Josh Wolfe Discusses Innovative Investments (Podcast)

the sciences. It's absolutely fascinating. If you are at all interested in the way venture capitalists think, uh, how new technologies are found and developed and exploited, and how they are adapted and eventually just become part of the everyday usage, and what the future might look like ten forty a hundred years off, then you're gonna find this to be an absolutely fascinating conversation. So, with no further ado, my interview with Josh Wolfe of Lux Capital. This is mess

There's in Business with Barry Ridholts on Bloomberg Radio. My special guest today is Josh wolf He is the co founder and managing partner of Lux Capital, a venture capital firm that supports basic science and scientists and entrepreneurs who are pursuing counter conventional solutions to some of the world's most vexiting problems. He is a founding investor and board

member with Bill Gates in Kai Metta. He is a co investor with folks such as Mark Andreson and Peter Thiel, and he's a director at firms such as Shapeways, Stratio, Scalio Control Labs, and Variant. Josh Wolf, Welcome to Bloomberg. Very great to be with you. So you have an unusual background. You're You're like a molecular biologist coming out of Cornell and your early work is on aids immuno pathology research. How does that translate to finance? And then

venture capital? Venture capital is investing the people who are inventing the future, and people that are inventing the future tend to be technologists and engineers and scientists, and so you have to speak their language. But when I was growing up, I was going to be a doctor. I was gonna go get an m d and then an m d, pH d. And then I met people who were actually making money, and I got way more enamored

with capital markets. And I remember doing my internships on Wall Street, and then I was at the Summer's doing uh scientific research, and my mentor was actually trading futures and options in the science lab, and I got so excited. I said, you know, what are you doing? And he explained and and so I got way more enamored with

capital markets than than science itself. But venture capital was the perfect hybrid because you get to bet on scientists who are inventing the future, but you just gotta understand what they're doing. So how much of this being enamored on of finance comes from your background? You you grew up in in the hood in Brooklyn? Yeah, well, I

have a buddy you grew up in c Gate. I know that area really well, Um, did that affect the way you looked at the world of of money and capital or was it just your upgring Well, first of all, if you don't grow up with money, you want it. So that's always a virtuous thing. And I actually think that the best entrepreneurs the kind of people that we

back and we look forward. If you can find the people that have the chip on their shoulder that they came from some sort of messed up background, it's almost always predictive that they're going to be very ambitious, hungary and ambitious. Now you want them to be ethical and ambitious because you also get a lot of hustlers and hucksters. Now, you grew up in Coney Island right by the seaside Carnival,

and you are filled with hucksters. So I would say, if anything, growing up in Coney Island made me super skeptical and cynical of human nature. I'm always fond of the Shakespearean quote that there's daggers and men smiles, and you grow up with this distrusting, slightly squinty eyed. You know, what's this guy's angle? What's the agenda that he's got?

The boardwalk? Did that to you? Yeah, you've got New York City people talk about is diverse, but the reality is you've got Brighton Beach with Russians, and you've got Coney Island that's primarily African American Latino, and you've got Korean on clothes. But you go to Coney Island on the boardwalk and it is just the absolute melting pot of New York. That's that's quite quite fascinating. So so you end up in finance, who work your way through

a couple of well known firms. How did you end up pivoting to use the VC word into venture cap It's funny because the word pivoting is totally banded lux. We only pirouette. We don't pivot. We pirouett. I got very lucky, and everything in my life I was describes randomnessnoptionality and ex post factor. I can explain everything. Is this perfectly near chain a priority? You never know and you recognize that most people are similarly situated, but are

somewhat oblivious to that fact. Well, but again, if you're gonna be skeptical about other people, then you have to be a little bit skeptical of yourself too. So intellectual honesty, I think is a is a good virtue, but it's hard. So I got lucky, and I met a guy named Bill Conway. And Bill is one of the three founders. Yeah, exactly, Carlisle Group founder David Rubinstein, famous one. He raises the money bill Less, famous by by design and invests it.

And he's just an incredible human. He decided, And again I don't know the circumstances of the day or the twenty four hours that preceded our meeting, but he was in a good mood and we pitched him and I said, you know, we want to build this great firm, And he said, I hope you make a billion, and he

invested with us. In my life, There's not nothing that I could have pointed to in the path dependence of this internship or this job, or going to Cornell or this class I took that would ever lead to that meeting. And so I'm humbled by what I call randomness. That is truly truly random, isn't it. So you and I met at a dinner not too long ago, hosted by any Duke on an educational um project that she's working on.

But I always kind of scan the people who are going to be at these dinners, and there was something in your bio that really made me laugh. And you describe your venture background as having an interest in science fiction like technology. I love that descriptor. But you're gonna have to explain what you mean by that, okay. So, so everything that is around us today was invented by somebody. Somebody came up with the idea, and that idea started quite literally as a fiction. It did not exist. It

was in somebody's imagination. Now, if you accept the premise that a lot of the inspiration for technology from other people who were inspired but didn't invent it, they were the people who literally wrote the science fiction books, they wrote the graphic novels, they wrote the comic books, they made the movie, they did the special effects, and they

imagined what could be. And it turns out you fast forward and you look at the Luxe portfolio today, a huge number of the companies that we've invested in the ideas behind them, the technologies, the design even was modeled on things that happened twenty four years ago in science fiction. And I've actually kept a archive of some of the sci fi archives, so if we went through these quickly. You've got the motorola, probably from Star Trek. It was called the star tack phone, right, that was one of

the first things. Right then in the rotors you can get to sing the word Star Trek and not invite a trademark dispute exactly. Okay, Now you've got today, you've got Siri, and you look at the image and the thing for Siri, it's just a silver version of how from Space Odyssey. You've got Michael Douglas disclosure. He goes into this room and he three D scans himself and he enters this virtual reality world. This was around the

same time as like on More Man. If you remember that okay, not not a fan favorite, but one of mine, and that sort of presaged the virtual reality landscape. You've got pod racing from Star Wars today. That's drone racing Lee. You've got robotic surgery when Luke Skywalker's hand is severed by Vader. That we got both Intuitive Surgical and then Orse, which was one of our companies that we sold to Johnson Johnson earlier this year for six billion dollars plus,

not too bad. And and all of these things were born in somebody's imagination. And if you think about really what venture capital is, it is believing before other people understand. And what are you believing? You're believing in somebody's vision. Now the differences, you have to make sure that they're not full of it, that you don't get a theo nos. And you have to have literally literally just wrote down the word there and and and that is now. Now

here's the intellectually honest thing. You do not know at the moment of inception or conception of a company, whether the person is malicious or delusional, whether they are intellectually honest or not. And so you put up a little money. It's like an anti in a poker game. You're trying to figure out is this person for real? And you try to find what are the technological milestones that will tell me that this is for real and not BS.

And the biggest thing if you walk into my firm and you sit in our Monday partners meeting, if you asked any of the partners, what is Josh going to ask about the technology or what is he thinking? The second that somebody is pitching it, I am thinking, whether I say publicly or in thinking it privately, is this a fraud? So you raised Sarah nos It's such an interesting question because my read of that entire situation from the get go is that it was both delusional and

a fraud simultaneously. She had zero medical background. She had and it's amazing how all the healthcare and medical device vcs passed and everybody else came in didn't know better. But it appeared that she believed she could legitimately do this, but with no basis in fact. So at what point does delusion become fraud? Well, when the technology doesn't work. I had a friend who is at a very large deck a billion investment fund that was doing crossover investments

to their public market portfolio. They have forty billion dollars. They were making private investments. They were going to visit there on us and they said, what's the number one question that you would ask if you were us doing diligence? And I said, does it work? And you'd be surprised how many people just want to believe the narrative of the story goes back to science fiction and not verifying

if it's science fact. Now, you had all these other telltale signs with her, Uh, the octygen are in boards, which all signaling value people that had you know, great military or geopolitical and and just tolly inappropriate from medical technology. But to your point, there was nobody there that really

had any sophisticated biotype perform and experience. Now, the truth is liquid biopsy, the ability to detect from a small drop of blood analytes that are indicative of cancer or something else will eventually from someone see the light of day. But you think about the scar that it has put on the industry in the sector and how hard it is for a legitimate entrepreneur that's developing legitimate technology. Today they've raised this significantly, So it's not just that she

was a fraud, and her partners were frauds. They've literally set medical technology back because now everyone's gonna be skeptical even of legitimate breakthroughs. And now, realistically, is it set back one year or two years or three years, or has it raised the cost of capital for that? How many people will die over the course of that setback. So you can argue that there's blood on our Yeah, I'm not a fan. In case you can't tell, I'm

