E264: The Asymmetric Edge: Generating Alpha in Venture

Speaker 1 Jamie, I've been very excited to chat. Welcome to the podcast.

Speaker 2 Thank you, David. Thank you for having me.

Speaker 2 Really excited to be here. I listened to you for a long time.
And so thank you.

Speaker 1 You have, according to Ilya Strubilov's unicorn list, you have 19.2% of your companies end up at the seed stage becoming unicorns. Tell me about your sourcing strategy.

Speaker 1 How do you go about sourcing such a high-quality and high-caliber companies?

Speaker 2 The number one signal that we found, because we've regressed a lot of this data and looked at where the companies that we've invested in,

Speaker 2 where has it come from, and we crunch these numbers all day, the most powerful signal has been the founder referral. So not the peer-to-peer, not our other competitors in the space.

Speaker 2 That tends to be about a third of the time.

Speaker 2 The majority of the time and the highest signal time and tying it back to the investment process of which companies end up being billion dollar outcomes are when I get a phone call from that five out of five founder often they may already be you know a multi-billion dollar company and they say hey Jamie like hey I just met this kid he's an LCG

Speaker 2 you need to go down and meet with him or her like tomorrow and those are the songest the strongest signals that we get and those are the ones where my antenna kind of pop up and there are only a handful of folks that I will kind of listen to in that regard But thankfully, some of them are already in her portfolio.

Speaker 2 But when they say, you need to meet this person,

Speaker 2 you know, I'm going to see them in the next 24 hours, most likely. Of course, there's many other ways that we source, but I think that's the most powerful one.

Speaker 1 Why do you think that founders, specifically Unicorn founders, are the best source for deal flow?

Speaker 2 Oftentimes, they're already looking at

Speaker 2 these companies. They might be developing commercial relationships with them.
They may have actually already worked for them.

Speaker 2 Tom Mueller was famously the number one employee at SpaceX if you if you count Elon as you know zero or two if you count Elon as number one.

Speaker 2 So you know how many funds that have been spun out of SpaceX, how many companies that have been spun out of SpaceX.

Speaker 2 Every single one of these companies or kids or funds has worked for Tom in the past. He knows every single one of them.

Speaker 2 So if we're talking about aerospace or defense and space defense or where those things meet as a category or just as a fore example, Tom knows these people.

Speaker 2 So when he calls me and says, hey, Jamie, you know, you've got to meet this kid, he actually knows the company and says, you know, we use this company. We don't use this company.
This one's great.

Speaker 2 This one's pretty mediocre.

Speaker 2 And this kid who worked for me is the best, one of the best engineers I've ever had.

Speaker 1 Some of the best venture portfolios of all time

Speaker 1 literally ranked at the highest are not actually venture portfolios they're angel portfolios they're mark andreessen's portfolio david sacks' portfolio some of the super angel portfolios technically some of them took money and and that's because they had this asymmetric information where they were investing in friends that they went to at stanford or in business school or engineers or engineers that had worked for them And they had the benefit of knowing how effective these employees were over years of working with them.

Speaker 2 To To be truly excellent at this game, you know, if you want to play with it, if you want to be in that category with Sachs and Mark Injuries and those folks,

Speaker 2 you're not in venture beta.

Speaker 2 And there's, you know, venture beta, it's not easy to get to venture beta, but I think there's a lot of firms out there that are offering venture beta and that's good and that's fine.

Speaker 2 But if you want to be truly excellent, you need asymmetric information. Now, that's true in private markets and it's true in public markets.
I used to work in public markets at Go too.

Speaker 2 And what you just said, David, is absolutely true. There has to be something out there, some kernel of truth or some kernel of information that you're getting that not everyone else has.

Speaker 2 And that's the kind of, that's part of the secret sauce of finding, you know, the next unicorn or decacorn or, you know, major company.

Speaker 1 When you find this

Speaker 1 next

Speaker 1 unicorn or deca corn that's sourced through you from your very top founders, people that they work with, How do you go about winning? These tend to be extremely competitive rounds.

Speaker 1 How do you elbow out the other VCs in that round? And what's your secret to winning?

Speaker 2 It's a terrific question, David. And I think that the honest answer is that

Speaker 2 we have to out-hustle them. as a smaller fund.
This is where kind of some of the hedge fund background kind of plays to my advantage and plays to our team's advantage.

Speaker 2 I'm just riffing a little bit here, but

Speaker 2 when I first got into venture, I just didn't see the same level of diligence and homework that I saw that was being applied at places like Code 2.

