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Unknown A
Today, I'm going to tell you about seven strangers who made the greatest investment of all time. Sam, I'm just going to put my finger to your lips and just say, let me cook here, because I got something for you. I'm just going to. I'm going to take you down a road here. All right? So I've been down this rabbit hole, dude, for the last. I want to call it six hours preparing for this podcast because I just got obsessed with the random story and lore of the first people that invested in Google. This is crazy. So this is the story of all the people who invested early at Google. And the lessons from this are not about investing in Google. This was like, you know, 20 years ago. But how crazy the world of angel investing is and how much you can almost create your own luck.
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Unknown A
And I want to show you how these people created their own luck. So step by step. So first, let me show you something. All right, Sam, check this out. Do you recognize this building?
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Unknown B
Just probably something in downtown Palo Alto.
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Unknown A
What you're looking at is 165 University Avenue, also known as the Lucky Office, also known as the Karma Building. You might recognize a little better here when you see one of the companies that was started here. So Google was started here before Google was started there. PayPal was started there before PayPal was started there. Logitech was started there after Google was started there. A company called Danger was started there. Sold for 500 million to Microsoft by the guy who created Android right after that. This office is legendary.
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Unknown B
Who's in there now?
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Unknown A
Well, it's had a little bit of a cold streak recently. And it's kind of like Ed Sheeran says. Ed Sheeran believes that rooms have songs, and he's like, once a studio has been mined by like, four or five great artists, it loses its magic. It's. There's no more songs left in the room. That's kind of what's happened to this office now. Hey, let's take a quick break to talk about our sponsor today. HubSpot has put together a list of 200 AI business ideas. These are business ideas that you could create using AI. And it's a list of 200. They did a huge brainstorm, so you could check it out. If you just click the link below, you can get access to these 200 AI ideas. I'll give you an example of a couple of them. One of them is you could build an AI dressing room.
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Unknown A
So let's say you go to an e commerce site and you want to see what something would look like on you. You can use AI to actually take a picture of you and show you what the clothes would look like on you or what the makeup would look like on your face. It's pretty cool, right? Or AI tools for real estate brokers, maybe something that takes their listings and makes them more. More fancy, more, more, More beautiful and attract more buyers. So check it out. It's a brainstorm of 200 possible AI ideas brought to you by HubSpot. You can get it free in the link below. All right, I want to take you through the first few people that invested in Google and how it happened. Do you recognize this guy here? Do you recognize either of these two guys?
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Unknown B
The guy on the left is Sergey. He's one of the founders. Is that Sergey or the other guy? Larry?
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Unknown A
Yeah, that's Sergey.
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Unknown B
Sergey. And the guy on the right is that Eric Schmidt?
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Unknown A
It's not Eric Schmidt. It is a guy named Andy Bechtelstein. Does that name sound familiar?
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Unknown B
No.
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Unknown A
Maybe if you just look at these murdered out guys. Yeah, these murdered out red Corvettes from the early 90s here. This might ring a bell or two. What you're looking at are some of the OGs of Silicon Valley. These are the founders of Sun Microsystems. Do you know what Sun Microsystems did?
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Unknown B
It was one of the first big companies, was it making microchips, workstations, computers?
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Unknown A
Basically.
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Unknown B
Okay.
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Unknown A
And they made their own chips also. They ended up making chips. They end up making their own operating system. They ended up doing a lot of things. These guys were like the OG of the og. That first guy, the Indian guy, that's Vinod Khosla. So that's Vinod Khosla. There's Bill Joy, there's Andy, then there's Scott McNeely. All right, so these are the four founders of Sun.
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Unknown B
Dude, by the way, for the record, they look dope.
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Unknown A
They look dope as hell.
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Unknown B
Corvette, the Flex that doesn't exist anymore. And I think it's fantastic. I think this is great.
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Unknown A
First of all, they're all on cell phones. Guess what? Cell phones hadn't been invented yet, so I don't even know what they're holding. There's like a corded phone that's running into their car with the little, you know, like the spiral cord. Anyways, these guys are awesome. So Andy wakes up one morning and he's got an email in his inbox. And it's from two Stanford students, Larry and Sergey, the founders of Google. And they're pitching him on an idea for a new kind of search engine. You know, the way that search engines worked at the time was there were these Ask Jeeves, there was altavista, there was Yahoo. And all of these companies back in the early 90s, they were, you know, search engines that had some combination of manual curation. So they had like editors picking what goes up front, front for people. How do you find what you find?
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Unknown A
Or you would search and it would just try to match the words that you're typing to the website. And these two PhD students said, hey, we have a new way of doing this. It's called PageRank. And what PageRank does is it basically says this is genius insight. The genius insight was of Google was that instead of just showing you what our editors say is the right answer when you search for murdered out red Corvette, instead of just giving you a word batch for it, we're going to show you a link to the website that other people are linking to. Social proof, right? So if other websites are linking to your website, that means your website's probably pretty good. And the more important those websites are. So like let's say the Wall Street Journal links to you. That matters more than if Sean's website links to you.
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Unknown A
And they had this insight that they could create better search results this way. They said, we'd like to show you. And so he says, I'll see you tomorrow morning, 8am he sees them, they pull up in a parking lot. He's in his. The story says Porsche. So maybe one of these is a Porsche.
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Unknown B
One of those is a Porsche.
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Unknown A
Okay, great. So as you can tell, I'm a car guy. One of those is a Porsche. That's Andy's car. Larry and Sergey show up. They have a little laptop and they are trying to show him a demo of Google. And they show him, they say search for something. He searches for something and the results come up and it's magic. The results are way better than you would get out of a traditional search engine. And they start telling them their thesis and what they're going to do and how they're thinking about raising money to go actually turn this into a company. And he says, guys, there's a lot of things we could talk about right now, but I think it's easier if I just give you money. And he goes back to his Porsche and he comes back with a checkbook. He writes them a check for a hundred thousand dollars and he writes it out to Google Inc.
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Unknown A
And they're like, google. They're like, hey, we haven't even incorporated the company yet. And he Goes, doesn't matter. And they go, but what about valuation? He goes, guys, this is the best idea I've ever seen. Take the money, start building. And he leaves. He gets back in his Porsche, he drives away and he doesn't even know how much of the company he's just bought because he didn't even agree on a valuation. A number of share price, none of that. He invests the money, he walks away. He invests at a 10 million valuation. Google today is like multiple trillion dollars, right?
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Unknown B
So he owns 2%.
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Unknown A
He owns 2% of this company. He doesn't even realize this at the time because they haven't decided on a valuation. And he's so excited about this company. And if you remember the four levels of luck, he's basically has that luck favors the prepared mind. He knew when he saw this company that was. He goes, this is the greatest idea I've ever seen. And, and this is the guy who created sun at, at the time. He's the, he's like the man, right? This is like if Elon saw something and invested in a company, he's like, no, this is the best product I've ever seen. And this is the guy that made Tesla and you know, SpaceX and building rockets. He's like, no, no, no, this is the shit. So Andy does that and he's so excited. He goes and he tells the next guy in our story.
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Unknown A
And this is the next guy. Do you know who David Sheraton is?
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Unknown B
He's another og, like Cisco or something like that, or one of these, like big things that I don't even know what they do, but they have a.
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Unknown A
Huge building, Arista Network. He also invested In, I think VMware that sold to Cisco for $700 million. So I took this screenshot off of Google. It says, the quiet billionaire. Oh, I forgot to say Andy's nickname is the golden boy. Well, David Sheraton's nickname was. He was the billionaire Professor. This guy's a professor at Stanford, but he's super wealthy, like a multi billionaire. He's also on many lists as the cheapest billionaire, as the top 10 cheapest or most frugal billionaires you'll ever meet. A little quote from him on it. They were like, dude, you're a billionaire. Why don't you like, you ride your bike everywhere. You don't even have like a fancy car. You still live in this old house that you lived in before you got rich. What's the deal? And he goes, honestly, I kind of hate the idea of living Like a billionaire.