with you. And look, it's easy for all of us to say back then, and I believe, by the way, because I know that you are a fellow skeptic that was a fraud. It's harder today both socially to come out and say I think that another company is a specific fraud. Now there's an entire realm of quantum computing today that I think is going to be wrought with frauds. It has all of the criteria for a fraud. People don't understand it. They have fomo if you're missing out,

they think that it's gonna be something really big. They don't want to feel stupid because they don't understand it. And so people are parting with money and I think that you're going to see at least one and maybe as many as five public frauds related to quantum computing. The tragedy of the comments finds its way even to venture capital. Tell us a little bit about your team at LUX, who are your partners and what what does everybody do? Well, let's start with my founder, my co founder,

who's Peter Abert. Peter is my dispositional opposite, which I think if you are going to have a firm as a critical thing. Now it's interesting because in hedge funds you typically have one PM and they make all the decisions. In private equity you tend to have teams. So Peter and I are the co founders. And the reason that it's important is he is the optimist. I am the pessimist. I'm sitting before you, and I am wearing all dark. I wear all black, and it's just my disposition. I

expect the worst. It helps pessimistic. But for the skulls all over them. Correct Pete. You will catch him in nantucket reds, in pastel colors. He is much more like my wife, who happens to be an activist hedge fund manager. She's more perma smile me as they say you know, I've got RB you know, resting be face, so so I expect the worst. He expects the best. And if you had an entire firm that was like me, we would be a bunch of cynical short sellers just trying

to spot the frauds and doubting everybody. If you had a firm entirely like him, we would be lemming growth investors, just paying any price and going off the cliff. The balance that we've had as friends for twenty five years and his partners for twenty has made culturally the firm what it is now. From us flows everybody else. And so you've got ten other investment professionals, and everybody is intellectually and ethnically and gender diverse. Now what is it?

What does that mean for me? We've got people that are Kashmiri, Pakistani, Iranian, Brazilian, Australian, You've got a bunch of white New York Jews. But the intellectual mix of people is so different. You've got electrical engineer PhDs. You've got people that have stem cell PhDs, people in material science PhDs, people that have no technical background and are

excellent at capital raising and marketing. And when we descend upon a company the entire And it's funny because I used this analogy the other day and people had no idea what Vultron was. And I feel like I'm a young guy, but jeez, it dated me. But it's like Vultron coming together. You get all the robots come together into this Megatron and uh, it's just, uh, you know,

a diverse group of people that all think differently. I always say that if two people think the same, one of them is unnecessary, and uh, it's it's a lot of fun. So you're concerned that your cultural references are out of date, and you're like, what almost fort Okay, wait until you're in your fifties and you'll drop a Monty Python or a Caddy check reference in the whole table of millennials look at you like perfect um. So

so you focus a lot on um. Basic science to some degrees tell us the sort of companies luxe investment. So it really is something that's in the cutting edge of an area that we think that other people haven't found. Now, the reason we do that is we want really high scientific technical complexity, not because we want to tackle things that are really hard. It's because we don't want competition.

It is way easier in venture capital to go find the next company that is developing an app for the smartphone or some social media software or something that is relatively easy. But the problem with funding easy things is you get hundreds of competitors, talk about random outcomes. Of those hundreds, who really is going to know which is

the next Snapchat or Instagram or whatever. It's practically in random. Now, I know that you're a student of skill verse lock, and the great question always, I think in this domain is can you fail on purpose? Something that Michael Mobison has and and in in in picking amongst a field of five hundred competitors in software, you know you've got

let's say, equal probability one chance. If you can find something where there's only three or four or five competitors, you can look a lot smarter because now maybe you have a twenty chance, assuming all things equal, of picking the winner. Can you can you invest in all five

or two out of the five or anything? You're typically conflicted, but sometimes depending on the stage of things, you might invest in one and then later on something else comes along and you might invest in it, but because you know that it should really be part of the first thing that you invest in, and by being able to influence that outcome and say, you know what, don't split the baby, don't try to split and and and recruit competing talent, don't try to go to customers and and

confuse them. Be part of one enterprise. And it's better owned something smaller, of something much bigger than to try to, you know, compete head to head. So sometimes we will influence those outcomes, but by and large, the stuff that we're investing is that the cutting edge of science and technology. It's hard, there's barriers to entry, there's intellectual property that imposes a negative right on people, so that you have

a moat. Again, all things that and I am psychotic about competitive advantage give the company that you're investing in a better chance than just pure luck. It makes a lot of sense, uh, when I think about batting averages for the typical VC funds, usually, and I'm going back to the you know, the John Dwarves of the world, um, the eighties and nineties vcs they tend to spread spread a lot of money around, most of which did not generate a positive yield. And then there's a handful of

not just winners, but giant outside winners, hundred cks. You know, think about eBay and Apple and and Amazon going down the list. Given this area and and the more basic science that you're focusing on, is it a similar distribution or how do the numbers shake out? You're looking for one home run to subsidize the next fifty or is it the distribution different? So let's let's look at the

macro on venture. You've got two extremes, one of which we say is spray and pray exactly what you're exactly what you're describing, Just bet a lot of lottery tickets. You have intellectual honesty or told naiveta you don't know what's gonna work, and in rhymes, so you know it's true exactly. The the other extreme stick with rhyming, wait and pay. Okay, so you wait until a winner emerges. You pay a very high price for the higher chance

of being correct. But obviously the higher the price you pay, the lower you're expected return. So in one case you're saying, well, let's bet in fifty or a hundred or two hundred companies and make small investments buying lottery tickets, and the other you say we're gonna load up into the ones that are winners, but we're gonna do it at such a high price, then maybe we're only gonna get a double. Now, for a successful venture fund, your look for three x or four x cash on cash over the ten year

period that you've got locked up money. Now, I always say the great advantage that we have as venture capitalist, let's say, over peers and other alternatives like hedge funds. Hedge funds might have quarterly, monthly, maybe annual liquidity redemptions, and that's a hard thing because it creates an institutional imperative where the manager is focused on the short term. We get to focus on five, six, seven years because

our investors capital is patiently locked up for a decade. Okay, if everything goes well, you might get three to four x cash on cash. Now some funds you might have a ten x fund, and some of you might have a too, But on average, that's what you're gaming for. There's two ways to cut it. First is you assume that one or two of your companies return the entire fund, all the capital that you've raised one time. Over our newest fund five million dollars, we've got a pair of them.

It's it's we recently closed a billion dollars, but the five million dollars. You might have one company where you own ten percent of it and it sells for five billion dollars. You've got five hundred million dollars back and growth proceeds. It's returning the fund one time over. You're next five companies in aggregate proceeds, return the fund another

time over. And in our case where you build a portfolio about companies, then the ensuing fifteen or twenty companies will turn it another time and you end up with that three x cash on cash. The other way to think about it, and again simple math. A third of your companies are total zeros. You lose everything, a third you make back give or take a dollar, and the third you make ten x, and you end up with

a three x cash on cash. The problem is you don't know which companies when you invest, are gonna be. If you did, you can only invest in the three I'm only going to put the money in the ten x correct. Now, of course, what we do wherever your confidence in your conviction is high, you upsize, and you know portfolio allocation, You put more money in the things that you think are going to be great, you try to put less money and but put so much of

this is reputational. And so you mentioned John Doer before and some of the great venture capitalists of the past, and it was their reputation in backing a winner that begot them the next deal. It's very much like when you sit in a movie theater and they say from the director that brought you you know, or from the producers of and it's that signal. It's the same signal of why elite you know, universities attract elite performers and

you get this path positive feedback effect. But so much of our business, if you are intellectually honest, is luck. There can be no doubt about that. Um. Although if you go with this, can you fail on purpose? I can guarantee you that I can fail on purpose. I can pick the absolute worst entrepreneurs that cannot raise money. I can absolutely pick fraudulent companies, and I can absolutely pick teams that can never deliver. And I could fail

on purpose. Well, but that just says that there is a skill component that doesn't by itself eliminate the lu So the threshold for having a fl decent venture fund is hey, if you can eliminate a lot of that fraud, that's how you end up with a three or four x as opposed to a one and a half for a two s well. And really the best is can you develop the reputation and can you actually be able to help companies so that you get the best entrepreneurs.

Because the truth is what we do in the end of the day of security selection and a little bit of competitive intelligence gathering and some smart capital allocation, but the most important thing that we can do is attract the best founders because they are the people who do everything.

At the end of the day, limited partners give us money and they allocate to us, and we in turn give it to the entrepreneur, and the entrepreneur in turn decides who they're gonna hire and who they're gonna fire, and what technologies they're going to prioritize and how they're going to sell. And the single best trait of an entrepreneur is somebody that can tell a story, somebody that has that narrative power, going back to science fiction and

just being able to back those individuals. They are the people that recruit talent, They are the people that raise money They are the people that garner attention and wind deals, and that is what makes the metric capital business quite quite fascinating. Earlier we were talking about UM science fiction and how that led to your interest in venture capital. But you've developed a philosophy that I think is somewhat atypical from some of those other vcs UH and business

people I've mentioned. One of the one of the things in your bio UM stood out to me EO. Wilson. You said he might be the person that had the single greatest impact on humanity. Explain that, well, totally biased view, but but he had the biggest impact on me intellectually. This was modern Renaissance thinking. The book Concilience, which I probably read and there about so over twenty years ago.

