internet is not just education, it's also healthcare, right? It's also jobs. So all these things are related, but specifically in education, right? People, governments sent kids home from school and said, well, you can learn online. Except there were many, many kids in the US, and throughout the world, who didn't have access to internet that was fast enough to do that. They didn't have access to computers or tablets that they could use to actually go through classes. So, I think it's been a mixed bag, but it does bring with it this potential.

Justin Fishner-Wolfson: (24:15)
And I think more people are focused on this, where you really can do more and more of these things on the internet and bridging that digital divide, I think is more important. And I think it was always something that people thought about. And now they understand that you can bring everyone into the mainstream economy, if you can give them internet service, and the resources to learn, get healthcare. I mean, even our health care message, all these direct to consumer healthcare businesses. Like Curology, 30 Madison, [inaudible 00:24:44] club. I mean, you don't need to go to doctors for a lot of things. You can deal with that stuff remotely. And I think that's very exciting.

John Darsie: (24:51)
Yeah, absolutely. I want to talk about mobility for a second. So you have several investments in the mobility space ranging from scooters to car sharing and even had an investment in DiDi the Chinese ride sharing company. How do you think whether it's pre pandemic or post pandemic, how do you think mobility is evolving and what will that look like in 10 years? And how does your investment portfolio within the mobility space reflect your views on that market?

Justin Fishner-Wolfson: (25:17)
I mean, it's been a little bit of a mixed bag. I mean, obviously the pandemic shutdown mobility in a very broad sense substantially, so that affected different people's businesses in better or worse ways. But I do think that the underlying trend of people not needing to own really large, really expensive assets makes sense, right? So, that part of the business, I don't think it's going away. I think there's broadly speaking the standard trend towards urbanization. So, all of these business models make a ton of sense. Obviously, the pandemic was very disruptive, but you've seen them, quite frankly, to my earlier point, they bounced back much faster than even I would have expected. if you would have asked me last year to to look at what's going on with Turo, or Get Around, or Uber or any of these companies, like the businesses have really bounced back in a way that I got to say I was somewhat surprised.

John Darsie: (26:09)
Right. You have an investment in a company called Planet that takes pictures of the earth every day. And I've talked with some other investors who have investments in Planet, and some similar type ventures, but Planet and other satellite photograph services recently discovered the Chinese were building new missile silos, nuclear missile silos in certain parts of the country. What has Planet and other companies of its type made possible in terms of how we're able to monitor what's going on around the world and how are people using that in creative ways?

Justin Fishner-Wolfson: (26:45)
I mean, these things were never possible before all of the cost reductions in both launch and satellite and I think that, that's what's enabling this new generation of technologies to do what you're describing, where Planet really can take a picture of any spot on earth on a continuous basis once a day. And when you can start to see that you can understand what change is happening. And I think that's really the interesting thing. So you can see what's happening in the rain forest. You can see what's happening in China. You can see, and that helps for disaster management, right? Obviously, if there's been a natural disaster, knowing what's changed on the ground could be incredibly helpful to all of the workers who are trying to get to people.

Justin Fishner-Wolfson: (27:25)
So, it shows up in all sorts of interesting ways, whether or not it's farming, whether or not it's environmental, whether or not it's disaster response. And it only works if it's economically possible, right? I mean, the US government used to do these things and they could task a satellite and look at something once in a while. And that was an incredible change from what it was before. And you're just sort of seeing the cost curve come down on all electronics. And if you can launch things pretty cheaply, you can replace the electronics on a regular basis, which means you're always using the latest and greatest.

John Darsie: (28:01)
So, you also have, in terms of the di the defense sector, you have an investment in a company called Anduril, that is developing all kinds of novel technologies around defense. That is certainly courting government contracts, and things like that. How are they taking an approach that's disrupting sort of traditional defense companies and contractors?

Justin Fishner-Wolfson: (28:24)
Yeah. I mean, I think they're following sort of in the footsteps of what SpaceX and Palantir have sort of pushed the government towards, which is that you don't need to always specify everything that you want, and then have people build it for you custom. There are things that can be commercially viable that make it less expensive, and you can buy products off the shelves, right? And I think that it's this changed from cost plus manufacturing as a business and a mindset to we're going to build products that solve a problem that has a certain value to people.

Justin Fishner-Wolfson: (28:58)
And if we can do that well, then we've got a really great business. And I think it's a good change for the government to buy off the shelf products based on their value and not try to design everything themselves. I think that's a very hard problem. And I think for unique stuff, it totally makes sense. When you're sending a man to the moon, no one knows how much that costs, right? We've never done it before, but it's been a long time, and after 40, 50 years, we should find a commercial solution to this stuff.

John Darsie: (29:26)
Right. We know how to do it now. It's just a matter of being able to do it efficiently a high number of times.

Justin Fishner-Wolfson: (29:33)
I mean, look at smartphones, right? I mean, you don't need to specify this Apple and Samsung. These guys, they're going to keep improving these products and they're going to sell hundreds of millions of them. And that's what's going to drive the cost down for everybody, including the government.

John Darsie: (29:48)
Right. Yeah. We talked a little earlier about your time at Founders Fund. Peter Teal, obviously sort of the most prominent partner there at Founders Fund. Obviously he's not the only one making decisions, but he has sort of a libertarian view of the world. He believes that private sector has the ability to produce things, including things that you're talking about with Anduril more efficiently. What's your view of the world in terms of how public and private work together, you touched on it a little bit talking about defense companies and space companies and things like that. But what did you take away from your time working with Peter at Founders Fund? And do you share any of his worldview on that side of things?

Justin Fishner-Wolfson: (30:29)
I mean, obviously, it took a lot of things away from my time at Founders Fund my time with Peter, I think we share similar views of what companies are interesting, what companies are defensible, what companies will ultimately be incredibly valuable businesses. So I think a lot of that is the same. I mean, my views would be their market solutions work for a lot of things. And that ends up being better, faster, cheaper for everyone. I mean, obviously there are values to the government. There are things that the private sector is not going to do, but we should figure out where those lines are, and they constantly move. And the more things the government doesn't have to do, I think those things are better served by private businesses, by the market.

John Darsie: (31:13)
Right. And last question I want to ask you before we let you go relates to geography. So you had an investment in DiDi that I alluded to earlier. There's been a lot made of China's crack down on tech, starting with Alibaba through to Tencent. Now, DiDi delisting it from the app store. We could talk about China as its own distinct entity, how are you looking at allocating capital to China? We had some deals come across our desk based in China that we certainly took a hard look at, but had reservations about. How do you look at China and then geographically, are you focused on the United States? Or how do you look at places like Europe, places like emerging markets, whether it be Africa, Southeast Asia? Geographically, where are you focusing your investments and how do you think about geography?

Justin Fishner-Wolfson: (31:59)
And for us, we've always been focused on the US the vast majority of our investments are here. Partially, that's just driven by we're a relatively small organization, and this is where our networks and our relationships are. And it's obviously the place that we understand the best. We've been willing to invest internationally. I mean, obviously you mentioned the DiDi investment. We invested in Spotify. We've been willing to invest elsewhere, broadly speaking, that's when we've had a very good relationship with the company. We've had friends who have brought us into opportunities. So we feel comfortable with why we're seeing them in the first place. China is its own unique place, in a way that I think India is also its own unique place, right? Europe is different than the US, but we share a lot more similarities. The markets are a little bit more structurally similar, so we're totally open to investing internationally, but we're somewhat hesitant to do it in place just because we don't know those areas as well. And so we will, generally speaking, do that when we feel we've got some friends around the table that make us feel more comfortable.

John Darsie: (33:02)
All right, Justin, well, it's been a pleasure to have you on congratulations on what you've built at 137 Ventures. I think you have an incredibly exciting portfolio. You've obviously exited a lot of the hottest tech companies that we've seen come to market in the last five to 10 years and best of luck with all your future growth.

Justin Fishner-Wolfson: (33:21)
Thank you. Very nice talking with you.

John Darsie: (33:23)
And thank you everybody for tuning into today's Salt Talk with Justin Fishner-Wolfson of 137 Ventures. Just a reminder, if you missed any part of this talk or any of our previous Salt Talks, you can access them all on demand on our website at salt.org/talks or on our YouTube channel, which is called Salt too. We're also on social media. Twitter is where we're most active at Salt Conference, but we're also on LinkedIn, Instagram and Facebook as well. And please spread the word about these Salt Talks. We think people like Justin providing incredible access to private market opportunities, that a lot of investors didn't have access to when Justin started doing what he's doing. So thankful for people like him and how he's opened up these markets. But on behalf of the entire Salt team, this is John Darsie signing off from Salt Talks for today. We hope to see you back here against soon.

Transforming Financial Services | SALT Talks #237

“Satoshi Nakamoto solved one of the hardest problems in computer science: distributed trust. It showed a way to build an application such that the data’s decentralized. I would argue that crypto can’t succeed if Bitcoin doesn’t succeed.”

Asiff Hirji and Kyle Samani describe their crypto journeys and how they’re engaging with the blockchain-powered technology. Samani talks about why he was drawn to Ethereum and Hirji explains why he left his role as COO at Coinbase to join Figure, a start-up that uses crypto rails in the home equity lending space. Both guests offer their concerns around misguided crypto regulations in the US, particularly after China’s recent banning of decentralized cryptocurrencies.

Asiff Hirji is the President of Figure Technologies, Inc. (‘‘Figure’’), a blockchain-based home equity lender since January 2020. Kyle Samani is a Managing Partner at Multicoin Capital, a thesis-driven investment firm that invests in cryptocurrencies, tokens, and blockchain companies reshaping trillion-dollar markets. Prior to joining Figure, Mr. Hirji served as President and COO of Coinbase, Inc. (‘‘Coinbase’’), where he helped significantly grow the company’s revenue and valuation.

As a former engineer, Kyle leads technical thesis formation and diligence. He is the more outwards facing partner, owning relationships with entrepreneurs and other investors. He is widely recognized in the crypto ecosystem for his writing and system-level analysis.

LISTEN AND SUBSCRIBE

Spotify | Amazon | Google | Stitcher

SPEAKERS

Asiff Hirji

President

Figure

FULL BIO

Kyle Samani

Managing Partner

Multicoin Capital

FULL BIO

TIMESTAMPS

0:00 - Intro

3:27 - Entry into crypto

8:42 - Value of Ethereum

12:40 - Using crypto for home equity lending

17:30 - Interesting use cases for blockchain applications

24:30 - Impact of securitized crypto products

28:50 - Ethereum competitors

32:45 - Using crypto payment rails

36:45 - Concerns around crypto regulations

40:51 - China’s ban of decentralized crypto

EPISODE TRANSCRIPT

John Darsie: (00:07)
Hello, everyone. And welcome back to SALT Talks. My name is John Darsie, I'm the managing director of SALT, which is a global thought leadership forum and networking platform at the intersection of finance, technology and public policy. SALT Talks are a digital interview series that we started in 2020 with leading investors, creators, and thinkers. And our goal on these talks is the same as our goal at our SALT Conferences, which we're excited to resume here in September of 2021 in our home city of New York. But that goal is to provide a window into the mind of subject matter experts, as well as provide a platform for what we think are big ideas that are shaping the future.

John Darsie: (00:46)
And if you've been a recurring listener or watcher of our SALT Talks, you know of our enthusiasm for the crypto or the digital asset space, and we're very excited to bring you our latest episode of our digital assets series with two fantastic founders and executives in that space. Those two guests that I'm referring to are Asiff Hirji and Kyle Samani. Asiff is the president of Figure, which is a blockchain-based home equity lender. And prior to joining Figure, Asiff was the chief operating officer and president at Coinbase. Prior to that, he was an operating advisor at Andreessen Horowitz, chief restructuring officer of Hewlett-Packard, and served as the president and COO of TD Ameritrade.

John Darsie: (01:32)
Asiff also held senior leadership positions at TPG Capital, Saxo Bank, Hewlett-Packard, and Bain Capital, and is served on a number of public and private boards, including Citrix Systems. Kyle Samani is the co-founder and managing partner at Multicoin Capital, which is a thesis-driven investment firm that invests in cryptocurrencies, tokens and blockchain technology. In his current role, Kyle helps identify market opportunities and sets the strategic direction of the firm.

John Darsie: (01:59)
Prior to Multicoin, Kyle co founded Pristine, which is an enterprise software company that enables desk-less workers with solutions for smart glasses. And under his leadership as CEO, Pristine grew to millions in revenue and raised over five million in venture funding before being acquired by Upskill in 2017. Kyle is based in Austin, Texas, and holds a degree in finance and management from NYU Stern, and has been programming since he was about 10 years old, definitely way ahead of me on that one.

John Darsie: (02:30)
But hosting today's talk is me. Again, I'm John Darsie, I'm a managing director at SALT as well as a director of business development at SkyBridge Capital, which is a global alternative investment firm. That was about eight billion in assets. We also were the first [for-React 00:02:45] fund and the first fund of hedge funds to make a direct allocation into Bitcoin. And we currently have about $500 million of exposure into Bitcoin in our flagship products. But I want to start off, Asiff, I read a little about your bio, but I want to hear more from the horse's mouth.

John Darsie: (03:02)
You were at TD Ameritrade, you were the president and COO. You also have worked at some of the most respected investment institutions in the world, Bain Capital, TPG, Andreessen Horowitz. What convinced you as somebody that has this diverse background that it was time to dive head first into the crypto space, into the digital asset space that you did at Coinbase and now at Figure?

Asiff Hirji: (03:25)
Thanks for inviting me to this. Look, I've been an operator, entrepreneur, investor in fintech for over 30 years. I started initially in things like direct banks and insurers. And I would tell you, I'm a software engineer by background, so to me, very simplistically, we've been to two waves and we're now going to the third wave of innovation in financial services. The first wave was we went off mainframes and onto distributed computing, protocol-led, Internet1, great businesses being built including things like Ameritrade and so on. Basically, what we did was we made it self service.

Asiff Hirji: (03:55)
We took things that you had to go into a bank or a teller to do and we made them self service on the internet with a web browser. And that lowered costs and increased inclusion, but fundamentally, it didn't alter the cost structure. The next thing we did was when we went from distributed to mobile cloud, and that made things like the phone ubiquitous, it made lots of different types of products available. Again, all you did was you took the application and shoved it further out towards the user. It lowered some costs, but still didn't fundamentally attack the cost structure of financial services.

Asiff Hirji: (04:26)
We're now about to go through the third wave, and that's from mobile cloud to decentralized, or blockchain, if you prefer. And for the first time, we're actually affecting where the data is. The data is no longer on a central computer somewhere, the data is now distributed out to the users. You control your own data, Kyle controls his own data, I control my own data. And the fundamental thing that blockchain does is it gets rid of the intermediaries. The financial services system we have today is built such that you have to have a whole bunch of trusted intermediaries in every transaction, because that's the only way you can ensure that if I want to pay you, John, some amount of money, that my bank takes it from my account, sends it through the pipes to your bank, who then ultimately gets it to your account.

Asiff Hirji: (05:08)
And every single intermediary along the way there charges a fee. With blockchain, you can have peer-to-peer, bilateral, risk-free, real-time settlement. And that means I can send you money as easily as it would be for me to send you an email. As long as I have your address, I can send it to you and there's no settlement risk, and it just settles. And that means that the cost structure crashes for financial transactions. And so that's why I'm excited about crypto in general, which is, I think it'll fundamentally rewrite the way we do financial transactions. It'll make financial services more or less free. So this whole concept of the un-banked and under-banked will go away because you'll have financial inclusion.

Asiff Hirji: (05:45)
And best of all, you will be able to create this with far less capital being deployed, far less complexity, and you'll get rid of a number of the issues that we've had most recently with things like say the GameStop situation, or what happened with Robinhood, etc. None of those things can happen in a bilateral, risk-free settlement mechanism that crypto allows.

John Darsie: (06:05)
And Kyle, you come from a programming background, an engineering background. What was your Eureka moment as a young man deciding that you wanted to make crypto or digital assets your career?

Kyle Samani: (06:18)
Yeah. In early 2016 after I had stepped down from Pristine, I was trying to figure out what I wanted to do next with my life. I had studied finance at NYU and always had an interest in the intersection of software and finance. I started playing around with some of the Stripe's API, this is like February, March, 2016. And I got to the limit of them pretty quickly, which is basically Stripe made it really easy to accept credit card payments as a merchant. And I remember I had some ideas I was struggling with, and one of the ideas I remember I had is that I wanted to do something where as a user, I could go to a website and I could receive payment as a user quickly, like within five to 25 seconds, depending on my identity or some action I conducted or something.

Kyle Samani: (07:04)
And I just assumed that Stripe was the payments company, top dog. I just assumed that Stripe made it really easy as a consumer, you can get paid reasonably quickly. And what I learned real quickly after digging into Stripe's API's is that, A, that's, that was wrong. And that even still to this day as a consumer, if you go to a website, getting paid is very, very difficult. Paying is okay, I wouldn't say it's great, typing in a credit card and paying is okay, but getting paid sucks, and I realized that limitation.

Kyle Samani: (07:35)
I discovered about Ethereum and it dawned on me quite quickly that with Ethereum, I could go to any website and I could get paid theoretically in seconds. And then I started exploring what else you could do with Ethereum, and I realized that it was fully programmable extensible money. And when that light bulb went off, it struck me as a very, very important idea in technology. And so over the course of 2016, I started reading and learning about the space and investing my own money and time. By the spring of 2017, I had developed a full time internet hobby and made a decision to do that professionally instead of just personally.

Kyle Samani: (08:08)
And so I made the decision to launch multi point in May of '17 and we launched our hedge fund on October 1st of '17.

John Darsie: (08:15)
And we often come at these talks through the lens of Bitcoin as most people's gateway drug into crypto or DeFi, but you're not a Bitcoin-first evangelist within the crypto space, you're much more Ethereum first. And then obviously, Multicoin, you guys are investing in series of protocols. What did you like about Ethereum and what didn't excite you about Bitcoin? And to this day, how do you look at the differences between those two platforms?

Kyle Samani: (08:44)
Generally speaking, a lot of those sources of confusion, both inside of crypto and among new folks who are getting into crypto is the split between what I'll call the money crypto people and the tech crypto people. The money crypto people tend to have an econ background or tend to be focused on libertarian ideals of sovereignty and ownership and central-banks-inflated monetary base and all those kinds of things. Those were obviously the first people to get into crypto because that's what espoused Bitcoin.

Kyle Samani: (09:17)
And the tech people have only gotten into crypto more recently building on top of Ethereum and now on top of some of the newer smart contract platforms like Solana and some other ones as well. I've never had a strong background in economics or never had dove and into the history of central banks and all those things, so the Bitcoin value proposition to me just never resonated. I knew what Bitcoin was in 2012, I just didn't care. Ethereum struck me as important because I understood that I could program money in ways that Stripe could not let me do. It wasn't 10% better than Stripe, it was infinitely more extensible than Stripe. And so that's what pulled me in into the space.

Kyle Samani: (09:59)
Since then, the space has evolved even more, and we can do all kinds of things that I couldn't have imagined then, and now these systems are coming and scalable and we're seeing the next wave of things that you can do that are truly crypto native, things like social tokens and NFTs that weren't even conceivable a few years ago.

John Darsie: (10:17)
Right. Go ahead.

Asiff Hirji: (10:20)
Let me have some perspective on that. I was one of the original Bitcoin believers and I still am, that's what got me into it. And I would tell you that as a software programmer, and I do have a finance background, but whoever he, she or they were, Satoshi solved one of the hardest problems of computer science, it was how to do distributed trust. When I was at Watson Labs way back when, this is one of the issues we used to try and beat our heads against the wall against that we couldn't come up with a solution. They came up with a solution, and it's pretty ingenious. But more than that, they showed a way to build an application such that the data is decentralized. That's the fundamental breakthrough.

Asiff Hirji: (11:01)
And all the other things that came along, whether you're a Ethereum believer or a Solana, it doesn't matter, they would not have been possible without Bitcoin. And I would argue, and maybe this is not a popular point of view, crypto can't succeed if Bitcoin doesn't. And that's because the Bitcoin, if you think of crypto for the average person, if you said crypto, they would think Bitcoin, they don't think something else if they think of crypto at all. And to have the single largest asset in the space, the one that the started the space then fail is not going to be helpful for the industry.

Asiff Hirji: (11:33)
It's not like the internet where you could say, "Oh, AOL introduced the masses to the internet, and then it's okay that AOL failed because we had the rest of it come along." To me, it's not the right analogy. So a couple of things in my mind, one is Bitcoin is super important. It solved one of the biggest problems and showed us how to build applications in a way that we hadn't thought before. I believe it's a store of value, I believe it'll continue to innovate with stuff being built on top and beside it. But I think that it has unleashed all the other innovation that Kyle is talking about.

Asiff Hirji: (12:06)
We wouldn't have had NFTs, we wouldn't have had all these other things without Satoshi, again, whoever he, she or they were, having created the breakthrough in the first place.

John Darsie: (12:16)
And also tell us about Figure. So you were a president and COO at Coinbase, you were responsible for a lot of early to mid-stage growth. You left prior to the direct listing, but you were responsible for a lot of the growth there. And you probably had your pick of the litter in terms of where you could go next in the space, you chose Figure. Tell us about what Figure is and why you chose that.

Asiff Hirji: (12:40)
I go back to, I really think that blockchain or crypto should be fundamentally rewriting the way we do financial services. And it is, if you look at DeFi, but DeFi is aimed at people who are already long crypto. DeFi is bringing traditional financial services products to people who are already long crypto, it is not showing people like you and I and others who are using traditional financial services how to use crypto do those things better. Do you understand the difference?

John Darsie: (13:11)
Yeah.

Asiff Hirji: (13:12)
So if you're a long crypto DeFi's great. If you don't have crypto at all, so far, blockchain has had no impact on you at all, unless it's a speculative asset class. And for blockchain or crypto be successful, it needs to be as ubiquitous as the internet. We shouldn't be able to imagine living life without it if that's really going to be successful. So one of my biggest frustrations at Coinbase was that most of the projects that came to us while they espoused that they were doing something in financial services for the masses, etc, what they really were was token speculation. When you got right down to it, they really weren't doing anything real.

Asiff Hirji: (13:47)
And so I went looking for, who is using blockchain to at scale make financial transactions, everyday financial transactions better? And Figure was the only company I found. And what Figure is doing is, it takes very simple financial transactions that we do every day, like I want to borrow money to buy a house, or I want to borrow money to pay off my credit card, or I want to make a payment to a person, etc, and it's built how to do them on blockchain. So it's taken these really immensely complex, capital-intensive processes and boiled them down to things that happen in minutes with minimal capital requirements.

Asiff Hirji: (14:24)
And we're not doing it because we're trying to be the biggest lender in the world, we're doing it to show the lending industry it can be done. We were able to originate mortgages at double the margin of any other provider in the space, we're able to do home equity lines of credit instantly, whereas it's normally a 45 to 60-day process. And now, we have the largest players in the space looking at our technology wanting to adopt it, and that's what we're after. We're after them trying to adopt it and bring out the solutions to the masses with lower capital and much lower costs. That's the promise of crypto and that's what we're trying to push.

John Darsie: (15:00)
Why did Figure star with home equity lending as a product? Was it a proof of concept in order to expand to a more institutional audience to demonstrate that proof of concept? Why did they start there?

Asiff Hirji: (15:12)
We needed something that had both sides of the market. We needed something that the consumers needed and that the financial markets would then buy. So you could choose a lot of things. And then we wanted something that you could actually control end-to-end to begin with. And so a home equity line of credit is actually a good product that way. If I was traditionally a lender like a SoFi or whatever, I would originate, say $100 million worth of these loans, and then I would go to the market and say, "I want to securitize this." I would represent what that package looked like in terms of FICO scores and loan to value and geographic distribution, I'd get a bunch of bits.

Asiff Hirji: (15:50)
I'd pick a winner. They would hire an auditor, they would audit my loans. 60 to 90 days later, the transaction would finally settle. In the meantime, all my loans are tied up and capital's being consumed, the buyer's got their capital tied up. A hugely expensive process. We don't do any of that because when we originate a loan now, we get the credit score company to stamp the score to the blockchain. When we get a valuation, we get the valuation company to stamp the valuations on blockchain.

Asiff Hirji: (16:15)
There's no more auditing anything, you as an investor can sit there and say, "Hey, I want California. I want CLTV less than 80. I want FICO over 720. Only loans that match that show up in the end because we're replacing trust with truths on the blockchain. And if you want them, you can bid on them in the open market and you buy them. And so we've turned the 45 to 90-day capital-intensive process to a capital in advance of origination process. It's capital light. That's just in one product.

John Darsie: (16:45)
It almost reminds me a little bit of the early days of Amazon, where Jeff Bezos chose books as his proof of concept. "Okay, I'm going to master the logistics around delivering books, the commodity that everyone knows and likes. And then once I do that, I'm going to, I'm going to expand this technology to a whole different suite of products.

Asiff Hirji: (17:03)
Exactly. Exactly right.

John Darsie: (17:06)
Kyle, at Multicoin, you guys do multiple things. You invest into liquid tokens, but you're also investing into project builds on top of it, a lot of the blockchains that you're investing in. What are some of the most compelling use cases you've seen? In addition to talking about something like Figure, what are other really interesting use cases you've seen for blockchain-based applications?

Kyle Samani: (17:29)
Yeah. I'll touch on an example here that's very real-world and tangible. And then if you want, we can go into some of the more abstract, weird less tangible things. So we are the lead investors in a thing called Helium. Helium was one of our largest positions and we're super excited about it. Helium is new business model for deploying and managing wireless networks. So what does that mean? If you think about Verizon or AT&T today or any of those big telecoms, they're extraordinarily capital intensive.

Kyle Samani: (18:01)
They have to go identify where they want to have towers, they have to rent the land, they have to work with tower companies, they have to work with city governments. They have to hire armies and armies of people, get them trucks, get them much of hard hats and equipment. They drive around, they install all this equipment, they run a bunch of back haul. It is extraordinarily capital intensive, and they have to do it at large scale, like doing one city alone is not enough because people expect their phones to work wherever they go, so you have to do large, large geographical coverage.

Kyle Samani: (18:29)
The only way to do that is to then raise a tremendous amount of debt financing and then lock in your customers into two-year contracts so you have some guaranteed revenue that the underwriters will lend against, basically. And it's obviously a very centrally coordinated and top-down. Helium is basically the exact opposite of that. The vision of the Helium is any Joe Shmoe at home, either a consumer in their home or a small business owner can buy a hotspot, which is about yay big, plug it in the wall, put next to the window, plug in electricity, plug in ethernet and then create radio waves, and any device walking around nearby can access those radio waves and pay per byte of data.

Kyle Samani: (19:07)
And if you think about this model, you take the two largest sources of costs, which are labor and land, and you send both of those costs to zero. You just outright remove those costs from the system. And so this is really disruptive to the cost structure model of telecom. We were fortunate to lead the last round of Helium in 2019, and they started rolling out the Helium network later in 2019. Today, there's over 60,000 hotspots live around the United States and Western Europe and China, another 500,000 hotspots have been back ordered, but not yet shipped.

Kyle Samani: (19:42)
And you just see this network really rolling out. And so this is the kind of thing that we're really excited about, is using these decentralized technologies as a way to incentivize people all over the world, we don't know each other, don't trust each other, to all do some collective action and produce some net positive results as a result of that coordination. And the best part of this whole system is, the whole thing is not centrally owned and managed. Helium Inc mean could go out of business today and the blockchain would keep running, all the systems would keep running. It's a truly decentralized system.

Kyle Samani: (20:15)
That is the new kind of crypto-enabled business model that we think is super exciting. That just you can't map this to the traditional Web 2 type business models at all.

John Darsie: (20:27)
It's fascinating. So now I want to hear your weird abstract application.

Kyle Samani: (20:32)
Yeah. DeFi is the first segment of that. As Asiff noted today, this DeFi ecosystem has a fair bit of press coverage. There's probably $50 billion or so of capital sloshing around in it right now. It is circular, the DeFi ecosystem is mostly people levering up to speculate on more DeFi things. That is okay, that is not bad in and of itself. It's the Wild West, and the first thing people did was take leverage because that's what people do in financial markets. And what level up on is they leveled up on other DeFi crypto things. But now they're proving that this stuff works and you're going to start to see it expand into more regulated institutional offerings over the next few years.

Kyle Samani: (21:15)
So DeFi is section number one. I won't harp on it too much more. I think some of the newer cutting edge areas that we think are super interesting are things like social tokens and NFTs, and I think these things go together in some interesting ways. Social tokens are my favorite thought area at the moment. What is the social token? You may ask. There's no strict definition, but I'd say loosely, the idea of a social token is having a token that is in the name of a person or a group.

Kyle Samani: (21:46)
So it could be Kylecoin or Asiffcoin.

John Darsie: (21:49)
SALTcoin.

Kyle Samani: (21:50)
Huh?

Asiff Hirji: (21:50)
SALTcoin.

Kyle Samani: (21:50)
It could be SALTcoin.

John Darsie: (21:54)
We're working on that.

Kyle Samani: (21:55)
You can get it be whatever. You can have David's get a coin, you can have Red Hot Chili Peppers' coin. I don't really care. Pick your entity or organization that today doesn't really have an asset that represents value and their utility around them, and give one of them to those people. Obviously, one thing you're going to say is, what do you do with these coins? And the answer today is, I don't really know. But I do know that people are creative and they're going to do all kinds of weird wacky stuff with them. And I do think it's going to become a normal part of society where... It might not be everyday people, I don't know if my mom is going to have her own coin, she probably doesn't care.

Kyle Samani: (22:33)
But I think for anyone who has a public presence on the internet, it's just like everyone has an Instagram or a Facebook or a Twitter, it's going to become part of the public discourse on internet society. And creators and celebrities are going to do interesting things with their coins. So the obvious things are like, "Hey, if you own X number of coins, you can get lunch with me. You get access to movie premieres and stuff like that." Those kinds of things are relatively obvious and will happen over the next six to 12 months. I think there's going to be a bunch of creators though that starts to do really interesting things.

Kyle Samani: (23:06)
Like, for example, these TikTok hype houses, I wouldn't be surprised if you know those creators, you get three of them and say, "Look, if you own X number of each of our coins, you can come be in our next TikTok video, and you can use that to launch your own TikTok career and then develop your own brand identity from there. And the way that these things are going to get remixed, I think this is going to be super interesting and fascinating. The design space for social tokens is incredibly broad and interesting and is going to unlock the intersection of human creativity and finance in a way that it has never intersected before.

John Darsie: (23:38)
So Asiff, going back to Figure, you guys demonstrated the use case for blockchain technology with this home equity products. On March 11th, you had your first securitization, it was an ABS securitization. Maybe prior to that, banks were saying, "Oh, this blockchain thing sounds kind of interesting, but do we really need it? We have traditional databases. We have traditional ways that we gather information about the underlying loans and assets and the securitizations." Did that trigger some sort of aha moment for banks that that's led to a different level of interest?

John Darsie: (24:13)
And let's say for example, we had Figure during the global financial crisis or prior to the global financial crisis, how would Figure had changed the way we analyzed different securitized products and would it help prevent potentially the crisis?

Asiff Hirji: (24:29)
Two really good question. Securitization was a milestone, and third-parties went and looked at it and said, "Hey, compared to a regular securitization, not including the ratings, which is even more expensive, this saved over 120 basis points compared to a regular securitization." Now, you think about how big the securitization market is, 120 basis points on that is a very, very big number for the industry. So we got a lot of interest in that. And it's just some of the very basic things that are different. So if you're using blockchain, for a normal company originating loans, running a warehouse, you warehouse loans before you get ready to securitize them.

Asiff Hirji: (25:07)
If I've got a provider of the warehouse, that provider of the warehouse has three to five people managing the exposures in the warehouse to make sure I'm not overrunning the geographic distribution I'm supposed to be in or the FICO scores or whatever, and I've got two or three people doing that. We have none of that with blockchain. It's a smart contract. The smart contract basically says, "Here are the rules that govern the warehouse." That's it. If the rule set is right, you can't overrun the warehouse with stuff that you're not supposed to. And so those three to five people go away on both sides. It's just one very simple example.

Asiff Hirji: (25:37)
And so we've got to the point where when we originally started, we had hedge funds as the primary buyers of the loans we originating. Now, it's major banks, credit unions and pension funds who are the major buyers of all these things. And secondly, it was hedge funds that were providing the financing. Today, the financing is provided by the Wall Street banks, all the big ones, including JP Morgan. If you had said two years ago, Jamie Dimon's bank who said Bitcoin was a sham was providing a warehouse on blockchain, people would've laughed you out the building. But that's what they're doing.

Asiff Hirji: (26:12)
So what's happened in terms of the adoption. And to your second question, because the servicing data is all, again, on blockchain, our servicing data is real time and it's real time available to anybody. As long as you have the loan ID, you can look up the performance of the loan real time. When we had the COVID correction just over a year ago, we actually had hedge funds who were buyers of our loans using our real-time data to look at the performance. They were using it to ARB MBSs is on the market because they could see how well our loans performing relative to others.

Asiff Hirji: (26:47)
And by the way, our loans were outperforming first lien Fannie. That's how well they were performing because we had the real-time data and we're able to manage them in real time. And so again, you go to a blockchain-based system, it is less capital consumptive, it is much more real time, it is hired there for credit quality and higher credit performance. There's no reason to not do it this way. And that's all we're trying to do. We don't go in saying to people, "We have a blockchain-based system, are you interested?" We go in and say, "We have a system for loan origination, sales and service that saves you over 150 basis points, is real time and requires less capital. Are you interested?" It just happens to be on blockchain.

John Darsie: (27:29)
It's an example of the COVID correction that really resonates with us at SkyBridge. We had heavy exposure to the structured credit space, that entire market broke down on a technical place-

Asiff Hirji: (27:39)
Correct, it froze.

John Darsie: (27:40)
All these intermediaries, and one decides to do something out of the ordinary and it freezes the entire market. We are very transparent with our investors, we're marking things to market. The entire market froze, so we're telling people, "Our assets are marked down 25%." Fundamentally, they're not impaired. We don't think really at all, or definitely not to that extent. But if you remove all those intermediaries and you create a more efficient, transparent system, you make a lot of people's lives easier, including ours when communicating to clients around March, April of 2020.

John Darsie: (28:14)
But Kyle, you talked about how you really got jazzed about crypto through a Ethereum. You said, "Wow, this is taking what Stripe has done with this API and putting some leverage onto that." But there's other blockchains that compete with Ethereum. Ethereum obviously has as created tremendous network effects has become the go-to platform for NFTs and other tokens, but there's other blockchains that are out there doing similar things that in a lot of ways might be more efficient or better constructed. What are some other competing blockchains with Ethereum that you think stand out?

Kyle Samani: (28:49)
Sure. We're going to get loud public investors in a blockchain called Solana where we've been early investors. They started R&D back in early to mid 2018. Solana network has been live now for about 16 months or so. The reason why we've been so excited about Solana is they have from inception, been focused on two things, one enabling on-chain limit order books, and two, really focusing on scaling these systems. One of the interesting thing about Ethereum from is the market cap of Ethereum today is 250 billion plus or minus, and the number of daily transactions on Ethereum is about one and a half million.

Kyle Samani: (29:31)
So if you just think about that math, of any system you know whether it's Facebook or Twilio or Uber or whatever, any of these systems, the market cap per daily user on Ethereum is truly... It's at a totally different level. It's very, very high market cap per daily user. Now, these things aren't apples to apples comparisons because they're obviously different and what they do is different, so you can't rely too heavily on a direct comparison, but they really... The number of users there is actually a lot smaller than you would think, given the hype and given the market cap.

Kyle Samani: (30:06)
Our theory has been that you have to scale these things to get you to 500 million daily users plus, and the Solana team has provided an incredible alternative approach to scaling these things where you can write code now and know what's going to work in six months and in 18 months and in 24 months, and you know how it's going to scale. And so we've made a big bet there. And in the 15, 16 months since this thing has been live, we've seen a number of pretty interesting developers take advantage of this, and the most notable of which is called Serum.

Kyle Samani: (30:41)
Serum is a new order book, it's a decentralized exchange. It's conceptually similar to Coinbase or FTX or these other things. But it runs natively on a blockchain. If you think about the financial markets, look at equities, look at FX markets, look at commodities, look at any of these things, the way that all of these liquid assets trade is they trade on order books. You've got market-makers quoting spreads and quoting liquidity, and obviously, you're adjusting the prices as new information comes out and whatever. And that's how finance works. And there's a reason that it works that way because it's the right way to price assets.

Kyle Samani: (31:17)
The challenge in Ethereum has been because of the throughput limitations, you just can't run an order book on Ethereum, and everyone has agreed that that doesn't really work. And Solana has been architected, that was the goal from inception was to run an order book on-chain. And they've now proven that's possible. It's not as performant as the NASDAQ or New York Stock Exchange, and I don't want to claim that it is, but it's close enough that you can get global permissionless order books for any arbitrary asset. And that works now, and you can see it live now, and that's already trading 50 to a million dollars per day on Serum right now, and that's been growing at a nice, steady clip.

Kyle Samani: (31:53)
We really think that the key primitive heading an order book available is going to be the most important financial construction as we think about scaling these systems to billions of people.

John Darsie: (32:04)
So if I want to go to payments, as we've talked about, Figure started with HELOC loans, and use that as a proof of concept and has gone out and done securitizations now, and is getting heavy institutional interest, but also has ambitions to solve this blockchain for payments issue, which is one of the holy grails for the industry about how to really potentially move off of those Visa, MasterCard rails to deliver point of sale credit. Could you explain to people who are less familiar what that means, what the implications of that are, and whether it is realistic to move off of those traditional credit card rails and why a point of sale credit is a better solution.

Asiff Hirji: (32:45)
Yeah. Look, if you and I walk into a merchant and we take out a credit card and swipe it, there's actually at least seven or eight intermediaries who take part in that transaction between my paying for something and the merchant receiving the money that I'm trying to pay them and me receiving the goods. And again, each of those intermediaries takes a cut, and the poor merchant depending on the size is paying somewhere between 100 to 300 basis points on that transaction. It's super expensive. And most of the merchants are paying at the upper end of that in terms of a fee. And a lot of that goes to, again, back to the complexity that we've built into the Visa-MasterCard system.

Asiff Hirji: (33:23)
And not only does is it really expensive, but the way Visa-MasterCard works because it's a credit product, I the merchant, I'm not actually guaranteed that I'm getting the value for the transaction because the consumer can claim that there's fraud or something else, and then I get a charge back. And so it's a hideously expensive process for the merchant. Studies show that a merchant on a $100 is maybe clearing something between 87 and 95, depending on what they're doing and how often they get charged back, etc. So go back to, what does blockchain do really well? Blockchain does real-time bilateral settlement between two parties, no intermediaries.

Asiff Hirji: (34:03)
So if I went into the merchant and I could pay with stable coin into their wallet, from my wallet to their wallet, it settles instantly, there is no risk anymore that there's going to be a charge back. There is no fee other than the blockchain processing fee itself, which is orders of magnitude lower than the 300 basis points that Visa, MasterCard, etc, are charging that merchant. You take just a tremendous amount of cost and complexity out of that system. So we have built a service we call Figure Pay, which is a challenger bank, so think Chime or Dave or whichever your favorite is, meets buy now pay later, say something like a firm meets merchant acquisition, so think Square.

Asiff Hirji: (34:43)
So it's got a card, you can use it at any merchant, but if it's a Figure Pay merchant, it's not the 300 basis points, it's more or less free, and it uses QR codes, just like they do all over Latin America and China, it's running entirely on blockchain. And if you were a fintech, not only can you leverage this product to offer payment services to your customers, but you can also offer banking services, because the core banking functionality is provided by the blockchain, there is no core. So if you're a bank, one of the biggest costs you have is your core banking system, which is probably antiquated written in COBOL 15, 30 years ago. And again, all of that goes away using blockchain.

Asiff Hirji: (35:24)
And so we have four or five of these businesses lending being the most mature, pay being somewhere in the middle, and we have some that we're incubating. Pay is now getting traction like lending was, say two years ago. Lots banks looking at it, lots of fintechs looking at it, lots of retailers are looking at it as a superior way of providing that merchant acceptance credit card type functionality, also banking functionalities to customers, again at a much lower cost all over Europe, all over your smartphone, all on blockchain rails.

John Darsie: (35:54)
Yeah. And we're investors in Chime and Klarna, so we understand that story intimately well. I want to talk about regulation. Elizabeth Warren, everybody on Wall Street's favorite Senator, she's both anti the establishment too big to fail financial system, banking system, but she's also been a loud critic of crypto, of blockchain. She recently issued a letter to SEC chair, Gary Gensler saying, "By July 28th," I don't know how she picked that date, "I need to have answers on how we're going to regulate crypto." Are you concerned, I'll start with you, Asiff. Are you concerned about irregulation being this existential threat to the development of this crypto ecosystem and blockchain technology and cryptocurrencies? Or how do you see regulation in the United States shaking out?

Asiff Hirji: (36:45)
I think regulation is a big risk. I think if you look at what China's doing with fintechs that are listing in the US, let alone anything else, the Bitcoin hash rate, if the regulators really are serious about lowering costs and increasing financial inclusion, and that's what they claim they are, if they're serious about that, they have to be pro crypto. I believe the reason that they're not pro crypto is because they don't understand it. And they view it simply as an asset class, which is the wrong way to think about it. And not only an asset class, but a highly speculative asset class, which will only end in their minds badly for most investors.

Asiff Hirji: (37:23)
And so that's why when I was at Coinbase, we started a bunch of things that tried to educate regulators and educate our legislatures about what crypto is and what it can do. And those things are making progress slowly, but they're making progress. And so I believe there is a mismatch between the level of understanding within regulators and their perception of what crypto is versus where crypto is actually trying to go. Are there things in crypto, which are which are scammy? Yes. Will some people lose their money? Yes. But that doesn't mean that all of crypto is scammy or that there is no real value underneath it.

Asiff Hirji: (38:03)
For a lot of what we do every day, there is a better crypto solution that is lower costs and will drive more inclusion for people who are currently excluded from the system.

John Darsie: (38:14)
Kyle, when you're evaluating investments, whether it be in liquid tokens or companies that are developing on different blockchains, how do you evaluate regulatory risk? And what's your outlook for regulation in the US?

Kyle Samani: (38:29)
Building off Asiff comments here, it's definitely a real risk, and there's no one in the world you can forecast how the political winds are going to change both in the executive branch, as well as in Congress and how that's going to filter into the SEC, the CFTC and other regulatory bodies. Those things are actually impossible to predict on any medium to long horizon term. I would say though, I'm just generally an optimist. If you look back at the history of the internet, there's been a lot of moments where people thought it wasn't going to take off, where the CIA and NSA tried to ban encryption.

Kyle Samani: (39:07)
There was that whole debate, there's been others over the years. If you look back at the early history of Bitcoin, say circuit 2010 to 2014 or so, there were a lot of real concerns that governments were going to just shut this thing down as a threat to monetary systems and stuff. And actually now, it's being in a meaningful way, embraced by a number of governments US and others. And so I'd say, I'm just generally a techno optimist on most of these things. And I think specifically, if you look at just wealth creation and obvious lifestyle creation of software and smart phones and computers over the last 25 years, literally everyone in the world understands just how powerful that forces has been.

Kyle Samani: (39:49)
I think general interest is in letting innovators innovate and do things. Obviously some folks like Senator Warren like to yell things on national television, but I'm generally quite optimistic that that's not going to... It may cause some bumps here and there, but I don't think it's going to present an existential crisis of any form.

John Darsie: (40:14)
Do you think it's a Bitcoin issue, but it's also a broader issue for crypto that China is now basically completely exited the entire cryptocurrency experiment? They said, "You know what, well, at least decentralized cryptocurrencies and blockchain technologies." With the DD listing issue that you referenced earlier, Asiff, they're becoming very paranoid about data. And so they want to control every bit of data that passes through that country in and out. And so they're obviously going to prioritize the digital yuan. Do you think China's adversarial stance towards crypto is going to hamper development of the space? Asiff, we'll start with you.

Asiff Hirji: (40:53)
I think that just like every technology, there are two ways or three ways you could use it, some of which are not great. And China is showing us that there is a dark side to crypto, which is you can use it to further the totalitarian state. So should there be central bank, digital currencies? Maybe. Maybe. But China's basically said, "Our currency will be digital because that lets us further enhance the surveillance state because now you cannot get the fiat unless you have a digital wallet and I issued it to you, so I the Chinese government know exactly who you are, and I can track everywhere you spend it. And if I don't like what you say or what you do, I can block it."

Asiff Hirji: (41:35)
Now, that is the evil twin, if you want to think of it, of crypto in almost every sense because crypto is trying to be decentralized, it's trying to empower the end consumer. It's trying to give data back to people so that they can control the privacy settings of it, etc. But that same technology has been used in a very different way in China. My guess is there's been more and more technological separation between the Western and China, and I personally believe that will continue. I don't think it's a threat to Bitcoin or Ethereum, or any of the other projects that we've mentioned here on this show, but I do think that it's a very different application of the same technology with a very, very different outcome, which is not great for humanity at that point.

John Darsie: (42:26)
Kyle, how do you look at the China issue?

Kyle Samani: (42:30)
It doesn't impact us in a meaningful way on a day-to-day basis. They've shut down mining is the big thing that's happened. Motivations are a few fold, but I think that the most cynical interpretations are overstated, at least of that particular action. It does feel like China's generally moving towards a surveillance state, Orwellian future, that seems to be happening. Although, I don't take it for granted that is actually the outcome that we're going to get, although it's a reasonable probability outcome. When we think about crypto and the opportunity in China, there's two angles we think about.

Kyle Samani: (43:12)
One is developers and then there's users. Most developers who are building novel crypto things who are based in China or leaving China just for personal safety reasons, which is pretty smart thing to do. A lot of them go to Taiwan, Singapore, Hong Kong, pick your locale nearby, and that's pretty common. And so that has really created problem for us as a firm. The other question then of course is users for these things. If you look at who is using DeFi today, it's actually overwhelmingly not Americans, it's overwhelmingly people in Asia, Southeast Asia is a massive market and has almost no press coverage in the United States. China is a massive market.

Kyle Samani: (43:51)
And the reason is because obviously people in these countries are trying to opt out of their fiat systems and of their payment rails that they are more or less subject to from birth onwards. And so those people are very interested in experimenting with these technologies, trying them, figuring out what they can and can't do so that they can opt out of the local regimes. And given what we've seen there in the last few years, I'm quite optimistic that we'll continue to be true. It may become more legally risky for folks in China, specifically unclear how exactly how that's going to play out.

Kyle Samani: (44:27)
But there's just across Southeast Asia and China, you've, call it, two billion or so, two and a half billion people, who for the most part are trying to opt out of their local financial systems. And that market is just astronomically large. And so we continue to spend a large percentage of our time and energy both understanding what developers are doing there as well as understanding the way that consumers are using these technologies in China and elsewhere.

John Darsie: (44:54)
Well, Asiff and Kyle, it has been a pleasure to have you on. We'll leave it there, save it for your next appearance, everything else we can talk about here today for your next appearance on SALT Talks. We hope that you'll be able to join us in person in September, we're bringing back our in-person Salt Conferences in New York. There's also the Block Works Digital Asset Summit going on at the same time. So we're excited to have just a really large ecosystem of players in the space, and from the institutional world, we're somebody that's a newer entrant into the space from a SkyBridge perspective, and really excited about all the potential that it holds.

John Darsie: (45:25)
And like I mentioned earlier, Bitcoin has been our gateway dragon and we're excited to be involved alongside the things you guys are doing in the space. But thanks so much for joining us here on SALT Talks.

Kyle Samani: (45:34)
Thanks for inviting us.

Asiff Hirji: (45:35)
Thanks for inviting us, John.

John Darsie: (45:37)
And thank you everybody for tuning in today's SALT Talk with Asiff Hirji from Figure, and Kyle Samani from Multicoin Capital. A reminder, if you missed any part of this SALT Talk or any of our previous SALT Talks, you can access them on our website On Demand at salt.org/talks, or on our YouTube channel, which is called SALT too. We're also on social media, Twitter is where we're most active. We're @saltconference. We're also on Linked, Instagram and Facebook as well. And please spread the word about these SALT Talks, we love educating people, especially on the topic of crypto and digital assets.

John Darsie: (46:09)
So again, share this episode with your skeptical uncle when it comes to crypto. On behalf of the entire SALT team, this is John Darsie, sounding off from SALT Talks for today. We hope to see you back here again soon.

Jason Crabtree: Reimagining Complexity | SALT Talks #228

"Risk is a consequence of dependence. If you get really dependent on something, you probably want to think a lot more about what happens if it goes away."

Learned from his time in the military, Jason Crabtree reveals government agencies’ and private companies’ vast cyber insecurities, leading to his founding of QOMPLX. Crabtree details some of the most common mistakes and how individuals and organizations should approach cybersecurity. He discusses his decision to take QOMPLX public via SPAC. Crabtree offers his views on energy security following the attack on Colonial Pipeline and discusses whether crypto plays a role in increased ransomware attacks. He predicts the nature of future cyber battles and explains how to prepare.   

While “complexity” is often viewed as a negative attribute, the most powerful things in life are complex. Planet Earth. Global enterprises. Human beings. Several years ago, Stephen Hawking said “the next century [21st] will be the century of complexity." Rick Nason of Dalhousie University’s Rowe School of Business explains in his book It’s Not Complicated: The Art and Science of Complexity in Business, “if you manage complex things as if they are merely complicated, you’re likely to be setting up your company for failure." Eliminating complexity would make no sense. Embracing complexity and harnessing it is the path to success.

LISTEN AND SUBSCRIBE

Spotify | Amazon | Google | Stitcher

SPEAKER

Jason Crabtree

Chief Executive Officer

QOMPLX

FULL BIO

MODERATOR

Anthony Scaramucci

Founder & Managing Partner

SkyBridge

FULL BIO

TIMESTAMPS

0:00 - Intro and military career

6:52 - Ransomware and founding QOMPLX

9:41 - Cybersecurity best practices and mistakes

15:45 - Cyber insurance

18:32 - QOMPLX choosing SPAC route

22:22 - Understanding personal cyber risk

24:56 - Future of energy security

27:15 - Global cyber risks

31:10 - Crypto and ransomware

33:18 - Data integrity and cyber warfare

TRANSCRIPT

John Darsie: (00:07)
Hello everyone and welcome back to Salt Talks. My name is John Darsie, I'm the managing director of Salt, which is a global thought leadership forum and networking platform at the intersection of finance, technology, and public policy. Salt Talks are a digital interview series with leading investors, creators, and thinkers. And our goal on these talks is the same as our goal at our Salt Conferences, which we're excited to resume in September of 2021 and welcome our guests to that conference as well. But that's to provide a window into the mind of subject matter experts, as well as provide a platform for what we think are big ideas that are shaping the future. And we're very excited today to bring you a Salt Talk focused on cyber security and operational risk with Jason Crabtree of QOMPLX. Jason co-founded QOMPLX with Andrew Sellers in 2014. As CEO today, he guides the vision and long-term direction of QOMPLX and oversees all aspects of the company's operations.

John Darsie: (01:05)
Prior to QOMPLX, Jason served as a special advisor to senior leaders in the department of defense cyber community in support of operational cybersecurity missions, including research and development, strategic risk management, and digital transformation initiatives. Jason is a widely recognized expert on cybersecurity, data and risk management. He's been featured on most major news outlets and quoted in the New Yorker, New York times, Yahoo Finance, and more. He received his bachelor's degree in engineering from the US Military Academy at West Point where he was selected as the first captain and brigade commander of the Corps of Cadets and later elected as a Rhode scholar. I received a master's in engineering of science at the University of Oxford before leading infantry troops in Afghanistan in 2012.

John Darsie: (01:52)
Hosting today's talk as somebody with not nearly the resume that Jason has, it's Anthony Scaramucci, who is the founder and managing partner of SkyBridge Capital, which is a global alternative investment firm. Anthony did go to Harvard law school so we'll give him that, but it took him three tries to pass the bar, so that knocks them down a couple of rungs. But with that, I'll turn it over to Anthony for the interview.

Anthony Scaramucci: (02:10)
You see how he starts? Are you going to mention the fact that I got fired from the White House? You throw that in there and once in a while too, you're going to mention that?

John Darsie: (02:17)
We're trying to forget that one.

Anthony Scaramucci: (02:18)
Jason, let's just put it this way okay, I was a little cocky. I was out on Manhasset Bay, water skiing when my friends were studying for the bar, it was my bad. Let's move on Darsie, let's move on. Jason, it's a real pleasure to have you. You got this great story. You're doing things that most people dream of. You went to West Point, you were in a war zone, fought for your country, thank you for your service. You were a Rhodes scholar and now you're building an amazing business. So we have a ton of young people that listen to us. I want you to take us through your mindset and the arc of your career and how you got us to where we are right now.

Jason Crabtree: (02:57)
So I started raising cows. So that was actually...

John Darsie: (03:01)
That wasn't in the bio.

Jason Crabtree: (03:04)
So I grew up raising some Angus cattle and I grew up around a lot of ex-military people out, out of just West of Seattle. So I got to know a lot of folks that had been mostly part of the Navy, usurprisingly, it's a little wet there in Puget Sound. And we realized hat frankly, that post 9/11, that I wanted to do something with public service. And when 9/11 happened, I said, "If I'm not going to do this now, then this isn't a serious thing for me." And I had an opportunity to get to know some West Point graduates that I used to go mountain climbing with for fun. And they had this tremendous view on leadership.

Jason Crabtree: (03:39)
It was much more about enabling the people that worked for them and it was a little bit of the opposite of the Navy boomer commanders that I knew that were in the area where there's nothing closer to God than a boomer commander that's underway. And so I ended up finding myself just really drawn to these people and decided to apply to the academy and was fortunate enough to get accepted. And that started a whole chain of unexpected events.

Anthony Scaramucci: (04:02)
Your service in Afghanistan was in 2012. And when did your service end?

Jason Crabtree: (04:10)
So I left the army in late 2014 after working at Cyber Command for a few years. So the time Paul Nakasone who now runs the NSA, he was a one-star still and so I worked for his boss, Lieutenant General [inaudible 00:04:22] Hernandez, which was awesome, great experience for me to just be able to see the whole of government capabilities in this space and what we were doing. And frankly, figuring out how the government was trying to sit alongside what was happening in the private sector.

Anthony Scaramucci: (04:36)
I got to Afghanistan on a troop support mission in January of 2015 and so I met with General Campbell and his staff in Kabul, and they took me into their Cyber Command center. They showed they had actually Australian army in there with them as well. They were showing us the drones that were up in the air at that point, it's declassified now, they were in the process of disrupting a terrorist camp of which was in the Khandahar region. They ultimately went in there with the Afghani special forces, wiped out 180 terrorists, took all their laptops and so forth. And then we met with the Cyber Command people to discuss how they were going to unbundle those laptops to find treasure troves of information related to potential terrorism in the West. Is that sort of the stuff that you were doing, Jason?

Jason Crabtree: (05:32)
So I was an infantry officer. So after I finished graduate school at Oxford, I came back, went to ranger school, went to entry school and then went to out to Fort Lewis and then across to Kandahar initially. So probably not that far from where you were, right at the tip of the horn of Panjwai and Arghandab River Val. And so I spent time down there with a really great group of soldiers. And as you noted, a big part of getting advantage in Afghanistan was trying to figure out how you could suck out enough information to have an intelligence driven mission. Could you be focused about what we were trying to do? So we were constantly dealing with the bags of stuff that would come back from some of the different types of raids or other things, and could you figure out quickly what was there so you could get ahead of where the enemy was planning in their own cycle?

Anthony Scaramucci: (06:18)
And so Cyber Command is wickedly important for the American military. It's wickedly important for the defense of the United States. And we are at war right now, at least that's my opinion. I'd like to get your reaction to that. We're in an information war, the war is hacking, ransomware, disinformation that's being flooded onto the internet. Tell us about your business. Tell us about where we are in the world related to ransomware? And tell us your business model, Jason.

Jason Crabtree: (06:53)
Yeah. So I think when you start to look at where we are as a country, we're experiencing two kinds of things. We're experiencing all the information operations stuff, that's all the disinflation capability, that's all the manipulation of social media and how can you get people to behave differently? And then we're experiencing all of the actual attacks you're seeing in the news right now, which are much more about getting paid. And most of those are these criminal organizations that are out there harvesting American and global companies. And they're harvesting vulnerable businesses that have money and they can shut them down and hold them hostage. And that's a really attractive thing to do if you know how to get paid for it. And the entry price, the ticket price for that to join that ecosystem is pretty low. And it's gotten a lot lower over the last decade because so many of the tools and techniques to actually go out and find vulnerable businesses and hold them hostage are just widely available.

Anthony Scaramucci: (07:51)
And so QOMPLX, you started it out of your garage, which is the classic American story, I absolutely love that. We started SkyBridge out of a little tiny office and you're going public via SPAC. Take us through that journey. Jason, take us through it.

Jason Crabtree: (08:06)
So, when Andrew and I were still in the service, we worked on a lot of these core defense issues. How do you be able to see not just the perimeter of these networks, but what's happening inside? And that's a big part of the story about why cyber attacks just continue to grow. The reality is that most businesses and government agencies, and you saw this not just in ransomware attacks, but remember department of justice, department of treasury owned end to ends, the keys to the kingdom held by Russian nationals. That's just this last year. Those capabilities were really about taking over the center of these networks because they look like a raw egg. They got this real thin crust and inside it's just a big gooey middle, and you can go wherever you want after you get in.

Jason Crabtree: (08:52)
And so we left in 2014 because we realized that some of the most important things that we were lacking, that private sector didn't have, public sector didn't have, was all about, could you actually make that big gooey middle more difficult? And could you identify the cracks on the outside of that network fast enough and quick enough that you could find them and patch them up before bad guys found them? And I think what you've seen as the answer is we haven't done very well in that as an industry and QOMPLX is doing that for some of the world's largest companies and government agencies, is we really try and change the power imbalance and put the blue guys back on the right side of history here.

Anthony Scaramucci: (09:30)
Oh, I love it. I want to take it to the very human level. What can individual executives and regular people do to keep themselves safer?

Jason Crabtree: (09:42)
Well, I think part of this comes down to the basics. Everybody wants to go talk about magic pixie dust, AI sparkle stuff, and they haven't gone back and done the basics and say, "Do I even know what's on my network?" If you're a corporation, "Do I actually know what kinds of privileges, what are people allowed to access?" That's one part of it. But for just a common person, don't reuse your passwords all over the internet. Go get a password manager. It's cheap, it's easy. There's even some free ones that are out there. It'll help you use a unique password and every site. And that's part of why you see a lot of folks get harvested and lose their social media accounts or lose their email accounts, it's because they're reusing passwords all over the place.

Jason Crabtree: (10:20)
The next thing is, turn on multifactor authentication. Multifactor authentication are being enabled everywhere. It's not going to stop everything, but it's definitely going to make it harder. It makes it more likely that someone has to target you. Last one is, backup your stuff. Whether you're a small business or whether you're an individual, a lot of people don't actually back up their things or ever even know how to restore from a backup. And that stuff's not sexy to talk about, but it's actually what helps people get going. And after that, it's all about visibility. And for corporations, are you looking for these things fast enough so you can identify where people screw up and put stuff on the internet that shouldn't have been there, or you can identify when people are in your network? You actually have to look for it. You can't bury your head in the sand and then say, "Oh my God, we're so surprised. Somebody was in here trying to get the money out of the bank. There's gambling in the casino, heaven forbid."

Anthony Scaramucci: (11:10)
I'm always worried about this stuff. And I'm fascinated about your view. Are there too many companies offering cybersecurity services and technology? I see more and more announcements and there are big transactions, public and private all the time right now. What's your thoughts on that?

Jason Crabtree: (11:27)
Yeah. I think cybersecurity is going to go through a real consolidation and we think that because you see so many legacy companies that were really designed for this big perimeter focused defense. A lot of corporations and government agencies were building more and more elaborate perimeter defenses, these tiler and taller walls. And it turns out that, whether you to pick the imagine a line or lots of other historical examples, you can go around the wall, you can go under the wall, ad that's exactly what you see happening with phishing attacks. So you get someone to click on something and download it and it bypasses the big wall into the organization. It's exactly what happens when someone in the finance department or the HR department opens up somebody's resume because that's their job every day to click that, someone's going to have a malware capability embedded in that, or they're going to have a macro in an Excel spreadsheet. Everybody loves to send those around.

Jason Crabtree: (12:22)
But turns out those are some of the most dangerous things you can possibly do is open up an Excel spreadsheet with a macro, and I don't see that going away anytime soon. And as a result of that, that means that you bypass all these tremendously expensive legacy companies that were really configured for a world that doesn't exist anymore. And their blinky boxes don't go to the cloud very well. And that's why you see QOMPLX and others, I think, positioned around the identity space. Identity is much more central to the future, and frankly, you're seeing the government endorse it. That's why President Biden just signed the zero trust order as part of the executive order for the federal government just a few weeks ago.

Anthony Scaramucci: (12:58)
It's great stuff. So where does QOMPLX fit into that picture? How do we defend business and society? Give us the macro framework.

Jason Crabtree: (13:07)
So the macro framework is you're hearing big words like zero trust. And zero trust is all been about this idea that you're going to move away from the big perimeter and you're going to make your identity the center of your defense. Great. It also only works if you can authenticate that people are real, that computer and user log-ons are real. And it turns out that whether it was the office of personnel management, so in 2014 you saw this huge, huge attack by the Chinese, where they took millions of people's personnel records, their applications to gain a classified intelligence permission from the government, and we saw millions of those records go to China. That same attack was a part of what you saw at capabilities like Marriott, Merck, TravelX, Finastra, Norsk Hydro, all of these massive breaches that disrupted companies. Same thing at Colonial, this is what dark side ransomware getting does. This is what the Russians just did to DOJ DOT and the whole solar winds debacle.

Jason Crabtree: (14:13)
They all attack the keys to the kingdom. And once they get the keys to the kingdom, they can create users, they can impersonate users, they can do what they want because it's not your network anymore, it's theirs. And I think what QOMPLX really does is we actually catch that and we do it now for some of the world's largest corporations. And it's funny because this is actually what Andrew and I helped work on some of these problems for the defense department when he was doing some chief architecture work for the air force, before we started the business. We just realized that we needed to go so much further than the big incumbent vendors were willing to go. And that's what QOMPLX has been doing for the last six and a half, almost almost seven years now.

Anthony Scaramucci: (14:49)
So when you say much further, describe what that means? What does so much further mean in terms of capabilities?

Jason Crabtree: (14:57)
Yeah. So every time a user or computer wants to do something, you want to send an email, go to a file share, you have to effectively say, "Hey, am I allowed to do this?" The problem is if I can just impersonate me being you well, that's better than me being me on the SkyBridge network. I'd rather be you on the SkyBridge network.

Anthony Scaramucci: (15:16)
You don't want to be me. Apparently I got fired from the White House and I failed the bar three times. So you can ask John Darsie, you probably don't want to be me. But I get the point, but I want to switch subjects for a second and ask you about your opinion of cyber insurance. We're watching more accelerated losses. I think they're confused about how to write premium related to these cyber losses. What's your thought there? And where do you think that industry is going?

Jason Crabtree: (15:45)
Yeah. So I think whether it's ransomware or whether it's cyber insurance, the whole world's gone digital. And that's not going away. But risk is all about what you're dependent on you. You have a lot of risks if you're dependent on stuff. And today cyber security is really in the news because in the course of the last decade, everyday business doesn't function without the IT department operating anymore. And I think the challenge when you look at cyber insurance, and this is where insurers are having to figure out what to do with it, it's the fastest growing line of insurance. It's also the one with the fastest deterioration in terms of its actual losses. So the adverse development you're seeing is really, really negative. But they have to solve it because everything's getting instrumented. You can manipulate a building control system and cause a fire.

Jason Crabtree: (16:38)
There was a big article this week talking about how vulnerable America's water systems are. Well, America's water systems can be manipulated, you can poison people, you can hurt people. So you don't really have a choice if you're an insurer in property and casualty about whether or not you're going to get good at this. You just have to figure out how to actually learn what the hell is going on so you can navigate it. And what you saw insurers start with was surveys and surveys didn't work very well. And then they said, "Hey, we'll look at the outside of that egg. We're going to scan the outside of you and maybe that'll work." The problem is though that all the big breaches were all about taking over the middle, getting the keys to the kingdom. And so what insurers are starting to figure out now is that all their loss events all look the same. 90% of breaches roughly, end up involving active directory and these big identity providers getting compromised.

Jason Crabtree: (17:24)
And that's exactly why you see both the security industry and the insurance industry suddenly saying, "Oh my God, we've got to totally reposition ourselves from building taller fences, to having really disciplined hunting and identification operations so we can find and root these kinds of people out. I don't want to be an outsider on your network. I want to be an insider. And if I take over your identity provider, I am an insider." That's the goal of every attack is to become authenticated. And that's why you see insurers really struggling.

Anthony Scaramucci: (17:53)
I think it's great insight. It's great commentary. Let's switch topics about going public through a SPAC.

Jason Crabtree: (17:59)
Sure.

Anthony Scaramucci: (17:59)
Now Jason, I know I'm not somebody, I'm going to explain to you why, because the Wall Street Journal said that everybody that's somebody has a SPAC. And we don't have one so therefore I know I'm not somebody. But you have a SPAC and you went public in that methodology rather than through a traditional IPO. Explain why, SPACs are obviously very popular, why did QOMPLX choose that path? And then obviously, can you hang with the big companies who are making moves in the space through that structure?

Jason Crabtree: (18:32)
Yeah. Well, I think it's a really fair question. The SPAC market is certainly widely debated. I think the reality is for companies like QOMPLX, we are a real business, so our performa business, we bought a partner as part of this as well, our performa business did 96 million in revenue last year. So we're not one of the folks that are, I'll call it in the totally speculative bucket. I think we're building a real company, we're driving real revenue, we work with real partners, we have long relationships with them. But we also really wanted to partner with long-term investors and institutions that we know are committed to cybersecurity and this broader digital transformation as part of the future. I think QOMPLX is really tied in to this idea that you're going to want to watch the things you care about. You're going to want to see how healthy they are. You want to see how they're interacting over time, and you're going to want to simulate a lot of different futures for them so you can figure out how to make better decisions.

Jason Crabtree: (19:28)
That's really what risk management is. Can you identify something that's going to get you hurt or is going to be a great opportunity? And can you figure out how to maximize the likelihood of avoiding the bad spots and getting the good spots? And for us, a SPAC vehicle and for us, we partner with Tailwind and Bill Foley, Cannae Holdings is our largest shareholder going into the transaction, the largest shareholder coming out of it. It was really just about building our company and making incremental improvements to the capabilities we provided the clients. We could have done it privately. Being public, it allows us to be more aggressive in our future as we actually are really preparing to continue to tussle with these much larger businesses that are trying to figure out how to transform themselves from these legacy providers to a company that looks more like us, where we're actually a cloud native analytics infrastructure provider. We actually do this stuff like they're trying to make themselves look like for the future.

Anthony Scaramucci: (20:24)
Well, listen, I think it's awesome. I don't want to take all the questions because we have the very elegant and intellectual John Darsie on deck here. But I want to ask this macro question. You went from West Point to Cyber Command, to taking your company public. After you ring that bell, what's next? And when do you sleep and how do you sleep? Do you sleep upside down? What are your secrets, Jason?

Jason Crabtree: (20:49)
Well, I think we're very just focused on how to go build the business, but I'm looking forward to getting some time back out in Montana with some family and frankly, getting an opportunity to just take a breather and spend some time with my little girl, my dog, and my wife. So that's definitely coming up for us. But I think for me, going through this whole process of going through the public listing process through SPAC has certainly been a great learning experience, but it's just really confirmed for us why I think a lot of great companies are going to continue to go through a SPAC listing process where they can partner with really good sponsors and frankly, engage with a lot of great investors. We had some great books come into our pipe and I'm excited about what that means for our future.

Anthony Scaramucci: (21:32)
I'm super excited for you. It's an amazing thing that you've done and congratulations on the company. I'll turn it over to John for some remaining questions, but I'm looking forward to meeting you in person.

John Darsie: (21:43)
Yeah, and one of the things we're really excited about for our Salt Conference in September is having Jason and the QOMPLX team there. I know you work with a lot of organizations that we do business with as well, but helping to train our audience in terms of how to create more secure environments and more secure work processes is something we're looking forward to in September, and having you guys there. So grateful to have you involved. But we were joking before we went live, as we were setting up our cameras, about whether you had tape over your webcam or things that you can do individually to maintain individual cybersecurity. What are steps, if I'm an individual looking to just create a more secure environment in my life, what are steps that you would recommend?

Jason Crabtree: (22:23)
Well, I think the reality is that people just need to be aware that everybody's a target. And especially when it comes to small businesses, a lot of the folks that really get hurt by a lot of the ransomware groups in particular are small companies. And you see that when they take on your local school district. Ryack is really famous for actually stealing your financial information, and when you say you don't have money for ransom, they'll give you back your bank statement, show you how much money you have so that they... They like that kind of stuff because it engenders the right kind of response. So I think if you know that you're a target and then you start to think, "Hey, I don't want to walk down that dark alley. I want to think a little bit more carefully about how it is that I'm positioned." Password managers, multifactor, backups, make sure that you're actually configuring your stuff to be secure. Don't just enable everything. You're going to be much better off.

John Darsie: (23:09)
Yeah. You, I understand, are in the early processes of writing a book about how the democratization of technology is going to impact security going forward and that covers a lot of different areas. But what exactly does that mean? How does this democratization we've seen in the technology world impact how we need to look at security and operations risks?

Jason Crabtree: (23:33)
I think the key thing just goes back to some really simple precepts. Risk is a consequence of dependence. If you get really dependent on something, you probably want to think a lot more about what happens if it goes away. And a lot of organizations that get themselves in a lot of trouble, don't take the time to say, "Hey, how do I fall back from my primary mode to my alternate mode, to some sort of contingency or emergency plan?" And I think for whether it's your personal life, if your phone goes dead, do you have a map? Those types of simple types of relationships with technology in our life are becoming more important. And you see this when you see the internet outages, you see ransomware attacks, you see this just very complex digital supply chain that's emerging.