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Unknown A
He goes, I'm actually pretty offended by this sort of thing. You know, the type of people that live in houses with 13 bathrooms and so on. Something's wrong with those people. And this is David Sheridan. He gives away tons of money. So he's given away, you know, tens of millions of dollars to universities, to schools, to education, to philanthropy. But he himself just rides around like a doofus with a bike helmet out on his old bike, and he just. That's how he lives his life. And he's great. So can we.
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Unknown B
Can we just say really quick that the professor billionaire type. I think of all the billionaires, they might be one of the best.
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Unknown A
Maybe your favorite, I think I thought criminal billionaire, like, Silk Road type shit was. Those are cool.
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Unknown B
Those are cool, but they're not aspirational. Like, I want to be friends with them. But, like, the aspirational one is the professor billionaire. You know, the guy who started Renaissance, the big hedge fund. Professor billionaire. Ed Thorpe was a professor billionaire. Those are the best billionaires.
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Unknown A
But what about. I thought you loved, like, the. Just the ruthless tycoons, the.
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Unknown B
I like reading about them. They're fun to read about. They've got great stories. But if you could be anyone you want to be, you, the professor billionaire. It's great.
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Unknown A
So Andy tells David Sheridan, he goes, hey, you got to talk to these guys there at Stanford. He starts. He meets the guys. He also writes a check in the same round again, 100, $150,000. So he puts it in. Okay, so now.
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Unknown B
And was he a billionaire when he made that deal, or was he just.
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Unknown A
Not a billionaire, but successful? He had started a company called Granite System. He had. And eventually he does create Arista Networks, which is a multibillion dollar company, but at the time was like, you know, let's call it probably had tens of millions of dollars.
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Unknown B
And he is really rich now. I just googled them. Holy crap.
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Unknown A
Yeah, like 10 billion plus, right?
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Unknown B
20 billion. Like closer. Like really rich. Like top 100 rich.
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Unknown A
Yeah, he's him and Andy, both of them. They. They both are now. So he. This guy's made. This guy ended up making over a billion dollars just off his Google shares. Okay, so he meets David now, who's the next person that finds out about this little. Little company called Google that's started by these two students on campus. Well, David goes to a holiday party, and at the holiday party, he meets another person. Do you know who this guy is?
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Unknown B
Yeah, Ron Conway.
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Unknown A
Ron Conway. This is gonna be a little bit of a long Session. Because Ron Conway is a goddamn legend. And I kind of knew Ron Conway was the man. I've actually met Ron Conway before, and he just has this presence. He's got a bit of an aura.
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Unknown B
About him, but it seemed like a forgetful professor type. Cause, like, where he's, like, always taking notes, and he's, like, always moving and doing stuff, and he forgets stuff.
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Unknown A
Is that, like, he's always taking notes? So, like, this picture, he's got this yellow legal pad. When I met him, he also had the yellow legal pad, and he was furiously writing notes. And we were just at, like, a lunch. We were like a lunch with the mayor. And he was just writing, like, copious amounts of notes. And he was just, like, always on the move. He was moving. And if somebody asked him a question, he would just. Somebody came to introduce themselves. He's like, how can I help you do what you're doing? And he was just like, get to the ask. Like, what's your ask? If I could do it, I'm going to do it. And then he would jot down a note on his yellow legal pad. Cool. I'll make that introduction. And like, literally, like, seven minutes later, the introduction was made. This guy moves at a different speed.
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Unknown B
You know, like in the Mafia, when the Godfather has a wedding, his daughter's wedding, everyone in the town can come and ask him one favor. He's like that every day.
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Unknown A
Exactly. I. You said. Is he also, like, the forgetful professor? I think he's more like. He's more like Santa Claus. He's. He's Saint Nick. He's like Saint Nick after. With, like, a triple espresso. And so he's just moving. Okay, so. Okay, so Ron Conway goes to this holiday party. And the way he tells the story is he goes, I get to this party, and I'm in a tuxedo, and I got. I hate being at a tuxedo. I'm so uncomfortable. And I just see. I see David there. He's also in a tuxedo. And I go up to him, and I go, david, let's talk about something else, because I'm so uncomfortable. This tuxedo right now. And he. David had invested in. In his fund. And he goes, david, the deal is you invest in this fund. Cool. I'll invest your money, but you got to be telling me what you're seeing.
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Unknown A
And, like, you got to be my eyes and ears on the ground. He goes, david, what are you seeing at Stanford? What's exciting right now? He goes, oh, I just I just invested in these two PhD students that are doing the search engine thing. And he had invested in Ask Jeeves. So he knew, okay, search engines, big deal. If somebody says there's a new search engine that's better than Ask Jeeves. I got. I'm interested. I want to check it out. So he asked David, can you arrange for a meeting? And he tries to get this meeting, and he kind of fails. They. They're like. They're busy. They're like, look, we're not taking angel investors. We want VCs. But they go, but. But maybe you can actually help us get a vc.
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Unknown B
Was Ron a legend then or a legend in the making?
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Unknown A
Legend in the making.
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Unknown B
Got it.
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Unknown A
Are you. Do you want to. You want the quick backstory on Ron? That's pretty insane.
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Unknown B
Yeah.
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Unknown A
All right, so he. Ron Conway, starts off as an entrepreneur. He starts this company called Altos Computing. So he's also making computers like sun. And. And he ends up taking it public. And then they get their ass kicked. The personal computer comes out the PC, and the PC starts kicking their ass. They end up selling the company, but they do well. And his early investor was Sequoia. So he goes to Don Valentine, who's like, the guy who created Sequoia. Yeah, the OG of OG investors. And. And Don's like, all right, Ron, what do you want to do next? What's the next company you're going to start? He goes, honestly, I never want to manage a thousand people again. That was. That was a nightmare. I don't know what I want to do, but that's not it. And he goes, that's a bummer. Like, you know, my.
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Unknown A
My hope was you're ready to start a new company, and I was ready to write the check. But if not, maybe you'd be a good investor. How about I recruit you to Sequoia? Why don't you come follow me around for a couple of weeks, see if you like this investing thing? So he follows. He follows Don around, and he's like, hey, this is. He goes, hey, I think you'd be pretty great at this, but you know what you should do? You should do this thing called angel investing. It's a new thing. And angel investing at the time was actually a term from Hollywood. It was about investing in movies.
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Unknown B
I think they called it super angel or something. Wasn't it like, even, like, a different term?
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Unknown A
He became a super angel, but, like, it started with just angel investing. He goes, you know what? You don't even have to start your own VC fund. You could just invest your own money, just small checks, 10, 20k checks. And then, hey, when you see something cool, you bring it to me. It's Sequoia, right? And so he tells me, we should go do this. And Ron decides, all right, I'm going to start angel investing. And basically he. He starts angel investing his own money. Very quickly, he decides. He's. He's like, I made one great decision in my life, and it's in 1994. He's like, all right, I could just be an investor. He's like, but if I. If I'm competing against guys like Don, I have no advantage, right? They've been doing this. They're just more skilled, more experienced than me. They have a better brand than me, and they just know that game inside and out.
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Unknown A
He goes, but what can I do to differentiate? He goes, well, what if I actually just start investing? What if I pick a niche? And he goes, and so Don's like, okay, is your niche going to be like, hardware, computers, just like you just did with your company? He goes, no. All I know is I hate hardware. So what's the opposite of hardware?
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Unknown B
Software.