Was this idea in science that turned me on. In turn to Charlie Monger, these two people are our compatriots. Charlie's view of Renaissance thinking and worldly mental models and EO. Wilson's view of the unity of the hard sciences and the soft sciences, between psychology and physics, between economics and geology, and finding patterns lets you identify some universal truths, and so if you can continue to find those first principal universal truths. I think it sets you on a good

path for making good decisions. Quite quite interesting. I assume you've worked your way through Port Charlie's Almanact. I've given so many copies of that away. I've I've created more doorstops and the coffee table book gifts, and he's one of my whales. If you, if you can get around to introducing us, I would love to. You know, I

have a funny story. Uh. My wife and I went years ago to the Berkshire Annual Meeting and we were at the I forget if it was the days into the Marriot, whatever the hotel was, and before I actually had invested with Bill Gates, there was a dinner and it was Bill Gates, it was Buffett and it was Monger. I picked my wife up from the airport because I arrived earlier, and we go out to grab her bag

and the car was broken into. Your car, our car was broken into and everything was stolen, the laptops and everything was gone. In Omaha. I go to the front desk and while we're going to the front desk, who was settling the bill for their private dinner restaurant Charlie Munger and here I am. My wife is really upset. You know, all our stuff was just stolen from the car. And there's Charlie Munger at the front and she looks

at me and she's like, go ahead. You know, it's just she knew that Charlie was gonna trump, you know, the front. So um, and you had a conversation. I did, and it's a highlight that you have great memories of. Well, you know, he's not a very loquacious person, you know, nothing to add but h but I think that his his rigor in being you know, I remember there was a story that somebody asked him what is the single thing that you would attribute your success to? And he

said being rational? Fair enough, right, And that's if you can try to be as rational as possible, which means identifying all the points where you are irrational. Um and mindful. You know. We were at dinner together with Anni Duke and Danny Kneman and and Kaneman's partner's wife, Amos Tversky's wife,

Barbara Correct, who also just wrote an amazing book. And um, it's really interesting because Danny has identified all of the mental biases, the cognitive biases, that we have and it doesn't matter because even being aware of them, you still he will still fall victim to them. It's called the bias. Bias. Even knowing your own awareness of of these cognitive issues is not sufficient to defeat them. Looking at an illusion, even knowing it as an illusion, it still works on you.

It's how you wired. You know, we were very well does line to adapt to the savannah, But these more complex capital risking ventures where risk is out there but the dangle of reward, our brains just go on the fritz when that's presented to us, at least our instinctual brains. Getting past that, you have some shot. But it's not easy. But it's interesting because you know, we we respond to the bustle in the hedgerow right, the little little sound that's there, and is that a tiger you know? Or

is it just the wind in my world? I have to respond to that with heightened sensitivity. Is that a little signal over there? Is that entrepreneur into something big? And so we're constantly overreacting, in part because it is so zero. Some I do not have the opportunity to invest in the public markets where I can say, you know what, I really like that, and it's up ten

per cent or it's down ten percent. There is a zero sum nature where I am racing to beat everybody else to the big scientific technological breakthrough and own it before everybody else can. I like that answer, and kudos on the Zeppelin reference. I appreciate that. UM. There's another quote of yours. I like you. You refer two things as minnows and mega's. Explain what that means. This is a phenomenon right now, the minnows and the mega's and

venture capital UM. Historically, you had lots of firms that existed, and maybe they were two hundred, four hundred, five hundred million dollar firms. What you've had in the past few years is a phenomenon that has created a barbell of capital allocation to very small funds, and many of them what I call the minnows. These are people who have raised ten or twenty or fifty or a hundred million dollars. They are a single or in some cases a duo g P general partner, and this is a spray and

prey approach to VC. In some cases they are, but more importantly, they're very It's like the institutionalization of Angel investing. Okay, that's fair. Why is this happening in part because there is a junior person at a major fund who found the hot deal that made the fund a lot of money. But the problem is that person is not part of the succession of the partnership. They don't have the economics,

They're not gonna get paid. So the limited partners recognized, you know what, Jane Smith or Joe Smith, they were really the deal maker here. Let's put them in business because they are the future of venture capital. And the LPs are thinking, how do I get a big allocation in the next climate Perkins or Sequoia, and how do I get that early? So that has created what is intelligent to do on a small basis with a handful

of these people. But again a prior you don't know which ones are going to be really successful hundreds and hundreds of minnows. Now, the way that we look at that as a firm is, these people are our friends. They are a source of deal flow. We can be a source of capital to them. Some of them are going to turn into great franchises. Nearly impossible to predict which ones. At the other extreme, you have the megas, the megas are the people that are raising billions of dollars.

Now the eight hundred pound guerrilla or Godzilla, depending on your view, is soft Bank? Sure SoftBank has cosion funds. Is just it's a hundred billion dollar guerrilla. Well, it is a complex beast, and I would call it Godzilla. And it has completely changed the undulating landscape. Why because again, in public markets you have relative efficiency at times. Of course, you know you have massive inefficiencies at the times, but there is no market more inefficient than ven your capital.

Where in the private markets, a single price setter can come and just decide what the price of something is. They create the market clearing price. There is no short selling, there's no counter offers, there's very little liquidity. So soft Bank has come and created all of these unicorns and deck accords. And what's crazy is the money that they're putting to work. In some cases they are pricing up their own investments. Now, put on the tinfoil hat for

a moment. I have a more slightly nefarious view that a reason that soft Bank is doing this. Understanding the motive is that they're doing this to be able to create paper assets and increases and paper valuations that can serve as collateral against indebtedness. That it's north of a billion dollars. So by being able to invest in we work at ten billion dollars and then pricing it up to twenty, you just showed that you had gain and

your billion dollar or two billion dollar investment. And if you look at their earnings over the past one or two or three quarters, a significant portion of the profits that they are reported is from these paper gains I liquid and then when one of these companies actually exits and you have liquidity, like an uber or gardens, they take those proceeds instead of distributing to the investors, They say, you know what, we're gonna borrow against this. We're gonna

issue debt and sell it to retail. So I think the entire complex, which is really run by a bunch of Deutsche Bank X credit structure credit. You know, Deutsche Bank is the most straight up bank there is, of course, I mean, there's no risk there that you know, you have total collapse and uh so, so I think that this is for venture capital systemic risk and one of the poster children of illiquidity. I think that the narrative about singularity in the future. All of that is great

for society because it funds all kinds of experiments. But for the soft bank and soft bingk investors, I would be very, very nervous. So soft bank is a Ponzi scheme. Quote unquote, says Josh Wolfe. I'm gonna put that down and put those words in your mouth. Um. The minnow and mega model, by the way, very much reminds me of one of the smartest things that one of the smartest banks does, which is Goldman Sacks. Are you familiar?

You know when when Goldman Sacks has a hot trader or they have a manager who's killing it, rather than have that person slip out and launched their own thing, they'll tap and say, hey, have you have a thought of starting a hedge fund? Will help fund you. We'll give you first billion dollars, will help you raise capital owned by the way, where your prime broker, and we're

gonna have a piece of the GP. But go out and um, a thousand minnows have spawned, and that's how you end up with where we twelve thousand hedge funds these days, most of which barely earned their keep um including fees. Beyond fees it's it's not necessarily a money maker, but that description of VC funding minnows is what Goldman

has been doing for I don't know, twenty years. It's actually very interesting because on the hedge fund side, you know, between Citadel and Millennium and bally Asney and SEC, you've seen that phenomenon right where they say, Okay, we're gonna do risk management of the top, we're gonna have a lot of people will blow them out if they lose you know, teen percent or whatever. The was notorious for

that in in venture capital. First of all, the time frame to know if somebody has made money is so long. But um, but you haven't had that kind of institutional complex because the time that it takes to find out if somebody is right or wrong, the pay schemes, all this, it's just it's it's very complicated. But you do have this bifurcation in many many investors that are making small bets, and that is good for the angel investor, the person

that's starting up. It is easier than ever if you want to start a business to find capital, and that has an important footnote which is the beneficiary of that. Over the past few years has been we work because ever I see, I thought you're gonna say the public, why why we Because the public gets subsidized. The public is always the beneficiary in the end, even during bubbles, right. I mean, of course pensioners and retirees lose money, but