Jason Crabtree: (24:11)
So a lot of what I've been thinking about and had published on the past has been much more about how do you allow people to think about what are their dependencies? What is my unique business? What is my unique life depend on? And how do I get more comfortable that I'm going to be able to be successful even if something in there gets mucked up on a day-to-day basis?

John Darsie: (24:30)
Right. And energy is an area that you've covered a lot in the past. You wrote a book in 2015 called Driven By Demand How Energy Gets Its Power, which we would highly recommend. And obviously we saw the colonial pipeline situation recently and there's a lot of implications of a move towards more smart infrastructure that's more plugged in, but with that comes more risk. What is the global energy future look like? And how do we optimize it from the current system?

Jason Crabtree: (24:57)
I think one of the key things when you talk about energy, and it doesn't matter if you're talking about the power system challenges you're seeing in ERCOT that have been in Texas over the last year that have been very visible and in the national eye, or if you're thinking about resource and exchanges because of climate concerns and the shift away from coal and fossil fuels. It turns out that you have to think about how do you coordinate this stuff? Electricity moves at the speed of light, so you have to balance the inputs and the outputs constantly. And that requires a lot of information technology because you have to coordinate a lot of different people that make energy and consume energy. So if you're able to do that, you can do a much better job of having a much more efficient and flexible future, but wind farms and all these other variable power sources, they're both variable and uncertain.

Jason Crabtree: (25:46)
And so I think no different than when you're talking about dealing with variability and uncertainty in financial markets, or dealing with it in your own life, those are two words you really have to watch out for. And it means that you have to think carefully about how you do your own planning and again, you have to think, "What happens if this thing isn't available when I need it?" A nuclear power plant, you pretty much know it's going to be there when you're thinking about being dependent on wind and others, it's not that those aren't very valuable, they are, but you have to coordinate them as part of a whole system. And that whole systems design is a big part of our future.

John Darsie: (26:16)
Let's talk more about China for a minute. So the US government in one of the first big bipartisan pieces of legislation that we've seen in a long time just passed the $250 billion bill that'll be deployed over five years to build up our manufacturing infrastructure and our high-tech infrastructure, as a specifically an answer to China, their dominance on chip making and other resources like that. There was a great podcast from The Daily recently about Apple and decisions it's made in order to do business in China that potentially come with some risks. Tele-communications infrastructure Huawei has been on the controversy around 5G and whether or not the US is doing enough to invest in that infrastructure or seeding that territory to China. But how much of a risk in your eyes is China in terms of aggressive cyber attacks, cyber espionage, and how that could be used in more nefarious way moving forward?

Jason Crabtree: (27:16)
Yeah. So listen, I think it's widely acknowledged that Russia, China, North Korea, Iran are some of the most belligerent entities we'll call them, in terms of thinking about global cybersecurity and what that means. I think it's important to remember though that China historically has been much more around intellectual property theft and data theft for espionage and intelligence purposes. And that's been different than, I'll call it some of the moonlighting and some of the toleration of large scale criminal organizations that you've seen in Russia or parts of the supply chain for those criminal enterprises that are largely in parts of the former sort of Soviet Union. And so I think China is important as well in the sense that, if you look at some of the major recent attacks, after solar winds, there was actually a series of events around some Legacy VPN providers perimeter backing up that firewall edge perimeter device space.

Jason Crabtree: (28:13)
But when China got burned on one of its ops, it actually effectively let everyone have access. So Russia imposed a different way of thinking about being very stealthy and a little bit more targeted. China burned down its operations by kind of saying it's free for all and hiding in the noise. So it's going to be important for us to be honest about how to deal with these folks in different ways. And China's mostly still focused on pilfering secrets that can be used elsewhere.

John Darsie: (28:42)
Right. There's certain cyber attacks, including the recent one of the US government that we believe came from Russian sources, that we stumbled into. And they might've been in those systems for longer than we would like to think they were. But it led me to a thought and a question around how many, or what percentage of cyber attacks do we discover and how many just continue to live inside some of our systems in a more surreptitious type of way? But in terms of our ability to discover and detect cyber attacks and espionage, is there a percentage that you think about in terms of how many we actually know about?

Jason Crabtree: (29:20)
Well, I think part of why you're seeing more reporting is you're actually seeing more organizations know they're breached.

John Darsie: (29:26)
Right. Which I guess is a positive thing, right?

Jason Crabtree: (29:29)
Well, I think understanding the scope of the problem is really important. And I think you're going to see more movement towards mandatory breach disclosure for public policy reasons as well. And I think you're seeing even some proposals this week from Senator Warner and others that are driving us that direction. And part of that is that a lot of organizations haven't shared that they've been breached because they didn't have a mandatory reporting requirement. So even when people think about how big the JBS or Colonial ransomware were, and those were 4.4 million for Colonial, roughly 11 for JBS. CNA Financial, big insurer in Cincinnati, $40 million ransomware this year.

Jason Crabtree: (30:11)
So there's real money out there that started to go into these criminal enterprises and it's hundreds of millions of dollars this year alone. And it's driving continued escalation of capabilities and it's driving a lot more people to get into that space. So you've got to see more aggressive prosecution, but we also just got to make ourselves less of a target. Right now we've got a target on our back, we live in a glass house, and we look like something that's really easy to rip off. And that's part of why you see them doing it.

John Darsie: (30:38)
Right. How closely have you studied cryptocurrencies, blockchains, how those are enabling this rise in ransomware and attacks? Obviously the Colonial pipeline situation, the ransom was paid in Bitcoin, but the government was actually able to recover portions of that bribe. Do you think that crypto is creating this rise in ransomware attacks, or do you think it's just something that people are using it as an alternative to other systems they've always used in the past for ransoms?

Jason Crabtree: (31:11)
I think certainly crypto is one of the contributing factors that's helped make it easier to move vast amounts of money, and at least pseudo attributable formats across national boundaries. It's certainly easier to get money around the world using cryptocurrencies or NFTs or other things than it is to get swift transfers through a process and laundered as an example. So it's certainly an element, but it's definitely not driving all of ransomware. I don't think it's fair to say that cryptocurrency is causing ransomware or causing crime. If a bank leaves a bunch of hundred dollar bills in the middle of the lobby and with a sign that says, "Don't take, pretty please." We don't say, "Oh fundamentally, the problem is that we make money." And I think that's exactly why you see us call for two things.

Jason Crabtree: (31:59)
You need to see more stuff like what Lisa Monaco is doing, what John Carlin and others are doing in department of justice, going after and imposing costs and consequences on criminal organizations. So we should prosecute them. But we also actually have to acknowledge that a lot of global corporates and a lot of American businesses, large and small, are making it really easy. They're leaving stacks of Benjamins in the lobby. And then they're upset that there's gambling in the casino. They're upset that somebody is going to try and take them. And we've got to actually harden our defenses and not be surprised that criminal organizations are going to try and get paid.

John Darsie: (32:31)
Right. And we're hopeful that Lisa Monaco is going to join us at Salt in September, actually, which will probably put her just before the panel that you speak on, because she's obviously tackling a lot of the cybersecurity issues within the administration, Deputy Attorney General, for those who aren't aware. The last question I have for you, and it's more around warfare. You obviously now are focused more on the business community, but you spent time in the military. What big threats keep you up at night when you think from a cyber perspective or even of the other perspectives and what is the future of warfare look like? There's some startups, Anduril is one that just got, I saw they got a series D round, they're raising a lot of money to tackle the future of warfare with drones and cyber and all kinds of stuff. But what are the threats that keep you up? And what does the future of warfare look like?

Jason Crabtree: (33:19)
Yeah. So I think when you think about challenges that we're going to face in the future, and in some ways this ties back into Anthony's earlier question, how do you deal with securing the integrity of the information that your people, your trusted sources give you, your financials, your operations, things that you believe to be true because you sensed them, you measured them, you stored them, you moved them? And how do you also reconcile that with a world where you've got lots of people walking around with what would have been in the 1980s, a supercomputer. The iPhones, the Android phones, they've got everything from cameras, to microphones, to other kinds of sensors on them, and they're tremendously powerful. And now you can take that information where there's a shred of truth, and you can use a lot of different AI tools to manipulate that in a really convincing ways and to amplify those signals.

Jason Crabtree: (34:16)
So I think half of this discussion, and I think this is just as true for warfare is about how do you make sure that the integrity of what you own and control and operate is real? Why do I believe what I believe? How do I know it's true? Do I have security and visibility in my data supply chain? And that's part of why we started QOMPLX was not just the cybersecurity stuff, but how do you control your data supply chain? What's the ingredient list? You think about food safety or something simple like that. What's the actual nutrition label for the datasets that you're making your decisions on? I don't care if you're trading or if you're going to actually launch a bomb strike, you need to know what that is. And then the second app is, if you're paying other people for information, how do you know why they know it? And is it real?

Jason Crabtree: (35:03)
And so I think you're going to continue to see military community, intelligence community, finance community, individual people, trying to figure out how to navigate that. And that's going to be here for a long time. It's part of why I think it's a big growth industry for us to be in. We're a data company about risk and it's one of the most dynamic and fun places to be. So I can't imagine any other place for me. And frankly, we're also doing it for government and we're doing it for big companies. So we're seeing both sides of that in a really unique way. And I think it's going to keep driving, at least my thinking.

John Darsie: (35:37)
Well, I sleep better at night knowing that smart people like you are tackling these problems. So Jason, thank you so much for joining us here on Salt Talks. You guys are doing amazing things at QOMPLX. Again, we're grateful to have your expertise at Salt in September. And I know our community is looking forward to hearing from you. Anthony, have a final word for Jason before we let him go?

Anthony Scaramucci: (35:57)
Well, we know as entrepreneurs, it's all about the execution, Jason. So congratulations on the brilliant execution of what you're doing and we wish you great success and we'll see you at Salt. And you I've made a three step authorization by that time so you'll have to take me through that as well. All right?

John Darsie: (36:16)
I'll tell you a story offline about when Anthony got the job in the White House and he was calling me to help him secure his iPad and his laptop and things, but story for another day.

Jason Crabtree: (36:27)
Looking forward to it.

Anthony Scaramucci: (36:28)
And if you think I was relying on him for that, okay, I got a bridge I can sell you here in Manhattan, all right, Jason? All right, you guys be well. Have a great one.

Jason Crabtree: (36:39)
You too.

John Darsie: (36:39)
And thank you everybody for tuning into today's Salt Talk with Jason Crabtree from QOMPLX. We think these topics around cybersecurity are extremely important. So thank you for tuning in and please spread the word about this talk if you enjoyed it. Just a reminder, if you missed any part of this conversation or any of our previous Salt Talks, you can access them on demand on our website. It's salt.org\talks or on our YouTube channel, which is called SaltTube. We're also on social media Twitter at SaltConferences where we're most active, but we're also on LinkedIn, Instagram and Facebook as well. And on behalf of Anthony and the entire Salt team, this is John Darsie signing off from Salt Talks for today. We hope to see you back here against soon.

Alex Rampell of a16z: The Future of FinTech | SALT Talks #223

“I think there are trillions of dollars in market cap for financial services, insurance and real estate. All of these industries will be upended by the Internet.”

Alex Rampell started his career as an entrepreneur and founder and explains how that helped him succeed in his transition into a VC investor. With expertise in FinTech, Rampell discusses the outdated models of financial services, making it ripe for disruption. Entrenched incumbents in the financial services space will ultimately need to innovate in order to fend off the wave of start-ups. Rampell also explains the huge opportunity for tech companies using a new money-making model called embedded finance. He talks about the inevitable digitization of wallets and an increasingly friction-less financial processes. Lowering regulations for start-ups to receive bank charters will be critical to increasing healthy competition.

LISTEN AND SUBSCRIBE

Spotify | Amazon | Google | Stitcher

SPEAKER

Alex Rampell

General Partner

Andreessen Horowitz

FULL BIO

MODERATOR

Anthony Scaramucci

Founder & Managing Partner

SkyBridge

FULL BIO

TIMESTAMPS

0:00 - Intro

3:10 - Moving from entrepreneur to investor

9:18 - Evolution of FinTech and its disruption

20:57 - Ability for big banks to innovate

25:28 - Embedded finance

38:40 - Digital wallets

45:59 - FinTech regulation

John Darcie: (00:08)
Hello, and welcome back to salt talks. My name is John Darcie. I'm the managing director of salt, which is a global thought leadership forum and networking platform at the intersection of finance technology and public policy. Saul talks are a digital interview series with leading investors, creators and thinkers, and our guests today actually fits sort of all three of those descriptions, but we'll get to that in a second. But our goal on these talks is the same as our goal at our conferences, the salt conference, which we're excited to resume in September of 2021 here in our home city of New York. But that's to provide a window into the mind of subject matter experts, as well as provide a platform for what we think are big ideas that are shaping the future. And we're very excited that I'd welcome. Alex Ram Pell to salt talks. Alex is a general partner at Andreessen Horowitz, a leading venture capital firm, where he focuses on financial services.

John Darcie: (01:01)
He has a long history of both founding and investing in leading financial services companies, including currently serving on the board of branch bright side descript, divvy, Earnin FlyHomes loft, mercury pier street point propel central link, super evil mega Corp. My favorite, uh, TransferWise and very good security. Alex, additionally led the firm's investments into open door plaid Quantopian, which was later acquired by Robin hood and arrival, which was later acquired by it live nation prior to joining Andreessen Horowitz, Alex co-founded multiple companies including affirm, uh, which is a leader in the buy. Now pay later space, uh, that he co-founded with max Levchin a fraud eliminator, which was acquired by McAfee in 2006 point TrialPay, which was acquired by visa in 2015 TXM, which was acquired by Envestnet in 2019 and YAB, which was acquired by coupons.com in 2013. Uh, Alex holds a bachelor's degree in applied mathematics and computer science from Harvard university. And as I mentioned, I think he's one of the foremost experts in the best investors in the world into the financial services sector with a focus on FinTech hosting. Today's talk is Jason Zinn's, who is a partner at SkyBridge capital who leads a lot of our FinTech investments, uh, that we're engaged in at SkyBridge. Uh, and he's also a contributor here on salt talks, I think making his second or third appearance, but we're excited to have Jason joining us again here on salt talks. Jason, go ahead and take it away.

Jason Zins: (02:35)
Thanks, John. And thank you Alex, for, uh, for joining us today, excited to have a discussion around the future of FinTech. And before we dive into some of the relevant topics today, I want to start quickly with more of a personal question. You have extensive experience as both a founder and operator, as well as more recently at Andreessen with, um, with, with more of an investment role. Um, so touch on, if you can, some of the differences in skill sets required for those roles, as well as perhaps some of the similarities or the senators choose between

Alex Rampell: (03:08)
The two. Sure. I mean, and hopefully the synergies, uh, are pronounced, but there are some people who are great investors in terrible entrepreneurs and vice versa. Um, when our firms started a lot of the logic behind getting founders CEOs as the investors is because they're going to have the most empathy. Like if you, if you take somebody who's a spreadsheet wizard and they say, Hey, let's make C1 that sell higher. Um, what does that actually mean? Like at a company, how do you actually increase your gross margin by 5%? Or how do you launch a product if you're relying on a bank to okay. The entire approval process and you know, one of the nice things about being an entrepreneur is that having been in the trenches and like, okay, when crap happens and everybody quits one day, because they got higher offers for Facebook or, you know, all the kinds of things that are the ups and downs of being an entrepreneur.

Alex Rampell: (04:00)
It's nice when you have that experience. So again, you have empathy for the entrepreneur. So when you can help them through that situation, because really we are, we are trying to not just provide capital, but actually expertise know-how and advice to the entrepreneurs that we work with. And it's kind of hard to do that if you haven't done the thing that they're doing right now, but that haven't been said, um, like the most, the most important thing from an investment perspective, it's just like find the best investments, um, you know, find the best investments. And like the job of investing is the most venture capital is finding, picking, and winning. And it's obviously very different than public equities because of public equities. There's no winning. Like if you want to go invest in ticker symbol XYZ, you just go buy it. Whereas a lot of the best deals in venture capital tend to be a consensus, right?

Alex Rampell: (04:47)
So if you think about a two by two of right versus wrong consensus, non-consensus, you can't make money being wrong. You know, it doesn't matter if you're in public equities, private equities, if you're wrong, you're wrong and lose all your money. Um, in public equities, you obviously want to be right. But if your consensus, right, well that might already be priced in. You're not going to get a great return. So you want to be non-consensus right. Whereas a lot of the best deals in venture capital, they're almost known to be very, very interesting deals. Like, you know, Coinbase was known to be a very, very interesting deal. When we did the series B of that one, many, many years ago, we had a win that deal. So that was consensus. Everybody wanted to do it, we had to win it. And one of the ways that you win it is just from like, you know, you're, you're pitching yourself as the product.

Alex Rampell: (05:30)
And again, it's helpful if one of the areas of expertise that you have is that you've actually done this job, that this entrepreneur is working 20 hours a day doing. So, so I'd say like, they're, they're very different, but, um, there's definitely a lot of benefits in terms of just understanding the complexities, if you will, of, uh, what ended up going into the financial statements as the output, um, if you've actually worked on the inputs, then it's, it's a nice, uh, it, it gives you some of understanding of the struggle for one, but also it's like, wow, like maybe that isn't as easy as the guy is suggesting. It might be because I've done that before. And it's really complicated.

Jason Zins: (06:08)
So having some empathy with the founder across the table from you has been helpful in, in winning deals, which seems like it's an increasingly important part of venture investing today. I think one, one part I just want to highlight is it's not just identifying the next great investment. It's winning that investment and getting the company to actually agree to take your money. Is that something that has evolved and gotten more challenging or more apparent of late as more money has come into the space?

Alex Rampell: (06:36)
No, absolutely. I mean, once upon a time there were only, I don't know, three venture firms, right? I mean, if you go back far enough in time, there was probably zero venture firms, then one and two and three, but we're at a time right now where there's a lot more capital than there are great opportunities. I mean, just because think about today 2021, the five biggest companies on earth are tech companies. You rewind 15 years. It was financial services companies before that it was oil and gas companies. So like the, the big area of explosive growth is in technology. All of that's been the case since mankind first invented fire. I mean, technology has always moved us forward. There's always interested in technology. It just comes in many different forms and sizes. So now it really is a it's kind of a sellers market. I mean, the seller gained the seller of, of shares in companies, namely entrepreneurs.

Alex Rampell: (07:23)
So they have a lot of choices around who to work with. Um, at the same time, the, the outcomes have gotten much bigger, which is why, you know, what is called venture capital today is, is a bigger asset class in many respects than it was in the past. Because, you know, once upon a time, if you sold your company for $400 million or $500 million, that was a big exit. And in that era, you'd have funds that were relatively small. I mean, now you have companies that when they go public, they're worth tens of billions of dollars. And it's not just all, um, bananas like 1999. You know, some people say that because there are real people using the internet. I mean, 4 billion people have smartphones, um, apple, Google, like these are tech companies that print cash. They're not just attracting eyeballs and hoping to monetize them later. So that's, what's led, I mean, know, take 0% interest rates and everything else. Add that to the mix. You have a lot of interest that's going after the sector, which has made it more competitive, which is great for entrepreneurship. I mean, it, it, there's probably no better time on earth to be an entrepreneur.

Jason Zins: (08:26)
Well, we, we, uh, certainly have picked up on some of those dynamics in some cases, are, are I guess, guilty of, of coming into this space as new entrance. We've been a little more active in, in the private markets, um, specifically on the FinTech side and, and our view has been really post pandemic. Uh, that was really the catalyst that has now accelerated much of the disruption that we're seeing. And while there's been disruption going on for, for many, many years now, financial services, unlike other sectors is arguably been the most resistant to change. Um, you have an interesting, I, I assume an interesting perspective on this because you've been in the space, uh, for much, much longer. And so when you zoom out and you think of how FinTech has evolved over the years, but really more specifically pre and post pandemic, uh, what are your views on that?

Alex Rampell: (09:19)
Yeah, well, FinTech, it's funny. Um, I gave a presentation a few years ago and I said, you know, what is FinTech? And if you were to ask people 20 years ago, it would have been selling tech defense. And I highlighted this by showing a map of the world and I highlighted Finland, but it's not fins with two ends like Finland. I mean, it really was selling technology to financial services firms. So FIS Pfizer, TESIS like, these were a lot of the original financial services companies or fi FinTech companies, right? They were software companies selling software to banks. Um, so like, you know, somebody like TCIs, uh, that was part of, I believe Synovus was part of a bank. Banks said, Hey, we need software to go actually issue credit cards and deal with like how much balance and whether or not we approve this transaction on the fly.

Alex Rampell: (10:04)
They built that internally. And then they ended up spinning that out into a separate company called TCIs was worth tens of billions of dollars before it itself got acquired. And that was the original kind of gen one and FinTech. And now FinTech is not, it's kind of like what you've seen happen with software. Like 20 years ago, you could have had a Lyft or an Uber, but when the amount of capital available was low and risk-taking was not extreme. And I mean that in a, in a negative way towards Ben in a positive way towards now, what would Lyft or Uber have become? They would have been taxi dispatch services. It's like software, very high margin software. They just sell that software to taxi cab companies. But the whole experience would have been terrible. And of course, taxis are still terrible today, but Uber and Lyft have really changed that industry.

Alex Rampell: (10:51)
And if you think about where I'm going with this metaphor, it's all right. Uh, we're going to build a software company, a FinTech company that sells software to banks, but banks suck because if you want to go transfer money from, I don't know, dollars and send it to the UK, you have to go to the bank of America branch and wait in line for two hours and then fill out all these forms. And then they screw it up and they get like a decimal place wrong. Then you have to go back and do it again. I mean, like, this is the kind of stuff that you have to deal with with the bank and just having software wouldn't make the entire experience better. What you've got to do. If you really believe in the software that you're building is you vertically integrate. You say I'm going to be my own customer.

Alex Rampell: (11:29)
I'm not going to, I'm not going to wait five years to sell bank of America on something that they don't want. And they don't really care because they have this like nice little oligopoly going, like I'm going to crush bank of America. So, you know, somebody like chime today. I really admire, we're not an investor. So this is a genuine admiration. Somebody like chime, like they built a lot of software and you know, what would they have done 10 or 15 or 20 years ago in one point, oh, well, they probably would have sold that software to banks and said, Hey, kind of like what digital insight does or what Jack Henry does. Like, you know, make software that banks buy. But again, Jack Henry is a very valuable company, but if you want to make the experience much better and say, Hey, you can get paid two days early, um, or no overdraft fees, um, or really take, take advantage of the cost advantages of the internet, right?

Alex Rampell: (12:16)
I mean like, what is COVID done? It's like, why the hell would you go to a bank branch? It was kind of comical to me like when the government is just kind of like flippantly shutting down X versus Y. And it's like, who knows? Like why is the wine store open? But the gym that actually makes you healthy as close. It's like who the hell knows it doesn't make any sense. But the thing that is a absolutely necessary thing that has to be open all the time is a bank. Really? This is the 21st century. What do you do in a bank? Like, do you need to try on a mortgage? Like, it makes sense to buy clothes, maybe offline, but even ask moving online. So I just think the bank branch is an anachronism. All of these banks are really tied into this. Very, like I w I wouldn't even call it 20th century.

Alex Rampell: (12:53)
It's like 18th century notion of it's like physical presence is what gives you the right to go offer financial services to your local community. Like, yeah, that made sense in the 18 hundreds where you stored your gold in a safe, and then the bank guarded it with like guys with guns. That's not where the world is today. I mean, cash is going away. There's really no reason to go to a bank. Branch and banks are really clinging onto this old fashioned technology. And then there are other areas of financial services, like take insurance. Like, do you really want to get sold insurance by an agent who like, wants to talk to you on the phone if you're 30 years old? Like, no. Um, and this is one of the jokes that I make, which is if you're under 30, do you know what the least used app on your phone is?

Alex Rampell: (13:34)
What's called the phone app, right? It's like the one where you actually talk to people. So there really is a generational divide, which is one of the other reasons why you have this massive, uh, once in a generation opportunity, which is, you know, I would say if you're under the age of 30 or 40, people just want to buy things in a different way. They don't want to talk to a salesperson. They just want to point click purchase. And then on top of that, you have the geographical opportunity, which is, you know, take Nigeria 200 million plus people, almost all of them now have smartphones. Like a smartphone is 40 bucks, uh, that is now a bank. So a lot of people that were skipped over for getting offered financial services, whether it's investments or interest bearing accounts, or just digital money. So, you know, if you live in a country with a massively inflationary currency and you want to go swap it to dollars, wouldn't it be great.

Alex Rampell: (14:20)
If you could do that online, you don't have to go to a branch. You don't have to go like, wait in line. You don't have to get robbed while you do that. Like, these are all things that technology is moving forward. So, I mean, I think there are trillions of dollars of market cap in what I would actually more broadly define as a fire it's financial services, insurance and real estate. Like all of those different industries are going to be upended by the internet. They haven't been historically, but, uh, the, the, the Internet's coming for you would be my message for most, most, uh, bank and finance executives. W w

Jason Zins: (14:49)
W we certainly agree that, um, you know, you've, you've absolutely seen a post pandemic, uh, really a, a massive decline in people going into brick and mortar banks moving to manage their finances. Online. Chime is a great example. W w we happen to be an investor in chime. We're very excited to see where that company goes. It almost seems like chime. And the other big fintechs are finally starting to sort of bully some of the big banks and the incumbents into submission. I think just this week, a few of the, um, the bigger, uh, banks announced that there'll be stopping overdraft or account balance fees. So, um, perhaps you're starting to see that continue. Uh, and that's a concept I want to come back to in a moment, as far as how, uh, the banks are responding, but, um, to be blunt, do you, do you think FinTech is going to do to the big banks and financial services, what Amazon did to retail over the years?

Alex Rampell: (15:45)
Well, it's complicated. So, I mean, I, I don't want to write off the banks all together. And a lot of what they have going for them is, I mean, they have higher operating costs in terms of the bank branches. They have 5,000 people working in compliance when they could just write their own software, if they had competent software engineers, and then, you know, do it at a fraction of the cost. But what is, what does JP Morgan have as an example? Well, JP Morgan has over a trillion dollars of retail deposits and how can any FinTech company that is not a charter bank have a lower cost of capital than JP Morgan? Like they can't. So when you look at things like lending, it's like, okay, well, the cost of maybe originating alone or servicing a loan, all of these things will be cheaper for the financial services upstarts, the FinTech guys, but the cost of capital is just massively, massively lower for the entrenched incumbents.

Alex Rampell: (16:40)
Um, and part of that is just a regulatory thing, which is like, why not make it very, very easy for every one of these fintechs to become a bank? Um, because like you, you can't be an eBay for money, if you will. Uh, if you aren't actually able to take deposits and use those deposits to fund your loans, to do that, you have to be a bank. So that's the big advantage that the banks have, the big disadvantage that the banks have is that they've got bad technology. They have entrenched P and L lines. Like you mentioned the overdraft thing, like I think bank of America made over a billion dollars last year on overdraft fees. So they've got a guy or gal or somebody who's in charge of the P and L for overdraft. And it's like, right now, it's a P like, why do you want to turn that into an L?

Alex Rampell: (17:24)
Um, and you take, you take away enough of these things that are right now, very big profit centers. Like you've gotten a business and you have a cost structure. That's very bloated as well. So, I mean, if you're running bank of America or Citi or chase or any of these, you should probably figure out a way within two years to completely exit branches, go digital, only offer digital service. And if you can do that very, very quickly, and you're making most of your money on net margin, and then you as a bank, I mean, this is where Walmart beats Amazon, right? Because the challenge with Amazon versus Walmart is kind of two-fold one is that there's no way in hell Walmart's ever going to advance an Amazon web services. So like the optionality on product expansion for Walmart is basically nil. Um, and they have this physical footprint, but the physical footprint for Walmart I would argue is actually valuable.

Alex Rampell: (18:12)
Like they don't, they're not renting like class, a real estate at a hundred bucks, a square foot a year. Like they find these giant warehouses. They actually double as fulfillment centers. Like there's a lot of advantage there, but there's not like this. There's not an analog of this cost of capital piece. That is the key input to net interest margin, which is where banks make a disproportionate amount of their money. So I don't think it's as black or white as that, but in terms of where Americans might have their primary financial relationship, like where does the direct deposit of payroll go? There's a higher and higher chance that that's going to go to a FinTech player. And then there's also this chance that what you think of as a FinTech player is completely different. And what I mean by that is more in this kind of embedded finance sense.

Alex Rampell: (18:58)
So if I'm Lyft or Uber, you know what I should do to retain all of my drivers that currently have left me, and that's why it's hard to get a Lyft or an Uber right now, I should just give them free bank accounts. And that doesn't mean that I'm opening the bank of Uber or the bank of Lyft. I should find a way to white label and account, um, deposit money in there in real time, give them a card because that's one of the ways that I retain them as a user. I get a percentage of all of their staff. That's what interchanges, that's how chime makes all of their money. So you'll probably see more of these things, but then again, when it comes back to the most profitable Motherlode of, of, of banking of, you know, net interest margin, when, when times are good, um, it's, it's harder to see a clear path for how the fintechs really dominate that space without becoming a licensed banks.

Jason Zins: (19:44)
No, absolutely. So it'll be a little more nuanced and it'll be interesting to see which fintechs go, which route as far as you know, lending certainly is, is an interesting one where balance sheet is helpful. I think you also identified some of the clear issues with the bank business models, which I'm sure inside of these big banks they're well aware of as well, right? The cost structure that's eaten up by their real estate footprint, uh, the P and L it's driven by charging customers fees, which is a big reason why they're going to fintechs like chime. Um, do you think that there's enough Goodwill, uh, within, or, or willpower, I should say, within the banks to innovate and get past, uh, the inertia in their business structure, the bureaucracy and the politics that goes on inside these banks? Or is it just going to be a slow bleed and, and, you know, certainly some, some may innovate, right, like impossible to ever bet against Jamie diamond at JP Morgan, certainly visa, which, uh, which you've worked at is, um, has been innovating acquisitions and new products. Um, but broadly, do you think, do you think that the big banks, the incumbents are going to be able to innovate in the ways that they need to?

Alex Rampell: (20:58)
Yeah. I mean, there's a saying that I use a lot, um, which is the battle between every startup and incumbent is whether the startup gets distribution before the incumbent gets innovation. And I think it's part it's true for everything, but it's particularly true here because to go get access to millions and millions of, um, uh, customers like to get them to switch from a direct deposit at bank of America, to this unknown company called chime, that loses money, like, you know, w would my grandmother who, you know, throughout the great depression, which she put money at a bank, like, like chime or a non-bank light shine, like probably not. So to win people over takes time. Like, that's the thing that people kind of underestimate. I mean, like which, which I have a lot of exp, like you asked about the entrepreneur experience, it's like, wow, like it's really hard to acquire customers on the internet.

Alex Rampell: (21:47)
It's not hard to give away money on the internet to go get when over Casper is get them to deposit their life savings. But I feel like that kind of stuff is very, very hard. Um, so, and it's not like this, um, this, this is not like, you know, blockbuster, that's going to get run out of business by Netflix. It's like JPM has many business lines. One of which is retail. Like if, if retail suffers and loses 5% account volume, but really only like the tiny accounts that kind of complain about overdraft fees and everything else, it's like, it's kind of a non-issue for them. I mean, it's an issue, but it's not, it's not existential. Whereas when people start buying an Amazon, like that is an existential problem for circuit city or comp USA, or any one of the, you know, a hundred tombstones that now lie on the intranet graveyard or the kill by the intranet graveyard.

Alex Rampell: (22:34)
So I, I think it really, um, I think it's a little bit more nuanced than that. Um, and you know, the, the big is to their credit. They are moving more towards this, uh, digital first embrace. But I, I gave a talk at a big bank maybe three years ago, and I had this whole thing where it's like, I start off with this sat analogy, which is, you know, Walmart is to Amazon as, you know, XYZ bank that I was talking about is to what, and they're like, can you take that out? Because we have a question here, charge of expanding our branch network. And I was like, no, I'm not going to take it out because I don't think you should be expanding your branch network. It doesn't make any sense. And they're like, no, but like, we actually, we saw that in places where we have more branches, we get more accounts and it's like, you know, there there's this thing called correlation.

Alex Rampell: (23:17)
And there's this thing called causation. I would make sure there was a causal relationship between the two before you, uh, before you go all in on this like correlation thing. So I, I think they'll, they'll get with the program eventually. Again, it's not, it's not an existential threat, but I could see like this and actually like in, in their defense as well, like they have to serve not two masters, but kind of two different age groups, if you will, which is, there are people who are 75, who if they're like, Hey, if I have a problem with my bank account, I want to go into a branch and talk to a person. And they're like, Nope, Nope. You got to, Hey, by the way, who has all the money in America? It's not people that are 15, right? It's not people that are 20. So there is this generational thing where like an older bank actually has to serve two different demographic groups.

Alex Rampell: (24:00)
One of which is probably very, very comfortable going to bank branches. The other one is like, why the hell would I do that? So, and obviously if you're, if you're a new upstart, you're just like, you know, to hell with the people that are rich, that have, you know, millions of dollars in, or 75 and older, I'm just going to focus on people that I don't have to go build a physical presence for it. But you know, that, that had been said, I think they all have apps. That's kind of proof in and of itself. It's not like they haven't gotten with the program, but they haven't gone all in on that as a strategy. Whereas that is the all-in strategy for all the FinTech guys.

Jason Zins: (24:29)
And it seems like to, to pick up on a point you just mentioned, and in many, in many cases, the banks versus the fintechs are serving different demographics, different constituents. And it'll be interesting to see as, as that continues to play out and that expands, and then they really start to play on each other's turf. Um, how, uh, how, how, how they react, hopefully it's ultimately the consumer that, that will benefit from, from that competition. Um, I wanna shift gears a little bit and pick up on a concept that you mentioned in one of your comments a moment ago, this idea of embedded finance, um, which is an idea that you and your colleagues at Andreessen Horowitz has been talking about for, for a number of years, um, sort of this notion that, uh, all companies will be FinTech companies. Can you explain at a high level, uh, what, what that concept means? And, and you touched on an example already, but if you could sort of hammer that point home, because I do think it's a very important trend that we're seeing.

Alex Rampell: (25:29)
Sure. So I'll, I'll start with a little joke, which I like, which is, uh, there, there are two pigs in a barn and one of them says to the other one, like this place is great. Everything's free, the food's free, it's heated. And then the caption underneath the little cartoon says, if you're not the customer, you're the product being sold. We see that the pigs were about to become vacant. Um, and effectively, there are two ways of making money as a consumer company. You either sell a product or sell a transaction or sell a subscription to a consumer. So like Peloton, they're selling you a subscription. That's very, very clear, or you are selling the consumer to an advertiser. So Facebook they're, you're the product. Uh, and you are the customer of Facebook, but not really not financial, you're not paying anything you're being sold.

Alex Rampell: (26:12)
The impression that's being offered to you is being sold to an advertiser. And those are kind of like it's option a or option. Do you even ask people when they're pitching us? Like, how are you going to make money? Is it a transactional business model or an advertising business model? Well, now there's a third one, which is this embedded finance thing, which is like, if, if the, if you update that to pigs, a little cartoon, it'd be like, no, um, the, the barn is free. They just want us to use their co-branded credit card and deposit all of our payroll into their bank account. And, and, and so what's happening right now is that if you look at B2B as an example, like look at a company like mind, body, which basically does like, you know, CRM and booking services for spas and beauty salons and whatnot.

Alex Rampell: (26:53)
Um, they made money by selling software, but actually it's like, now they'll do credit card processing for you. Oh, wait, your spawn needs money in advance of getting paid by all of these consumers that have bookings next week. We'll give you a loan and that's embedded. And again, going back to the point that I made around, like this battle between, uh, distribute distribution versus innovation here, like the cool thing is if you build a software platform that already has all the distribution, so you're Uber, you already have all the drivers. Um, it's very easy for you. Now, there are tools like what AWS did for rolling out servers through tools like I'm on the board of a company called plaid. It makes it easy to read information from somebody's bank account, um, or there's a company called Marketa that allows anybody to issue a card.

Alex Rampell: (27:39)
So these are examples of embedded finance for any company can very, very easily offer financial services in a, in an integrated way, not lead generation, not saying, Hey, you want a loan click here. And it goes to some third-party website. It's like the loan is actually captive within the product. And you've seen the financial services companies do this first, like, you know, square has a very low margin credit card processing business. Um, but guess what? That gives them captive rights to that entire merchant base to do. What's called, um, you know, a merchant cash advance business and MCA business where they can say, okay, we have this thing called square capital. We're just going to take 5% off the top, not 2% or not 2.9%, but like it took, we're going to give you a loan right now. And then we're going to get the next week of credit card payments as they come in.

Alex Rampell: (28:27)
And that's how we're going to pay off the loan. We have better underwriting that way, but we're embedding this lending thing into our company, but that kind of makes sense for square. And we see kind of, I mean, square, it has got a banking charter there. They're getting an ILC, I should say. Um, but you know, what about companies like mind, body? Um, what about companies like toast, which is like square for restaurants or like there was a company that pitched us that does, um, it's like a operating system for body shops for your car. That's effectively going, how are they going to make money? They're going to make money, uh, via embedded finance, uh, where there's a big space in vertical software called dental practice management. You go to a dentist, they have a software product. It's not Excel. They store all the pictures of your teeth.

Alex Rampell: (29:08)
They they'd get reminded of like when to call you for an appointment. Again, they bill your insurance company, all of this as part of a, it's called a DPM dental practice management software products. Like it's kind of a small market, but actually it's not. Once you think about the embedded lending opportunities either to the patients or to the doctor, as you think about the VIG on credit card payments that you're going to get, like these are massive massive spaces. So the point is that almost every company, if they have a long lived relationship with a consumer or a business, has an ability to embed financial services monetization, um, in a way that they control. And that gets two opportunities. One is it's the infrastructure layer. Like that's why we bet on something like plaid or why, you know, Marketa might be interesting or a lot of these things that allow anybody to have this financial services line, um, or a line item to the revenue lineup. And then the other is kind of just changing the way you look at companies, which is like, oh, what is mind, body? That's a boring company. Why would whoever Vista, why would they buy that? Um, well it's because there's so many additional revenue opportunities. Once you, once you turbocharge them with financial services,

Jason Zins: (30:15)
Wouldn't have thought of, uh, such a big opportunity set in the dental space. But, uh, it reminds me that I do need to go to the dentist. So thank you. But the infrastructure companies that you mentioned like plaid and Marketa and square and Stripe are really the enablers of this embedded finance concept. Um, but ultimately it's up to the companies themselves to really implement that. And even to go so far as to base their business model around it. So w where are, where do you think we are in that evolution? Is this just a buzzword that's being talked about in VC circles or fintechs that are popping up around it? Where are we in, in, you know, corporate America, whether it's fortune 500, uh, to, to early stage startups?

Alex Rampell: (31:00)
Well, I think right now the charge is being led by companies that actually have a, well, number one, you have to have a close relationship with your client or customer. If it's something that you see once a year and you think, oh, that's going to be like, um, Zynga the game company, I'm going to get people to use my bank. It's like, that's, that's probably not the right relationship, but, you know, if, if you're a QuickBooks and you're like, wait a minute, like, why don't I just offer my own insurance? Like I already know, like how much money this small business makes. Like, how do I embed insurance in there? Like, that makes a ton of sense. Um, and this is a top priority for a lot of the companies that already have a financial relationship. They just never had the tools. It's like, okay, I know I want to launch a website, but there's no AWS, well, you know, I'm sure Intuit's had this idea for a long time, but now that the building blocks are available, they're able to actually do it.

Alex Rampell: (31:51)
So I would expect companies like them to do this much more quickly. I think for ones where it's like, you know, dental practice management, um, like there was a company called synchrony, uh, which is, it's one of the biggest players and the kind of installment payments place, a space. Um, and they have, they're one of the most profitable business lines is called care credit, where they do installment payments for elective medical procedures. Um, and dental would be considered one of those as well. So things that aren't covered by insurance. So, um, they have always been the, like, they, they they've relied on like just selling into doctor's offices for a very long time. And that's how they've gotten their distribution. But, you know, one of the dangerous to them as an example is that if you have the dental practice management software that says, Hey, wait a minute, we should do this.

Alex Rampell: (32:38)
Right. Um, they're not going to, they don't even have to do it themselves. They're not like, I don't think that, um, you know, Henry Schein, the dental supplies company and their software products is going to go figure out balance sheet lending, but they can take some, they can bid out that space, white label it, and then get a big chunk of the economics. I mean, it's kind of like what you've seen with Shopify as well. Like how does Shopify make money? Well, Shopify makes money by they've just got recurring. They, they have a recurring billing model for their hundreds of thousands of small merchants, but they also make money on payments that they offer. So I think kind of V1 is always going to be like, where there's a clear financial relationship V2 is where there's like almost a clear business relationship, like dental practice manager.

Alex Rampell: (33:18)
Like I help you run your business, mind, body, I help you run your business. Uh, service Titan is like an operating system for HVAC contractors. So like, it keeps track of your jobs where you're going next, but your billings are like all of this kind of stuff. You know, it's a multi-billion dollar company. It's still private. How can they make money? Well, they own this relationship. They run the HVAC contractors business. It's trivial for them to add lending and payments now that the tools are available. But the ones that are kind of further field is it's like, should apple offer a bank? Should Google offer a bank? It's like, ah, I don't know, like if I'm apple or Google and I'm printing, you know, tens of billions of dollars a year of net income, I'm not sure if I want to mess around with this like low margin thing called financial services, versus if I'm a SAS company with a couple hundred million dollars of ARR. Um, and it turns out that by getting two points of GM of my customer is GMV. I can double or triple that number. It's almost a no brainer.

Jason Zins: (34:14)
Big tech certainly seems to have enough of their own regulatory issues. I, I don't know that they want

Alex Rampell: (34:18)
To add on the only way that it could be worse. It's like, okay, I want to do my big tech thing and censor speech. And I want to be an oil company and I want to be a bank. That's the only way that you could potentially be run more of fell of government regulation. So I think that the big guys are going to tiptoe more slowly. They're going to be more of an enabler. So, you know, if you think about where the future goes in five or 10 years, will you still get solicitations to go sign up for a credit card in us postal mail? And I think absolutely not. Um, there's probably going to be an app store for financial products, and that's going to sit on your phone. So just like, there's the app store on my iPhone where I can go download whatever app I want.

Alex Rampell: (34:58)
Well, I have my apple wallet. Like that should be not just adding stuff to my apple wallet, but it's like, oh, I want to get a capital one card. I should be able to permission my contact information. Like, just like, you know, you go and install an app on your phone and it says, do we have access? Can we have access to your photos? Can we have access to your contacts? Your location is permission, right? And you as a consumer, get to choose the permissions that you give the app. And one set of data that you have is like your social, where you live your credit history, all of that, like, you know, my vision for the future is that, and this is where I think the big tech guys are gonna play a big, uh, disproportionate place, as opposed to like trying to own the account is you're going to go to the apple wallet or the Google wallet and say, I want to add a new card to my wallet.

Alex Rampell: (35:41)
And then it's going to say, do you, do you permission your social and everything else to capital one? And I'll say yes. And then, boom, uh, I'll get decisioned on the spot. I'll either get the capital one card or I won't, it gets provisioned to my wallet. There we go. And by the way, I can do the same thing with refinance. Um, you know, most of, uh, companies like lending club, what do they do? They just go refinance credit card debt. Why can't I just add an auto refinance partner in my apple wallet doesn't mean that apple is going to be in the refinance business. That's terrible idea. But what it does mean is that you're going to unbundle this idea of a product product is credit card, right? Pay for things from the rate that I'm paying on my revolving credit line, which is, you know, happens on the backend.

Alex Rampell: (36:23)
So, you know, capital one, can't stop me from paying off my entire 18% balance right away. Um, there are lots of people that are competing to get that business, and that will probably happen within these wallets as well. So I, I think that's probably the direction that big tech will go, which is they liked it. Like there's no better, there's no better, uh, area of the market to play in and being a platform. Um, and given that the way that you're going to pay for things, which is the ultimate daily active use product, it's, you know, it's a term that we often use a lot of venture capital. It's like, do you have a DAU product? And the only one that's really there in financial services is payments. I mean, maybe gawking at your stock market portfolio might be a daily active use product, but not really at the same level worldwide as paying for things.

Alex Rampell: (37:06)
Um, so, you know, controlling that payment instrument is going to be important. That's increasingly going to be the phone. COVID also accelerated that like acts like apple pay took off Google pay took off because, you know, places stopped accepting cash and people didn't want to pay with dirty credit cards anymore. So, boom, you've got that taking off and they are the ultimate platforms for a new generation of, of, um, of companies I think. And even for the incumbents, right? It's like, you know, how much money does capital one send, spend sending out postal mail to get people to go sign up? How much money did they spend on commercials from Samuel L. Jackson asking what's in your wallet? Like that's all going to get redirected, I think, to, to mobile and being top of wallet on the digital.

Jason Zins: (37:45)
So it, this is a good, a good shift into another topic. I want to touch on which, which you've started to discuss. Um, as far as the future of payments, digital wallets, I listened to a great podcast recently that you appeared on, uh, with Patrick O'Shaughnessy is the host of invest like the best, um, uh, a great FinTech, uh, and, and related podcasts. Um, perhaps just behind Saul talks, of course. Um, but you did a great breakdown on visa and the history of visa, which I found to be fascinating. Um, you started a company that was ultimately acquired by visa, and so you spent some time there. Um, so you certainly have some, some unique insight into the future of payments. And you started to allude, um, to where we're headed. How far away do you think we are too, to fully integrating payments and wallets onto our

Alex Rampell: (38:39)
IPhones? I think we're pretty close. Um, again, had it not been for COVID, um, we'd be doing this, not as a zoom, but probably in person and zoom kind of you'll still have in-person stuff, but zooms are taking over for a lot of otherwise, you know, far away meetings that would have to be done via planes and in-person. And I think the same thing can be said, as I mentioned for, uh, digital wallets where it's really accelerated adoption. Um, but there's still like go to a gas station. Most of them, you can't pay with apple pay. So there still is this, this lagging technology thing in the U S the irony is that the kind of more emerging the market, the more emerged it is in terms of this very, very topic, like, you know, China is an emerging market from a, nobody had credit cards there 30 years ago, perspective, like they've fully emerged. Like there's no such thing as cash anymore. It's like all of these QR code based payments. So I thought it was

Jason Zins: (39:39)
Bothered me, but by the way, we, we always seem to be behind Europe. You mentioned China. Why is it the us is always behind whether it's a QR code, even the credit card chip. Is it just like a C systems?

Alex Rampell: (39:52)
Well, I think it's like, if it ain't broke, don't fix it. So it's one of these things, like if you're running on cash and cash, cash, cash, cash cash, and like, nobody has cards, nobody has cards. And now it's like, everybody gets a smartphone, then it's like, oh, wow, like what's the best thing available. And we're competing with nothing. Like you go to the best available technology at the time. It's like, you know, there are no landlines in many countries because it's like, you know, many countries didn't have landlines for dozens, if not a hundred years. And then when this mobile technology kind of came available, then like everybody just got a smartphone or even before a smartphone, I just got a cell phone. So I think you have a little element of that here, which is a lot more people here have credit cards.

Alex Rampell: (40:34)
We're kind of over penetrated relative to, I don't know, like how many people in Nigeria have a credit card. Like almost nobody. How many people in Indonesia have a credit card? Almost nobody. Uh, it's very expensive to mail out plastic and to get merchants, to go buy these terminals and all these different things. Like, what's the cheapest way of getting this out there? Well, everybody has a phone let's just use QR. It's like your credits. Aren't fundamentally better. There's nothing better about them. If anything, they're a little bit slower. It's like I have to open up my phone and like, like the, the actual, like NFC chip is probably the fastest, like that's how apple pay works. Um, so I don't think we're necessarily behind. It's just like, we don't really have an incentive to like change because it's not that hard in this country.

Alex Rampell: (41:14)
I mean, even if you're at the lower end of the income bracket, like you can go into Walmart and buy a prepaid visa card. It's not that hard. So I think that's the main reason why, but, um, but kind of looking at to, to your question of like, where things go, like, I mean, I think it's inevitable. Like there are some questions that are, if questions, there's some questions that are questions, and this is just a, when one, like, you know, will people be carrying around a dead cow wallet, which is what I call my, my actual leather wallet that has like cash in it and credit cards and whatnot in 10 years, it's like, no, will that be eight years or five? Like, I don't know. I can't tell you exactly how many, but there's no question that all this stuff goes in your phone.

Alex Rampell: (41:51)
It just makes a lot more sense. Um, it's going to, actually, I was joking with a colleague of mine, like, you know, what happens to like stick ups in robberies? Like, you know, what, what do I steal from you if all you have is your phone, right? And the phone will only unlock with like your face or your fingerprint and you have no cash, like, like what's the point of robbing people anymore. Like maybe criminals, we will have to go to like, you know, night school and study computer science and figure out how to blackmail people that way, as opposed to like, you know, sticking them up with a gun in San Francisco. So

Jason Zins: (42:20)
That's an interesting concept. I hadn't, I hadn't thought of, of, you know, mobile banking, digital wallets as a potential, uh, uh, remedy for crime,

Alex Rampell: (42:30)
But that's Korean unemployment is the way that it's gonna, it's gonna unemploy all the Roberts that it's, it's really unfortunate. So, um, for, for them not for me. So I, you know, I, I, I feel very, very confident that it's going to happen and it's already on its way to happening. The question is really more interesting for me is like, what then changes in the world when you've built that, like, who gets disrupted. And that's why I mentioned things like net interest margin, where like, if you could, uh, if you could remove all friction, like a lot of banks just rely on friction. Like, why do I have an account with like crappy bank of America? Um, this is actually true for years. It's like, so I remember this, um, I wrote a check for somebody whose bar mitzvah. They hadn't deposited like three months later.

Alex Rampell: (43:08)
I wanted to close my bank of America account. I'm not going to do that in like, have my check bounce. Like what kind of, what kind of smoke would do that? So I leave this account over there and then I've got my direct deposit from my employer going in there. And then my gym membership is withdrawing from there. So it's like kind of, there's too much friction for me to switch. But think about what happened with cell phones, where I used to have sprint. And now I've had at and T now for 20 years, maybe not 20 years, but I don't know if you remember this, but the, uh, the U S government said there has to be number portability between the cell phone carriers. So if you want to switch from sprint to Verizon, uh, sprint has to let you do that. They can't just hold on to your number.

Alex Rampell: (43:46)
Whereas before I don't know what it was probably 2004, 2005, you couldn't do that. You were locked in with the carrier and it actually incented, uh, from the carriers perspective, uh, more, more R and D and more cap ex like Verizon, like had the best network and they weren't really being rewarded for it because like sprint sprint had the worst network and the sprint customers didn't want to leave because it's like, they'd have to lose their number. When that changed. You had a massive, massive migration. Like I was a sprint customer that got the hell out of sprint. Um, and this actually did happen, like sprint really suffered because they under invested for a long time, the ones that actually over-invested and had like competent infrastructure you're, you're called and you get dropped every 10 seconds. They got an influx of customers. Like you could argue the same thing will happen.

Alex Rampell: (44:31)
Banks enabled by the mobile wallet increasing, or rather decreasing the friction from moving from one count, from one account to another. Because if you were to ask people, it's like, Hey, why don't you go switch your bank account? Like, everybody's got their version of the apartments for check and the gym payment and the Netflix membership and the blah, blah, it's just like too complicated. Um, and if you could just like wave a wand and say, oh, well, my phone will keep track of all of that. And we'll just reroute it or like, oh, I'll keep my bank of America account open. And then if there's a debit there just push the $200 in there for the bar mitzvah gift, like great, like solves that problem removes friction. And whenever you remove friction, it makes the customer experience so much better. Like it actually increases competition. And by increasing competition, that's the way that customers actually pay less and get more. And

Jason Zins: (45:19)
It seems like some of these infrastructure fintechs like a plat, um, and others are, are removing frictions through things like a direct deposit switch plan recently rolled out in beta. Um, it sounds like that innovation and the benefits to consumers are coming from the fintechs and not from the regulatory side. Where do you think regulation play plays in here, or you mentioned, uh, as it relates to telecom, um, how much is regulation hindering this innovation and what can the, the, the regulators and, and, and government do better, um, to enhance the experience for consumers?

Alex Rampell: (46:00)
Well, I think this is a very easy one. I mean, um, I think almost all regulation gets it backwards, which is the only companies that can afford the 500 lawyers that can ensure compliance with regulatory X, Y, and Z, especially when Gramm leach, Bliley is 400 pages long. And Dodd-Frank is like, you can only afford that if you're rich and you're rich, if you're an incumbent. So these regulations always help the incumbents always. And what you should want, if you're a regulator is to say, okay, how am I going to screw those fat cats at JP Morgan and Citi and chase? Well, let me just get 10,000 companies out there that are competing with them now, how do I do that? We'll make it easier for them to get a bank charter or don't threaten them with jail time. If they break some law that was passed in 1820, like, you know, create a sandbox where it actually encourages, you know, I hate to use this term.

Alex Rampell: (46:50)
Innovation is what the hell does that mean? I'm in competition. It's like, we want a thousand companies out there that are like bank of America, but aren't charging overdraft fees. And if there are a thousand that are out there, they're like bank of America that can get launched in almost no capital, um, that are FTC insured and, you know, make sure that they don't blow people's money on like Lambos and whatnot. But like, that's the kind of regulation that's good. That kind of regulation that's bad is, you know, here are the 4,000 pages of documents that you have to fill out to become a bank and show your, you know, five-year projections and all this kind of stuff that just, you know, what you're doing is you're ensuring that no new banks will get created. And if you want the banks to be more, pro-consumer like, that's going to happen naturally with competition.

Alex Rampell: (47:35)
And that's what regulation should be focused on, but everything that's done, I mean, it drives me crazy because like, if you look at GDPR in Europe, it's the most idiotic thing ever. It's like, who can afford like, okay, we hate Facebook and we hate Google. I got it. Europeans make sense to me. But like what's, you're doing is you're ensuring that there will never be competition to them because of this whole, like, you know, Facebook can afford a thousand lawyers and like startup that can go compete with them. Now that they need 5,000 lawyers to compete as well. Like there will be no such startup, like I'm not going to invest in a company in a company if they show up with their business plan and it's okay. Our first plan is to build no product, but hire 500 attorneys. Like no, like nobody's going to do that.

Alex Rampell: (48:14)
That's insane. So I think the regulation here is just very, very clear, which is like, just eliminate it as much as possible for the upstarts. Um, that's unfair for the big banks and actually like that, that has largely happened with credit cards by accident. So there's part of Dodd-Frank called the Durbin amendment, which basically said, uh, interchange for debit cards at, uh, one rate. Like the federal reserve actually gets to set it if you're a big bank. So if you have over $10 billion of assets, it's five basis points plus like 21 or 22 cents. So that's very, very little like, you know, a hundred dollars transaction and whatever bank of America is making like 20, 20 something cents, right? Like it's very, very little money. Uh, if you're a startup and you're having your card issued from a bank, like sudden bank or Celtic bank that has under $10 billion of assets, but guess what?

Alex Rampell: (49:06)
You're exempt from that. And you're making maybe 1.6%. So like the reason why chime and others, like everybody that's in FinTech land, that's issued a card, a debit card to people that's making like hundreds of millions of dollars a year on this stuff. It's all because of this like random thing called the Durbin amendment in Dodd-Frank that was never intended for this. It was meant to like, you know, um, it was because the merchants hated paying these high credit card interchange fees. It didn't change credit card interchange fees. They only changed debit card interchange fees, but it ended up helping startups, like without the Durbin amendment, it's like this random stroke of luck that enabled all of these companies like chime to, to thrive, which is great. It's like, that's another example of like how regulation helps. Although if you look at that from the merchant perspective, merchants are like, what the hell? I don't want to pay 1.6% when money's just moving from this account to another account. So it's more complicated, but you know, regulation can have a benefit for the ecosystem. But I think by far the main form of regulation that that will help this ecosystem is getting rid of, is getting rid of as much of it as possible.

Jason Zins: (50:04)
I, uh, I, I certainly agree. I think it's an interesting example with the Durbin Durbin amendment and, and shine, um, sort of the unintended consequences of regulation, but in this case, uh, arguably, uh, a positive one at least for, uh, for consumers. So we've, uh, we've run out of time. Alex. I appreciate you spending some time with us today. It's been an interesting conversation. Hopefully you'll come back and that and see us again, whether it's via zoom or at our, our, uh, our salt conference, uh, in New York in September. Um, so with that, I'll turn it back over to John and thank you

John Darcie: (50:39)
Everybody for tuning into today's salt. Talk with Alex Ram, Pell of Andreessen Horowitz. Just a reminder, if you missed any part of this talk or any of our previous salt talks, you can access them all on demand on our website@sault.org backslash talks or on our YouTube channel, which we would love for you to subscribe to it's called salt tube. Uh, we're also on social media. Twitter is where we're most active at salt conference, but we're also on LinkedIn, Instagram and Facebook as well. And please spread the word about these salt talks. We at SkyBridge are enthusiastic investors in the FinTech space and Alex, more than anyone is an expert on everything that's taking place, the massive growth that's taking place in the FinTech sector. So if he knows somebody that's interested in the space or wants to learn more about it, definitely share this talk from behalf of Jason, the entire salt team. This is John Darcie signing off from salt talks for today. We hope to see you back here again soon.

Michael Greve: Forever Healthy | SALT Talks #221

“The rejuvenation biotech industry and shifting paradigm in medicine, keeping healthy people healthy, is going to be the biggest industry this planet has ever seen.”

As one of Germany’s most successful early Internet entrepreneurs, Michael Greve explains his pivot to investing in biotech and rejuvenation therapy start-ups. Greve notes that there are already significant advances in science and medicine, but a fragmented environment prevents efficient collaboration. For too long, Greve says anti-aging advancements have not delivered sufficient tangible results and he hopes to use his venture capital and network to help fulfill that potential. Greve ultimately believes the biotech industry, centered around keeping people healthier for longer, will be the biggest industry on the planet.

LISTEN AND SUBSCRIBE

Spotify | Amazon | Google | Stitcher

SPEAKER

Michael Greve

Founder

Forever Healthy Foundation

FULL BIO

MODERATOR

Anthony Scaramucci

Founder & Managing Partner

SkyBridge

FULL BIO

TIMESTAMPS

0:00 - Intro and background

8:03 - Transition from entrepreneur to venture capitalist

10:23 - Greve’s personal health journey

14:50 - Forever Healthy’s mission around biotech, rejuvenation therapies and anti-aging

21:20 - Approach to aging and disease

32:02 - VC in biotech and market potential

36:00 - Biotech start-ups vs. traditional tech

40:30 - Latest $365 million biotech investment

43:53 - Management approach and attracting more investorsEPISODE TRANSCRIPT

John Darcie: (00:07)
Hello everyone. And welcome back to salt talks. My name is John Darcie. I'm the managing director of salt, which is a global thought leadership forum and networking platform at the intersection of finance technology and public policy. Saul talks are a digital interview series with leading investors, creators, and thinkers. And our goal on these salt talks the same as our goal at our salt conferences, which we're excited to resume in September of 2021 here in our home of New York city and our goal at those conferences and on these salt talks is to provide a window into the mind of subject matter experts, as well as provide a platform for what we think are big ideas that are shaping the future. And we're very excited today to welcome Michael brief to salt talks. Uh, Michael was one of the most successful founders of the German speaking internet industry together with his brother Mathias.

John Darcie: (00:57)
He created numerous ventures, including last minute dot D E a, which he turned into the largest last minute travel site in Germany. Most notably the brothers founded web dot D E and after a successful IPO, grew it into one of the country's most successful and largest internet portals and online media businesses. After the successful sale of his companies, Michael created the seed stage venture capital investment from Kazu, uh, that came to fund and mentor some of Germany's most promising tech startups, including babble Staffbase and Mamboo hosting taste talk is Dina Radenkovic. Who's a partner at the salt fund, which is an early stage venture fund and left investing in pro programmable biology, primarily life sciences, healthcare industry. Uh, now I'll turn it over to Dena for the interview.

Dina Radenkovic: (01:46)
Thank you, John. And thank you, Michael. I'm really delighted to share the stage with you today. Thank you for finding the time and calling us from and Germany. So perhaps we could start, obviously you have an incredibly interesting story and we'd like to find out more about it, but when John was selling your bio to kind of start with you are one of the most successful Durman tech entrepreneurs. Could you start by telling us a bit more about your early career? Like how did you become the most successful German tech entrepreneur, your brother Martinez? How did it become to develop last minute that the, that you sold last minute? And then, um, how did that evolve to create web D E

Michael Greve: (02:28)
Oh, yeah. That's a, um, uh, yeah, and interesting story there because, um, uh, actually I was my, my brother and I, we were always very, very interested in technology and, and I mean, we've lived through all the psych cycles of the tech world, basically owning one of the first apple, two computers in Germany, uh, teaching ourselves programming. Um, we both dropped out of university because we thought it's not that interesting to just learn stuff that numerous people already did before and started own software business and went to different stages. And, um, did software projects, uh, did software development for the Macintosh and, uh, and a lot of stuff. And then, um, at some point in time, this internet thing started and, um, and, uh, I was so excited about that. And, uh, that was really, really the super early days. So we had one internet happened, Germany that was in at the end, um, university of Tulsa, that was our hometown.

Michael Greve: (03:28)
And, um, I bought myself and, and, and a PC for, for, uh, uh, 86, uh, computer. And you had two very SCO Unix, or very, very complicated everything and your ISD and dial up networking. And, but I got ourselves an internet connection and the, one of the hops in Germany was university in Casa. So we made a deal with them that we could dive into the whole thing. And then we played a bit around with that. And then we saw the potential of the technology and we decided, okay, let's become an internet company. And we stopped all of our other business and said, okay, now we're going to be an internet company. And, uh, we were super excited about that thing. And, um, we went to, to seep it to the big computer fair by then. And we were on a small, um, uh, with a small booth there on the, on a shared booth with a big sign or company was called Synetic.

Michael Greve: (04:22)
And we said food service, internet, and, um, advertise that. And, uh, we went all over the show and talked to all the big companies and there were, sorry, everybody says, oh, internet, we don't need that thing. Or we have an it department, and yes, we have a server, uh, for, uh, Microsoft stuff, but we don't need this internet thing. So actually nobody wanted to have us. And, uh, the, the right next to us, there was not a small booth with the Greek guy and Manuel, and he wanted to sell, travel, uh, by using IST and to transfer the last minute bookings over IST and into PCs that were set up at, um, at the, uh, at, at the travel agent at travel agencies. And nobody wanted to have them either. So after the show, we said, Hey, we have to do something together. And then we said, you want to do this travel thing, but I stand is not the way to go.

Michael Greve: (05:14)
Let's do internet. And this is how we started last minute, Dottie. And, uh, basically as, as a, as a travel site and that by then people were still using modems to dial up to the internet. That was really, really early. And, um, we also started an agency business. We said, okay, we're going to develop a website and to all that stuff. And, um, and the question that always comes out, came up with the people I see, but yeah, this internet thing, but how would people find us? And we told everybody four months, yeah, there's this company, you know, Yahoo, they have this directory and somebody is going to do something similar in Germany. And, um, but actually nobody didn't. And then after a few months, like three, four months, I said, okay, we have to change that. And I wrote a little to put, to, to create a web directory. And then we just called in all our friends. And then, uh, over a weekend, we completely surfed the German internet. And by then there were 2000 websites in Germany and we put these 2000 websites in a directory and put that online under the name of web 30. And this is how it started from there. It just grew

Dina Radenkovic: (06:20)
Fascinating. Well, all the factors for successful second for nurse school, dropout learning, all being a bit discouraged by your idea initially, um, all the factors seem to be there. And, um, how was it working with your brother?

Michael Greve: (06:34)
Uh, well, actually we did, it was very good. So I mean, the, somebody I fully trust and we build, um, a web 30 to get the last minute to eat together. And, but when we sold last minute, but the, uh, somehow, or, um, entrepreneurial ways, part that he stayed a bit with the company when we sold it, uh, because we sold it to our biggest competitor and formed the largest internet business in Germany by doing so to compete better with Google and, and, uh, the American competition. And, um, so now I'm doing, we, we still have a shared office space and, but he's doing his things and I'm doing my thing.

Dina Radenkovic: (07:13)
Is there a lot of competition

Michael Greve: (07:15)
Between us? No, no, not at all. It's just the, uh, it's the, the, on the contrary we ate, well, we help each other a lot and we talk about our ideas and share. So, uh, I just had lunch with them, so it's really very, I'm really happy to have a very good connection to him.

Dina Radenkovic: (07:31)
Well, that's wonderful. I, it seems that you've had the great co-founder. And how has it, obviously, after, um, having and selling your company, so you went into venture capital and you had a very successful venture cap is a three-year as well by investing in some of the most promising Germany's tech startups, like Bob bell, fact-based bamboo many others with hizo technology. So how was it for you that journey from an entrepreneur to a venture capitalist and what are kind of the key take home messages that you would say to founder turns a VCs?

Michael Greve: (08:04)
It actually, it was just taking it to the next level and other time, because when we built web 30, I mean, we started out as a three, four people team. And in the end we have, uh, we had 700 employees and there was always a why we, we sold it because it was simply no fun anymore to run such a big company, because in the end, we really love to work with technology and drive things forward. And, uh, if you start growing your company and you're the, you're the CEO, I was the CTO. So you basically have your, all your product managers already that you're, and you have to coach them and make, make them successful. And, uh, once we sold web 30 is just taking it to another level because we, we don't see ourselves like just as financing people, but we really helped them to be successful.

Michael Greve: (08:50)
So this is our key, uh, approaches. We see ourselves as part of the founding team, we coach them, we mentor them. We really help them to build the equity story. And this is what I also, uh, enjoy most it's for me, it's not about, it was never about the money, but about the story that we could build, the success that we could create. And of course in the end, it really pays off. If you create something with a great story, that's very successful and with a lot of passion. So, and, uh, yeah, that's what we did. And then in venture capital, I mean, it's, it's a bit unusual in Germany in, in, in Silicon valley, it's the normal way to go. So once you're a super success, when you have all that experience, also all the growing pains, you know, if you grow from three to 700, um, there are a lot of, there's a lot of pain involved in doing that, and you have to learn a lot of things the hard way. And, um, and I had great, I had great coaches when doing that, um, that really helped us along. And we just wanted to pass that on. Uh, and, and to be helpful in that regards to our startups.

Dina Radenkovic: (09:55)
Well, it certainly turned out to be extremely fruitful. Um, and it's interesting to hear about your very hands-on approach, but investing, turning a bit more down the, the healthcare routes, you mentioned that you had the very unhealthy lifestyle of building your tech companies, as you can tell us a bit more about that. And do you really think that we need to have a compromise between healthy lifestyle while we're building and, and working hard? And w what's your view on that right now?

Michael Greve: (10:24)
Okay. So yeah, I had the super unhealthy lifestyle. It was like the epic tome of a hacker. You, you really could, if you would do this in a movie, you everybody would say, oh, really? Yeah. Uh, that can't be true, but it was true. So I was 20 kilograms, overweight, no sports. I was smoking three packs of cigarettes a day. I had two red bulls for breakfast. Uh, I had a bottle of red wine in the evening to calm down coffee all day. Uh, so smoking, smoking, smoke and meetings all day, and, uh, had a lot of fun working seven days a week, like 16 hours or so. And, uh, of course that was not super healthy. And at some point, uh, particularly after we sold web Dotty and bender the venture capital, I said, okay, this has to change. And, uh, and, uh, because I want to stay healthy.

Michael Greve: (11:11)
This is, uh, I say, okay, I can't go on like this. I didn't have haven't had any issues, but it became apparent that if I couldn't go on like this and to answer your second question, um, no, I don't think you have to compromise nowadays. I mean, 20 years ago that wasn't a wholly totally different story, um, to feed yourself, uh, to have a healthy diet or so that was something that was really uncommon by then. Um, nowadays, I mean, you have organic food everywhere. You can have paleo restaurants and you're in the cities. And, um, so it's, it's much easier from the environment to, to have a healthy lifestyle, but still it's a challenge because if you're really passionate and working on your thing, um, to find the time to exercise, to meditate, to sleep and to do all these things, it's challenged. Yeah.

Dina Radenkovic: (12:00)
Fascinating. No, I mean, for sure, and a lot of young people would say that they have to optimize for performance and that it's fairly easy to focus on health and lifestyle and wellness. Once people have a lot more time and resources on their hands, but obviously being a medical doctor by background, knowing that heart disease and atherosclerosis starts in adolescence, I'm very keen to kind of support this new wave of, uh, found well founded companies that have wellness, uh, at its core. And I think you, you totally explained it well that it's, we have no higher awareness. It's a bit more, it's a bit easier to do that. Right. So how has your lifestyle changed right now? You mentioned a bit of meditation. I don't know. You mentioned you had lunch. I didn't know if you had time restricted feeding. Was it later in the day, tell us a bit more about your longevity practices.

Michael Greve: (12:52)
Uh, generally I, I have a, uh, a very well organized schedule around that. So I, uh, I have my morning rituals. I, uh, I meditate, I do a yoga or Pilatus in the morning. Um, I do my stretching exercises. I do a gratitude journaling. I glued to affirmation. So all the psychology goes with that as well. Uh, I get my eight hours of sleep. I have a very good sleep hygiene and all these things. And then yes, I have a very clean diet, um, as well. So, uh, I, uh, look out for that, uh, as well. Yeah.

Dina Radenkovic: (13:31)
Okay. Well, you're definitely practicing what you preach and when you launch wherever healthy, I mean, forever healthy as an organization that does many things. So, um, it's a quite ambitious project. You will fund research at numerous incidents across the world. You do a lot of science education. So you run a conference and undoing aging that has now been moved for the spring of 2022. And you also, what I found really interesting is that you kind of grade this collections of medical knowledge basis and a research practical resources, depending for general public, to help them learn about longevity medicine. Um, and, um, obviously you also create companies in space. So which part of the forever healthy are you most passionate about and most involved on the day-to-day basis? Right.