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Unknown A
Software. What's this new thing? The Internet? And at this time, by the way, the browser hadn't even been invented. Like, Mark Andreessen is still a student at University of Illinois. He hadn't even graduated yet, but he's like, I think there's this thing, software. We needed it for our computer, for our hardware, and there's this new thing called the Internet. Fuck it, I'm all in on the Internet. And he just decides. He's like, look, it's a thing that's at zero. So he goes, the beautiful thing is there are no experts, so I can't be behind because this thing just started. So I'm going to go in this thing at zero, and I'm going to get to watch it grow. And by the time, you know, this thing's four years, five years in, I'll be the expert. He goes, that's the greatest decision I ever made in my life.
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Unknown A
He goes, by the way, it's now 20, 25. I'm still all in on the Internet. He's like, this. This thing, I. I thought this thing was small. Then he goes, I still think it's early days. And so he. He goes all on the Internet. Now, around 1999, he's been angel investing. He raises a fund. He raises a fund for $25 million from other people to be Valley, you know, angel investing, fund sv, angel. If you've heard of it. And actually at the time it was called it something else. Angel investments or something like that. But he decides, I'm going to invest in Silicon Valley companies. He raises $25 million. The doom boom hits. It's getting hot. He raises the next year another 175 million. And his, his approach is just spray and pray. He's investing in anything and everything that he sees. And so he's made like 250 investments by the time the dot bubble bursts.
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Unknown A
And when it bursts, he's like, oh, and they go to him, his, his. He's only working with like four or five guys. And they're like, hey, what's our strategy? Like, the market's crashing. He goes, our strategy is we don't invest anymore. Like, our strategy is, I think it's over. I don't know, I don't know what to do. Like, there's just no, there's nothing to invest in now. And so he's, he's like, but my hope is that one of these deals that we did early on is a winner. And basically what he says is that when the dot com bubble burst, 80% of our companies just went to zero. But luckily he had Google and he had invested in Google along the way, and Google carried him. Okay, so how did he end up investing in Google? Because remember, they didn't want an angel investor, they wanted an institution.
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Unknown A
Well, the thing about Ron Conway is that Ron Conway is known for being just extremely generous. So even if he's not going to invest in the deal, he's just like, I'm going to help the founder. And his philosophy was, and a lot of people say this, but he actually did it. His philosophy was, all I do is I am in service of the founder. I'm just going to help as many founders as I can. And money will be the byproduct. Like, money has to come. If I help enough great founders, money has to show up. And Paul Graham basically calls us the Ronco principal. And he goes, Paul Graham describes this. He goes, he goes, I noticed Ron Conway. He goes, I've never heard one instance of Ron Conway behaving badly to any founder. And that's incredible because this guy's invested in like thousands of companies.
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Unknown A
He goes, in fact, I went looking for examples. Has anyone had an experience, Ron Conway treated you poorly or didn't act in your best interest? He goes, and instead I just got this outpouring of people being like, no, you know what? He had nothing to gain from a situation. And he just Went above and beyond. And he goes, so Paul Graham hears this and says, you know what, actually, maybe there's something to this. Actually I've heard about a couple other investors that are like this. And he goes, maybe this is not just like a funky coincidence. Maybe there's a bit of a strategy which is so much of angel investing is getting invited into deals. And if your reputation is just one where you just always act benevolently, then it's actually not just like an act of generosity or charity. You're actually building a reputation that's going to get you into the next deal, the next deal, the next deal.
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Unknown A
And that's exactly what happened here. And so Ron Conway, who by the way, just side note, go to SV Angels website, if you were trying to research this company, what would you, what.
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Unknown B
Would you pay attention to, which companies they invested in?
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Unknown A
And what do you see there?
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Unknown B
Pinterest, Coinbase, Facebook, OpenAI, Snapchat, Twitter, rippling Reddit, Okta, Anthropic Square.
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Unknown A
Every hit company is on this list. Every hit Silicon Valley company is on this list. Paul Graham, when he Airbnb, Brex Checker.
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Unknown B
Like everything ever, like literally every company.
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Unknown A
Paul Grabb did a talk where he interviewed Ron Conway and he goes, all right, if you need to remember one thing from this, I'm going to say a bunch of words, but just remember this one, one sentence. Ron Conway is the man. He goes, I was going to do an intro talking about the hit companies you've invested in. And then I realized it's actually shorter to, to write down a list of the hit Silicon Valley companies that you missed. And he had three. It was like he missed Salesforce, he missed Kickstarter, and he missed one more, I forgot which one it is. And he's like, it's insane the number of hits that you've invested in. And he goes, and the funny thing is that Ron doesn't even spend like, I don't know if you know about his like investing style, but it's exactly the same as yc, which I find.
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Unknown B
Fascinating, which is why he just like a hundred thousand dollars into every single thing.
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Unknown A
He meets you and in 10 minutes he makes a decision and he, Ron says it's usually three to five minutes and he'll just decide on, on the spot in three to five minutes. YC has a 10 minute interview and then they make their entire decision off 10 minutes. So the two best pickers, the two best angel investors in the history of Silicon Valley, both make all of the decisions in under 10 minutes. Isn't that insane.
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Unknown B
And so how much does he invest?
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Unknown A
Initially, he was investing, like, you know, 25k, and then it became 100k and then became 250k.
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Unknown B
I'm not sure if that strategy would work now, because there's so. Because I think that then in the 2000s and 90s and things like that there, if you had the gumption to be one of the people who, like, threw your hat in the ring and, like, got a meeting and did this, I think that because the barrier to entry was high, because there was a higher ratio of, like, freaks doing this shit, you know? Now it's because it's, like, cool that there's a lot more noise, but I don't. So I don't know if that would work.
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Unknown A
Now, let's look at their list here. Anthropic. That's recent. Open AI. That's recent. Hugging face. That's recent, right? Like, these are the big. If I said one of the best companies in the last four years, you know, that to be invested in OpenAI. Anthropic, hugging face. Like, these would be in that list. You know, he's in Uniswap, which is. Was the big one in the crypto phase, like, you know, five years ago, whatever. So I think this still works. But the trick to making it work is not just that they make snap decisions, right? Like, his decision, you know, his process was basically, they were like, what's your thesis? He goes, I had no thesis. He goes, I went into angel investing when there wasn't even really a word. He goes, there was no thesis that you could have at the time. I just, all right, the Internet's cool.
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Unknown A
And then he's like, I. He goes, I. I realized one mistake pretty quickly, which was that the more I tried to judge a. You meet a founder and they have an idea, they have a personality, and then there's a market. And basically, if you try to blend those together, you try to make a decision off the mix of the idea, the founder, and the market, you lose. If you love the founder, but you hate the idea, you also lose. He goes, airbnb. I didn't love the idea, but I love the founders.
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Unknown B
So what does he pick? One of those three or just the person?
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Unknown A
He's just like, I just picked the founder. He goes. And what I do is, I was like, I'm just gonna invest in the founder. It's the founder's job to figure out the idea. And they'll change. They often they change the idea. And he goes, and by the way, I'm not just investing in this founder for this company, I'm investing in this founder for life. Because he goes, I realized that the best founders start multiple companies. So for example, he put one of his first employees when he started doing this was his son Topher. And his son's 13 years old and his son makes his first investment at 13 at a little company called Napster. And he's like, oh, I heard about Napster, but I don't know about this shit. Topher, go use this thing and tell me if it's amazing. Topher comes back the next day.
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Unknown A
He's like, dad, this is the craziest thing I've ever seen. I can get any song, I could download anything. This is changing the game. I'm downloading bits of the song from other people around the world. It's the like this mind blowing, this decentralized thing. And he's like, cool, all right, let's go invest in this thing. He goes, and he meets the founders or he had already met the founders. That was his diligence. And he invests in Sean Parker and Sean Fanning and he's like, cool, anything you guys do from here on out, I'm in. And so Napster didn't work out, but Sean Fanning's fourth or fifth company ended up being a hit. Napster didn't work out, but Sean Parker's next company was Facebook. And he's like, I totally didn't get Facebook. I didn't know how social networks would make any money. It seemed like college kids, you know, posting pictures of their drunk, you know, escapades, like didn't seem like something was going to be money.