the reality is we continue progress. Right in the Jim Sarrewicki had a great quote many years ago in The New Yorker which said, in greed and average lies the hope of progress. Sure, and it's true because that's what happens. Right. Everybody finds something, they overdo it in the short term, they underestimated the long term. But in that greed and avarice, lots of stuff gets laid down. The book that best summings up that sir Wicki quote is um Pop Why

bubbles are great for the economy. So you look at railroads and televisions and cars and computers and fiber optics. Every with the exception of financial bubbles like the Great Financial Crisis just leaves behind debt. But every other bubble. Look, so you probably remember Global Crossing and Metromedia, Fiber and all the fiber optics companies that were laying unlit cable at something like two thousand dollars a mile, and it end they'll go bankrupt, and it gets bought the next

generation for pennies a mile. And that's what makes YouTube and Facebook and Netflix and all these other bandwidth intensive applications viable because some losing investment basically made the Broadman available for free. So you hit it, you hit on and I think two really important things and percent right right late nineties, you had a narrative promulgated by George Gilder,

who happens to be a friend. Yeah, but but George god Guilder used to literally say I worked with a guy used to get the Guilder Telecosm newsletter, and I would read it and I would always come away with, what is this? I don't do price nonsense. Price is what matters in the public markets. How can you not do price? George was directionally right about technology, okay, and there's certain directions that's a tough call to make. Hey, the the fault position of human technological advancement is up.

I could save you two thousand dollars a year in the newsletter, But you had that Guilder effect right where he would come out and because everybody else was looking at it. It was a big bold letter. Whatever the public company, the thing would be upft. Remember Nortel, he got behind it exploded, and go down the list of all of the j D S Uni phase and all these guys. Okay, so so, but you're right, Gary Winnick

and Global Crossing. Now Hype got high cost a capital, God low, like you said, hundreds of miles of dark fiber optic God laden lid. And the winner from all of that was the third world who got connected to the Internet for free. The losers were the growth investors, the public investors. The winners were the distressed equity guys who came and picked up all the assets for cents on the dollar. Now you go back almost a decade in venture capital, the same thing was happening with solar,

an alternative energy. Everybody was funding solar, and you didn't have to be a genius to predict this. You just hadn't know a little bit of history going back ten or fifteen years, which was optical networking was the only to be. If history doesn't repeat it rhymes, it was going to be the same thing as solar. And so in solar we said sit out the ride, don't invest You're gonna have massive hype. It's gonna lower the cost of capital. People are going to do uneconomic things, and

the winner will be the third world that gets connected. Now, my anticipation of the time was that the private equity guys would come in and scoop up these assets for cents on the dollars. And I was wrong, really because the people that scooped up the assets for cents on the dollar were the Chinese. Huh, and they now dominate the solar electric quite quite fascinating. Let's let's talk about some of the technologies that are out there and how

they're doing. You know, when three D printing first came out, what is it almost fifteen years ago? Is so the promise was we'd all have these fun two D three D printers. I need a part, you can print just about anything. We'd be printing heart valves. So we've been printing all this stuff And did we get our our hopes up too high? Is that still somewhere off in the future or has three D printing really been an overhyped bust? Yes? Yes, and yes so really yes, I

wasn't expecting it has been an overhyped bust. But This is predictive if you know your history of technology, what you do, you look at Karlotta Perez and the diffusion of technology through through history. You go through a um installation phase where everybody gets the thing and people are tinkering for the past twenty years, and those typically near a generational long thing, maybe it's three quarters of a generation,

but between years. So for the past twenty years you've had the installation phase where people are getting lots of different three D printers. You have top ones that do cost a few thousand dollars, but they really do don't do very much. They print plastics and it's good for schools and universities and tinkers and this kind of stuff.

But then you've had the domain of prototyping, and so that's also been another you know, early that's a big cost saving the two thousand hour or three the bigger units that you could design a part and say, let's see what it looks like in three days. Yes, but it's still modest. It isn't the boom that we've all been looking for. Three printing. Now, I do think that over the past three or four years we've been entering this deployment phase so you go from installation, which is

twenty years to now deployment. We invested in a company called desktop Metal, and when we invested it was about three and a half years ago. The industry for spare parts and UH end use parts was maybe five billion dollars. Today it's nine, so rapid growth in the industry. It's probably going to ninety over the next decade. Son x

ten x and over ten years. Now. Why, if you look at most of the economics of manufacturing, it is spent on tooling, but the vast majority of the value and use parts and these spare parts, if you can change the economics of how you make this stuff. Historically you ship them and you ship it three ways see air or land, but there's a fourth way to ship

apart digital digital. So eventually my mechanic is going to tell me my turbo charger needs a new fan and he'll be able to print it and slap it in instead of waiting six weeks for it to show up from Germany. And in fact desktop Metal is working with

I think seven different automotive companies for exactly this. These small bespoke parts, a water impeller, UH something is part of a motor where it does not make sense to spend the fixed cost to tool and die a part where you're not gonna make ten thousand or a hundred thousand or a million of them. You just need one or two of these parts. So I think that that is going to be a big trend, and particularly if you look at a company like Desktop Metal is a

Boston based company. It has grown very significantly, got BMW and g E and and uh Saudi Aramco and whole Slive Strategics that are investors alongside us. But the other piece of this is wait a second, you said sodium

ram comes on interrupt. So what you're that you just made me think of is you have some a crew out at a offshore oil rig that needs and something breaks and to get something flown out to them could take a week and they lose a week of production, or they have a machine, they manufacture the part and

they're down for four hours and that's it. Correct. Now, maybe it's not four hours, maybe it's a day and a half, but but yes, because the the installation phase where you had a bunch of these printers there that we're doing plastic, there's no way that an industrial company is gonna be able to use that. Now, when you have the sophisticated laser centering metal three D printers, it's real, it's real pieces, it's real technology for real applications. So

that's one. And you're seeing this in jeff In in jet engines, in automotive, you are seeing it. If you get a knee implant, if you get a hearing aid, it is a good chance over that that is three D printed product. Now, this is not a biological product. This is still some form of play sticks and or no, it's it's it could be titanium for your knee. And what I mean by by it's not a it's not an organic product, a metal or plastic. So um, how far off is the Hey and need a new aotic

card valve? And I don't want one from a cow. Almost all of this stuff is still structural. When you start thinking about the other component, which is function, you're really far off. There's a guy, I think wake Forest Tony Atala who's doing three D printing of organs. Now that's that's the sort of vision I'm thinking. Now. I think the best need to kidney print. They can't do kidney, but the best that they've done is a bladder because it's basically just structural right, it's hold old fluid. So

in other words, it doesn't have the mechanical functions. Even if you're working with stem cells, you can't maybe in a lab, but today, like being honest as an investor, you we are far far away from being able to introduce structure into that alright, So so maybe years, a hundred of years. I think it's possible. I would say high probability. In an hundred years, I think it's more likely. Rather than printing it, we're probably going to harvest them.

We're gonna grow them, and that approp I'm not. We're going to grow them inside of animals. Now, there's gonna be ethics about that. But today if you want to no ethics about growing kidneys in front side of animals, if you wanted to take it from yes, but as for for a pig or or who are very similar biologically to humans or or a chimp, it's a nicer life for them than they becoming bacon. Yes, but it's a there's ethical debate. Okay, thanks, take take let's take

care of that ethical debate. You're gonna save millions and millions of lives and inconvenience a few chimps. How is that debate going to go much further than that? I think that if you can, if you can appeal to the default morality of are you reducing suffering, then you have an entire camp with people that increasingly and this is this is observable. It's not speculative that more and more people are embracing animal rights and saying, you know what,

it's sentient, it's suffering. Look, there's nothing more I love. Actually, this is not fully true. Nothing more I than bacon. The only thing I love more than bacon is peanut butter and bacon, which I know sounds disgusting, but it does sound disgusted, but it is amazing. Okay, So I have a friend who's a vegan who eats bacon, and I'm like, you know this comes from a pig, right, And the answer is, but it is delicious, so so.

And by the way, pigs are actually much smarter than doors or horses, and that hasn't slowed down the human onslaught of pork. But doesn't make it right. So okay, but you can you can make the we're digressing, but the ethical argument that it's wrong. We can intellectually agree with it, but in the marketplace that is a giant losing argument, is my point today. And you are seeing

both as evidence. If you look back in the arc of history, I think that what we're seeing with Beyond Meat, you will see you know this uh til ray like phenomenon. I think this is a company that ends up. You know, that's we value eight but after it ran up, after run up five et. But the market is saying something right now, maybe you've got algois and maybe you've got momentum investors and maybe got people, but there's demand and an interest in this, and it's it's if you believe

that markets tell you something. Right. Markets are there to serve you, not to tell you. But but if if you believe that there's something in the ascendency of Beyond Meat a single in the same way that the ascendency of global crossing and these other things, going back to that pridor the ascendency of these things tells you that there's something there. And I do think that we're a

rounding air in the world of food. Let's you and I make a bet right now, when is the first year in our lifetime, when the annual pork consumption short of a worldwide you know, disease phenomena like bovine won't won't happen all right? How about on a per capita basis?