Speaker 2 Before Code 2 had made this sort of big pivot to become a crossover fund investing in publics and in privates.

Speaker 2 is the amount of diligence, the amount of research that we would do to get something in the book, the public book at Code 2 before they had a big privates book as well.

Speaker 2 So

Speaker 2 when you bring that level of homework to a founder at the earliest stage and you say, hey, listen, I have a 50-page deck, you know, or I have a 50-page memo rather on your company.

Speaker 2 And I am going deep, I'm going almost private equity deep on your company at the seed stage. And I'm going to share this information with

Speaker 2 the growth players or with the seed, you know, whoever is writing the next check into the next round. I'm going to help them underwrite your next round.

Speaker 2 And oftentimes you can beat people with the research that you do. And I think that that's something that goes unsaid or it doesn't get said enough.

Speaker 2 Maybe I shouldn't even be revealing it publicly here.

Speaker 1 I had J.R.

Speaker 1 from Industry Ventures and he talked about just the meticulous diligence process that they go on, both on funds as well as deals.

Speaker 1 And a lot of people in pre-seed and seed, they kind of throw their hands up and say, well, it's unknowable. It's unknowable about this market.

Speaker 1 By By the time Bain creates a research report, it's already too late and all these things are unknowable.

Speaker 1 And that might be true, but to me, that's also an excuse or a form of laziness to not do as much as you can to try to get more information in the space.

Speaker 1 The worst case is you end up getting information that is not very useful or that doesn't move the needle.

Speaker 1 But I think People don't do the necessary hard work that takes to both diligence both companies, founders, and everything, and just kind of use this whole framing of a pre-seed and seed just to be lazy, for lack of a better word.

Speaker 2 I agree with you, and I, and I don't want to cast shade upon any peers or any peer firms, but I do agree with you that

Speaker 2 there is a tendency or a proclivity for folks out there to at the pre-seed level to just say, hey, you know what? It's a small check, anyways, and it's a big end market.

Speaker 2 So let's just kind of see where this thing shakes out. And this guy's ex-Anderol or ex-Mach.

Speaker 2 And so it's probably a decent sharp ratio bet.

Speaker 2 But you can go much deeper. You just have to get creative.

Speaker 2 And you could become your own investigative journalist of sorts and just go down any rabbit hole to find bits and nuggets of information that may surprise you as being incredibly informative in uncovering blind spots and things like that.

Speaker 1 Perhaps it's not binary, but one of the main sources of diligence that I think needs to be uncovered in these pre-seed and seed opportunities is why that individual is leading this name brand startup.

Speaker 1 Let's say they're at Andor at SpaceX.

Speaker 1 Again, it's not binary, but they tend to fit in some continuum as they're not a great employee, they're burning out, or they're the top of the top and they want to build something even bigger, or they want to build something for themselves.

Speaker 1 And zeroing in on that diligence on just how quality of an engineer that

Speaker 1 first one or two employees are at a company, I think is one of the things that goes under diligence.

Speaker 2 You know, I started my career at Goldman Sachs, and

Speaker 2 it was just the ultimate training ground. It was where you went, you know, to, you know, to cut your teeth.
And I think I sort of view SpaceX as the new, as kind of having that ethos.

Speaker 2 And I think it's that their star is so bright that's shining at what is admittedly now

Speaker 2 a large institution. You know, let's use SpaceX as an example, to where they've got bigger dreams and their ambitions are so bright that

Speaker 2 they can chase those dreams. And that might not be starting another space company.
You know, in many cases, it's I want to build small modular reactors in the nuclear realm. And this is my dream.
And

Speaker 2 due to the beauty of the SpaceX tender process and the liquidity around the name you might have some of these you know younger people they're in their younger 30s you know I'm 41 now so they seem like kids to me but you know they might be in their young 30s and they've got quite a bit of money in the bank and they can start they can start you know their own company and

Speaker 2 these tend to be very ambitious young people so I think it's more the latter that their star is so bright that they you know they're not running again they're not running into any ceilings at SpaceX It's just that

Speaker 2 they can have a much larger outcome for themselves. And I think it's more of that.

Speaker 1 When I spoke to Jamie Goel from Wave Function Ventures, he's a former SpaceX guy. He said that people at SpaceX fit in three different camps.

Speaker 1 One is the ones that burnt out after six months, so they just couldn't take it.

Speaker 1 They couldn't take this responsible engineer culture, which basically means that every engineer was responsible for everything in their orbit.