Michael Greve: (14:20)
Actually, I have to say all, because right now, nowadays I don't do anything anymore that I'm not passionate about. That's the, uh, well, it was always that way, but it's clearly, it's clearly that, uh, that, that it's still that way. So I wouldn't do anything that, that, that I'm not really passionate about. Um, yeah, if I have a healthy, uh, is a mission-driven thing, um, we are completely private financed by myself. Uh, uh, I don't call it. It's a humanitarian effort, basically. It's about to enable people to extend the healthy lifespans. And, um, in order to understand what we're doing is if we have to understand what's going on in the world right now, especially in the world of, of, of, of science and medicine. So there are two really amazing facts. One is there is already a lot of medical knowledge that could be that if we would use it, uh, we could use to it to extend a healthy lifespans, but unfortunately that knowledge is buried in research, spread out over websites, special communities expert.

Michael Greve: (15:20)
So it's really, really hard to access even for medical doctors. So it's not really, really easy to access. That's one thing. And the other thing is that the world, as we know it, where we were completely helpless about our aging process and, uh, age-related diseases has started the transition to a world where we have aging under full medical control. And, um, H related, uh, diseases are a thing of the past. Of course we are not there yet. Yeah. But the theoretical groundwork has been done. Uh, so we know actually we know what we have to do in order to counter aging and through to, um, get rid of H related diseases, uh, on the theoretical basis. The basic research has started, uh, more than a decade ago. Uh, we have the first research results, um, uh, and even the first startups are there that take these, these initial results and try to turn them into therapies for human use.

Michael Greve: (16:18)
Of course we are not there yet. Uh, and we don't know all of them, this process will take it's it's, it's, it's a decade long thing. We don't know, maybe it's 20, 30, or 40 years. And, um, uh, but these two things together, the medical knowledge, that's not, that's, that's not used in this beautiful, uh, development of, uh, actually being able to reach of an eight people taking together that should enable us to extend a healthy lifespan quite dramatically if we use that in combination. So, and that is what we want to do. We want to accelerate that process. And so what we do is one-to-one, and we use, we want to use all the knowledge that's there today to bring ourselves to the future. And on the other hand, we want to accelerate the future. So the bring the future faster to us. And, um, this is also how forever healthiest structured.

Michael Greve: (17:05)
So one part of ever health is completely focused on what can I do today in order to extend my healthy lifespan, to a lower, the probability to have an age-related diseases and such. And on the other hand is what can we do to accelerate this future? And for accelerating the future, we are running the undoing aging countries, friends. We are, um, uh, we are funding research, uh, on, uh, the routine causes of aging and what we can do about them together with the [inaudible] foundation. And we also create startups in, in, in that area. Um, because I think this, uh, the, the, to really accelerate the rejuvenation, um, the availability of rejuvenation therapies, um, it's not enough to talk about this. I mean, if you talk to about, about to people about rejuvenation, it's totally sounds like science fiction, you know, and, and, uh, it's and you can talk as much as you want people to say, oh, okay.

Michael Greve: (18:02)
Interesting. But actually there's no emotional connection to that for foremost. So, um, right from the get-go my, my, my feeling was we have to deliver proof, and this is what we've set out with our venture capital company, because I've turned my venture capital company three years ago, completely on rejuvenation biotech. And actually we want to deliver proof and we want to prove that rejuvenation, um, is not, um, uh, science fiction anymore. And we also want to prove that, uh, Richard venation is not only for the Richards for everybody. Um, we want to prove that it's uncomplicated and we also want to prove that's the best business model ever. And when I talk about rejuvenation, we have to understand this. That's not going to be one pill or one shot that you get. And if you're 17, next morning, you wake up. You're 30. It's not working that way, but you have to understand aging. Aging is such a multifaceted process that you probably need like 50 or 60. Nobody knows how many different root causes and, and aspects we have to text. But what we can do is we can attack one after the other and, uh, reverse the damage that the body does to itself, just because it's an operation and, uh, reversed that step-by-step in order to extend a healthy lifespan. And this is exactly what we're doing with our startups.

Dina Radenkovic: (19:22)
Fascinating. So many things that will fall up, um, from what you've said. And I certainly believe that particularly in the, in the post pandemic environment and in the current climate, people are more interested, um, to firstly, more health aware and were instead invested in healthcare and in biological aging, and often kind of the barriers to entry into this field were from capital and talent perspective is exactly what you've said, lack of education. So I think what you're doing both with the academic conference, but also it kind of creating content for the general public and kind of democratizing access to this high end longevity medicine, which is just good preventative medicine, essentially. Um, it is really fascinating, and that is another reason why we got really interested in your work. And you mentioned obviously that there'll be multiple technologies, um, that are gonna focus on, on aging.

Dina Radenkovic: (20:16)
And you've invested in about a dozen off longevity companies and they each target when one's kind of looks at your portfolio, they each target a different pathway. Um, but often they have the aging as an indication, and sometimes it's another chronic disease or that is associated with aging or cancer. Which of these pathways would you, would you highlight from your current portfolio companies? And then secondly, do you think that we have a fundamental problem that aging is not classified as an and hence sometimes it's companies, even when they have good technology and good pathway to make sense? Um, they're, they're very plausible biologically, but they con go for aging as indication. So they almost need to find a plan B like another disease to go far. So they ended up spanning in clinical trials, even though the science is there, they're just not having managed to find the right fit. And how do you see that as a challenge in your current portfolio companies, but also in other companies in this field up for jubilation biotech as you called it? Okay.

Michael Greve: (21:21)
Yeah, that's a very good question. So, um, to answer your last question first, so, um, uh, aging as an indication, uh, is complicated. So because personally, I don't think that aging is a disease because, um, uh, you would, you wouldn't look at a house and say, this house has ages. The house has a disease. So aging is more a metaphysics. It's like the world, you know, uh, things age it's, things that just happen. So, uh, there's deterioration of something is an operation if your cost and operation, um, it ages, but it is, there's not a single process that you can say, this is aging. And, uh, uh, so, and also we have really, we have an issue to measure aging, so there's not a good way to measure aging and to quantify aging. So, um, so in that respect, what we're going for is individual root causes, and there are some root causes that are directly linked to diseases.

Michael Greve: (22:14)
For example, um, uh, let me give you an example, what, I mean, uh, one of our portfolio companies underdog, um, we are trying to get, uh, rid of heart attacks and strokes. So, um, uh, in order to, uh, understand what this has to do with rejuvenation is all the things that we see as age related diseases in, for example, heart attack, stroke, and even cancer are age related diseases because the prevalence goes up exponentially with age. So there's, there's, uh, uh, virtually no child, uh, at the age of 10 that has a heart attack, you know, but, uh, when you age, the, the, the, the probability of course goes up and in the end, we have to see, um, if we all would, uh, become old enough, we will have all, all each individual age related disease. It's just that one person dies of a heart attack sooner, and the other person dies of cancer, but in the end, we all have this deterioration that leads to all the age related diseases.

Michael Greve: (23:12)
So, um, uh, I think there's, yes, it would be nice if we have aging as an indication, but I think there's lots of things that we can do with the current regulatory environment. And underdog is a very good example. Um, uh, um, in order to understand what we are doing, there is an in how it relates to each of the nations, you have to understand how does a heart attack or stroke comes to pass. So in our bloodstream, we have cholesterol, uh, in particular LDL cholesterol, and that cholesterol enters the arterial wall. And in the, the cholesterol, the LDL is oxidized, and it's a recognized by the body as a foreign entity, then to get rid of it, the body causes the immune system to help. So the immune systems enter the arterial wall as well, and it sees the oxidized cholesterol and the immune system just, uh, gobbles that up the macrophages, the immune cells, and in the immune cells, you have a special, uh, waste processing plant called the lysosome.

Michael Greve: (24:12)
And so the cholesterol is pro uh, transferred to the lysosomes. And then the lysosomes, usually we have enzymes to break, uh, uh, things that we don't want down, and then they can be processed and released to the body or be disposed of, unfortunately, we don't have enzymes to break down, um, oxidized cholesterol, and that case it's seven Quito cholesterol. So then the body is really smart. Uh, the immune substance license has a plan B, so it says, okay, if I cannot get, if I cannot break it down and just keep it because it's harmful. So over time, uh, the macrophage and the license on when the macrophage, uh, gobbles up more and more of that, uh, oxidized cholesterol, and it grows, and then the license on growth and it, the, the, the macro fat grows, and it, it turns into a so-called foam cells. And these foam cells, they make up the plug in the arterial wall that grows first to the outside.

Michael Greve: (25:06)
Then it grows to the inside of the artery. And at some point the pressure is too high. And the arterial wall ruptures, the plaque goes into the artery and the body sees a, um, an injury. And then the platelets comes, you have to fix that injury by sticking together, and then you get a blood clot that blood clot closes up the artery, and then you have your heart attack. So, um, so what we have done now, we have developed a compound. It's, it's a funny thing. It's a, it's a sugar it's private, the most healthy sugar that you can think of. It's a cyclodextrin. And, um, that compound is able, you it's able to, through the bloodstream, enter their chair was entered the macrophages, enter the license zone, grab the C seven Quito cholesterol and transport it out of the whole thing and makes it disposable by the body.

Michael Greve: (25:56)
And by this re uh, turn the macrophages back into normal immune cells, deflate the plaque and no plaque, no heart disease. So basically what we do is reread juvenate the, the, the, the, the, the arteries by removing the, the plaque and restoring the youthful state. And it's a very good example of how rejuvenation works. Uh, um, we just remove stuff or we fix, uh, stuff that breaks and that the body cannot, uh, repair on its own. And by doing so, um, we, uh, no plaque, no heart attacks, let's say 80 to 90% of heart attacks are due to, um, uh, plaque summer, uh, through the chair cramping, but most of them are to no due to plaque. So, um, so this is how the technology works, and it's already pretty successful with so already demonstrated that we can grab the cholesterol, the seven keto cholesterol from foam cells and deflate them.

Michael Greve: (26:49)
So that's pretty cool. So now for accessibility, imagine you turn this into a, um, into a pill that, uh, and that is our vision appeal that in average cost $10 a month to swallow. So, and, uh, and this is also the, the, the big difference from the old type of doing medicine way by the paradigm was making sick people healthy. Again, I think we are at, at the, at the verge of a transition position and the new rejuvenation technology will allow us to do this transition to a completely new paradigm in medicine, which is keeping healthy people healthy instead of fixing things when things are broken. And so what I envisioned is a therapy that everybody over 35 can take that, but just prevent the buildup of plaque. Um, it's purely a smaller daily. And if, if you have that pill, no, uh, no heart attack, no stroke, beautiful thing.

Michael Greve: (27:44)
And, uh, our vision is that we can produce this pill for an average, let's say $10 a month, um, uh, maybe a bit more expensive in the Western world. And therefore in developing countries, let's say in India, maybe it's only $1 a month, but in the end, you have to see that we are talking about instead of a disease population. We're talking about everybody over 35 40, which is 4 billion people on the planet. And that also shows you that, um, it's going to be a super good business to keep healthy people healthy, um, because take 4 billion people that spend an average $10 a month. That's $40 billion per month, $480 billion a year. Um, let's say times 10 or 20 for a decent company evaluation. So we are talking about a market capitalization for the companies taking just this aspect of aging between five and $10 trillion. Just for that, I don't say this is going to be one company, but that's the potential of the market. And that's also something that we want to prove that this is a beautiful business model and a beautiful thing on your humanitarian, uh, side as well.

Dina Radenkovic: (28:55)
Fascinating. Well, I mean, Michael, you have quite a few interesting companies in your portfolio, and you obviously can to target most of the nine hallmarks of aging and a few additional things. You have a company like chondrial, hell, do you have a company? And it takes on a telomere raises. You have a company looking at cancer, you have a company with messenger and a technology, which is obviously an extremely interesting with the success of messenger RNA vaccines for SARS Coby, too. Um, but what I find fascinating is that the different approach that you're taking. So, um, just kind of to set a bit of a background is that for, for a big group of people in this, uh, aging research community, one of the necessary parts that needs to happen is the development of surrogate of aging. So they almost say like, if you, I mean, going with the old one, that if you can't measure it, you can't improve it.

Dina Radenkovic: (29:47)
They would say that it nothing really major can happen in rejuvenation biotech until we can quantify aging. And then we can slow in real time clinical trials that were conducted over five to 10 years, that the disease that aging is actually reversed. So, um, it's, it seems that you are saying that actually, we don't need to wait for the surrogate markers. We can start reversing this processes for chronic conditions associated with aging right now. Um, and when these come, they can kind of we'll incorporate in, but they're not necessary. Um, and, uh, the other thing is how do, what people often say is like, can we really fit this longevity companies into the standard venture capital model, right? Like, can they be as profitable as, I mean, you were in software and now you're turned into rejuvenation. So I've venture capitalists say like, yes, it sounds very interesting, but I can't, it's never going to be the same.

Dina Radenkovic: (30:43)
The, you know, it, within the timeframe solve the life of a VC fund, won't be profitable. It's more risky. Um, I mean, we focus very much on programmable biology, um, because we kind of use technology, um, and, and computational to solve problems in biology. So we believe that that the angle there is that it has a shorter translation time because this and this spectrum, whereas you have some really, really strong rejuvenation biotech company. So kind of going back from being a VC with softer companies, hands-on investment, how do you, how does that change when you, when you go to rejuvenation biotech, and you mentioned one aspect of making it profitable is essentially in trying to everyone, every adult should take it. Maybe we'll have it for, for every person, um, to kind of even stop, stop aging. But what are the other aspects that you think can be incorporated to make this more attractive for descender venture capital industry? Not just, yes, it's a good cause. And it's advancing the field that your reverts. So second one, okay. There is a bigger market because everybody ages at a certain pace. And is there anything else in addition, we can make aging research, particularly more biotech, play more fit for the VC model, or on the other hand, we need to change the financing model in order to advance this field.

Michael Greve: (32:02)
So, yes, uh, the nature. So, um, first of all, um, uh, I think one has to understand, and I strongly believe, um, the rejuvenation biotech industry and the shift, the shift in paradigm medicine, keeping healthy people healthy is going to be the biggest industry this planet has ever seen. So, um, it is, uh, I mean, if you look at, uh, uh, compare, uh, the, the value of having a nice mobile phone to, to what it's personally worth to you to know, I'm not going to age, I'm not going to have cancer. I'm not going to have a heart attack. I'm not going to have, so what is the difference, this and that. So what would you be willing to pay per year for having all this useful health for a long, long time? Whereas it's a new phone and now you see one company, uh, doing a phone has a market cap of $2 trillion.

Michael Greve: (32:53)
So that's one thing. And as you said, is, um, uh, in general for a VC or from an investment perspective, um, this is going to be the best business ever. I'm, I'm absolutely, uh, in, in for that, um, yes, financing might have to change. I think that, um, the, um, but, um, if you come from a D it is not the convention biotech play, I totally agree, but tech investors really get this, uh, approach that we are doing. So we're seeing a lot of interest from the crypto industry, from other tech investors. And also from my fund is, um, we are, we don't have partners, so we're just, uh, investing my own money and we're taking a very long-term view on the thing. So, um, we are thinking about 10, 15 years. Um, and, but there are people who can take that you, and especially in the tech world, there's a lot of money available and I think what it needs, and this is what we also try to do is by doing this companies and by showing what is possible to excite other peoples and in the end, it's just a matter of risk reward.

Michael Greve: (33:59)
Yes, it's super risky what we are doing, and it's especially risky, uh, what we're doing because we focus on category openers. So we invest in things that have not been done before, um, like a underdog or rebel, but we do it for example, uh, cross-link breaker decalcification. Nobody is doing this right now, but if we would succeed doing that, that's going to be a unique product, uh, with an enormous market potential and of course, high risk, but the reward is enormous. And of course, venture capital gets that. Um, so yes, you might have to restructure your fund. You might have to talk to your partners differently. Um, but there is a big, big upside, and we want to show this with our lighthouse investments that we do

Dina Radenkovic: (34:45)
Fascinating, but I, I'm a firm believer of that. And you've touched on two interesting things before I move on to the next section. And the first one is you go for new technologies and you make one bet per every technology and what it means technology. We often say in biology, we refer to a specific pathway. So often it's basically the first mover company that failed. Do you think that that can be, um, how often do you wait before you make a bet on a, on a certain field? So let's say in the field of San analytics or in the field of messenger and eight companies, or do you go with the first company that is driving the space and you think the first company has an unfair advantage that will start collect data as they go along and be the best. And then the second question that you touched upon there, you mentioned the link between cryptocurrencies and their interests. I mean, they're having a couple of Twitter threads, uh, quite recently about the link crypto and longevity, and that both that are kind of trying to, um, innovate in, in very kind of old, um, more, more central light industry, one kind of being financed, the other one being get traditional version of, of sick care medicine. Um, do you think there is an additional link, do you think we should get more people from cryptocurrencies interested in longevity or is that just naturally happened? Okay.

Michael Greve: (36:01)
So to answer your first question is, um, um, actually we don't invest in, if you take her, uh, if you really look at, we do not invest into, uh, companies per se, because it's not that the companies come along and then we invest them. We really helped to build, uh, especially our core startups, we help to build them. So it's usually in our experience, it was a two to three year process. We get in contact with the researchers, follow the research. In most cases, we even sponsored their research for two or three years, and then we help assemble a team. You need to see, oh, you need a good game plan. You need a development plan. Um, and it's not that easy. It's not like in, like in tech where you just have a few developers, they have a nice idea. You give them some money, everybody has a laptop, and then they do some programming and there you go.

Michael Greve: (36:49)
Um, it's completely different. So, uh, it is a two to three year process. So really we know the people for quite some time before we go. And there was the, uh, into the, uh, into company fund formation. It was the underdog with revel, with less strain and with Salvy, uh, all the same, we really went into the field and looking at the technology. And, um, and, uh, also this why we do this as Yardi is a lighthouse investments. And, uh, yes, I, I think that the first mover, it's not an unfair advantage is just a lot of hard work. I mean, uh, the, uh, if I look at rebel also, for example, when we tried to break cost links, um, they have been doing research for 10 years on that. So, and then, and then we respond to that research for, I think, three years, and now we're taking it to the company and still it is somehow at the research stage fund other three years. So it's a lot of hard work and nobody else is doing that work right now. So we're doing the work that nobody is doing. And, um, and, and, and, uh, yeah, we're doing this in, in a, in a company. Yeah.

Dina Radenkovic: (37:58)
And, uh, any notes on crypto on longevity?

Michael Greve: (38:01)
Oh, well, um, the things that we do or that sends to all the hallmarks of aging approach is this, um, basic old let's repair things that are broken. It's a very engineering approach. So it's, it's really like going to the root seeing what's going wrong, what's breaking down and then trying to fix that. And that also eliminates the need for complex markers. So if you see, if you have calcified tissue, you just decalcify it, and you can measure the decalcification. So there's no need for an epigenetic clock, for example, to do that. And, um, and, uh, it's obvious if something calcifies like your kidney and you can decalcified, it works better. So you get better rid of, uh, all the waste in your body. That's probably a very good thing. And, um, engineers get that the tech industry gets that the crypto community gets that.

Michael Greve: (38:50)
And I just expect that over time, more and more tech investors will move into the rejuvenation field, not so much the biotech investors. I think the funds are completely structured different. They have a different risk management, a different approach, um, uh, a different risk profile and, uh, take investors are used to making huge bets that prey pay off like a hundred times or a thousand times. You know, this is what people in tech look for. And also if you look at tech investing right now, um, the, the money that goes into tech, startups, dwarfs biotech investments in biotech, you're talking about all, we do an IPO at a hundred and 200 billion, a million that's already something. I mean, three of our startups already turned unicorns, hon, uh, before even going public. And, uh, we are in even pre IPO. We're talking about hundreds of millions flowing into our startups to gain market share. That's a totally different ball game. And I think we're going to see the same, same enrich of a nation biotech.

Dina Radenkovic: (39:56)
Yes. And I think that we're both on the, on the same journey, trying to bridge that gap between technology and biology and Michael, you recently made a incredibly impressive announcement offer to 360 million that you're going to devote to fund rejuvenation research. So, um, what do you plan to do with, with that, uh, money? Is it going to be through your funds? Is it going to be creating companies is going to be all of it? Can you give us a bit of, uh, an outline of your ambitious plan because you will have a decent budget to achieve quite a few things?

Michael Greve: (40:29)
Yes. So, um, that money, these 300 million euros or $360 million, uh, are in my venture capital company, keys zoo. And they are used to either form new startups, but category opening startups or support or key startups on the way to, uh, uh, to the clinic and to create product. And the, the idea is that we can track a stake. Uh, we can take a strong lead in our key investments, uh, which currently we have, uh, four of those and really support them all the way, um, uh, to, to the, to the end product. And by, um, taking a strong position, also encourage others to invest with us. So my, uh, I, I think that with, uh, taking the 300 million, um, we could, uh, enable and other three to four times, uh, the money in, in co-investments. Uh, so that's going to be a substantial amount of money that will really get our, um, uh, products, um, through the clinical phases, to the market, to price optimization, and to really get it to the masses at a very low price.

Michael Greve: (41:36)
So, because I think this is what is, what is needed most now in the market is success stories. I truly believe if we can show rejuvenation, for example, if we could show, I really hope for that. If we could show that we can remove plaque from the arteries in the end, by swallowing a pill every day, this is going to be really revolutionary. And then people will understand, oh, that is of a nation. It's not this machine where people are pushed in and then you push the 60 year old and then you get a 30 year old, but, oh, I just re we germinate. My Archer is, and I don't have a heart attack. Yeah. I get rid of DNA damage. Then I don't have cancer that is rejuvenation. And you do this in enough things. Then you, you, you, uh, keep a youthful body for quite some time. And, uh, once people would understand that the VC community will understand that will encourage other researchers to do this. So this is why I said, okay, we have to do this because we have been very fortunate with our internet investments. Um, as I said, we have three unicorns where we have been the founding investors and still on the substantial equity. And, uh, I just want to use these resources to really drive the, um, uh, uh, industry forward by creating successful companies

Dina Radenkovic: (42:53)
For sure. And I completely agree that we need a successful case study to really demonstrate the value and the purpose of this approach. And do you, have you carved out the percentage, what is for follow on rounds in your current companies? Because as you've explained, you have built your current company. So do you want to maintain the majority control over this? Company's hasn't moved fault, um, anything that you would have for creating new companies and what are your key partners on this journey? Often medical research happens in silos and aging kind of takes a step back to look at medicine instead of saying, oh, let's be hyper specialized led to say that many of these things that are likely to kill us just like here with aging. And there are similar disease processes related to nine hallmarks of aging and, and other things. So who are your key partners obviously sends Aubrey de gray and who is missing and w w what is missing in the ecosystem, um, that would enable you to do more.

Michael Greve: (43:53)
Okay. So, uh, to answer your first question, we're not going, um, uh, for controlling our startups. We don't want to have the majority. I personally, I'm a strong believer in strong founders. So we want to have the founders in control like that. That's not the case, usually in biotech because the founders are diluted to a negligible. And, but it's completely different in technology and technology. You need a strong founders and a few, we have to have the same here. Um, we just want to, uh, maintain a strong position to just help us guide our startups and be there for them. For example, it's very helpful if there's an investment round, you directly commit as an existing investor. Let's say I do 25, 30 or 40% of that round. So that, that, that helps the startup that gives the gifts, confidence also to other investors coming in, um, that also allows just non biotech investors to come in because the sell cake is always there. They're taking the lead, uh, which doesn't mean take the majority, but take the lead so I can just follow on. And this is already happening. Um, we have a lot of tech investors going along with us, they just say, okay, let him do the work. And we go along with it, but we also want to stimulate, um, uh, stimulate the whole thing. Yes.

Dina Radenkovic: (45:10)
Excellent. And anyone who are obviously sends, but any other key partners or

Michael Greve: (45:17)
Yes. So we are super open to networking. Um, we have one project running, uh, that's called the, the, um, rejuvenation network at QSU. We're building a network of a really loose network of venture capitalists, uh, universities, tech transfer offices, and really to create a community because, um, in, in biotech, especially with driven Asian biotech, um, the, the amounts of money that have to flow in the risk is very high and people like to, um, syndicate and to share the risks. So we are super open to that. We're really invite others to come in. Um, our main goal is to drive the industry forward to of course, to drive the, the, um, our startups in the, in this, uh, into, um, prove our key goals that it's working. It's inexpensive. It's for everybody. It's, it's uncomplicated and it's a good business. And, uh, but, uh, and this is also why we run the undoing agent conference.

Michael Greve: (46:12)
Our conference is a big networking event. Yes, it's about science, but hopefully next year, we're going to have the, the, the conference again. And the conference now has three tracks and one track is science. Second track is startups. And the third track is rejuvenation now. So what can I do now? And we're going to invite media as well. So we're going to have scientists, startups, investors, media, the blocker, but also the general media, uh, to prove that, Hey, there are things that you can do right now, the first analytics that can be applied today. And now it's not for the rich it's for everybody. I mean, you could take physically in as a supplement for us, might be a very good analytic, and that's just $30 a month. So that's not for the rich. Everybody could just buy that from Amazon, um, uh, to make that example. And so, yeah, I think networking and driving the whole thing forward is, is, is, is very important.

Dina Radenkovic: (47:08)
Thank you, Michael. And often we close it. What do you like to see play out in the next 20 years? But I think you've answered that in a sense that we're going to remove our cholesterol and one pill, and we're going to have one successful case study to kind of lead by example and in this field of longevity. Um, and, um, I guess what is the best way always you very active on forever healthy technologies is very transparent. You have a lot of information. Is there any other good way for people to keep up with, um, your, your team's work and your work online,

Michael Greve: (47:43)
Where you can, uh, go to our website, it's FIBA, uh, there shall be.org or.com. Um, you can subscribe to our newsletter. We have Facebook groups, we do regular online meet ups. You find that on our own page as well, where we talk about certain research that we do animal diseases that are a germination or maximizing health teams. We have scientists, uh, looking at, uh, all the latest research on certain topics and analyze that. So, yeah, we have to required a community around that, or you can visit the undoing aging conference. So we're very open if you want to collaborate as an investor, right. To ventures@qsu.com or find us on LinkedIn. Um, so we're really easy and we're very, very open, um, uh, to communicate

Dina Radenkovic: (48:29)
And share. Well, thank you, Michael. Thank you for finding the time and for sharing your impressive work. And we're very excited to have you in our network and John, over to you. Do you have any questions? Are you waiting for your cholesterol bill before you ask it? Yeah. You

John Darcie: (48:47)
Covered it pretty well. You know, I, I'm still a young guy, but, uh, you know, we could all use the cholesterol pill to help us out a little bit, especially in the pandemic. So, uh, we're, we're a few people have gained a, COVID-19 not just gotten COVID-19, but, uh, that's neither here nor there, but Michael, thank you so much for joining us on this week. Salt talk and thank you everybody for tuning into this week's salt talk. Uh, we love educating people on some of these massive breakthroughs that are taking place in the field of program biology and healthcare and life sciences, uh, that Michael has helped leading. And Dr. Dina has helped helping delete as well. Uh, just to remind you, if you missed any part of this salt talk or any of our previous episodes, you can access them on our website. It's salt.org backslash talks or on our YouTube channel, which is called salt tube.

John Darcie: (49:31)
Uh, we're also on social media. Uh, Twitter is where we're most active at salt conference, but we're also on LinkedIn, Instagram, and Facebook. And again, please spread the word about these salt talks. We love educating people. These are all free open for everyone to access. So if you found this conversation interesting, please share it with your uncle, your aunt, your grandfather, your, your dad, your mom, uh, and, and educate them about things that are going on in this space. But on behalf of Dr. Dina and the entire salt team, this is John Darcie signing off from salt talks for today. We hope to see you back here again soon.

Ali Tamaseb: Super Founders | SALT Talks #215

“Second time founders are more likely than first time founders to start a billion-dollar companies… What I found among the successful founders was a never-ending itch for building, selling or creating something.”

Ali Tamaseb is a partner at Data Collective (DCVC), a VC firm in Silicon Valley with over $2B under management and investments in over ten separate billion-dollar startups. Tamaseb received a B.Eng. in Biomedical Engineering from Imperial College London and graduated from Stanford Graduate School of Business. He was an honoree of the British Alumni Award, and Imperial College President’s Medal for Outstanding Achievement. His recently published book is Super Founders: What Data Reveals About Billion-Dollar Startups.

There are many popular narratives about what makes a great entrepreneur that do not actually match most successful founders. Ali Tamaseb spent four years researching around 300 different billion-dollar companies started in the last 15 years. Tamaseb explains some of the key findings related to successful founders. For example, many were not experienced in the field in which they started their company. Tamaseb hopes his extensive data-driven research will help future investors and founders better understand what makes a successful startup.

LISTEN AND SUBSCRIBE

Spotify | Amazon | Google | Stitcher

SPEAKER

Ali Tamaseb

Partner

DCVC

FULL BIO

MODERATOR

Anthony Scaramucci

Founder & Managing Partner

SkyBridge

FULL BIO

EPISODE TRANSCRIPT

John Darcie: (00:07)
Hello everyone. And welcome back to salt talks. My name is John Darcie. I'm the managing director of salt, which is a global thought leadership forum and networking platform at the intersection of finance technology and public policy. Salt talks are a digital interview series that we started in 2020 with leading investors, creators and thinkers. And our goal on these salt talks the same as our bowl at our salt conferences, which we're excited to resume with salt New York in September of 2021. And our goal is to provide a window into the mind of subject matter experts, as well as provide a platform for what we think are big ideas that are shaping the future. And we're very excited today to welcome Ali Tomasa to salt talks. Ali is a partner at data collective, also known as DCVC, which is a highly reputable venture capital firm in Silicon valley with over $2 billion us in assets, under management, he holds several leadership and board positions at companies both globally and across the United States.

John Darcie: (01:09)
He holds a degree in biomedical engineering from Imperial college of London and studied general management at Stanford graduate school of business. Uh, Tomasa was an honoree of the British alumni award centenary enterprise award and the Imperial college metal for outstanding achievement. His work has been featured in BBC, the guardian Forbes, the Telegraph among many other news outlets. And he's given talks at major events and conferences. Hopefully salt is in his future as well. Uh, he lives today in San Francisco, California, despite being very much a citizen of the world. And I know DCVC, uh, does business around the world as well. And I don't want to get started without mentioning that he's also the author of a new book it's called super founders. What data reveals about billion dollar startups. I'm fascinated to learn more about what the data reveals so we can hopefully find that next unicorn hosting today's talk is Sarah Koons, who is the founder of Cleo capital and a frequent guest host here on salt talks. We've loved getting Sarah and her perspective involved in these conversations. And with that, I'll turn it over to Sarah for the interview.

Sarah Kunst: (02:14)
Hi, so excited to be here and so excited to hear about what makes a super founder a super founder. Um, so before we dive into that, Ali, thank you so much for joining us. And we'd love to just hear a little bit more about, you know, your story and, and your motivation to write this. Why are you giving, giving away the guide so that everybody else can find deals as good as you are?

Ali Tamaseb: (02:39)
Thank you, Sarah. I'm glad to be here with you and John. I think the motivation behind this book, it started four years ago and you know, there's a lot of popular narratives about what makes for great. And I think a bunch of that comes from media, the social network movie, or watch that we know about the stories of Steve jobs and Steve Wozniak, two co-founders, one technical, one business, visionary, you know, savvy. There's a lot of these famous stories. There's not actually a lot. There's a few of these famous stories that shaped our mindset about what the rest looks like. But today there's 300 something billion dollar companies that are started in the past 15 years. And they don't necessarily all look like the same or look like these couple pocket or narratives that we do. And it's my job as an investor to sort through thousands of companies every year to take it back one or two shots and sit on the, sit on a couple of boards and, you know, help these companies get to bidding dollar exits and, you know, nobody had done the work of going to the ground troops of seeing, was there something different about these companies that become billion dollar companies and outcomes or not?

Ali Tamaseb: (03:49)
So I decided to collect the data and, you know, it's, it's a very hard thing. It's, there is know some data about the financing history of startups out there on platforms like PitchBook and Crunchbase, but there's no data on the competitive landscape. And these companies started on the defensibility factors on the carrier path, on the founders, on the fundraising history, on the origin of the idea on the pivots. There's a lot of factors. So I sit on 65 different factors and I collected this on every unicorn that's been founded in the past 15 years, every industry tech, biotech, health, energy index, as well as a collected the same data on every non unicorn, every company that had raised a minimum of $3 million in venture capital, but did not become a successful outcome. So I had some stuff to compare between the two groups and those findings are shocking. I decided to write a book and I decided to interview a lot of these founders. I interviewed founder of zoom, Instacart, nest, and investors like Alfred Lin of Sequoia and Peter Hill.

Sarah Kunst: (04:53)
That's awesome. And what did you find? What, what brand of hoodie makes founders most likely to be successful?

Ali Tamaseb: (05:00)
Um, you know, the shocking thing was the data showed a lot of factors that normally we've thought to be correlated with success are not correlated with success. And that's sort of the shocking and counter-intuitive part is obviously the data showed. There's a bunch of things that do matter. So there's some truisms and there's a lot of stereotypes and we will talk about both of them in this session. Maybe let's start with some of these stereotypes. The one that I like is about, you know, successful founders need to have solved their own problem. They need to be, you know, their own customer. They need to have a personal mission or a personal problem. And I think you see that again, it's, it's, it's a little bit of that narrative bias. The bias comes from, you know, these stories make for a good story and they make themselves into media and you see and read articles about them.

Ali Tamaseb: (05:51)
But when you actually collect the data, you see that a lot of these, you know, very successful founders, very opportunity event, they found a good trend. They are excited about starting a company, the events we talked to different types of customers, they jumped from industry to industry until they found the right idea. And we often don't hear about that one or two years of a journey that these entrepreneurs went on to find the right idea. We only hear the last part and somehow connect that to, we know this founder had this problem when they were in and there were a child or something happened to them and try to connect the dots like that. But oftentimes that doesn't exist. A similar thing to that is about, uh, having domain expertise in the same industry. I think a lot of ways we assess company startup founders is, you know, are you, you're building an insurance company?

Ali Tamaseb: (06:40)
How much do you know about insurance? Or how many years have you worked in insurance? It turns out that doesn't matter. Only 30% of consumer tech founders of unicorns had to work in the same industry. Only 40% of enterprise SAS. You know, unicorns has worked in the same industry, the rest, they had this, a skill of learning more than anybody else about the specific problem. They had the resources and connections and the soft skills to go on and know about that specific venture into the market. More than anybody else, even if they were not from the same industry, there's a lot more there's there's there's about things about age. You know, there are people who were looking for the 19 year old, 20 year old college dropout to people who are looking forward to gray hair, you know, to treat decades of work experience. It seems like again, age was not correlated with success.

Ali Tamaseb: (07:30)
You can be 19 years old, you can be 68. I think that was the oldest that I had in my dataset to start a company. And when you even compared it to distributions and median age was 34 among tech unicorns, and 42 among healthcare and biotech, which seems a little bit older than you. When I survey people were asked them, what do you think the average founder of a billion dollar company when they started that company look like, you know, there, there was a ton, uh, we can go on about competition. For example, a lot of people try to say, we don't have competition. You're the only people, 85% of unicorns, hatch competition. When they started, they won in most of these cases, they were competing with big sleepy, incumbent giants. Uh, you know, they're competing with the Oracles and the visas and JP Morgan's of the world, you know, rather than other startups. So, you know, th there's a lot we can go on. If you have specific thoughts about any of these topics you wanted to ask, go on, or, you know, each of them are in the different chapters of the book. I go into details and provide examples of stories of the companies. Yeah,

Sarah Kunst: (08:36)
No, this, this is there's, there's so many, I have so many questions. Um, so, you know, one, one really, uh, one really interesting data point I thought, um, was, was the schools they attended. So, so dig into that a little bit more. I think there's this, this thought that, you know, it's kind of Stanford, Harvard or bust, um, and, and it feels like you found something pretty different.

Ali Tamaseb: (08:58)
Yeah. So the data showed that school does matter. So that's one of the factors that is correlated at success and, you know, the typical Stanford, Harvard, and MIT's, they do contribute a lot of, you know, founding founding CEOs of these billion dollar companies. However, then you look at the full distribution, you see that there were as many founders of unicorns that hadn't attended schools, not even in the top 100 as the same, the same number of them had attended to top 10 schools. So it looks like a bar book, 36%, top 10 university founders, 37%, you know, top, not even in the top 100 and the rest in the middle. So again, it is correlated, but there's a lot of hope there's, you know, 58% or 68% of founders of these billion-dollar companies did not go to a top 10 schools. Yeah.

Sarah Kunst: (09:53)
That's really interesting. So, you know, what, what, is there a Moneyball strategy here, right. Do, do, do people just pick up the book and then, you know, make a really crazy spreadsheet and say, you know, if you're a founder who's doing XYZ, you know, take our money because you're, you're statistically more likely to, to make me really rich. Um, how, how do you think about, I guess one that, that for the gamblers in the crowd and then to, you know, how do you think about that just impacting your own investing?

Ali Tamaseb: (10:20)
For sure. So I think it's the reverse. We can become better investors by putting away our preconceptions and misjudgments about a specific founder or a company it's amazing to go. Like there's a bunch of things that book showed. It matters, large industry. It does matter defensibility. It does matter. Previous work experience doesn't matter. Being a former entrepreneur, doesn't matter if you have previously sold the company for small amount, that does matter. There's a bunch of things that the book and the study found out to be, uh, contributors to success. And I will talk specifically about one of them, uh, which is the previous, you know, entrepreneurial, uh, things that you've done. But I think my goal with the book is to push the industry in your head, let give, give a notch to, you know, the other investors that, you know, if the put some or preconception notions about and where the ideas come from, chip on the shoulders, somebody solving their own personal problems. You know, what degree they have, we can become better investors by not saying no to the companies that go on and to company dollar companies it's as, as important to say yes to the companies that are successful, as not saying no to companies, you see, you have access to invest by rejects for the wrong reasons. And I talk about all these wrong reasons to reject the company for

Sarah Kunst: (11:41)
What are some of the wrong reasons to reject a company,

Ali Tamaseb: (11:46)
You know, family members, uh, starting as a company. I see a lot of investors reject founders based on that, you know, there's a of successful companies that two brothers, two brothers, modern Sohn, fiances, married couples that happens and they're successful. Um, you know, not investing in a company because they have competition because what if Google does, you know, MasterCard does this. And in a lot of these cases, these startups end up becoming successful, or, you know, not having domain expertise in a specific industry. Now, what do you know about this industry? There's a lot of these reasons which might be wrong. What is important is the character of that founder, you know, being able to sell the vision and attract super amazing people in the early days, one of the best examples of this Katrina lake of stitch fix, you know, first one year, she attracting amazing talent out of Netflix, out of Walmart to join her as in the executive team, these are some of the factors that are contributors to the success of these companies.

Sarah Kunst: (12:49)
Yeah. And, and, you know, talk a little bit more about, you know, you talk about how early value creation matters. And obviously it's a little bit more nuanced than, Hey, if you sold your first company for a billion, you'll probably sell your second for 2 billion. So, you know, what do you mean by that early value creation? Um, especially when it, it isn't, uh, you know, just you're already incredibly rich.

Ali Tamaseb: (13:10)
Exactly. So I think, you know, when then investors think about investing in serial entrepreneurs or serial successful entrepreneurs, it's exactly what you say. You know, you sold the company for $500 million. Your next one would be [inaudible], that's normally what comes to mind. What I found is, I mean, that's obviously true, but it expands the beyond that, uh, founders, founders, you know, second time founders are more likely than first time to start billion dollar companies. Second time founders whose previous company was a small success. Maybe it was an equal hire or maybe a technology acquisition. Dave are more likely to start a billion dollar company next, you know, even people who didn't start venture backed companies, you know, started a side hustle and made a million dollars. They started a project and, you know, somebody wanted to buy that for, you know, $500,000 or $2 million. They were more likely to start bidding dollar companies.

Ali Tamaseb: (14:07)
What I found among these, you know, successful calendars was a never ending H for building something, for selling something, for creating, you know, even, even not for money. Uh, I can give a lot of examples here that founder CloudFlare had started a non-profits, you know, STAM email collection tool before starting Kopser founder of call the, you know, $2 billion meditation app, which is, you know, very popular had started this vet page, the million dollar homepage, which was, you know, a million pixels who would sell each pixel for $1 know a lot of people paid attention to it. He made a million dollars. That was it. It wasn't a bench of venture backed, you know, success. It wasn't exit. We've made a million dollars founders of Stripe, you know, the $80 billion company they were in first time entrepreneurs, even though they became billionaires by the age of 20 something, before that, they had started a company, an auction management tool for eBay sellers called Octa Matic that was acquired for four and a half million dollars.

Ali Tamaseb: (15:06)
Before that founder of Spotify, he sold a company for, I think, $1 million before, out of Coinbase. He started, you know, comfortable university tutor, even the big, big, big people that we think are first time founders, bill gates, Microsoft wasn't the first company [inaudible] was the first company Zuckerberg. Facebook was the first company, but it wasn't his first project. He had started a bunch of projects in different apps before. One of them would add on the Angelo founder of Cora, which was a music player, a synopsis music player. So you see the never ending passion in H going out, creating, selling, and, you know, moving on to the next thing among these founders.

Sarah Kunst: (15:46)
Well, in middle school or in high school, I would get in trouble because I would knit during class and then I would sell them. And so I would knit during class so people could see it and then get excited and they would pay me more. So I guess that means I'll be a billionaire, I assume is what I'm hearing. Exactly. Exactly. Don't worry. I'll send you the docs after. Um, so I mean that, that these are, these are just such interesting insights. Um, what's, what's the thing out of all of this looks like the one data point that surprised you the most.

Speaker 4: (16:17)
Um, if I were to say, well, one,

Ali Tamaseb: (16:24)
I would say competition, um, 70% of these unicorns, we're not creating a new category and they were competing for share in an existing market, but better execution. I think a lot of us are thinking about new. You need to be creating a whole new category from zero. You need to be Coinbase, but turns out a lot of these billion dollar companies, the majority of these billion dollar companies are doing better execution in a massive market. They take market share and they become big. And actually on average, they had created larger companies than new category creation companies, which seems a little bit counter intuitive to me, but it's not same thing on being a first mover, only 30% or a first mover, 70% retinol. And they had, they were just recycling old ideas that became successful. It's at a different point. And when they became successful, it was because of an inflection point in terms of regulation or a new technology.

Sarah Kunst: (17:25)
No, that that's super interesting. Um, that there's yes, I I'm thinking through, you know,

John Darcie: (17:30)
And my followup question about competence. Well, what is it then, John, what's your follow-up for that? You know, the competition fees. Do you think competition makes people better? I think about Stripe as an example, and they're in sort of a commoditized space where you have add gin, you have PayPal, you have a square, you have authorized.net. There's all kinds of different ways that you can take payments, but Stripe has just continued to aggressively innovate around all the data and information that they gather, because they're the main point of sale. That's just one example. But do you think competition breeds, excellence type of situation? Or what do you think the drivers of success in a more competitive environment, as opposed to that moat concept that somebody like Warren buffet talks about when he invests?

Ali Tamaseb: (18:16)
For sure. I think competition from good big companies is a sign that that market is large and you want nothing better than a massive market that the customer is educated. Somebody has paid the price, educate the market to take the market time and risk. And at this point it's a massive market. Customer is educated and you can just go execute better and sell. And obviously, you know, it does drive innovation and, you know, a lot of excellent seeing the way these companies operate. But I think the biggest thing is it's a sign that the market exists and it's large.

John Darcie: (18:49)
They almost like if you start a company and there's nobody trying to do anything, resembling what you're doing, maybe you're solving for a problem that doesn't exist. Exactly. That's an interesting way to think about it.

Speaker 4: (19:02)
Yeah, yeah. That is, that

Sarah Kunst: (19:04)
Is a super interesting way to think about it. How, how much do you feel like, so I guess how long did collecting all this data and writing the book take you and, and you know, what changes have you seen in your own investing since sort of, you know, before you started doing this or before you kind of, you know, started digging in and then now after you see these findings,

Ali Tamaseb: (19:24)
Yeah. It's a little bit over four years. So the data collection piece took three, three and a half years. And the writing, the book piece took me one year and interviews and stuff. So, you know, the hardest part was data collection. It's 30,000 data points. You can outsource it, you can't automate it. It requires a lot of judgment meeting, cold emailing surveys, a lot of different things to collect this data. So that was the longest and hardest part. Um, and then the interviews were the most fun part because I got, you know, talked to all these amazing founders and investors. Um, and again, the little bit hard part at the end was editing and finishing and making it into a book the way this, this has changed my thinking, I think number one is to not let my judgments come into debate of backing a great entrepreneur.

Ali Tamaseb: (20:16)
You know, you don't need everything to check out for a company. You don't need everything to be good about a company. That's not a recipe for investing in the best company. You need to, one thing to be exceptionally good and that the other pieces may fall into pieces or the theater pieces will fall in and, you know, the company would work out. So that's one, the second is, you know, again, instead of looking for what company you worked at or what university you come from, these kinds of stuff, look for this characteristic it. And what have you sold before? What have you built before? What type of money did you make before coming and starting this company? And I think you can get a lot of information about the characteristics of these founders rather than proxy metrics like university or your work and these kind of stuff.

Sarah Kunst: (21:05)
I love that characteristics, not proxy metrics. I like it. Um, how, how do you think, you know, there, there's obviously in our industry, sometimes a lot of bias in terms of who gets funded and who doesn't, how does this data help sort of disrupt that because you know, that the pattern matching that everybody talks about in our industry, you know, I think your book is a great point that it's not the pattern matching it's bad. It's just that most people are probably matching, you know, the wrong patterns. And so how do you think this helps, you know, kind of expand the aperture? Does it help expand the aperture of who should be looking at getting funding?

Ali Tamaseb: (21:38)
For sure. Yeah. I guess the point is instead of letting 10 or five famous stories run that, you know, pattern matching, let's 200 companies run that pattern matching. So by showcasing, I think I have hundreds of stories from a hundred different companies in the book, you know, all different examples or different attributes. So I hope, you know, this helps show a lot more examples of some of these companies that went on and became successful. And sometimes against the odds, a lot of my interviews is, you know, companies that succeeded, even though they didn't agree with what the data was saying about them. So I wanted to give the full picture about, you know, there's patterns. There's, anti-pattern, there's a lot of different things that may work, uh, even at the, at the odds that data. Um, I think the main way it's in reduced bias is, you know, telling investors and entrepreneurs that a lot of things you may have cared about before you don't necessarily need to care about how many co-founders you have, what university you went to, you know, a lot of these things, or if your family members, or if you have competition with, you know, and it depends on what type of competition.

Ali Tamaseb: (22:43)
But if you go and look into a lot of these, you know, patterns and factors, you realize you can put aside some of your judgment or wrong bias against, and look for characteristics, look for a big market, look for, uh, you know, some sort of defensibility or accumulating advantages that would make this company a massive success.

John Darcie: (23:02)
I got a question, Ali it's about geographics. I want to dig more into that question. So if you're on Twitter, you have to see Keith Rabois every day and all of his minions pumping up Miami as the next big tech hubs, everybody's got to move to Miami. You know, obviously Silicon Valley's had a high concentration of startup founders of talent of VCs. Uh, but that's sort of decentralizing, COVID acting as an accelerant for that. As you looked at data around, you know, geographic location and what types of areas incubated the most successful startups, what did that data show, does it show that it's more decentralized than we think it is, or did it show that Silicon valley dominated and also as you look globally, is there any know explosion in entrepreneurship around the world? I think you and I both have spent some time in the middle east, uh, in the UAE in particular, uh, where there's, there's a pretty thriving, uh, startup ecosystem that's developing there, but what are your thoughts on the geographic piece?

Ali Tamaseb: (23:58)
Yeah. So when you look at the data and you have to pay attention, this is historic data. So I'm not sure given everything that happened, but COVID distributed work, remote work, everything was accelerated towards this. So I'm not sure how predictive that data would be, but I'll tell you the historical observation historically, or in the past 15 years, exactly. Half of billion dollar companies were created in Silicon valley. The other half were created in different tech hops, Southern California and New York, Boston, uh, and you know, a lot of different regions that you can think about in the book. I have a number of interesting interviews. One of them is Rachel calls and found rogue Guild education. What's very interesting about her story. And this is, you know, a multi-billion dollar company in the upskilling and attack the space that she was in Silicon valley. The company started here raised money here.

Ali Tamaseb: (24:48)
She was a Stanford MBA grad, and then intentionally moved the company to Denver, which is not a traditional tech hub and the company thrive there. And she's very happy with the decision, you know, looking back five years, six years after. So I think a lot of this move towards, you know, let's go out of Silicon valley, let's go where it makes sense for the company. I talk about root insurance, which is, um, you know, not in a Silicon valley tech hub, but it's there, there's a concentration of people from the insurance and InsureTech industry. Um, so I think you need to look for, what's better for your startups, but you know, when you look at the data, the companies in Silicon valley, they were more likely to succeed. So there seems to be some, something about concentration that helps or historically have helped. Now, maybe that thing can distribute to other tech hubs that get enough concentration of talents. It could be Miami, it could be Boston, it could be New York or anywhere else or even internationally, but it seems like at least historically there was something to that concentration of talent and capital, maybe in the future that, that doesn't remain. I don't know the answer to that

John Darcie: (25:52)
Question. I'll look forward to super founders to the CQL super founders where you study sort of the post COVID era, uh, Steve case, who's a friend of salts who's been on salt talks who has been at our conferences. Now he has a fund that's invest in the idea that at least in the United States, you're going to see a greater distribution of talent and startups in the rest of the country, outside of Silicon valley and also in New York or the places that he looks for for startups outside of those places. And you see companies like Palentier move to Denver, for example. Uh, so you are seeing, you know, uh, people relocate and look for higher quality of life with the ability, uh, and in the explosion of remote work. So again, looking forward to super founders, 2.0, get started four years in the making right. Only four

Ali Tamaseb: (26:37)
More years ago. Yeah. Hopefully I'll, I'll spend another four years and in 10 years,

John Darcie: (26:43)
The last four years I created, uh, for children. So, uh, I need to spend more time, you know, maybe working, um,

Sarah Kunst: (26:51)
Actually, yeah. Do you have any data about, about, uh, family? How, how many, how many founders are parents? Oh, I don't want to hear

John Darcie: (26:58)
It. You can to tell me that my career is done now because I got too many kids.

Ali Tamaseb: (27:02)
I don't know the answers to that. And probably not because, you know, when did median age is 34, you know, you can make some assumptions about the family situations of these founders.

Sarah Kunst: (27:13)
Yeah. That, that, that is very true. That is very true. Um, well, sorry, John, you're doomed. Uh, but you know, maybe one of your kids will have a great chance. Actually. That's another interesting question, you know, is, are there correlations like that? I know that, you know, it seems like a lot of times founders feel like, Hey, you know, I started my company because I saw, you know, I'm from an entrepreneurial family and it doesn't usually, it's not that they were tech startup family, but you know, maybe their, their parents owned a restaurant or something like that, you know, or you hear a lot about, you know, uh, the, the disproportionate number of immigrants who start companies, are those things that, that I think even founders believe about themselves, are those showing in the data or, or is it, is that less important or just not, not stuff that ended up in this dataset.

Ali Tamaseb: (28:01)
It did not, you know, the hard thing about doing a study like this is you need to pick metrics that you can collect that data on all these, you know, a couple of hundred companies and the non unicorns. And it's impossible to do things outside of, you know, traditional things like, you know, what you can get from LinkedIn and interviews and these kinds of stuff, uh, maybe you can get about 20 of them, but not all a hundred. So I didn't from the stories, I guess it, it does, you know, hearing a lot of these entrepreneurs seems like a lot of them come from families who were academics. You know, a lot of them had, you know, moms or dads who were professors or who were entrepreneurs who had started non-tech companies and they had seen that path. Um, but I guess what's more important than that is they themselves had a history of starting stuff and building companies and projects from, from a young gage and, you know, finding the, and eventually they got to starting that massive billion dollar outcome.

John Darcie: (28:57)
Yeah. So one of your key findings that you talked about Ali is the idea that, that most unicorn founders had no industry experience. So I work in the financial industry. Uh, SkyBridge is basically a hedge fund to fund to funds. We also, uh, do some direct investing as well. I guess you could consider us a legacy financial institution. We work with a lot of traditional banks, but you're seeing an explosion in FinTech, you know, that this was happening even before COVID COVID has been an accelerant for FinTech. So when companies are going into a new space, you think basically based on your data, that the idea that you're coming in with a fresh perspective, let's say the financial industry, as an example, most FinTech startups are created by people that didn't grow up as an investment banker at Goldman Sachs, a wealth manager at Morgan Stanley.

Ali Tamaseb: (29:44)
Yeah. And again, when you, when you look at the distribution, it doesn't say you are less or more likely if you don't like, it's not a good thing. If you don't have domain expertise, it's also not a good thing. If you don't have domain expertise, you know, 30% of consumer tech founders did have domain expertise and only 40% of SAS enterprise did have industry domain expertise, but it goes back to the characteristic thing. When you look at a lot of these founders, they had the resources, maybe they had some track record, maybe they had, you know, had this small exit before it built that reputation to go and network with people in this industry and go on a fast learning curve of, you know, in one or two years, learn more than anybody else about that specific part of this specific industry that they wanted to go into straw. They would know about that more than anybody else. There was no more people in that more than anybody else. And it's those kinds of soft skills about having the resources and the network and getting the talent and capital and selling division. That's more important than, you know, having 10 years of experience as a Bell's manager to be able to come in and build a Bell's management software company. For example,

Sarah Kunst: (30:50)
That's really interesting. I feel like what you're telling us is there's not just a cheat code where we can go identify a billionaire as soon to be billion dollar startups, but, you know, and it's so important. I think to, to question some of the things we take for granted, um, you know, what, what, how, how long back did this data go, meaning, you know, is this data a big reflection of like the last 10 years or the last 20 years and in how

Ali Tamaseb: (31:14)
Much? So 2005, yeah. 2005 to start was the start of this data set.

Sarah Kunst: (31:19)
Yeah. You know, how, how much do you think, what do you think would change? Obviously, the Internet's changed so dramatically since pre pre 2005, but you know, if you, do you think if you ran this again, 15 years from now, you would see a lot of similar data sets or are there, you know, massive in your mind fundamental kind of macro shifts that, that might, you know, show that that totally different profiles of

Speaker 4: (31:42)
Founders are successful?

Ali Tamaseb: (31:44)
I think some things will change. Certainly the names and numbers would change, you know, the companies. So for example, if you look at the early cohort of the 2005 to 2008, nine companies, those founders are more likely to have worked at Yahoo or at Oracle. When you look at the past five years, those founders more likely to have worked at square or Facebook or Stripe. Um, so that's the kind of, you know, a lot of these numbers change or, you know, what was a seed round back in 2005 is, you know, a pre pre seed round now, uh, in 2021. So a lot of these numbers change, but even when I look at different industries or geographies or different times, a lot of these trends and a lot of these characteristics all are still the same. You know, it's the same people who had a blog for building back in 2005 and the are the same people in 2020 that had a bunk foot building and have created stuff that ended up becoming billion dollar founders. Same thing about competition, same thing about a lot of different things. Obviously industries change, new categories emerge new macro shifts like geography and remote work can, you know, alter data. But I think generally a lot of these may hold. Okay. Yeah,

Sarah Kunst: (32:53)
Yeah, no, I, I, you know, instinctively, I kind of, I'm inclined to agree. Um, but, but we'll see, cause we have all the data now. Um, how do you hope people will use this book? I mean, should, should founders be reading this to try to reverse engineer success, should investors be reading it to do the same thing? You know, how, how this feels like it's going to become a must read in a, in a big teaching tool. So also of course tell us where, where we can find it and where we can buy it. But, you know, we'd love to just kind of know how you envision this being used out in the world.

Ali Tamaseb: (33:26)
Yeah. I hope, you know, founders, investors and people around the industry and lawyers, mentors, advisors, accelerators, incubators, investment bankers. I think that's, that's the audience for this book. And anybody, you know, honestly is interested in starting companies and entrepreneurship and the way I think, you know, there's a lot of practical advice for founders in the book based on the data that, you know, this is something doesn't, that doesn't matter, maybe, you know, number of co-founders doesn't matter. So if it means that you have four amazing people to start a company started doing stick to the narrative that you need to go founders. So a lot of these things I talk about in the book that know something doesn't matter, don't, don't sweat it. Um, and you know, same thing for investors, you know, reducing bias. And there's a lot of inspiration in these stories and interviews that, you know, I think as a founder, uh, it would be very interesting to read and understand the path that, you know, these couple of hundred other companies took and these founders took to become a massively successful founder.

Sarah Kunst: (34:27)
Awesome. Yeah. That's super helpful. John, do you have any last questions?

John Darcie: (34:30)
Well, my last question is when does the book come out working? We buy it, uh, tell us all that about super funds.

Ali Tamaseb: (34:38)
Yeah. So the books come out May 18th, uh, just at the shelves it's available on Amazon audible, Kindle, local bookstores. Um, you can read it in different versions and us and outside of us as well. A lot of different countries

John Darcie: (34:53)
Dictate the audible version. I

Ali Tamaseb: (34:55)
Did not know there is somebody much who has a much better voice and accent than we needed. That's doing the honors. All right. Well,

Sarah Kunst: (35:03)
You would have been great at it, but everybody needs to go get this book and, and you know, maybe, maybe we can get you a, to, to New York in September for the salt conference and everybody can, can hit you up for advice on how to, uh, to invest in the next unicorn IRL.

Ali Tamaseb: (35:20)
For sure. I'll be glad to.

John Darcie: (35:22)
Okay. All right. Again, the book is called super founders. What data reveals about billion dollar startups, really looking forward to reading it. Ali, thank you so much for joining us on the show and thank you everybody for tuning into today's salt. Talk with Ali Thomas hub of just a reminder. If you missed any part of this talk or any of our previous salt talks, you can access them on our website. It's salt.org backslash talks or on our YouTube channel, which is called salt tube. Uh, just a reminder. We're also on social media. LinkedIn is where we're most active at salt conference, but we're also on Instagram, Twitter, and Facebook as well. One data point that Ali didn't point out is that people who watch salt talks are actually, uh, 74% more likely to become unicorns, uh, that is unaudited on verified, but, uh, it it's a snippet that that's in part of his book. I'm not going to tell you what page it's on, but, uh, thank you everybody for tuning in and please spread the word about these salt talks, but on behalf of Sarah and the entire salt team, this is John Darcie signing off from salt talks for today. We hope to see you back here again soon.

Walter Isaacson: “The Code Breaker” | SALT Talks #212

"Jennifer Doudna invented, with her colleagues, a way to edit our genes. I think that’ll be the most useful but also most morally challenging technology of the 21st century."

Walter Isaacson is the Author of “The Code Breaker: Jennifer Doudna, Gene Editing, and the Future of the Human Race”. The novel provides a gripping account of how Nobel Prize winner Jennifer Doudna and her colleagues launched a revolution that will allow us to cure diseases, fend off viruses, and have healthier babies.

Isaacson is a Professor of History at Tulane and an advisory partner at Perella Weinberg, a financial services firm based in New York City. He is the past CEO of the Aspen Institute, where he is now a Distinguished Fellow, and has been the chairman of CNN and the editor of TIME magazine.

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Walter Isaacson

Professor of History

Tulane University

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Anthony Scaramucci

Founder & Managing Partner

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Jim Mellon: Reimagining Aging | SALT Talks #211

“20 years ago, the human genome was unveiled as a map… scientists now know some of the key pathways that influence aging. We are not destined or pre-programmed to die at a specific age.”

Jim Mellon is a British entrepreneur, investor and author known for his ability to recognize emerging global trends. He’s most recently established himself as an expert in anti-aging and longevity research.

A constantly curious mind is necessary in identifying the next major global trends and investment opportunities. Anti-aging and longevity advancements will soon have massive impacts on life expectancy. The mapping of the human genome twenty years ago opened the door for scientists to begin understanding the different pathways that influence aging. Already drugs like metformin show promise in helping to extend life. “Within thirty years, the average lifespan at birth will be somewhere between 120-130 years. It is a fact, that with or without new technology, by 2100 there will be at least 100 million people 100+ years old”

AgTech represents another major industry primed to transform society. The adoption of alternative proteins will continue to grow rapidly as we look to address climate change while feeding a growing population.

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Jim Mellon

Chairman

Juvenescence

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Anthony Scaramucci

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John Darcie: (00:07)
Hello. Hello everyone. And welcome back to salt talks. My name is John Darcie. I'm the managing director of salt, which is a global thought leadership forum and networking platform at the intersection of finance technology and public policy. Saul talks are a digital interview series with leading investors, creators, and thinkers. And our goal on these salt talks the same as our goal at our salt conferences, which we're excited to resume in the post pandemic period. Uh, God willing September of 2021 in New York, uh, which we're very excited about anybody watching. We'd love to have you there, but our goal on these talks and at those conferences is to provide a window into the mind of subject matter experts, as well as provide a platform for what we think are big ideas that are shaping the future. And there's no bigger idea we think, uh, shaping the future, then the idea of longevity and just the amazing advances that we've seen in life sciences over the last several years.

John Darcie: (01:00)
So we're excited, very excited to welcome Jim melon to salt talks. Uh, Jim is a British entrepreneur and investor with a wide range of interests. There is private investment company, burn Bray group. He has substantial real estate holdings in Germany and the isle of man as well as holdings in private and public companies. Jim's investment philosophy is underpinned by his ability to recognize emerging trends that give rise to new industries or major shifts in markets. This includes the global financial crisis in 2008 and 2009 as foreseen in his first book that he co-authored, it's called wake up and subsequently in the new science and technologies detailed in cracking the code. The great book by Walter Isaacson and fast forward. Uh, more recently, Jim has established himself as a leader in the nascent field of aging research and longevity. His groundwork into the field is summarized in the book juvenile essence, which he also co-authored.

John Darcie: (01:55)
Jim sits on the board of trustees of the buck Institute for research and aging and the American Federation for aging research. He's also a trustee of bio gerontology research foundation and the lifeboat foundation as an honorary fellow at Orielle college at the university of Oxford and sits on the advisory board of the Milken institutes center for the future of aging. We're great friends with the team over there at Milken, but I understand that the AGA spent some time at Cambridge. I know you're an Oxford guy. Jim don't want to create any early tension here in the salt talk. If you guys start butting heads, I'll jump in and be the peacemaker. But, uh, hosting, today's talk returning to salt talks as AIJ Scaramucci, who is the founder and managing director of the salt fund, which is an early stage venture fund that we launched building on the salt ecosystem and making investments primarily in the life sciences biotechnology area. AIG can talk a little bit more about that. Uh, but with, without any further ado, I'm going to turn it over to AIG for the interview. Jim,

AJ Scaramucci: (02:53)
Jim, welcome. So, so lovely to see you, you know, I'd love to start this interview way, turning back the way back to the Oxford days, actually, where you were studying politics, philosophy economics. Take me into the mind of, of Jim at that time. What were you thinking? What were your aspirations? How were you imagining your career unfolding? Let's start there.

Jim Mellon: (03:15)
Uh, well, thanks. AJ thanks, John. It's really great to be on this, uh, program. Um, honestly, um, probably like you, I went to university very young. I was 17 and I graduated when I was 20. Uh, and the only thought I have was passing the exams, which were more difficult than I expected and, um, also getting a job and I had a wonderful time at Oxford. I had close links with Oxford as I'm sure. And I know you have with Cambridge, I'm deeply grateful for all the connections and all the opportunities that it afforded me. Um, but the most important thing really was to get a job. And so at the end of my time at Oxford, they had something that I'm sure you have the same quarter milk round when the employers come around and they interview people. And it's the usual one of investment banks and, uh, odd array of companies.

Jim Mellon: (04:14)
Uh, and I was offered three or four jobs. Uh, one was with a company called Clark shoes. I think they even sell their shoes in the U S um, and, but they'd been through several bankruptcies. I'm very glad I didn't go to that. Another one was with a well known investment banking company, and I'm glad I didn't go there either. Um, and the last one was with, uh, well, the one that I was considering, uh, very seriously was with a company that offered me a job in Hong Kong and it was in fund management and I didn't know what financial it was. I didn't know what a bond was, even though I had studied economics and I didn't know what a stock really was. And so I took that job because it was in Hong Kong and I wanted to leave the country, which I think is a great thing for anyone.

Jim Mellon: (04:54)
I think if you're living in the U S or the UK or anywhere, if you can go and travel the world, what a great opportunity. So I went to Hong Kong. I was, this is a long, long time ago, way before your time. I was paid 5,000 pounds a year. And then, uh, uh, the company was really growing quickly. It was called GT management. It's not a known as LGT or Lichtenstein global trust, the very big, uh, financial company. And, uh, they sent me to San Francisco where they were opening an office. And so I was able to, um, to be at the beginning of the big tech boom in the mid 1980s in the United States. And I can tell you this now, but I think I'm the only person ever to sat in a commercial aircraft going from Palm Springs to San Francisco. And in front of me with Steve jobs and bill gates together, talking in a friendly fashion on the flight hallway. Uh, and you know, we all think of them as being rivals and, you know, never speaking to each other, but they were there, they were in front of me. And if I'd had, uh, the guts that I have now, I would have gone and talked to them and my life might have been completely different.

AJ Scaramucci: (06:08)
Wow. That's, that's an amazing story. So, and, and Jim, as you've, as you've kind of entered into your investment career and culture, your craft, we're curious to know how have you developed that investment philosophy? What are, what are some of the heuristics you use in making decisions? And then also, what are some times in your career where you've, uh, kind of been challenged or you've, you've seen, you know, there, there was, there was an up or down that you had to had to manage or deal with.

Jim Mellon: (06:40)
Yeah. I, I, you know, you're the first person ever that I've spoken to, who's used the word heuristics, which is exactly the right word. So my, uh, condensed the motto, uh, and will be the subject of my next book is curiosity, adaptability and application curiosity is where you need, um, he eristics, you know, people like us read a lot regard that as being the job that we have to try and pick up, uh, the little sense that we need to understand where the next opportunity, uh, is rather than, you know, invest in the status quo, employee heuristics, and, and those heuristics are honed and developed over time and experience. I don't think you're born with them. I think it's just a question of, uh, really working at it. Uh, and so most of my morning is taken up with, uh, reading and reading widely on, on any subject at all.

Jim Mellon: (07:40)
Um, and then, you know, adaptability is particularly important now where the world is changing so quickly in a technological sense, young people are going to have to do multiple careers. We all know that, uh, so they have to be adaptable, you know, in my time you probably went into a job and that was it. And, uh, I know lots of people who've done it of my generation. Who've, who've done that. And some successfully, um, some unhappily, um, and the last thing is application. And we all know that unless your, one of the two geniuses sitting in front of me on the Palm Springs flight, uh, or Zuckerberg, or one of these very, very few people, Jack Mar, uh, that you have to work hard at it. You know, you don't, success is something that doesn't fall in your lap. And so, uh, curiosity, adaptability application that had been my, uh, watch words all well read throughout, um, my career.

Jim Mellon: (08:37)
And, uh, and I've kind of navigated. And you asked me about, you know, difficult times, wow, there've been plenty of difficult times. I mean, I'll give you an example. We were in, in the, on assumption of curiosity, I was reading and then the internet wasn't around in 1994, I reading about Russia, privatizing its, um, industries and, uh, doing it by way of distribution of anxious to every adult in the, in the Federation. Uh, and those matches with a sale and foreigners could goodbye those ventures. And so myself and my colleague, Jane Sutcliffe got on a plane. It was a rather complicated, uh, way of getting there, but we eventually ended up in Moscow. We ended up with $2 million in cash, body guards, all that sort of stuff. And we bought a $2 million worth of ventures at the vegetable market in Moscow, uh, to convert into, uh, chairs, the auction that was taking place of every single business, ranging from a hairdresser to the oil and gas companies in Russia.

Jim Mellon: (09:39)
And, um, it was a very successful investment. And within a year or two, we had billions of dollars invested in the former Soviet union. Now that was great. And, uh, in 1987, we made a very large amount of money, but in 1998, uh, Russia defaulted on its debts. Its currency was heavily devalued. And I remember getting a call from a former colleague of mine at Oriel college, Oxford, who was then the treasurer of Morgan Stanley asking for a margin call of $40 million. Now $40 million in 1998 was a lot of money. It wasn't my personal much call. It was the company's margin. We only just scraped that we got the $40 million, but wow. You know, to me it represented almost a 1998, was it wasn't a lifetime, but it was a big chunk of work. And it was almost about to go down the two. So you have to be aware of what might blindside you in either direction. Uh, you know, when we all know that when you're riding high is the time when it's most likely you're going to have a fault. So I'm very cautious these days about everything that I do. Yeah. Fascinating.

AJ Scaramucci: (10:50)
You know, there's, uh, we, when we were doing some, some research on your investment history, there's such a broad range from real estate and, you know, oh, markets bodies uranium for a time. And we actually had to some, some questions from our community around uranium. Uh, there's, there's a sort of an interesting dynamics at play is an emerging by-product of, of COVID, uh, there's been sort of supply shocks, uh, and you know, a decade ago, uh, or more when you, when you were, you were involved, uh, there were some similar kind of, there's a similar environment. I'm curious, is this something you're, you're kind of keeping track on having an opinion on?

Jim Mellon: (11:36)
Yeah, that's a great question. And basically, uh, when I got involved in uranium, I, it was a serendipitous moment because I have a friend who's a business partner and he happened to have a potential uranium deposit in Namibia. We were in my pub in London, uh, where a lot of good ideas I happen. And, uh, and you're, you're both very welcomed to come into a pub with me in London if you want. And, um, we put in $50,000 into this prospect and within two years it was sold for two and a half billion dollars in cash. Uh, now that was because uranium obviously representing nuclear power was the interregnum between fossil fuels and renewable energy. And the reason that that mine has never gone into production is because the price of uranium, which had gone from $20 to $140, a pound collapsed post Fukushima. And, uh, the Germans also shut down their uranium.

Jim Mellon: (12:42)
But today, and it's interesting, you should mention that I don't have a uranium, uh, prospect, but I've invested in Chemico as an example. Um, because I do think that, uh, nuclear is going to have it stay again, that we just can't move straight from fossil fuels to renewables, uh, with certainty and without huge costs, without putting nuclear, which is a clean energy somewhere in between. And the Chinese are building lots of, uh, uh, nuclear power stations. I think that even in the UK, we're building two or three, I guess, in the U S you'll be building some as well. So it's a it's, I think it's a good one to invest in at the moment.