What about per capita even it won't happen in our all Okay, So now that we've taken care of the ethical issue, which is an interesting debate with no real market thing um, which brings us back to I don't even know how we got three D printing to three D printing. So if it's not if it's not the organs, um, it's not the organs, But it is the parts inside the body. It is the parts inside the aircraft, it

is the parts inside the ship. Where the and it's really interesting because the you change the economics of manufacturing, it has geopolitical implications. If you're just shipping a cat file instead of having spare parts in inventory sitting in a port of which there are trillions of dollars sitting imports, there's interesting implications. Same thing you're saving on storage, you're

saving on transportation. It's a greener approach for sure, Even whatever energy consumed by the printer, it's better than manufacturing and storing and shipping or whatever. It sounds like it's a no brainer if it if it can successfully penetrate that mark, I think the no brainers gonna come in it's economics. So we have another company here in New York and half the operations are here in New York,

half are in ninehoven In in the Netherlands. They have made twelve million unique parts, over a million users and customers hundred thirty countries. They'll print two million parts this year, unique parts, individual unique things. If you are a small business and you have a room that's not dissimilar from the room that we're sitting in, you know, matter a few hundred square feet or whatever it is, that's filled with inventory, and you think about the cash conversion, sure,

and how much is locked up in that. If you can free that by instead of having the inventories and just uploading that as a CAD file and printing it and shipping it on demand, it will unlock capital. Anytime you unlock capital, I think you create value sure for sure. So so let's talk about some of the other things, some of the other areas that you focus on. And I have not mentioned um the company that you one

of your early investments that was in nuclear waste for mediation. Um, let's talk about that, and then I'll have to ask you about thorium. Tell us about what you guys did with nuclear waste remediation at a time when everybody else

was looking at green alternate event. So, so if you listen to and there were very smart guys and very successful older venture capitalists, but John Door and Venode coastle are they with the legends, and they were writing the op eds and they were crying on ted stages, and they were really promoting the idea with Al Gore and others that the most important thing you could find were solar wind, bile fields, ethanol battery electric cars. Okay, the

problem was everybody agreed with that. And the number one thing that is predictive of returns is not whether there's a hockey stick growth curve that Gartner tells you this is going to be a big industry, but how much money is going into the industry. More money that floods in, the higher the price of the assets, it'll be great for consumers, lower returns. So we said, where is nobody looking? And that's the thing that I love to do. I love to understand where is the consensus and where's the

varying perception. What's the thing that nobody else is looking at. Nobody was talking about nuclear. You watched Al Gore's movie back then, Inconvenient Truth, doesn't even mention the word nuclear because it was taboo. It was politically taboo. So we looked at nuclear. We spent a year and a half looking at every part of the fuel cycle. We started

with the uranium miners. Maybe there's something there. Turns out there all hucksters and fraudsters in New Mexico, Nevada, so the Coney Island and me said, you know what, stay away. You and I have had the Mark Twain quote. But my favorite discussion, but the old time grid is Mark Twain quote is what is a mine? It's a hole in the ground with a liar standing there, exactly exactly. So, so that was the same thing, right. And and by the way, uranium mining, if if, if it took off.

Uranium itself was such a small portion of the cost of operating a nuclear plan. It was relative in consequential, whereas the marginal cost of nat gas and oil it was primarily driven by the underlying material to the commodity. So we we said no to irany minors. Then you looked at modular reactors. This is a good idea smaller reactors that could be moved easily in and and built,

you know, uh, incrementally. So instead of building a billion dollar giga watt you know, a power plant for to serve a million people, you will build an array of say thirty thirty megawatt plants, each one maybe cost you

a hundred million dollars, and you build it over time. Now, the problem with that is is really for the domain of very long uh tenure investors, maybe sovereigns, billionaires, people that could wait five years not for the technology to develop, but because the regulatory Okay, so we said no to that. But then you look around and you say, GE's the biggest unsolved problem with nuclear is not the political it's it's what do you do with the waste it's disposed?

And so you've got, you know, this whole push for Yucca Mountain, which would be a geological repository. We have spent tens of billions of dollars on Yucca Mountain. Do you know how much waste has gone in zero So we looked at that and said, okay, that's sort of interesting. Now, what about the the way that you store nuclear waste on site? And it turns out that there are basically

two companies. One that makes a vertical cask like almost a casket to put the rods, and one that makes a horizonto one, so you can make a vertical water, you can make a horizon on one. But that was basically some innovation, right, that's the innovation. Now what happens is these rods inside the reactor, you know, they go through a nuclear chain reaction, They heat the water, the

water turns the turbines, that's hod of nuclear power. Then when you're cooling them, they sit in a pool of water for five years and then they're pulled out and they put into these little caskets five years just to cool down. No, no additional reaction, that's just a very low level background. Water is a natural neutron observer. And but but there's all this low level waste that is sitting there. So everything from worker dose radiation to parts

and and and there's a big market for that. But the bigger market and this was the thing that really got us. If you actually sit and I promise you. This is not scintillating reading, but it was insightful because nobody was looking at it. If you read the d OE budget billion dollars a year, six billion of it is spent a nuclear waste clean up, you have you

read the Fifth Risk by Michael Lewis. Yes, the whole that last third of the book is all about what the people think the Department of Energy is about energy. It's not. It's about nuclear nuclear weapon clean up and some nuclear energy. Now that that book was written well after this. So this is two thousand. Uh. Hanford, Savannah River, Idaho National Vannah River is giant, huge people. People are unaware of how there is an entire city in Hanford,

Washington to Washington. You fly in there, there's an airport dedicated to this one bar. It's called the Three Eyed Fish Bar, like out of the Simpsons, and and the entire thing is a community and a complex dedicated to nuclear waste clean up. Now, the people that are making all the money, and when I tell you they make money, it's billions of dollars a year basically shoveling waste from

one side to the other. And this will be going on for decades it's U r S, it's c H two M hill, it's floor, it's the big engineering primes. So we looked at this and said, not only do you have this in the U S, but you have this in the UK with a site called Cella Field, you have this in France with log Is there an opportunity for a high tech solution that could win contracts by doing this faster and cheaper. We looked around. We couldn't find anything nobody else's and that nobody was in

the space. And I gotta tell you, going around for a year to nuclear waste conferences, I was certainly the only person under fifty years old, uh, and I was certainly the only venture capitalists there. So we go and we find the best technologists that we can, and we find the best people that were under the age of sixty because they weren't that entrepreneurial in this space. And to be honest, we found people that were like fifty eight or fifty nine, and we end up blocking him.

The best technologies, which were a combination of material science and chemistry and physics, materials that could grab the worst radio activelopments like caesium and strawntium acium, uranium, plutonium. And then we had a second technology called vitrification, which in Layman's terms is glassmaking. Take the stuff, lock it up into a glassmate, putting it in in silicon or some other silicate is glass. And but you're heating at about

seventred degrees, it turns into this molten form. It can't leak, re leach into the radio acci radious, not cranking. Haven't transmutated it. You know that that doesn't really exist. But but but in gold and we know that does exactly. And then and then oh, start a mining company and taking public so with a liar exactly. So so we

we ended up starting a company. We named it Curryon after Madame Curie, and in part because with a K to be cute, and and uh in part because I read the article in the about the Department of Energy and it said that there's billions and billions of curries, which is the measure of radiation. And that was the inspiration. So we started the company and with very little money, and uh, I had two of our LPs who were prominent hedge fund managers and Austin. We put a total

of three million dollars into it. And I put a million and a half in from our fund at the time, and we owned thirty five percent of the business. We stake these guys. They go off to work and the first year they did about a million revenue. Second year, black Swan, you had a negative event, which was the seismic event that led to the earthquake that led to the tsunami that led to the Fukushiman disaster. And lo and behold, the only company picked in the US for

this cleanup was this little company, Kuran. So we went from a million dollars in revenue to forty then eight still working there now it's still still are and and they actually sold to Veolia, which was a French giant. We sold for four million dollars, going to third of the business. We made an excess of forty times our early money where suring the entirety of that fund. And it was gratifying because we like to sound says as as santimonious as it sounds, that we like to invest

in matter that matters. It was meaningful because you actually did something to reduce all the radiation from this disaster site. And we got to make our investors a lot of money. We have been speaking with Josh Wolf. He is the co founder and managing partner of Lux Capital. If you enjoy this conversation, we'll be sure and come back for the podcast extras, where we keep the tape rolling and

continue discussing all things technology and venture related. You can find that at iTunes, Overcast, Spotify, Google Podcast, Bloomberg, wherever you're finner. Podcasts are sold. We love your comments, feedback and suggestions right to us at m IB podcast at Bloomberg dot net. Check out my weekly column on Bloomberg dot com. Sign up from my daily reading list at Rid Halts dot com. Follow me on Twitter at Rid Halts. I'm Barry Hults. You're listening to Masters in Business on

Bloomberg Radio. Welcome to the podcast, Josh. Thank you so much for doing this. I've been looking forward to this for a while, UM, since you and I sat at what was a fascinating dinner UM and I hope something comes out of it. Uh, really interesting idea that any Duke is working on. You mentioned my friend Michael Mobison was also there. It was really a murderers rogue of people. There are quite quite a gallery of intellect. I don't

know what's going to come of it? But I thought it was fascinating and I thought what you discussed was really interesting. I have no idea what it was, but it led me to say I should have him come. Here's an interesting guy to sit and chat with. So what do you recall what your big idea was in that? That? Meaning?