Speaker 1 They couldn't hand it off and they couldn't kind of say, that's not my job. The other end of the spectrum were these SpaceX lifers.

Speaker 1 They're the people that are there for 10, 15 years that just could not see a bigger mission on the planet than making the human species multi-planetary, going to Mars and all this.

Speaker 1 And then there was people in the middle that would go there for five, 10 years,

Speaker 1 build their skill set, build their network, and go on to start other great things. So he kind of saw this as these three camps.

Speaker 2 Jamie's a good friend. So So I talk to Jamie all the time and getting his experience is incredibly helpful.

Speaker 2 Part of this business and bringing it back to that sort of asymmetric advantage is collecting people like the Jamie Goals out there that are just a phone call away.

Speaker 2 And we just, you know, chat about this kind of stuff. And so that's, you know, that all feeds back to those information loops that are asymmetric.
And

Speaker 2 he's got a good

Speaker 2 overtake as any.

Speaker 1 tell me about the humanoid robot space your investor in figure which just to bring it back to elon directly competes against tesla elon says that the optimist is going to be their biggest product ever talk to me about the humanoid space how big is it and

Speaker 1 what's going to determine who wins that space

Speaker 2 so so so let's start from the top so so the labor market the global labor market is the largest end market in the year. So going back to what I was saying at the beginning,

Speaker 2 the market for physical labor is about $42 trillion

Speaker 2 a year.

Speaker 2 So we'll start there. So we've got a big sandbox to play in.

Speaker 2 Now, if we look at many of these applications and many of these jobs within this kind of sector and what are the sub-sectors, These are not necessarily jobs that we want for Americans in the future, or at least let me say that differently, that I want for Americans in the future.

Speaker 2 So like picking and packing, you know, there's about 150% a year turnover for laborers in this in this kind of space. These are jobs that can be automated.
I believe they should be automated.

Speaker 2 And I believe in its inevitability that major corporations will have no choice but to automate

Speaker 2 many of these jobs, especially if we want to reindustrialize and relearn how to build things in America again.

Speaker 1 One of the things that I'm trying to figure out is whether the humanoid robot space is going to be more of industrial

Speaker 1 or a residential product. In other words, are we going to get these maids that are cleaning the house and

Speaker 1 doing the laundry, or is it more production lines and automation?

Speaker 2 Elon has said that this is going to be the largest asset class in the world. It's going to be bigger than the smartphone market.
It's going to be bigger than the auto market. I think it's both

Speaker 2 and it's beyond that. And the math pencils for the reasons we just discussed.
So you think about industrial applications and repetitive tasks like, you know, in the 3PL space,

Speaker 2 worker 247 move this palette, you know, that contains two sticks of deodorant over to this area. There's that job, right? Think about cleaning hotel rooms.

Speaker 2 How many hotel rooms around the world need to be turned on a daily basis?

Speaker 2 All those sheets need to be cleaned all those towels need to be cleaned and re-hung you think about all the office spaces out there that are cleaned each day minimum wage in the united states right now is is call it like 52 or 53 000 i want to say maybe it's a little bit higher than that so you tack on i'm going back to the industrial application like the industrial kind of worker or the logistics you know worker you tack on disability and insurance and then you factor in that they work about a six hour a day but they show up for work half the time and there's 150% turnover when you talk to somebody's warehouse owners their total cost for each of these employees is closer to 150,000 or $200,000 a year and so when you present to them something that might be a hundred thousand dollars a year or eighty thousand dollars a year But guess what?

Speaker 2 The thing can work for 15 hours. It can work for seven days a week.
It can work in the dark. it can work in the cold or the extreme heat.

Speaker 2 You know, there's no COVID, there's no unions, there's no problems, there's no complaints. There's a big 3PL player that's already expressed interest for 85,000 humanoids from FIGUER.

Speaker 2 So, at $100,000 a robot per year, that's $8.5 billion in ARR right there.

Speaker 2 So, that's from one customer. So, I think that's why it could get really exciting

Speaker 2 very quickly, and that they'll play a big role in the future.

Speaker 1 You've deployed now two funds into the ground, $35 million first fund with a total of $100 million deployed, including Co-Invests, and $75 million with $200 million with Co-Invests.

Speaker 1 What were your learnings going from Fund one, Fund 2, and what do you plan to do different for Fund 3? When you want more for your business, start with Northwest Registered Agent.

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Speaker 2 The main learnings from fund one to fund two was that we got we got quite a bit more concentrated in fund two. So we started to get a little bit more aggressive.
And what do I mean by that?