AJ Scaramucci: (13:23)
Yeah. And so Jimmy in parlaying a bit, I mean, you're, but what's so fascinating about you and your background is you, you really put your, put your money where your mouth is, and you have a really strong conviction in certain vectors, certain mega trends. And the two more recently is the one of, of aging as the fundamental indication, longevity, uh, dressing the nine hallmarks, et cetera, uh, switching the paradigm to preventative as opposed to reactive forms as medicine and therapeutics, and then on the food and ag front, right pivoting into a world where cellular agriculture, synthetic biology and fermentation are the status quo and traditional agriculture goes to the wayside. And I'd love to understand, you know, as you were developing that, that mental model, both in writing, and then also manifesting in a company today, do you have an essence in it? And, and, and another one in the food and ag space acronym. Nomix how did you walk us through that, that process as well as, uh, give us a sense for why, like, what, why, why were those, why are those two things as so compelling and interesting to you?

Jim Mellon: (14:35)
Okay, so I've got two wonderful biotech partners. We've created a number of biotech companies, and we've invested in biotech for the last 15 years. One is dat Dubin who was formerly the head of drug research at, um, Pfizer. And the other is Greg is a well-known funder of, uh, biotech companies. And, uh, Greg and I were talking, he more about the, you know, how to live longer with the technologies that were then available, which is basically exercise, you know, reducing harmful inputs into your body. Uh de-stressing et cetera. And me more along the lines that, well, the science behind aging is catching up with the aspiration of us all to live at least healthier and the, towards the end of our lives, um, if not longer. And so having created a number of biotech companies, a couple of which are listed in the United States, we decided to create juvenile essence.

Jim Mellon: (15:35)
And do you have an essence is an interesting company because we don't know exactly what's going to modify aging, but we know that something's going to modify aging. So we created the back 20 bats. If you want to put it that way across, uh, multiple projects, uh, to where we only need one or two to work. And the first goal is to compress the period of what's called morbidity at the end of life. So that's having a dread disease post the age of about 70, which almost everyone, thousands, you know, so that could be osteoarthritis, or it could be cancer or diabetes or whatever it is, and trying to reduce the impact of that, uh, given that people are living longer, even, you know, in the pandemic period, their life expectancy generally is going up around the world. Uh, and then ultimately trying to modify aging so we can slow or reverse it, or even, I mean, this is the goal of some people like Eric Burdon, for instance, or Aubrey degrade of halting it.

Jim Mellon: (16:40)
And, uh, so the way that I, I create these, uh, opportunities is to write a book. And I can tell you that if you write a book, you get access to people who otherwise wouldn't talk to you. So I drove around the U S three and a half years ago. And, um, uh, which is by the way, was a wonderful experience. I mean, it's just such an incredible country and, uh, interviewed all the key opinion leaders that I could find. And, um, uh, they speak to you because they've gotta be in a book and then juvenessence became the template for our, for our company, which does no raise the back $250 million of equity capital, and is, um, in the process will, will be public, uh, sometime this year. And, um, well we have some exciting stuff. We have a consumer facing division that now has a product on the market, which comes.

Jim Mellon: (17:33)
And I know you're very close to, uh, Dr. Eric Burdon. Um, it comes out of his lab and the buck Institute, uh, it's called metabolic switch. It's on sale in the United States. It's really a remarkable product. And then we have an organ regeneration program, our subsidiary called late Genesis, which is in phase two trials in sick patients to regrow livers in situ. Uh, so, you know, we're getting there, but we're feeding our way towards it. The longevity industry is at the dial-up phase of the internet equivalent. We're in the very early stage. And as far as agriculture is concerned, uh, the, I got really interested in cellular agriculture, uh, because that comes out of biotech processes, using bioreactors media growth factors, et cetera, to create replicas of meat and fish and, and materials. And so that's why we got involved in that. And now we're the biggest investors in the world in this area.

Jim Mellon: (18:35)
Now that sounds like a major boast, but I can tell you it's a bit like being an Admiral and the Swiss Navy, it's still a very small sector. So, uh, so AIJ, um, you know, I think the two are very linked. They're linked to sustainability, they're linked to the need to reduce, uh, emissions and the need to improve our human health and in so many ways and so long life. So at the end of maybe not the end of my career, but the tail end of a long career, I am making, I hope that impact is positive for everyone. Yeah.

AJ Scaramucci: (19:09)
Yeah. And, and three and a half years ago, when you came to the us in that exploratory mindset, speaking with people like Aubrey or Eric at, at, at the buck Institute of aging, what were some big standout takeaways for you when you, when you look back at that experience? What, what surprised you, uh, what, what was unknown to you? How did, how did, how did that experience refine your, your heuristic perhaps, and sort of manifest what became juvenile assets?

Jim Mellon: (19:41)
Yeah, so, uh, I think it was basically a confluence of, um, I mean, it was a happy coincidence that, you know, Aubrey nearby lies another great example, David Sinclair, uh, Eric, um, and we'll be working on this for literally decades. And, you know, because the Alexia review has been chased by mankind for millennia without success. In some ways it was always regarded as the realm of crackpots and, uh, you know, almost religious cult type people. And so, but 20 years ago, the human on the human genome was, uh, unveiled. It was unveiled as a map, which couldn't be well-read and as time has gone on, and computer power has got greater and there's been great scientific collaboration across the internet. The unveiling of that, uh, map has become a reading of that. And we now know, or at least the scientists know about the, some of the key pathways, at least that influence aging.

Jim Mellon: (20:54)
We also know that we are not destined or pre-programmed for data specific age, and they know that in at least a mammalian and, uh, species, that it is possible to manipulate key pathways to, uh, keep, uh, mammals and ourselves living longer. And what really struck me was the work that was done in some, you know, compounds that are widely available. Um, but for different purposes, like a very good example is Metformin, which I'm sure you're very familiar with, uh, which is effectively a wonder drug and which nearby has been trying to get, uh, funding for his trial for, for a long time. Uh, but you know, as far as I can see almost every single person in the longevity industry is taking Metformin on a daily basis, um, and near thinks that will add six to eight years, uh, to lifespan. And I think Nick is a wonderful, wonderful person.

Jim Mellon: (21:53)
So what really impressed me was that the first of all, the collaboration of people in the longevity industry, positive collaboration, which is so great, then, you know, there's not a competitive landscape, is if anything works in this field, then it's going to be the biggest industry on the planet. Because there isn't very, there aren't many people who don't want to live longer. Even my dad who's 92 will be signed up for all the, uh, all the drugs that they want. Uh, and, um, so that, that was one thing. The second was the, the fervor and the, the, the, the years and years and years of grinding work that people, Aubrey, Eric have been doing to advance the cause. And I just felt that, you know, it was an inclusive family and I wanted to be part of it. And I feel that I am now a part of it.

Jim Mellon: (22:40)
And I'm very, very grateful, uh, to, to have been included in that, even though I'm not a scientist, but I understand enough to know that we can and will make an impact. And I also make the assertion today, but within 30 years, average life span will be at birth will be somewhere between 120 and 130 years, I mean, absolutely possible. And it is a fact with all, with that new technology, with new technology, be an even bigger figure, but by 2,100, uh, there will be at least a hundred million people of a hundred years old plus on the planet. And that's up from half a million in 1990s. So, you know, the progress is incredible. Yeah.

AJ Scaramucci: (23:25)
And being on the front lines and making those bats that you made at at Juven essence, what do you, I know these things are malleable in the last second will change, et cetera, but which one of these is it, is it the nav boosting? Is it similar Lytics? Is it something in the computational drug discovery or wind pathway on the front lines today? If you, I know you've, you've created a portfolio approach, but when you're speaking with the research scientists, uh, downstream, what, what today feels like the most promising, uh, mechanism that can unlock, uh, the most net years of both health span and lifespan?

Jim Mellon: (24:04)
Yeah, I think it's, uh, there's no Polly farmer. I mean, it is a farmer approach. There's no single pill that we're gonna be able to take that will keep us alive for over 30 years, at least not now. Um, and, uh, what I'm very excited about is a regenerative medicine, uh, you know, effectively that the image of the class that you've seen this before, a kind of state car that's restored, uh, to, uh, as is the, as was state, uh, we are very keen on trying to find ways in which, uh, organs that are failing can be regenerated, uh, in vivo. And that's a major push for us. And I think that we were getting close to that actually working. And the fact that the FDA has allowed like Genesis to go into sick patients, uh, using, uh, lymphnodes as a topic bioreactors w seated with, um, uh, with hepatic cells to, uh, basically regrow liver tissue, uh, to take over the burden of a fading that, um, is, is a very big positive.

Jim Mellon: (25:09)
Um, but that platform can be used to regrow the famous where your T cells are produced, regrow the pancreas, uh, ultimately regrow the kidney or, uh, as well. And the big issue with, um, transplants is a first of all, there aren't enough, uh, organs out there to be transplanted, uh, particularly in livers. Secondly, it's a very expensive and very long, uh, operation in the U S to have a liver transplant is $800,000, and it's about a 15 hour operation. And the third is that you, uh, need immunosuppressants, uh, for the rest of your life. And just imagine that you'd had a transplant and you're on heavy immunosuppression and the COVID comes along. I mean, you're not even allowed to see anyone, uh, you know, the whole period of COVID because the slightest infection will take you away. So what we're trying to do is find a way of amalgamating science.

Jim Mellon: (26:05)
And so our company Ajax, um, has got a stem cell line called HLA G, which is a maternal stem stem cell line. That means that the mother doesn't reject the fetus. And we're trying to use that along with like Genesis technique, which is by the way only about $130,000 compared to the $800,000 for a transplant. Plus it's an inpatient, uh, sorry, that patient procedure, as opposed to an inpatient procedure and use that to avoid the need for immunosuppression. So the opportunity in regenerative medicine, I think is number one in my list of, of what we can do, um, in terms of, uh, you know, what drug C might want to take. I think that analogs or tweaks of Metformin or rapamycin will, are absolutely something that we're seriously interested in. Um, send analytics have so far been disappointing as you well know, and unity failed in its first trial. It's now engaged in a second phase three for age-related macular degeneration. I hope. And I pray that it works because on paper said, analytics should be working, but so far they're not, but as I said earlier, we don't know exactly what's going to work, but we know something's going to work. Definitely.

AJ Scaramucci: (27:19)
Yeah. That's super comprehensive. Yeah. I mean, I think there, there is something for sure in this regenerative medicine realm, the cellular therapeutics realm, and whether it's placental derived tissue, as an example, in the case of cellularity or trying to populate kidney or lung scaffolds with mesenchymal stem cells, you know, the work of Martine wrath, Blatt, et cetera, there's there, there is a lot of converging, um, areas that are really showing, showing early signs of promise. Uh, it's extremely exciting. So today, so today Jim, for yourself, cause people are going to want to know you're taking Metformin. Are you taking some kind of NAD booster or what, what is the constellation of things that you do for yourself, uh, has given you, you have become a champion of, of longevity research?

Jim Mellon: (28:09)
Well, they always say a J the best tailors, the ones that are less stressed, um, I'm, uh, taking, uh, I do I've, I've actually started on Metformin, uh, because at the urging of my colleagues, um, and I'm not taking NAD boosters, I am, uh, I'm now drinking the ketone Ester from juvenessence metabolic switch, which actually tastes absolutely horrible. But if you remember your mum giving you, um, you know, medicines and saying that if it tastes bad, it's good for you. It's the same, it's the same concept, I guess. Um, and I do feel better actually. I've been on it for about two weeks and I feel better for that. Um, and, uh, so, uh, I'm not doing a lot other than I look exercise. I think given that we are not at the point yet where the stuff is in wide dispersal, uh, I think exercise is the most important thing, and it can be anything even walking, but doing, you know, a lot of steps every day. So I do a minimum of 15,000 steps a day, but don't look at me. I think my colleague Greg, uh, takes it to extremes and I'm somewhere in the middle of the night. I'm probably the slouch. Um, you prefers to watch some Netflix and follow all the advice that I could

AJ Scaramucci: (29:26)
Fair enough. Fair enough. And yeah, the parlay there, I mean, there's, there's, you know, an enormous amount of capital, particularly in the age of COVID that has been coming down into pharma or MRN research or, or what have you. And, you know, longevity really does seem to be like this secret hiding in plain sight. Right. I mean, it, it really is. Uh, as you said, you know, it's kind of like the dial up days and perhaps we will look back a decade or two and, and look back maybe on even this conversation and say, wow, this, this truly was the beginning. The question I have is, is how do we get more investors interested in longevity, pension funds, sovereign wealth funds, institutions, what watershed moment do you feel needs to happen in order for that wave to really, really ignite from a capital perspective?

Jim Mellon: (30:20)
Yeah, that's a brilliant question. I mean, I think that, uh, the pandemic has done two things. One, it has shown up the need to build up the immuno resilience and the elderly cohort cohorts, because as in the United States, as in the UK as, and everywhere else, the average age of people dying of COVID is more or less at the average age of life expectancy. I mean, in the UK, it's actually one year ahead of average life expectancy. So older people who have reduced immune systems, uh, building up those immune systems, I think is going to be really important and any breakthrough there. And again, that's a major focus of, as a juvenile essence is going to show the capability of extending, um, life, uh, and, uh, also start garnering the money that is necessary to really propel this thing forward. I completely agree with you ha this is a monumental industry in the making, but as yet, because there isn't anything that it's, you know, you can put your hand on and say, this is really working.

Jim Mellon: (31:37)
Um, uh, it's not got the hype around, for instance, cannabis or cryptocurrencies running, even though it deserves to have a much, much bigger priority than those things. Um, but we're, we're not, not far off the point. Um, you know, there are, there are good companies in this field. Uh, some of which you're very familiar with, you know, Peter Diamandis, his companies as an example, um, the data Sinclair's life bio-sciences, uh, and one or two of us will have something in the next one or two years that will be mind shattering and will propel huge amounts, uh, into this field. We're not quite at the point, but on the other hand, but when not finding a great deal of resistance to people putting money into the concept. Um, and, uh, although my money raising is always difficult as, you know, we are, we're doing pretty well on that school. And, um, I'm, I'm, I'm confident we'll get enough money to, to progress our programs.

AJ Scaramucci: (32:39)
Yeah. Yeah. And do you feel that, uh, sort of recognizing aging as a disease or an indication, uh, is, is sort of a linchpin in this, or a lot of aging companies seem to be pursuing aging or, you know, one of the nine hallmarks as an example, but they have to masquerade as traditional pharmaceutical companies and pursuant of, you know, X, Y, and Z oncology indication. And you, do you, do you feel, I mean, that is in this iced a bit, do you feel like that is, that is of critical importance?

Jim Mellon: (33:11)
Yeah. My colleague, the chaperone Coff runs in silico medicine, which was our first investment in juvenessence, which is doing very well, um, is a big illness, you know, getting aging recognized, uh, by the who as a, a disease in itself. Uh, I think he's been making along with his, uh, partners in this, uh, in this mission, some success, and it is important because let's face it apart from viral diseases or bacterial infections or some rare childhood diseases. Uh, aging is the number one cause of disease. Uh, the proliferation of disease as you get older is quite incredible. And, um, so we need to look at aging as the fundamental cascade from which all the diseases of aging come. And I, I'm totally with you on, in that. I think that will be a big moment. Uh, and, uh, we're working on that with, uh, with, uh, partners in the other companies and other organizations, uh, in the aging space to try and make that happen.

Jim Mellon: (34:18)
But I have to take my hat off to Alex because I think he's the, he's the main driver of this, but it's a very, very good and well noted point that, you know, as soon as aging is recognized as a disease, and maybe we move forward. Now, I wouldn't say companies are necessarily imposters. What they are doing is they're navigating the FDA and the rules to find a commercial application because no company can hang around for 30 or 40 years. And seeing if, you know, Aja lives to 150 or a hundred, um, and well, it's a lot longer than 30 or 50 years. I know, but in my case, let's say, and, um, they, uh, so they need to find some way of getting a drug or a therapy that's commercialized. And then in the near future, we're no different to that. You know, we're looking for near term commercial opportunities, which then measured with biomarkers, and you talk about the whole monks of agent, but measured with accurate biomarkers are getting better and better, uh, allow scientists to see if there is actually an aging or anti-aging effect from the therapies that people are taking.

Jim Mellon: (35:21)
Um, but, uh, as you know, Metformin is a prescription drug in the United States, but it's not here in Spain and, uh, I can go buy it in the pharmacy. And so it makes it slightly different for you guys in the U S

AJ Scaramucci: (35:33)
Yeah. So Jim, uh, you know, I, it kind of pivoting into new book moose law, which came out last year. Uh, you know, you seems like a similar story. You interviewed an enormous number of experts in the space of cellular agriculture and food and ag tech more broadly. Uh, and similarly you're, you're making waves here, uh, as an investor and as an entrepreneur, love to learn you again on the front lines of this industry in particular, what are you seeing? What is, what is, what is promising, what is investible today that can see, uh, you know, some, some rate of return. I mean, we've seen impossible and beyond, and even just, and sort of the plant, uh, sort of protein alternatives start to really garner one market share, but to enterprise value cellular agriculture seems to be a bit more nascent, uh, things like fermentation and synthetic biology may be here even more ahead. I'm curious how, as you map that landscape, what seems that it is within our grasp in the next five to 10 years?

Jim Mellon: (36:40)
Yeah. Well, uh, you described it extremely well. I would say that, you know, rather like longevity has come into its own because of a single event, which was the unveiling of the human genome. The rise of alternative proteins has come into its own, uh, for three or four reasons. One is the desire to change the outcome and climate. It is a fact, and, you know, you can dispute the percentages, but about a fifth of noxious gases come from intensive farming, and it's more than any other form of human activity, including transport. So reducing intensive farming is a really good thing for the environment. Secondly, cutting down the rainforest, which everyone is justifiably upset about is being done to grow soy beans, which then get fed to animals, which are very inefficient, uh, converters of plant protein into meat. Uh, in the case of Kansas, about 25 to one in chickens, it's somewhere between six to nine to one, uh, that's highly wasteful.

Jim Mellon: (37:53)
And also it adds to further environmental damage. Thirdly, you've got the Indians and the Chinese demanding more and more animal protein, and quite rightly, why shouldn't they eat, uh, as they get rid of the same stuff as Americans or Europeans, uh, do, but in, so doing what's happening is that you're putting unbearable strains on our environmental system and on potential human health. So 80 that's eight, 0% of antibiotics go into intensively farmed animals. Now, what that does is to create antibiotic resistance in human beings, because we're, I don't because I don't eat meat, but people are eating these, uh, meats and they're becoming more and more antibiotic resistant. Um, one day, uh, it could be, it'd be, and I know bill gates has been banging on about this, but it could be that we just antibiotics and work anymore. And if we got a bacterial pandemic, rather than the viral pandemic we have now, where the whole world is being shot down, 3 million people have died a week.

Jim Mellon: (38:59)
It could be looking at a much, much worse situation. We could be looking at a blank deck and, you know, people's holder, that's all possible in the mobile world. The black death was in the middle ages. Well, how was our responsible for vaccinations? So this pandemic, it wasn't much better than it was in 1918 or 1920. So we need to reduce the consumption of antibiotics. And 80% of them go into intensively found animals. Now you've also got the overfishing of the seas I've done, if anybody, to watch cease bursty, but it's a harrowing tale. Um, uh, and, uh, you know, this is going to be a massive disruption and it's happening very quickly. You asked companies are investible. We think about 30 in the world of which we've invested in 14. Uh, and yeah, and none of those companies are public, but I would imagine that one or two of them will go public in the states.

Jim Mellon: (39:53)
You mentioned each just possibly a spec, uh, Memphis meets in the states blue, which is the leading, uh, fish sell a company will go public. And of course you rightly point out in plant based meats you've got beyond and probably impossible game public shortly live kindly go in public and openly Cletus company. Um, making oat milk will go public quite soon. 10 years ago, half a percent of the U S market was alternative loans today. It's not good between 20 and 25%. The two biggest us little producers of Bombas borderland Dean foods. That's before you put your taught rightly about precision fermentation before the precision fermentation companies come along like perfect day or legendary out of butter Lynn, and they produced absolute replicas of whey Kasey making up milk, cheese, yogurt, et cetera, without any dairy cows being involved. So I make these predictions, I'm sorry I'm buying on here, but I'm very passionate about it.

Jim Mellon: (40:59)
10 years time, the dairy industry, as it currently exists, where you think of cows and being Milt that others getting to stand it, that backs breaking off to two or three years. And whereas they would normally live 20 to 25 years. Miserable lives back industry is gone, gone almost all around the world and we'll be drinking the perfect days or the Oatley or whatever. In terms of meat, 50 send to the meat market will be either plant based and everyone knows the brands, meatless farms call and impossible, uh, and, uh, or cell ag. And the reason I fundamentally prefer sell ag is because there's IP around it, but it's a, it's a, it's a moat that creates in my opinion, more value. And so companies will be able to produce these foods in labs and basically on an industrial scale, as the price comes down, uh, will become more valuable than the plant based foods.

Jim Mellon: (42:02)
And they're probably better for human health, but we know contaminants, no bacteria. So the food, the shelf life will be longer. Um, in fish there'll be no mercury microplastics, which are a disaster for fish at the moment. Uh, no antibiotics, no hormones, um, et cetera. And the total addressable market for all these things for dairy for meat or fish is about $5 trillion, which is twice the size of the whole UK economy. And about a quarter of the U S economy. This is not a trivial market. You know, if Tesla is worth $800 billion on the back of electric vehicles, and these companies are worth peanuts by comparison, they are addressing a fundamentally bigger need. We don't all need to get into a car every day, but we all need to eat. So this is absolutely transformational. And, uh, this is a long side, uh, longevity in juvenile since my other main passion. And I, I don't need to do anything else in my life except focus on these two because you know, they're both transformational.

AJ Scaramucci: (43:12)
Wow. Yeah. I mean, we personally, we feel the exact same way. I mean, we have stood up a vehicle at salt specifically to invest in program biology at the intersection of longevity and food and ag. And we are investors in companies like Xi Rue, which has mentioned in your book. I went to school school with Ryan at perfect day. We've been friends with fantastic friends for the last eight years, been involved in that company since the beginning. Um, and you know, it, it really, it really is, uh, it is happening, right. I mean, I think the, the gaining, the gaining function in, in cellular ag really is the cost related to the recombinant proteins being fed during the culture expansion process. I'm curious if you've seen, have you seen, uh, again on the front lines, some novel approaches to this, so that'll really kind of move the needle. I mean, moose law, I think is a great, a great analog or our heuristic to think about this. Um, but do you feel it'll look, it'll sort of just just happen or w what, what fundamental, uh, breakthrough do you feel needs to happen to unlock this for, for humanity at large at scale?

Jim Mellon: (44:20)
Yeah. Um, so there are three, the reason I think that I call it griddle parity, but the cell ag products have the potential over time to be lower in price than conventionally fund meats in particular will fish is because the input ratios at scale hence moves law are lower. We think about too to one compared to, as I mentioned that 25 to one, four a cow. Um, but you're actually right. The growth factors have to come down in price. Now the proteins recombinant proteins are, are currently extremely expensive because they are derived from biotech processes, but we know that in biotech at scale. So for instance, insulin would be a good example. Uh, the price comes down dramatically and in the case of insulin, it's about $4 a gram. And, uh, we are pretty confident that those same transcriptions will happen in cell ag. Similarly, the bioreactors that are used at the moment are relatively these small and they need to be scaled up.

Jim Mellon: (45:32)
And so companies like Sartorius in Germany are working on scaling them up to enormous sizes that you can produce a hundred thousand people's protein from one single factory. Uh, and I believe that will happen in the next two or three years. Uh, and then, uh, lastly, you've got the media or the, um, nutrients, and we know that they're coming down in price quite dramatically as well. So we're to, it's an iterative process. I don't think there's gonna be one single massive breakthrough, but it's going to be actually, I don't know, but I don't think it's going to be totally transformative, but I, I can tell you that if you graph the price of the initial burger unveiled by my passed in 2013 in London, who's now the chief scientific officer of Mosa meat costs about 300 pounds as in U S dollars. And now it's down to about $10.

Jim Mellon: (46:28)
It's following the trajectory of Moore's law, Gordon Moore, his original law of these, of these semiconductors. So it's only a matter of years before you get down to Gribble parents, the, and below, I'm absolutely confident that we're going to get that. I think the bigger roadblock it's going to be number one, the agro Luddites, particularly in the United States to, um, uh, uh, you know, representing capital pharmas and all very empty this stuff. And I can understand why they are, but in a way they should be embracing it because they might actually make some money out of it. Uh, and number two, the regulatory process, um, uh, and then third is of course, consumer acceptance, will people accept eating food that's made in a, uh, industrial way. And I think that will happen. Um, and I, to give you an illustration of that, I was reading about Libby pasta and pasteurized milk, and it it's amazing, amazing to me that pasteurization was all around for a long time before it was used mandatorily in United States and people were dying because they were drinking unpasteurized milk, which caused huge amounts of, uh, uh, gastro problems, uh, in, in the U S uh, and, uh, only when the science was proven to the satisfaction of the regulators, was it made mandatory, but consumers embraced it straight away, even though it might heating up the milk to 130 degrees Celsius, and then couldn't get it straight away.

Jim Mellon: (47:55)
Um, so it was a novel foods are easily embraced that they represent convenience, taste, texture and price, and those are the four key factors that will drive this industry.

AJ Scaramucci: (48:07)
Sure, sure. I think that's a really interesting, uh, analog, and it leads me to my next question, which is the consequences of, of this stuff, both in longevity and in food and ag. I mean, do people really want to live forever if they had the option? Do you, uh, or in the food and ag ecosystem, will, will people, I mean, uh, my gut is yes, they will accept cellular ag as a mainstay, but there's definitely going to be friction there. I'd love, love to hear a little bit from you on, on the kind of downstream second, third order consequences of, of these technological inevitabilities if you,

Jim Mellon: (48:47)
Yeah. Well, I mean, the consequences of, uh, people living healthier for longer are, uh, you know, incredible, um, in some ways, you know, people do live routinely to a hundred, 110. Um, it's like adding another 12 hours to your day, instead of making out with 24 hours away, couple of 36 sites, what are you going to do with that time? And that will be a big question for a lot of people. Uh, it obviously upends all sorts of financial products, you know, pensions insurance, uh, government structures and all that sort of stuff. And there's not enough attention paid to that. So we do a longevity forum every year in London, uh, with my collaborators, including professor Andrew Scott, who wrote the a hundred year life to try and educate people about, you know, what are, what are the consequences of this? And by the way, it's an unstoppable trainers it's going to happen.

Jim Mellon: (49:40)
Um, and, um, the, uh, so, and in terms of agriculture, well, luckily, uh, there are two parts of agriculture. One is growing crops for human consumption, which is a very profitable business, generally speaking. Um, and, uh, then there's also growing crops to put in animals and grain the animals themselves, both of those, hopefully it will reduce an intensity. They have to reduce the intensity. Uh, but if farmers divert their attention to growing CrossFit humans, they can make much better margins than they currently do. And a lot of them are just living precariously, trying to grow animals and, and cross to put into animals. Uh, and, uh, there is opportunities for farmers to other stuff where they land, like for instance, building houses since only 1% of the workforce in developed countries works in agriculture. It's not going to be highly disruptive. There's not going to be like the horse and cart being displaced by the motorcar. This is a, it's going to be all the minds, being miners, all losing their jobs. This is a much lesser change. And the major part of agriculture is actually processing marketing, consumption, retaining a food that will stay the same.

AJ Scaramucci: (51:02)
Definitely. And Jim and Jim, you know, uh, where can, where can people find you interact with you? Are you active on, on, on social media? How do people keep up with, with your work? I know you're, you've got these recent books coming out, perhaps another one down, down the pike, but give us a sense there.

Jim Mellon: (51:23)
Um, I'm on LinkedIn and anyone can contact me on LinkedIn. I'm not on any of the other things, because I think LinkedIn is the only one that's polite and, you know, has a special purpose. Um, so I'm on that, a contact me on that, and I'd be very happy to connect anyone to my colleagues if they want to talk directly to any of them. Um, and, uh, as far as the books are concerned, the profits go to whatever. And the, and this case, the moose law, uh, all the profits go to the good food Institute, which is the leading advocacy group for trying to reduce intensive farming. I mean, my own motivation by the way, ha or intensive farming is not to make money, but to reduce animal cruelty. And, um, you know, as a, I can see John's wearing his dog, uh, don't think, and I'm sure you're a big animal lover as well.

Jim Mellon: (52:22)
H I'm sure you are. Uh, and, uh, we can't have any more of this. I mean, you know, chickens in 1950, where one third, the size of chickens today, the chickens today live an average of 23 days. Uh, the male checks are shoved into basically the butchered, uh, when they arrive in the world. Um, and cause, you know, live 28 months before they're slaughtered and most of them never see the daylight until the day they are slotted. Uh, we know about fish. I mean, th this is a, it's a cruel and horrible industry. And my motivation is to sorry, is to reduce this as much as possible,

AJ Scaramucci: (53:05)
Definitely with that geo, I mean, it has been such a pleasure to speak with you. We'd love to see you again on, on salt talks in the future. And one of our events, uh, in New York or Abu Dhabi, Singapore, is as the world opens up. Uh, but with that, I mean, John, uh, I mean,

John Darcie: (53:22)
I, I think Jim, we would obviously love to you in New York, in September, but a beef, a warrior station right now is definitely not a bad move. So I don't blame you if you decide to, just to kick your feet up on the beach and continue the great work you're doing, but we would love to see

Jim Mellon: (53:36)
You. I, I would love to come with we're longing to travel actually. And, uh, it would be super, uh, to be included in one of your events. I really appreciate it. And, uh, it's been an absolute pleasure, ha and John, thank you for having me

John Darcie: (53:51)
And thank you for joining us and thank you everybody for tuning into today's salt. Talk with Jim Mellon of Juven essence. Just a reminder, if you miss any part of this talk or any of our previous salt talks, you can access them on our website. It's salt.org backslash talks and on our YouTube channel, which is called salt tube. Uh, we're, we're more active on social media than Jim we're on Twitter at salt conference. That's not to say we don't get some, some hate messages every once in a while. They'll probably be talking about how I'm, uh, you know, not dressed properly or, or wasted too much time in the introduction before we got to the good stuff with AIG and Jim get all kinds of, you know, hateful messages on social media, but we try to keep our self-esteem in order and block it out. Um, but uh, also spread the word about the assault talks. We think these issues related to longevity, as we talked about, you know, the animal cruelty issue is obviously very important and also just helping people live healthier, longer lives, we think is a very noble mission and a great cause. So on behalf of AIG and the entire salt team, this is John Darcey signing off from salt talks for today. We hope to see you back here again soon.

Warren Fisher: FinTech Investing | SALT Talks #209

“Most people think of FinTech as a revolution… I like to think of it more as an evolution. We still have mag strips on the back of our debit and credit cards and that was invented in 1966.”

Warren Fisher created Manole Capital which is focused on investments in the FinTech space.

The payment space is the quintessential FinTech business model. It represents one of the most dramatic shifts in consumer behavior as we see the use of cash steadily decline. The trend is driven by millennials and Gen Z who are more digitally native and continue to gravitate towards cashless transactions. “The expression is ‘cash is king,’ but we like to say ‘free cash flow is king.’”

The concept of buy now, pay later has grown rapidly, especially among younger generations. The space is dominated by three companies: Affirm, Afterpay and Klarna. These offer the buyer at the point of purchase equal installment loans, marking another shift in payment behavior. “Gen Z is in love with Buy Now, Pay Later. They don’t look at it as a $100 dollar transaction, but instead four $25 monthly payments.”

LISTEN AND SUBSCRIBE

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SPEAKER

Warren Fisher

Founder

Manole Capital

FULL BIO

MODERATOR

Anthony Scaramucci

Founder & Managing Partner

SkyBridge

FULL BIO

EPISODE TRANSCRIPT

John Darcie: (00:07)
Hello everyone. And welcome back to salt talks. My name is John Darcie. I'm the managing director of salt, which is a global thought leadership forum and networking platform at the intersection of finance technology and public policy. Saul talks are a digital interview series that we started in 2020 with leading investors, creators and thinkers. And our goal on these salt talks the same as our goal at our salt conferences, which were, uh, proud to say resume in September of 2021. And actually this morning, uh, mayor bill de Blasio just said that they're fully reopening New York city on July 1st. So we're full systems go for salt in New York in September, but our goal with those conferences and our goal here on these salt talks is to provide a window into the mind of subject matter experts, as well as provide a platform for what we think are big ideas that are shaping the future.

John Darcie: (00:56)
And we're very excited today to welcome Warren Fisher to salt talks, where it started his career at Goldman Sachs asset management after graduate, uh, graduating with a bachelor of science degree in accounting from Lehigh university in Bethlehem, Pennsylvania, while on G Sam's growth equity team Warren was, was responsible for both the financial sector as well as service companies in the technology industry. Hence how he's found his way to the intersection of finance and technology today. Uh, in addition to his analyst duties, Warren was a portfolio manager on several of the portfolios over his 19 years at GE Sam Warren was a co-portfolio manager for the Goldman Sachs growth opportunities fund, which is a mid cap fund, the Goldman Sachs, uh, capital growth fund, which was a large cap fund, as well as the Goldman Sachs flexible cap growth, which obviously was an all cap portfolio.

John Darcie: (01:45)
He then joined fortress investments in 2013, affirm that we're very familiar with here at SkyBridge to help build Logan circle. Uh, first equity franchise, uh, Warren co managed three large cap growth portfolios as well as one mid cap portfolio. And in 2015, Warren created a Menaul tappable to exclusively focus on the FinTech industry, which is going to be the focus of our conversation here today. Hosting today's talk, making his debut here on salt talks is Jason Zen. Who's a partner at SkyBridge capital, which is a global alternative investment firm. And Jason also heads up our FinTech investing initiatives at SkyBridge. So looking forward to a fascinating conversations today between Warren and Jason regarding FinTech. And with that, I'll turn it over to Jason for the interview.

Jason Zins: (02:30)
Thanks, John. And, uh, thank you Warren for joining, uh, my first day back in the office, actually. So I'm not Anthony, uh, who usually hosts these talks, but I am in his office right now. Uh, and, and thanks Morgan for, uh, for joining us. So w why don't we dive in, um, I'll just start with a, a quick intro. Um, obviously it's SkyBridge, we're, we're very bullish on the FinTech space. We've been very active on the private side this year with names like chime and Klarna and others. Uh, and it's really based on a view that financial services has been ripe for disruption for some time now. And while innovation has been going on, uh, over the last number of years, it was really the pandemic in our view, that was a catalyst to accelerate. A lot of this disruption. Uh, UBS came out with a report recently, very bullish on FinTech, longterm, uh, looking at some of the secular growth drivers, uh, going forward over the next decade. You have none other than, than Jamie diamond at JP Morgan, uh, who in his shareholder letter, um, really endorsed or at least embraced FinTech, um, all recent developments, but Warren are our guests here today. You've obviously been a FinTech investor for quite a while now, uh, both on the public markets and private market side. So why don't we just start with your general view on FinTech, uh, and maybe touch on whether that has evolved pre and post pandemic?

Warren Fisher: (03:57)
Sure, thanks for having me today, looking forward to our discussion. Um, maybe the best place to start is, is how we define FinTech. And for us it's anything utilizing technology to improve, uh, an established process or procedure. And that could mean various things to various people. Um, obviously you guys, uh, have a background on the blockchain and the digital currency side. Um, you can have digital banks, alternative finance plays, uh, reg tech, InsureTech, um, robo advisors, financial advisors, the exchanges, um, but for us, the quintessential FinTech business is that the payment space. Um, we love the predictability, the sustainability, the recurring revenue, um, business models that these companies have. And, uh, you know, that for us is, is the quintessential FinTech business.

Jason Zins: (04:53)
Terrific. And before we dive into payments and some specific names in general, um, can you touch on a few of the other verticals just round out the FinTech ecosystem for us?

Warren Fisher: (05:05)
Yeah, so, uh, last week, or a couple of weeks ago, we had a big news and FinTech land with, um, the, with Coinbase going public. Um, certain people may not consider that to be FinTech. Uh, we have invested in the derivative exchange space for a number of years, and that covers the names like CME or ice, um, who owns the New York stock exchange. It could be NASDAQ or CVOE does options. Um, and for us, you know, a name like Coinbase is no different than a derivative exchange. They're the intersection, the marrying of buyers and sellers of assets and a Coinbase, um, which right now just does what four or five dozen different digital currencies. Um, but it also does storage and custodial work. Um, it's just a really interesting company. It's just fascinating for me to kind of see the market cap of it, have a name like Coinbase coming up, coming to the market, doing a direct listing, not an IPO and having a market cap in the 60 to $70 billion range to kind of put that into perspective.

Warren Fisher: (06:11)
That's bigger than CME. And I see him he's been around for over a hundred years and, uh, I certainly, while has a 20 year history, um, certainly can go back over 150 years with its ownership of the New York stock exchange. So a lot of change, a lot of, uh, new names coming into the space. Um, it just kind of reminds me that, you know, most people think of FinTech as being a revolution. Uh, you mentioned earlier, you know, Jamie diamond, uh, doing a shot across the bow to his own employees saying that we need to be aware of FinTech and technology and embrace that change and not look to do a kind of put our head in the sand. You know, I like to think of FinTech as much more of an evolution, not a revolution. You know, I've been covering the payment space for over 25 years and, you know, to me, it's fascinating to see it's not a speedboat, it's not terribly nimble.

Warren Fisher: (07:08)
It's more like an aircraft carrier. Um, you know, we still have max stripes on the back of our plastic credit and debit cards and, and they were invented in 1966. Um, the U S got, uh, EMV technology that chip in your debit and credit card in October of 2015, but that technology was in the mid nineties in Europe. So, you know, things happen in payment. And, um, I like to say slowly and steadily evolving. And, you know, for me, as, as we look at the space, the biggest market share donor is cash. And that might be a, uh, area that we talk about today. Just the steady market shared donor for all of these digital payments and FinTech names is the use of cash.

Jason Zins: (07:55)
Absolutely. The, the, the death of cash is as you call it, we will touch on in a, in a few moments, but I just want to pick up on, on one concept. Uh, you just, uh, you just described, which is really, um, the Coinbase versus the incumbents like CME and others, but you can apply that to really any FinTech vertical, depending on the day, PayPal might be bigger than bank of America square might be bigger than Goldman Sachs. So can you touch on a little bit, the next five or 10 years FinTech generally relative to the incumbents?

Warren Fisher: (08:29)
Sure. So I think the best place to start is maybe the financial sector. If you look at the S and P as a whole, uh, the financial sector is roughly the third largest segment in the market. If you look at the 11 GIC sectors, uh, the S and P and 80%, roughly 75 to 80% of the financial space is comprised of banks and insurance companies. And one of the areas that we do not invest in, we have no exposure to any banks or insurance companies is we're really just chickens where, um, we're, you know, w we stay away from banks and essentially digital banks, nouveau banks, alternative finance companies, because I don't want to take bounce sheet risk. I don't want to own a company that has opaque, uh, an opaque balance sheet. That's taking credit sensitive, um, interest rate sensitive that's, um, I like predictable, sustainable recurring gravity.

Warren Fisher: (09:29)
We like to make money per transaction in a way revenue per swipe. And it goes to, you know, we have certain characteristics that we look for in companies, whether it's market leadership, a durable, competitive advantage, what Warren buffet likes to call a moat around the franchise. Um, just those high barriers to entry, and when it comes to a bank, um, there really are no moats around that franchise. That commodity is the us dollar. They're borrowing it from, from their DDA accounts, their checking and savings accounts ended up renting it out. And that for us is not an ideal business. Um, we want to have companies that have, um, secular growth, not cyclical growth. And so we stay away from that alternative finance part of the, of the FinTech space. We just think that, um, banks are ripe for, um, for having their, their business really stolen over the next five to 10 to 15 years.

Jason Zins: (10:30)
Well, we, we certainly agree with you there. It'll be interesting to see, uh, which banks are able to innovate and navigate this. Certainly hard to bet against the Jamie diamond at JP Morgan.

Warren Fisher: (10:39)
Yeah. I mean, you look at JPM and they have a fortress balance sheet. Um, but our issue with it is, is that balance sheet transparent? Is it sustainable? Um, can you model in free cashflow? And when it comes to financials, we saw this with the, with the financial crisis. The most important thing is our mantra teams rationally allocating capital, and with financials, with banks, with insurance companies, unfortunately you don't find out who's swimming naked until the tide rolls out to use it another Warren buffet quote. Absolutely.

Jason Zins: (11:14)
So we'll touch on a few hot FinTech companies, uh, during the salt talk. And I want to start with plaid. Um, we're extremely bullish on the company. Really think it represents the FinTech ecosystem more broadly. They obviously just, uh, raised their series defunding, uh, led by altimeter and silver lake and ribbit capital. Um, so blue chip, uh, cap table, big jump in, in valuation, uh, companies currently valued at 13.4 billion. Um, give us a sense of your view on the company, how you got involved, uh, and, and what your view is on plat.

Warren Fisher: (11:52)
Sure. So, um, the Manoir FinTech fund is our hedge fund. And one of the nice things about our hedge fund is we can do both public and private. We married those two areas of FinTech and the vast majority of our positions are public. Um, and that gives us the ability to have a good amount of liquidity and transparency for our limited partners. But we can, like you said, own a handful of, uh, private FinTech companies. And we came across plaid back in 2018. Um, we made our investment, um, in December, 2018. And if you recall, the S and P in the fourth quarter of 2018 was down significantly. I want to say about 13, 14% in December of that year, the S and P was down over 9% and we made an investment in plaid and they had just done a series round valuing unit around a little bit, over $2 billion.

Warren Fisher: (12:53)
We actually got a discount to that. So we were pleased with that. And, uh, we owned it for, uh, 13 months. And then January of last year, we were reading our wall street journal like you, and, uh, opened up and saw that there was a transaction where visa was acquiring plaid for $5.3 billion. So obviously a positive for us. Um, we envisioned like most deals at that would be a, uh, six to nine month kind of closing and visa would be the new shareholder and owner of plan. We actually wrote a note on plaid before we purchased it, and I don't know how many people read it. It might've just been my mom and dad, where were the only two people that read it, but we called plaid the sets, the sexy plumber, and it's not a, a flashy business. It's not one that builds a, a great brand name like you have with visa and MasterCard debt, signified trust.

Warren Fisher: (13:50)
They were 200 countries around the world. Um, plaid is very much on the backend of a most transaction, similar to a lot of our payment processors who authorize clear and settle a transaction names like, like a global payments or first data or an FIS or five serve. Um, these are names that don't have great brand names, and we never really envisioned plaid having a, a great brand name. What they do is they're connecting, um, hundreds of financial apps, FinTech apps, um, to the funding source. So if you're opening up a Coinbase account, um, and you want to fund it, um, we just did this recently. We saw when we, when we connected our Coinbase account to our bank of America account, that transaction was done by plan. Um, if you opened up a Robinhood account and millions of gen Z and millennials opened up Robin hood accounts over the last 12 to 18 months, when you fund that brokerage account from your bank account, plaid is acting as a connection to that bank, that funding source that validation.

Warren Fisher: (15:03)
And, um, over the course of last year, um, initially the UK came out and, um, wanted to analyze Visa's acquisition of plaid. Um, they, at the end of the summer approved that transaction, but then in November of last year, the U S department of justice came out and said, you know, said time out, hold on. Let's, uh, let's take a look at, um, this DCIS acquisition of plaid. And they sued to block the transaction. Uh, initially visa came out and said, well, we've got a lot of high priced attorneys and lawyers on staff. We're going to go ahead and go to court. Um, and then in January of this year, they decided, you know what, let's just go ahead and terminate the acquisition of, uh, plaid. And, um, we'll use it well, we signed the long-term contract to use plaid services. And, you know, for us, we were kind of at a, at a pressure mark here.

Warren Fisher: (16:04)
We don't see a lot of deals get broken up. Uh, we actually own visa in, in our portfolios. So here we had one of our companies acquiring another one of our companies. And, um, it's interesting, the reason and the rationale that the DOJ gave for, for breaking up the visa transaction was visa has a huge market share in the debit space over over 70%. And one of the visa executives, you guys should Google it, or anyone watching should Google it. If you just do visa plaid, sketch iceberg sketch, you'll see that there was a, a doodle, a sketch, if you will, that a visa executive did. And the DOJ used that sketch as their ammunition for shooting down this transaction. And in an above the iceberg, you see bank connections and, uh, account validation. And then below the iceberg, you start seeing items like credit decisioning.

Warren Fisher: (17:04)
Um, you see, uh, marketing and advertising, you see financial management and identity matching and fraud detection. And that is really what the DOJ got worried about. That a visa owns plaid, and it also dominates debit that this could be a another monopoly. And so they, they kind of walked away. Visa walked away in January of this year. You talked about the valuation of it. Um, actually more than doubling, almost tripling from what visa was going to pay for it. I look at it and say, visa, put the good housekeeping seal of approval on plaid. It dominates this space of a bank connecting invalidation and the movement of funds. And, uh, you know, we still own it. We envision either a stack. It might be too big for us back, but we envision the company maybe having an IPO later on this year or internet year. And it being the latest tech company to kind of come to the markets.

Jason Zins: (18:07)
Great. So I want to, I want to zero in on the DOJ complaint, cause to your point, it, it is fascinating and the, the iceberg or the volcano picture is sort of becoming

Warren Fisher: (18:17)
The volcano, at least

Jason Zins: (18:19)
In, in nerdy FinTech circles. But the DOJ complaint, um, to us is almost an investment memo for plat, right? And, and one of the key quotes that I love from one of the visa executives is that they view plaid as an existential threat to their debit business, which as you mentioned, they, they more or less have a monopoly on with, with 70% market share. Um, and so now that the, uh, the visa deal and the acquisition is falling apart and plat is moving ahead on its own, uh, obviously a very different environment for plaid, right. That acquisition was pre COVID. We're now in a different world. Um, where do you see plaid, uh, going forward? And what do you think the potential is over the coming years?

Warren Fisher: (19:06)
Well, I think, um, if you look at the, kind of that sketch in the bow, uh, uh, waterline, uh, if you will, um, I think it has a lot to do with fraud detection, um, and identity, you know, confirming identities. Um, we're not really envisioning it going into the advertising and marketing space, but just the ability to move money from point a to point B. Um, we talk a lot about visa and their capabilities. You know, visa does 150 million transactions a day. It could do 1700 transactions a second, and, um, their capacity, their spare capacity is 40 S that they can do 65,000 transactions. A second, uh, PayPal during the holiday season did over a thousand transactions a second. And so it really is the, the, the middle of moving money from point a to point B from point B to point C. And, um, to me, it goes to our definition of FinTech is, is visa or PayPal because they moved money.

Warren Fisher: (20:14)
Is it a financial company? Um, is it a tech company because of the capacity that they have and the millions of transactions that they do a day? I don't really care. Um, for me, it's not a matter of, um, are they financials? Are they, tech companies is, is plaid a, uh, financial because all of their customers are banks and brokers. Once again, it doesn't matter to us what we're looking for. Those companies that can generate predictable, sustainable recurring revenue. And we think the future for plat is really bright. It's going to have, um, a business model. That's, transaction-based, that's very scalable. That's going to generate very high operating margins. Um, and it, it should generate, um, absolutely growth for the next three to five years and beyond.

Jason Zins: (21:04)
But we, we certainly agree. We think that the flip side to not having a sexy consumer facing business is obviously a much lower cost structure, much higher margins to your point cloud does have a recurring revenue model. Uh, and we think, again that the DOJ really laid out the potential on the disruptive nature of plaid. Really just to hammer home. The point visa is this $500 billion company doing $25 billion in annual revenue. Um, Plaid's ability to disrupt this monopoly on money movement in the United States, uh, we think is, is, is very exciting and, and has the potential to be, um, to be massive. So, um, let's, uh, let's transition into, um, a concept that you, you mentioned earlier, uh, and you have a presentation on this, the death of cash. Um, and I think you had some pretty interesting statistics, uh, really just about the rapid decline of cash in the last decade, certainly has accelerated as a result of the pandemic.

Jason Zins: (22:05)
A lot of it is generational or demographic with, with millennials and gen Z. Um, but I think you estimate that about 30%, only 30% of transactions in the U S today involve cash, uh, in Sweden, that number is 6% and they have a goal to be entirely cashless by 20, uh, 2023. And that sort of be consumer behavior, uh, has massive implications, um, for various verticals, certainly payments, uh, and others. Um, but I want to focus for a second on Sweden, um, and touch on another company, uh, Klarna, which is a Swedish company, uh, the global leader in the buy now pay later space, also raised money, uh, recently at a $31 billion valuation making it the largest European FinTech company, uh, on the private side. Um, so touch a little bit on, on this buy now pay later vertical, which is sort of inside of payments or an adjacent to it. Um, give us your view on the space and Klarna in particular.

Warren Fisher: (23:08)
Sure. Um, so a lot in there, on, on cash, maybe, um, we always like to say, you know, you know, the expression cash is king for us, it's free cash flow is king. Um, I joke around and saying the depth of cash, but cash is still 75 to 80% of global purchase transactions and, uh, countries that are very institutional and sophisticated like Germany and, and, uh, Japan, Japan is still at 82% cash based, um, in terms of purchases, uh, Germany's 84%. So on the flip side of those two countries is as you mentioned, which has that goal of, of going cashless, but, um, there is a slow and steady decline. We talked to a moment ago about that, um, decline of cash usage, but it's, it's going to take years. Cash will always be a part of the payment chain. If you look in the U S about a third of transactions are still done in cash, but if you look at the $10 transaction size and tend to add $10 and less, it's still 55% of those transactions are done in cash.

Warren Fisher: (24:15)
And so that will continue to move down. Um, whether it's the one New York program in the subway system, that's the MTA is coming out with to allow contact list and mobile based payments, the ability to use your phone at the turnstile to go into the subway, the train, or the bus, um, clipper, um, is in San Francisco for ferries and transit San Fran that just got announced last week of all things. Um, but here in Florida, where I am the highways, uh, no longer had people taking cash on the highway, it went, um, entire digital and automated, um, back in 2011. So the transportation space is really an interesting area for where we're seeing cash being removed from our society. But, um, on the flip side of that within payment land buy now pay later is really fascinating. It's taken us a while to get comfortable with it because in our mind, um, we tend to look at more digitally native products, whether it's, you know, the payment networks, visa, MasterCard, or PayPal, the payment gateway is like an Adyen or Stripe, um, a Braintree at a PayPal or the payment processors, or even the merchant acquirers.

Warren Fisher: (25:34)
Um, it's taken us a while to get comfortable with buy now pay later because it really is just an installment. If we go into a home Depot and buy a hundred dollars, our, uh, drill, um, the ability to make four twenty-five dollars payments over the next four weeks, um, that's an installment, but, uh, we'd come around to this concept. And there's three companies that really dominate the space maybe soon to be four. Um, you have a firm that went public in January, uh, did very well on its IPO. You have Afterpay out of Australia and you have, as you mentioned, the third, the largest of the three, um, being corner out of Sweden. And what they're doing is they're essentially offering, um, consumers GMCs and millennials, the ability to make transactions at the point of sale and do that equal for equal installment means. Um, and for that they're charging merchants upwards of five or six or even 7% to do that.

Warren Fisher: (26:40)
Now you have to compare that to a hundred dollar transaction in the U S a hundred dollars credit card transaction will generate about two to two or four, maybe on an online transaction two and a half percent in fees. So a hundred dollars transaction generates fees of $2 and 50 cents, um, in terms of a cost for the merchant in a buy now pay later environment that merchant on a a hundred dollar transaction might pay $5 or $6 to enable that gen Z, uh, consumer to transact that hundred dollars transaction at home Depot. So, um, there are significant costs when it comes to buy now pay later, but merchants are, uh, excited to offer it to their consumers. And it's just another way for consumers to transact. They can use cash, they can use their debit card, they can use a credit card, they can use buy now pay later. Um, and so we're really are seeing a transformation with online or at the physical point of sale for brick and mortar retailers. Um, how the consumer wants to transact and merchants want to enable their consumers to transact any way that they want.

Jason Zins: (27:52)
And, and to your point, it does seem that despite the higher cost, it's obviously growing rapidly with merchants, seeing the benefits of, uh, acquiring or attracting, um, these newer, younger shoppers, um, who really view buy now pay later. And the companies that you mentioned as really an alternative to traditional credit, um, and the credit cards, which as you know, younger generations are, are increasingly, uh, avoiding, uh, having, having credit cards in your wallet. Um, you, you mentioned or alluded to the, the differences in consumer behaviors across countries and regions. On the one hand, you've got a country like Japan. On the other hand, you have a country like Sweden. The us is probably somewhere in the middle, maybe closer to the Sweden side. Um, but buy now pay later in the U S is relatively new, I think, uh, penetration for buy. Now pay later as a percentage of total e-commerce is around 2% or a little bit less, but growing rapidly, um, to the tune of 200% or even 300% for a company like Klarna. Um, do you think this is a fad, or do you think this is part of a longer term, um, trend that will continue to develop, uh, as the younger generations continue to participate in the consumer economy?

Warren Fisher: (29:12)
Yeah. Going back to maybe what I said earlier for us, it's much more of an evolution than a revolution. Now, the, the growth rates that names like affirm and Afterpay and coroner are generating are eye-popping, but they are coming off a very small base. Um, we, we needed to embrace and understand millennials and gen Z and how they are transacting. We do a, um, a survey, uh, several hundred, um, gen Z, uh, consumers. And we, we ask questions on four key financial services areas. We do, um, digital currencies, Bitcoin. We do brokerage banking and, uh, we do payments. And one of the takeaways from our survey work is that gen Z is in love with buy. Now pay later, it comes a little bit down to almost the us mindset of they don't think of in that example, I used earlier that a hundred dollars drill at home Depot.

Warren Fisher: (30:13)
They're not thinking of it as a a hundred dollar transaction. They're viewing it as four equal $25 transactions over the next four weeks. And so, um, you know, some people buy a car or lease a car or, you know, acquire a car, and they're not looking at the cost of the vehicle. They're looking at what are my monthly costs. Um, some people buy a house and say with interest rates at this amount, um, what are my monthly costs going to be? And so I now pay later really is an environment where for us, we get worried that these companies are giving out credit, um, and not doing the analysis, their credit decisioning on those consumers well enough. And so that goes to the opaque balance sheet that some of them might have, but there definitely is a ton of growth there it's part of, you know, a lot of gen Z and millennials grew up seeing their parents deal with the financial crisis.

Warren Fisher: (31:12)
And a part of that problem was their parents may be getting in trouble with credit cards. Um, that's why we're seeing a resurgence on debit. Debit usage is a way to maintain and control your spending. Um, buy now pay later is, is essentially just, uh, an extension off of debit. And it's kind of weaving in it's maybe at middle ground, which we debit and credit. It's, it's really fascinating. We do think that there's going to be, um, multi-year growth, kind of, for all three companies, one name that's getting into this space as well as PayPal. Um, they certainly have the capability to do it. And so, um, you know, we're excited for that, that space. And once again, that's a private name in Florida that we can own inside of our hybrid hedge fund FinTech fund.

Jason Zins: (32:00)
Well, we, we certainly agree with the long lasting nature of, of the growth story here. Um, obviously, you know, really just getting started. And you mentioned clearness monster, I, excuse me, a firm's monster IPO in January clarinet with, uh, a big private funding round. I likely to be a public company in the near term. So we'll, we'll continue to, uh, to monitor that space, um, shift gears here in, in the minutes that we we've got left, um, into contact lists and mobile payments and digital wallets more broadly, which is, uh, I think a space that you focus on. Um, obviously some of the biggest fintechs out there, like a Stripe and PayPal Addie, and you mentioned, uh, really enabling this shift. Um, can you just talk a little bit broadly about the future of mobile payments and tie in digital wallets there? Of course.

Warren Fisher: (32:51)
Sure. So, um, I still have in my jeans on leather wallet and it's got, you know, a couple of different plastic debit cards. It's got, you know, visa and MasterCard credit cards from multiple, multiple banks, whether it's prepaid cards as well. And I have a couple of dollars in cash. Um, we envision over the next three to five to seven years, being able to replace that wallet in your pocket with this, your iPhone, your mobile based, uh, payment, it will be the way that you transact. So instead of going out with a wallet, uh, we had the visual going out to the store, going out to your local coffee shop, going to Starbucks or Panera or CVS or Walgreens, as you knew your shop and using your phone to transact. We're seeing that already with what I'm going to call that bridge, which is QR codes.

Warren Fisher: (33:40)
Um, they were not developed for payment. They were QR codes were developed for manufacturing and supply chain management, but the payment area has embraced QR codes. And you can turn your iPhone, your Google phone, your Samsung phone, whatever phone you have into a point of sale device where you can accept payments from someone else via your phone. We know the success of, of PayPal's Venmo in doing P2P transactions, simply moving money and texting money. Um, you know, for me to you, if I were to lose a golf bet or a split lunch with you, and that is taking off square and their cash app has as a great product as well. Um, and, and we really envision, you know, if you look at COVID last year, it was obviously awful. Um, global pandemics are never good, but if there was one benefit in, in a way it really benefited and acted as a tailwind for a lot of our payment companies, it forced the adoption of digital currencies and contactless payments and, um, you know, foreword by either a couple of years or maybe even a decade as, as some industry experts have articulated.

Warren Fisher: (34:56)
If you go back 10 years to 2010, and you looked at the us market in terms of retail sales, you're talking about a $6 trillion annual spend on the U S retail side. And 10 years ago, e-commerce was four and a half percent of that total spend. And then by 2015, it continued to go up steadily marching higher to, um, 7.3%. And last year it got into the double digits. So we had a kind of huge way of adoption of digital payments and e-commerce usage. Um, you know, people know that the flu can on paper currency for 17 days. Um, the CBC came out and said, last year, if you touch and handle paper currency, you should immediately wash your hands in the U S a dollar bill changes, uh, hands 55 times over the course of a year. And so there's a dirtiness, um, to paper currency.

Warren Fisher: (35:59)
And that just goes to what we talked about earlier that, that depth of cash. And so we really see kind of the biggest and easiest kind of donor being cash as a tailwind for the digital payment space. And then second, we see big growth in continued growth, um, away from physical brick and mortar locations, physical retailers towards e-commerce and retailers and merchants need to have a bio wine pay in store or an omni-channel kind of presence in order to survive. And that was one of our big takeaways from last year. And COVID-19 is companies need to be able to adapt. It's not just the banks and Jamie diamond who need to adapt and embrace technology. It's your everyday restaurant needs to be able to do takeout. Um, it's your stores that need to allow their consumers to shop online and maybe even pick it up in store or have it directly shipped to them.

Warren Fisher: (36:56)
I don't know about you guys, but I have, um, a box outside of my door or each and every day from Amazon prime. And, um, all those transactions have to be done via a digital payment. And it just so happens that the largest payment gateway for a company like Amazon is Stripe, which we own in our fund. So, you know, we, we like the, the marriage of public and private FinTech companies in our fund, and we're seeing great growth opportunities and enormous opportunities on the private side. But I would still argue that the names that many of us know the visas, the MasterCard, the PayPals, um, have wonderful growth opportunities that are having them as well. So

Jason Zins: (37:40)
We're gonna, we're going to bring in Bitcoin here for a moment. I'll be back on to those without it. Um, but specifically as it relates to payments, I think obviously Bitcoin, at least in our view, the discussion has been settled as far as the store of value. We, we certainly believe it's it's digital gold or gold to point out. Do you think Bitcoin or more broadly blockchain, um, has a space in, in, in payments, uh, five, 10 years from now?

Warren Fisher: (38:10)
So, so, um, you know, we like to say that any currency needs to hit on two different requirements and you mentioned it there's store of value, and we are slowly coming around to it. Anthony and Brett have, have done a good job of beating us over the head with this. Um, and it does have for certain institutional investors, um, a store of value, digital gold, um, I think it has a market cap, Bitcoin, at least of a trillion dollars, comparing that to, um, gold being, you know, 10 to $11 trillion. So there will be, um, a use for it as a store of value. It really needs to, our issue comes down to, it needs to maintain that value, not have a ton of volatility, and it can't really depreciate too quickly. And, you know, we can see Bitcoin and other digital currencies have, you know, 10 and 15% moves over the last weekend alone.

Warren Fisher: (39:08)
Um, you know, so the store value we're on board with that, but for us, the medium of a change part of your question, doesn't really suffice. Um, now names like square cash app, like, uh, PayPal are trying to enable their digital wallet holders, um, who had transacted in Bitcoin. If I bought 5,000 or a thousand dollars with a Bitcoin, and I want to use that to shop at CVS or Walgreens or Starbucks or whatever it might be. They're going to enable that consumer to transact. The problem with that is the IRS does not consider Bitcoin a currency. It considers it an asset. And because of that, you have capital gains taxes if you transact using Bitcoin. So if I walk into CVS or Walgreens and I spend $20 and I have in my digital wallet at PayPal and embedded paper gain in Bitcoin last year, it was up 300%.

Warren Fisher: (40:11)
It's more than doubled this year. So most people have a paper gain on their Bitcoin in their wallet. At the end of the year, I have to give PayPal a 10 99 a w nine. And so they're going to get, um, at the end of the year, an eyeopening tax hit for that transaction. And so, you know, also that's just on the tax form. Um, we see problems with the medium of a change. You also have to look at, um, the ability to return items. So Elon Musk, um, what makes some, some fanfare for a Tesla, um, a month ago when they bought $1.5 billion of Bitcoin, put it on their balance sheet and said, anyone who wants to buy a Tesla, um, can now do that with it. The problem is what happens if I return my Tesla, or if I buy a television at best buy, and they're allowing me to use Bitcoin, what happens when I return that item is the merchant acquirer and the merchant going to give return to me Bitcoin or dollars.

Warren Fisher: (41:17)
And what happens with the volatility of Bitcoin, if it has a five or 10 or 15% move either way from when I purchased it to when I return it. And so we see problems on the return side, and then frankly, just on speed. And we talked about the ability of visa to do 65,000 transactions a second. Um, if you look at Bitcoin and digital currencies and how many transactions they can do a second it's seven. And so they, they're not at a level of scale. Um, certainly that the payment processors currently allow me to transact. Um, and so we see some issues on the, the medium of a change. Um, you know, we're, we're there with you on the store of value. Um, the medium of exchange we're not there yet with. And, and we always go back to, you know, May 22nd. Um, the anniversary May 22nd, 2010.

Warren Fisher: (42:14)
Uh, there was an interesting guy who used the first ever a Bitcoin transaction, um, was what occurred when, when lastly went ahead and use 10,000 Bitcoins to buy two large Papa John's pizzas. Um, and in 2010 lasso thought he was getting a great deal. Um, you know, those 10,000 Bitcoins now have over $500 million worth of value. So I don't care how good those, those Papa John pizzas were. That was a bad decision to use Bitcoin to transact. So, um, you know, maybe, maybe that kind of hits on some of your medium of exchange, uh, on the Bitcoin and digital currency side,

Jason Zins: (42:54)
Hopefully Papa John is still sitting on that those 10,000 Bitcoins,

Warren Fisher: (42:59)
They probably are not,

Jason Zins: (43:01)
Would be worth, I don't know, hundreds and hundreds of millions of dollars today. So I'll end with a final question. We've discussed a couple of different payment or money networks today. Um, the big incumbent being visa, we talked about plaid, uh, and their emergence as a, as a real-time money movement network, which has discussed Bitcoin. Uh, I agree some of the, the immediate challenges for day to day transactions, although there does seem to be applications for large cross border instant transfers of money. Um, but a decade from now, what do you think money, networks and payments look like? Um, with, with some of the ones I just mentioned, visa, something like a plat and alternative network or a Bitcoin on a blockchain.

Warren Fisher: (43:48)
Yeah. I mean, um, the people have called for the death of cash for a number of years and in our lifetimes, cashflow will still be around, uh, people have called for the death of the, uh, remittance market. You know, the Western unions of the world, there are 170 years old. Um, and so I think, uh, maybe the calling for the death of a MoneyGram or Western union probably is premature to, there will always be a need for me, transacting with someone, whether it's cross border for a remittance of even a couple of hundred dollars that transactions still might happen in cash in a decade from now. But we really think, um, the big shift is going from your wallet to this, your iPhone, and being able to move money. Um, PayPal's Venmo really, uh, dominates the PDP space, but it shouldn't be the only one.

Warren Fisher: (44:43)
There should be apps, whether it's the cash app from, from, um, from square or Venmo's, uh, PayPal. But the ability for me to send money to you instantaneously through a text is to me where we're going, that's the revolution. It's going to take a little bit of time to get there. Um, that's kind of one. Um, and then to the other really big items we see, we talked about it earlier is, is e-commerce trends. I'm not going to be surprised if e-commerce goes from the mid teens to the high teens, low twenties percent of total, uh, us retail sales of that $6 trillion of spending. And the big three in that space are Adyen in, uh, Europe. Um, PayPal's Braintree and Stripe Stripe is, is our single largest holding. And we envisioned just years and years of continued growth on the e-commerce side. And, and frankly we're earning money on every one of those transactions multiple times, because I can use my visa or my MasterCard, um, account LinkedIn through Stripe. Um, so we can earn merchant acquiring fees, payment, processing fees, payment, gateway fees, um, network fees. And so we really view that as being a wonderful avenue of growth and where we're comfortable investing as opposed to the banking channel, which, which unfortunately still has. It's a cyclical model and it still has opaque balance sheets.

Jason Zins: (46:17)
Terrific. Well, we certainly touched on a number of different FinTech themes and exciting companies out there. Uh, of course we had SkyBridge are very bullish on the space going forward. Uh, but Warren, thank you for joining us and for giving us your thoughts, uh, on the, uh, the broader FinTech space. So with that Donald, turn it back over to

John Darcie: (46:37)
You. Yeah, Jason, that was a fantastic debut. I don't know if I'm going to get my job back in hosting. Some of these salt talks

Jason Zins: (46:45)
Twins right now, so

John Darcie: (46:47)
Hopefully nobody can tell the difference, but Warren, it's great to have you on, obviously we're very excited about the FinTech space and it's great to have an expert like you on here to break down everything we're seeing in the space. So thanks for joining us from beautiful Tampa, Florida, and, uh, and Jason, good to see you in the office. I'll see you on Monday. We're we're returning to office work on Monday, so excited about that. Very excited. Yup. Thanks Warren. And thanks Jason again. And thank you everybody for tuning into today's salt talk, uh, focused on FinTech with Warren Fisher of Minola capital. Just a reminder, if you missed any part of this talk or any of our previous salt talks, you can access them on our website@salt.org backslash talks or on our YouTube channel, which is called salt tube. Uh, on social media. Twitter is where we're most active at salt conference, but we're also on LinkedIn, Instagram and Facebook as well. And please spread the word about these salt talks. We love educating people, especially during the pandemic, the ability to, to stream these salt talks and, and educational resources into people's homes, uh, you know, through digital recording. Hopefully we can see warrants sometime soon in New York, including our salt conference in September. But, uh, again, please spread the word about these salt talks. And this is John Darcie on behalf of the entire salt team and Jason here making his debut on salt talks signing off for today. We hope to see you back here again soon.

Tsedal Neeley: The Remote Work Revolution | SALT Talks #207

“The last 13 months have not only accelerated the virtualization of work but also everyone’s technological advancement... the digital revolution is right behind us.”

Tsedal Neeley is the Naylor Fitzhugh Professor of Business Administration at the Harvard Business School. Her work focuses on how leaders can scale their organizations and recently published her book Remote Work Revolution: Succeeding from Anywhere.

The pandemic accelerated the pace at which remote work and virtualization became integral to organizations. This has created a whole new paradigm, and with it, new challenges for leaders to consider. Creating and maintaining a culture becomes more complicated when employees spend less time together in person. Technology needs to be accessible and used intentionally so that all different worker groups are included. “You need to use the right technology for the right task for the right goals.”

Large segments of the workforce have experienced remote work during the pandemic and have discovered many benefits like savings from an eliminated commute and other associated costs. This will increase calls for more hybrid work models that allow employees to spend less time in the office. “The tension is the majority of employees don’t want to come back [to the office full-time].”

LISTEN AND SUBSCRIBE

Spotify | Amazon | Google | Stitcher

SPEAKER

Tsedal Neeley

Naylor Fitzhugh Professor of Business Administration

Harvard Business School

FULL BIO

MODERATOR

Anthony Scaramucci

Founder & Managing Partner

SkyBridge

FULL BIO

EPISODE TRANSCRIPT

John Darcie: (00:07)
Hello. Hello everyone. And welcome back to salt talks. My name is John Darcie. I'm the managing director of salt, which is a global thought leadership forum and networking platform at the intersection of finance technology and public policy. Salt talks are a digital interview series that we started in 2020 with leading investors, creators and thinkers. And our goal on these salt talks is the same as our goal at our salt conferences, which we're looking forward to resuming hopefully here in September of 2021, which we'll talk about a little bit with our guests today, but our goal is to provide a window into the mind of subject matter experts, as well as provide a platform for what we think our big ideas better shaping the future. And we're very excited today to welcome a big time subject matter expert onto salt whose, uh, subject matter expertise is extremely relevant, especially in the age of COVID.

John Darcie: (00:59)
Our guest today is professor [inaudible] Neeley. Uh, so doll is the Naylor fits you. Professor of business administration at the Harvard business school. Her work focuses on how leaders can scale their organizations by developing and implementing global and digital strategies. Again, nothing more relevant at no time, more relevant than in the age of COVID starting early in 2020. She regularly advises top leaders who are embarking on virtual work and large scale change that involves global expansion, digital transformation and becoming more agile. Her most recent book is called remote work revolution, succeeding from anywhere, and it provides remote workers and leaders, the best practices necessary to perform at the highest levels in their organizations prior to her academic career. Uh, so doll spent 10 years working for companies like Lucent technologies, the forum corporation in various roles, including strategies for global customer experience, 360 degree performance, software management systems, Salesforce sales, management development, and business flow analysis for telecommunication infrastructure hosting. Today's talk is Anthony Scaramucci, the founder and managing partner of SkyBridge capital, a global alternative investment firm. Anthony is also a graduate of Harvard law school. So the, I know that, uh, Sedol and Anthony have crossed some paths or have some mutual relationships that they might get into today. I'm glad

Anthony Scaramucci: (02:27)
You mentioned it Darcie. Cause I would have mentioned

Anthony Scaramucci: (02:29)
Times that I went to the Harvard law school seven

Anthony Scaramucci: (02:32)
Times in 45 minutes, but professor, what a great accomplishment, what a great life story, congratulations to you and having gone to Cambridge Latin high, uh, and there you are, uh, across the river. What an amazing, uh, experience, um, I guess I want to start, you know, there, if you don't mind, uh, tell us how you grew up, tell us what you were thinking about. Did you think you were going to be a business school professor at the Harvard business school? Tell me, tell me where you were, what you were thinking about.