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Unknown A
But Sean Parker's in and I just, I've decided Sean Parker's a founder, that I want it back. And so I invest in Facebook too.
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Unknown B
All right, so bringing it back to Google.
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Unknown A
All right, so bring it back to Google. He goes to the Google guys, they're like, hey, we want a vc. But they're like, all right, we will let you in if you can go get a Sequoia. Because Paul Graham asked him, they go, he goes, you know when you invest in Google, did you know, like this is a huge company, there's going to be like an all time company. He goes, you know, you could never think of a company as like a trillion dollar company. He goes, but I did think it was going to be really, really big. And I went all in trying to get this investment. And he goes, why'd you go all in? And he goes, well, because they had three things. He goes, first, super smart geeks. That's criteria. One, two, really determined. Three, do they do something that surprises me?
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Unknown A
For example, they're really smart geeks, but they're also really charismatic. Or they're really. He goes, but that wasn't the case for them. It wasn't the case for Zuck. That they're really charismatic. He goes, with Zuck, it was that early on he was talking to me about, like, getting into getting 300 million users. And he's like, no service had 300 million users. So the fact that Zuck had figured out, like, yeah, we're gonna connect everybody. He's like, oh, okay. Just the fact that this guy is saying things like that he has a level of ambition that's not really, you know, common. And guess what? I wasn't surprised when he turned down a billion dollars from Yahoo, because all he wanted to do was rifle focus on a product that would actually reach everybody. So with Google, he goes, they were super strategic. They. He goes, they.
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Unknown A
They told me. They go, you can. You can be in if you want, if you can get Sequoia. He goes, okay, that's great. Sequoia is great, but why Sequoia? They go, not just Sequoia. We need Mike Moritz. He goes, okay, Mike's great, but why Mike? And you go, because Mike is on the board of Yahoo. And what we're going to do is we're going to build the best search engine. And right now, Yahoo has a deal with AltaVista. AltaVista powers all of their search. So we want to cut two mega deals. We want to be the default search engine on Yahoo. And once we convince Mike Morris that this is awesome, he's on the board of Yahoo, he'll get us the meeting. And then we want to do the same thing with aol.
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Unknown B
Do they have, like, a product at this point?
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Unknown A
They had a product. They had users. And he talks about that. He's like, you know, basically, he's like, I saw the searches. The results were better. And they had early users that were like, the people who used it used it all the time. So it wasn't like they had a ton of users. But it's the same thing as Facebook. The people who used it used it like crazy. And so he. And so they go, we want Sequoia and we want Kleiner Perkins. He goes, well, you know, you could have either or. They don't usually like to do deals together. He goes, we want Sequoia and we want Kleiner Perkins. Because Kleiner Perkins. John Doerr is on the board of aol or has a relationship with aol. We need that deal, too.
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Unknown B
So they were cocky and smart and strategic.
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Unknown A
Yeah, they knew what they needed. And they were like, we're going to. It's like an algorithm. It's like that's the output we need. So then we need to find the path to that.
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Unknown B
Well, I read stories of them, the Sergey and Larry retelling the story. And they were like, we were full of ourselves. We thought we were the best, and we were pretty good. And we, we acted like it.
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Unknown A
Well, there's stories of both. Right. At one point, they tried. Before this, they tried to sell the tech for billion dollars.
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Unknown B
Yeah.
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Unknown A
And this is when they were like, oh, it's just an algorithm. And then they had sort of gotten bigger and bigger. So anyways, so he goes. So he goes, I basically. So from the time that that guy Davis hurt and tells about this company at this holiday party, he goes, I called them for five months straight. Every month, I called them, and finally I got my audition. And at that edition, they go, you're in if you can get Sequoia. So he starts working the phones. He gets them a meeting. Sequoia's in, and Kleiner Perkins is in. Or actually, there's one little thing before that. He goes, hey, guys, I'll lead this myself. $10 million. And they go, no, we don't want you. He goes, okay, fine, I'll go get you Sequoia. So he goes, and he gets him Sequoia and Klein Perkins. But they're negotiating.
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Unknown A
They both want to do the deal. They both want to do the deal at unprecedented numbers. They're trying to do it at, like, a $75 million valuation, which at the time was like, bananas to do a $75 million valuation. But they, they, they believe that search was already, like, a big deal and they thought this was the new search thing, but they can't agree who's going to get the deal. They don't want to share it. And Larry and Sergey get frustrated after a month of back and forth to. Larry and Sergey are like, dude, forget this. We don't want to be fundraising anymore. Ron, you said that you would do this thing. 10 million yourself. Was that bullshit or is that real? He go. They go, you said you could make that happen. Could you actually make that happen? He goes, I can make it happen.
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Unknown A
This is Friday. He goes, I'll have it by Monday if you want it. And they go, all right, that's what we want. He goes, but honestly, guys, do you want. Do you want that, or do you want them to share the deal? They go, our first choice, we want them to share the deal. But if they can't get their shit together, we'll do it with you. And again, Ron Conway badly wants this deal. But he does what Paul Graham calls the most generous act in the history of Silicon Valley. He calls Sequoia. He calls Client Perkins. He goes, guys, they're not bluffing. If you don't have this thing done by Monday, they're doing a deal with me to do all 10 million. But they want this with you guys. That's what they truly want. You guys got to figure this shit out. By Saturday morning.
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Unknown A
They've agreed we're going to do this. And they carve out Ron a little allocation because he put that deal together. Yeah, he gets the 250k. So that's how Ron Conway gets in on this deal. One last little Ron Conway thing. Because it's just you said something about, like, Mafia, and here's Ben Horowitz from Andreessen Horowitz. He wrote a whole blog post called Ron. And in the blog post about Ron, he says, ron is not an investor. Ron runs a network. And in Ron's network, everybody who's a node knows you are important, and there's a certain code of behavior that you have to have. He goes, to get into the network, you must have a relationship with Ron. No, I say relationship that means not just I've met or I know. More on this later. He goes, two, you must answer when called. Ron makes sure that his network matters because he demands extreme reliability.
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Unknown A
If he calls you to participate, you must participate when called upon. And he goes, three, that keeps you in what I call good standing with Ron, which is you must remain in good standing with Ron to remain in the network. If you do not act when called upon or you do not act well in terms of you have some kind of bad behavior with founders, Ron will light you up and take your ass out of the network. And he goes, no matter what deal you're in, it is more costly to be out of Ron's network than it is to try to get one up. And because of that, he has ensured that Silicon Valley works.
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Unknown B
So people like this guy that much, huh?
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Unknown A
All right, listen to this story. So Alfred Lynn, who ends up. Have you ever heard that name, Alfred Lynn before?
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Unknown B
Zappos. Zappos, yeah.
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Unknown A
He. He ends up being, like, the number two guy at Zappos. I think before that, he had started this company he's like. And he tells the story. He's like, yo. So we had this company, it was honestly, it was on the brink of failure. And he's like, it didn't end up. He's like, it looked like the company was going to fail. And me and my co founder were talking. We're like, all right, have we tried everything? And they're like, well, there's one investor we haven't talked to because we don't really know him super well. But like, Ron did invest in our company early on. And they're like, we, we had this deal if, with this big company, this Fortune 50 company fell apart. And like, there was no way. If we lost this deal, the company's dead. So he goes, I didn't know Ron at the time and his investment was really small, which is why we hadn't reached out to him yet.