You know what I actually think at least one of the ideas was as they were thinking about how do you get more broad distribution about decision making for young people, how to train people to make better decisions and while they're in the junior high school level, and and and the first principles approach that you would want to take to this is, well, how do you reach those people? And the old school thinking is let's put it into the curriculum of the schools. And every time that you've

tried that, you know it's typically failed. And so you know, go where these people are. So if if you've got social kid, yeah, or that you know, if that you've got young kids it's on roadblocks, you know, have gamify this so that young people can be on roadblocks and you know, playing decision making games and looking at things maybe even starting to learn to think of probabilities or slightly older generation it's it's podcast, or it's uh, it's this is this is now old school media. I used

to think this was so cutting edge. You're telling me this is now old People that are listening here no voltron, they know Caddy Shock, you know they younger, younger people maybe not, that's uh. I've had a number of NBA professors tell me they assigned m various episodes of this is homework. So there's some right, it's it's content you have, you have amazing access to amazing people. Why not, it's it's quite it's quite insane. Talk about dumb luck. That

will have a longer conversation about that. At another time, we were just talking about nuclear waste remediation, and I have to ask you about the concept of thorium powered reactors. I don't know how many years ago, this was a huge article in Wired magazine if you were coll wired um about all the advantages of thorium and how productive it is and how low grade the waste is, and

yet nothing's ever seemed to happen with that. I'll give you a probability in a timeframe, there's a fifty chance that we see something in the next fifty years, and a ten percent chance that you see something in the next ten years, and if you do, over seventy percent chance that comes from China. The Modi family has been backers of an effort on the East Coast. I think it was called thorium power. We looked at a bunch of efforts. The problem is it is very long, very expensive,

regulatory fraud. It's just it's it's just gonna take too too long. The virtues of thorium are great. You know, it's cheap, cheaper, lower, probably cheaper than uranium or or any of the other and lower. The biggest virtue of it is you have less probability of proliferation because one of the outputs of traditional nuclear is plutonium. No plutonium thorium, which is really interesting. And um, let's talk about there's a few text subjects we didn't get to. I have

to ask you about chrono biology. Yes, so let's talk a little bit about And my understanding of this is, Hey, we could take the RNA sequence and clip off the ends, which tells people tells other cells when they're supposed to die, and theoretically we have an infinite lifespan there. There's there's many different dimensions of this idea of chrono biology, and the biggest one is that different cells in your body are different ages, and there are markers on those cells

that can tell how old something is. So the Prokinje cells in your brain are probably twenty five years old, oh mine much older than that. They feel it anyway. The gut and skin cells you have are maybe days at most weeks old. So different parts of your are basically regenerating and growing and dying at different times. You're not like there's not one Barry, right, You're made up of lots of different things at different ages, and so being able to do a body clock to understand those

different things is important. Second, it turns out, of course we have circadian rhythms, right, you get tired at night, You have different levels of hormones at different times of the day. Different people might be night owls people might be but there's something to that physiologically throughout the day. The third is that there's now evidence and scientific papers are coming out showing that if you give chemo at certain times of the day to certain types of people,

that it might be more effective than others. Really, so there's something in the body about when you're being reactivate. Look you you, I'm sure have a time when you feel that you are your most alert when caffeine works on you, Whereas you might after lunch go into your food coma at three o'clock or something and caffeine just doesn't work as well as it does, say at nine thirty, when you know your hormones and and metabolites are are

spiking at a different rate. So the idea of chronobiology is within the cells, between the cells, and even between people. Is there something about the dimension of time that plays relevance for medicine in the body. That's that's quite fascinating. Um, what else? Autonomous driving GPU gaming to your concept of of UH, intelligent machine goes from GPU from gaming to

power artificial intelligence to machine learning. What's next? Is this what's going to drive fully autonomous driving, autonomous military vehicles? Where does this go? And explain what GPU is? So, So GPUs are graphic processing units. This is the ability to do UH large scale multidimensional processing of polygon. So back in the day, if you had in a Nintendo

sixty four, it was this big revolution. If you were playing James Bond, back in the day, it was like, wow, you know like three dimensional you know Simulation Tank Command. I remember that game, and that was two dimensional. But but you can see what was all three dimensional polygons and that's how they created the sense of depth and the illusion of space exactly. But but over time you can see this clear progression, almost like a Moore's law

of visualization. But we went from CPUs, the central processing units, which were primarily dominated by Intel, to GPUs, which were primarily dominated by in Vidia. Now, the narrative in public markets around Nvidia was this is tightly coupled to PlayStations,

PS four and uh xboxes. But suddenly something happened a few years ago, about seven years ago, where they invented a language called Kuda c U d A, and it put it in the hands of academics and researchers who suddenly said, wait a second, instead of using CPUs for high throughput computing, we can instead use GPUs to do this processing. And they started doing the processing for neural networks to be able to do artificial intelligence and machine learning.

And so you saw the shift where GPUs were primarily coupled to the consoles and gaming to suddenly being the soul of the new machine inside of things like autonomous vehicles and drones and simulations. This is an area when you say, like what's next In terms of autonomous vehicles, increasingly the technology stack is um is maturing. You have light ar, you have solid state LDAR, but the really

valuable thing is the simulation. And this is a fascinating phenomenon because it is affecting many different industries, the gap between reality and that which is simulated, so the ability to render reality in physics engines, He's leading everything from you can play a simulator on something like Drone Racing League and you can actually fly a drone and it's indistinguishable. You can actually simulate something inside the human body using a CT scan of a body and have a GPS

guided experience using a surgical robot. You can actually have a simulation of a street and then have an autonomous vehicle that is learning on the simulation as opposed to actually learning driving in the road, and it's increasingly indistinguishable. So typically that takes place on a screen. I know

you're a sci fi guy. When do we get um the star Trek Wholegram room the whole of deck well, you've got we have a company actually called looking Glass that's doing volumetric display, but we're not needing three dimensional without a screen. Three dimensional. You have a screen, but you have no V R A R glasses, So it's a it's an optical trick like holograms are. But the future there is that you'll be looking at something lookin

too uh um. You know, a pitch on a soccer field, then it's in three dimensional like a fish tank, and you're watching the game, you know, right there. H So, one last star trek thing I have to ask you about. You've talked about transporter technology, right and we're not talking about spooky um connections at a distance or anything on a on a sub atomic level. You're literally talking about the ability to send matter from here to there. Explain that, Well, I don't think you can do. I mean that is

science fiction. What you can do is, I can take a picture I'm looking at a coffee cup on our desk here. I can three D capture a similar acorum of that cop I can now it's a CAD design. I can turn the atoms into a representation in bits, and I can send those bits as a cat file digitally to a three D printer, and I can print a version of that, but I am not actually transporting

the individual atoms which is copied it. Which is why I will never step foot on a transporter, because people don't realize the transporter kills you and creates an exact duplicate of view wherever it goes. And I was always I was always surprised at Star Trek how that never came up other than the doc not wanting to do it. But every time you step on a transporter, if you want to make a device to execute people, and this would be it, right, you basically take people and disassemble

them on a molecule and atom by anom basis. Now, the fact that you have the ability to reassemble them elsewhere, that doesn't mean they're not dead. This is just an exact duplicate. But I just thought that was an interesting But so you're talking about reporters are not an investable thing. You're you're talking about basically the variation of three D printing using at a distance, using using um a full three D scanner, scanning you know, and and three D scanning.