Tsedal Neeley: (03:03)
Oh, Anthony, you're going to go right to it. Huh? Um, so no, I am a reluctant academic, uh, w this is the big reveal. Uh, I actually never thought that I would be a professor, much less a business school professor. I grew up as the daughter of small business people, entrepreneurs, uh, and when I was about 19 years old, my father said to me, you know, so doll, you're interested in business. Uh, you need to learn how businesses make money. So you need to go into sales. I said, what? You need to go into sales and learn how organizations generate revenue, what kind of sales, anything? So, and like any, you know, self-respecting a 19 year old. I started with candy, Anthony. I sold candy. Uh, eventually I started to, uh, sell technology systems, consulting services, and eventually met all of these mild-mannered academics in one of my big, uh, consulting sales jobs who didn't have sales quotas and who are all mild mannered. I said, you know what? I want to be like one of those people. And so here I am Anthony. I'm a mild-mannered, uh, academic at the Harvard business school. And, um, along the way did a lot of traveling with my work. I've always believed that the world is small.

Anthony Scaramucci: (04:33)
So, so John Darcie, we've established that she's a great sales person.

Anthony Scaramucci: (04:40)
They tell you that your mild

Anthony Scaramucci: (04:41)
Mannered, you got to hold onto your wallet. Okay. So let me just make sure I know where my wallet

Anthony Scaramucci: (04:45)
Is. [inaudible]

Anthony Scaramucci: (04:49)
You're coming at the game with a jujitsu that I can't properly manage. Well, before we go into my more urbane and academic questions though, tell me your favorite candy. You started in candy. I said I'm a, I'm a Reese's peanut butter guy. So what, what, what's your favorite candy?

Tsedal Neeley: (05:07)
I'm a toffee with chocolate type of gal. So score Heath bar. You realize I'm answering questions. I've never answered in life.

Anthony Scaramucci: (05:18)
I got to know. Okay. So Darcie, I've got this toffee place in, in, uh, is I love toffee by the way. Cause I'm, I'm a little, I'm a, I'm a total foodie. I got to talk. He place it called N strums in Colorado. We got it. We got to send some to professor Neil. Okay.

Anthony Scaramucci: (05:36)
Okay. I'm gonna try to win your heart and mind.

Anthony Scaramucci: (05:42)
I'm going to try to win your heart and mind through your palette, but let's talk, let's go to the remote work revolution, succeeding from EV anywhere, which is your book. Uh, and let's start with why you wrote the book and how timely the book is by the way, because it's coincident with the pandemic and tell us, uh, what you were thinking about when you wrote the book and now let's apply it to the real world. We're all living through the coma. COVID-19 pandemic. What about the book is relevant and accurate. And what about the book? Did you miss? If you missed anything, tell us, tell us your observation.

Tsedal Neeley: (06:20)
So this book had been underway for a very long time before the pandemic hit. In fact, it was a pet project for me because the problem I was trying to solve was people telling me after years and years and years, working with executives, teaching with executives, managers, and, uh, virtual and global team members that no matter how much they themselves change their behaviors to be fabulous virtual collaborators, unless everyone else develops the same skills. It's not helpful. How do I get my group, my team, my unit on the same page. So Anthony, I started hiring artists to look at visual language. I started to hire curriculum design people to try to produce a book that would have stickiness to it when groups and teams, uh, used it. Um, and I was, I had about two hundred and fifty two hundred sixty pages worth of written material research illustration. And I was walking around with it with no publication date in mind.

Tsedal Neeley: (07:31)
And in the meantime, while actually working on a different book called the digital mindset COVID hits, this book was then produced in two and a half months because all that work had been underway for about three years. Uh, it pains me. It really pains me that we've landed in this place, uh, because of this deadly virus. But the virtualization of work is something that I've always felt would be a core part of modern organizations. That's why the book is organized to bring, to bear all of the success factors when people go remote. And the actual structure of the book, uh, is relevant to COVID because, uh, along with the Harvard business review, we did a Q and a session with managers, uh, and ended up with the, uh, themes of the book, uh, because all these people kept asking about productivity. How do I monitor people?

Tsedal Neeley: (08:36)
How do I ensure productivity is maintained? What digital tools do we need? How do you maintain connection and trust, uh, in global work. And in fact, after this Q and a session, we posted it on hbr.org and it garnered almost half a million downloads in just a few days. So we knew we were capturing the key questions and the book is structured in that way. So you ask what, uh, did I miss, uh, in the book? I actually don't think, uh, uh, I missed the essence of what people need in order to construct a very effective organizations that includes virtual arrangements, but I wish I had some more things around remote teaching, remote learning, uh, things like that, more specific, uh, things, uh, that people care about, uh, and to correct that, uh, in a way, um, I've launched a course called remote work revolution for everyone it's free, it's on the Harvard X platform. And we've, we've made sure that there were affinity groups like teachers who can work together and learn together. Yeah,

Anthony Scaramucci: (09:50)
I didn't, I didn't mean it in a pejorative way. I meant academic setting and then the academic world is meeting the real world. And since you, or a great intellect, you, I knew that you would synthesize and try to figure out what's there. And so more teaching, more online, teaching, more, more of that. I guess the thing that plagues me, uh, which is near and dear to my heart is some of this trying to run a company remotely. Now for the last 13 months, you can never find John Darcie when you need them professor Neely, just so you know. Okay. He does show up with the salt talks appropriately, uh, tired, but I have no idea where he is, unless he's a here on assault org, but we'll talk about that. You and I will talk about that separately, but my issue

John Darcie: (10:36)
Is I'm in the office. Where are you, Anthony? Still on your basement?

Anthony Scaramucci: (10:39)
I'm in my basement like Joe Biden. Okay. It's been a very successful strategy. It's going to be my strategy and I'm sticking to it. So what I want to say, professor Neely is what I'm worried about is what John is actually addressing. We're out of the office. Uh, we have issued a return to work, uh, memo for May 3rd. I believe it is, or May 4th, um, which is coincidence with where the municipal workers in New York city are returning to work. Um, of course we are being lenient related to, you know, people that are concerned or have safety issues, comorbidities, things like that. Um, I've requested that people get vaccinated. I'll just talk to you very candidly. And again, that's a request I'm not mandating it or anything like that, but I believe in the science behind the vaccination, I myself have been doubly vaccinated. What I'm worried about though, is the culture, the lack of physical proximity. Um, I feel like I'm shooting in the dark as somebody that runs the organization in terms of creating the culture. Am I wrong about that? What, uh, what do I need to do? Be my career coach? Uh, you've got so many people that listen into thing that are worried about the same thing. What do you, what do you tell them?

Tsedal Neeley: (11:57)
I think you're spot on when you talk about culture as being the fundamental issue that leaders like you and organizations are concerned about. And it's, for that reason, we find that 68 to 70% of organizations would want people to come back in person. But the tension in that and the challenge in that is that the majority of employees don't want to come back to the tune of 81 to 87%. 81% is the number that Harvard business school online recently, um, uh, gathered from a survey, uh, 87% comes from the Gardner group, a survey they released in December of those numbers, 27 to 30% want remote work, full time and, uh, leaders, uh, who want people in the office. I think you have to be very careful when you force people back. Uh, first of all, because you know that they don't want that. The second thing is physical proximity does not equate strong cohesive cultures.

Tsedal Neeley: (13:04)
In fact, what is culture? If the definition of culture is what are our shared values and for most of us they've stayed the same in our organizations. What are the things that are important to us? The second half of that, or even 75% of that is what are our shared norms? Uh, how do we do things? How do we communicate? How do we solve problems? How do we make decisions? What are attitudes and behaviors essentially COVID has completely killed the cultural norms that we used to have because we've been working remotely for the last year. So the idea that we're going to go back to some old culture is actually not accurate, not true. And for you Anthony career coaching, you have to learn how to lead and build a distributed organization. If you were a global organization and had a presence in other parts of the world, they're not in that same space with you. So physical proximity and borderless meter ship becomes incredibly important.

Anthony Scaramucci: (14:10)
I think that's well said. I think it's an interesting perspective. If you're running a fortune 500 company, you're many of your people in your mind are working remotely. They're not in your corporate office. And I, I respect that, but let me ask you about the, the dilemma. I'll call it a transition dilemma. Uh, we ask people to leave, uh, they left, they're operating to the best of their capability. In fact, our firms doing reasonably good job remotely. Um, I now sort of want them back. Um, but you're saying something that I agree with you, you're a coaxing them back. You're not mandating it necessarily, but I sorta am w you know, in the, you know, passive aggressive sense of that

Anthony Scaramucci: (14:56)
Or aggressive, aggressive, or aggressive and back it's come back. You're the boss.

Anthony Scaramucci: (15:01)
Yeah. So what do you, what's your reaction to that professor?

Tsedal Neeley: (15:05)
I, I think Anthony, um, and I, I, you know, this is how I talk to any leader, CEO, uh, nation state advisor. Um, you have to adapt and be flexible and join the revolution that's taking place. Do you want people to be, uh, having water cooler conversations that are full of resentment? Do you want to lose loyalty and commitment with remote work lifestyles have improved dramatically? And by the way, I absolutely don't believe that remote work is a panacea. Uh, and in fact, in the book, you'll see that I write about all of the challenges that do exist, like being out of sight, out of sync, out of touch, and out of mind, all of those things are very true, but these are all competencies that we need to build in order to reap the benefits of, uh, the virtual environment. People are more satisfied.

Tsedal Neeley: (16:07)
People really value their autonomy, which is really self-control flex time, spending more time with the people that they cohabitate with. It could be family, it could be other loved ones and, uh, productivity has gone up in most places. So our historical arguments around productivity have been debunked as well, right? So the, the, the, the only thing that we need to work extremely hard and developing is how do we connect and how do we convey culture and establish new ones despite, uh, the fact that we're not in the same place. And I'll add one more thing. If I may please, um, Anthony, it's the fact that even physical spaces are going to be different. Uh, we're going to have one way hallways. We're going to have social distancing. Uh, you're going to have signs all over the place. Health will be, uh, something that temperature checks, temperature checks, you know, the whole thing, Pritchard checks. Uh, and even if you want to hold meetings in your old conference rooms, because of social distancing, other people will have to dial in using their laptops. So you're going to have what I call a distributed meeting. Anyway, you're not going to have everyone at the same time. So the idea that we're going to return to our old cultural norms, we need to abandon and learn how to create and maintain culture, even when we don't see everyone. That's interesting.

Anthony Scaramucci: (17:39)
You you're, you're, you're, you're coming at it from a faith perspective. And I don't mean a religious perspective. I mean, you have to have faith in your people. You have to have faith in yourself and you to inculcate that into everybody. Is that a fair assessment of what you said

Tsedal Neeley: (17:54)
Yes. And faith in your people, uh, that have proven that they can do this for over a year. Uh, and in the remote environment, I always find myself quoting Ernest Hemingway, uh, never quoted him this much in my life, but what does he say? How do you know you can trust people or that people are trustworthy by giving them trust? You start with a default of trust.

Speaker 5: (18:20)
You equip, you empower. Yeah. Uh, it's

Anthony Scaramucci: (18:23)
Interesting because it's also, how do you, how do you become powerful it's by giving power away. Okay. That's the irony of it? You know, unfortunately I had one or more conversations like that. See, Darcie's laughing in that other Hollywood square box, because I've had more than one conversation with various people in my short stay in the white house about calm down, share the power, but we didn't go in that direction, but that's a whole other topic. So, and, and, and, and while I'm looking at Darcie, how do you deal with guys like Darcie that are at the water cooler talking resentfully? How do you deal with those types of people? Well, I'm kidding about him obviously. Cause I love him. I'm talking about, you know, how do you deal with the resentful employee?

Tsedal Neeley: (19:10)
You know, if you are the cause of that resentment, it's not going to bode well. So you deal with that resentful employee by meeting people, halfway, you, you, you talked about power and I love to hear from, uh, John as well, because he represents an age group. That's been struggling, uh, a good deal that we should all care about in just a moment. But this, this thing is when you have up to 81 or 87% of your workforce, wanting to retain some form of remote virtual work who holds the power, really who holds the power.

Anthony Scaramucci: (19:50)
We want hearts and minds. Yes.

Anthony Scaramucci: (19:53)
I I'm a big believer in delegation and creating autonomy. So I'm I'm for the openness. But I also believe that we've got to mix it up a little bit together once in a while. And so I'm hoping to get to that compromise. We're going to let John talk in a second. He's got some tremendous

John Darcie: (20:10)
Lead, good HR meetings.

Anthony Scaramucci: (20:12)
He's got tremendously good millennial, like questions. He'll out stage me here in a moment, but I want to ask about workplace equality initiatives. And I want to ask about issues related to race and progress while we're operating remotely. Is it possible impossible? What do you say to people when they say, geez, I'm searching for more diversity. I want to create more inclusion, but I don't, I don't have my office, uh, together. Is that an issue or not an issue? Tell me what you think their professor.

Tsedal Neeley: (20:45)
Yes. So the topic of equity is incredibly important, especially as we are mapping out the future of our work and our workforce. And there are a couple of ways of thinking about it. One is, uh, we want to make sure that, uh, we, um, uh, are thoughtful about the people that we're asking to come back in a hybrid environment that we're not looking for low status, or even people who are just super junior, starting out in their workforce and pulling people back, uh, who, uh, are of certain demographic groups. Uh, we need to watch our bias. The other thing is, uh, many organizations have talked about the fact that they have much more diversity in different parts of their organization with people that they deemed to be essential onsite people. And, uh, if you are devising and you talked about mixing it up a hybrid workforce, your onsite essential people need to be able to participate in being able to learn from home and do certain things from home.

Tsedal Neeley: (21:56)
So we need to be very creative in ensuring that everyone gains from the virtues of remote work in terms of inclusion. Uh, one of the things that we need to make sure is that people have the technology that they need to work, uh, that they are in areas where broadband is accessible. Uh, that's one, uh, equipment structural point, but we also need to make sure that we're democratizing conversations that we're pulling people in. If we're in a video conference, call a zoom call, uh, we need to make sure that certain groups are not receding because when you're in the actual communication event, uh, you end up losing a lot of voice. So people have to work extra hard to draw people in as well. So I've talked about structural. I've also talked about the very micro and communication event. Last thing I'll say is that people are beginning to tap diverse talent from outside of their headquartered areas, uh, in order to bring them into their organizations, without asking them to move. This is a competitive advantage. This is an opportunity to seek diversity for more places than we ever have. Once we begin, we begin to detach our talent pool, uh, from, uh, uh, physical locations.

Anthony Scaramucci: (23:24)
It's a really good point. You know, that, you know, you, you, you create more competition, um, for staff, but you're also broadening the staff pool by having all of this remote activity. So hopefully it will lead to higher quality people. So let me turn it over to John Darcie, who is sitting in my office while I'm here as Scott safely in my basement, drinking my Starbucks and John, you know, you may want to turn my kids' pictures a little bit so they can get it, get in the view there.

John Darcie: (23:52)
I think it's, it's emblematic of the times that we're in. So I've obviously been working from home for most of the last year coming into the office sporadically, but when I'm in the office, I struggled to work in a COVID work environment. I don't have my webcam set up on my desktop in the pit that we have here on our office. I have to come in here into Anthony's office and onto his machine to have the capability to operate in the way that people normally do. I'm almost feel handcuffed when I'm at the office because of the environment that, that most people are working in still, which is a remote work environment. So I'm trying to retrofit my workspace slowly in my office to meet sort of the capabilities that I'm able to achieve from home. And I think Anthony has experienced that as well, coming into the office, which he's done periodically, uh, is that he's got a state-of-the-art studio in his basement, which you have as well. Uh, professor, you talked about how all the Harvard faculty has multiple cameras and virtual backgrounds and everything set up, uh, for a remote teaching environment. And it's almost, it's jarring in a way to come back to the old way of doing things because we feel, uh, like, you know, we, we sort of went into the future in terms of our capabilities, uh, that we're able to achieve from home. That's incredible.

Tsedal Neeley: (25:01)
That's really incredible. This is very, very true in that we've set up super advanced home offices and our work environments are not set up this way. And what about the commuted? W co can

Anthony Scaramucci: (25:15)
You say a word about it? No, I would say

John Darcie: (25:18)
It's jarring in some ways, you know, again, I've been coming in a couple of days a week, uh, over the course of the last several months on and off. Um, but yeah, it's jarring, you know, I think before you got used to two and a half hours of commuting, probably every day is what I have in my life. I live on long island. I commute into Midtown Manhattan, and I think my commute relative to some of my colleagues is actually less. Um, so you talk about two and a half, three hours a day commuting when you're used to waking up and being able to start your day, as soon as you get out of bed and, and end it, you know, at the end of the day, without having to commute home, you know, it is jarring to sit there on the train and the subway and everything to go through that process, to get into an office where you do feel somewhat handcuffed in a lot of ways.

John Darcie: (26:00)
And so I think going forward, you know, a lot of people talk about the hybrid work-life balance, where you're able to come into the office when you need to and work remotely in your state-of-the-art home office. When you need to, if I were designing the future of my workplace, that's what I would probably choose where it's also mentally healthy to be able to spend more time with your family when you need to and things like that. But, um, you know, I do think that I sort of fall somewhere in between that old school thinking, and we've got to get everyone back in so we can really look over them and make sure they're doing what they're supposed to be doing. And the new school of, you know, just go out there and, and trust that everyone blindly is doing the things that they're supposed to be doing at home.

Tsedal Neeley: (26:39)
You know, John, uh, I'll add to your, thank you sharing by the way, this is incredibly valuable because it provides insight into the lived experience of coming back and what that's like. Uh, Microsoft recently did a major survey in looking at people's experiences and behaviors through, you know, all the data they collect, uh, and they surveyed some 30,000 people, uh, and part of what they are learning as well is people are saying that they're saving money, uh, from the commute that every day you buy coffee, you have lunch. So there's been a lot of savings for a lot of people as well, uh, in the last, uh, in the, in the last year. But the, the, the part that I wanted to highlight too, is people want, like Anthony mentioned to be in person for the bonding, for the culture, for the connection. Uh, it's not just, uh, to monitor people's work. Behaviors is just, you want to see, you want to connect, but if you go in the office and no one's there, or two, three people are there, it's not going to be like, it used to be. So connection has to be, uh, really created in a more intentional way.

Anthony Scaramucci: (27:53)
What are you love? Yeah,

John Darcie: (27:55)
I think one of the great parts of your book is you, you go into critical and concrete steps that people can take, um, you know, best practices, both for organizations and for individuals in terms of maximizing productivity and maintaining culture in a remote work environment. So what are some of those best practices? Let's start from an organizational perspective. If somebody is looking to really optimize this remote remote work environment, and they want to maybe go to a remote work environment long-term and may I point out the two of the most valuable private companies on the planet? One being Stripe is now a hundred billion dollar company. They have emphasized a remote workforce, and they have one of the most global engineering workforces of any company in the world and Coinbase, which is set to start trading lives, uh, on the NASDAQ exchange, probably at about a hundred to $150 billion valuation. Doesn't have a headquarters. They've basically committed themselves to saying we're a fully distributed workforce. So what are some of those best practices that you think some of those companies that have done it? Well,

Tsedal Neeley: (28:55)
Yes. Yes. Um, so first Anthony you're right. Uh, here's better questions. I'm just kidding. Um, so here's, here's, uh, the thing, the, the, the first thing is, um,

Anthony Scaramucci: (29:06)
I'm stopping my video just

Anthony Scaramucci: (29:10)
Because

Anthony Scaramucci: (29:12)
All of my confirmed fears and insecurities have been proven true by professor Neil. Let me just turn the video off as we're doing this. That's that's really, that's really funny. Yeah. Well, he does have better questions and by the way, he's a star, he's a star. So I like, that's why I like teasing him. I mean, come on. It's a, it's a Jenner. It's a generational struggle over here. Neely. Let's go help out your fellow, baby boomer. Okay.

Tsedal Neeley: (29:37)
I see, I see that John is a star and I'm trying to you to retain him. Okay.

Anthony Scaramucci: (29:42)
Thank you. Thank you. All right. Let me pay attention.

Anthony Scaramucci: (29:45)
Let me put the volume up higher than hold on. So,

Tsedal Neeley: (29:50)
Um, I think you won my heart when you referenced my book, John, let's just, uh, so listen, here's the deal. The very first thing to do is to make sure you survey your organization and your workforce anonymously to understand true and real preferences. Because once you do that, then you can look at what jobs, what tasks, what functions can actually be remote and how remote can those be. And in some organizations we need to really look at what is the optimal level of fluidity that the organization can bear. So you mentioned a couple of companies, Dropbox and others are not declaring themselves as your moat. First companies, Zillow notice they're all tech companies, um, and Twitter and others are saying that people can autonomy mostly choose to go remote, or if not, they can come in. This is one of the important conditions of an effective remote workforce is that people have choice.

Tsedal Neeley: (30:56)
This is why I worry about forcing people in the other thing. Uh, John is that we need to make sure that people have the right competencies, uh, managers and leaders need to know how to lead virtually it's different. It's not the same set of things. There's some very natural, but detrimental aspect of virtuality that people have to manage very intentionally. Similarly, everyone needs to better understand how to use all of the digital tools to be effective, uh, at work. What do I mean by digital tools, anywhere from email to, uh, enterprise wide software systems to video conferencing, how do we use them? When do we use them? Because there's a phenomenon called tech exhaustion tech exhaustion, which is about cognitive overload, because people have just been using technology nilly, Willy. There's actually very systematic ways of doing those. Those are all the things that are important. And then finally, some of the large companies are bringing in chief remote officers into their C-suite, uh, in order to manage the large workforces or their highly distributed workforces. This is where the question of culture comes in as well. I'll pause it.

John Darcie: (32:14)
Let's go to the individual. You know, I think we've all experienced zoom, fatigue. You know, a lot of companies are going to zoom free Fridays, you know, to get people off of staring into the screen, you know, uh, as they've done for most of the week. Um, so, but I think zoom also has the benefit of, I used to do so many conference calls, right, where I would be on the line. There was a faceless person I was talking to on the other end. And during the work from home period, I've actually gotten to know some of these people better through zoom because I'm seeing their face. And I'm having, before we even start a conversation about, you know, whether it be a sponsorship for our conferences or, you know, whether it's capital raising that we're doing, I'm sitting there looking into the face of people around the world that I didn't necessarily wasn't necessarily able to do that at scale before. So what are some of the best practices for people to leverage the technology that's at their disposal, but also to avoid the, you know, the, the technological burnout that people experience when you have high volume of zooming going on?

Tsedal Neeley: (33:10)
Yes, let me first begin by saying that zoom fatigue should not exist. Once you learn some of the best practices related to digital digital tools. Like we should not have zoom fatigue, it should go away and we call it zoom fatigue. You know, Eric Yon has endorsed the book. So I won't call it a zoom fatigue. I'm going to call a tech exhaustion because you can have the same problem with, with other, uh, tools, but here's the thing. You use the right technology for the right task, for the right goals. Not everything requires live or what we call synchronous communication. Some things are actually much better for it to be used in an asynchronous communication mode. For example, if we need to process very complex information, the last thing you want to do is call a zoom meeting or a Microsoft teams meeting and have people listen to some terribly complex, uh, information.

Tsedal Neeley: (34:09)
It's better to email that information and have people asynchronously absorb that information and internalize it. So two dimensions that I will mention, uh, when it comes to digital tools, one is synchronicity, should it be synchronous or asynchronous? The other dimension is, should it be lean media or rich media, lean media includes things like Google docs or email. They don't convey just like you mentioned, John, um, uh, variety of expressions. They don't convey, uh, emotionality. They don't convey context, but not every communication requires that rich communication does. So you can imagine a two by two, which is actually in the book where certain activities work really well, depending on whether you want it to be synchronous, asynchronous lean, or, uh, or, or rich, not everything requires rich and synchronous, which wa, which is what a video conferencing is. The other thing is meetings are too long. For some reason, meetings have gotten longer in the last year. They need to get shorter. Yeah. You

John Darcie: (35:20)
Know, it's difficult because we try to maintain that SkyBridge, the TA the type of engagement that we have at regular meetings and in-person interactions that manifest itself in the form of frequent, you know, large-scale, uh, conference calls, but at the same time, it potentially detracts from productivity and, and things like that. So it's an interesting balance that we're trying to strike, and I'm sure that many others are trying to strike as well. I don't want to talk about loneliness. So I have the great fortune of having a beautiful wife, three beautiful kids. And so during the pandemic, I have enjoyed spending time with them and not felt some of that, you know, level of loneliness that I think a lot of people have felt that are a little bit more isolated with that being said, you know, I haven't been able to nurture a lot of my friendships the same way, uh, you know, with, with my extended family or my friends, the way I normally would.

John Darcie: (36:09)
And again, going back to those people that are even more isolated, you know, you can zoom as much as you want, or you can go on Microsoft teams as much as you want, but it maybe doesn't replicate, uh, the level of social interaction that's healthy, uh, for human beings to have. Is that true? How can we nest, how could we potentially use technology to replicate, uh, some of that social interaction in a way that eliminates some of those feelings of loneliness and how in general do we maintain our mental health in a way, you know, our humans are hardwired, I think in a lot of ways for some level of social interaction. So how do you find that balance in a digital world? That's, that's mentally healthy from a social perspective

Tsedal Neeley: (36:47)
Problem. Uh, and in fact, uh, I call it poor professional isolation. Uh, millennials have struggled in the last 13 months with isolation, uh, and especially if they're not necessarily, uh, um, with others in a household or their back into their intergenerational homes, just feeling isolated, uh, and kind of excluded from the activities that, uh, make them feel connected to others. It's a massive problem. And in fact, uh, us surgeon general, Vivek Murthy, and I had a conversation about this. It was a NASDAQ podcast where we talked both of us, because he thinks a lot about this topics, a mental health issue. Um, so you cannot think about replicating what you do in an in-person, uh, into a, a virtual environment. You have to think about these things differently, and you have to think about them, uh, through, uh, multiple means. So the VEC actually talked about how even a 10, 15 minute phone call, uh, can nourish us in extraordinary ways, rather than zero.

Tsedal Neeley: (38:01)
I believe that organizations did they have a responsibility, particularly if people are engaged in profesh, professional work outside of their organization, to make sure that people feel connected to others in the organization, meaning you actually want to pair people up to work together on projects, create teams when in the past it could have been achieved through individuals. You, you need to check in on people more. The Gardner group conducted a survey several months ago and found that percent of managers never checked in on people not to even to say, how are you, how are you doing so you have to make sure you're building in micro moments, uh, in, uh, for example, a regular meeting, uh, of 60 minutes, 10% of it is spent on checking in, connecting at the top of the hour, six, seven minutes. You pair people up and you have them working together. You do all of these virtual, uh, activities and including learning, training, doing learning that are interactive together. Another powerful way of breaking the isolation. So we have to do things outside of being taskmasters to make sure that people are connecting with one another. That's part of our,

John Darcie: (39:22)
So I want to talk about the future. So right now we're going through this sort of the beginning phase of what I think is a transition back into somewhat of a hybrid environment where you start to see some organizations like SkyBridge, like Goldman Sachs and others pushing their workers to come back to the office. As soon as may, you have a lot of companies talking about the fall, they're going to encourage people to start coming back. But I want to talk about, let's say 2030, or, you know, almost a decade down the line. How can you reimagine the world in a way using things like remote work and digital tools that you write about in the book? What does our world look like? And how can we reimagine our society more broadly in a way that leverages remote work to make the planet thrive, to make human beings thrive? You know, w what is the future of work really look like in 2030, if we were to get an a time machine,

Tsedal Neeley: (40:10)
John, this is a dissertation topic. I think you might have to take it up. Um, it's a very good and important question. I strongly believe that the last 13 months has not only accelerated the virtualization of work, but it's accelerated, everyone's technological advancements. Every organization had to leap forward when it comes to technology. What I think is right behind us, which is why I think we need to get this hybrid virtual, right? It's not going to go away. We need to learn how to do it. We need to take a leap of faith that we need to experiment. We need to lead, not in terms of fear and anxiety, but opportunity and, uh, scale. And, uh, the digital revolution is right behind us. And what do I mean by that data machine learning, artificial intelligence, personalization, matching building, online communities and building networks of people.

Tsedal Neeley: (41:12)
That's what I perceive based on everything that we know and all the acceleration that we see that, um, uh, that work is going to shift in extraordinary ways. We're going to have AI bots and agents who we're collaborating with. We're worried about building connections with other people. We're going to have AI agents working with us and institutions are going to use bots to practice, to have people practice negotiation skills. 2030 is quite to look very different. And I think 20, 20, 20, 21 is preparing us for it. And those who do will leap forward, and those who don't will move slowly at their peril.

John Darcie: (42:00)
I would love to hear you, uh, do an entire podcast on that subject matter, because I think it's fascinating. Like you talked about AI, there's a lot of different views on what it's going to do to society. I think there's some people that think it's going to displace a massive number of jobs in a way that we're going to have to find new ways of connecting with each other of adding value, uh, to society and just rethink our place in the world. And I think that's a fascinating point that, uh, that the pandemic sort of gave us a preview of that world. I want to ask you one more sort of big picture macro question. I'd also like to get Anthony back in here just for some final remarks on everything we've talked about, but what is one innovation or product, you know, I don't necessarily want you to feel like you're having to shell for, for one software solution or something, but what's one innovation you think has the potential to most markedly transform the workplace.

Tsedal Neeley: (42:51)
Ooh, one innovation, one product

John Darcie: (42:55)
As a teleconferencing. Is it something like slack, that's a, you know, asynchronous collaborative tool or, or what are things that you've seen, uh, people experiment with that you think have the potential to create sort of new paradigm in terms of how we work? Because I think email is an example of something that's so archaic and, uh, it creates so much stress and anxiety. You know, that ping that comes in through email, that I think there's much more effective ways to collaborate. I'm just curious if you've observed anything that you think is highly innovative, that's disrupt existing system. So

Tsedal Neeley: (43:27)
My answer is going to be different. It's not about the technology, by the way, I get about 10 emails a day, we've got a new innovation. Would you talk to us? Would

Anthony Scaramucci: (43:36)
You look at it? It's hard

Tsedal Neeley: (43:39)
To sort through them. And they're, I cannot tell you how many people are working on different things right now. And I don't think that's where the innovation is going to be. The innovation is going to be in our behaviors and how we use them. The number of technologies and their proliferation is not going to go down. It's actually going to go up, but we need to develop digital first mindsets and think about scale and think about augmenting everything that we do through the technology that's currently present. So I don't even see people using present technologies effectively and to scale, to connect, to do work, uh, in smart, intelligent ways. I would begin there because what you don't want to add, John is more technology, uh, in our world. There's so many of them how we use them and how we strategize around them is what we really need to innovate around. This is my true belief,

John Darcie: (44:38)
Right? Anthony, you want to chime in with any follow-up questions before we let [inaudible]?

Anthony Scaramucci: (44:43)
Well, listen, I could listen to you all day, professor. I mean, the thought the thoughts are, uh, right in the wheelhouse of where everybody needs to be. Uh, I want to thank you for joining. Um, I think the future of work is going to be very different over the next five or 10 years, but you're going to have a lot to say about it. And so, uh, I'm looking forward, looking forward to following up with you. And since we praise John Dorsey, I'm very grateful that we're in the month of April and not December because he be counting the coins. You know what I'm saying? As a bonus, right? So the good news is I can get his head back into the right space, hopefully over the next six months. So listen, John I'm teasing you he's professor Neely. He gets fan mail. Okay. Does he really? Yes,

Anthony Scaramucci: (45:30)
He gets fan. I love this.

Anthony Scaramucci: (45:35)
Please send me some fan mail, please. I mean,

Anthony Scaramucci: (45:38)
It was a real, it was a

John Darcie: (45:39)
Real, a breaking point in our relationship professor when I started getting fan mail. Cause listen,

Tsedal Neeley: (45:45)
You're a superstar and that's really obvious. I'm so thrilled to have spent this time with you, Anthony. Uh, please let go a little bit, trust a little bit, join, join the revolution.

Anthony Scaramucci: (45:56)
Uh, and uh, and I think you'll be happy.

Anthony Scaramucci: (45:59)
I think you said some very meaningful things. And I'll say to all my old fashioned friends out there that got raised in the seventies, uh, we have to embrace the future. And I think that you've made a very big statement today about how to do that. And I'm, I'm looking forward to pushing this out to as many people as possible. I want to thank you for coming

Tsedal Neeley: (46:18)
On. Thank you so much. Bye Jake.

John Darcie: (46:22)
And thank you everybody who tuned into today's salt talk. We think these topics as professor Neily alluded to this is sort of the beginning of a new world. I think there's pre COVID the pre COVID world and there's a post COVID world. And the people that think that we're going back to the old ways, I think are mistaken. And I think that people that are preparing for the future are the ones that are going to Excel. A lot of the companies that we mentioned that are already embracing remote work and all the tools that you need to make that work productive and mentally healthy for your workforce. So please spread the word about this salt talk and all of our salt talks, which we think are, are very important to educate people about different things that are going on, but just a reminder, if you missed any part of this talk or any of our previous talks, you can access them all on our website@sault.org backslash talks, instead of doing virtual conferences, which we also also think are an ineffective delivery method for, for thought leadership.

John Darcie: (47:11)
We've created this webinar series just to allow on-demand resources for people to consume them on their own time and at their own pace. And whenever they feel compelled to watch a video or listen to a podcast. So, uh, we look forward to a lot of people consuming. This one we're also on social media on Twitter is where we're most active salt conference. We're also on Facebook, LinkedIn and Instagram as well. And on behalf of Anthony and the entire salt team, I want to thank you again, professor Nila for joining us and signing off for today. We hope to see you back here again, soon on salt talks.

Disruptive Venture Structures | SALT Talks #205

“There are more unicorns nowadays and the potential upside is so much bigger, so despite the COVID headwinds in 2020, venture exits were $290B.”

Trang Nguyen and Alex Bangash are co-founders of TI Platform Management, a venture capital investment firm focused on investing in innovative and disruptive companies.

Venture has rapidly grown into the largest asset class among institutional investors. A decade ago venture made up only 5% of portfolios, but now are central to investing strategy as companies have taken off in fields such as AI, crypto and cloud technologies. The upside for growth has increased exponentially. “There are more unicorns nowadays and the potential upside is so much bigger, so despite the COVID headwinds in 2020, venture exits were $290B.”

Venture opportunities are more diffuse today, so it’s more important to build better venture structures. Ten years from now, we will see venture exits continue to grow in size where a $10 million investment could exit at $500 billion.

LISTEN AND SUBSCRIBE

Spotify | Amazon | Google | Stitcher

SPEAKERS

Trang Nguyen

Co-Founder

TI Platform Management

FULL BIO

Alex Bangash

Co-Founder & Managing Partner

TI Platform Management

FULL BIO

EPISODE TRANSCRIPT

John Darcie: (00:08)
Hello everyone. And welcome back to salt talks. My name is John Darcie. I'm the managing director of salt, which is a global thought leadership forum and networking platform at the intersection of finance technology and public policy. Salt talks are a digital interview series that we started in 2020 with leading investors, creators and thinkers. And our goal on these salt talks is the same as our goal at our salt conferences, which is to provide a window into the mind of subject matter experts, as well as provide a platform for what we think are big ideas that are shaping the future. And we're very excited today to welcome Trang Winn and Alex Bangash to salt talks. Trang is the co-founder of TEI platform management, a venture capital firm that backs ambitious entrepreneurs creating the world's most disruptive venture structures founded in 2015 T platform management uses its $775 million plus in AUM to invest in today's most innovative companies and tomorrow's category defining leaders since its inception TEI platform has deployed nearly $475 million to numerous emerging venture funds backed 47 funds founded by 56 entrepreneurs and enabled entrepreneurs to raise over $1 billion from LPs.

John Darcie: (01:28)
The firm has also invested directly in more than 35 companies. Trang is the former executive member of trusted insight where she managed products and grew the institutional community to more than 35,000 limited partners. Alex is also the co-founder and managing director of Tia platform fund a platform for backing founders, building innovative venture structures. Same as Trang. He's the co-founder and chairman of trusted insight. He's a founding investor in funds, such as initialized founders funds, uh, Saster among others and an early investor in companies such as true pill and standard cognition hosting today's talk and reprising her role as a guest moderator here on salt talks is our great friend. Sarah Koontz. Sarah is the founder and managing director of Cleo capital, a venture capital firm. And now I'll turn it over to Sarah for the interview. And I might chime in here, there with a few questions, uh, as I see fit Sarah, but you take it away. Awesome.

Sarah Kunst: (02:31)
Thank you so much, John. Um, and thank you so much Tang and Alex for being here, we are super excited to talk and, and hear more about ti. So, um, you know, John did a great job, but I always love to hear it directly from you. So, so trying, why don't we start with you and then we'll go to Alex would, would love to hear kind of your bio's and how you ended up, uh, you know, starting, starting TEI.

Trang Nguyen: (02:56)
Sure. Um, thank you so much or the virus, uh, today. So, uh, Tia platform management is the platform for entrepreneurs that John mentioned. Um, so we had intrepreneurs as they, em, back on the next phase update journeys, uh, whether it means starting another companies or setting up with disruptive venture platforms, such as venture studio and two platforms. So we spend a lot of time at T platform management's brainstorm with entrepreneurs about different Novo venture structures, um, that they can be valid. And in many cases for, you know, some case, we act as the founding partners of these venture firms, um, uh, Tia platform management. I also really enjoy building the team. So one of the key things that I want to highlight is that we are one of the most diverse venture firms in the industry today. So we have a global team members that is more than 50% female and 90% minority, including toady percent black and 7% Latino. Um, just in the last 12 months, um, we hit back for black entrepreneurs, um, and these, uh, you know, amazing operators and entrepreneurs like, like our south Sarah. So diversity has always been, um, uh, important to the ways that, you know, I'll foam operate and evaluate opportunities. So that's just a little bit about platform management and I told it to Alex to talk more about what we do and he's like, well, and also why we stopped the phone.

Alex Bangash: (04:37)
Great. Well, thank you so much. Um, um, for having me here set great to great to be. And thank you. Thank you, John, for the introduction. Um, so, um, I think, um, uh, as Chang mentioned, there are, you know, there are many, many amazing firms, some invest with, um, founders and, uh, uh, directly some invest in their, um, in their, uh, in funds. Um, we, on the other hand, um, we like to think we're trying to re-imagine venture capital. Uh, we're saying, how can we be partners of founders, um, through their journey? So, um, founders will start building a single company. Then sometimes they will build multiple companies as a studio. Sometimes they will build a platform such as Sarah has built and, you know, so we are saying, how can we be they're, they're their partners, we're reimagining, um, when share capital. And, um, and that kind of goes very, uh, with my background as an engineer.

Alex Bangash: (05:42)
So I have no financial training. Um, I started as an engineer at, uh, uh, at bell labs. Um, and, um, from there, um, when I was in business school, after starting an optical networking company, I started an advisory service and one of the key things that, so basically I was a scout for LPs. And one of my key observation is that the best, the best venture capitalists were the founders and those building great firms. So that's how I got involved with, I was lucky to get involved with the likes of founder span and Excel, India and others in their early days. Um, uh, including now you're talking about Coinbase. Um, I remember Gary tan, uh, investing, uh, leading the seed round of Coinbase, uh, at, uh, um, by sea demo day. Um, and so, uh, you know, when, when, when Coinbase was giving out, uh, uh, I think it wasn't a full Bitcoin, but some fractional Bitcoin, um, to, to folks. So, um, so today, um, no, you know, we partner with entrepreneurs and, and help them, um, help them create the next generation firms, uh, firms, which will, um, which we'll be defining. And I think our big value add is while there are many, many great investors, these investors also have to build their firms and we help them with the structures such as studios, uh, platforms, um, API based funds and help them think about those structures and help them, uh, uh, both, uh, start partners and capital partners in, in their, in their journey. Yeah, that,

Sarah Kunst: (07:28)
That's awesome. Um, and you've been great, a great partner, uh, to, to me and Cleo capital, and I know many others and, and huge congrats on, on, uh, the Coinbase IPO. I know you're in a lot of things that, that, uh, do do some crypto. So, uh, you know, that is maybe a great kind of jumping off point to, into the next question, which is, you know, what's, what's going on in the market right now. What are you seeing in terms of, of current market trends? Um, you know, trying to touch on diversity, you, you touched on, on crypto, both of those are big trends, but, but maybe talk through kind of all the different trends you're seeing right now in the market and, and what you think they mean, uh, for, for other investors who are, are looking to invest into startups or into venture funds,

Alex Bangash: (08:14)
You know, I would say, um, so, you know, I'm, um, I've been to multiple cycles. I saw the web one dot or cycle. I saw the web, you know, web cycle and maybe we're in the web three dot or right. The distributed web with crypto and, or the parallel web. And I would say that, um, with, you know, kind of every, there's always a boom and bust cycle, right. There's always a boom and bust cycle. And I did, it's no question that we are in the boom cycle right now where, you know, and nobody could have predicted it as well. Um, COVID has accelerated, um, it has accelerated AI. It has accelerated crypto, right? It has accelerated, it literally has accelerated industry, which, which were shunned by, by, um, w VCs, you know, I'm not going to name the VCs, but, um, you know, about a decade ago, um, some, some of the most prominent kind of Midas list list out of support, Hey, we do everything except health tech and FinTech because they're regulated industries.

Alex Bangash: (09:23)
And today some of the biggest opportunities are in ad tech and FinTech, right. And they they've massively accelerated. Um, now, you know, you can see from the, uh, of course not just the telehealth boom, but then the kind of the fintechs, um, eating, eating the shared, I mean, what is the square square and, uh, uh, square and Stripe and Coinbase will be bigger, you know, or are already bigger than, than Goldman Sachs. So, yeah, I think there is, there is this, there is this trend, um, well off people now finally, um, finally, uh, believing, but then there are some other things other trends and venture has become, you know, venture has become the largest asset class amongst institutional investors. So if you go back to, you know, kind of traditional investors, um, uh, almost a decade ago, or when you're used to be 5% of the portfolio, um, and, um, you know, there were, there were some kind of, um, heads of private equity who hadn't even invested in venture today because of this massive acceleration of gains and also reinvestment of, um, our, for some institutional investors, uh, tech and, uh, you know, and venture multi-state venture is Turkey in some cases, even bigger percentage of their portfolio.

Alex Bangash: (10:46)
So I think, I think those are, those are some, some of the trends, you know, that we're seeing, we're also seeing this, you know, huge bifurcation of, right. So, you know, uh, about, um, again, 15 years ago there were, um, venture, it was the, the, the conventional knowledge was venture is not scalable, you know, and, uh, you know, you'll have the benchmark say in the plaintiff backends with their small, small funds, then the goes, this is a cottage industry. It's a, it's a mentorship model and you can't scale it and you can't institutionalize it now, you know, the largest private equity fund is a venture fund, you know, and, um, the, um, some of the VC funds are raising bigger funds than some of the mid-market buyout funds. So, so I think there's this Institute position at the top. Um, and maybe, you know, in 20 10, 20 years, the biggest, um, you know, the biggest asset managers, aren't going to be Blackstone, Carlyle, you know, invest in applied or SoftBank, Sequoia, Andreessen, et cetera, as they, they, they, they create assets.

Alex Bangash: (11:55)
Um, but on the more on the, you know, on the flip side, um, as these funds are getting bigger and bigger, they are getting farther away from the entrepreneurs. And that's why, you know, we partnered with you, Sarah, because you have this unique opportunity of, of, uh, of catering to those entrepreneurs at the earlier stage, you know, and that's why we're doubling down on formation, um, things like studios and, and seed funds and pre-seed funds, um, uh, where, uh, you know, and platforms where they are now taking the place where, um, uh, you know, kind of a traditional VC's used to do. So, um, I left, I stopped there. I know I, through quite a few different, different things I've trained. I don't know if you want to add, I think

Trang Nguyen: (12:39)
Just to add to Alex boy, so number one, we clearly see that, you know, venture capital itself is going through a rapid period of transformation and innovation, right? So, you know, as Alex mentioned, we see that, you know, as there's a boom of disruptive venture models, such as, you know, studio and, you know, as a platform models like Cleo capital, for example, right. And you know, this, um, evolution is actually, uh, this evolution is actually, uh, empowered by COVID-19 and remote work. Right. Uh, we see that, you know, chatty, she VC firms, you know, B, B side look beyond cat-like traditional VC hub. They start to develop a new way for capturing startup, right. So, you know, you see a lot of VC lawn spot, right. Um, you know, while spouse models and so on, because, you know, it's just very difficult for them, um, to fight, you know, innovation in their model and to what Alex mentioned, you know, they are further away from entrepreneurship as you know, they based Lasher upon site and invest in later shapes around finance.

Trang Nguyen: (13:52)
So, um, we definitely see, you know, the rise in venture studio. Um, we saw, you know, platforms. So to give you an example, when we first invest in, um, you know, when we started the film in 2013, I think like we can count, you know, into, um, a little handful of studio venture, maybe two of them, right. Uh, today, you know, we had by over 10 venture studio, right. Um, so venture studio is very, you know, [inaudible] and more active, but it's also very attractive to a lot of, um, introductional investor, right? So number one, the LPs, they can get access in the same type of, uh, Syria entrepreneurs, such as Elon Musk or Quito, Tio. Um, and also they, they gain access to, um, a portfolio of set up, uh, founded by Syria and entrepreneurs and, you know, the same raise money from Excel and Sequoia.

Trang Nguyen: (14:53)
So in a way, LPs can get directly to the, uh, you know, entrepreneurs without paying extra layer of fee and carry. Uh, secondly, you know, the studio venture is very disruptive in a way he's actually enabled the LPs to own more equity of the companies, uh, until series B and C, right? So as capital become planted, and as the childish venture firms have raised billions of dollars and involve investment on later stage around finance, you know, these models, uh, like studio, uh, platforms, um, become very attractive to yuppies because, you know, it's helped them with, you know, go out to exposure to early stage ventures. Right. The second chance that, you know, we see is that, you know, uh, which Alex had mentioned these, that, you know, funds have raised laughter fun side and part of that reason because they ma unicorns now they, and, you know, as a potential upside when so much bigger.

Trang Nguyen: (15:56)
Right. Um, so despite the headwinds of COVID-19, uh, in 2020, um, the venture exit in the U S is sale is 290 billion, right? So you, Hey, you know, Airbnb go public, uh, um, 100 million new, Hey, snowflake, the 33 B and then door dash at 72 V and then so on. Um, so, you know, 2020 is not just an outliner, but if you look back, you know, just in the past three, um, uh, last year numbers, like the last few years, like there's more IPO than, um, the entire decade preceding two times 18, right? So, you know, when, um, a venture fund or a venture managers or C fund managers, when they raise a fund, they should factor in number one day more unicorns nowaday. So, you know, and they also, the potential exit side is much Lasher. And the last site also has increased significantly, right.

Trang Nguyen: (16:56)
Um, just in the last five years of vital sign and also ECI valuation has increased by at least 50%. Right. We see a lot of companies went to YC demo day, and now, you know, after YC raised 20 million, um, see, first of all, it's finance or, you know, all companies that come out why sees that raise 200 million valuation. So that's kind of like the change that we see and, you know, I think like as an institutional investor, we, uh, we should be open to seed funds raising lash of one side. And at the same time, uh, seed managers also, um, should factor into a cow potential Lasher estate and, you know, raise proper funding aside for follow-on. Yeah,

Sarah Kunst: (17:39)
Yeah, no, that, that, that's totally right. And, and, you know, we, we see a lot of that in the market, I think right now that, you know, companies are going from zero to multi-billion dollar evaluations incredibly quickly and, and often, um, you know, the, the earliest investors are the ones who stand to make the most money if they have enough to, to keep doubling down and, and really be driven by conviction. I totally agree. Um, so, you know, talk a little bit about when you talk about seed funds, not, not all seed funds are emerging manager funds, but there certainly are a lot of emerging managers in NTI has been incredibly supportive of, of many very early emerging managers. And it seems to be paying off really well for you. So we would love to hear more about, um, some of the emerging managers that you've backed and, and kind of, who've gone on to do great things, as well as sort of how you think about, uh, investing in emerging managers, um, you know, for limited partners for, for larger institutional investors, um, what should they be thinking about? Because it feels like most, uh, larger institutional investors are just not adding very many emerging manager positions right now.

Alex Bangash: (18:45)
So, so I think the really important thing to think about, and, you know, and, you know, we, we ha had you as well on the ascent, uh, thinking is like when, and when, when an emerging manager gets off, because there is so much noise in the market, right? There's so many different companies they're no longer, only at only in San Francisco. Um, you know, take, take crypto for instance, they're global companies they could be coming from NSS is coming from India. Um, you know, they're, they're, um, they're coming from different markets and the founders are, are, are global. Um, and this was true before pre COVID. Now it's also true post COVID. So I think what, what is, what is really most important and really hard to build is to build the firm to build a differentiated firm, right? So there are good investors like there were before, but being a good investor is less important today, you know, because you, because the, the deal flow is so diffused and there's still, you know, you could be part of the Stanford network or part of a, you know, a part of a, um, squared alum, alumni group, or Uber alumni group.

Alex Bangash: (20:00)
And you get some sort of deal flow, but it's so diffused right now that you need to kind of build a better mousetrap. And I think that's has been our defining, um, TCIs that we want people to build better, uh, um, better venture funds, structurally. That doesn't mean there aren't that you can't build a good friendship, um, by just a single person saying, look, I'm going to be really thoughtful. I'm going to be really disciplined. And I have a great network, you know, that was true. That was true for, you know, not going to name, name, the firms and name the great partners, but, you know, it was true from say, w you know, in the, in the nineties and till 2005, when everybody sought a particular partner today, that's not the, you know, the, you know, in, in crypto people will want different partners in SAS, they will want different partners, um, depending on yeah.

Alex Bangash: (20:54)
The seed. And then, and then they have built, you know, they've built different farms. So I think that's, what's really, really important for us is who's building something really unique. Um, you know, and that's why, you know, we, we were lucky to partner with you and Sarah, because we think you're building something, I think unique it's, it's at the inception stage, but, you know, I mean, it's, as, you know, it takes a village, it takes a lot, and it takes a very long times. So, um, sometimes that's why we, you know, represent patient long-term capital. Um, and we're not looking for some dislocation or not, not looking for some, some person who's just like, oh, that person is a great brand. And they have, they're a great board member. Of course, those people will do very well, but that's obvious the non, the non-obvious is who's building like, uh, you know, who's building a great studio, no, where they will, they will build a company who's building, you know, Visalia is great, but, you know, by sees the beginning, just like, you know, Google or Facebook was great, but then there was WhatsApp and YouTube when, you know, a tech talk and they'll always be there.

Alex Bangash: (22:05)
They'll always be the kind of the next big thing, you know, and that's what we are, what we're looking for. And sometimes we're right, and sometimes we're going to be wrong. Um, but w VC is a power log game, you know, um, one of our studios, uh, you know, two years ago made 150,000 investment and it's worth 250 million. So, you know, there's asymmetric returns since that's, if they say metric returns from, from Coinbase and, and, and, um, peer to BNB and all these other companies. And, and what's, what's even more exciting right now is that if you fast forward like this, right now, we are in one of the biggest booms ever. Um, and markets will retrench. You know, there will be a time when people say, what were we thinking? Right. Nobody will be in wanting to invest in anything. Um, but if you, you know, if you kind of fast forward 10 years, the biggest thing, and genetics exits will not be a hundred billion dollars.

Alex Bangash: (23:05)
It might be 500 billion. Right. And so if you had, if you've invested at a 10 million valuation, yeah. That $500 billion company, then you will have the, you know, the, the asymmetric returns. So that's, that's kind of the back that we're making. Those are the types of people that we, that we back and we want to be, we want to be patient, you know, we want to be patient long-term partners in rather than, you know, particular names. We there's a lot of, you know, I was very, very low lucky to get, you know, um, to get my clients into emergence. As far as find, I was very lucky that Krista, I let me hit in his foot, our spine. I was very lucky to the first capita, let me in their first farm. I was very lucky that Steve Anderson at baseline then hit his first one. Like, they're all spectacular farms. I think, you know, after seeing Chris as founder, Sarah was never see a hundred X bond again. And then I think Getty, Dan might do better with his money, you know? So they'll always be someone better, you know?

Trang Nguyen: (24:04)
So I love it. Well, well, hopefully you're,

Sarah Kunst: (24:08)
You're saying that about Cleo capital in a few

Alex Bangash: (24:10)
Years. Exactly. Yeah. We're rooting for you Sarah. 200 X that's our benchmark

Sarah Kunst: (24:20)
Love it. That's amazing. And then, yeah, I would love to hear kind of your, your thoughts on this as well, sort of how you see emerging managers and where you think people should be, you know, should people be putting more money into emerging managers right now? Because it definitely seems like, um, because most people are, so overweighted in venture right now. They're, they're being very slow to add new managers, even though I think, you know, on the startup side, it kind of feels like we're in the early stages of, of sort of, you know, web 3.0 is Alex put it.

Trang Nguyen: (24:50)
Yeah. So, um, I actually think, um, in my opinions, and I think like with the same, with a lot of our LPs and we have one, some of the most sophisticated LPs in venture, I think it's very important that the LPs keep, you know, investing in emerging managers. Right. Um, if you look at the last decade and, you know, we, you know, TIAA platform, we actually looked at the performance of, you know, owners of funds in the last decade, by the Muslim managers own way in almost every single year, you know, the top one all the way he, you know, outperform established fund managers. Right. That's why you can see, you know, with, um, you know, another, you know, managers in Tia platform who had an as a hundred X fund. Right. Um, and then back to my point earlier about, um, a lot of childish, no VC firms has gone on and raise millions in dollars.

Trang Nguyen: (25:44)
Right. And they don't really invest in early stage venture. Right. Um, they actually invest in growth stage and competed with private equity and also hedge fund. So, you know, Chad's, you know, VC firm become grow from. And so the way for an institutional investor to actually, you know, invest in early stage, early stage ventures, actually to emerging managers, right. Because even with a lot of the cop, like early stage ventures that you see before Andreessen, right. You know, they become, you know, growth [inaudible], um, you know, [inaudible], so it's very important for your LPs to continue to invest in emerging managers so that they can hae the Hilti diversification in their portfolio, construction. And pro is that, you know, so children in ventures look salivating over time, right? So a lot of the top managers, 10 years ago, they know no longer as a top managers a day.

Trang Nguyen: (26:45)
And a lot of people, a lot of managers are not in the tier one list. I remember I talked with one of the institutional investor, um, actually just early in the weekend. Um, the lb actually show me the list of the top VC. Um, they, they want to get into, and funny enough several here, right? Incubated and snowflake. And Snope like a snowflake position in Southern Hills actually lashes and Excel on Facebook. But some of you is not in that top tier list. So the heels should be in that top tier list. So there's only children over in terms of generation. So it's important for your LPs to invest in emerging managers, because if you don't invest in the first sec, first one or second plan, you may never really get an opportunity to invest in talent for fun. And last, you know, I think investing in emerging managers is very important because it's the pathway to invest in managers with diverse backgrounds. Why, because women and racial minorities make up by growing proportion of emerging managers. Yeah,

Sarah Kunst: (27:52)
Yeah, no, I, I totally agree. And, and I think, um, a lot of smart people are listening to you on that, and there's a lot more people who need to hear that message. So I love it. Um, you know, we'd love to talk a little bit about rolling funds, um, and w w sort of rolling funds and, and studio models, and sort of all of these things that are not just sort of a, you know, kind of, Hey, we write you a check after you've been around for a year or so. And, you know, we're a two and 20, you know, tenure window venture fund. So we love to hear your thoughts about what's going on in the market. Um, you know, with rolling funds and maybe explain what that is to, to people who are less familiar. And then also, you know, Alex, you mentioned, uh, studio models, what you're seeing there, because it, it feels like there's some fundamental differences in kind of venture itself. Um, not only the kinds of companies they're backing, but, but sort of how the funds themselves are structured. And we'd love to hear kind of your take on some of that.

Alex Bangash: (28:48)
Um, I think these are some of the structural disruptions, right? So if you, if you look at what happened in the late two thousands, um, the, the cost of starting companies went down and you didn't need $5 million to buy a server and buy Oracle software, you know, um, to, to host a website. Um, so that gave rise to the micro VC super angels and by VC, right? So I think we're going to another, um, you know, even more transformative, um, uh, kind of, kind of movement today. And, and that of course has to do with local, no code. It has to do with remote work. Um, now anybody can set up a company anywhere, um, and, and they can build things and they can get funded through, through these, these things. So I think, you know, um, I am not that familiar with, with rolling funds and, and I think they are kind of, uh, you know, they're, they're, um, it, this is, again my opinion.

Alex Bangash: (29:52)
I think they're, they're, um, um, significance, maybe overstated, but I think, you know, um, I can give you a little bit more about, um, you know, I can give you a little more about specs. I think specs are kind of very disruptive. They enabled venture capital, they enabled faster liquidity. And one of the biggest pet peeves of, um, institutional investors about venture was the long hold times. Um, now with respects to those hold times are coming down significantly. Um, and, um, the, you know, there could be, there could be a scenario where these backs, um, you know, uh, replace late stage venture. Now that is a real possibility and specs. We'll also go through the boom and bust cycle. So I think that could be a very, very disruptive as most people have raised these larger funds on the assumptions that these companies are going to stay private eight to 12 years or 13, 14 years.

Alex Bangash: (30:56)
Um, now these companies can go public after four years, three years, you know, what, even six or seven. So I th I think it's disruptive to late stage venture, um, yeah. On, on the early stage side, I think, you know, rolling funds are very significant. Um, we're not focused on that. I think it's harder for institutions she wants to, to play on it as well. So rolling ones are a little like crypto and ICO's and stuff. They're, you know, they're less controllable. Yes. Uh, uh, let's see, let you know, no, not at easy to think and, um, you know, uh, kind, kind of, um, w with crowdfunding. Um, but, but, um, what has actually happened is, um, today and Trang Trang alluded to this a little bit, um, is, uh, today founders can build a portfolio. So the cost of companies has gone down so much.

Alex Bangash: (31:51)
And with local, no code, you actually don't need a founder. Um, doesn't need to go to a VC for one to one company, you know, before a founder only could go to a VC with one company now, um, with, with all, you know, with cloud and remote work and local ordinal code and distribution tools, the founder's name. Well, um, yeah, you know, I'm going to spend half a million dollars testing out five ideas, and, you know, I don't know, I want to launch three out of five or two out of five, and I don't. So, so that's, that's kind of a unique opportunity. And then you're also seeing the same founders now, you know, you're seeing a lot of part-time funds, which was not there, and that's of course rolling funds a contributor to that. Right. Um, but I, I don't think it's the sole contributor.

Alex Bangash: (32:45)
There are VCs who will give you money. There are some MPS, or non-traditional NPS, they'll give you money that some family office, they say, yeah, well, we'll give this person money on the side because they have great deal flow while they build their companies. So, you know, um, that, that has created a, a lot of opportunity on the, on the early stage. Um, and it's also created a lot of noise. So, you know, um, I think that, of course, there'll be many, many, many, many, many winners. Um, but there will be some, some, you know, some next generation firms that will get really good at him. So, so basically there will be factories of startups, right. So I think there will be factories of startups that build these things. There'll be factories of startups that accelerate, and, and you're seeing that in Y Combinator. I mean, it's unbelievable.

Alex Bangash: (33:37)
Y Combinator does more in one demo day than what some of the w w uh, top VC, you know, some of the best names on Silicon valley have done, you know, um, in, in 20, 25 years. So, you know, they've gotten to that scale and we're going to see, and I think that's the beginning, right? We're going to see other manifestations of that. We're going to see that, and not just an acceleration, but we're going to see that in building. Um, and of course, um, you know, you saw, you saw that with what Mike Spicer did with, with snowflake. I mean, they built the incubator. It's not like the point, however, is the point, however, is that these things are not easily replicated. Right. Um, so, so, you know, it's not easy to build a Y Combinator. It's not easy to build a snowflake. It's really hard. It's not easy to build a Cleo capital. That's why you're doing it, et cetera. So,

Sarah Kunst: (34:32)
Yeah, I agree. It is certainly not easy. And you see a lot of people try and, you know, they sort of put in similar things and they don't get the same results out. And, you know, it's, it's interesting with the Y Combinator is of the world, because there've been so many, um, accelerator programs and so many incubators, and so many of them have, have failed. And, you know, I'm, I'm interested to see, I, you know, if, if, you know, with these studios, with the rolling funds, with the part-time funds, with all of these new models, you know, is it something that, that makes the overall pie bigger, or is it something where, you know, a lot of people fail and there's just sort of one or two quick, you know, breakouts in each category. And so, so it's interesting, but, you know, I personally think that overall it's, it's really positive because, you know, when you look at venture dollars, there were more and more money.

Sarah Kunst: (35:22)
There's more and more money flowing into venture capital, but the vast majority of it flows into the later stages. And, and, you know, the reality is that, that it often seems like really early stage founders are, are a little bit underfunded. And so, you know, would love to hear your thoughts on that. There's a, there's a lot of talk of sort of, there's too much money chasing too few few deals. And, and do you feel that's true, particularly on the early stage side, or do you think there's a lot more space for more great companies to be built?

Alex Bangash: (35:53)
I think there's a lot more space for great companies to be built, but I always, and this is what we do in both with funds and with companies, you know, we like the people who are misunderstood, I would never chase the fund. We always back the underdogs. Uh, we always back to people who are misunderstood, and that doesn't mean that the, you know, kind of the, um, that the top dog, so of the, the most, you know, the kind of the, the, um, the, the people who win the beauty contest won't do well in a lot of cases. They do, but that's not, that's not our DNA, that's not the people we back. Um, and you know, and a lot of times, um, you know, those are the folks that are building something really substantive and it also goes to pricing, right? So, um, the, the, the companies that are, you know, that are really hot, they tend to get overfunded and their pricing is, um, you know, um, is, um, they're, they're fully priced or, you know, priced for perfection.

Alex Bangash: (36:52)
Um, and the, the, the best opportunities are the ones that are, you know, that are a thing. So, you know, not to name names, but actually 18 months ago, um, last year, you know, we had three, three lending companies in our portfolio, and we were like, very concerned, everybody we talked to, they were like, oh, every time there's a change in the credit cycle, the first first companies to go, um, the lending companies just get completely wiped out, right? They have, they get no second chance. And, you know, just a year after that today, I think two out of the three have raised a billion dollars to a billion dollar valuations. Um, and lending is, is, uh, a heart again, it's called buy. Now, BNPs buy now pay later. So it's funny how things that are out of favor will become, become in favor. And, you know, also the, the trick, the trick is to find those, um, you know, those, uh, um, founders who are building substantive companies, not the, not the ones that are building popular companies, and sometimes the C becomes a popularity contest, right? So it's all the heart people in San Francisco. Oh, well, they have this in their portfolio. We need to have a similar company in their portfolio. So, um, unfortunately VC is, you know, VC and LP is not a courage game. It's not a courage of conviction. And that's what we thrive on. You know, we, we like to back the, you know, back managers and companies with the courage of our conviction.

Trang Nguyen: (38:27)
Right. And I agree with Alex on, in terms of there's a lot of space for early stage companies being built and, you know, on the institutional side, really, like if you look at last year to 10 20, the majority of the LPs capital actually go into later stage and, you know, e-stop leaps managers given the uncertainty in the market. Um, but you know, and I think Sadie mentioned about Y Combinator, you know, you know, you see a lot of on salary does come and go and walk. My leader has a brand and network effect. Um, but you know, on the studio venture side, she thinks they space for a lot of studio ventures and they are not competing with each other because, you know, the studio is formed by proven entrepreneurs and, you know, they have factory creating multiple companies. So they, you know, there's more, um, successful and, you know, um, proven in Syria and entrepreneurs, um, you know, we expect to see more studio in the future and that's where a lot of startups can be formed.

Sarah Kunst: (39:33)
Yeah, I agree. I think that there's just, there's so much in front of us when it comes to building awesome companies and, you know, I focus mainly on the us. Um, but, but, you know, as, as Alex, as you mentioned, kind of about the global kind of, you know, rise of so many amazing companies, um, where outside of the U S are you guys excited about right now, where are you looking? Where are you investing? Um, and, and, and where should the rest of us be looking?

Alex Bangash: (40:00)
Yeah. So, you know, the, the, the really exciting thing is that the lines are getting blurred. So we say, well, we can only invest 25% outside the U S so just earlier today, um, we talked with an Indian entrepreneur, um, he he's, he's building a, uh, you know, a company in the blockchain space, the com he, he he's an Indian, he was an India entrepreneur incorporated in Marta, and now has companies headquartered in San Francisco. So, you know, is that an Indian company, is that it is funded by an Indian VC? Is that an Indian company? Is it a European European investment or is it, so these lines are incredibly getting, you know, getting blurred and look at UI path is going to go public. Is that, is that a Romanian startup, or is it, uh, you know, is it a Silicon valley startup? So, and thankfully, so, because that's how it should be, you know, we want to back people with global ambitions, like global ambitions, and why should it be, you know, in, I think most LPs have been trained when they invest in private equity and in Sub-Saharan Africa, it's Sub-Saharan Africa, when they invest in Eastern Europe, it's, it's Eastern Europe, CDPs, then Europe currency risk.

Alex Bangash: (41:17)
When you invest in, um, you know, Eastern European, um, we seek, you know, venture company, they are global, they could be incorporated in Delaware today. We're seeing amazing companies from a SAS company, SAS and infrastructure companies from Chennai India, you know, who would have thought that China is going to be a part of SAS and, and, and developer facing tools. So, so, and, and those companies aren't incorporated in India, they are incorporated in Delaware. So, so that's the point. And you're seeing that in, in, in crypto. And so across the board, I think, you know, amazing, amazing companies coming out of Europe. Um, you know, and then the flip side is also true to the one we were talking with one of our partners and they said, you know, you know, you know what addicts today, the contrarian thing is to invest in Silicon valley because Silicon valley is so out of favor, hardly VCs have left the area.

Alex Bangash: (42:17)
So, you know, I think there will be, there will be innovation coming out of everywhere. Um, uh, you know, um, people serving these different markets and you, you, you know, so, so SAS tools, developer tools, they're global, um, but then sometimes fintechs, you need, you know, in fintechs, you will need fintechs for each geography. You will need them, the neobanks from Brazil car deported over to Southeast Asia, you know, so you will see, see, um, see kind of fintechs geography by geography, and you could build, you know, huge companies in each geography in, in India, in Europe, in Latin, in, in, uh, you know, um, in lending companies and Neo banks and payments companies and insurance companies. So, so I think, um, you know, the regulated industries will be more geography by geography. Um, but you will have see global companies come out of, uh, you know, a lot of, uh, um, uh, um, a lot of geographies in, and you're seeing right, you said, Coupang come out of Korea and, uh, FreshWorks come out of India. And so, so,

Sarah Kunst: (43:31)
So Silicon valley is your favorite new emerging market. That's

Alex Bangash: (43:34)
What I heard. Yeah. If you want to take the country and a contrarian approach right. And say, yeah, you're the most country. And think you can do is invest in Silicon valley. Know

Sarah Kunst: (43:44)
Exactly. No, I, I love the global approach. I think that, you know, that it's so shortsighted to think that, um, you know, where, when you look at where people live and, and, you know, especially the younger generations, uh, where they're concentrated geographically, it feels that there is like a lot more investing to be done, um, in areas outside of the U S and Europe. So I love that. Um, this has been great. Um, do you have any kind of last thoughts for us as we wrap up? What are you most excited about right now in the tech world?

Alex Bangash: (44:18)
Um, you know, um, I, I think, um, I'm just most excited about, you know, how all this will unfold, right? So I don't know whether there will be a bloodbath and I, I, there's always this boom and bust cycles, you know? Um, but what I know is that venture, unlike all these other asset classes, um, you know, we've seen that venture is actually getting bigger and bigger and the big, the big VC funds will do great that emerging managers will grew date. The new models will look great, right. There's room for everyone to grow. Um, and then also, I, I think that, that, um, you know, venture is, what's so exciting is that venture is one of the few places which does well by doing good. Right. So I think we're seeing the resurgence resurgence of kind of, um, um, climate focused funds. And maybe this time they're better, you know, now we're building the infrastructure, we're building the Lego blocks, we're building the developer facing tools. They API is the AC SDKs to, to take on the challenges of, of climate. It's not, you know, the, uh, the, the kind of the climate one Dato, uh, clean tech, uh, uh, you know, investing that we saw. Um, so I think that's, what's most exciting. Um, and it's also been, you know, um, it's also kind of uplifting, like when share is the thing, which is, you know, doing, doing, doing good while doing well. So that's, what's

Trang Nguyen: (45:48)
I think to add to Alex boy, I think, you know, just last year we see, you know, the, um, you know, the exit of snowflake kind of proven out studio motto investing. So, you know, I think like for all of us STI platform, we're very excited about, you know, S more entrepreneurs setting up, you know, new venture structure. We got to enroll in a lot of more, um, you know, Novo structures and, you know, many of them will result in, you know, exceptional returns. So, um, you know, we just spoke with the wonder, well, fund managers last night that, um, create amazing platform like jar south side, um, hope two times 18 vintage fund is already at 8.5 X, and there's a lot of room to grow from there. Yeah. Yeah. That's amazing. That's super exciting. Well, those are very exciting numbers to end on. So thank you guys so much, um, for coming on and hopefully we get to see you at assault conference in person soon as well.