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Unknown A
We first went to our big investors, but we struck out. So he goes, we had nothing to lose at this point. So at 11pm I wrote Ron an email that said, hey, you don't really know me, but I'm an executive at a company or investor in and we need a meeting in person with the CEO of this Fortune 50 company. We need the meeting this week and if you can't make it happen, hey, that's totally okay. I understand. But we may be going down and I'm sorry. He goes, he goes. Two minutes later is 11pm Two minutes later, Ron writes back in a way that I now have learned is Ron's style. It's immediate email short and it's all caps, I'm on it, all caps. By the next morning, Ron had done it. We got an eight figure contract with that company that led to a nine figure contract all because of this desperate email.
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Unknown A
And eventually our company got acquired for 800 million. We were on the brink of death. Ron didn't know us from Sam, and he saved our ass.
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Unknown B
Dude, the takeaway from all of this. San Francisco is amazing. Now it's cool to shit on it because it is very frustrating. It's a very. I've lived there for 10 years. It's super frustrating. But I've missed out so much not being there. And just like what people don't realize is San Francisco is only like what, 800,000 people. And if I had a guess, Ron Conway lives in like Pacific Heights Marina area. And just like walking around that area, you feel it and you hear these like weird conversations and just being able to email someone and just be like, I'll meet you at the Coffee shop five blocks away. That's special, man. Just these types of interactions are special.
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Unknown A
So check this out. So you said, like, I don't know if that approach would work because now there's so many more companies and that at the time when there's very few people starting companies that might have worked. So they asked him. This was kind of like when he was in his peak investing time. They go, so how do you invest? He goes, I only take meetings that come from my network. So he goes, I will get five pitches a day. So I see 30 a week. 30 deals come to my desk a week. Every single one is from a referral of a founder or investor that I know well, that knows me and knows what to refer to me. He goes, I will invest in one out of 30 every single week. He goes, of the five that I get per day, I'll turn down two or three just via email, no phone call.
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Unknown A
The rest will invest in and I'll invest in. I'll make my decision within five minutes of talking to the founder. They go, well, what are you looking for in that founder? He goes, I'm looking for three things. Insane 24 7. Desire to work. He goes, I could tell when I'm talking to a founder, if they wish they could just spend all of the time working on this, and they view everything else in their life as like a nuisance or an obstacle in the way of doing this. He goes, have they warned their wife or girlfriend, like, hey, I love you, but I'm all in on this thing, and I'm going to be gone and I'm going to be doing shit. And like, this is. This is it. This is my thing. And I'm doing this because that's the first thing I look for. He goes, and when he goes, if I could feel it, then I know it's going to be infectious to other people because they're going to have to recruit badass other people.
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Unknown A
He goes, lastly, can they communicate why this matters? He goes, you know, Zuck, it's not like he had, like this crazy charisma or personality, but when you talk to him, it's the feeling we got when Amjad from Replit was on the podcast where there's, like, this. It's like, oh, this is kind of bigger than I realized. And this is like your life's work. This is kind of. This is going to change everything, isn't it? And they sort of distort your reality to believe that this shit is even bigger than you could ever believe. Next week, we're going to hang out with. With Jimmy. Mr. Beast and I always have this feeling. Every year we go to do this event with him. We hang out with him. We stay. We literally, like, stay at his house. And when you're there, it's like what he's doing is the most badass, important, crazy shit that any human being could be doing.
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Unknown A
And then you leave and you click a video like three weeks later. It's like these friends are putting their hand on these chocolate bars. And whoever takes their hand off flask gets, like, half a million dollars of chocolate bars. It's like, wait, this is just like, this is kind of a dumb video. But when you're there, it's not a dumb video. It's fucking everything. And he's able to like, make you feel that way. So that's kind of what he describes. The last thing he talks about is he goes, rifle, focus on the product. He goes, I invested in Square and all Jack Dorsey ever wanted to talk to me about was the product. He goes, I invested in Twitter. Same thing. All they talked to me was the product. I invested in Facebook. All Zuck, want to talk to the product. He goes, pinterest. Pinterest.
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Unknown A
I didn't really get. It's like this pin board, like scrapbooking. I didn't really understand it because I met the founder, Ben, and he goes, oh, he's talking about this product. He goes, then I met his head of product. Or he's like kind of his. One of his core guys. And I met him three times, and every time he was wearing the same shirt. And I go, hey, do you wear this shirt, like, often? He goes, I wear this shirt every day. And you know what the shirt is? It's a shirt with a circle, and just the inside is just this word, focus. And he goes, this guy literally every day wears this shirt that just says focus in the middle of it. This guy was X Facebook, and then he was at Pinterest. And this guy was just absolutely obsessed with focus. All we need to do is focus on the product.
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Unknown A
Oh, there's a meeting. Oh, we got invited to speak at this event. What are you talking about? I don't want to go there. He goes to the point of being rude. These people just want to focus on the shit that they're focus on their product. That's it.
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Unknown B
So he. He did Google. He brokered the deal. Who are the other people I want?
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Unknown A
Next guy. No, who you see?
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Unknown B
I see Shaquille O'Neal. Shaq. Not a chance.
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Unknown A
So Shaq is sitting at the.
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Unknown B
That doesn't even make sense. Was he even famous then?
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Unknown A
Of course Shaq's famous. This is the 90s. Shaq is a NBA star. At this time, Shaq is in a hotel. He's in a fancy, I don't know, Four Seasons or Ritz Carlton, sitting in the lobby. And he. This is Shaq telling the story. He goes, I see four distinguished gentlemen in the lobby.
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Unknown B
Is this your Shaq voice? We gotta go lower.
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Unknown A
I see four guys.
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Unknown B
Four.
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Unknown A
Four distinguished gentlemen. He goes, and what he says? He goes, the gentlemen don't know who I am, but their kids do. And their kids are like, oh, my God, it's Shaq. And they run up to him. And the cool thing about Shaq, if you've ever seen videos of Shaq, Shaq is like a giant kid. He's super playful. He's super good. He's super good to people that see him. He does. He's not like one of these celebrities that's like, sunglasses, hat on, trying to, like, push people away at all times, getting annoyed when you get in his space. And so Shaq goes, I'm doing my job, babysitting. And so he just starts playing with the kids. He's just babysitting while they're having a meeting. At the end of the meeting, Ron Conway comes up to Shaq and goes, thank you so much for playing with my.
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Unknown A
My grandkids. And so they just start chit chatting. He goes, yeah, we were just talking about this investment that we're doing. You know what? You should invest in this company. It's one of the best companies I've ever seen. It's called Google. Shaq gets a meeting with. With. With. I think. I think I guess this with Larry and Sergey. He goes, yeah, it was an accident. He goes, I'm doing my job. I'm babysitting. And then he goes, I asked him. He goes, I have a meeting with them. Sounded good. I put in some money. I forgot about it. Years later, Google goes public. He doesn't even realize that he's invested in Google. He reads in the newspaper that Shaq has. Shaq is in the S1. Shaq's gonna make a killing off of this. He goes, I'm Shaq. What? And so he goes, and he remembers. And so Shaq turned.
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Unknown A
And he's like, yeah, I wish I invested more. Shaq turned, like, you know, a couple hundred grand into, you know, 100 million plus off of his Google.
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Unknown B
No way.
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Unknown A
Really? Nobody knows how long he held it, but, you know, it's pretty insane. So Shaq is the next one. Do you know who this is?
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Unknown B
Yeah. Rip.
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Unknown A
Rip. This is. I don't actually. How do you say her name?
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Unknown B
Susan. Susan. Last name is a Polish name. Wajowski. I forget.
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Unknown A
Wojcicki. I don't know what it is. Susan W. So Susan ends up getting in on the action early with Google. But I don't know if you know.
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Unknown B
The story, how I know that she had a garage and they wanted to work there. And did she like give them a free place to stay and work there and got like a little bit more equity?