The resolution has increased exponentially over the past few years and so that's going to continue, and I think that you can capture very discrete elements. Uh. This is another area where actually I'm very excited about biology, which is the imaging and microscopy tools that are coming out to be able to capture things in real time at a

near atomic scale inside of cells. But the idea of teleportation is you know, today's science fiction three D scanners coupled with three D printers will closely approximated, but it's still a trick and at a molecular level, you know, let's we might as well talk a little bit about Crisper and gene editing. Um, are you describing building these things from scratch or are you talking about growing these things, designing, redesigning the genes and growing them or doing a scan

and reproducing them. Well, there, no, no, So in biology, there are there are people that have gene libraries. They're trying to assemble nuclear tides. There are people who are editing them using the technique of Crisper. Crisper is really, I don't want to say, an overhyped technique, but it is a very hyped technique that was a fundamental breakthrough and the fundamental breakthrough was effectively control C, control V,

and computing. It was copy and paste. You can actually use this technique to be able to transpose code, dawns or nucleotides from one part to another, and so that allows you to literally edit like a Microsoft word with precision. But we are still so far away from being able to deliver. There's been no crisper in a human There's been no technique where you say, you know, Jeez Barr has got a genetic defect here and let's you know,

edit that out. It's just it's it's it's so far away from practical reality that it's still a lot of hip. But when you say so far away a thousand years, no, I mean, you know, a hundred years, ten years impossible to predict because you could have a breakthrough, you know, in so intellectual but realistically, fifty years from now you will be able to edit not you but you can today edit embryos. You can you know in China is

doing this. China, and this is something I always say that China lacks something that we have, and because they lack it, they will be ascendant. And the thing that they lack is the ethics and regulatory apparatus that slows things down here in the US. Well, the way to let me rephrase what you just said, China prioritizes the group over the individual. In America, our priorities or the

individual of the group. And that's the difference between individual rights or a society that's lasted five thousand years totally. And and the result of that, I think is that many of the advances in biotech will actually in the near future occur in China, particularly around CNS disorders Parkinsons. And the reason I say that is, first of all, with the growing demographic population we have that are going to get older here in the US and suffer from

things like Alzheimer's and Parkinson's and neurodegenerative diseases and inevitability. Statistically, that is a huge market. We have shifted much of our primate research outside the US because of ethics reasons. China does not have any such ethics reasons. They do work on prisoners that even Americans would be a guess that that that may be so, but they are definitively

doing work on primates. Uh. And I think what's gonna end up happening is we will import from China the drugs much in the way that the US X boards Hollywood to the rest of the world. I think China will be exporting drugs and hopefully you know, it's well tested, close to FDA approved apparatus, so that we're not in in uh important crazy stuff. But so, what's the difference between doing the research? This is where the ethical slash

economic discussion we had earlier comes to four. Is there a difference between doing the research or purchasing the end result of that research? To me, it's the same effectively, the research was done. You may not like it, but you're eating the pork or you're buying this product. How are you not as responsible for the research as if it was done here? Isn't it hypocritical to pretend otherwise? And this goes to whether we're talking about food or

what have you. Well, look, it is a US citizen, your your tax money goes to university research, and you might fund some research. Whether you agree with that or not. I mean that's the age or the War Department or this. So that I mean, which itself is another ethical issue we should touch on. Because military technology, I think is

going to be an absolute boone in venture capital. I think it's one of the most exciting and important areas in the next you know, five years um in part because the vast number of big tech companies from Google on down are issuing wanting to do work with military. They have such pressure from the HR and I R departments that people are saying, I don't want to work

on this stuff. It is creating a giant, gaping, whole void where there is a tremendous opportunity for some of the smartest technologies, some of the smartest scientists and engineers, to work on these wicked, thorny problems in defense. Your pal Peter till We are co invested in a company called and Roll. I think it is going to be one of the greatest companies in defense. If you look

at the new entrants. If you look at the new entrants in defense, you know, you've got Lockeed, You've got Raytheon, You've got be A, You've got General Dynamics. There hasn't been anybody over the past. They've all conglomeratized over the past thirty years. There used to be fifty companies in that space. There's seven. And in some cases you have people that are doing amazing things, but it takes a very long time, and they're working on huge, multi billion

projects like the thirty five Joint Strike Fighter. In other cases, you have many, many small beltway bandits who are just getting these cost plus contracts because they know somebody that knows somebody. But true innovation the thing that I think gave American military might, which in turn gave our economy the ability to project power across the globe and control two oceans, and all the geographic plus military advantage we have,

it has to be supported by continuous technological advantage. Is something that over the past twenty years, I think has slipped away. I think very few engineers want to really work on these problems, and I think the smartest ones that do are not only going to make a fortune, but they're going to do a tremendous patriotic duty. Quite quite interesting. There's a fascinating story about how a bunch of engineers tried to get the Navy to take radar

in the new book um Loon Shots. It's just astonishing that this was an old technology by the time it was put to work in World War Two. Nobody could get the War Department, which, as it was called, back then to recognize the military value of this, I gotta

think there's a million things. It's always I mean, even the Jim Wolsey, whose former I who was a venture partner on our firm Familiar really he uh you know, tells a story of of Amber, which was he traded a bunch of alpaca back blankets to um to some people over in eastern Europe to be able to get a runway and then actually fly a drone. He was looking at Milissovitch and uh and in that early drone was predator by this really entrepreneur Abe Caram at the

time wolves. He went to the d O D and said, I need a drone. I want to be able to you know, have an unmanned pilot that could a pilot vehicle that could give me eyes on the ground. And they said it will cost five million dollars and take six years. And he was able to go to this entrepreneur and in five million dollars in six months they were able to create this astonishing and whatever happened with the company behind the Predator drone did Boeing a General

Atomics General Stomics. Okay, that's a that's a minute. General dynamics or general Atomics. Really that's a great that's a great name, j um So I only have you for a fine amount of time. Let's jump to our speed round our favorite questions. These are what we ask all of our guests. Um, first car you have our own? You're making model Ford Explorer. It was a Hunter Green and uh, I think I had it for a year before it spun out on the highway and uh I

never drove it again. By the way, this is my test question because eventually someone's gonna say, what's a what's the car? I don't know what you talk exactly? Uh, tell us the most important thing people don't know about Josh wall I mean, you know, there's so much that I don't even know about Josh Wolf right. So being intellectually honest, but uh, personal side of me, I love

heavy metal and hardcore. I grew up going to you know, mosh pick Brooklyn, place called Lamore's and Life of Agony, and I like skateboarding, and I like people that just have this sort of gritty rebel side to them. Heavy metal hip hop. When you say heavy metal, like my hip hop following ends at Pulse Boutique with the Beastie Boys, but yeah, it's too commercial, like you know Black Moon.

On the hip hop side, um uh, like two commercial is three eleven or or and and on the heavy metal side it would have been um deaf Tones, Life of Agony, bio hazards, you're hard for. Like, to me, heavy metal is Black Sabbath and that's like when I was coming up. But you say that today. But when Black Sabbath came out, people were like, what is this devil music? Exactly? Um, tell us about some of your early mentors. You obviously have a few who have helped

shape your career. Well, it's interesting there there used to be this placard outside of our old office. We were on forty first Park in Madison that we're down on Broadway and you said that, Um, you know, reading great books is like having conversations with you know, the best minds of history, and so so many of my embedded in the ground. And so my office is forty Brian Parks, right, they're they're fabulous. They're all over and I don't know

who did that, but it's genius. I love it. And and you know you're you're looking down, you're looking at your feet, you're looking at your phone or whatever, and you notice these things. But that one always hit me because so many of my mentors in a sense are people that I never met, that are dead right there,

just live in the pulp and the ideas. But but the one human mentor that I really I feel oh my career and and the intellectual honesty is Bill Conway, the founder of Carlisle, who is just his ethics, his integrity. It doesn't matter what the deal docs say, it doesn't matter what the contract says, you just do the right thing. Um. The kind of questions he asks, the way that he speaks without saying things. You know, it's, um, what do

you mean by speaks without saying things? Um, he has a diplomatic way of saying things, and sometimes the messages and what he doesn't say. And uh, I find that there's a handful of people that can communicate that way where you sort of intuit what they mean without them actually being explicit. Quite quite interesting. Um. Talk about investors, be at VC or otherwise, who influenced your approach to

the world of risking capital? Well, you know, I think I read every bio and every article that I could about the early venture investors Um, so you know Tom Perkins and General Drio and all the early venture capitalists, um and and so many of these lessons are basically irrelevant because you have this depends there's an idiosyncratic moment. I remember there was a guy from a firm he was a legendary investor back in the day, Ben Rosen from Seven Rows, and he was early investor in Compact,

which was once a significant technology investment Invincent. You just need one. You just need one because you get one hit and then that hit begets you know, a reputation or reputation but gets more hits and so on. So on the venture capital side, it was you know a handful of individuals. The person who I have the most respect for and venture capital hands down as Bill Gurley. I think he's a true investor. I think he came from the cell side on Wall Street and he understood

how to be an analyst. First, he understands businesses, he understands human nature. I think he happens to be a towering giant because he's very tall and I'm very short. But um, we're both on the board in the Santa Fe Institute, and and I oh with Michael exactly. Michael chairs it and and and so, uh So, I'm very fond of Bill um and uh you know, but there's Bill Janeway is another guy who I think really interesting, super smart guy, and the way that he always thought

about risk and technology was an influence. Um. There's an older guy, Chris Brody, who was a Warburg pinkis who I spent a lot of time with. I've probably learned how to be a good board member from watching uh Chris, you know, hold people accountable. So a lot of you know, individual lessons. But but from an investing philosophy, I mean, hands down, it's like the value investors because they were just rational and they have they wouldn't touch venture capital.