John Darcie: (46:50)
Absolutely. I just got out of the way and let you guys run, cause it was such a good conversation. So, uh, thanks again, Sarah, for introducing us to Alex and Trang and thanks for joining salt talks. And like Sarah said, we were getting back, hopefully the in-person a conference game starting in September in New York. And you're talking about being a contrarian, Alex and investing in Silicon valley innovation. We feel the same way about New York city. You know, New York city has been called dead once or twice. Uh, but, but we're, you know, putting our flag back in the ground here and, uh, we're going to come back with our conferences and, and get, get back into the city and I'm actually in the office today. So it feels good to start getting back to it,

Alex Bangash: (47:28)
But thank you for having us. Thank you. Thank you so much, Sarah. And thank

John Darcie: (47:32)
You everybody for tuning into today's salt. Talk with trying when and Alex Bangash from TEI. Just a reminder. If you missed any part of this talk or any of our previous salt talks, you can access them all on our website. It's salt.org backslash talks, and also on our YouTube channel, which is called salt tube. We're also on social media on Twitter is where we're most active at salt conference, but we're also on LinkedIn, Instagram and Facebook. And please spread the word about these salt talks. Especially if you have a young aspiring technology or venture investor, I would point them to this great conversation here today. They can learn a lot about taking sort of a contrarian mindset and how to find, uh, like Alex and train. We're talking about true entrepreneurs and not just engaging in that popularity contest. That's so often the case in Silicon valley, but on behalf of Sarah, this is John Darcie signing off from salt talks for today. We hope to see you back here against them.

Deena Shakir: Transformative Technologies | SALT Talks #204

“Intersectionality is not only my actual identity, but also very much my career path. Whether it’s the intersection of health and technology, or computational biology and food, it’s very core to my thesis.”

Deena Shakir is a partner at Lux Capital where she invests in transformative technologies. She’s particularly interested in contrarian and underdog founders building digital health companies.

As the daughter of Iraqi immigrants, 9/11 had a profound impact and served as motivation to build bridges between communities through work and service. This included a stint at the US State Department as a Presidential Management Fellow before pursuing a career focused on sustainable economic development. A wide-ranging career has helped establish a deep and interconnected network that plays an important role as a venture capitalist. “Everyone has their superpower they bring to the table… I’m never going to be the smartest person in the room, the most technical or most experienced. My superpower is my ability to connect.”

When identifying start-ups and their founders, it is hugely valuable to find someone who has not only expertise, but also the ability to tell a story. Communicating a company’s mission through a story is vital to sustained success, whether it be fundraising or hiring.

LISTEN AND SUBSCRIBE

Spotify | Amazon | Google | Stitcher

SPEAKER

Deena Shakir

Partner

Lux Capital

FULL BIO

MODERATOR

Anthony Scaramucci

Founder & Managing Partner

SkyBridge

FULL BIO

EPISODE TRANSCRIPT

John Darcie: (00:07)
Hello everyone. And welcome back to salt talks. My name is John Darcie. I'm the managing director of salt, which is a global thought leadership forum and networking platform at the intersection of finance technology and public policy. Saul talks are a digital interview series that we launched in 2020 with leading investors, creators and thinkers. And our goal on these salt talks is the same as our goal at our salt conferences, which we're excited to resume, uh, in September of 2021. And we hope our guests today will be able to join us at that event. But our goal is to provide a window into the mind of subject matter experts, as well as provide a platform for what we think are big ideas that are shaping the future. And we're very excited today to welcome Deena Shakira to salt talks. Deena is a partner at Lux capital, a multistage venture capital firm with around two and a half billion in assets, under management, where she invests in transformative technologies, improving lives and livelihoods she's particularly interested in contrarion and underdog founders, building ambitious companies in digital health and sits on the boards of companies, including H one, all stripes.

John Darcie: (01:14)
And she wrote she's the daughter of Iraqi immigrants, and Dina has had a very non-linear journey into venture capital, always orienting around tech and entrepreneurship with an impact focus prior to joining the lock. She was a partner@googleventuresandledpartnershipsformoonshotproductsatgoogleanddirectedatsocialimpactinvestmentsatgoogle.org. She was a presidential management fellow in the Obama administration where she worked in secretary Clinton's office and the U S aid on program supporting global entrepreneurship, a passionate advocate for diversity inclusion and equity. Deanna is also on the boards of several non-profits. She's a Forbes contributor, a Kauffman fellow, and as a council on foreign relations term member, she lives with her husband and two young children in the San Francisco bay area. But I think she's escaped. Uh, I have three kids as well, so I know how it goes. She's escaped the zoo. That is the household during COVID and is in the Lux offices today. Hosting today's talk is AGA Scaramucci.

John Darcie: (02:11)
Who's going to be increasingly joining us as a host here on salt talks. He's done a few previous interviews. I know we did one with Joe Lonsdale a few weeks ago, AIG, but AIG is the founder and managing partner of the salt fund, which is a new fund that we've launched, leveraging the community and ecosystem that we've built here at salt that's incubating and investing, especially in early stage life sciences oriented companies. So I know a lot of overlap with what we're doing at the salt fund and what Dina does over there at Lux, but, uh, with no further ado, I'll turn it over to you AJ for the interview.

AJ Scaramucci: (02:42)
Thank you, John Dina. So good to be with you. I mean, there's tons of rich things in that background before we dive into your role at locks and, and perhaps some of the investments you've made. I'd love to just contextualize that a bit. How did you get here? Well, how did you get to, to, to Lux capital? Let's start.

Deena Shakir: (03:03)
Yeah, sounds great. Thank you, John and AIG for having me. And that's probably the question I get asked the most, um, just behind it, if you look at my LinkedIn background or my resume, um, it certainly is, uh, nonlinear and non-traditional um, although, uh, I would contend that said there really is no traditional path into this field, you know, for me grew up in the bay area. Um, as you mentioned, John, my parents immigrated from Iraq. Um, my father came to the bay area to complete his residency at Stanford in psychiatry and just fell in love with the bay in the seventies. And so, um, you know, I had a very privileged childhood compared to most of my relatives and that were very, very much informed my identity, especially, you know, being in high school when nine 11 happened and feeling perhaps for the first time in my life, that my hybrid identity as an Iraqi, as a Muslim and as an American, all of a sudden to out it to anyone on the outside seemed at odds.

Deena Shakir: (04:09)
And so that really informed, it informs my career path, my, my educational journey and ultimately my, my goals in life. I wanted to help contribute to a world where that would not happen again. I wanted to sort of do what I had. I've always done when any third culture kid, any child of immigrants has done, which is to build those bridges and to be able to seamlessly transition between worlds and to do that in service of, uh, of impact. And so, uh, went off to the east coast for college. I went to Harvard, um, and, uh, and really thought I was going to do a PhD in anthropology. And I thought academia was going to be the path for me to do that. We studied the middle east, of course, at Harvard studying the middle east meds, you know, reading ancient at Katie and tech and setting Sumerian, Sumerian of philology, because very interesting, but not necessarily what I, what I had in mind.

Deena Shakir: (05:01)
And so I spent summers abroad and, um, and, uh, and then went off to grad school at Georgetown. And so ended up in DC. I graduated in 2008. Uh, in fact, I delivered the commencement address that year and the speaker right after me was that former chairman Ben Bernanki. And, uh, if you go back and look at the footage from that speech, I actually turned around to thank him and he had disappeared. So there was clearly something going on in that summer of 2008. Um, and of course, several, uh, several months later, we, we, you know, we came to see what was happening with the financial crisis, but bring that out because at the time, you know, the class before mine, class of 2007, 1% of Harvard undergrads went into wall street or consulting. It was just the thing you did there, wasn't really a clear path, um, between these sort of this dichotomy of doing well or doing good.

Deena Shakir: (05:55)
So you could go, you know, maybe you could see a doctor or you could be, um, you know, a human rights lawyer, or you could be an academic, or you could do what all the kids did and, you know, make a ton of money. And, um, and, and that's really unfortunate because it took me, you know, over a decade to realize that there is not only a gray area, if you will, that perhaps a more impactful area towards sustainable economic development, uh, in between. Uh, so I was pursuing the academic path and ended up in DC, as I mentioned. And that was a very interesting time, um, for the country, because it was there when Obama, who you may see in the, in the photo here behind me was, uh, elected was inaugurated and then ultimately took office. Um, and while I was in grad school, just, uh, as, as was the case, while I was an undergrad, I was working all the time.

Deena Shakir: (06:45)
I paid for both college and grad school by myself. And I was lucky enough to get an, a number of scholarships, but also was usually working one to three jobs at a time and happened to, um, one of those jobs happen to be as a journalist very briefly. Um, and I was on air, but I did a bilingual, Arabic English news show. I'm not sure if you can tell based on my presence with getting actually, it was very difficult because let's just say, I thought my Arabic was good, but when you ha when you have to do a news show on air and Arabic, that's a whole nother story. So happy to be on air anytime, but please don't ask them to do it in Arabic in the future. Um, but, uh, the ended up interning with the BBC and covering the white house when Obama gave his canonical speech, which became known as the Cairo speech in 2009.

Deena Shakir: (07:28)
Um, I know we talked about this before Aja, so I'm, I know you remember it, that that speech was a watershed moment for relations between the last and the middle east. And for me as someone who had grown up in the bay area, who was passionate about, uh, economic development and who specifically knew the power of technology in particular, um, to, to not only build bridges and product for impact, but also to enable livelihoods, I was really motivated by that speech. And I dropped my niece in career in journalism and made it my job to make that my job and find out who was going to be running, um, the policies coming out of that speech. So, uh, was lucky enough to get a presidential management fellowship ended up at, uh, initially it was at USA ID and then at the state department, um, and spent several years working on a number of initiatives around the post Cairo portfolio, specifically enabling, um, and, and funding, uh, programs for entrepreneurship in the region.

Deena Shakir: (08:26)
And so how, how did, how did that lead to, to venture, um, as a, is a good question. And, and a lot of it also has to do with another watershed moment for the region, which was the Arab spring and being in the U S government as an Arab American. Um, when that was happening was, was really interesting. And I was witnessing changes on the ground in the region that I didn't think I would see in my lifetime. Now, back then, we were all a lot more hopeful. Um, uh, you know, uh, certainly looking in retrospect things perhaps didn't end up the way that many had hoped, but what I was seeing was that technology was enabling change in a way that was truly revolutionary. And that to me was incredibly exciting. So it was a combination of seeing that, you know, the beginning of, of what we were, what we now call the fourth industrial revolution.

Deena Shakir: (09:12)
And I was coming out to the bay a lot for work. My job working in secretary Clinton's office, uh, on public private partnerships was to facilitate those types of relationships with startups, VCs, and, and, um, and also large tech companies. So combination of like feeling this, the, the energy here in the bay, recognizing that this, this place I had grown up in which when I left, I honestly never thought I would come back. It didn't seem like there was an opportunity for somebody who wasn't, you know, just, uh, maybe a chip engineer or, or, or perhaps a software engineer, but Silicon valley and the technology in general was not just a separate sector anymore, but a way of doing everything better, more effectively, efficiently, and in some cases more democratically. So, uh, that's when I decided I wanted to, to, to learn how to build product, and that's a, not an easy transition and it was early, you know, there's definitely a diaspora now of folks from DC in, uh, in the bay.

Deena Shakir: (10:09)
But back then, this is 2011, 2012. It wasn't a clear case to make, um, as to how someone with my background who literally studied the most non-technical degree, you could get at Harvard social studies and near Eastern languages, and civilizations would be qualified for a job on the product side. So very difficult, um, but ultimately ended up, um, being fortunate enough to get a really cool opportunity. Um, and so spent five years working on early stage product partnerships at Google, including some, uh, social impact initiatives, including, you know, Google's elections products and so on, but ultimately, uh, lands in, into healthcare. And that's what led me to venture. And it was leading Google's first HIPAA compliant, uh, product effort, meeting, incredible entrepreneurs who were doing things frankly, better than my team of hundreds of engineers at Google. And recognizing that big tech probably was not going to be the source of innovation in these really intractable fields.

Deena Shakir: (11:08)
Uh, and, and I just felt that same energy I felt when I wanted to work in the administration and that same energy I felt when I wanted to move into Google. And now I knew that it was the, it was working with startups that, um, would be my, kind of my life's work. And so, um, met some amazing entrepreneurs invested in some of them, myself as an angel, very small checks source. Some of them, some of my friends didn't venture. Um, and then that made my way over to GV where I was for a couple of years before joining Luxe. So that's, that's the not so short story.

AJ Scaramucci: (11:38)
Yeah. Yeah. I mean, it's fascinating. I mean, having that sort of systems level approach, having those varied experiences in politics, in journalism, even in academia, and then eventually in technology as given you, I think a very unique perspective on venture. I think that's a perfect segue. I mean, an Atlas and you give us a sense, give us a flavor of your own investment philosophy in the context of the broader firm and perhaps even call out a few investments that you've made that you feel particularly

Deena Shakir: (12:08)
Compelled. Yeah, absolutely. Um, so at a high level you Lux has been around about 21 years, started off in the early days as a small seed fund out of New York that, um, my partner is Josh and Peter started with this hypothesis, that there was a really unique opportunity to invest in the earliest days of company creation and in funding, contrarian, rebel entrepreneurs who were taking on some of the most challenging problems. So we're literally turning science fiction into fact. And if you think back, you know, at that time there, wasn't such a clear venture return profile for that type of a business. Now we call it frontier tech, deep tech, hard tech, and every venture firm is trying to do it. But back then, that was pretty much a category creating, um, and bold mission. Um, and so, you know, I have so much respect for Josh and Peter for doing that and doing so in their early twenties, no less.

Deena Shakir: (13:00)
Um, and, and that's how it started. And they, you know, in the early days that a lot of nanotech and nuclear and clean tech and the fund has evolved quite a bit since then. So we are no longer a small seed fund. We now have 2.5 billion AUM, and we are a multi-stage fund, but we are very much still true to that core of, uh, of a deep conviction in science and technology in improving and advancing, uh, humanity. And very much still love to be there at the earliest days of company creation. So we're quite flexible. We can incubate, we can be first capital in, we are investing out of our sixth venture fund, which is a $500 million fund. And that's really for everything from pre-seed to series B ish. And then we also have our, our second opportunity fund where we not only double down on our existing investments, but also can make growth stage investments and companies like Benchling, which we just announced another round.

Deena Shakir: (13:55)
And yesterday, like Everly health formerly I really well, um, applied intuition, uh, and others. And so, um, you know, in terms of me and my thesis, you know, one of I had a couple of different opportunities that I was exploring, um, when I was thinking about leaving GV and had been at Google and alphabet broadly for almost eight years. And, um, it Lux was one of the easiest decisions I've had to make in my career. I was very, very lucky. It was clear to me that everything about their investment philosophy was just very aligned with my values. And also my, my background Lux loves to invest in the intersections and intersectionalities, not only my actual identity in terms of who I am, but also very much so my, my career path. And so whether it's the intersection of health and technology of hardware and software of computational biology and food like Shiru, um, and, and so many more that that is core to, to what they do.

Deena Shakir: (14:54)
And it's very much also kind of core to my thesis. So since I joined, I've made a number of investments. You've mentioned a few of them. Um, I probably spend the majority of my time, maybe 60% or more of these days looking at human health and population health. And I, one of the, our most more recent investments is in a company called steady MD, which, uh, Lux led the series B four. And I joined the Bora board of, and that company is really revolutionizing the expansion of digital health, again, from this notion of being a separate field to being sort of the rails that's powering virtual care across industries. Um, so, so that's a company I'm super excited about as somebody who, you know, worked on digital health product at Google in the very early days. And it's been recognized, you know, what it takes to succeed there.

Deena Shakir: (15:46)
And also, you know, frankly what the last year has taught all of us, um, about the importance of, uh, healthcare moving into the home of the decentralization of clinical trials and clinical research, um, and of the ability of technology to enable access at large, uh, to improve human health. So that's one example. Um, another is Shira, which was actually my first investment at Lux and the company that I am proud to continue to serve on the board for. Um, and so Shiru is applying computational biology and machine learning to the development of novel plant-based ingredients. And so for me, this is a massive opportunity to Kent, to, you know, contribute to, um, taking on climate change through, you know, reducing greenhouse gas emissions, but it's also a massive opportunity for a tremendous generational company. Uh, as again, we've seen in the last year, although I made this investment and, you know, before the pandemic, there is not only an increasing consumer demand for plant-based ingredients, but there is a, a really large challenge on the food supply chain.

Deena Shakir: (16:53)
That is that that is contributing to, uh, the bottom line for a lot of these food companies. And so rather than creating the next impossible burger or beyond meat or a chicken alternative, which Shira was doing is actually using machine learning to develop new ingredients. That will be the building blocks of those companies, but also enable the large fortune 500 food companies of the world to replace egg protein, or gelatin or various other ingredients in their foods. And that, and that is something that is incredibly exciting to me. It's a model that's worked quite well in healthcare and pharma for a long time. Uh, and, and Jasmine, um, with her company, Shiru is the first to actually apply it to food. So very excited about that one as well.

AJ Scaramucci: (17:37)
Yeah. Yeah. And, you know, just to jump in here, I mean, when you think about it, I mean today, I mean, we're living in a, in a time where there is truly an abundance of capital where even pension funds, sovereign wealth funds are coming down and doing direct investments really for the, for the first time. And, you know, the question here is how does, how does locks, how do you, when you approach entrepreneurs, what does it mean to be founder friendly? Uh, what does it mean to really add value, uh, in, in the context, uh, of Luxon differentiate amongst the many, other many other funds, like when you work with say Jasmine, that she wrote would love to understand, you know, how you, how you win deals, but also how you empower and catalyze the, these entrepreneurs to tremendous

Deena Shakir: (18:22)
Success. Yeah, it's a really great question. Um, I, it's funny because when I speak to family members of mine who are very much outside of the venture capital world, they find it baffling that the check writers are actually the ones who are doing most of the selling and the hustling and trying to win. That's certainly counter-intuitive, but you, you absolutely hit the nail on the head. It's like, it's the, it's the nature of the business capital is everywhere now. And recently more so whether it's, uh, a family office, a corporate VC, or an entity these days, very, um, aggressive individual angel investors like getting access to capital is not the problem, uh, for entrepreneurs. So, so there is very much a, um, uh, a selling process that's important, but, you know, for me, it's, it's, um, a lot of it is grounded in authenticity and that is, believe it or not, uh, rare to find in this industry.

Deena Shakir: (19:16)
Um, and so, you know, having my voice out there, standing, uh, standing up for what I believe in across the board from an investment thesis perspective, from a corporate governance perspective, from a diversity and inclusion perspective is something that's very important. Um, and one of the beautiful things about this job is that we have the ability to meet with the inventors of the future all day, every day. Um, and so in a way it's been almost a return to academia for me, and almost a little bit of an anthropological exercise that I've been taking and really forcing myself every now and then to take a step back and actually produce some content. So I've been doing some writing, um, and, uh, and that was something that I really kind of just did for myself initially, but I've actually found that to be quite helpful in, um, attracting co-investors and entrepreneurs who are able to see who I am and what I stand for.

Deena Shakir: (20:12)
That's not necessarily a formula and venture. There are some of the most incredible VCs out there literally are not on Twitter and don't write anything. So, you know, that that's just something that has been helpful for me. Um, and, and the other, the other thing to note is that, you know, you might be, you might have a PhD in a very technical field investing in a technical company, but you're not going to be sitting there writing the code or, you know, developing their prominent proteins yourself. So it's important to have the fluency and the product to be able to understand what it takes to build a team and very much what I did in my, in my prior world. But it's also important to, uh, to, to understand what it takes to scale a business, and importantly, to have a network, everybody has their super power that they bring to the table.

Deena Shakir: (21:01)
And this is the advice I give to a younger folks that I mentor in terms of how, you know, different paths to get into venture. It, it's not about a formula, a template and pathway it's really about like, what is it that you bring that's different than somebody else? What is your superpower? And I am never going to be the smartest person in the room. I am not going to be the most technical, uh, and I'm not going to be the, even the most experienced, but my super power, which dates back to what I mentioned earlier, even in my childhood and my upbringing is the ability to connect the ability to bring people together. And the, the sort of diversity of my background in terms of different jobs and lives that I've held at all throughout being focused on partnerships has really enabled me to build a, not only why, but very deep network that I bring to bear, whether it's through commercial relationships that result in, you know, non-dilutive capital for these companies, whether it's through, um, different co-investors we can bring to the table, or whether it's through relationships with future board members or hires.

Deena Shakir: (22:07)
That's, that's my thing

AJ Scaramucci: (22:10)
Makes a ton of sense. And, and when, when you make that, make those investments decisions, Hey, you know what, we're Luxe, we're going to lead, lead that round. You're going to join these boards, as you think about all of the various input parameters that go into that decision, whether it's team market, et cetera, how do they wait for you if you were to kind of allow us to delve into your mind's eye there PA what is the weighting of those? Those are

Deena Shakir: (22:35)
Right. The great question. I mean, it's, it's almost a cliche, but truly it's about the people at the end of the day. Um, and the more I, the more I've been doing this, the more I realized just how much truth there is to that. Um, you can have an incredible idea. Um, and that idea might be enough if you're working on a product within a large tech company, because, you know, you can swap out team members, you know, it's, there's, there's more kind of fungibility there, but when you are putting everything at risk to start a company and going through the incredibly, like, you know, psychologically draining process, that, that, that it inevitably turns into no matter how successful you are, it's about the people. And so that definitely team is very important and, you know, a lot, some of that has to do certainly with the, with their background, you know, their, their, uh, understanding of the markets, but also their ability to communicate.

Deena Shakir: (23:31)
That's really important to me. And so we, we invest in, uh, quite a few scientific solo founders, um, and there are a number of companies, um, probably the majority of companies in my portfolio fit into that bucket. Um, that it's very, when we find someone and Jasmine is a great example and are certainly others, including a few investments, we'll be announcing that in the coming few weeks where they not only have the technical and professional, uh, expertise, but they are incredible storytellers. And that is important because it reduces financing risk down the line. It, uh, empowers them to hire, well, obviously there's, you know, a marketing and kind of growth element associated with that, but it is something that is important at all stages of the company. And I've actually said this before, and I really believe it for me, it's not my Harvard degree or any of the experiences I had in my professional career that I think is the most valuable that I've had. It is literally my speech and debate experience in high school that I think has been the most valuable skill asset activity that I have ever done in my life. And so that's something that I do spend time as well with our, with our, with my founders and coaching them on. Uh, and that Luxe in particular also is, um, ha has a wonderful program where we help, um, founders with that as well.

AJ Scaramucci: (24:50)
That's fine. Definitely. You know, you, you've been a, a huge voice and very active on the diversity front in Silicon valley. And, you know, th this is, this is a topic of continued discussion on, on Saul talks. We'd love your take on what, what ways, what techniques would you suggest, or how do you think about, uh, diversity in the context of venture capital, like literal partners, uh, as well as entrepreneurs and how we can sort of reorient ourselves to be more inclusive, more, more broadly?

Deena Shakir: (25:25)
Yeah, that's a great question. Um, you know, I, I think back to the, the first few years that I was at Google, where, um, you know, as you might recall, Google was the first major company to release their numbers in terms of the demographic data and specifically on there, on the technical side. And it was damning, it was bad. And so I actually helped put together kind of a, uh, an internal SWAT team to try to figure out how can we address this both internally, but importantly, you know, given the convener that Google is and the ecosystem, and that was actually a very valuable exercise, you know, almost a decade later. And how I think about the problem now from venture capital, what we realized through that is, you know, specific then to, how can we increase the number of, uh, of, of women and people of color graduating with computer science degrees, that there are points of attrition throughout the, the, the life cycle of an individual, uh, and shaft, you know, recent data actually has shown that some of these biases and preferences start as early as 18 months of age, um, uh, you know, and maybe John as a parent and certainly myself as the parent.

Deena Shakir: (26:32)
I think about that a lot when I, you know, w w w when I'm doing my own parenting. And I think back to my own childhood, I grew up with three brothers. And, you know, that that is certainly something that is important. So in addressing issues around representation, diversity, and inclusion, there are so many, so many ways that we need to work on it, and no one solution or no one point of attrition is going to be enough at Google. You know, they've funded programs like the Gina Davis Institute, um, where they, first of all, worked on actually mapping out data within, within, uh, TV shows within Hollywood, within media. And that helped to actually write characters into TV shows to, to offer examples, um, and, and, and role models to children and, and also to, uh, to, to adults. And that was something that has worked well in stemmed more broadly in the medical field in particular.

Deena Shakir: (27:23)
And so, you know, there's definitely the element of media, which is quite important. Um, there is the elements of a child early childhood education. This is something I'm also very passionate about personally, first and foremost as a parent. Um, but also, um, as, uh, you know, as, as someone who's focused on what the next generation will look like. And so there's, there's much to be done now, but we need to start earlier on. So I actually wrote a children's book, which will be coming out soon. Um, that is specifically about a, um, a, a young girl who, um, started the company and goes through, uh, the process of, of fundraising and what that's like, I, you know, and, and, uh, specifically as a young woman of color. So, uh, there, you know, there are many ways to address those. I do think the last few years have certainly been a reckoning for the world and everything from, you know, me to, to, um, you know, to the venture capital industry.

Deena Shakir: (28:17)
And there's been quite a bit of progress. And I know this because I, I wanted to, you know, enter VC before any of that happened. And I felt a market difference in myself, but there has not been nearly enough progress. And unfortunately, uh, the pandemic, uh, in many cases has exacerbated existing inequities and biases, um, particularly for women and particularly for women of color, uh, not just in terms of, you know, the number of, you know, the, the, the mortality rate for COVID itself, but actually for, you know, the folks who are dropping out of the workforce, it is devastating and there's much work to be done there. And if we can't even keep women in the workforce, imagine how much work there is to be done, uh, on the fundraising side. And so this is something that continues to be a huge problem. I'm very, very happy to say that there are incredible organizations, like all Ray is like him for her, um, and a number of others out there, women in VC, et cetera, that are really focused on this, um, that have raised money and have institutionalized and happen are being incredibly thoughtful, starting with research and all the way through kind of programmatic activities.

Deena Shakir: (29:25)
So I think that I'm hopeful and I'm optimistic, and I'm involved in that, um, that these things are, are long-term problems and require long-term solutions.

AJ Scaramucci: (29:35)
And when does this, when does this book come out? Well, what can, when could it be expect this to, at the shelves where I'm very about that

Deena Shakir: (29:41)
TBD TBD, it's still a, it's still a work in progress. I mean, the book is done. We're just going through the process of getting it published. So stay tuned for that. Um, but I'm very excited, John, hopefully you can, [inaudible] the baby's born.

John Darcie: (29:56)
The oldest, my oldest is a girl too. So obviously looking to surround her with positive, uh, you know, female role models. And as she grows up, I would love to, uh, to introduce her to

Deena Shakir: (30:06)
You. Absolutely. And she can hang out with my daughter who's around the same age. So for sure love

John Darcie: (30:11)
It. We're going to have a playpen at salt in New York. It's like,

Deena Shakir: (30:16)
So nice. Nice.

AJ Scaramucci: (30:19)
So, uh, so I think this, this could serve as a great segue. Do you sort of the second chapter of the interview here, Dina, we're really gonna, uh, go into some kind of broad existential topics. LA love, we'd love your take. So I think the first one is not quite the softball, but what do you think the world will look like in 2050 and generation from now? I mean, you could take this in any which way direct and in a direction you so pleased, but give us a sense as you close your eyes, what do you see for the world in 2050 for better or worse?

Deena Shakir: (30:55)
I dunno if that's a softball, that's a hard one. She asked somebody that in 2019 before the pandemic, um, you know, I I've been really interested, um, just intellectually, but also from an investment perspective and, uh, gen Z. Um, and, um, I just find the, the sort of the preferences, the behaviors, the, um, the epistemic choices that they're making very markedly different from the generation before. And so that's kind of what I think about when I think about the, sort of the change makers of, uh, you know, who will be, uh, you know, shaping the next generation, whether it's their focus on, you know, environment, the environment and climate change, their inherent, um, comfort with stigmatized topics like, you know, mental health and seeking therapy, um, whether it's a sort of digitally native experience that, you know, it is different, you know, as a millennial myself, you know, yes, I was on AOL as a child.

Deena Shakir: (32:04)
Um, and you know, all of that, but this is, this is different. Now this is, this is not just about communication. Um, it's about creation and it's about, um, and it's about, uh, the next wave of invention. So I'm, I'm incredibly optimistic and excited. Um, you kind of have to be as a VC. That's one of the things I love about this job, you are, you are, you know, these are long-term investments, right? I'm not, I'm not, uh, you know, buying stocks, right. I'm, uh, I'm taking, uh, you know, making investments in, in the future here. I see, um, an incredible opportunity on the science side. I think that what we've seen over the last year is remarkable. It is incredible. I, I have to like, you know, when, when I got my, my, uh, my vaccine, I, I, uh, like many, I cried not just on a personal level. It like, you know, we're getting through this, but holy, this is such an amazing achievement for humanity, that the speed at which we were able to uncover the incredible innovation behind it, the collaboration that it took. Yeah. There were some snafoos along the way, but if that's what we can do now, you know, I'm pretty optimistic about what 2050 will look like.

AJ Scaramucci: (33:17)
Yeah. I mean, not on this point here. I mean, it, the fact that it took us 10 months, really from the embryonic phases and the breakout and Mohan to, uh, to not, not just one to really, uh, compelling an efficacious vaccines and Pfizer Moderna and maybe a handful of others to go to be seen on the, uh, the J and J side that societal immune system was quite compelling. Like, I mean, it, it was, it was bad. Don't get me wrong, but I would, I would say props to us. I mean, it's a real time horizon for Vermeer drug to market 10 years in 10, we'll take, we'll take 10 months. And I think it's, uh, a good experiment for, for things to come. How do you think, I mean, with COVID and your, your investments in healthcare and such, how has COVID really materially impacted the healthcare system and your view, and it has, has COVID in the aftermath or the continued aftermath impacted your, your investment thesis, uh, in that category. Yeah,

Deena Shakir: (34:22)
Yeah, no, it's a great question. Um, you know, we we're, we have been investing in healthcare, certainly Lux as part of my even joining for, for decades. And I have been working on a prior to COVID, but this is, this is such a cliche. I hate to even say it out loud, but it truly was, you know, it was a watershed moment for digital health. And, uh, and I can kind of elaborate a bit specifically on how and why, you know, a lot of my secret sauce or my sort of super power, as I mentioned, was around the people. And so I've been having conversations for the last decade and developed relationships with the decision makers at the C-suite of some of these top insurance companies. So payers, health systems, so providers, um, and, and research facilities. And I know I worked on and I tried, uh, I know how difficult it is to, uh, to, to, to, to make change, especially when it comes to these deep rooted kind of challenges around, uh, incentives and provider behavior and so on.

Deena Shakir: (35:20)
It is not easy. So the, the last year forced change, empowered regulatory change that might've taken decades, it impelled behavior change that might've never happened. It catalyzed, um, these technologies from niche nice to have into permanence into essential. Then if you look at the last couple of months, they're the sort of investor calls of some of the largest payers and, and, you know, the Aetnas and the anthems of the world, the Humanas the world, as well as even retail, um, CVS and Walmart. And so on, everyone's talking about digital transformation, everybody's looking for these solutions and they realized, perhaps not, not at their own choice, um, that it works. And certainly there's still a place for, of course, for, you know, interfacing care, but healthcare moving into the home is here to stay. And that is across the board, not just in terms of care delivery, but another element that's quite important to us.

Deena Shakir: (36:20)
Um, and to me personally is also on the research side and the decentralization of clinical trials, the virtualization of clinical trials, the incorporation of digital biomarkers, and so on is not only important to us, to accelerate research and enable us to have, you know, solutions like these vaccines quite quickly, but also to, um, to, to be more inclusive in our research, which has been a systemic problem for a long time, women have been drastically under-researched resulting in issues like dosage, um, you know, miss Smith's dosage recommendations and ultimately sometimes deaths as well. And it's even worse in general for, um, uh, looking at racial considerations. So a large part of that has been just how difficult it is and consuming it has to be a part of clinical research. So that's one thing that's exciting. And we're in companies like science 37 and electro labs, uh, and H one, which are really at the forefront of enabling that, um, virtualization and de-centralization using technology.

AJ Scaramucci: (37:17)
Yeah. And, and on the, on the government side of the house, the regulatory side of the house, uh, when we're sort of crafting legislation and so on and so forth, if you were in, if you were in that position, if you kind of went back to your, your government days, what pieces of legislation would you be drafting to enable and empower, uh, the entrepreneurs, whether it be on the healthcare side, or even on the therapeutic side, on the FDA side of the house.

Deena Shakir: (37:45)
Yeah. Um, that there, there would be a lot of suggestions that I would have, but, you know, certainly it's not as easy, of course it's writing legislation, as you know, because there are really entrenched interests that play here that can make it difficult, whether you're thinking about, you know, cross border licensing for physicians or, um, you know, uh, what it takes to, to, um, to, to regulate a new device and regulation is there for a reason, regulation is important. Uh, we need that. We need, uh, you know, checks and balances and safety measures in place, but we also need to, um, facilitate and fund innovation. And I think, you know, what we've seen, certainly in the last few months coming out of, um, uh, the administration has been a renewed focus and interest on that. And I think that's promising. Um, but that there's a lot of play there. So let's see. I mean, it remains be seen how much of the regulatory changes that, um, you know, whether it's around HIPAA compliance or, uh, or so on how, how much of that is here to stay, but again, I'm optimistic. Hmm.

AJ Scaramucci: (38:46)
Yeah. I mean, there's a lot of interesting regulatory considerations for these truly game changing paradigm shifting technologies in the life science sector. I mean, one of course is gene editing and the use of use of CRISPR, particularly if you're going after the germline of a given species. And I'm curious when, when it comes to genetic modification of humans, you know, if we had the ability to, to, to really do that in a pinpoint precise way, and we understood the, the ramifications, should we, should we take that, take that leap? I'm curious what your take is there.

Deena Shakir: (39:26)
Yeah. You know, I'm going back again to my childhood. Uh, you know, my, my grandfather in Iraq was a pediatrician and worked with the world health organization and he was actually involved in the early days of the, of the human genome project. And I, and as I think about, and he passed away, um, over 10 years ago. But as I think about the advances in the last decade, I always think back to what I, what would he think? And could he even have conceived of just how much opportunity there is now with these, um, you know, the cost reduction on sequencing, the human genome and our ability to uncover variance. And, uh, and hopefully from there discover therapeutic treatments, you know, Lux is, uh, is in a company called variant, which is doing just that. Um, we are, uh, we'll be making some additional announcements soon. Um, but I am long on poly genetic testing. I am long on, um, you know, pharmacogenetics. I think that there's just incredible opportunity toward the personalization of medicine, um, which has been a long time coming. And, um, and these advances on the genetic science side are, are, um, really groundbreaking. And so we're just at the cusp of that innovation

AJ Scaramucci: (40:41)
And w and one thing we think about, which is kind of a segue to that is, wow. I mean, lifespan is also extending about every year that goes by, we gained about a fourth of a year in life expectancy. That's been the case since the industrial revolution then kind of do some extrapolation over the next few generations. It is foreseeable that humans will be living a well over a hundred, perhaps even to 150 years of age. And that has tremendous ramifications on the healthcare system, on the insurance system, as well as, you know, all kinds of others, uh, related to the workforce here's as you, as you think about that or yourself, but also in the context of locks, how is that increased lifespan, uh, affecting the way in which you're thinking about these different ramifications in health and life science?

Deena Shakir: (41:32)
There is. So there, I mean, one of the big things that I'm, uh, and Lux is really thinking a lot about is at CNS and sort of, you know, cognitive science and, and, you know, that is one area where there's still tremendous. Um, just so much that we don't know, um, and, and so much opportunity there. And, um, and I had family members, um, who I've seen go through, um, you know, Parkinson's and dementia and so on. And so it is also very personal to me. So that's one area where, you know, I'm, I'm excited about the potential for transformative innovation. Um, and then in general, you know, on a more short-term, uh, level also just the idea of aging in place and what we saw through us again, through the last year, and, um, a lot of what we saw in revealing issues with nursing homes and so on.

Deena Shakir: (42:20)
But, uh, you know, as we have an increasingly digitally savvy, uh, elderly population, and as in particular, going back again to this issue, uh, uh, question around equity and gender women, finding themselves in the sort of sandwich generation where we are care-taking for our parents and also for our children, what are the types of technologies around care coordination? Um, and so on that can help to, um, to facilitate that and enable that again. I think there's, it's still quite analog in many ways and a big challenge for a lot of people. I'm sure everyone listening here has someone they know is not themselves personally, that's going through that. So I think that there's quite, um, quite an opportunity there and, and luckily a lot of venture dollars going to toward those types of companies.

John Darcie: (43:06)
And I have a question for you. So you do a lot of investing. You've done a lot in your life to change the world, but you also work at a venture capital firm where the expectation from your LPs I assume, are that you drive returns. So when you're looking at investing in life sciences companies or deep tech companies, how do you balance sort of this sales, marketing, and commercialization part of the thesis against, wow, they're doing really interesting things. I'm not that concerned about the monetization piece at the moment.

Deena Shakir: (43:35)
Yeah. You know, it goes back to sort of what I was sharing in terms of, um, graduating from undergrad and thinking about this sort of doing well or doing good. And, and the evolution of my own perspective over time, part of our investment thesis is that we are investing in entrepreneurs who are taking on massive problems, and those massive problems are there for also massive opportunities on the business side. Uh, but there are also opportunities to improve human health and to, uh, you know, in the case of Shira, for example, you know, contribute to, uh, reducing greenhouse gases, et cetera. So we are not an impact, you know, VC, we ultimately are stewards of capital for our LPs, who by the way, also represent some of the most effective from anthropic institutions, institutions, and endowments that are out there, which is another element of the impact, uh, to venture that is not often talked about, but it's something that is, is real.

Deena Shakir: (44:36)
And I feel very good about that when I know that not only are we creating value for, uh, you know, for the farming for these companies and for these individuals and creating livelihoods and, you know, stimulating for further innovation down the road by enabling ecosystems and so on. But we are also returning cap well to our LPs who are, um, you know, who, who are educational institutions and endowments and charities and so on. So that's, that's another piece of it. Um, in terms of your question on monetization that, you know, that is something that, um, is a risk and an informed risk that you take when you're an early stage, you know, a science investor. Um, but it's not a bet. It is, um, it is a calculated, um, decision that is made based on a deep understanding. And we're very thesis driven here. So a deep understanding of what it takes to get to, to, you know, to get to monetization what the market looks like, you know, deep relationships with the customers, if you will, down the road, et cetera, et cetera. And so it's, it's, it's certainly, it's never foolproof, but we, we, we are very calculated in how we make those decisions.

John Darcie: (45:44)
I'm going to ask you one more question before we let you go, Dina, it's about a super intelligent AI. So you talked about how she Ru is an example, and I'm sure plenty of your other investments incorporate AI, uh, uses AI to discover new plant proteins and things of that nature. Do you think we'll ever develop super intelligent AI or true AI? That's able to learn like a human learns, how far away might that be and what are the implications of that for the way we think about society and our workforce?

Deena Shakir: (46:12)
Yeah. Um, I mean, it depends how you define that because some might argue we already have that, but, you know, there's obviously a massive problem which has been, um, you know, which has come to light in particular with, uh, some large, um, companies with pretty, pretty serious news events in the last few months around, eh, you know, AI and ethics and AI and bias. So that isn't, that is another, uh, you know, interesting, uh, example where this sort of intersection of technology and, and, and, and, um, you know, artificial intelligence, computer science and humanities needs to come to play. So, you know, one of the, um, I think it was two years ago now Stanford launched the center for humane artificial intelligence, which I am a huge fan of. Um, and I love the intersectionality. They, they bring to the, sort of the innovation there.

Deena Shakir: (47:01)
Uh, if you look at companies like the one I mentioned variant, you know, which is ultimately focused on, on genetics and science, one of their first hires, uh, was an ethicist. Um, and so having that really deep in the DNA, no punt intent, no pun intended of these companies is, is, is quite important. So, you know, NLP, to some extent, uh, or, or, you know, is already almost approaching that level of kind of incredible with, you know, the, uh, how good the AI is in a number cases out there, but, um, there will need to be, um, checks and balances, particularly around bias.

John Darcie: (47:37)
Well, Deena, thank you so much for joining us on salt talks. It, it, uh, it's very encouraging to hear people like you with such a diverse background, uh, thinking about things like ethics in addition to investing in innovation. Um, so we're very excited. You're on the forefront of all these breakthroughs and look forward to doing hopefully more with you, uh, with the salt fund and other things that we're working on. And like I said, we'd love to have you at the salt conference in September. And, uh, if, if you need a babysitter, we can, we can collude on that. Um,

Deena Shakir: (48:07)
You might regret making that offer, but maybe I'll take you up on it. Thanks. Thanks for having,

John Darcie: (48:17)
And thank you for joining us again here on salt talks. And thank you everybody for joining us for this conversation today, with Dina Shakir, from Lux capital w one of the most fantastic, uh, venture capital firms, we think out there in the marketplace today, uh, solving big problems in a way that's also benefiting the world. Just a reminder, if you missed any part of this talk or any of our previous talks, you can access them on our website. It's salt.org backslash talk, and also on our YouTube channel, which is called salt tube. We're also on social media. Twitter is where we're most active at salt conferences are handled, but we're also on LinkedIn, Instagram, and Facebook. And please spread the word about these salt talks. If you have people that are interested in how venture capital works and a lot of the innovations that they are helping to invest in, uh, please share this salt, talk with them, but on behalf of AIJ and the entire salt team, this is John Darcie signing off from salt talks for today. We hope to see you back here again soon.

Dr. Yossi Bahagon: Israel's Vaccine Rollout | SALT Talks #167

“As human beings, some of our behaviors will evolve. The first thing that’s evolving is how do we [and the health care system] approach our health care.”

Dr. Yossi Bahagon is a family physician and serial entrepreneur who founded and managed the digital health division at Clalit Health Services – the second largest health maintenance organization in the world. Dr. Bahagon is a founding managing partner at OurCrowd, a global venture investment platform.

The pandemic will inevitably force human behavior to evolve in many ways. This is especially true for our approach to health care and its delivery. Israel has been an early adopter of health care digitalization and telehealth. Clalit Health Services was created over ten years ago and allows 100% of Israel’s population to access one’s own health information through a phone or computer. Empowerment through digital access creates a more collaborative relationship between patient and doctor, a dynamic termed participatory health. “Participatory health is about how do you make the patient a true partner in his or her own health care… this is what the digital health revolution is all about.”

This digital health foundation in Israel has been central to its successful vaccination efforts. Citizens have become familiar with the digitalization of their health care which has made communication and delivery of vaccines into patient arms more seamless. “Within a month and a half, 45% of the Israeli population is already vaccinated. If things continue at this pace, in a month or two, we will gain herd immunity.”

LISTEN AND SUBSCRIBE

Spotify | Amazon | Google | Stitcher

SPEAKER

Dr. Yossi Bahagon

Founder & Manager

Clalit Health Services' Digital Health Division

FULL BIO

MODERATOR

Anthony Scaramucci

Founder & Managing Partner

SkyBridge

FULL BIO

EPISODE TRANSCRIPT

John Darsie: (00:12)
Hello everyone. And welcome back to SALT Talks. My name is John Darsie. I'm the Managing Director of SALT, which is a global thought leadership forum and networking platform at the intersection of finance, technology and public policy. SALT Talks are a digital interview series with leading investors, creators, and thinkers. And our goal on these SALT Talks is the same as our goal at our SALT Conferences, which is to provide a window into the mind of subject matter experts, as well as provide a platform for what we think are big ideas that are shaping the future.

John Darsie: (00:44)
And we're very excited today to welcome you to the latest episode of SALT Talks that we're doing in partnership with OurCrowd, which is an Israeli-based crowdfunding platform. And today's episode is going to focus on the miracle of the Israeli rollout of the COVID-19 vaccine, something that we could definitely learn a lot from here in the United States, as in various parts of the countries, we're achieving success and in some cases not achieving success in rolling out the vaccine in a efficient way.

John Darsie: (01:13)
But our guests today on this SALT Talks episode is Dr. Yossi Bahagon. Dr. Bahagon is a clinically active family physician, a serial entrepreneur, and a global key opinion leader in the field of digital health. Dr. Bahagon founded and managed Clalit Health Services Digital Health Division. CHS is the second largest health maintenance organization in the world. CHS's digital activity led the digital transformation of the Israeli healthcare system and became a global benchmark for nationwide digital health deployments. It serves today millions of patients in tens of millions of interactions monthly, and they were definitely ahead of the curve in what is now a mega trend in terms of telemedicine. Dr. Bahagon has also been a founding team member of several successful digital health companies and co-founded Qure Ventures, Israel's first digital health focused investment fund. Dr. Bahagon serves as the special advisor for the World Health Organization, as well as an advisory board member of Best Buy Health and Almirall Pharmaceuticals and a mentor at Microsoft's Think Next Accelerator and Biocat's Digital Health Accelerator.

John Darsie: (02:28)
And hosting today's talk is David Suisa. David is the Publisher and Editor-in-Chief of the Los Angeles Jewish Journal, the largest Jewish weekly in the country, Los Angeles being one of those locations I was referring to earlier that could learn a lot from Israel's vaccine rollout. For the past 13 years, David has been writing a weekly column in the Journal that earned him the Best Columnist Award by the LA Press Club and First Prize for Editorial Writing by the American Jewish Press Association. Prior to journalism, David was a founder and CEO of Suisa Miller Advertising, a marketing firm that was named Agency of the Year by USA Today. In 2005, he sold that company so he could dedicate himself full time to the Jewish world and we're very excited that David is joining us as a first time moderator here on SALT Talks. And with no further ado, I'm going to turn it over to David to conduct today's interview.

David Suisa: (03:22)
Thank you, John. Thank you to SALT Talks and to OurCrowd. I have a special fascination with our subject today. For one thing, every time I go to a doctor's office, I still have to fill out all the forms on real paper with an old pen. And all I see is hundreds and hundreds of old paper files. And I always ask myself, when are we going to enter the digital age here in America? But then at the same time, recently, I have a sensor on my skin that has really changed my life, because it helps me measure my glucose. So I've tasted both worlds, and I'm delighted to be able to talk about this subject with Yossi today.

David Suisa: (04:07)
So I'd like to start, Yossi, with something you wrote 10 years ago in a medical journal that caught my attention. And let me quote from what you wrote. "In the upcoming decade, digital platforms will be the backbone of a strategic revolution in the way medical services are provided, affecting both healthcare providers and patients. Digital-based patient centered healthcare services allow patients to actively participate in managing their own care in times of health, as well as illness, using personally tailored interactive tools." That sounds like a wonderful world, Yossi. When you think back of what you wrote 10 years ago, how does it look today?

Yossi Bahagon: (04:52)
So first thank you, John. And thank you, David and OurCrowd for connecting the dots here on this SALT Talk. Hearing what you are quoting me, I probably should read back what I wrote a few years ago. Maybe I will know how to read the future better. So definitely we are speaking over Zoom in a world that half of it is under lockdown. And unfortunately that COVID led to the revolution that we are experiencing today in remote care services.

Yossi Bahagon: (05:35)
But actually this came true faster than I imagined. It's just a year, a year and a half ago, people, as you described, every time had to go to the physician's office for every routine check, for every child check, for an ear pain and so on. Things have dramatically changed these days and accelerated and COVID which accelerated this change. We see a world that is actually going today through what you just read. And I believe that what we are seeing now is just the tip of the iceberg, meaning COVID is going to stay with us, whether we like it or not, even with the vaccinations, which we will speak about later on, it's going to stay with us for the months. And maybe even for the two, three years to come, if everything will go right.

Yossi Bahagon: (06:40)
And some of our behaviors as human beings will evolve and started evolving during this period. And since it's a healthcare crisis, the first thing that is evolving is how do we approach our health care and how does the healthcare system approach healthcare? So exactly that, how healthcare is delivered and how healthcare is perceived.

Yossi Bahagon: (07:13)
I think the main thing that I pointed out back then, and I can still reiterate it today is what I like to call participatory health. Participatory health is how do you make the patient a true partner in his or her own healthcare? So the technology aims that we will speak about later on, we need to remember that they are only means for this objective of making the patient a true partner, just like you hinted with regards to your continuous glucose monitoring that is attached to your arm, which gave you the power to know where your glucose stands with a glimpse of an iPhone or a smartphone that you get nearby the sensor. So this is exactly what the digital revolution is all about.

David Suisa: (08:20)
You know what I find also fascinating is that there is an acronystic system that seems very, very difficult to change, which is a human being entering a doctor's office. And that's something that's been with us for hundreds of years. And I still feel that it's like granite. It's like an old school. The doctor expects it, the patient expects it. I go into an office and I see a doctor in person. And what I've noticed is that we've been forced to change that during the pandemic, because we had no choice. So now we're entering telemedicine, whether we like it or not. And I'd like to discuss now the situation in Israel, because it seems to me that you were better prepared for the pandemic and for the spread of the vaccine, especially than other countries. And you personally, Yossi, you were involved with creating a digital health system in Israel through Clalit, correct? Could you spend a few minutes discussing how you helped create this digital health system and how it helped you when the vaccine finally came, helped spread the vaccine so quickly?

Yossi Bahagon: (09:45)
Sure. Happy to, thank you, David, for the question. I don't know if you and the audience know that, but for more than 10 years now in Israel, 100% of the population, 100% of the population have access to their personal health record. Meaning I can with one tap, go into my smartphone and enter my personal health record. And not only I can see all my data there, meaning diseases, medications, hypersensitivities, my last x-ray, my last lab test and so on, everything. I can also act upon it in various ways. So having telemedicine sessions, ordering my chronic prescriptions, all the data is analyzed at the background so to enable personalized medicine. So for example, the system crunches the data in order to find a woman who have a higher risk for developing breast cancer and send them proactively notifications for doing preventative medicine in order to find it in early stage.

Yossi Bahagon: (11:10)
If you ask me why am I personally attracted to this field beyond the cool stuff and technology, which will... It's about the ability to change people's life in the masses. When I was a physician in a clinic, I had 1,000 patients that were under my responsibility. When we established the Digital Health Division at Clalit, as John said, it's the second largest health organization in the world after Kaiser. Now, and this is what I told my team, it's not about technology. It's about the human experience that you create. And it's about touching the lives of millions of peoples through this digital platforms and changing their lives. We can point out to this specific woman that because of the system that we built, we saved their lives from a deadly breast cancer. And similarly with regards to men, that we saved their lives from a myocardial infection from a heart attack.So it's not numbers and digital. It's people's lives and people's experience.

Yossi Bahagon: (12:32)
From this platform, again, I'm speaking 10 years before COVID. When we started it, I told people telemedicine, they asked me, "Tele who?" So today, obviously everybody knows what telemedicine is, but this platform was the foundation of the great success that we are experiencing this days and in the vaccination rollout. We are moving from a startup nation to a vaccination. So I can describe you my experience. I got the text message inviting me with the date and place and with a QR code, got there five minutes before time, the gate opened based on me presenting the QR code. 10 minutes later, I was out. A day after, I got a text message for my second vaccine booking, together with an electronical form there to fill if I had any adverse effects. This system is built on what we built, what we are building for the last 10, 15 years in which enables now that's 45, within a month and a half, 45% of the Israeli population is already vaccinated.

Yossi Bahagon: (14:01)
And if things will move forward in this space, in a month to two months, we will get in what is supposed to be the herd immunity. And we are already starting to see the numbers go down and we are already starting to see that the economy's opening. And this is because again, yes, you can call it digital health, but it's essentially, now digital life.

David Suisa: (14:31)
What I'm hearing from you is that the digital technology is encouraging a model of cooperation between the doctors, the providers, and the patients. Now here in America, I've seen something different. When people encourage patients to take ownership of their health, they tell you to do your homework on Google, find out and almost interrogate your doctor. Ask questions, and also look for second opinions. From the doctor's standpoint, he pays huge malpractice insurance. So he needs to protect himself against malpractice. There's almost, I don't want to exaggerate the point, almost a confrontational thing where so many of us, first of all, are taught to really trust the doctor completely or interrogate them. What I'm sensing hearing you speak now is a completely different model, where the doctor sees the patient in a kind of a partnership model, where the technology encourages partnership.

David Suisa: (15:41)
And it's amazing, because I've been living this partnership for only two weeks now because of my Libra Sensor, and I emailed back and forth now with my doctor. So this is the first time in my life I'm actually living through this and I see it as a real game changer, but it's happening because I have the kind of doctor who is willing to work with me as a partner. So is this what we're hoping for, for the future of healthcare around the world, to create a model of partnership that may even be introduced in medical schools as the model to strive for? And hence technology can be a facilitator of that new, more productive model.

Yossi Bahagon: (16:26)
You describe it in a beautiful way, and I can only fully agree. Maybe I will give one example to anchor to what you just said. So what we are seeing today is that the digital platforms are entering the traditional healthcare world and they are providing the physician and the patient better tools to provide better and more personalized medicine. This is supposed to create a situation where the physician, instead of focusing on crunching the data and collecting the data himself, will be able to go back to the traditional model of the interaction between the patient and the physician, meaning humanity. Because this is something, that at least for the foreseeable future, digital platforms are not supposed to do. So, for example, if you just ate lunch and your blood glucose is above the target, you will get the message, "Hey, David, your glucose levels is 183. If you would walk now for seven minutes, based on your past logs, you will bring your glucose levels back to target." So it's combining advanced data science with behavioral science and user experience in order to improve your clinical outcomes.

David Suisa: (18:05)
Yossi, I want to get more personal if you don't mind. You are a doctor who is now the managing partner of OurCrowd Qure. I'm interested in how you've added the investment side to your life. What made you think of adding this component to your life? And tell us a little bit more about OurCrowd Qure.

Yossi Bahagon: (18:34)
Yeah, so it's a good personal question. My grandmother, when people asked her, "Your grandchild is a physician, what exactly does he do?" And she didn't know to tell, "He's an expert in medical infomatics." She didn't know how to explain it. So she said, "Oh he's some kind of physician of computers."

David Suisa: (19:05)
Sounds like my mother.

Yossi Bahagon: (19:09)
There is the personal things that you are attracted to. So I was attracted by technology, but at some point I saw early on that this could change so many people's lives. Usually when people ask me about my background, I say, "This is digital [inaudible 00:19:27] is not what I do for a living. It's my life's mission. It's my passion. It's my way to bring back good to the world." That I'm saying it though, it's very, very personal. I'm saying it here because I feel it's genuine enough to put it on the table.

Yossi Bahagon: (19:48)
I want to tell you a story about one of the things that led me to where I am today. So I was sitting there one Friday in my clinic, and I got a call from a patient of mine. She was back then in a small island in Thailand called Ko Phi Phi. I remember it because you will understand in a second. And she told me that her son, a four-years-old son is suffering from fever and is coughing for the last three days. And can I help her because it was an island without any communication and so on. And I told her I opened, I think it was Skype back then, and I looked at the child and I said to her, "Rachel, I really want to help you, but I can't. Why? Because you are there and I am here. And I can't listen to the child's lungs and diagnose whether he has pneumonia and you needs some antibiotics and so on."

Yossi Bahagon: (20:52)
After this call, I gave a call to two entrepreneurs that I knew, and I asked them, "Listen, can we build a solution that will enable me to send a long hand from Israel to Thailand, and not only see my patients, the way we talk to each other now, but also check them up as if they were now entering my clinic." Seven years later, there is this Israeli company called Tyto, which is now used by tens of thousands of families in Europe, in US, in Israel, which enables exactly that, to enable not only remote visits via video, but to enable actually remote examination as if you were entering the physician clinics.

Yossi Bahagon: (21:52)
Now these are the type of experiences that you say, "Hey, it's not about the funding. It's not about the return." These are, I don't want to say side effects. It's not. Good business usually leads also to good execution, but the motivation lies in the doing good. And the investment side is an enabler.

David Suisa: (22:19)
I'll tell you another thing, Yossi, that fascinates me. When we talk technology here in America in terms of healthcare, we often talk about the kind of technology that has made healthcare exorbitant, that had made the costs skyrocket. For example, new surgery techniques, new big machines, and new technologies that a lot of times doctors feel they got to use. Sometimes they overuse any, and it skyrockets healthcare costs in America. And what I'm hearing from you is a different type of technology, the type of technology that actually makes healthcare not just more human and more cooperative, but also more efficient and cost effective.

Yossi Bahagon: (23:09)
Definitely.

David Suisa: (23:10)
So when you consider, because you're always exposed to these kinds of new innovative technologies as the leader of this OurCrowd Qure, do you make a distinction between those two categories?

Yossi Bahagon: (23:25)
So definitely. And this is also an opportunity to say a bit more about Qure. So Qure, as John described at the beginning, is the first fund in Israel that was purely dedicated to digital health and we've so far invested in 12 companies in different areas, in genomics, in telemedicine, in preventative care and so on. And the criteria that you just expressed, meaning it the fact that it's a cool tech is by far not being enough. And we put a rule. It was one of the things that when we started investing was in front of our eyes. If it makes medicine more expensive, it's not for us, because the hurdle is how to gain better care, with better partnership from the patient and to reduce the costs, because the costs are already going through the roof, especially if, you mentioned the US and it's about, I believe today, 20% of the US GDP. So indeed this was one of the criteria of how do we take the costs down? And it's an important criteria.

David Suisa: (24:51)
Now another thing I've noticed with technology is sometimes you just have really, really cool gadgets and the new generation, they're used to having cool gadgets, new apps and new social media. Everybody's on Clubhouse now. And I'll give you an example. All right, gadget happy. I go for walks every day. And my sister in Montreal also goes for walks. And my mother is getting on my case because my sister counts all her steps through her iWatch, right? And my mother bugs me every day. "Why aren't you doing what Judy's doing? Count your steps. She does 10,000 a day." And I'm saying, "Mother, I'm not the gadget type of guy." Right. I go for an hour walk, whether it's going to be 8,000 steps or 11,000, it doesn't make a big difference for me. I'm not gadget happy. However, the Libra is unbelievably useful and game-changing. So I'm wondering if that's also one of your criteria, that you stay away from stuff that may look too cool. And does that come up in your [crosstalk 00:26:04]?

Yossi Bahagon: (26:04)
Actually it comes up, it comes up a lot. We were in a discussion with the large global pharma company just a few days ago. And they asked exactly the same question. This is a very good point that you bring. Many times, the people that suffer from chronic diseases are not the ones that go to jog three times a week at the Central Park. On the contrary, they are are the ones that are less tech savvy. There are the ones that you need to motivate in order to encourage them to do work. They are the ones that are standing in front of Apple Stores all the night to get the latest version of Apple. And, you know, guess what? This is 80% of the chronic patients, the type of people that I just described.

Yossi Bahagon: (27:01)
We have a very strong collaboration with Johns Hopkins, with regards to doing clinical trials with these digital health solutions. So one very important point to emphasize is that digital health is more health than digital. Meaning if you want to bring solution, you need to verify that it brings results. And the only way to verify it brings results is to create this evidence together with leading organizations like Hopkins, as an example. And in choosing the population that will come into these clinical trials, you need to choose not only the young ones or the tech savvy. On the contrary, you need to see how it affects the average Joe was is 75-years-old, who is low to medium socioeconomic state and so on in order, indeed, to make sure that you point and you target to the masses. This is where the change will come from.

David Suisa: (28:11)
I saw an interview with Steve Jobs years ago, and I never understood why he started crying. It was after the iPad came out and he said of everything he did in his life, that was the one thing that touched him the most deeply. And I never really understood that. And then I went into a place that was for crippled children, and I saw how they were using iPads to discover color and sounds. And then 10 years later, I saw my mother, who never used a computer in her life. Finally press a finger on an iPad to see videos of her grandchild in Israel. And I understood. The reason he cried that day is because he understood that that was the ultimate product for the masses, because all he was asking was something that was true millions of years ago, which is the ability to just touch.

Yossi Bahagon: (29:06)
Exactly.

David Suisa: (29:07)
The ability to touch. And what you bring up is such an interesting point. If 80% of the people that are severely ill don't have that high tech capability, then those kinds of innovation now are going to have to have that high-touch component. Can you give us a few examples, Yossi of some of the innovation that is happening right now under OurCrowd Qure that you're excited about?

Yossi Bahagon: (29:34)
Yeah, for sure. So I gave already two examples of Tyto, the remote physical examination solution and of Sweetch, which is an AI-based solution for chronic disease prevention and management. Zebra, who is the company, if we started our discussion from the data that was accumulated in Israel during the last 15 years, so Zebra collected tens of millions of images from different healthcare providers in Israel, and based on creating this smart algorithms, the company, the system now knows how to diagnose in a very precise way, a variety of health conditions. If we want to connect it to COVID, so we know, one example is, when a patient enters the ER and the staff takes a chest x-ray, based on this chest x-ray, Zebra is able to predict which patients will be prone to a more severe disease, so they need more medical attention and which can be just with a watchful waiting.

Yossi Bahagon: (31:04)
Again, when you combined large data sets with advanced data science in order to improve clinical outcomes, and likewise Side Diagnostics, Side Diagnostics is clinic-based lab, which can use one drop of your blood to get a full, a complete blood count reading based on a technology that uses higher again, advanced data science together with advanced imaging solutions. And you can get in 60 seconds exactly whether you suffer from a most probably from a viral infection or from a bacterial infection. So these are just a few of the companies that we've invested in out of hundreds of companies that we've screened along the way.

David Suisa: (32:07)
So when John from SALT Talks introduced us at the beginning of the show, he brought up the idea that's probably the highest subject of interest, where I live anyhow, the vaccine. Everywhere I go, it is the number one subject of conversation. Everyone wants to know did you get your first shot. Did you get your second? How did you do it? It's unbelievable. I have really wealthy people that I connected that have not been able to get a shot. High-risk people that have not been able. It's just the number one subject. It's seen as a miracle, and everybody wants to get their vaccine.

David Suisa: (32:45)
So you mentioned, we are fascinated here in Los Angeles by what's happened in Israel and how fast you did it. So you mentioned at the top of the show that the data management was absolutely critical. In fact, I remember interviewing the head of the prenatal center at Sheba, and he mentioned that as soon as a baby is born in Israel, they immediately go into the data bank. I don't know if that's accurate, but that's what I recall from interviewing. So you really have a huge importance on getting this consolidated data, ID database, but is that the only reason why the vaccine has had such a rapid rollout?

David Suisa: (33:30)
I heard that your Prime Minister called the head of Pfizer 17 times. This is from the head of Shaare Zedek, Jonathan Halevy.

Yossi Bahagon: (33:39)
Yeah, Jonathan Halevy.

David Suisa: (33:42)
He told me that Prime Minister Netanyahu called the head, Bourla at Pfizer, 17 times. I wish we had that same kind of, I don't know what you call it, chutzpah maybe. And they paid extra. Basically, there was a sense of urgency that started from the top in terms of we're going to do absolutely everything we can to acquire as many doses as possible. And I almost said that there's been almost an army-like execution. Can you talk more about the success of the rollout?

Yossi Bahagon: (34:19)
So I think it's a combination of several factors. The political thing that you've mentioned and the data played, we've discussed at the beginning of the show, but the truth is that it goes back to what you said about chutzpah. This is a very important point when it comes to understanding the Israeli innovation, and why we don't get no as an answer. It's as simple as that.

David Suisa: (34:53)
No. Is there a request for more information?

Yossi Bahagon: (34:57)
Yeah. So I don't know if the story about Prime Minister Bibi Netanyahu and the 17 calls is a reality, but I'm sure that it reflects a reality and it's reflects a very Israeli thing. We don't get no as an answer, whether it's we have an issue that is related to defense and security issues, so we need to build Iron Dome in order to continue our normal life here. Or we have an issue with overcrowded roads, so we need to build the Mobileye for autonomous driving, or we have an issue with chronic diseases, so we need to build an interoperability system that will consolidate all the data. And at the end, this spirit of innovation that simply doesn't get a no as an answer. The common thing, you ask why, if you would ask me at the beginning, who would be the country, that when there will be vaccines will unroll it the fastest, I will tell you Israel because of this main fact.

David Suisa: (36:09)
Now there is a backlash, right now. It's what I call the dark side of technology. Everything has two sides, the plus and the dark. And right now the dark side of technology that I'm sensing both here and in Israel, which is the spread of misinformation throughout social media, where you see these videos of so-called experts that are talking about how vaccines are dangerous, that vaccines are not necessary, that the COVID itself is just like the flu, and they're getting, Yossi, hundreds and hundreds of thousands of views on the internet.

David Suisa: (36:50)
And in fact, I was reading an article this morning in one of these Israeli papers that show that there's a rise in the number of Israelis that are skeptical of the vaccine. So it's not obvious that every Israeli now wants to get vaccinated. And we need a certain amount percentage of the population to get vaccinated so we can get to herd immunity. Now are you aware of this backlash? And can you talk a little bit about it? Is that something that concerns you?

Yossi Bahagon: (37:24)
Of course, something that I think we are all over the world are suffering from this fake news related to the vaccine and we all pay the price. So the only thing, there is the media that can fight it, but there is also, us as human beings, every one of us have to push the close and far interactions that we have and to state it in a very clear way. We want our life back. So it has a pathway which we can walk through and discuss that these vaccines did went through proper clinical trials. And these vaccines, the numbers now in Israel, they are already very loud. I'm speaking about millions of people that, for example, in Clalit. Clalit published a study just last week of 1.2 million people that were compared to a group that was not vaccinated. And the results are outstanding with regards to the immunity and with regards to stopping or reducing the infectious factor of the virus.

Yossi Bahagon: (38:49)
So it's no longer a clinical trial. It's already real world evidence. And for people who ask me, you don't know what the longterm effects of this vaccine will be. No, there is a very simple answer. It's the risk-reward question. Nobody also knows what the long-term effect of getting COVID will be. And if I decide in which hands to be with regards to long-term effects, whether in the hands of scientific evidence or in the hands of a virus, I prefer to take my chances with the scientific evidence.

David Suisa: (39:32)
Well my rule of thumb is, I ask my doctor friends, "Is this something you will put in your body?" And if they are willing to put it in their body, they have quote, unquote, literally skin in the game, then who am I to say no? Before I let you go, Yossi, I'd like to talk a little bit more about OurCrowd. I knew OurCrowd before it was born. I'm a big visitor of Israel. And then I saw OurCrowd when it was born and I visited your offices. And over the years, it's become this phenomenal global investment platform. I'm curious if I can get your impressions of OurCrowd in general, what brought you to be associated with them and give us a little bit of an overview of what OurCrowd brings to the picture?

Yossi Bahagon: (40:25)
So OurCrowd today is one of the largest, I believe the largest and the most active VC in Israel. So it fuels the innovation that we spoke about in many areas, whether it's automobile and healthcare and cyber security and digital consuming and so on. And it actually became, I joined OurCrowd four years ago after I did my own diligence and met with the leadership and understand what are the values behind this. So there is the democratizing of investments value. So today if you have even a small amount, relatively small amount that you want to invest, you can do it just like the big ones. This is a big value. And we hear about it a lot today with regards to companies like Robinhood. So think of OurCrowd as a Robinhood, not for investing $500, but for investing $10,000 or $5,000 or $50,000. For a bit of the larger amounts, where all the investments are validated by a professional team before they are brought to the platform. So this is one value.

Yossi Bahagon: (41:49)
The second value goes to Israel and OurCrowd in many aspects became the window for Israeli innovation. Just a year ago, last February, 2020, there was the famous OurCrowd Summit happening in Jerusalem. 15,000 people, for more than 80 countries came to this conference. And if this is not a [foreign language 00:42:22], I don't know what is. So now, bringing the data about vaccination to the world, bringing Mobileye to the world, bringing all the other weeks that helps companies build the digital based solutions, Tyto, Sweetch, Site Agnostic, Zebra, Brain Queue, which we didn't even discuss that is utilizing AI to make people who suffered from a spinal cord injury walk again.

Yossi Bahagon: (43:04)
So for me, what OurCrowd is, it's building a healthier and a better humanity. And that's the core value. And from that you go to the investment thesis and so on. Part of the success is it all starts and ends with the people that you have and the quality of the people that you have and the values that they carry. So if we talk about the OurCrowd success, I believe it belongs to the people who created it and who will maintain it on an ongoing basis. Maintaining, we discussed it before, to maintain the high-tech touch and the human touch.

David Suisa: (43:50)
On that note. I want to show you my screen. Check my glucose. This is my Libra. And this is the example of everything you spoke about today. I want to thank you so much, Yossi. I know it's late in Israel right now, and you took a whole hour to really discuss some really, really important issues. And I'm very grateful for you taking the time. John, do you want to have any final?

John Darsie: (44:16)
Yeah, I'll say a few words just to send us off here, but thank you, David, for joining us as a first time moderator here on SALT Talks, and Dr. Bahagon, thank you for joining us as well. Hopefully we can learn a little bit from the amazing technology that is taking place and has been taking place in Israel, as well as everything you guys are doing to contain the virus and now roll out the vaccine. So thank you so much for joining us.

Yossi Bahagon: (44:41)
Thank you, John, for hosting us and thank you, David, for the great moderate.

David Suisa: (44:46)
My pleasure. God bless. Stay safe.

John Darsie: (44:48)
Thank you everybody who tuned into today's SALT Talk as well. We always enjoy doing these episodes with our friends over at OurCrowd. They bring us fascinating guests and interesting companies that are doing interesting things and innovating in a variety of different fields. So just a reminder, if you missed any part of this episode or any of our previous episodes, including ones that we did with OurCrowd back in December, you can access our entire archive of SALT Talks free on demand on our website at salt.org/talks, and also on our YouTube channel, which is called SALT Tube, where we have a fast growing subscribership there.

John Darsie: (45:23)
Now we're also on social media. We're on Twitter @saltconferences where we're most active, but we're also on LinkedIn, Facebook and Instagram as well. And please spread the word about these SALT Talks. We think a lot of the topics that we cover, it's important to educate people about things that are going on in the world. And on behalf of the entire SALT team and our hosts today, David, to signing off from SALT Talks for today, we hope to see you back here again soon.

Arjun Sethi: Venture Capital, Bitcoin & China | SALT Talks #130

“Instead of thinking about what's forward, it's about how do you see the present more clearly.”

Arjun Sethi is a co-founder of Tribe Capital, a venture capital firm built by engineers and scientists. Arjun sits on the board of Carta, Relativity, and Bolt. As a founder and operator, he has also been an active angel investor in over 100 companies, including Lyft, Opendoor, Gusto, and Front.