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Unknown A
Yeah, kind of. So her sister Ann was dating Sergey and Anne says, my boyfriend needs a office space. And Susan wasn't wealthy at the time. She was like a mid level, like marketing manager at some company. And her and her husband had just bought this house, and then they were feeling a bit of the pinch about like, kind of the home, and they're like, you know what, what if we rented out our garage? So they put up an ad saying, we'll rent out our garage. Ann is like, oh, actually, my boyfriend needs a space. So the Google guys rent out her garage for 1700amonth. And they start working out of her garage. And she just sees them working there day and night, and she sees, she hears updates. Just because she's bumping into them, she quits her job. She ends up being employee 16 at Google.
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Unknown A
And so that's how she became a billionaire was by quitting her job to go work for the company that was working out of her garage at the time.
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Unknown B
She ended up being, up until recently when she passed, she was the YouTube CEO.
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Unknown A
Exactly. So she, she had worked on AdWords for a bit. And then when the Google she was a big advocate for, like, hey, we should acquire YouTube. And when they acquired YouTube, they were like, hey, you were a big champion for this deal. She ends up becoming the CEO of YouTube for many years before she passed away.
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Unknown B
And I think that sister of hers started 23andMe.
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Unknown A
Correct. All right, this is. I don't think you know who this is.
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Unknown B
No. Oh, yes, I do. I do. Pear.
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Unknown A
Yes. Oh, wow. That's a. That's a deep pull for you to know this. So this is Pedman. Now, he did not actually invest in Google, so I'm cheating a little bit. But this is part of you said, well, my takeaway is the magic of Silicon Valley. Here's more of the magic of Silicon Valley. Okay, so this guy's story is crazy. He, him and this other guy, last name Amidi, I think it's like Samit Amidi or something like that. Amini Persian. Two Persian guys. So first Persian guy starts a rug shop in Silicon Valley, right in the heart of Palo Alto, is selling luxury Persian rugs. And right above his, like, right next to his. His rug shop, there's also some office space. And so he. He ends up renting out office space to the founders of. I think it's like PayPal or something like that.
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Unknown A
PayPal's early, early founders were there. There was a couple others. And so he ends up in. He's like, he's selling rugs to these people. He gets to know these people, and then he realizes, like, wow, Google that.
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Unknown B
Like that classic gregarious, like, immigrant or Persian guy? Persian guy. Like, hey, my friend, come here, come here, come here, my friend.
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Unknown A
Exactly. You want some tea? Let's have some tea. And they have a tea.
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Unknown B
Tell me about yourself. Tell me about yourself.
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Unknown A
He becomes friends. He's right next to them. He's sell rugs, he's selling them office space. But he's like, dude, these companies, you know, made a killing. And so they start taking their rug money and they start investing and become angel investors. And they don't know anything about technology really, but they're like, let's just invest in the people that come in to buy the rugs if they seem interesting. And so how does Pedman factor into this? Pedman cold calls this guy and he's like, hey, I'm coming out to Silicon Valley. And he's like, can I give a. Can I have a job with you? And the guy's like, well, have you ever sold rugs before? He's like, no. He's like, have you ever sold anything before? He goes, no, but I could learn. And he goes, listen, man, I. How can I give this job to somebody who's got no.
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Unknown A
No experience? He's like, he plays on the Persian side and he says, like, how could you turn me down? You haven't even met me yet. Just meet me. And so he agrees to meet him. He hires him. And so he ends up becoming basically like a rug salesman for this guy. And he. Over the next 15 years, his English improves, his confidence improves. He becomes Abidi's top rug seller. In his best year, he moves $8 million worth of rugs.
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Unknown B
That's insane. That's absolutely insane.
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Unknown A
One of his first.
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Unknown B
Out of a. Out of a storefront, out of a storefront Palo Alto. And so that's like, you know, $600,000 of rugs. A month or. That's so many dollars worth of rugs, it's insane.
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Unknown A
It's totally insane.
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Unknown B
So along the way is that 20 grand a day of rugs?
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Unknown A
Yeah. And this guy's living. He. He comes to Silicon Valley. He lives in an attic above a yogurt shop, and then becomes a rug salesman. And that guy ends up becoming one of the greatest investors in Silicon Valley. And here's his trick. So he's like, he. He meets somebody, he starts selling rugs. And one of the guys who walks in is this guy, Andy Rubin. Andy Rubin comes in, he sells him a $5,000 Persian rug. And during the negotiation, he's, like, so impressed with this guy. He's like, man, you're a great negotiator. What do you do? He's like, oh, I'm a businessman. I got this company. And he's like, tell me about it. And he's. He's got this company called Danger. Remember I told you one of the companies in the lucky office company called Danger? And these guys made. Do you remember the T Mobile Sidekick cell phone? That's. Andy Rubin made that.
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Unknown B
Yeah.
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Unknown A
His next thing he made became Android. And so Andrew Rubin's prolific.
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Unknown B
And then now he's since done DeepMind or some type of, like, he went.
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Unknown A
He went and became, like, the head of mobile for, like, the big Chinese manufacturer or whatever. And then I think now he's doing, like an AI thing. So he's like. And so he's talked to this guy and he goes to his. He goes to his boss, I'm eating. And he goes. He goes, we got to invest in this guy's company. He goes, cool. What does it do? He goes, couldn't tell you. It's something technology, super complicated. I don't know anything about it, but I'm telling you, we got to invest in this guy. He goes. He goes, are you sure? He goes, listen, if this guy was selling red balloons, I would invest in it. This guy's going to make things happen. And so he goes, okay. They write a $400,000 check into. Into Danger, and along the way, he ends up becoming, like, a partner in their investing as he makes money from his commissions.
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Unknown A
He takes every dollar he has, basically $200,000, and he buys into, like, their partnership to be investing in startups, and they invest in all these different startups. So he meets Joe Lonsdale.
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Unknown B
No way.
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Unknown A
After he'd done Palantir, Joe's buying rugs, whatever. He gets introduced to him, and he goes, joe, I would love to show you a rug. He's like, cool, I'll come into the shop. He goes, no, no, no, no, brother, let me bring the rugs to your house. So he brings like a hundred rugs to Joe Lonsdale's house. And his trick is he's like, you learn a lot about a person when you go to their house, much more than if you meet them for coffee or they come into your shop.
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Unknown B
And at the time, Joe Lonsdale would have been in his mid-20s, right?
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Unknown A
Yeah, he's very young. And he goes and he meets him.
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Unknown B
And he's like, he's in that Persian rug game.
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Unknown A
He's in that Persian rug game already. And he's like, he's like doing this next company, Add a Par, which, by the way, recently sold for a couple billion dollars. And at the time he's like, love this guy. Love Add a Par. Joe Lonsdale, we got to invest in this thing. And he ends up investing in Add a Par. He ends up investing in Dropbox because one of the co founders of Dropbox is also Persian. And so he's speaking in Farsi. He's like chumming him up and he's like, come on, please let us in. He ends up doing that. He ends up investing in Applovin, which is now $100 billion plus company.
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Unknown B
Because I think the founder of Applovin might be a Persian guy, right?
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Unknown A
I think so, too. I think so. Yeah. He's Iranian or somewhere from that area. And so there's like this whole mafia that gets created off of this rug shop. How insane is that, dude?
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Unknown B
Do any WASP want to relate with me? Hey, let's talk about baseball and hot dogs and cows. Like, like, where did you watch that, dude?
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Unknown A
Okay, I'll give you some credit. You one of your best investments now is this company you told me about that I totally didn't get because I was like, dude, what are you doing? You're just putting nicotine pouches in your mouth while we're doing the podcast? Yeah, I always have one in. And I was like, what the hell are you doing? And you invested in this company called Lucy that was making like a nicotine gum or pouch at the time.
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Unknown B
At the time, it was a gum.