You know, Charlie Munger and Buffett and everything that I could read you know that they've ever written or said, and all the you know, acolytes that followed from them, I think are just It gives you a a grounding sense of a true business and markets and human psychology and and uh so, I think even as a venture capitalist, you know, if you if you haven't studied those greats your you get a massive deficit. Let's look about books.

We've mentioned a few over the course of our conversation, what are some of your favorite books, be they fiction, non fiction, techychology. I'm a voracious reader, so so fiction nonfiction, so Conciliency. O. Wilson was a great Um. How the Mind Works Stephen Pinker. Um. I loved The Operator about David Geffen And I like reading biology. Uh sorry biographies? Um, why Zebras don't get old scar? Oh? Sure out of Stanford?

What's this game? Poki? Right? Suppolsky Roberts Polk is he's a primatologist, right, but at the end of the day, where where he's really a behaviorist if you think about it. But but we we are two primates sitting here talking, right. And related to that, there's a great book that Robin Hansen wrote in the past one or two years called The Elephant in the Brain about signaling and if you understand why people the motives behind why people do things.

I think it's really interesting. Um, let's see the on the fiction side, it's interesting. My wife really got me into fiction. Got no going back in fifteen years or something like that. But the Magics, um, and it was sort of the psychological profile. Oh. I can't remember the author's name, but it was m A g u s. It's this guy's got this like Greek island and he he has this teacher professor who takes this little sojourn there and he's just like all these mind games that

he plays with John Fouls. Yeah, it was. It was dark and cool and psychologically that turned me onto a British writer, Rachel Kusk, who's writing like every sentence you know I mentioned before, I love the line that there's aggers and men smiles from Shakespeare and so just her use of language and the psychologically astute prose that she has is great. Um she has a trilogy that seems to be Outline is the first um and and Transit was the second, and Kudos I think is the third.

Um fiction recently over story by Richard Powers. It's just brilliant pros And I really got turned onto fiction because I think that you can you can tell more in a paragraph by an amazing fiction author who understands human psychology than you kind reading an entire textbook. So I'm surprised there isn't a science fiction title on the list because you talked so much previously about sci fi, Neil Stevenson, I mean by you know by far the depth, the

rigor the foresight. You know. The Diamond Age for me, probably around the time that we were starting Locks was just such an inspiration. Um, Diamond Age. Yeah, and I know that one. And he didn't he do seven Moons? Yeah? Right? And um yeah, and then and then TV writers like um, you know, David Milch and Deadwood and the current writers on Westworld. Um, I just I think it's absolutely brilliant, scintillating soliloquies that they put forth and philosophically erudite, really interesting.

We are in a golden edge of television, I think. So, uh, tell us about a time you've failed and what you learned from the experience. Well, you know, there's business failures and there's personal failures. The business failures you lose some money, right, or you made a bad decision. So if you're losing money, is you know you're not gonna hit home around every time you're at bad may not be a failure. It's

within the expected distribution and returns. We watched as process first outcome right, So so there are times where we actually make money, but we considered it a failure because we have the wrong process. So what I mean by that is maybe our thesis was we were going to make a certain amount of money or we gonna work for this reason, and we were. We ended up making money, but we're totally wrong. We consider that a process failure.

But being you know, I don't want to sound like, um, I don't know to cliche here, but like, the the biggest failures for me are the things that have the permanence of regret. So choices I made, or relationships that I under invested in, or people that I didn't spend enough time with who passed, like, those to me are

the biggest failures. And um, if there was like if there was a younger Josh that I can go back to, it would be you know, some of the relationships that I wish I could have fixed or or people like I said who passed, that I could have spent more time with. Those to me of the biggest failures because you can never fix them. You lose money and investment. You know, a big deal, you'll make money in another one, but you know, you lose a person or a friendship

or relationship. I think those are the biggest failures. So afterwards, I'll give you the secret to time travel and tell you how you could solve those issues. Um, and I'm not kidding. What do you do for fun? What do you do when you're not reading or or at work? My my kids are just you know, it's an amazing adventure.

I've got three of them. Uh you know, now there are nine six and three, two girls and a boy, and you know you get to just see the world through their eyes and and make all kinds of new mistakes over. Um. So I love my kids, I love my family. I was an only child, though I ever wanted was a big nuclear family, and my parents blew when I was young. So this is sort of the chance I've had to make it right. Um. Love reading, skateboarding, basketball,

just still skateboarding. In fact, there's a Sunday morning crew of Dad's, um you know that are sort of between forty and five, and we go out and try back at the skate park. And you've got to keep the orthopedics busy. They need to earn a living also, UM, tell us what you're most optimistic about today and what are you most pessimistic about? You know, I think this

is a constant. I'm always optimistic about scientists and uh, you know, the incremental discoveries and the big breakthroughs that they're going to make, because I think it's an inevitability. I always talk about this sort of directional hour of progress, and I think there's an absolute inevitability, just driven by human greed pursuit of status, that we are going to continue to discover incredible things that by definition, nobody ever anticipated.

So I'm optimistic about science itself as a process. Um. I am generally pestimistic about human nature. I mean, the best and unfortunately the worst things that I think happened in the world are not because of um, you know, inanimate things. It's because of animated things. Is about people, two legged mammals who who are you know, filled with um too much read or too much fear, too much hate, or too much ignorance. And and so I'm generally pessimistic

about human nature. And and uh, you know that classic Daggers and men smiles. UM. And our final two and most favorite questions, what sort of advice would you give to a millennial or recent college graduate who came to you and said, Hey, I'm interested in a career either as a technology entrepreneur or a venture capital. I think the single most important thing for anybody is to UM, to build your brand, be differentiated, be indispensable. UM, stay

close to the money. You know, find where the capital is flowing and stay close to it. That was one of the great early advices that I got from somebody. UM. And and be voracious in your reading. I think you have to be exposed to so many things so that you can sort of develop your passion and then from your passion development expertise and be able to stand out so you know, all those things are in a linked UM.

And the best advice that I probably give, again with regret to my older self, is I think you need to find the balance between having the chip on your shoulder and the ambition. And then UM, you know, being mindful that every relationship you have and every person that you know, at some point in the future, they're going to be a call option and you don't want that to expire. So UM, you know, be good to people.

That works for me. And our final question, what is it that you know about the world of venture capital investing today that you wish you knew twenty or so years ago when you were first getting started. I wish that I would have known and this is gonna sound a bit cynical, how rigged the game is. Um, I

think every system at every point is rigged. And if you can figure out you know, that little uh, you know, mechanical turk in the machine that's pulling the con rigged Yegg explained that a little bit every look in you know, people thought, you know, just gotta pick the winners or whatever. But the system was rigged. I p O s were rigged,

the distribution of IPOs was rigged. UM, you know, housing market c d O s. There's always a game being played, and it's and there's a a a secret that the people who are making the most money basically keep they won't acknowledge public until after the fact. And so I think at any point in time in some domain it's happening. And whether it's central bankers today, or whether it was the housing crisis, or whether it's the soft bank stuff too, you know today or um, that there's always some game

that's being played that is totally unfair and rigged. And UM and to sort of appreciate that and and look forward, UM, try to try to figure out where's the system rigged, because it always is somewhere quite quite cynical and fantastic, fascinating. We have been speaking with Josh. I almost called you Josh Lux Josh Wolf, managing partner and co founder of

Lux Capital. If you enjoyed this conversation, we'll be sure to look up an inch with down an inch and on Apple iTunes and you can see any of the previous two hundred and fifty such conversations we've had over the prior five years. UH. You can find that wherever final podcasts are sold Spotify, Apple, Google Podcasts, etcetera. We love your comments, feedback and suggestions right to us at m IB podcast that Bloomberg dot Net. I would be meant remiss if I did not thank our crack staff

who helps put this together each week. Carolin O'Brien is our audio engineer today. Michael Boyle is my producer. A tick of Val Bronn is our project manager. Michael Batnick is our head of research. I'm Barry Ritolts. You've been listening to Masters in Business on Bloomberg Radio.