Success is never a straight line and involves failure and unsuccessful attempts. Achieving success requires exposure to the people and community where you’re involved. Ultimately, it’s then about the arrival of an inflection point where you decide whether to push forward or stagnate. Silicon Valley offers exposure because of the vast community of like-minded individuals in close proximity. Lessons learned from previous unsuccessful start-ups can help create an even stronger team, where each member brings distilled ideas. “There was a set of folks that I would say, had shared DNA around thinking about iterating innovation and what could you build that's different around looking at technology companies.”

When considering whether to invest in start-up companies, it is important to recognizes one’s own thought patterns and biases. Focusing on what is known about a company instead of a person’s background or network is important in avoid those pitfalls. “We have a motto internally, which is, ‘how do we focus on what versus who you know?’”

LISTEN AND SUBSCRIBE

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SPEAKER

Arjun Sethi

Co-Founder & Partner

Tribe Capital

FULL BIO

MODERATOR

Anthony Scaramucci

Founder & Managing Partner

SkyBridge

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EPISODE TRANSCRIPT

John Darsie: (00:07)
Hello everyone, and welcome back to SALT Talks. My name is John Darsie. I'm the managing director of SALT, which is a global thought leadership forum and networking platform at the intersection of finance, technology and public policy. SALT Talks are a digital interview series that we started during this work from home period with leading investors, creators and thinkers. And what we're trying to do on these SALT Talks is replicate the experience that we provide in our global conferences, the SALT conference, which we host twice a year, one in the United States and one internationally. And at those conferences and on these talks, what we're really trying to do is provide a window into the mind of subject matter experts, as well as provide a platform for what we think are big ideas that are shaping the future. And today we're very excited to welcome Arjun Sethi to SALT Talks.

John Darsie: (00:57)
Arjun is a serial entrepreneur, investor and executive with deep roots in Silicon Valley. And more than a decade of experience building, sourcing and investing in high growth technology companies. Most notably, independently investing in companies, such as Opendoor, Gusto, Lyft, Postmates and True Color. Arjun also co-founded Tribe Capital, which is a venture capital firm with about $500 million in AUM built by engineers and data scientists, which have invested in fast growing and notable companies, such as Carta, Relativity, Applied Intuition, Instabase, Momentus and Bolt. Prior to founding Tribe, Arjun was a partner at Social Capital where he led the team that established a successful track record of backing high growth companies, such as Slack, CloudKitchens and Box. He also served on the executive team at Yahoo, where he grew product usage over one billion to over one billion monthly active users. He joined Yahoo as part of the acquisition of MessageMe a messaging app that he founded in 2012.

John Darsie: (02:05)
Prior to that Arjun co-founded LOL apps, a mobile gaming and applications company that he scaled to 100 million monthly users before he sold it to Six Waves, a subsidiary of Nexon. Just a reminder for anybody tuning into today's SALT Talk, if you have a question for Arjun, you can enter that in the Q and A box at the bottom of your video screen on Zoom. And hosting today's talk is Anthony Scaramucci, the founder and managing partner of SkyBridge Capital, a global alternative investment firm. Anthony is also the chairman of SALT. And with that, we'll turn it over to Anthony for the interview.

Anthony Scaramucci: (02:40)
Well, first of all, congratulations on your career, and I'm going to out you a little bit. You said that you were in the lower quartile of the people in your five mile radius. Isn't that how we all think about life, but in all seriousness you're doing amazing Arjun. And I always ask these cliche questions in the beginning, like, what can I learn about you that you didn't know on the Wikipedia, but I'm not going to ask you that one. I got a different question for you, okay? What are the base ingredients for success, the distillation of your life that has allowed you to identify these companies and see where they could be years before they become what they have become?

Arjun Sethi: (03:30)
So first off, John Anthony and team, thanks for having me on board. Two, if I take a step back and try to think through your question, which is a hard one to answer, I think it comes down to a couple pieces. One is raw exposure. What do you see, what is the tribe of things that you see around you? Two, then what's the inflection point at which you decide to push forward or stay stagnant? People think about local, state and federal, but when I think about local, it's also just family. And so your exposure is what are you trying to get done? So I grew up in an immigrant family. My dad came from India with a couple of bucks in his pocket, and his whole goal in life was to survive first.

Arjun Sethi: (04:23)
And then from survival it's to push to the next phase. So I kind of grew up with that perspective, which is if we didn't try as hard as possible, we could be out in the streets. And while that might seem extreme, given where we are today, it didn't feel like it was that extreme as we were growing up. And so the exposure of the folks that were around you was around education, was around science, was around what could the world look like if you had replicators? Similar to what you see in Star Trek? So I think what happens is that when you have exposure to that type of community, we have a very large community here in Silicon Valley that thinks that way. And then we have our sub pockets. What does that allow you to do?

Arjun Sethi: (05:07)
And then how do you start thinking from there? And then the last piece I'd say from a pedestal is what's the speed at which you want to learn? So that the word university is supposed to be, a meaning of like an institution of learning. So if I think about the institution of learning here in the Silicon Valley, where we are based, that just gives you the ability if you want it, the toolkits to keep pushing. And I think that's like one of the privileges of why I liked staying here, being around the folks that are here, the universities that are here, the companies that keep pushing that mantra forward.

Anthony Scaramucci: (05:44)
My life experience has gone up and down. Obviously if you're having a bad day ever Arjun, I want you to imagine me getting fired from the White House in July of 2017, it will make you feel better about whatever kind of day you're having. But you seem to have a pretty amazing career. Tell me about a setback. Tell me about a shot that you've got hit with and then how did you recover from it and what lessons did you learn from it?

Arjun Sethi: (06:14)
I think what people read on biographies, LinkedIn, they'll look at that as a progressive success. What they won't see is, I grew up with a pretty hard family. My dad had lost his job twice, and he had gotten a job in like the semiconductor industry and he had to take a pay cut. In some cases, when we moved from Northern California to central California, to Southern California, we had experienced different forms of racism, and when I was younger I didn't know what that meant. And so as you grow older, you start kind of instilling that into your livelihood. But I got fired from almost every job. I wasn't a good employee. I got fired from Macy's. I got fired from Pfizer Electronics. I got fired from Radio Shack when it existed, all of these companies. And then I think just keep moving up the stack-

Anthony Scaramucci: (07:10)
So was there a common theme, Arjun, of the firing? I mean, my firing is usually I'm doing something really stupid and I'm saying something I'm not supposed to be saying and the next thing I'm in Pennsylvania Avenue. Was there a common theme to your firing?

Arjun Sethi: (07:25)
I think it was, and we can get to it at some point, but there was probably a lack of care, where there just wasn't an inflection point that it really mattered, that you need to start pushing forward and learning and being productive in some way. And that's a different philosophical tilt, but, and I also got kicked out of school. So this thing just keeps progressing, which is, I actually just had a progressive of failure routes, that at a certain point, I think it finally clicked, which is I can't continue to do this. And I think you can get stuck in that, but if I didn't have like a family support, if I didn't have folks around the table that had kept helping to propel me back up and saying that it's okay if you fail. These are not failures. These are unsuccessful attempts, you can figure it out.

Arjun Sethi: (08:13)
But then I wouldn't have had the 15, 16, 17 chances. And so what I took from that was how do you iterate test and design towards what you want to forge moving forward? And so, I appreciate the description of myself, but previous to those companies that I started, 10 failure companies with, founding teams that didn't work, because we weren't iterating towards something that could work. And it doesn't really happen if you don't have a North star. And so luckily I had like a vision of where we wanted to move forward with my co-founders and myself. And that's actually been sort of the emphasis. If you look at my career, doing what I do at Tribe is actually the same thing I was at Lolapps, MessageMe, at Yahoo. That's the exact same thing, it's just, now we're just building a technology company that's deploying capital into venture capital as an ecosystem. And so the mindset is different and the way in which we build is different the way in which we iterate is different.

Anthony Scaramucci: (09:12)
So you left Social Capital after working with the Chamath Palihapitiya and right now, John Darsie cannot believe I-

Arjun Sethi: (09:21)
Palihapitiya, Anthony. It's not that hard.

Anthony Scaramucci: (09:23)
All right, it's close enough.

Arjun Sethi: (09:24)
Chamath Palihapitiya.

Anthony Scaramucci: (09:25)
Chamath doesn't care, he knows I love him. And he knows I don't know how to pronounce his name. It was almost close enough. So you left after a couple of years, what did you learn there? What shaped you from that experience?

Arjun Sethi: (09:40)
Look, the first step, I'd say that, as I mentioned, instead of the five mile radius, go 50 miles. There's a set of folks that have worked with each other for a very long time. I actually met Chamath when he was at Facebook and I was at, Lolapps. He had tried to acquire my company and the apps that we were building on the platform. So there was a set of folks that I would say, had shared DNA around thinking about, iterating innovation. And what could you build that's different around looking at technology companies, right? Instead of thinking about what's forward, it's how do you see the present more clearly, what is there now? And then how do you forge your path forward? And that's the world we live in. And so, a lot of what I think we admire, with Chamath and other folks in the ecosystem and why we all work together in the first place and admired each other was that we were all forging a path towards the same direction, came from the same cohort, same clubs, same schools, in some case.

Arjun Sethi: (10:41)
And, what Social Capital was able to deliver was a collection of a lot of these individuals. You could say the Social Capital mafia. If you look at the folks that came out of the firm, and we all took what we distilled as the most important, and then forged ahead with that. So I took our data science and product approach towards what I think venture capital looks like in innovation. A couple of other folks took different pieces of that, Chamath himself took different pieces of that to the public markets. And then I think you just see a lot of us move in that direction because we had a collection of ideas that were really well-regarded in the firms. I think that's really special. You've seen that with companies like PayPal, you seen that with companies like Twitter, we have a very special collection of individuals and they go out to go do their new thing.

Anthony Scaramucci: (11:30)
It makes total sense. And obviously we had him on SALT and he was very impressive, and as are you. Let me go in this direction. You're an entrepreneur, you're in Silicon Valley, you're trying, start something, you have a vision for something, they come to see you. How do you know? You're the sort of like the Simon Cowell, you're at the desk, you're looking for the X factor. How do you know that they have the X factor?

Arjun Sethi: (12:11)
We don't. The whole point is that we don't, if you think about, what people do and what they build, I think what happens is, for example, you and I are chatting now and so you get, some sort of pattern recognition of your past 20 years of history of saying, "I think this person has it, or they don't." But you're, pattern matching to your biases may that be right or wrong. And so that happens a lot, right? Like you can just see that with the way in which people get funded, the capital they're deploying, that they're being infused. And our approach is, "Hey, I think we may not know, the collection of experiences where this person comes from." We have a motto internally, which is, how do we focus on what, versus who you know.

Arjun Sethi: (12:55)
And so let's forget where, what school they went to. Let's forget where they grew up. Let's forget all those pieces for just a second. Let's look at their team, let's look at the focus of what they've built. And especially in a world that's software and tech enabled, what can you measure, right? What can you measure from a ground truth perspective? It's kind of akin to financial accounting. When you look at the public markets and you look at a company, you look at their guts through financial accounting, balance sheets, [inaudible 00:13:19] income, et cetera, can you do that with software? And that's what we have been working on for our whole careers. And so it was a way of how do you articulate that for the next set of, Zuckerbergs or Dorseys that show up and say, I have this product, but there are outliers, there are extreme.

Arjun Sethi: (13:36)
You might not like the way in which they, articulate their vision. But the whole point is that, that's not the point. The point is what is it that they've built so far? What's their foundation? Let's forget where they come from. You just a second and see if there's any demand from customers, integrations. Is there anything that you can measure that will give you now insights into what the future could look like if could forecast? And that's the fine tuning that I think is really important to think, that's the approach that we take. So the answer is we don't know, but we start building conviction and starting off from a foundation of what they have built, and we morph around them rather than having them morph around us.

Anthony Scaramucci: (14:17)
You're in a very interesting high altitude ether, Reid Hoffman once said to me that if you're waiting for the website to be perfect, you're waiting too long. Let's launch the website and start figuring out as it goes. Do you share that philosophy? And if you do, how would you describe when is the right time to start a business or to try to scale a business?

Arjun Sethi: (14:46)
Yeah. So, I'll try to paraphrase here, but I think it was, if you're not embarrassed about your product, you're doing it wrong. And so while I think that's a good approach or certain types of companies, it's not the approach for every company. So if you kind of split the world into bits and atoms on the bit side, if you're building a mobile app, if you're building mobile infrastructure, you have fast iteration time and feedback. Yes, you can experiment at a faster pace and you shouldn't be embarrassed about what you're building, because you can do it cheaper, faster, better. And that's what that technology stack is all about. And when you move to the world of atoms, you can do that in some cases where if you're trying to build a spaceship or a rocket, if you're trying to help with climate change, if you're focused on drones that go out there, you can't iterate a drone that's gonna like drop in the middle of the sky.

Arjun Sethi: (15:38)
It's not the point. And so I think you kinda have to bifurcate between the two worlds and then say, okay, now, based off of these frameworks, what's the right way to approach the market, the product that you're building, and frankly, how much capital do you need, in order to hit the first iteration that might be embarrassing in that vertical that you're thinking through. So while I agree with that, that works when you're thinking in small terms of the internet, although the market obviously is quite, quite large for the internet in the world of bits.

Anthony Scaramucci: (16:15)
I'm late to the VC space. And I know that there are-

Arjun Sethi: (16:20)
Never late, never late.

Anthony Scaramucci: (16:22)
Never late, okay. So that's a good line, right? That's what people tell me about Bitcoin. We had planned B on yesterday, he said he felt that he was late, but now he realizes he's never late. So that's a good line, but let's say that I'm an old timer. I'm late to the VC space. I see the specs, I see these VC funds. I see these special partnerships, these SPVs, what would you recommend to me as someone that's a traditional stock and bond buyer, I own cash, stock, bonds and gold. What am I missing and how would you recommend that I enter the space?

Arjun Sethi: (17:04)
I think you're smarter than I am on this. And I've watched your talks before, so you take a macro perspective. Right? And say you think about, Hey, what are the financial policies that are being, projected worldwide? Not just here in the United States, but with ECP, the Japanese Central Bank here in the United States, just printing and then rates going down, and then you just continue to do that. Someone hiccups, you do the same thing over and over again. And so you take that traditional approach. It's okay, great. The traditional portfolio approach, traditionally, where you kept your capital may no longer have the same yields and you got to keep up with some aspects of inflation. And not aspects of inflation that are average, but aspects that are cumulative towards certain parts, California and places where you are and vice versa.

Arjun Sethi: (17:53)
If you go to African emerging markets and so, that's the high level macro, and then you go into micro and say, "Okay, well, what are the emerging classes of where you want to spend your time?" There's a power law in equities, there's a power law in alternatives, then there's a power law in certain human innovations. And part of it is, what does Bitcoin mean? As programmable money is what a lot of people call it. What does gold 2.0 mean? There's a lot of ways in which people kind of describe it. And then you keep going into, down the train. What does public equities mean and what is private equities that haven't gone public for so long with a lot of latent demand mean? And then what are the financial instruments to invest into this innovation?

Arjun Sethi: (18:36)
So I think it really comes down everything. I think, to not bury the lede, just comes down to growth. Where's growth going to happen? Is that innovation oriented? Is that incrementalization oriented? Is that stock buybacks oriented? And how do you kind of perceive your way around how you want to deploy our capital? So when you say you're late, I don't think you're late at all, because we've just starting to see, you can call it the ramifications, or sort of a new economy thought process, post 2008.

Anthony Scaramucci: (19:07)
I mean, you're making excellent points. And I do study the Dow and the S&P 500 and the rotation, and if you look at the top 50 names from 20 years ago, they are very different from the top 50 names today. If you look at the top 10 names, and of course you and I know that Tesla just got added to the S&P 500. And so my question to you is what are going to be those leaders, in five or 10 years? Are there private companies right now that you're looking at, you'll say, "Wow, in five or 10 years, they are going to be the Ford Motor Company of 1920, but they're the XYZ company of 2025 or 2030."

Arjun Sethi: (19:51)
Yeah. So, I think this is why I love technology. There's a concept that we talk about a lot. Peter Thiel talks about it, what our perfect monopolies versus innovation monopolies. Internally, we call that one of N versus N of one companies, which is, what's a special company that is just so special it's hard to compete with? And then what are the sectors that are all similar to each other, again, one of N, one of many companies.

Arjun Sethi: (20:17)
And so I think if you take a look of just, this is a good point, just going from atoms to bits and what are the industries that are moving and shaping the world forward. Payments, e-commerce, the retail to digital transformation. This is not just the United States, this is worldwide. Where are you going to be placing your bets? So if you just look at the power law of the public markets, now you can call it the FAANG, MF stocks, where there's different acronyms today. But it's really concentrated towards the future, right? Where those are the companies that are winning now, and that there's going to be a larger majority of them that are going to continue to win given that consumer demand is going that way, B2B demand is going that way and worldwide demand is going that way.

Arjun Sethi: (21:01)
So you just kind of trace route that and say, "Okay, well, where else is that going to happen? What are the ecosystems that need to be there to support them? And then what are the ecosystems that are going to actually just die over the next, let's call it five, 10, 20 years from now?" And I think you've seen that, where private equity went really hard. I don't know if you remember 2008 to 2014 into retail. Retail is coming back. We know that ship has sailed, it's not coming back. COVID has accelerated that, not just here in the United States, but worldwide. And so you kind of, again, trace route that down, say, "Okay, well, what are the next industries that need to be A reshaped, and then B supported?" And that's kind of how we think about it, within the Silicon Valley realm of what we think is going to happen in the future.

Arjun Sethi: (21:49)
And I think it really just comes down to the private companies that are being built today. What are they doing and how are they supporting that ecosystem? And are they special? Or are they just one of many companies that are going to be a part of that transformation? I would argue anything that's D2C or consumer demand related are just one of many companies, right? What's the next brand that you're going to buy from when you go on Shopify or Amazon? But then the next set is who's supporting those brands? Who's someone that monopolize that? Who owns the roads and the railroads of the future. And that's I think what we spend a lot of time thinking through. One, we don't know, two we've seen some of them, and then three, we got to figure out a way to identify them without us having a certain biases that we've had in the past.

Anthony Scaramucci: (22:34)
Tell me one sector. You don't have to give me a name of a company, just say, "Look, this is an unstoppable force that's going to be with us in 10 years.

Arjun Sethi: (22:48)
Financial services, I think is completely and utterly being not only disruptive, but revolutionizing all over the world.

Anthony Scaramucci: (22:56)
So something like neo banking as an example, the revolutionizing the banking industry?

Arjun Sethi: (23:03)
Yeah. So if I walked down the street at 20 years ago, I would go to a retail branch and I would say, "I need these five things." And then depending on my purchasing power or status of, lower income, middle and above, those pieces would be fragmented, right? I'm privileged enough to have, the likes of Morgan Stanley to say, "Here's everything I'll do for you." But you don't have that for folks at a lower tier, and that's starting to change, right? Like I can send an email saying, "I want these five things." You can't do that if you're at the lower income or bracket and you can't do that if you're sitting in Mexico and if you can't and you can't do that if you're in India, driving an auto workshop. But that's starting to change where now they get the ability where the future was already there, but it wasn't evenly distributed and that's what technology allows us to do. And I think people use the word neo banking, but it's much more than that, right?

Arjun Sethi: (23:53)
Where that auto workshop individual wants a USD denominated account. He thinks about preserving his wealth in dollars. And I'll get to Bitcoin in a second and the same thing's happening in Latin American countries, the same thing's happening in Nigerian companies and you have this global influx of people moving back and forth. And so what does settlement look like? What do payments look like? What does banking look like? What does insurance look like? What does real estate look like when these products get bifurcated? And then a lot of people try to think and say, "Okay, Bitcoin is that piece, or crypto markets are going to be that piece." It's possible, but I think you have to think about it from an application perspective. What does the technology, the database, the settlement and the distribution allow you to build? And I think it's more people want trust security laws and you take those all together. Like we have here in the United States. And what are the products that get built off of that?

Anthony Scaramucci: (24:48)
All of a sudden I'm 100% with you and now I'm watching the neobanks take over. They've got no bricks and mortar. So they're offering the services at little to no cost and they're paying higher interest rates. And it becomes almost impossible longterm to compete with that. So I agree with you there. Let's talk about-

Arjun Sethi: (25:12)
Yeah. I think it's more than that. It's, we are willing to pay for a certain amount of experiences and products that they're able to say, in the world of negative and zero interest rates. Forget that for a second. Do you trust my experience to deliver you an outcome? Do you trust my experience to deliver you capital, lending and democratize that? Do you trust my product where you're willing to pay like a subscription fee for all these services that other people got? And then at scale, what people got at the higher tier you're now able to get at the lower tier as well. And I think that's actually the change, which is you can flip the pyramid and say at scale I can offer these services worldwide.

Anthony Scaramucci: (25:54)
Yeah. It's pretty fascinating before I turn it over to, John Darsie and our audience participation. I want to talk a little bit about SPACs. What is your feeling about the SPAC market, it relative to the IPO market? And do you think it's a viable long term solution SPACs or is it a by-product of the regulatory environment that we're in?

Arjun Sethi: (26:19)
It's a good question. If you take a step back and say in the '90s, what did we have? We had roughly eight, 10,000 companies going public, or sorry that were public, on the NYSE and NASDAQ, you had the ability for people to participate in the upside of these companies where they're at and certain valuations let's call it, 500 EV and up, and then what the regulatory regime in the 2000s, and then, again, the regime in 2008, while it may have been, protectionist is also created this mechanism where the regulatory regime just made companies go public later. And so I think you look at any entrepreneur to say, "Do you want to go public or private?" There's a set will say, "I want to stay private forever because I want to control it."

Arjun Sethi: (27:08)
But there's a large set that say, "Yeah, I want access to capital markets, but I can't because it's too expensive." Or you've actually just do the math. If you have 50 million in revenue and for you to go public, it's going to be five or 10% just to start, that just doesn't make any sense from a unit economics perspective. So you just, wait, wait and wait. And now you have, I'm on the board of a company called Carta. And the number one thing all of these companies are asking by the way, there's about 14,000 companies in their platform. It's about a trillion dollars of private equity just in the private markets that don't move. It means that it's just a stake of private investors like myself that are waiting for liquidity or dumping more capital into these companies because they're growing and we're participating in the upside, but the regular markets and an irregular individual is not, regardless of being accredited.

Arjun Sethi: (27:58)
So I think what you've seen now is that there's just a ton of latent demand for those enterprise value companies and not just companies that are in the United States, but worldwide, because worldwide liquidity also doesn't exist. If you're thinking about a growth perspective, if you're sitting in Taiwan or Indonesia or Southeast Asia, you don't really have any options. You're going to look at the US markets NYSE and NASDAQ because their growth mentality and frankly, an American mentality, where you can't go public and these other markets that want like four to five years of profitability. So there's this massive regulatory, I'd say down pressure of private companies where they can't go public, and SPAC I think it's become a mechanism where you can do that. And it's not just the SPACs. You have secondary liquidity. These exchanges have started popping up, we've invested in one, Carter being the one, at certain EV.

Arjun Sethi: (28:49)
And then you start thinking about, okay, well, these companies are still at their inflection point where they need help. They want other folks that are along with them. The world of activist investors in the public markets are gone. And so the SPACs allow people to partner with folks with a cash injection like they have in the private markets to think longterm. Now, while I don't think it's perfect, it's a mechanism, direct listing is another mechanism, and the traditional IPO is another mechanism. And as you know, these are all forms of raising capital or, getting access to the capital markets, for other forms of capital that they might need to grow. And so is it here to stay? I think so. Is it going to be at the peak of what we've had over the last two years? I'm not sure. But we're keenly watching it. A lot of our companies are now in their board decks saying here are my options. Raise capital, go public. And SPAC is a mechanism for that.

Anthony Scaramucci: (29:49)
All right. Well, listen, congratulations on all your success. I've got to turn it over to Darsie who's the millennial in charge, that's going to now try to outshine the two of us, so don't let him do that, Arjun. Okay? You and I have now bonded. Don't let them get the best of us. Go ahead, Darsie.

John Darsie: (30:07)
So Arjun, just following up on the SPAC question, you had a portfolio company recently that went public via SPAC. Was that a positive experience, and has led you to be more receptive to the idea that, SPACs are a long-term solution?

Arjun Sethi: (30:21)
Yeah. So while we were at Social Capital, Chamath and team, and the rest of us had thought of what are all the toolkits that we could provide on behalf of our companies. And one of them was SPAC and at the time it was a pretty dirty word, right? Like you just think of it as companies that aren't good enough should not go public. And that was a mechanism used, or the reverse merger and what we had seen over time, very accelerated by them. And I think COVID accelerated this even more, is that there were certain types of companies that need more capital. So as a private investor, investing into space, climate change, drones, heavy CapEx industries, these companies need 50, 100, 250, $500 million in order to hit their next milestones.

Arjun Sethi: (31:08)
They already have product market fit. We already know technologically their products work. They just need the capital to build it. So if you want to build a farm, right. A vertically integrated farm that deploys, food at a cheaper rate, how do you do that? Where are you going to get that capital from? It's harder to do it in the private markets. And I think I go back to the first question of, how do you know if these entrepreneurs have it or not? Well beyond that? What if they already have it? They don't have access to capital in the private markets. What do you do? And a lot of it is they just get fully diluted. It's really hard for them to get that capital in it and something that should have taken a year or two to accelerate will take five or 10 years.

Arjun Sethi: (31:47)
And so I think that SPAC became a mechanism for that, which is, are people willing to take the risk for certain types of these companies that are definable, there's a narrative to it, there's a team behind it. And someone has done the work that you either trust, or you don't to say, here are the types of companies and here's how much capital injection do you need. And so those are the companies in our portfolio that have been looking at that approach. And so Momentus, which is a first mile and mile delivery mechanisms. So that they've literally attached themselves like a parasite onto a star ship or a rocket. And then they go from point A to point B to point C for you. So it's kind of like a hub and spoke model. They need capital to build their satellites and their propulsion systems.

Arjun Sethi: (32:28)
The first one already works. They've already launched it. So, the technology works and the second one, the launch, with payload for their customers, and we'll be out in the next three to six months. Those are really well-defined companies that you can say, "Okay, great. Let's give them the capital. They already have product market fit. Now it's about how fast can they accelerate and where do you go from here?" The private markets value those companies lower as high risk where we don't think it is, the public markets think of it as a little bit less risk, and they're willing to give them the capital to make it happen. So I think it's been a good experience for those types of companies. It's still TBD for international companies and it's still TBD for generic software companies that are growing and they do have access to private and public capital.

John Darsie: (33:14)
Right. And you saw Chamath first, SPAC was Virgin Galactic, and you've seen it on a nice run lately. And it seems to be a really good solution that they've found, for that company. So, I mentioned in the open about how Tribe Capital was founded by yourself and a team of engineers and data scientists, and you guys are very data-driven, in terms of how you invest. And so you can take a lot of raw transaction data from companies and you synthesize it to create sort of a bottom up approach for private investing, the same way a Dodd Graham type of investor would take a bottom up approach in terms of analyzing a public company's financials. Why is a data driven approach important? And how do you combine that data with your own judgment intuition, from sort of a top down perspective on trends?

Arjun Sethi: (34:02)
Yeah. So there's a lot of questions in there. So I'll try to break those into pieces. Over the last 20 years, if you look at Facebook, Google, Yahoo, like the new order of technology companies, and you just go down the stack like Airbnb, we, we grew up in those companies, we helped those companies. We help them scale. We either through investment or starting them in some cases. So that's the team's DNA. And so you take that team's DNA and you take them to a traditional venture capital firm and you ask them to invest in companies. The first thing we think of, or when I entered venture capital, I'm why are we still using Excel? Why are we still using paper and pencil to make investment decisions? It doesn't make any sense to us.

Arjun Sethi: (34:48)
Because we've built all of these family of frameworks to invest our time, our capital, our products with the fast feedback loop, why can't we bring what we've done for the last 20 years and bring it to the investment side as a way for us to augment our decision-making? That's how it started. I'll call it seven to 10 years ago. It was just so archaic for us that we, when you get into venture, it becomes less team oriented and it becomes more solo oriented. So we flipped it. We flipped the script and we basically said, "Okay, great. Let's take that. As a bottoms up approach to understand a company the same way, we take a bottoms up approach to build products at least in the consumer and enterprise ecosystem."

Arjun Sethi: (35:34)
And I'd say that we have this motto internally. And if you take the dollar bill and you turn it around, I forgot what the exact symbol is, but I think it says like Novus ordo Cyclorama or something like that. It's like a new order of the ages. That's the exact way we think about where we are in venture, and capital allocation, which is you've had this tradition, where you looked at balance sheet, and accounting frameworks. Can you build those frameworks? And can you build systems and software to help you make better decisions? And can you flip the script in the way in which you can help these companies, partner with them. And so when we go to a company and I know this is a long-winded answer-

John Darsie: (36:17)
[crosstalk 00:36:17] like the long-winded answer.

Arjun Sethi: (36:18)
... the pitch literally is if you want the folks that helped scale Uber, Facebook, Yahoo, that the folks that built these companies from zero to billions of customers, that's us with capital. So we are a technology company that think about venture, and we build products, we build distribution products, we build analysis, we build data and analytics that we can serve you in that way, because that's the language you speak. That's how you're thinking about building your company. And those are the types of folks that you want around the table versus, talking to your grandfather. Your grandfather might be really smart, but they're taking a solo approach to helping you. And that's very, it's hard to scale that.

John Darsie: (37:01)
Yeah. One of the aha moments for me lately, and we don't have any financial interest in Stripe, but when Stripe basically started Stripe Capital and the idea that they're analyzing all the transaction data on the fundamentals of companies that are using their APIs and actually investing in businesses, that they noticed really positive trends related to revenues and profits and everything that's going on, on the underlying level at a company, about, the value of data, the exponential value of data in a technology first world. I want to go back to Anthony's question about, founders. So a founder comes to you, and they say, "Hey, I have this idea. I have some money. I could bootstrap it. I could take venture capital money and dilute myself." There's other sources of capital, first of all, how do you know for that founder, whether it's the right time for them to launch the startup and how do that they're ready to scale and how do you give them advice on the best source of capital, as well as the best partners to help them scale the business?

Arjun Sethi: (38:05)
This really comes down to underwriting risk. So if you and Anthony decided to start a company tomorrow, you have access to capital, proliferation of it at the pre-seed and seed stage. So it's called idea and concept. So there's a set of investors that focus on people and markets, tech, experience, et cetera. That's all over the world. That's awesome. Right? Like if you kind of think about it, there's a ecosystem that's being built that kind of mimics or romanticizes what you see here in the Silicon Valley. And so that we're going to adopt that in certain other sectors. That's a different type of risk that you're underwriting and that's become more and more proliferated with more people, right? So it's syndicated out, whereas before it was just in the hands of a couple of folks. And that's called pre-product market fit.

Arjun Sethi: (38:50)
Post-product market fit, that's a new set of investors in a different set of investors. So it's really about the gradients where you are in that life cycle of building. And so to answer your question is we don't know. I think we have to be more bold about investing into harder things and newer things, because it is cheaper, faster, and easier to build that. And so there's a set of investors that do that. We're not good at that. That's okay. We explicitly say that, but we do invest in certain ideas that we like, but we underwrite risk kind of appropriately, which is, we're not giving $20 million to someone that has an idea in concept. We might be giving them a couple of hundred thousand dollars to start, but there's a whole set of us, that you can say times 10, that are going to do the same thing.

Arjun Sethi: (39:34)
And then they have enough capital to start an experiment with. I think that's something that's been lost over time. Where you used to actually have that in the '20s, '50s, World War I, World War II. You had that from the '50s to '70s and it kind of stopped. And it might've not been this public and private partnership, but it was there for things that we wanted to do moving forward. That's not really measurable. And I think the important part here is that you need to invest, to try and have unsuccessful attempts. After that you have frameworks, right? You have people like us that come in and say, I now am able to quantify that you have something that works and it has product market fit. It may not have the same velocity that we might all think, but that's a different risk profile.

Arjun Sethi: (40:14)
I'm not underwriting risk in the same way. And so now it's all about value. What's the value of your enterprise? What's the value of your product? What's the value of your revenue? And that's not any different than financial accounting, the lagging indicators, but you can still do that with software. So again, long winded, but there's a lot of things that you can do. And what's the type of capital that needs to go into trying things and iterating and scientific things that you want to try that are hard. And then what's the capital that goes into it once it finally works, it's a two different states of mind, right?

John Darsie: (40:49)
So I want to end on a macro question that's pretty timely based on IPOs we've seen just this week. So you had DoorDash go public and pretty much doubled immediately before it even started trading. Airbnb is now a North of a hundred billion dollar company that back in March, we were talking about or not, the company was going to survive because the pandemic was supposedly gonna destroy any tourism type of business. But they obviously have rebounded from that spectacularly. Do you think, from a valuation perspective, when you look at these companies that are going public and the valuations we're seeing in a stock like Tesla, that technology is getting into that, B word territory that some people that are less familiar with the technology industry, they come to me and they say, "Oh, John, I know you work in finance. Are we in a bubble again? Is this another tech bubble?" And I sort of guide them to an answer, but I don't want to ask a leading question to you, but do you think things are getting a little bit frothy in the technology space or do you think we're just scratching the surface in terms of what the economy is going to look like in the future? And so these technology companies are still undervalued and you're not late.

Arjun Sethi: (42:00)
I'll preface my answer with, I don't know, but then I'll answer with frameworks that I think are important. So take a step back 20 years, you guys have experienced this, where we had talked about, irrationality and valuations. In the 2000s when we had the technology bubble, before the technology bubble, there were other things happening in the world, right? You had the issue with, Russia, you had longterm capital, I'm forgetting the name of the situation exactly. You had a multitude of things happening all over the world that were negative, not neutral to positive, just negative. And so everyone was rushing towards the next growth story, and that was .com. Anything .com, even if it had nothing to do with technology, you just put .com in your disclosures and you just skyrocketed, that was a different era of companies that had no revenue, no customers, and no substance, right?

Arjun Sethi: (42:58)
And that's the narrative. And then technology continued on its path. And you can argue that it was devalued and it took a longer time for, like the likes of Google to be sort of recognized the likes of Amazon to be recognized during that transition period. Same thing kind of happened in 2008, which is, it's a different bubble. It's a real estate bubble. And now we're entering a world where, again, macro you have negative, to low interest rates, depending on the area. You have a printing of cash and you don't have the yields that you used to have if you wanted to take your capital out of the tech where you could, get, six or seven percent back, in the 2000s up to the 2008 timeframe, you don't have that today. And so the question you kind of have to ask yourself is the value of these companies, the value of their growth, the speed at which they're growing exponentially, right?

Arjun Sethi: (43:48)
It's a super linear, right? It's not stagnant, it's not sub linear. What is the value of those companies that are retaining their customers, expanding with them revenue and engagement wise. And so from a software perspective, those are the questions you kind of have to ask. Do I think some of these companies are overvalued, of course. There's a power law to some of these companies where everyone's piling into what they believe is safe and the equities market, and the same thing happens in the private market. It's just about where do you enter and where do you exit. The great thing about what we do is we enter early and we just leave it up to you guys on the smart side, on the public markets to think about what's overvalued and what's not. But it's a hard one to answer because there's not a lot of downward pressure.

Arjun Sethi: (44:28)
Like where's that coming from? A company like Nikola, which is extremely fraudulent, is still valued at $7 billion. You know that there's something frothy there. And there's not a lot of downward pressure on that company, it's still, I think that's an issue. And then I could probably talk about 10, 11, 15 companies like that. Where that mechanism of downward pressure doesn't exist. So is the market frothy? There's some of it, but I think you're seeing it in pockets. And it's still yet to be determined where, 30% of our GDP was just printed. And what does that look like over the next three, five, 10 years? I'm not sure. It's hard to answer.

John Darsie: (45:06)
Yeah. I mean, I think about Bitcoin in the same way. I came at it for the last several years as a skeptic, but I'm thinking in my head now, look at all the new buyers that we have of Bitcoin, who are the sellers? I don't really see a lot of people that are eager to sell at these levels. And you have all types of companies from mass mutual, to other large investment institutions, Paul Tudor Jones coming out and buying this and buying 1% of their portfolios in Bitcoin. But those are massive astronomical sums of money. But Arjun, thanks so much for joining us. We'll leave it there. Anthony, do you have a final word for origin before we let him go?

Anthony Scaramucci: (45:40)
No, I think, look, it's a fascinating conversation, you're my crystal ball now, Arjun. So I'm going to be calling you from time to time. Like I need to look in there so you can tell me what the hell is going on with the world, okay? I'm counting on you.

Arjun Sethi: (45:54)
We call it the magic eight ball, I'll shake something and I'll give you an answer.

Anthony Scaramucci: (46:00)
Something tells me you're a little bit more precise than that, but I love that line. Well, you be well and thank you so much for joining us on SALT Talks, and congratulations. And I'm looking forward to the future successes for you and your firm.

Arjun Sethi: (46:12)
John, Anthony. Thanks for having me on board.

John Darsie: (46:15)
Thank you, Arjun. And thank you everybody who tuned in to today's SALT Talk.

Strauss Zelnick: The Future of Esports | SALT Talks #124

“With interactive entertainment, you not only have great graphics, great stories, great characters, great gameplay, but you can consume the experience with your friends and with communities, both existing and new, all around the world in real time.”

Strauss Zelnick serves as Chief Executive Officer and Chairman of the Board of Directors of Take-Two Interactive Software, Inc. In addition, he recently served as Interim Chairman of The CBS Corp. Board of Directors.

Quitting a role as a film studio president in order to launch a video game company 25 years was a major risk, but this relatively new genre of entertainment showed signs similar to motion pictures in the 1920s. On top of the meteoric rise in video games and interactive entertainment of the last couple decades, the pandemic has accelerated its growth and adoption as people spend more time at home. The technological developments of video games have made human interaction central to its experience, offering a social element for many who wouldn’t have it during a stay-at-home period. “We like to consume entertainment with other people; we like to participate with other people; we like to watch with other people.”

Esports represents a new frontier in the video game space with over 250 million viewers. It even serves as the primary entertainment for 125 million. The industry will continue to grow and likely evolve into an ecosystem similar to the professional sports leagues.

LISTEN AND SUBSCRIBE

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SPEAKER

Strauss Zelnick

Chief Executive Officer & Chairman

Take-Two Interactive

FULL BIO

MODERATOR

Anthony Scaramucci

Founder & Managing Partner

SkyBridge

FULL BIO

EPISODE TRANSCRIPT

John Darsie: (00:07)
Hello everyone and welcome back to SALT Talks. My name is John Darsie. I'm the managing director of SALT, which is a global thought leadership forum and networking platform at the intersection of finance, technology and public policy. SALT Talks are a digital interview series that we launched during this work from home period with leading investors, creators, and thinkers. And what we're trying to do during these SALT Talks is replicate the experience that we provide in our global conference series, the SALT Conference. And at our conferences and on these SALT Talks, we're trying to provide a window into the mind of subject matter experts, as well as provide a platform for what we think are big ideas that are shaping the future. And we're very excited today to welcome Strauss Zelnick to SALT Talks. Strauss founded ZMC in 2001, he has a long history of leading media and communications enterprises, and is deeply involved in originating investments, advising executives and guiding strategic and operational initiatives across all portfolio company investments.

John Darsie: (01:07)
Strauss serves as the Chief Executive Officer and chairman of the Board of the Directors for Take-Two Interactive Software Incorporated. In addition, he recently served as interim chairman of the CBS Corp Board of Directors. Prior to forming ZMC, Strauss was president and CEO of BMG entertainment. And before joining BMG, Strauss was the president and CEO of Crystal Dynamics, a producer and distributor of interactive entertainment software. He spent four years as president and COO of 20th Century Fox, where he managed all aspects of Fox worldwide and motion picture productions and distribution business. Strauss holds a BA from Wesleyan University, as well as an MBA from Harvard Business School and a JD from Harvard Law School, which he shares with our moderator today. He is the author of Success, a concise guide to having a life you want, and Becoming Ageless, two great books.

John Darsie: (02:07)
And Strauss is also a workout fanatic. And he has a few years on me, but he's in much better shape than me. That is for sure. Reminder, if you have any questions for Strauss during today's SALT Talk, you can enter them in the Q and A box at the bottom of your video screen on Zoom. And hosting Today's talk is Anthony Scaramucci, the founder and managing partner of SkyBridge Capital, a global alternative investment firm. And with that, I'll turn it over to Anthony for the interview

Anthony Scaramucci: (02:30)
Just pointing out John, that it's like calling your aunt a woman, that Strauss Zelnick is in better shape than you. I just thought I would just mention that before we get the-

John Darsie: (02:41)
I left you out of it, Anthony, but-

Anthony Scaramucci: (02:43)
You didn't have to overstate the obvious. Okay? So Strauss, welcome to SALT Talks. Great to have you on. You got such a story background, but I always ask this question. Tell us something about you that we couldn't learn from Wikipedia or from doing a Google search.

Strauss Zelnick: (03:07)
Thank you for asking, Anthony. It's great to be here. It's great to see you, although first seeing you in person. And Anthony, among his many attributes, is also share something that I pride myself on which is if you text Anthony, you get an answer in about 30 seconds. I try to do the same. And I will say that during this political period leading up to the election, that was a great source of information and at times comfort. So it's been-

John Darsie: (03:39)
Or misinformation, Strauss. Don't give him too much credit.

Strauss Zelnick: (03:41)
[inaudible 00:03:41]. I was basically lying to you with overconfidence [inaudible 00:03:46].

John Darsie: (03:46)
You could have heard him on election night, he was yelling at me. He said, "You were too confident. You made me confident. What were you doing?"

Anthony Scaramucci: (03:52)
I won at nine o'clock. It was a little dicey. Okay? But that was the whole Trump design. He was still trying to get all those votes get counted after the fact. Okay, fine.

Strauss Zelnick: (04:01)
Anyway, so it's great to be here.

Anthony Scaramucci: (04:04)
Let's move on. We were talking about you being a fatso, Darsie. Let's move on. Okay? We got other more important things to talk about. But guys, [inaudible 00:04:09].

Strauss Zelnick: (04:09)
So let's see. Probably the thing that you wouldn't-

Anthony Scaramucci: (04:11)
You grew up in mass, right? You're from Mass.

Strauss Zelnick: (04:13)
The thing that you wouldn't be able to tell from Wikipedia is that I started off wanting to be a performer. So even though I spent my whole life in media and entertainment specifically in the movie business, television business, the music business, the video game business, the broadcast television business, but like many people who find themselves in an executive position in entertainment, I started off wanting to entertain. The only problem was that... I had a small problem, which was an utter and complete lack of talent. So that's where I started off. So I was-

Anthony Scaramucci: (04:45)
[inaudible 00:04:45] did you go on an audition? Were you-

Strauss Zelnick: (04:46)
Oh, yeah. I was actually... I was a singer songwriter. I wrote lots of songs. And that was sort of my area of great interest. I was a novelist. And in fact my thesis at Wesleyan was creative writing. When I was in high school, I made money by being a magician at kids' birthday parties. And I also did some acting. And in fact, I just nearly missed getting cast in a major motion picture when I was 17 years old. So I went through a sort of, one of those group auditions and I was second to last and ultimately didn't get it. And they ultimately didn't make that picture, made it many years later, but not that particular one. So I had a number of sort of a near success experiences, but I just didn't have the talent for it. And I had the presence of mind to understand that before it was too late to turn my attention to the business side of the equation.

Anthony Scaramucci: (05:37)
But you stayed in media. You like media entertainment, you like that whole sector of the US economy. Why? Why do you like it so much?

Strauss Zelnick: (05:47)
Well, first of all, again, having fallen in love with the all forms of entertainment from the point of view of a potential creator or performer, the closest I could get was to being the business side, because I seemed to have some story for business. And this is true. Many people who work in the entertainment industry, I have an enormous respect for creative talent, for performers and for creators, and to be able to help them bring their amazing creativity and talent to audiences all over the world, it gives me enormous satisfaction. It's also not lost to me that there are some great business opportunities. And the one that's been biggest in my career has been interactive entertainment because for some reason, I was able to identify that as an opportunity when I was still in the movie business many years ago. And I took an enormous risk and did something no one ever does, which is I voluntarily left the position of president of a major film studio, took a 95% pay cut and moved to Silicon Valley and started a video game business well before it was sexy to do so.

Anthony Scaramucci: (06:55)
And what did you see? So what the vision was, people would spend more time at a video game than they would actually even at a motion picture? Or what did you see? What was the insight?

Strauss Zelnick: (07:05)
No. I think this is not so long ago. What I saw was, this is the beginning of a burgeoning entertainment business, and this has all the earmarks. So the motion picture business in the 1920s before there were sound movies and before there were color movies, but you could see that this was going to be a huge business. And there were a bunch of entrepreneurs who saw that and built what became today's major studios. And I thought the same opportunity existed about 25 years ago and I was part of that with Crystal Dynamics. That was my first video game business. The second one was at BMG Interactive and the third was of course, Take-Two,

Anthony Scaramucci: (07:49)
But things have changed for the entire entertainment landscape as a result of COVID-19. However, in the interactive space, one could argue that it's actually gotten better in some ways. It's perhaps more robust. What are the changes that Take-Two has experienced? Where do you think things are going? Am I correct in that observation? That's not me doing anything scientific. It's just me observing my children, what they're doing in this period of time.

Strauss Zelnick: (08:19)
Well, of course this pandemic has brought terrible tragedy and privation so many, and then we need to be mindful of that, respectful of that. And it's hard to want to take a victory lap in that context. That said, there's no doubt that sheltering at home caused people to consume more entertainment of all forms that they could consume at home. So it took an enormous toll on live entertainment and sports and benefited linear entertainment, motion pictures that you can watch at home television, distribution, music, and of course, benefited interactive entertainment as well. But it disproportionately benefited interactive entertainment. And I think the question you're posing is why would we get a disproportionate benefit? And I think the answer is that people realize it with interactive entertainment, you not only have great graphics, great stories, great characters, great gameplay, but you can consume the experience with your friends and with communities, both existing and new, all around the world in real time, as you're consuming the game.

Strauss Zelnick: (09:20)
And we like to consume entertainment with other people. We like to participate with other people, we like to watch with other people. What a great thing to be able to play a multiplayer game as a character and to compete with, or cooperate with Anthony, even though Anthony is a 100 miles away or a 1000 miles away or 3000 miles away. And you can do that with interactive entertainment. You can't do with anything else. People love watching movies with other people, but I don't think during the pandemic Anthony, you're sitting at home watching a movie and you're in a group chat with friends in France who are watching the same movie. But you specifically are doing that when you're playing Grand Theft Auto online. That's exactly what you're doing.

Anthony Scaramucci: (10:02)
Yeah. No, I think it's fascinating. Amazon's obviously trying to do that now with Amazon Prime to try to link you to other people while you're watching the movie, but you're not interacting, you're not competing, there isn't a story arc like there isn't Grand Theft Auto that you can actually participate in, which makes it very sexy, particularly to younger people. But I want to ask you this question because there's constant product innovation, you have PlayStation 5 coming out, Xbox Series X. Both of them are out effectively, a shortage on both of them. How do you guys adapt your business model to the hardware component to this stuff? Do you make the stuff sexier? Has it been more appealing? The graphics, where are you from a vision perspective?

Strauss Zelnick: (10:51)
Well, what's great about these new platforms is they give our creative folks the technical ability to build better experiences. Whether they load faster, or the graphics are better, or the interactions are more realistic because memory is better. And the rate of data transmission is faster, or what you can do graphically is deeper or all of the above. Business model doesn't really change, although certainly new technology has enabled new business models most specifically, the ability to keep consumers engaged in between big releases and then to monetize that engagement. But this new array of platforms, including upgraded PC platforms, really doesn't have much of an influence if any, on the business model.

Strauss Zelnick: (11:41)
It does however, potentially increase the size of the market when people say, wow, that NBA 2K21, that looks like real basketball. Step back from the screen just a little bit, squint a little bit, I can't tell the difference between NBA 2K21 and a basketball game. This is amazing. And you're going to see even more of that in the next five or 10 years. And I don't think it'll take 10 years. We will be able to create video games with computers that look exactly like live action. I'm not saying we will, by the way. People may still... Our creative folks won't necessarily choose to do that. We'll still have titles of like Borderlands looks like a graphic novel. But you'll be able to do that if you want to do that, and that's going to be very intriguing.

Anthony Scaramucci: (12:26)
You're bringing up an NBA 2K, which... My kids wanted me to ask you this question. I'm dying to ask you this question. It's about esports. And so, you have this contract with the NBA, you have NBA 2K and then you have the introduction of this new sports franchising even where players are playing in arenas, players are playing in Las Vegas. Is this a fad in your opinion, Strauss? Or is this the next frontier in sports and entertainment?

Strauss Zelnick: (13:00)
Well, for sure, it's not a fad and for sure it's a frontier. The question of course, is always how high is up and that I can't speak to. I know the 250 million people love watching esports. 125 million people say that it's a primary entertainment activity for them, but this is still not a heavily monetized market. The entire esports business is about a billion dollars. And most of that goes to one title, incidentally, not our title. I don't think esports will be found in 50 different leagues doing 50 different things, any more than professional sports are. I think you'll have five titles in the same way we have five big, massive worldwide sports that matter, or so. And I'm hopeful that in the NBA 2K league will be one of them because it's based on something that we know people love to participate in and watch, which is the NBA.

Strauss Zelnick: (13:53)
So unlike some of our competitors, we don't believe that we can put out an array of titles in it. Any given time, we can take a new intellectual property and turn that into an esport. I think that's going to be very difficult to do, but I remain immensely hopeful that the NBA 2K League will become a very big business over time. It's going to take a while. It's still a very, very small part of our business, not a material part of our business yet.

Anthony Scaramucci: (14:16)
So I want you to put your traditional entertainment hat on and your interactive hat on at the same time. And I want you to think about where we are in terms of COVID-19. And so, my friends in the media business or traditional media business are slowed down, there're delays in production, they can't release movies because many movie theaters are closed or there's only 25% occupancy in the movie theaters. And so, the first part of this question is, what do you think happens to that side of the entertainment industry? How quickly can it recover or is it permanently changed? And then the secondary element of the question is, and so how was that overflowed and impacted you at Take-Two and what I would call the interactive media side of the business.

Strauss Zelnick: (15:05)
Look, I think with WarnerMedia's announcement that they're going to go day and day to their digital platform, along with a theatrical release. That puts a fine point on the possibility that post pandemic theatrical distribution is going to be challenged on an ongoing basis, but that really wouldn't be a big change. That would just be an acceleration of a prior trend. And I think one of the things that many people have said is that the pandemic has accelerated prior trends. It's been great for ZMC because we try to bet on trends that we expect to come to fruition in 5, 10, 15 or 20 years. Well, acceleration is fantastic for the companies that we already own and interesting for the companies that we'd like to own. So I think theatrical distribution is challenged. Motion picture business has been a challenge business for a very long time, much longer than most people acknowledge.

Strauss Zelnick: (15:57)
And I think that will continue to be the case, but of course the television business has been, if anything, benefited. By sheltering at home, people are consuming more television along with more interactive entertainment. So I don't believe that we're seeing any kind of tragic consequence for legacy traditional linear entertainment. I think we're just going to see more happening that was already happening. And I think there'll be great opportunity for great creators, largely in the television space. I think if you want to dig in to what will happen to all the various subscription platforms and television, I think there's not going to be a winner takes all, and there's going to be a whole bunch of losers. That's a separate conversation.

Strauss Zelnick: (16:40)
Now juxtapose that against our business. Look, we're booming. The average age of our consumers, 37 or 38. People consume for the rest of their lives the entertainment they fell in love with it at the age of 17, you know that. You know that the music you like most, no matter what you say, is the music you loved when you were 17. The entertainment you loved at 17, that's always been your love. That will stay your love. So when you turn 39, you don't stop playing video games, but new people are coming into the market. That cohort's going to grow for the next 20 or 25 years just naturally. Does that mean that we do well? Not necessarily. We have to execute every day. We have to make hits, but it certainly is nicer to have meaningful tailwinds than headwinds. And the interactive entertainment space has loads of tailwinds. Again, accelerated by the pandemic undoubtedly.

Anthony Scaramucci: (17:30)
See Darsie, what Strauss is saying, that means that NSYNC is going to be in your life for the rest of your life. I just thought that I would [inaudible 00:17:39].

Strauss Zelnick: (17:39)
I hope so. NSYNC was one of my acts. So [inaudible 00:17:42].

Anthony Scaramucci: (17:42)
Yeah, I remember. That's I'm bringing it up.

Strauss Zelnick: (17:43)
Yeah.

Anthony Scaramucci: (17:44)
Just to let you know, Darsie, you when you're 95 years old, you'll be listening in NSYNC. Imagine that. So, Strauss before he can-

Strauss Zelnick: (17:51)
I still listen to James Taylor. So I'm sure it's true.

Anthony Scaramucci: (17:54)
[inaudible 00:17:54] who's kidding who.

John Darsie: (17:55)
North Carolina guy.

Anthony Scaramucci: (17:57)
Before he gets to me, I'm going to interrupt to keep moving. I want to ask you about Quibi, if I'm even pronouncing it right.

Strauss Zelnick: (18:04)
Quibi.

Anthony Scaramucci: (18:04)
Quibi. I thought it was a fascinating idea. Some of the smartest people I know were involved in it and it failed. And it was a billion and a half dollar loss and it failed pretty quickly. And so my question to you is, did it fail because of the idea? Did it fail because of COVID-19? Is it an idea ahead of its time? Or is it the DeLorean where it was just never going to catch fire?

Strauss Zelnick: (18:37)
Well, it's hard to say. I mean, the first thing is it's so tempting to be critical of someone else's failures and to claim here I am, I'm so smart and I knew it all along. Innovation is really hard and I have enormous respect for what Jeffrey tried to do, what Meg tried to do. And they... In record time, they were able to aggregate extraordinary talent and they took a chance. And for an array of reasons, it didn't work out. And again, it's tempting to be critical of those reasons. I think ultimately, launching any kind of consumer proposition in a big way is really hard. And I do think launching something that didn't exist before into the pandemic is very different than what we faced.

Strauss Zelnick: (19:30)
And we already had a business. We had a very successful business. We already had numerous successful titles. NBA, Borderlands, Grand Theft Auto, Red Dead Redemption, the list goes on. And so, we had an ongoing business generating consumer engagement. We could build that business. And of course, we were benefited by sheltering in place. But I can't say to you that had we tried to launch our business from scratch with loads of investment in mid-March, that it would have gone well. Seems to me it would have been very, very difficult. So I admire what they tried to do greatly. It's terribly unfortunate that it didn't work out and I think it may be that they were ahead of their time. And that remains to be seen. Now, look, our approach to innovation tends to be smaller scale. I'm very conservative. I hate losing money, so we tend not to make big splashy moves.

Strauss Zelnick: (20:28)
So we tend to make smaller incremental moves. And the good news is that making smaller, incremental moves, it means that you're unlikely to have significant losses. And I'm very grateful for the fact that in my career I haven't had any at all. I've always created a return for shareholders, I've never failed to repay debt. But equally you may lose the opportunity to have that extraordinary, massive groundbreaking win. And to each person, to each entrepreneur, their own style and approach.

Anthony Scaramucci: (20:59)
Now we're talking.

Strauss Zelnick: (21:00)
I pursue the style and approach that works for me, but boy, took a long time to create the success that we've had with Take-Two and the success that we've had with ZMC. As I like to say, the only overnight successes are other people's successes, certainly not mine and onto the next. But is short form entertainment one of the past to the future of entertainment? Unquestionably. Will it be realized in a way that's additive to what already exists on Snapchat, TikTok, YouTube and other platforms? Unquestionably. We have not seen the full expression of short form entertainment, not even close. So it may turn out that what was tried with Quibi will really inform what's tried in the future.

Anthony Scaramucci: (21:46)
Well, I mean, it just to give you such a how little I know. I didn't get the opportunity to invest in Quibi, but I would have invested in it. I thought that that was a brilliant idea. And I have an enormous amount of respect for Meg Whitman. I think she was a classmate of yours, right? Or was she at Harvard Business School with you or-

Strauss Zelnick: (22:02)
Not with me, but I think she did go to Harvard Business School. Jeffrey and I obviously, worked together in the motion picture business sort of at the same company, but we were on the board of the MPA together. And I've always obviously, admired what he's been able to achieve.

Anthony Scaramucci: (22:18)
It's just one of these things. When I was back in college, one of my cousins worked for AT&T and it was 1981 or 82. And he was explaining to me that we were going to be able to play Atari Pong over the phone lines. And he was explaining to me how it was going to work and then AT&T disbanded it. And I remember him saying, well, they disbanded it because it was too costly. They couldn't figure out a way to make it work the way we're making it work today in terms of the innovation. So I do think it's something just slightly ahead of his time. You mentioned ZM-

Strauss Zelnick: (22:52)
By the way, I worked at AT&T. My first desk job was a summer internship at AT&T.

Anthony Scaramucci: (22:57)
Out in New Jersey by, right. Or [inaudible 00:22:59]?

Strauss Zelnick: (22:59)
Across Basking Ridge, New Jersey.

Anthony Scaramucci: (23:01)
Yeah.

Strauss Zelnick: (23:01)
Best corporate cafeteria ever. I think that was in 1979 or 1980.

Anthony Scaramucci: (23:06)
Yeah. So my cousin's name is Michael Saka, not that you would have overlapped with him, but he worked there for many years. And he always said that the breakup of AT&T... And this is something we've had monopolist and anti-monopolist on SALT Talks to talk about these things. Because the breakup of at AT&T actually unleashed a tremendous amount of technological growth. All those patents, as you know, Strauss, from Bell Labs, there were licenses that were able to be doled out. And sometimes what happens is monopoly power suppressed technological innovation because they're making such great economic rent from their existing structure. You don't go from copper wire to fiber optic if you don't need to, so to speak.

Anthony Scaramucci: (23:49)
But what I want to ask you about ZMC, which is a private equity firm that you are also the founder of. You've mentioned it a few times. And you basically take a position, correct me if I'm wrong, that you're looking for the future. The portfolio of companies there is what is the next trend? It's sort of a private equity firm that sees around corners, if you will. So what things should we be watching for in 2021 and beyond, as you manage to grow that portfolio?

Strauss Zelnick: (24:20)
The theme that... We're theme driven. So we don't get books from bankers and say, well, that's interesting and then send in a bid. We pursued 10 to 12 investment themes at the time, then we proactively try to find companies that are operating within that theme. Companies we believe have great futures ahead of them, and then try to invest in those companies or buy those companies. And that's what we've always done. And that's led us to stay away from themes that we thought we'd be challenged in the early part of the 2000s. We didn't buy consumer magazines, we didn't buy newspapers, even though they were... believe it or not, sexy at that time. We didn't buy broadcast radio or broadcast television, even though that was very sexy at the time, of course, multiples have come way down. It's pretty hard to make a great return when you have multiple dilution.

Strauss Zelnick: (25:08)
We did however, invest in online market research before that was a thing and television direct marketing before that was really a thing. And we've invested in businesses that enabled the growth of mobile communications before that became obvious into such businesses. The theme that I am most excited about is the explosion of data which I would express this way, however much data you think consumer and enterprise will need in five years, you're wrong. It'll be more. There was an explosion of data and the consumption storage and transmission of data. And so, we're investing in businesses that enable the consumption, storage and transmission of data first and foremost. So it's hard to do because we're not buying stock and Facebook.

Strauss Zelnick: (26:02)
I don't think our limits would think that that was a very good thing for us to do for them. They can do that without us, if they wish. We're typically buying businesses that are enabling enterprises or software enterprises within that space. There are numerous other areas that we like, but that's the theme that I find most exciting. Or said another way, Anthony, you know those to be true. There're a lot of people who say the most exciting parts of the media business and the entertainment business are behind us. The 50 years between 1930 and 1980, that was really exciting.

Strauss Zelnick: (26:35)
I think actually the next 40 years will be the most exciting time for media and entertainment and that'll live mostly be supercharged by technology. I also think there are people who say we have the internet, we have digital communications, we kind of know what that looks like now. It's all pretty mature. And I think the answer is no, it's just the beginning. I'm on an iPad today, it's great device. But in 10 years, I'll be on something that's way better, way cooler, way lighter, way cheaper. Take a look at this device. This is a super computer in your hand, but in 10 years it won't be this form factor, it won't be this heavy. It'll be a much smarter, much better, it'll look and feel different. And that's just two examples that are close at hand. So what we're trying to do with ZMC is think about what does the world look like in 5, 10, 15, 20 years and skate to where the puck is going, not where it is.

Anthony Scaramucci: (27:33)
So for somebody that doesn't understand the transition from say 4G to 5G, people think that that's incrementally 20 to 25% more improvement, but it's way more massive than that. So how would you describe that to a layperson, the move from 4G to 5G?

Strauss Zelnick: (27:55)
The opportunity will simply be that you'll be able to do more with wireless connections than you can do now. So what can we do now with a wireless connection? Well, I don't know. Right now I'm in Westchester County in New York and sometimes I have conference calls when I'm driving from Westchester into Manhattan. And what are the odds that I can make a high quality conference call completely uninterrupted from Westchester and Manhattan? The odds are about zero. Well, 5G will make those odds much higher. Just as an example. Once you have full 5G coverage. Or if I wanted to do right now, I'm on a Wi-Fi connection and I get pretty good connections, pretty fast and pretty [inaudible 00:28:36]. But if my Wi-Fi went down and I had to switch to my cellular connection, it wouldn't be as good.

Strauss Zelnick: (28:41)
In fact, it's possible that my video would be really choppy, while with 5G it wouldn't be. So just think about it as more data, quicker. And all of the uses that you find are currently constrained by existing cell distribution, are less likely to be constrained with 5G. It's as simple as that. It's otherwise not a game changer, but the biggest game changer is if you want to have super high quality wireless connections right now, you basically need fiber. And then you need a great short connection wirelessly. 5G can offer you much higher quality for longer distances, but I don't actually think this is how it'll be used. I still believe that the bulk of the high quality transmission will be fiber for very long distances. It's not like it would make sense to do that wireless if you don't have to.

Anthony Scaramucci: (29:32)
So before I turn it over to John Darsie and the ton of audience questions that are coming in. I've got a question about one of your books, being ageless. Basically, you wrote a terrific book. You gave a copy of it to my wife and I. And the title of it, it's called Becoming Ageless. Bill Maher, the American comedian, Strauss, he's a friend of mine, he's my nutritionist. And he basically told me three words that I should abide by as my nutritionist. And I'll tell you what he said, "Don't eat bread." That's his whole nutritional mantra. But you wrote a great book, you're living that book. You look about 15 to 25 years younger than you actually are. So I won't give up your age, but tell me something that we can share with our SALT delegates that they should be doing for their health and their wellbeing.

Strauss Zelnick: (30:32)
Well, first of all, I'm not shy about my age. I'm 63 and older than you, Anthony. And I'm not wiser, just older. And in terms of what I recommend-

Anthony Scaramucci: (30:43)
Cut Strauss's video, Darsie. You are my friend now. Can you cut his video, please?

Strauss Zelnick: (30:49)
So the first is, what is it that you want? So if you're happy with your current lifestyle, then the answer is don't do anything differently. But if you want to live as healthier life as you can, you can affect your health span. It's actually somewhat hard to do affect your lifespan. Even if you do everything right, you may not really affect your lifespan depending on your genetics or just serendipity. Terrible things can happen or good things can happen. But first and foremost, if you want to have a good health span and a good lifespan, there are a couple of things you don't do. Like, don't smoke. That is the factor most highly correlated with a short, bad life, is smoking. So don't smoke. Second factor most highly correlated with a shorter worst life is alcohol abuse, believe it or not.

Strauss Zelnick: (31:37)
So those two things, if you stop smoking, if you smoke, we can stop there. That's such a game changer. If you drink too much alcohol and you just drink less, that's a meaningful game changer. Now, beyond that, what steps can you take? And you talked about diet. We all kind of know what we should and shouldn't eat. I don't agree that don't eat bread is a whole answer. Because if you're saying, good, I'll stop eating bread, but I'm going to have 14 diet cokes a day. That's not going to go so well for you. So we know what's bad for us, we know what's good for us. And whole foods, staying away from processed foods, not drinking soda, not drinking fruit juice, which is just sugar and eating plenty of fresh fruits and vegetables, lean protein and limiting your processed carbs. That's probably a pretty good diet.

Strauss Zelnick: (32:25)
The second piece of advice is go to the doctor and do what the doctor says. Whenever people say, "Oh, I never go to the doctor. I don't need to. It's totally fine." You know what? It's not totally fine. You're making a terrible decision because there are a few illnesses for both men and women that are easily detectable. And if you happen to have them, if they're detected early easily curable, and if they're not detected early, they will kill you. For example, colon cancer. So if you don't go to the doctor and you don't have the appropriate tests, you could get that, not know you have it and it'll kill you. So go to the doctor, do what the doctor says. Another characteristic associated with a long, healthy life is actually taking the medication that is prescribed to you.

Strauss Zelnick: (33:05)
The third is move, some kind of exercise. I am a fanatic. You don't need to be a fanatic, but you should try to move five days a week. If all you do is walk for half an hour, a day, five days a week. That's great exercise. It's a great start. You want to do more than that, you're going to more than that. And finally, have some kind of spiritual life. Some kind of connection with other people, some kind of connection to the world outside of you. And whether that takes the form of religious practice, or meditation practice, or a yoga practice, or perhaps taking a walk quietly, or reading, or sitting quietly, but have some kind of spiritual life preferably that connects you to like minded people. Those things taken as a whole, I think will lead you to a healthier and better, longer life.

Strauss Zelnick: (33:53)
And when I say becoming ageless, by the way, no, I don't think I look 20 or 25 years younger, although thank you, Anthony. But I feel like I'm 25 years old. I try to operate as though I'm 25 years old. And I feel just great. And if I can continue to feel this way, it allows me to be my best self in every part of my life. My relationships, my work, my fitness, my leisure and it allows me to hold up well under stress too. So that's what I advocate [crosstalk 00:34:27], but for some people, honestly, they're just happy the way it is and God bless them. That's fine.

Anthony Scaramucci: (34:31)
I'm just letting you know the Botox stash that I have in my garage, none for you, Strauss. But I'm going to turn it over to John Darsie. And by the way, I really do want to recommend this book because it is a game changer and I will attribute a lot of my exercise regime to what I read in Becoming Ageless, just in terms of making it a priority like you would a meal, or savings, or investing, or spending time with family, you got to make yourself a priority during the day as it relates to exercise. So with that, let's turn it over to John Darsie. Who's got a ton of audience questions for you, Strauss.

John Darsie: (35:11)
The Botox is a very... it's a very important part of Anthony's mental health routine. He's very vain, and when he looks at the camera-

Anthony Scaramucci: (35:19)
It's just like Darsie reads Playboy for the articles, Strauss. I use Botox for my migraines. I just want to make sure everybody knows that. Okay? Go ahead, Darsie. Go ahead.

John Darsie: (35:30)
So we have a question about virtual reality and augmented reality. You talked about you're on an iPad, you have an iPhone, it's a super computer, but those, if you look 30 years into the future, our grandkids or our kids might look at us and say, wow, you used to use an iPhone? That seems very archaic way to access the internet or game or to interact with people. What types of forms do you think gaming and entertainment might take over that type of time period? Let's say 20 to 30 years. Are we going to see true augmented reality? We've seen some startups like Magic Leap that have gotten a lot of hype, but haven't really delivered. At least on a consumer level, we've seen some virtual reality like Oculus and others having quite delivered on their initial promise, but... And then you have people like Elon Musk who think we're going to implant chips in our brain. We're going to basically live experiences through our mind. What do you expect that form factor to look like?

Strauss Zelnick: (36:26)
So it's really hard to predict 30 years in the future. I mean, I think the only thing that is predictable is it will be very, very different than what we have today. And I wouldn't be at all surprised if we have certain devices implanted in ourselves. Virtual reality, what that conjures up today now is a vision and hearing occluding headset, where you embark in a world that is created for you and you move around that world. And no, I don't think that's the future of entertainment at all. First of all, it's solitary. We don't like to consume entertainment of solitary way. Second, it requires dedicated space. Third, it's really expensive. Fourth, it makes you not nauseated. And that's a real problem because nausea and entertainment, they don't really go together so well. So I don't really believe in the current expression of virtual reality is the future of entertainment, but I wouldn't rely on anything for 30 years from now.

Strauss Zelnick: (37:19)
Augmented reality means adding characters to the setting that you're currently in. Pokemon Go is a great example of that, it can be a lot of fun. Properly executed, I think that could be a great opportunity, but I don't think it will redefine the business any more than 3D redefine motion pictures. Or even frankly, any more than color redefined motion pictures. It was there, it was a tool. Great. It didn't give any company in particular leg up. So the end of the day, we like to tell stories and told stories and linear entertainment will always do that and will always exist in one form or another. And we like to compete and play games and interactive entertainment will exist for that purpose as well. And there'll be some merging of the two.

Strauss Zelnick: (38:05)
And I have zero doubt that the form factor for the devices on which we consume these properties will change and become lighter, quicker, cheaper, more convenient. But at the end of the day, storytelling has been around for a really, really long time. And playing games has been around for a really, really long time. And I suspect that won't really change. And music has been around for a really long time. Those core parts of the entertainment business won't change. Their expression will change greatly and our job as an enterprise is in fact to be at the forefront of that change and to try to innovate. And that's what we're trying to do with Take-Two and more broadly with ZMC. We'll see how we do.

John Darsie: (38:47)
So remote work is one of these mega trends that's been accelerated by the pandemic. You've seen stocks like Zoom, go to the moon and others who are enabling remote work. You're seeing big companies, Goldman Sachs recently indicated they're going to move some of their asset management business down from New York to Florida because of more favorable business climate down there. How do you think the gamification of work might play out in an environment where you're seeing more people work remotely? Obviously there's pluses and minuses to having people work in a decentralized setting. And one of the minuses is lack of interpersonal interaction and team building setting that you get in person. So how can we use things like virtual communities or video games or gamification to take some of the interpersonal interaction that you would normally get in an in-person setting and transfer it to a remote work environment?