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Unknown A
And it kind of just wandered around for a little while. Didn't even seem like it was going to take off, but now this is taking off, dude, I think Lucy's going to end up being like a 500 million or billion dollar company. You invested early on in that because you were. You were Pouch Bros. With these guys.
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Unknown B
Yeah, I did 25 grand into it. And I. When I did it, I. I was just like, oh, you started Soylent. And our mutual friend is Josh. And Josh says you're. You're cool. And nicotine is addicting. Yeah, Like, I guess cool sounds. Sounds good. I'm in. And So I invested $25,000. I think I only had. Had a hundred thousand dollars saved up, so that was like, a big deal for me. So hopefully. And then I, like, message them and I'm like, what's happened to you guys? I haven't heard from you in, like, six years. What's going on? And then they recently hollered at me, and it turns out it's going really well.
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Unknown A
Yeah, it's going amazing. Now shout out to John Coogan and the crew there. Okay, so let me finish out the story here. Did you know that Bezos invested in Google?
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Unknown B
I heard that. Did he invest in it because he was getting a lot of traffic from it or why?
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Unknown A
I'm not sure. There's. He's. I tried to find it. He could not find, like, any of this backstory here, But Bezos invested 250k pretty early in Google as well, which is kind of wild. It's the same way that, you know, Microsoft also invested in Apple and kind of saved Apple from failure at one point in time. Like, there's these stories of these people that you think are kind of enemies or competitors, but actually at a key point in time, invested in each other. I just thought that was kind of. Kind of cool. All right, I want to share with you. Let's see. Do I have anything else? Oh, there's one other hilarious story from this whole thing. Rod Conway was like. They go, did you know that Google would make, you know, so much money, would be essentially the most profitable money? Best money machine man has ever made?
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Unknown A
And he goes, no. He goes, I still have Google's first slide deck. 10 pages, 10 slides. And it was all about the product. He goes, the last slide, which is always like, the financials and the projections. It just said, thank you. He's like, dude, where's that? Where's your financial slide? And they go, we have no idea. And he goes, okay, love it. I'm in. But how crazy is this, like, wild world of, like, meeting people at a party or the lobby of a hotel and hearing about this thing and doing this deal? Isn't this. Isn't this crazy?
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Unknown B
But that's how it still is, isn't it? It is like, it's Just that you don't get out. You know, you still live there, but you don't get out.
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Unknown A
Like during, during the Tony Robbins episode on our pod, he has this phrase he says, which is proximity is power. And he just talks about, like, literally just being close to the action is like this most underrated thing you could do. Just being as close as you can to the people you want to be around, to the people you want to be like. Because whether it's you hear a thing, you meet a thing, you start to do the same habits and lifestyle of those people. Proximity is power. And like, that's the crazy thing about Silicon Valley is like, proximity is power principle.
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Unknown B
I moved to where I moved because of family reasons, but if I could live anywhere, I think Palo Alto would be the place. I think I dearly loved San Francisco, but I got pissed off at it because of the crime. But Palo Alto is, like, pretty amazing. Do you ever think that you'd rather be there? I mean, you're. You're an hour north of sf. Do you wish that you were an hour south?
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Unknown A
No, I mean, SF is now where the action is, but. So the question would be, do I wish I was still in the city? And the answer is I definitely would have. I definitely know I would make more money if I lived in sf. Like, it seems like it's a more expensive place to live, but actually I know I would make way more money because there's just the serendipitous bumping intos of people.
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Unknown B
It's just so much a great headache, though. It's such a headache.
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Unknown A
But yeah, exactly. Making money is not the only criteria. So, like, you know, family wise, it's much better to be in the burbs for me. So lifestyle wise, I'm happy with this choice. But damn, when I hear these stories, it does make me wish I was back in on the action. Like, I went and hung out with my friend Luke and Palo Alto, and we went to his house and he was like, you want to take a walk? And I was like, yeah, let's take a walk. And we walked around for probably two, three hours. And in that two, three hours, he was like, that's the garage where Google started. And this is this. And that's Zuck's house, actually. And this is this person's house. And then we bumped into like, somebody. He's like, oh, that's where the founder of Quora is. And then we go to a.
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Unknown A
We go to the Starbucks, is like a little coffee shop there. And like, I get recognized by five people that I, you know, I just sit in my house all day. But there's people who listen to the podcast and then they start telling me what they're up to, and they're doing a cool AI company. And then you leave the coffee shop and we just pop into our friends, you know, like VC shop, and we. He's having a meeting. He introduced us to those founders. And so I'm like, oh man, do the amount of serendipity I had in crazy hours now was crazy. And you don't, you don't really get it until you, until you experience it. And so if there's like one takeaway from anybody who's, who's like, you know, listening to this, I would say my two big takeaways was number one, proximity is power.
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Unknown A
And like literally just showing up and being there, being in the heart of the action for whatever scene you want to be in, how much that matters. And the second was the Ron Conway principle of how do you just act so benevolently that your reputation is the product you're actually building? You're not building a portfolio, you're building a reputation. The reputation builds the portfolio. And the third one is the midwit meme strikes again, where it's like, so the two best early pickers of startups ever in the history of Silica Valley both make their decisions based off of. Just do they feel like these people are fierce founders and they could figure that out in less than 10 minutes. And then here you have people that are doing market analysis and segmentation maps and tons of due diligence and this and that, and they have thesis on all these different markets and it's like, dude, the best people are literally just amazing judges of people, and they're making their decisions in five minutes and then they spend the rest of their time just helping people.
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Unknown B
It's so exciting to hear these stories. How much do you think that each of these investors made? Like, I guess like if you. And what was the first valuation?
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Unknown A
So the first valuation was 10 million. The next round was at 75 pre. So Ron Conway, this is now a decade plus ago, I think 2012, they asked him, they were like, ron, how much did you. They were, they were like, first. Were you scared off by the valuation? I mean, 75 pre today is a high valuation for a series A company. And you know, Google, obviously now it's obvious, but like, nothing's obvious at the beginning, nothing's that obvious. And he goes, which, by the way.
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Unknown B
That'S worth 150 million. Dollars today. So that's a shitload of money. Like, how am I ever. So this company has to sell for a billion dollars.
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Unknown A
Right, Right. So, like, they're like, did this valuation scare you off? He goes, no, I think that's crazy. He goes, companies are binary. He goes, a company, the investing we do a company is binary. It's either a huge win or it's a zero. I just let the market figure out the valuation, and then I invest. Once I've decided to invest, I let the market decide the price. He goes, yeah, we did great. He goes, for every dollar invested, we got $400 out. And this was back in 2012. And they go, is that the peak valuation or that's the current valuation? He goes, the peak valuation of Google is far in the future. And he knew, right? This is because this is, you know, 12 years ago, and Google has since, you know, you know, at least tripled in value since then. So it's a pretty, pretty wild return.
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Unknown A
Now, I don't know how much guys like Shaq and others got. So Ron got in at the 75 million round. The guys like Andy or David that I mentioned at the beginning of the professors, they got in. In the $10 million round, right? Which is just. Just wild. So, you know, $100,000 became over a billion dollars for each of those people.
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Unknown B
And the crazy thing about pricing is like, so Google was started, I think, 30 years ago, right? 30, 28 years ago. And what are they worth? A trillion or something? Or 2 trillion. What's crazy is that the companies, like, the equivalent of that would be investing in a company today and trying to convince yourself that it will be worth 6 trillion. Do you know what I mean?
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Unknown A
Like, it's really $2.3 trillion company today.
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Unknown B
So in 30 years, double that or triple that. So, like, it's incredibly hard for the brain to think, if I invest in this company, maybe one day it could be worth a trillion dollars. That's like, an inconceivable thing to think about. And so that's why angel investing is a mind fuck. Like, to think, like. Like, because you think like, oh, this is worth 100 million now you got to sell for a billion. And the founder's like, no, man, it's like one trillion. Like those. The math behind all of this is very, very, very challenging to even, like, wrap your head around.