Strauss Zelnick: (39:43)
Well, I mean, people are doing conference calls inside Red Dead online and inside Grand Theft Auto online, for example. That'd be I think, an example of what you're talking about, but I actually don't think the world is going to shift to total remote working. I think the companies that are saying, oh, we don't care if people work from home endlessly, that's fine. Or maybe we can pay them less if they do or we'll cut our real estate footprint. I don't think that is going to make any sense at all. I think you lose the ability for serendipitous interactions and team building. And the fact that you're able to do something when pressed to do it does not mean it's a great idea to do it all the time. What I do think will permanently change is first a willingness to understand that at times remote work can make sense.

Strauss Zelnick: (40:27)
Secondly, I think we are all going to be less likely to travel. I think we're going to say what, that trip that I thought I had to make, I can probably do those meetings via Zoom more frequently than before, but I don't think it will get rid of business travel at all. So for example, I think you'll still have a SALT Conference in Las Vegas when you can because I mean, it's to get people together and that's how you build connection and community. And I'll be there if I'm invited because I think it'll be fun. But I don't think you need to do SALT Talks in person five days a week. I think you can do this very effectively on Zoom.

Strauss Zelnick: (41:04)
So I think you'll see a move ahead where both will be true. We will be able to work remotely when necessary. We will primarily still work together in a physical setting because that allows for all kinds of unexpected and unscheduled interactions, it can yield great things. We'll still travel when necessary, but we may do so more selectively. And I think that is an acceleration of a pre-existing trend, but to believe it goes all the way to the other side, we need to ask ourselves, how do we gamify that thing that went to the other side? I'm going to beg the question and say, we're not going all the way to the other side in the first place.

John Darsie: (41:41)
So I'll leave you with one final question, it's something we like to ask CEOs. And you've led a lot of very successful companies, you invest in successful companies and you've obviously, catapulted your company during this work from home period as a result of the pandemic. What leadership qualities do you think are important when an organization is tested with a curve ball, like we saw come out of nowhere with a global pandemic that causes everyone to be basically quarantined in their homes for the better part of a year?

Strauss Zelnick: (42:10)
Well, first preparation. My prayer is not a business plan. The reason that Take-Two was so effective in this pandemic is that we have an incredible IT department run by Scott Belmont that had been totally focused at great expense on disaster preparation. And they were ready to do work from home test in early March and then guess what? Everyone had to work from home. We were able to roll out work from home in a week. We had 6,500 people, seven days after starting working effectively from home on enterprise quality computer setups. We had invested in a backbone that allowed us to do that. So it's all... it's tempting to talk about leadership thing, words, but leadership is based in actions and we were prepared and we try to be prepared for any eventuality that can occur. Then once you get into that situation, I think leadership is always being a player coach, being right there with the team, being engaged, being concerned. And the other part of leadership is making decisions that are in service of the common good.

Strauss Zelnick: (43:19)
So I have peers who said, wow, we're a very big strong company, but you know what? This tough time, a lot of companies are firing people. You know what we're going to do? We're going to do a 20% across the board pay cut because we can. We didn't cut any salaries, we didn't furlough any people, we didn't use it as an opportunity to reduce any head count, but we have a compact with our colleagues that we're going to take care of each other. And one of the reasons that we've been disciplined and careful and ultimately successful is so that we can withstand tough times.

Strauss Zelnick: (43:50)
So we didn't see this as an opportunity to take a pound of flesh from our colleagues and we'll come out of this. And as a result of that, I think have even better morale than before and maintain our incredibly low attrition rates, which is coincidence with having a high degree of success. We've seen those companies who said, yeah, we cut our footprint, we cut our costs, we cut our salaries. Well, that's great. When things come back to normal, you tell me how loyal your teams are. So at the end of the day, leadership is about actions not words. The words only matter if they reflect the actions that you take. And finally, I think leadership is about empathy and kindness. Something that forms an enormous part of our mission.

John Darsie: (44:31)
Well, Strauss, that's a great way to end it. Thank you so much for joining us on SALT Talks. Anthony, do you have a final word for Strauss before we let him go?

Anthony Scaramucci: (44:38)
Well, I just want to... well, read out the two books that Strauss is an author of. So the first one, which was literally last one, Becoming Ageless, the one I read. I [inaudible 00:44:49] recommend everybody. And I'm going to be out there, Strauss buying Success, a concise guide to having the life you want as well. So those two great books from Strauss Zelnick. Thank you for joining us. And yes, I see a SALT Talk in your future on a live stage somewhere, Strauss. You're not going to be able to get away from us. And congratulations on all the success that I'm sure that your team's looking forward to the these new gaming console. So I'm sure that they're already taking good advantage of. So all the best [inaudible 00:45:19].

Strauss Zelnick: (45:19)
They are. Thanks so much for having me.

Anthony Scaramucci: (45:20)
Happy holidays [inaudible 00:45:22].

Strauss Zelnick: (45:23)
Great to see you all.

Anthony Scaramucci: (45:23)
[inaudible 00:45:23] soon.

Strauss Zelnick: (45:23)
Thanks, Anthony. Thanks, John.

John Darsie: (45:24)
And we're very excited too. We were talking before we went live and we were actually joking about it a few weeks ago, but Strauss has agreed to do a workout session under the SALT Talks banner. So he does... he leads workouts for the Take-Two team internally that are religiously attended by I think, several hundred employees at Take-Two. And he has graciously volunteered to embarrass us by leading a workout session that none of us will be able to keep up with. So we're very excited to do that in the coming weeks.

Strauss Zelnick: (45:54)
Thanks again, guys.

Anthony Scaramucci: (45:55)
All right.

John Darsie: (45:56)
Thank you.

Anthony Scaramucci: (45:56)
All the best.

Josh Giegel: Making High-Speed Travel a Reality With Hyperloop | SALT Talks #115

“The mission of the engineer is to let people live the way they want to live without destroying the world around them.”

Josh Giegel is the CTO and Co-Founder of Virgin Hyperloop where he is leading a world-class team of engineers making the hyperloop a reality. Josh founded the company in 2014, when hyperloop was an idea drawn on a whiteboard in a garage. A little over two years later, VH built a full-scale prototype capturing the attention of governments worldwide. Today, Josh is leading the development of paradigm shifting electromagnetic, high power, autonomous technology, bridging the engineering work with unparalleled passenger experience, and working at the highest levels of government to develop a regulatory framework for hyperloop technology.

Growing up in a family of engineers opened Giegel’s eyes to a world of possibility. He learned from his dad early on to tackle any project by simply understanding the problem-solving process. An early role with SpaceX building rockets eventually led to a shift towards more earth-based interests. “We're going to do make life interplanetary, that's awesome as well, but I really started to focus on the responsibility of the engineer here on earth.”

Hyperloop aims to completely revolutionize the way we travel. “What we're trying to do is move people at airline speeds, but here on the ground.” This more environmentally-friendly technology will allow someone to live in NYC and commute daily to Washington DC with the ease of a commuter driving into the city from the suburbs.

LISTEN AND SUBSCRIBE

Spotify | Amazon | Google | Stitcher

SPEAKER

Josh Giegel

Chief Technical Officer & Co-Founder

Virgin Hyperloop

FULL BIO

MODERATOR

Anthony Scaramucci

Founder & Managing Partner

SkyBridge

FULL BIO

EPISODE TRANSCRIPT

John Darsie: (00:07)
Hello everyone, and welcome back to SALT Talks. My name is John Darsie. I'm the managing director of SALT, which is a global thought leadership forum and networking platform at the intersection of finance, technology, and public policy. SALT Talks are a digital interview series that we started during this work-from-home period with leading investors, creators, and thinkers, and our goal during these SALT Talks is the same as our global conference series of SALT Conference, which you may have heard of if you're participating in these webinars, which are conferences that we hold in the US and internationally every year.

John Darsie: (00:40)
What we try to do at those conferences and on these talks is provide a window into the mind of subject matter experts as well as provide a platform for what we think are big ideas that are shaping the future. We're very excited today to feature one of those big ideas, and we're very excited to welcome Josh Giegel to SALT Talks. Josh is the chief technical officer and the co-founder of Virgin Hyperloop, where he's leading a world-class team of engineers making the Hyperloop a reality.

John Darsie: (01:07)
Josh founded the company in 2014 when Hyperloop was an idea drawn on a whiteboard in a garage. A little over two years later, Virgin Hyperloop built a full-scale prototype capturing the attention of governments around the world. Previously at SpaceX, Josh developed the world's first reusable rockets and led the successful testing of six different rocket engines. From the final frontier to horizon right on the ground. Josh shifted his focus to the power of the earth with revolutionary waste heat to power, energy technology, leading research activities at Echogen Power Systems.

John Darsie: (01:44)
Josh is passionate about the power of engineering to create solutions that enable people to live their lives how they want, where they want in a way that is sustainable. This led him to leverage his expertise in high-performance rocket engines with his grasp of clean energy generation to develop the world's first autonomous high performance electric mode of mass transportation. Josh received his MS in mechanical engineering from Stanford University, where he was a graduate engineering fellow. He holds his BSME from Penn State University, where he graduated with honors and was first in his class. I know from talking before we went live, he's a proud Pittsburgh native.

John Darsie: (02:22)
If you have any questions for Josh during today's SALT Talk, you can enter them in the Q&A box at the bottom of your video screen on Zoom, and I'm going to be hosting today's talk. Normally, I would kick it over to Anthony Scaramucci or another guest host, but today you're stuck with me. So Josh, thanks so much for joining us. We'd like to start every talk with the discussion of the guests background and sort of their personal journey, their professional journey. So how did you grow up? How did you get into the career you did starting at SpaceX, moving into renewable energies? Now, what caused you to want to start working on the Hyperloop?

Josh Giegel: (02:54)
Thanks for having me, John. I appreciate the invitation. So yeah. The part that I think it was pretty exciting but also maybe a part of a punchline to a joke is everyone in my family is an engineer. So my mom, dad, sister, sister's husband, my wife, we're all engineers. So that really gave me one of many options as you could possibly imagine, growing up to [crosstalk 00:03:22].

John Darsie: (03:21)
A lot of pressure.

Josh Giegel: (03:23)
A lot of pressure. A lot of pressure. Our vacations would be going to National Laboratories or the Air and Space Museum or the like. But the part that really got me excited about engineering was spending time with my dad, building things, working on cars and the like, and the power of being an engineer, which is I used to think like, how does my dad know all the answers to all of these different things?

Josh Giegel: (03:47)
The answer was he did it. He just knew how to problem-solve. He knew how to go through the processes. To me, it was exciting that as an engineer, I didn't know what I was going to be doing in five or 10 years, but I knew I'd be excited by it, and I could sit, and I could basically predict the future from sort of the imagination space that you have in your head through being able to calculate it, compute it on the computer as you go forward. So then it was a pretty easy pick for me to want to do engineering in school and then went to Penn State for undergrad, which it was exciting time.

Josh Giegel: (04:25)
I mean, I think Penn State does well with sort of people that grow up within the state and really giving them a good kind of technical education. My eyes really got open going to grad school at Stanford about what the power of being an engineer could be, which is to imagine the future you want to live in and then go create it. You started to feel this energy, this vibe, this buzz, and I had got from a former colleague as a before who said, "You should go check out this company called SpaceX." This is when I was about ready to do some qualifications for the PhD and the like, and I went down to SpaceX. This is right before they had their first successful flight in 2008, and there was just an energy. There's just the buzz. It was a small company, interviewed with Elon, and it was kind of that transformational moment. I remember talking to my advisor, and he described what my PhD would look like. I said, "There is nothing I'd rather do less than what you just described."

Josh Giegel: (05:24)
So then ended up going over to, to SpaceX, building rockets, getting the chance to build something brand new and have more responsibility than a 23-year-old should have and successfully did that and then started to realize rockets are great. What we're going to do make life interplanetary, that's like awesome as well. But I really started to focus on the responsibility of the engineer here on earth. Started to go to some new ways to make power, some using carbon dioxide and things like that. Built some really successful things there and then really started to look at this transportation space and think like, wow, A, no one's built anything like Hyperloop before when Elon put out the white paper. B, it's going to be around long after we're gone, it can change. You can reduce emissions. It can make the environment more sustainable. More poorly, the mission of the engineer is to let people live the way they want to live without destroying the world around them.

Josh Giegel: (06:19)
This is big enough and hard enough to be fun. It's of a scale that's going to be around long after I'm gone and we're gone, and that's the part that is just truly exciting about it.

John Darsie: (06:29)
So before we dive deeper into the Hyperloop, I want to talk about SpaceX and space for a minute. You were obviously fascinated by rocketry and exploring space. What do you think the future for the human civilization is in space, and what timeline do you think it's going to be for us to really start launching mass space tourism and colonies within space?

Josh Giegel: (06:50)
Yeah, that's a good one. I think the part that we landed on the moon like 50 years ago, and we have been stuck in like low earth orbit ever since, it's not the technology. I think the technology when pushed can actually do what we want to do. I mean, we probably could have gone to Mars in the '80s if we really put our mind to it. I think the aspect of this becoming privatized though is really exciting. You see what SpaceX has been able to do. You see [inaudible 00:07:18] a dozen small rocket companies now that are popping up. A lot of them are former people I worked with that are starting them. You're seeing this kind of proliferation because people are able, the technology is there, the cost of access is reducing.

Josh Giegel: (07:33)
I think we're just tapping the surface. But I do truly believe it's going to be the private companies that are going to do it. I interned at NASA. I met my wife at NASA that I think the days of kind of this big government piece are over because there's profit to be made, there's money to be made, whether it's mining asteroids or doing something else. I mean, I think the opportunity is going to be private. I would suspect by the end of this decade, so like 2030, you're going to start to see some of the advances. You're going to start to see things move away from chemical rockets, which is really kind of keeping us parked here into some more exotic technologies that I think will take us to mars and to the stars.

John Darsie: (08:16)
Well, between SpaceX, Blue Origin, and Virgin Galactic, you have some well capitalized individuals that are pursuing these goals in space. So hopefully, that'll lead us to a more rapid development than we would if it was a public sector government project. Well, I want to jump into Hyperloop. So your ambitions went from space to, what can I do here on the ground on earth? You started a Hyperloop company. Could you explain for people who are less familiar with Hyperloop first what it is?

Josh Giegel: (08:46)
So what we're trying to do is move people at airline speeds, but here on the ground. So if we just dive that a little bit more, we want to move at the speed of an aircraft. We want to have fully electric propulsion direct to your destination. So unlike a train, you're going direct to where you want to go. You're not stopping at every place along the way. Then doing that again in a on-demand sense. So you're not waiting for a timetable. You're showing up when you want to show up. So it's sort of taking the advantages of air, which is speed, the advantages of rail, which is capacity, the advantages of like ride sharing, which is this on demand. It's trying to put them all together. So what we do is we create a tube and that too, we take out most of the air, not all of the air, like flying at 50 kilometers of altitude or 200,000 feet of altitude.

Josh Giegel: (09:36)
So you can go those speeds with really little drag, and so very low energy consumption. So you can go these feeds. Then we use electromagnetic propulsion and levitation that gives us contact lists, high speed, basically the ability to move it a those speeds without touching anything on the sides of the track, all things that we've developed and invented here at Virgin Hyperloop over the last really two to three years as we've progressed the technology. Then the goal really is to let people move at these speeds for a cost that's not any different than a bus ticket or a train ticket, but you get this much wilder, much more inventive space where you can live in one city. You can work in another. You could live in New York. You could work in Washington DC, and you could take this in a daily type of setting. But to do that, we have to do it at scale. We have to do that at speed, and then more importantly, we have to do it safely.

John Darsie: (10:32)
So you talked about how you started this company back when the concept of a Hyperloop was just something on a whiteboard. Elon Musk basically sketched it out and said, "We need to build this. I'm going to make this open source. I want to allow anyone to work on this technology." From when you started the company to today, what are some challenges that you've faced that you either expected and some that you might have not expected as you've been on this journey, and what do you think the opportunity is in terms of how widely we can adopt Hyperloop going forward?

Josh Giegel: (11:01)
Yeah. Every now and then, I think back in those garage days, and the garage days were filled with technology development, right, which is like, "Oh, we're going to do this. It's going to look like this. This is how we're going to achieve that." The white paper talked about a particular way that you could make a Hyperloop. Unfortunately, that way is not as energy efficient, economical as it needs to be. So we had to develop a brand new way of operating them. But I think the biggest challenges were it's one thing to build a technology. It's something completely different to build a company, something completely different to build a team, something completely different to build an industry.

Josh Giegel: (11:39)
We're trying to do all of those in addition to building a technology. That piece I think in a way has actually made the fact that the technology has worked, and we've done all that more rewarding because you had to do all of these things as we've gone through. But at the same time, it's not the first thing that comes to mind as an engineer when you're thinking about a new technology.

Josh Giegel: (12:04)
Those days in the garage, really, I think were some of the best days of my life, some of the most exciting days of my life, where you have infinite possibilities. You're unconstrained in terms of vision. Sometimes you could be paralyzed without constraints. But that view of in its raw form like, what is the future that we want, and how can technology get us there? That was what I signed up for. Then the part that's been actually fun is... So the thing that sets sort of the research scientists or the physicists from the engineers is the engineers make things practical. I want to build things. I love building things. That's ultimately what's setting us apart from some of the other people in the space and ultimately from just this idea is that without actually building it, without actually getting in it, without actually showing the technology works, no one's going to believe you.

Josh Giegel: (13:01)
Over the last six years, we've had plenty and plenty of [inaudible 00:13:03]. Each time, each new milestone is just like another kind of arrow in the quiver of like, "Hey, we know how to build technology. We know how to do it." This is not decades away. This is going to happen in the next decade.

John Darsie: (13:18)
So when we talk about the future of Hyperloop and how it can transform public transit around the world, is this something where we're going to be traveling from San Francisco to Los Angeles or from New York to Philadelphia, or is this something that can be built such that we can travel between continents, and it's going to be the primary source of on-ground public transportation?

Josh Giegel: (13:40)
My goal is that this turns into the primary source of ground transportation. I'll be even more specific. I hope my little two-year-old comes to me in 20 years and says, "Dad, how did you get around before Hyperloop?" That's the level of ambition that I'm trying to-

John Darsie: (13:57)
What? You rode an Amtrak train that averages 30 miles an hour and takes longer than it would take to drive to go between major cities?

Josh Giegel: (14:04)
Yeah. You're going to pay like $300 to ride that train or something like that. Yeah. That's not the future I want for him nor myself. So what we view is, if you look kind of throughout history, you could say every time we've connected with each other faster, there's been a massive economic growth and massive GDP growth. You could say Roman roads. You can say Spanish ships. You can say the transport at the road, the airplane, even the internet, all forms of connectivity. But we haven't seen the same level of innovation, same level of developments on the mass transportation space, as we've seen with some of these other areas. So we want to keep growing, want be more connected, but yet our infrastructure, the speed of our infrastructure is actually restraining us.

John Darsie: (14:52)
We've gone backwards actually. We had supersonic airplanes, and for a variety of reasons, those were shelves, and we've actually gone backwards, especially in the United States.

Josh Giegel: (15:01)
Yeah. The transatlantic time by flights has actually gone down because the energy consumption needs to be lower. So they're slowing the speeds down. So when you look at what this could be, if you sort of taking people off of the road and started connecting, we'll call it just the US for right now, imagine you had a couple of basically Hyperloop highway systems that maybe two or three routes that went East to West, and you had a couple that went North to South sort of crisscrossing the grid, you could have same day connectivity for goods, for people and then do it in a way that's actually environmentally sustainable.

Josh Giegel: (15:39)
So you could take all of the pollution that comes from transit of air of road of that. You can move it to electric, which could be powered by renewables, and you could do that in a way that's actually satisfying the needs. Right now, it takes four or five days to go from Los Angeles to Chicago on a train. So you can't really ship too many things in that case. But if you look at the package you buy from Amazon, you want same day. But what if I could do same day from a central place and just make it up Nebraska, four corners of the US, and I can do that at the speed of flight at the energy efficiency. You can combine that with autonomous last mile solutions. You have a huge amount of opportunity. Then you could start to say in the US it's big enough that we could do that. Our cities are farther apart. You want that speed. You want that benefit. In Europe and India and China, all of these places are doing it.

Josh Giegel: (16:31)
You can see the massive potential because The Silk Road in China being invested something on the order of about $100 billion right now to increase the average speed on that route from about 30 miles an hour to about 60 miles an hour. We're talking 10 X that. They're willing to put that kind of money in for that type of connectivity. So I do think you can, again, let people live the way they want to live but not destroy the environment. You can get them the speeds that on demand without having a massive energy [inaudible 00:17:07].

John Darsie: (17:07)
So what type of speeds are we talking here at the upper end of what you think we can achieve?

Josh Giegel: (17:12)
So we could go 1,000, 2,000 miles an hour in theory. You don't want to do that in practice because the tube would need to be too straight. So in reality, between big runs between, say Denver and Chicago or something like that, your top speed would be something on the order about 500 to 600 miles an hour.

John Darsie: (17:32)
Earlier this month, you were the first ever human to travel in a Hyperloop. So like you said, in theory, and in practice, this is a little bit different because in theory, it would demand perfection of the construction, every element of the project. What did it feel like to be in the Hyperloop? Do you think it's something that everyone is going to feel comfortable doing?

Josh Giegel: (17:51)
So I do think it'll be something that everybody feels comfortable in. One of the reasons I wanted to be the first passenger in it is I subscribe to a leadership philosophy of this kind of the adage of the Roman architect, right? The Roman architect, when you took the scaffolding out, how to stand under the arch to measure his worth as an architect. For me, if it wasn't safe enough for me, it wasn't going to be safe enough for everybody. Safe enough for me is I've got a wife and a kid who, by all accounts still enjoy my presence and wanted me... As much as they wanted me to get in, they wanted me to get out even more.

Josh Giegel: (18:30)
So the goal of what we were trying to do is also show that this is not for astronauts. This is not for risk-takers or adventure-seekers or whatever you want to do. This is for normal everyday people. So typically, if you're in an environment like in that tube, which is low pressure, you're in a space suit in case something goes wrong. But Sara, my co-passenger and I, Sara is our director of passenger experience, we were just in normal clothes because we designed the system to be safe enough to deal with whatever could go wrong and do that in a way that allowed us to just be in normal everyday clothing.

Josh Giegel: (19:06)
So that was a huge piece for us is that we wanted to show that we can build great technology. We can build great products, but we have to build safe products. The goal here was to show that like, "Hey, this is safe enough for two people to get in. I'm an engineer. Sara's not." She didn't need to know all of the things that could go wrong or that we made to make the system safe because she's trusted in the process, and that's the same thing we have to do to get something eventually certified.

John Darsie: (19:35)
So what did it feel like? You went what, a hundred miles an hour? Did it feel like you were on a rollercoaster? Did it feel like you were in a very low stress type of environment? What was the sensation when you were in the tube?

Josh Giegel: (19:47)
Aside from I would describe myself not as excited but giddy. So I was giddy getting into. Sarah and I were both giddy. Sensation-wise, it was kind of overwhelming to have the history of building the company, getting to a spot where we were sitting in something that used to be an idea. That was profound before you even went down the track. But once you're sitting in, you felt it was a little bit harder than our... It was faster than our normal acceleration would have been. So you feel a little bit of force back in your seat, like you would on an aircraft taking off. But once the Maglev is on, you're not being jostled about. You're not being shaken in the same way like you feel on a rail. It's almost floating in a pool of water or something like that.

Josh Giegel: (20:33)
I mean, I think the only bummer was that it was only about 400 yards lon. So it was about a 22nd test. It was kind of like, can we go again, guys? Can we go again?

John Darsie: (20:45)
As we get into winter here, I'm yearning a Hyperloop that can take me from New York to where you are in California for a little better weather. So hopefully, you can get speeding up on your development. But you talked about the fact that you wanted to be the first one to step into the tube. It's the same thing, Richard Branson, who we know well has spoken at our SALT Conference several times, he wants to be the first one with Virgin Galactic. He's going to be the first one to go into space as part of their space tourism.

John Darsie: (21:11)
So it's certainly a noble stance to take in terms of safety, and it's one of those things where... As soon as Tesla has an accident with one of its self-driving cars, it's splashed all over the newspaper, but they don't write about all the different accidents and the dangers that exist inherently with our current infrastructure, whether it be cars or their current technology behind trains. So hopefully, this becomes a zero-risk proposition, which I think it has a much better chance of doing than traditional forms of transportation.

Josh Giegel: (21:41)
Yeah. Certainly, we don't have people that can run across our street chasing a ball. We don't have weather. We're autonomous. But we're also actually an easier form of autonomous, right? Because we're in a confined environment, and I couldn't agree with you more. I mean, progress requires mistakes, and we have grown rightfully so very risk-averse to those types of mistakes, essentially when people can get injured or worse. So we have this ability to learn how to do these things faster in this kind of confined environment, which is actually a lot easier than the autonomous car companies have at these days.

John Darsie: (22:18)
So what's it like raising capital for a company that has such a moonshot type of mission? We've talked about some of the space travel companies. They're obviously well capitalized by their founders. But when you're raising capital for a business that's financial strength is going to be long down the road, soometimes it can be a little bit challenging, and you have to get people to buy into that story. What's been the reaction from the Genesis of your Hyperloop company to today and how investors reacted to the recent developments that have taken place with your first test ride in the tube?

Josh Giegel: (22:55)
So it's been quite a journey with that. I mean, I've been called a lot of things, and I've been caught a lot of things in those type of investor meetings. I'll keep most of them to myself. But at the beginning, we really had kind of these, as you said, moonshot believers like, "Hey, this could be a truly transformative technology." We raised over $400 million today. That really funded kind of the first a hundred million or so. But we all knew that this is not a software company. We're not building apps and things like that. This is a company building hardware, and that requires a lot of capital.

Josh Giegel: (23:29)
So we moved from some of those moonshot investors, some of those big guys, which huge risk-takers, but smaller checkbooks, and started moving into more of the strategic partners side of the fence. So the strategic partner where people who are looking to diversify some of their business interests or diversify some of their manufacturing capabilities. So started looking at a different type of investor. The biggest one that we've had to date is a group called DP World, which is Dubai Ports, and they wanted to move up. They typically move shipping containers. They own about 75 ports around the world. But they wanted to move up into logistics chain.

Josh Giegel: (24:07)
The chairman Sultan bin Sulayem, who's our chairman as well, he saw the opportunity that like, "Hey, this is going to transform the way goods can move." I want to get in on that earlier. I want to use some of the automation technology, the magnetic levitation technology and some of these other areas that can do that, certifying these strategic partners. We've had ups and downs on the fundraising piece, and the part that's been challenging has been they want to see, does the technology work? Can it be made safe? Do you have a regulatory pathway? Do you have a customer?

Josh Giegel: (24:41)
So about three years ago, we didn't have very many of those things. We had the path, the technology, but did not working yet. In the last three, we've shown that the technology works. Here in the US, we've done a lot of work with the Department of Transportation over the last two years. About four months ago, they issued like, this is how a Hyperloop would be regulated. This is the agency. So that was great, kind of clarified that. The third is we made it safe with a test that we did two weeks ago. The last piece is finding that customer, and the part that's been really exciting is since that test, people are saying like, "Oh, I thought that was 10, 20 years away that you would be able to get into a vehicle."

Josh Giegel: (25:23)
Now, I don't want to say my phone's been ringing off the hook, but the excitement from regulators, the excitement from people that are like, "Hey, I can use this for my project that's happening in the next five years, in the next 10 years, not a project in 2035 or 2040. This is something I should look at now." So I think we're just starting to scratch the surface of the aftermath of that test, really incentivizing, accelerating the idea that we can change the way that people are moving today and in the next decade, as opposed to 15 or 20 years from now.

John Darsie: (25:54)
So California is an example. They had a high-speed rail project that's now sort of been scrapped or at least postponed for the time being, because the thought is they're going to spend billions of dollars, and the technology potentially would be obsolete by the time the project is done. How close are we to whether it's California or Dubai or China or other places? What has been the reaction from governments? You talked about how it's been very positive since you did the test run. How close are we to getting to the point where governments, whether it's in the US or internationally are to actually appropriating funds to diligently build out a Hyperloop infrastructure?

Josh Giegel: (26:31)
So in the US, we're targeting passenger certification of our commercial system. We did a two-person test that's growing, pods getting bigger to about 28-person pod. We're targeting that certification around 2025. But the big key that came from the announcement four months ago from the department of transportation is that by saying that we're officially a mode of transportation that's subject to regulation, but also subject to public funding and the like is a huge kind of leap for us. So now we have access to things like RRIF loans and TIFIA loans to develop projects.

Josh Giegel: (27:08)
But you also look at where some of the incentives lie. So in the US, the Department of Defense basically funds technology development, right? Department of Energy funds technology development slightly differently. But the Department of Transportation really doesn't. But for every dollar spent on better forms of connectivity, you get $3 or $4 worth of GDP growth that comes out of it. But I think that view of high-speed rail is accurate, right?

Josh Giegel: (27:36)
We're potentially spending billions of dollars on something that goes slower than a plane, costs more than a plane, and is a technology that's derived from stuff that's a hundred years old. That's what we're trying to sell something different is like, instead of doing that, you can build a 21st century solution to 21st century problem. With that, I think you're starting to see the government's move. You're starting to see some of those applicability get there, and now we're laying out those steps to certifications. So really, that first person that's going the same way at the very beginning of the company, investors, those moonshot investors looked across the table, and they said, "This is a great idea, but I'm believing in you and the team that you're going to build to actually execute on it."

Josh Giegel: (28:19)
I think we're moving away from it being a moonshot idea to something that's actually... It's about execution. That I think is actually fairly exciting and actually part of the purpose of doing the test that we did two weeks ago.

John Darsie: (28:35)
Yeah. I mean, a lot of people have just learned about something like SpaceX in the last several years because the rockets have been taking people to the space station, and it's gotten more public attention. But as you talked about, that effort goes all the way back to 2008, and it feels like the Hyperloop project is on a similar type of trajectory.

Josh Giegel: (28:52)
Yeah. Couldn't agree more.

John Darsie: (28:53)
So you talked about your two-year-old son. I have a two-year-old. I have a couple more as well in that similar age category. Let's say 30 years down the road, you want to build this for our children. So that, like you said, in the future, they look back at regular cars and these slow trains, and they say, "Dad, how the hell did you ever ride in that?" In 30 years, when this is fully mature, just create a vision or an image for our audience about what does that going to look like? Is it going to be, I have my smart, my smartphone, and there's an app, there's a version of Hyperloop app that acts like Uber, and I say, "You know what, bring me a car. I want to go to Chicago," and then two hours later on-demand I'm delivered onto a street corner in Chicago? When it's fully mature, what is it going to look like?

Josh Giegel: (29:36)
I think that an ethos that I've been really going for and really trying to understand is like my personal mission statement is I will change the world to the technology I build. But the vision for this company is really to be the fastest mode of transportation, not from when you leave your door but when you think about leaving your door, when you think about where you want to go to your ultimate final destination. So I think in 30 years, you're going to have something that is going to kind of look something like this. I don't think there'll be smartphones anymore. I think there'll be something implanted somewhere deep seated into your brainstem somewhere. You'll have this notion of, "I want to go." Let's just say, I'm living in New York. "I want to go to DC."

Josh Giegel: (30:20)
So you're going to go to DC, and then you're going to get basically this information of where you need to go. It's going to be seamless. It's going to be basically you step outside of your house. There'll be something, your last mile solution, whether that's an autonomous vehicle, whether it's a scooter or something like that that takes you to the Hyperloop station. The whole time it's basically telling you when you're walking in the station, turn left, turn right. Here's your pod.

Josh Giegel: (30:47)
You get on your pod, you sit down, you can pull out whatever entertainment work, whatever it might be. It's taking you again directly to this destination. You're getting out. You have that final vehicle or your last mile at the destination side waiting for you because it knew and tracked you through the whole journey. There's no key because that's tied into basically your personal identity as you go through, securely obviously. When it comes to actual physical security, I think you're starting to see less intrusive, less bulky types of security measures. You're not going to be taking bags out and things like that. There'll be ways for that to be seamless as you walk through and really this idea that Washington is no longer a city that... It's not 200, 300 miles away. It's four hours away.

Josh Giegel: (31:36)
The thought is Washington becomes a suburb of New York, and really anywhere becomes accessible as a suburb of where you're at. So this thing you talked about coming to Los Angeles for the weather, growing up in Pittsburgh, there were two things that you'd need to do if you want to do activity. What's the activity, and what's the weather going to be. Here in Los Angeles, it's, what's the activity? Weather is always the same. When you're going somewhere, you always think like, "How do I get there?" That's what I think will actually no longer be a piece. I don't think, how do I get there when I go downstairs? Right? That type of thought process is going to be now extended to hundreds of miles in further destinations than we ever thought possible before.

John Darsie: (32:20)
It's a COVID friendly way to travel where you're not having to potentially intermingle with quite as many people. I want to talk about the pandemic and the impact it's had both on your business and your vision for what Hyperloop can do. There's a lot of data out there, recent stories about how many people have left San Francisco and New York City and other big cities around the country and moved to more remote areas. Remote work is becoming more popular. Secondary cities are expected to get a boost from this. Steve Case is someone who's been at our conferences and been on SALT Talk and hit one of his big theses is the rise of the rest. You're going to see these secondary US cities and areas around the country see a boom in entrepreneurship.

John Darsie: (33:00)
So you talked about how improving the speed of physical infrastructure, as well as the speed of internet infrastructure helps create economic growth in different areas. What do you expect to be first the impact of the pandemic on your business and the growth of Hyperloop in general? Two, what do you think the impacts of a more proliferation of Hyperloop technology, bringing people more quickly to different areas of the country, what do you think that has in terms of its impact on the economy and the future of work?

Josh Giegel: (33:34)
So it's certainly been an interesting time, and we build hardware. We are a company that's kind of company all working in a spot. We didn't have anybody really working remotely before the pandemic hit. It's certainly been an adjustment to my leadership style. I really liked being in there. I like building things. I like being out in the shop seeing what's going on. So it's been a challenge to do in this remote setting. So we've changed the way that we've worked some things. We have our test facility in Nevada. It's been getting okay, but there's going to be a... It's okay in kind of the short-term sense. If this lasts for another year, we're really going to have to start considering how do we adjust kind of long-term because our goal is to get back to each other.

Josh Giegel: (34:20)
At the end of the day, what we're doing, we might be engineers, but it's a creative endeavor. Instead of paint, our canvas is technology, and our paintbrush is science and math and this idea of how we actually work, a musician works really well with other musicians. With all the conversations being forced, it becomes a bit challenging. So we're trying some new ways. We're getting smaller groups together outside of some of our facilities to do that. Obviously, the latest surge is probably going to put that on hold again. But I think it's going to continue to be challenging for companies like ours building hardware, as opposed to doing software, to keep it together.

Josh Giegel: (35:05)
It is becoming interesting, right? Especially, I've got a big software team doing controls and the like, and now they can get pulled from anywhere to work anywhere, and they can move to these rural areas, lower cost of living's, and they can get to work on pretty much any place in the world that they'd want. So maybe we start looking at what we can do in a competitive space from the software team versus some of the hardware team that needs to be there to build things. That's a challenge for us as a business. But then long term, the effects of the pandemic, the one thing I always heard is like, "Well, travel is never going to be the same afterwards."

Josh Giegel: (35:43)
But they said that when the dot com-bubble burst, when 9/11 happened, when the financial crash in 2008 happened, and it was at its highest levels before this. It's going to come back. There's a growing middle-class and a large parts of the world that want to experience the world, want to see the world. I think the biggest thing about a Hyperloop is that when you connect these places, for example, in Missouri. You have Kansas City. You have St. Louis. They're about three and a half hours apart right now. You can connect those in 30 minutes. Now, all of a sudden, you have basically a seven or eight million population center in the Midwest connected fast, and you can get across Uptown New York.

Josh Giegel: (36:26)
So you could create the dynamic that exists on the population centers on the East and West Coast. You can click that in Heartland. Then you could more importantly... There's lots of things I like about Los Angeles, but there's lots of things I love about Colorado too. That ability to have this kind of quick on demand type of setup back and forth I think is going to allow people to work in some of these more remote settings, and maybe when they have to come into the office two or three days a week, not five days anymore, they're going to be able to do that from a more disparate or more distant place, and I think that's only going to be enabled if the transportation mode is fast, and it's economical, and that's what we're trying to do.

John Darsie: (37:05)
Right. So we have a question from a member of our audience about the ability to use existing infrastructure. So existing rail lines, existing highway routes. Is that going to be something that we can do to accelerate the build-out of mass infrastructure for Hyperloop, or is it going to be a heavier lift where we're having to dig or build new areas where we run the Hyperloop tubes through?

Josh Giegel: (37:28)
I think in the cities, you're probably going to have to start... The benefits of the cities are getting to the city centers, right, or connecting to the existing infrastructure that might be there. So that's probably going to be where you do some tunneling. Our tunnels are a lot smaller than high-speed rail tunnels with a much higher level of service. But the other thing is really interesting, that route I talked about in Missouri on that highway corridor is basically along the I-70 Highway, right?

Josh Giegel: (37:55)
The majority of what we're doing, because we're inside of a tube, we need a much smaller width, much smaller right of way, and you could actually put it in a highway meeting. The fact that we can bank an aircraft instead of a train means we can go higher speeds on tighter right of ways. We're looking at one between Chicago, Columbus, and Pittsburgh, and you can use existing right of ways as much as possible. So you won't necessarily be able to build on the infrastructure that's there. You do need new infrastructure. But you could build on the existing right of way, which would mean this would actually be quite a bit faster to get in and having to go not in my backyard type of setup.

John Darsie: (38:35)
We have another question from our audience about what it's like working with Elon Musk. So is he as smart as everybody thinks he is? Tesla, after a brief dip in terms of its market value is now trading back at all time highs. He helped lay the groundwork for Hyperloop technology. He's building one of the preeminent space exploration companies in addition to the work that he's doing with Tesla. So what's it like working with him, and is he the genius that we all think he is?

Josh Giegel: (39:03)
I mean, I certainly learned a lot from him and then certainly watching him do his thing. The thing I think is really profound that I've really tried to adopt is I'll say the steadfastness of his vision. So when I first interviewed with him in 2008, he told me in the interview process like, "I want to make a rocket that can land 10 times." Right? That was-

John Darsie: (39:31)
What did you think when he said that? Did you think he was crazy?

Josh Giegel: (39:34)
I like the idea. I just never heard anybody say it. Right?

John Darsie: (39:38)
Right.

Josh Giegel: (39:39)
So 10 years later it did. There is a reason. The way he set out both the vision kind of for Tesla and for there and the way he stuck to it, I think has been remarkable. I think Tesla's probably the most interesting one is that you see the struggle that some of the other big OEMs are having right now, because they have the supply chain that's based on internal combustion engines, they're trying to move it over to electric. That same thing that made them so successful for the last a hundred years is also the same thing that's making it really hard for them to shift the next piece. You look at Tesla. Tesla's been building electric cars for like 15, almost 20 years now. The other car companies have really only been doing it for maybe three, four, five.

Josh Giegel: (40:24)
So the way they've picked a certain technologies to invest in first, like the battery technology, I think, has been really, really exciting. So when you look at what we're trying to do, a Tesla can always pull over if something goes wrong. A Hyperloop can't. So when you start to say, where does the future look? When we want to electrify aircraft, when we want to electrify these things in aircraft, can't pull over. So the systems that we're building for Hyperloop are going to be some of those first type of fully electric, safety critical type of systems.

Josh Giegel: (40:57)
So I think we're starting now. We started that a couple of years ago, and we're going to be at the forefront of that for the next like five or 10, and that's going to give us a huge opportunity. But the thing I really appreciate is the grandness, the boldness of his vision. But there's lots of people that you see that have vision. There's much fee, like maybe two orders of magnitude less that actually are able to execute, and I think that's a testament to his ability to find the right teams that can actually execute that vision, and that's what set him apart.

John Darsie: (41:27)
So let's talk about the future for Virgin Hyperloop. So you had the test track that was a smashing success. Your phone's ringing off the hook with people that are interested in investing. What are the next immediate goals, and what are the next milestones that you're looking to achieve?

Josh Giegel: (41:42)
So we're looking to move from this two-passenger vehicle to this 28-passenger vehicle. Basically, as we do that, that's going to require kind of a scaling of infrastructure, scaling of the safety, the safety features to make sure we can do this. The biggest thing is we showed two weeks ago that we can make a vehicle or a vehicle can work, and now we need to show that a fleet of vehicles must work. That's really kind of the biggest difference that we need to move. So we need more capital to do that. So we'll probably be at some point out in the fundraising space. I think I've been keeping an eye on this backspace. That's been pretty fascinating to me to see how that... Compared to two years ago with the ice coin offerings versus what specs are doing and how companies with long runways, with big ambitions, how they're bridging some of their Valley of death gaps to get to where they need to go.

Josh Giegel: (42:38)
So I think that that's actually fairly interesting. But really right now, it's about finding that person that's going to look across the table and say, "I like the value of this technology. I like what it could bring." Because that last question those investors were asking us was, "Show me a project." I think we've checked off all these other boxes and really, how can we get in the next really year, two years? How can we sign up for that first project? Because once we get operating, once we get all of the learnings that come from that, it's going to transform our analytics team, our machine intelligence team with all the data that we could get.

Josh Giegel: (43:16)
So it's projects. It's the regulatory piece. Then probably soon, it's about how do we scale? We're about a 300-person company now. We're building the airport, the airplane, the air traffic control, and the sky all at the same time with less than about 230 engineers. So I think we [crosstalk 00:43:33]-

John Darsie: (43:33)
Well, they're trying to fly their plane, as they say. So Josh, it's been a pleasure to have you on. Hopefully, we can be helpful from a SALT perspective in terms of connecting you with those people who understand the power of this vision. It's a pleasure to have you on SALT Talks. Maybe next time we have our SALT Conference in Las Vegas, which is our traditional home for our annual conference, we can bring some people over and do a test track ride on the system you guys have built out there [crosstalk 00:44:01].

Josh Giegel: (44:00)
I think we would definitely love to have you guys inside that. It's magical. You can touch, feel, lick whatever you want to do. It's a visceral experience.

John Darsie: (44:10)
All right. Hopefully, the licking can be safe after the pandemic is over, but all the other stuff sounds good. Josh, thanks again for joining us.

Josh Giegel: (44:17)
Thanks, John.

John Darsie: (44:17)
It was a pleasure having you on.

Josh Giegel: (44:19)
Thank you.

Dr. Taghreed Al-Saraj: The Anxious Language Learner | SALT Talks #103

“I always had the love of explaining to make things simpler in order for everybody to understand.”

Dr. Taghreed M. Al-Saraj is currently working as a Post Doctorate fellow at University of California, Berkeley. She is the first Saudi female Post Doctorate in the history of UC Berkeley. Dr. Al-Saraj earned both a Bachelor and a Masters in Teaching English as a Foreign Language (TEFL) from the University of Miami, Florida. She earned her Ph.D. from UCL Institute of Education, University of London.

Learning a language creates its own type of anxiety in students. Something that should be seen as a positive opportunity, it often fills students with dread and shame. In fact, foreign language anxiety is a real condition that exists in the same way as math or public speaking anxiety. Students described the full range of anxiety symptoms experienced when they walked into the foreign language class. “I learned a third language, and that's when I started connecting my experience with what I heard the students were saying.“

Upskillable was created to match a person’s cognitive personality and skills with jobs. Resumes often do not accurately depict a candidate, reducing the likelihood of success in a role. By taking a personality assessment, candidates are offered more effective assessments of their skillsets and even how to improve in certain areas.

LISTEN AND SUBSCRIBE

Spotify | Amazon | Google | Stitcher

SPEAKER

Taghreed Al-Saraj

Chief Executive Officer & Co-Founder

upskillable

FULL BIO

MODERATOR

Anthony Scaramucci

Founder & Managing Partner

SkyBridge

FULL BIO

EPISODE TRANSCRIPT

Rachel Pether: (00:08)
Hi everyone. And welcome back to SALT Talks. My name is Rachel Pether and I'm a senior advisor to SkyBridge Capsule based in Abu Dhabi, as well as being the MC for SALT. A thought leadership forum and networking platform that encompasses business, technology and politics. Now SALT Talks as many of you know, is a series of digital interviews with some of the world's foremost investors, creators and thinkers. And just as we do at our global SALT conference series, we aim to provide our audience a window into the mind of subject matter experts. Today's focus is going to be on language and culture in the Arab world. And I cannot think of anyone better to speak to then Dr. Taghreed Al-Saraj. The first Saudi female post-doctorate in the history of UC Berkeley. Taghreed is the CEO and co-founder of Upskillable, which with no doubt, learn more about later. She is considered one of the most important Saudi researchers focusing on language education in the Arab culture. And she's also the author of The Anxious Language Learner: A Saudi Woman's Story.

Rachel Pether: (01:17)
Taghreed has presented on the topic of foreign language anxiety at international conferences around the world. She's a certified woman leadership coach, international public speaker, and an educational consultant. As always, if you have any questions for Taghreed throughout today's talk, just enter them in the Q and A section on your screen. Taghreed, welcome to SALT Talks.

Dr. Taghreed Al Saraj: (01:40)
Thank you for having me.

Rachel Pether: (01:42)
So firstly, completely by default, I must admit rather than by design, you actually launched a new magazine today as well. So congratulations on that achievement.

Dr. Taghreed Al Saraj: (01:53)
Thank you.

Rachel Pether: (01:54)
You have such an interesting background and we've had a few conversations now and I want to dive deeper into this intersection between education and language, but first tell me a bit more about your love of education and where that stem from.

Dr. Taghreed Al Saraj: (02:11)
Love of education, I think since I was little, I was always helping other colleagues of mine or students explaining to them how did we get to either math or sciences. Those are my strongest subjects. And so I always had the love of explaining and specifically to make things simpler in order for everybody to understand. And that's one of the things to be a good teacher, let's say, is the ability to simplify the material. And so I was always that if one of my friends came to me for that. So I think it was in my genes since little, it just grew.

Rachel Pether: (03:03)
I'd love to also maybe touch upon how that simplification piece builds into what you're doing now with Upskillable. But one thing that you've studied as the anxiety that comes with learning a language and as I mentioned to the audience, you've also written a book called The Anxious Language Learner: A Saudi Woman's Story. What started your interest in language specifically?

Dr. Taghreed Al Saraj: (03:28)
Here's the book. This is the book.

Rachel Pether: (03:33)
Beautiful. We all expect free copies.

Dr. Taghreed Al Saraj: (03:35)
Yes. I will send you. The whole inspiration of the book, I never intended to write the book. I was doing it for a research paper, but it was so much information that it ended up to be a book and not an article in a journal. So what was the inspiration is that my PhD was on how language anxiety can affect language learners and specifically in the middle East and Saudi and the Gulf area because how culture interacts with our way of learning and how we have the saving phase. All of these things that we grew up and the ideology that we had and you cannot fail, it's very shameful. And so that's how I started thinking is like, why is learning languages, something supposed to be very enjoyable, something that you would love to learn and to use became such a thing that people were fearing and running away from.

Dr. Taghreed Al Saraj: (04:52)
When I was teaching, before I was doing my PhD, I saw the students, when I had my masters and I was a lecturer at the time in one of the Saudi's universities here, I saw how students either dropped out of my classes and changed majors altogether, just because they couldn't have the learning language. And every time I was asking them, "So what's going on? Why aren't you putting more effort?" And they say, "We're excellent students, top grades in Arabic, but when it comes to English, I just don't know what's wrong with me. I think it's something..." They don't know what's going on and so they think maybe it's a black eye or that somebody has cursed on me is that I can't do languages, and it was so silly to think that. For me at the time, I didn't know anything existed, such called language anxiety.

Dr. Taghreed Al Saraj: (05:49)
When I did my PhD, so that gave me the motivation to look into what was hindering these students from learning a language. And when I got accepted to do my PhD at UCL Institute of Education, University of London, the more I researched this area, I found that something is called foreign language anxiety. It's the same as math anxiety, public speaking anxiety. And I was inspired by, "Could it be the things that I thought the students were not putting effort? Are they anxious students?" And that's what I was so surprised that, yes, all the symptoms that they were telling me they had was the anxiety they were feeling when it came to learning the language.

Dr. Taghreed Al Saraj: (06:39)
Some students said to me, the minute I come into the class, I start getting headaches, stomach pains and palpitation, sweaty palms. And it was like, "What?" I didn't know the symptoms. I didn't know. But the more, when I researched, I found out that there is such something and it's called foreign language anxiety, and those were the symptoms. So then at the end, it's not enough to know the problem, you now have to cure it. And so we learned the techniques to calm the students down in order to show them that languages is something you should enjoy, it's not something you should be feared from. And the minute you start changing the mindset then comes the enjoyability of learning that language, whichever language it is, but in our case was English at the time.

Dr. Taghreed Al Saraj: (07:33)
And so when I did my PhD, I did it in a way as if it was a story. So when I was in my viva, the professor, the examiners, when they came in and they said, we love reading this book, and it's a viva. When you write your viva usually you put it in there after you finished the examination and you get your degree, they put it in the library barely anybody looks at it again, unless they're doing research. But what's the most enjoyable compliment I got was, "We really loved reading this book." And it was like a story because the whole thing was stories after story of what the students were going through, but with statistics and everything scientific. Then I started teaching there and I learned from what the students were giving me even more now being a researcher expert in the field. I thought, "You know what? It's not enough to hear from other people to get their experience. How about me? If I learn a language, would I go through all the things that these students were going through?" And that's what I did.

Dr. Taghreed Al Saraj: (08:46)
So I went and I learned a third language, and that's when I started connecting my experience with what I heard the students were saying. And that's when I thought it was going to be an article in a journal and it turns out to be getting bigger and bigger and we ended up with this book. And it was an enjoyable experience writing it, going through the things and analyzing it even in more details and reflecting on my own self and how I learned English and how I learned my third language, which was Turkish. And so it was an eye opener, even for me as an even language expert in the field in applied linguistics.

Dr. Taghreed Al Saraj: (09:35)
That was, I think one of the things that people, the reviews that I guide, and it was so good is that people connected. A lot of people had the same symptoms, but they didn't know what they had. So they just thought, I'm not good at languages and they just left it. But when they saw and they read the experience I went through, the students went through, they were like, "I felt that too." So again, why don't I give it another try, but this time with a new eye and a new mentality and a lot of comments were really good.

Rachel Pether: (10:13)
And so when you were learning Turkish, did you go through the same symptoms learning that language as your students had also gone through and that you found in your research?

Dr. Taghreed Al Saraj: (10:24)
Yeah, that was the most interesting part is that I thought I was an experienced researcher so that I would know what's going to happen and I can control it. Apparently, we're humans. We say we could do, but the reality and the fact is that, yes, you can tell your brain this is the best way to do it, but unless your subconscious is ready, it's not going to happen. So the most important aspect is our subconscious is that controls our conscious, but we think it's the conscious that controls the subconscious. So without going too deep into this, is that yeah, and we're all humans at the end and we feel these experiences and these feelings and emotions that come out and that's the journey that I took the readers in, is that how I learned it.

Dr. Taghreed Al Saraj: (11:27)
And I specifically chose Turkish at the time and explain in the book why I chose that is that I didn't want anybody around me to speak that language. And I was at London and London at the time, [inaudible 00:11:45] University of London and I wanted nobody around me to help me or to practice. I wanted it to be like a foreign language and that's how... When I went to UC Berkeley, I continued and that's where I actually finished writing the book. It was in 2015.

Rachel Pether: (12:05)
And so when you're looking at language and I want to move on to the work you're doing in Upskillable and other places shortly, but when you're learning a language, what is it about that specifically that makes people anxious is it because of... So I guess, public facing and outward facing, and it's this interaction, like, if you make a mistake, it's very prevalent and obvious. What are some of the reasons associated to language?

Dr. Taghreed Al Saraj: (12:32)
So when you're young, very little, you're a year or two years old, you make so much mistakes, but your parents fix those mistakes, right? You don't get embarrassed because you don't know what embarrassment is. So it's okay if you don't pronounce things right. It's okay if you make a mistake, nobody is going to take it seriously. But now you're older, you're mature, you want to save face, you don't want anybody to laugh at you. So there's a lot of things that come in this area, the emotions that come out that you want to protect yourself.

Dr. Taghreed Al Saraj: (13:12)
So that's when it makes it much harder to learn a language while you're older than when you're younger. That's one. How you're being taught that language is also very important. If there's somebody that motivates you and is very understanding, very simplifying. That's why the simplification is very important. If you're just being forced to memorize things and you are like, "I have to do it." There's a difference and that's where my coaching comes in is that there's a difference between what you have to do and what you want to do. And so those are the things that can make a difference in learning the languages.

Rachel Pether: (14:03)
And you mentioned saving face, obviously someone that's lived in this region for 12 years. I know that's a very prevalent disposition, I guess. Are there other cultures where you've seen this in practice [inaudible 00:14:17] failure?

Dr. Taghreed Al Saraj: (14:20)
Yes. And I was fortunate enough to be chosen by the Japanese ministry of education to come into to lecture at Waseda University in Japan, in Tokyo. And so when I went there, at the time they thought I was British because I came from University of London and there was a lot of students that were trying to do research and couldn't find any resources on language anxiety. And so when I went there, gave lectures, they took me to classes to see how in schools they taught English. Now, I went into thinking that I am going to see in Japan, all the students were with iPads and the high technology going on here, learning these languages. And then when I was in there, I was like, "Hey, this is how we teach in the Arab world."

Dr. Taghreed Al Saraj: (15:23)
And that's not a bad thing, it's just basically focused on memorization and what I had in mind how they were teaching is totally different from what I saw. And it came to me that the cultures are the same. They rarely speak or volunteer to speak because they don't want to make a mistake. They want to save face and they don't want to do that. And it's the same thing with the Arab culture. In the Western culture, even in America, we also say, if you can't succeed once, try and again. But in the Arab culture, in the Asian culture is like, you want to say it right the first time round because you don't want anybody laughing at you.

Dr. Taghreed Al Saraj: (16:16)
But in a way if you want to learn languages, you got to accept you're going to make mistakes, people will laugh. So what? You laugh with them, it's not at you, it's with you. As always I tell my students, if we make a mistake, we're laughing together. We're not laughing at each other. And so you got to have that mentality that to be humorous it's okay. So what? It's all in the sake of learning the language, so let's make mistakes together. And so there weren't accepting that. And that's how I found that Asian culture is very similar to the Arab culture as well.

Rachel Pether: (16:57)
What you just said, the "let's make mistakes together." That's a beautiful segue into entrepreneurship. Obviously you have multiple failures along the way to success. So you did make the switch from academia to entrepreneurship. What drove that switch?

Dr. Taghreed Al Saraj: (17:15)
Well, when I was at UC Berkeley, I got headhunted by Mackenzie and so at the end we were... [inaudible 00:17:27] older interviews and we came to the last stage. Then they found out I was Saudi and they was thinking... Somehow I got back to Saudi because at that point when I was finishing UC Berkeley, I wanted to go back to London. But through McKenzie, when they was headhunting me, my CV was sent to two ministries in Saudi, and I got offers from both. I chose the ministry of human resources and I was heading the department for online training. It's a national platform. So I love that, is that I created the department with them and we saw how the training and development was, but it wasn't enough with that is that, I was telling, "Okay, so we're doing all this training on this platform, but how does the students know what to be trained on?" So how do I know what I'm lacking and how do I know what I have a strength in?

Dr. Taghreed Al Saraj: (18:42)
So with that, me and my colleague started talking and we came up with an idea of, wouldn't it be really nice to map the things that I lack and connect it to what training programs I need to have, so I can be in the right job and so with that, me and my colleague talks came up with an idea and from that it grew and we developed Upskillable and I have two other co-founders. The third one came on board. So I'm the Saudi, we have an American and we have a British. So the three of us put our heads together. We have expertise from different areas and we completed each other and we came up with what Upskillable is now.

Dr. Taghreed Al Saraj: (19:39)
And so if we talk about Upskillable, Upskillable is a platform that can assess people on their cognitive behavior and... Sorry, cognitive personality and skills. So our aim was to get the right people connected with the job description. So we wanted the right people in the right place for them instead of hiring somebody based on their CV. And we know from research shows 54% of people, what they write on their CVS is lies and that's the reality. And it's not only in Saudi, it's all over the world, this statistics. And so we wanted to do it scientifically. And how are we going to get these people without looking at their CVs? We wanted to see, do they have the capability to perform the job that they're going to be hired for before they get into that position?

Dr. Taghreed Al Saraj: (20:44)
And so that was it and then that's how we started and now we're also mapping it out. So now we have a platform when the candidates take these assessments, we now know their strengths and their weaknesses. And from there, we can map what they need to take in order to become better and target those weaknesses and make them much better for further development from themselves. And the platform is so much interesting is that we also can help companies restructure their company, because we know the strength and weaknesses of all the employees when they take our assessment. So they know who should go where. If you're downgrading, we also know who the important people to be there in the company. So there's a lot of usage for upskillable for companies.

Dr. Taghreed Al Saraj: (21:46)
And now on November 16th, and we're very excited with that is that we're launching a campaign to help in the IT sector to handle employment in the IT sector. So we're opening our platform for free assessment for all candidates in the technology field to take our assessments and the companies can come and see who's the highest rated in that field and they can recruit them. So we're doing that all to support the Saudiasation of the IT sector. So a new initiative in Saudi is to Saudilize 25% of the IT sector jobs. So with this, we're trying to help, not only Saudis, but all over. So we're opening the platform and because we're an international company anybody in the IT sector can come and take our assessment, and then we can map them. And when companies come and see their abilities, who's strong in what, we even give percentages for each person and we can compare candidates. So I can compare my abilities with you and companies can see who's strong in what. So the capability of Upskillable is just endless.

Rachel Pether: (23:10)
That's fantastic. And then, I'm assuming all this is virtual now, and if it wasn't in the pre COVID-

Dr. Taghreed Al Saraj: (23:22)
Yeah, it is. It was always virtual.

Rachel Pether: (23:22)
Excellent. And when you do identify the gaps and the weaknesses, are you then providing support in terms of how they can improve these weaknesses? I think you mentioned that you could map them to courses and things like that as well.

Dr. Taghreed Al Saraj: (23:36)
Exactly. Yes. So they know what they lack in, and so they can start training and search. And even for HR, the companies, when they ask us to assess their employees, we can tell them that, your employees lack so-and-so and so. They can start doing training programs for their employees specifically in certain areas. And so this is beneficial for the employees, as well as the companies.

Rachel Pether: (24:10)
Excellent. And we've actually had an audience question come in, which is spot on and relevant to what you've just been discussing. So thank you for your question, Steven. He's asked, how can the USA education and immigration systems help make attending school for Arabic students more enjoyable and therefore attract more students?

Dr. Taghreed Al Saraj: (24:31)
Okay. Repeat that again. I didn't get that [inaudible 00:24:41].

Rachel Pether: (24:40)
So how could the USA both education and immigration systems attract more Arabic students and make it more enjoyable for them attending school in the US.

Dr. Taghreed Al Saraj: (24:53)
Oh, attending school in the US? Well, anything to be enjoyable, and that's the key word. I like that word, enjoyable because education should be enjoyable is that we have to have gamification elements in it especially if it's online. Face-to-face, I have both systems. I have three systems that I have studied there, at the US and I spent so many years of my life. I'm a graduate of University of Miami as well and as well as the British system and the Saudi system. Always to make anything in education, you have to make it enjoyable if you want the students to continue learning, to get them on board, but the education also has to be very relevant because when the students graduate from the university, the job market is totally different. It's not completely, but there's a gap always between what we teach and what the job market needs.

Dr. Taghreed Al Saraj: (26:04)
Making the education very relevant is getting what the job market actually is asking for and adding that in the curriculum before they graduate and that's the most important, that's how we can make the education more important and relevant. And if you tell these students, because I always look at the motivation factor, anxiety, and motivation is what my focus is always on is that if I tell the students that this is what the job market needs, but it's and you should focus on that. Of course, these students don't go to universities thinking I'm just going to study there. Everybody goes to the universities, the end result is to get a job and to get a really good job. So if you're telling them in advance, your education is relevant, we've added elements of what the job market needs and making it for the time now, of course, they're going to put more effort, it's going to be more enjoyable and they there'll be more motivated to learn.

Rachel Pether: (27:04)
And when you talk about those gaps, are you mainly focused on the soft skills or the hard skills or it's a combination of both?

Dr. Taghreed Al Saraj: (27:11)
Well, it depends on what's the major. So soft skills were for sure all the different departments or any anything that you're studying, you're going to have to have, because that is just a must. But it depends on what if you're engineer or medicine, it's different according to the major that you are in.

Rachel Pether: (27:33)
And you also mentioned about the Saudiaization, the 25% and the IT sector with unemployment being quite high in Saudi Arabia. And this isn't just a Saudi problem, globally. with unemployment rising, how do you think this affects fresh graduates or people and highlighting, how does this affect them psychologically when they go in and also when they come out of study?

Dr. Taghreed Al Saraj: (28:06)
So, because there's a 25% Saudiaization, it gives them a lot of motivation into learning because they have a better chance into getting into the IT sector. So that's a very good thing for them for fresh graduates. But the second thing is that, you can't rely on anybody. I tell my students in the US and the UK, you cannot rely on what you learn at the university only. A fresh graduates, still as a fresh graduate. you can't come out of the university with just a one page of CV. You need to start either on the summer programs, go into volunteer. You need to start filling that CV while you're still in the university. I don't want to see any graduates coming into the end of it and graduating and saying, I don't have no experience. Where have you been in those four years?

Dr. Taghreed Al Saraj: (29:06)
Okay, let it go the first year. How about the other three years? What did you do in those three years? You have summer, what are you doing in the summer? Are you volunteering? If you are a business major, go into the business world. If you are in the IT, volunteer in any company that is on IT and learn how things are being done. And then when you come to class, the education you get becomes relevant because you've connected the theory with the actual work, a physical thing that you saw and that's when become more employable, because you're going to put that in your CV. I volunteered for this, I learned this which puts you at the top or at edge. It gives you an edge to other fresh graduates that didn't do anything.

Rachel Pether: (29:59)
Absolutely. And we take on interns all the time as well. And it's also great for the company because they're just so refreshing and that's so interesting to get involved, right? So it definitely goes both ways in terms of advantages. And I'm also interested, you mentioned because companies are so used to just looking at CVs, going through CVs, matching it to profile. It's always been the very standard way of doing things. Are you also seeing uptake from the companies themselves? They appreciate that you need more than just to box tick a CV to actually hire someone. How have you seen that evolution since you [inaudible 00:30:41]?

Dr. Taghreed Al Saraj: (30:41)
Yeah. And this is the newest technology. So why even look at CVs and waste time looking at CVs now because, and this is When we're now, let's say we are demoing because it's this new concept in, especially in the Gulf area, with Upskillable, when you're demoing it to the clients, they're looking like, "So we don't, we don't look at CVs anymore?" And we're saying, okay, now at the beginning, you don't look at any of the CVs. We assess them the results we can give you the top three or the top five, and you don't waste your time with the 500 that applied for this position. You want to be very efficient. You don't want to leave your HR to do the most important things. And that's comes after when they got assessed. You got the top five or the top three, they look at those people's CV, that's it. And from there, you get to either interview them and and see their personality actually goes with the company profile, the people that you want or the community of the company that you want. So that's what we are looking for.

Rachel Pether: (32:00)
Yeah, certainly I think we've probably all been in jobs where you appreciate that it's much easier to hire someone than it is to get rid of someone. So you'd better be super sure when you hire someone that is the right fit within the organization. We have some more audience questions that have come in some specifically related to language and some Upskillable. So I'll start with the Upskillable one first. Do you have a plan to market an API for vocational or higher education organizations so that you can have other partners feeding into from their own online platforms or at the moment is it all just your proprietary assessment tools?

Dr. Taghreed Al Saraj: (32:43)
So we have our own assessment tools, but you're saying that you want... I'm not understanding the full question.

Rachel Pether: (32:55)
So you obviously have a number of higher organizations and other training facilities that would have online courses to offer. Is this something that you are incorporating or you will look to incorporate [inaudible 00:33:09]?

Dr. Taghreed Al Saraj: (33:08)
Yes. We are looking and we are trying to get connection with other universities, other training centers that can provide so we can match the skills needed for specific jobs and for specific sectors. So, yes, please do get in touch with us.

Rachel Pether: (33:29)
Perfect. And thank you so much for your question. We have another question from Sebastian and thank you for being such a great supporter always, Sebastian. He has said, how critical is the learning of grammar to learning a language? He is fluent in three languages yet he's never mastered grammar. Am I missing something in speaking these languages?

Dr. Taghreed Al Saraj: (33:54)
No, you're not. As long as you speak the languages and people understand you, that's it. You're way ahead. So don't be caught into the little details. Hearing the language so much and I always tell the students, whatever language you want to learn, start hearing it a lot. The words become very familiar. Structure of sentences become easy. Then when you actually say it, you might have not learned formal grammar structure, but you've listened and you heard it and your ears just picked it up and structuring it becomes easy because they become engraved in your memory. That's how the sentence is. But this is at the beginning. This is chunking it up like that. But as you go along, you are able, and that's how there's a difference between learning language when you're smaller and when you're older. When you're older, you have transferable skills that whatever you've learned in the first language, you can understand how to learn it in the second language.

Dr. Taghreed Al Saraj: (35:06)
You can transfer the skills and say, "Oh, you're older. So you can analyze the language." And you can say, "Every time I say this, this comes with it." And so they're always joined. And so it becomes easier as an adult to pick up that grammar or structure of the languages. I'm not saying you don't do grammar. Of course, you have to, but at the beginning, you get chunks of languages and you learn that. And then you start saying, they're adjusting the language. Why is it always a disposition that this word comes in? And that's how you understand. And that's when grammar comes and becomes important.

Rachel Pether: (35:52)
No, that's an excellent advice. And when I think of language as someone that has studied badly, I might add. And you see that they are science part and I guess the spoken form is often the art form a grammatical part is slightly more scientific and structure focused. We do just have time for one more question. I know you've answered a number of really difficult questions. So I'd like to end on a slightly easier one, but what would be your advice? You have this experience in academia, you have this experience in entrepreneurship, you have such a global perspective. What would be your advice for a fresh graduate that's about to enter the so-called real world?

Dr. Taghreed Al Saraj: (36:46)
I mean, I always say, please do not come to the end of the university or the degree that you're taking and you don't have any job experience. It's a shame. In all universities, there is a career center. Please, make use of it. Go see what they have. They will have a lot of training going on there at the career centers. They review CVs for you. They help you with that. So you do utilize it. And I've seen that people don't go and utilize the career centers until their last year or the last semester. And that's wrong. Year one, the minute your foot is in college, you got to have... That career center should be your friend. That's the go-to place. You go to, and you start seeing what schedule they have, what courses they have. I

Dr. Taghreed Al Saraj: (37:45)
t's non-academic, and it's fun to go to there an hour or so, but it is good to have that knowledge, especially if you're, let's say, engineering, it's very specific. Go get something in a different field just to give you, so when you come out of it, you have a different perspective. It's not only very focused on one thing. And this is where I wrote an article in Arab news. And I said that the world needs more multipotentialite and this is the key word. I like to underline this very strongly, bold multipotentialite. There are people that are specialists, generalist.

Dr. Taghreed Al Saraj: (38:35)
So they have knowledge in so many different fields. You put those people with very specific consultant or very specialized consultants, they can do magic and wonders for a company, because they bring so much background experience in different fields. And this person that is very specialized in one thing, they can see the world in another direction. They just know this is how it's done. This is how it's always been done. But when they pair them with a multipotentialite, this person has a different idea and he's done some work here, he's done some work there. And from that knowledge, he transferred that knowledge and then they would tell, "So what if we do it this way? How can you try to make it done this way?" So to push them to think outside the box, and that is fantastic.

Dr. Taghreed Al Saraj: (39:31)
And that's what the job market now needs. A lot of people in HR might not agree with me and they say, "No, we need people that are specialized in this field." And I'm like, "Fine, get one, but get three, four multipotentialite that have a different perspective from different fields." Because that's what's going to make you... You want them to think outside the box and you need these people to help you, think outside of the box.

Rachel Pether: (40:00)
I absolutely love that. I'm going to take that and pretend it's mine. If you don't mind me.

Dr. Taghreed Al Saraj: (40:07)
I already wrote about it. So yes, take it.

Rachel Pether: (40:11)
Do you know I've always refer a closing, maybe comment from you is that I've always found it weird from such a young age, people are always saying what do you want to be when you grow up. And from age four you're supposed to have a one word answer. Like I want to be an astronaut. I want to be an engineer. I want to be a doctor. And yet, so many of us, I'm still waiting to grow up. I'm still not entirely sure. [inaudible 00:40:35] thing we have to do one thing that we have to do one thing, but in reality, there are a lot of multipotentialite.

Dr. Taghreed Al Saraj: (40:43)
Exactly. So why limit yourself? And there's so much out there to be experienced. Don't limit yourself, ever. Go with the flow. And this is my new article. Actually, I just submitted it yesterday in Arab news. It's called go with the flow, but I ended with a word or the sentence go with the flow, but in the right direction. So yeah, why not. Don't limit yourself.

Rachel Pether: (41:10)
Don't go against the flow.

Dr. Taghreed Al Saraj: (41:13)
Yeah.

Rachel Pether: (41:14)
So Dr. Taghreed, it has been an absolute pleasure. We have had a number of people actually say, how can they contact you? So what's the best way for people to get in touch if they have further questions for you or for about Upskillable?

Dr. Taghreed Al Saraj: (41:29)
Upskillable, yes. So if you go to the website of upskillable.com, you'll have contact us and that's how we can get in touch with that. But also my social media accounts, you have my Twitter account. T-AlSaraj, A-L-S-A-R-A-J. So, yeah, and you can do a search on my name and you'll see articles, but the best way is to go to a Upskillable.com and you'll see the contact as we'll get the messages, especially if it's for Upskillable. But please do if the people that are listening to me, not only Saudis all over the world, we're opening this platform on November 16th for everybody to go on and assess their skills in IT sector. And they will have a report to show them what they're strong in and what their weaknesses so they can learn and take that on board and go and develop themselves. Completely free.

Rachel Pether: (42:32)
That's an excellent initiative. And it's great to end on a positive, optimistic note. So from my side, thank you so much for your time, Taghreed. It's been an absolute pleasure. So thank you for joining us.

Dr. Taghreed Al Saraj: (42:44)
Thank you for having me. Bye.