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Unknown A
Yeah, totally. And even when it's staring in the face. I think I've told the story before, but I remember sitting in a conference room in Silica Valley in 20 maybe 14, 15, something like that. There was some point in time where I was telling this guy, I was like, yeah, I came out to Silica Valley. I applied to two places. The place I'm at now, and the other place I've applied to was Stripe. There's only two jobs I'd ever applied to in my life, and I didn't get the Stripe job. I got rejected. I blew the interview. And he goes, oh, actually, I goes, I'm investing in Stripe right now. And I go, stripe now. It's not like an angel investment anymore. He goes, yeah. He goes, yeah, it's a $3 billion valuation. And I remember just thinking, like, what a dummy. Like, you know, 3 billion.
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Unknown A
What do you think this is going to turn into? Like, three. Like, I thought this, the game of startup was to create a billion dollar company. So hearing that one was already at.
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Unknown B
3, it's already 3x overvalued.
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Unknown A
It's like, oh, what are you hoping it gets to 10 billion and you triple your money, like nuts. And now it's, you know, $100 billion company. I would have 30x my money even then. And it was so obvious. Like, anybody I knew used Stripe. It was so obvious. Stripe was the best company in Silicon Valley at that time. And I talked myself out of investing in it because I just couldn't fathom the numbers right. It just didn't make any sense.
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Unknown B
It's because you think in absolute numbers. So I remember one time when I first started my company, we were spending $30,000 a month, and I met with the CEO of, like, a billion dollar company. And I was like, can you believe this?
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Unknown A
I hired two people and we went.
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Unknown B
From spending $8,000 a month to $30,000 a month. How insane is that? And he was like, dude, like, I spend, you know, 300 million a year. Like, you. These aren't. He was like, you can't think of this as an absolute number compared to your real life. This is just a number on a spreadsheet. And it doesn't matter how many zeros are behind it. You just are these zeros going in and you're getting more zeros out. That's all you have to think about. Don't think about this in terms of, like a real number. And when he told me that, that kind of, like, shaped how I viewed a lot of things.
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Unknown A
You need to do, like the casino thing, you have to take your cash, trade it for these chips that are different colors you're not used to, and then just try to make the chip Stack bigger versus if you look at a, you know, a hand of Blackjack, you're playing $50,000 hand, that, that's a month's rent or whatever it is, right? It's like insane. All of a sudden you just start making different decisions. I remember like even. It's not even the absolute number, sometimes even relative will screw you up. Because I remember investing in Tesla when Tesla was like at like a 5 or $6 billion valuation and, or I invested even before that. I think it got to six or seven, something like that. I made like three times my money. And I remember looking at the market cap of the biggest car company I could think of at the time.
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Unknown A
I think it was like GM or some Ford or one of those, one of those companies. And it was like a $26 billion company. And I remember thinking like, and I looked up how many cars Tesla was selling and how many cars they sold. It was like, you know, Tesla sold like nothing compared to them. And I just remember thinking, okay, okay, the ceiling of this is like a $30 billion company. Like, cool. So like if I ride this out, if, if Tesla became the most valuable car company in the world, it would be a $30 billion. That would be 30 billion to be like a 5x from here. Or I could just take my winnings now and go and enjoy them. I don't remember the exact numbers, but I remember that 26 billion was like where the car companies were at. Tesla today is not only is it today like a one and a half trillion dollar company or whatever it is, so it's now it's a 1/2 trillion dollar company.
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Unknown A
So I was off by like, you know, more than 10x. I was off by like two orders of magnitude, basically. On top of that, Tesla is worth more than the next like 10 car companies in the world combined. It's, it's so like the whole idea of like it broke, like it breaks my brain, right? Like Tesla is literally worth all of the next six car companies. They're worth like, I think it's like, I don't know, 600 billion or something. Something like that. It's like a. Oh no, the big six are 477 billion. Tesla is 1.3 trillion. Right. So it's, it is just mind boggling what these things, it's hard, it's hard to understand.
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Unknown B
I mean, didn't I tell you the, the when I was trying to understand what a trillion dollar, a person worth $100 million compared to a person worth $1 trillion, which is what Elon will be in three or four or five years. If you have $100 million, you're like ungodly rich. Okay, but the equivalent of those two, compare of those two, the gap is the same as $100,010,000.
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Unknown A
Right?
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Unknown B
Isn't that insane? So like when I think of $100 million person, I think you're one of the richest people I've ever met.
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Unknown A
Did my, I think my. There's this great quote about happiness. It's like I have talked myself out of happiness a thousand times, but I've never once talked myself into it. Right? I've never thought, it's like I've never thought my, my way. I've thought my way into unhappiness a thousand, thousand different ways, but I've never thought my way into happiness. I don't know if I buy that quote exactly, but I get the premise of it which is like we could very much talk ourselves out of things or into unhappiness. I think investing is very much the same. I've now realized like especially in technology investing this may not be true for value investing but for tech investing where you're. The whole game is like find the one or two psychos and the one or two like breakout categories that are going to just break the entire game as the power law.
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Unknown A
And these things are going to become worth not a billion dollars, not $10 billion but like a hundred billion dollars or even a trillion dollars each. I think it's back to the like make a 5 to 10 minute gut based decision on the like quality of the founder or the overall space. Like the Internet in 94 crypto, you know, in the, in the early 2000s mobile now AI, right? It's like just oh, this is the smartest person I know is doing something in AI. That's enough. I don't need to like the more I think the worse my returns will get is sort of what I've realized when it comes to, to tech investing because it is all about the breakouts and the breakouts are not things that you could just linearly, you know, figure out. We had SHIELD on the pod the other day and he's like yeah, I invested in bitcoin early and Nvidia early.
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Unknown A
Like wow, you're so smart. He's like yeah, I invested in bitcoin because I thought it was going to become this other thing and I invested in video because I thought about, I thought it was going to win in crypto mining. So he's like, you know, even in the Ones. He was right. Even in the professional investor with amazing returns who picked the right two things to bet on over the last 15 years, Bitcoin and Nvidia. He got it absolutely right. He did it even for the wrong reason. Right. Like, it's like, God damn it. What are you supposed to do in this?
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Unknown B
This was a great podcast. That was a great story. We should. It would be fun. I would love to do a series where we get the first employee or the first investor in or one of the first in legendary companies to come and talk. So, like, Google, Facebook, Reddit, I think that's the hack.
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Unknown A
Because getting the founder obviously is great. Super hard. And they're also good. They're also, like, still running the company and have to say certain things. And like, they. They've been so media trained and like.
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Unknown B
The statue of limitations can be like, past it. So it's like, if it's 10 years old, it's like, look, no one's going to get mad at you if you say that. You guys, like, called the competitors and pretended to be a customer just so you can get, like, fake information. You know what I mean? Like, it's. We're past that. It's so you could actually reveal a bunch of stuff.
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Unknown A
Paul Graham asked Ron Conway. He goes, you've been doing this now for, like, you know, you were a founder and now you've invested all these legendary founders. What's changed? And he goes. He goes, we drank way more back then. He goes. He goes, what? That's the thing you're gonna say? He goes, yeah. He's like, every day around like 4pm, we had this woman, Donna, who would like, push a cart around the office with booze and we would all drink. And he's like. He's like, we literally talk, like, work hard, play hard at the same time. Like, let's do this.
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Unknown B
He's like, this was good old days.
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Unknown A
Crazy going on and is in our company. And he's like, that's just what we did. He goes, now I go to these companies, they don't do that at all. They're much better about segmenting it. They do play hard, but they like happy hour on Fridays after work, like, not like all the time during work. Crazy shenanigans going on.
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Unknown B
Dude, that was great. Is that it?
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Unknown A
That's it.
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Unknown B
That's the part.