Speaker 2 I don't mean aggressive like, you know, oh, I'm going to hard you down on this term sheet and I I want this lick breath. And I want, you know, I don't mean aggressive in that sense.

Speaker 2 I mean like preempting rounds at inflection points

Speaker 2 where,

Speaker 2 you know,

Speaker 2 your typical VC might, you know, come to you and say, hey, well, they're not going to raise their series A till next year. And, you know, I sort of hear that.
And my first thought is like, well,

Speaker 2 okay,

Speaker 2 fine. I don't, you know, that's maybe that's what they told you.

Speaker 2 But if you ask the question, you know, will they, will they take a little money you know will they take a little more money now so what what is something that we've done very successfully in fun two is identify those companies that are you know exhibiting some sort of like escape velocity or just true velocity to the upside and they're hitting just one a few big contracts or they're going to about to win some big stratify program or whatever it is calling them up And they say, oh yeah, we're going to raise our Series A next year.

Speaker 2 And you say, okay, great. Well, how about you take another couple bucks from us now you know on a safe and we'll do it at a you know a discount to the next round or whatever it is

Speaker 2 more often than not you'd be shocked at the response and the response at first is like well i don't know i don't want to take the deli you know and then you say well what could you do with another three billion dollars and making the number up well i could i could advance this program i could advance this program i could hire eight more engineers um and so more often than not people come to yeah, a little bit extra capital right now would be nice.

Speaker 2 And so, and then that Series A happens and we've already added, you know, more to our breakout winners. And

Speaker 2 that's, you know, another thing that we've really, we've really changed about our process is just really being, you know, playing offense as opposed to defense.

Speaker 1 After spending eight years at Goldman Sachs, you went to CO2 and you got to work with Philip Lafont, who's the co-founder of CO2. What did he teach you about investing?

Speaker 2 Oh my gosh, Philippe, so much.

Speaker 2 It's hard to even boil it. So I'll give you a bunch of four examples because he taught me so much and his brother Thomas as well.

Speaker 2 Philippe,

Speaker 2 Philippe

Speaker 2 is a true savant in terms of boiling down very,

Speaker 2 very complicated things into the two or three things that really, really matter.

Speaker 2 And so the, I'll give you you a you know sort of a a hypothetical and then an actual the amount of times for example that i would come to him with some you know really complex model and laundry list of the you know about a certain company of the you know 45 things that this company would have to just nail all 45 of them they would have to nail and then it could get in the book and he'd look at me and be like jamie this this feels like something with too much soul supplier risk And I would sort of double-click on that and let's go deeper on that.

Speaker 2 And that would probably most of the time, he'd be kind of right.

Speaker 2 The other big thing, which I think is very applicable in the sort of the crossover space, if you think about applying sort of the hedge fund mentality to venture that he taught me was he always thought it was crazy that sell site analysts and the rest of the street and you know Warren Buffett thinks this way, Jamie Dimon thinks this way, that companies, being measuring companies on quarters is just absurd.

Speaker 2 Even measuring companies on T plus one year or T plus two years is kind of absurd.

Speaker 2 And so he would look at a certain company and let's make up a company like Netflix.

Speaker 2 I don't know what it trades at right now, but I'm going to make up a number from a few years ago. Maybe it traded at 20 times or 25 times earnings.
And

Speaker 2 people would say,

Speaker 2 maybe that looks expensive optically.

Speaker 2 And Philippe would challenge the assumption, but he wouldn't challenge the assumption on the 20 or 30 times T plus one or T plus two years.

Speaker 2 He would say, well, in five to seven years, do you think that they can grow at this rate? And do you think that they can get to X $100 million subs?

Speaker 2 And then say, because I think if you just think about it this way and this way, if you think about it on a five-year or a seven-year or a nine-year time horizon, I think you're buying this company at three times earnings or I think you're buying this company at at two times EBITDA.

Speaker 2 And then I think he was able to apply that same lens of thinking to venture. And I think he taught all of us, all of us that,

Speaker 2 because it's really not that different. We're not really looking at the next one or two years in venture.
We're looking at, you know, obviously five, 10 years down the road, what can this company be?

Speaker 2 And so those are some of the things that I think Philippe taught.

Speaker 1 I had Dan Ives on a podcast. He thinks about public markets very much like a VC.
He thinks about if you froze the market for five years, what would you invest in?

Speaker 1 He was early at Apple, he was early at Tesla, he was early in Palantir.

Speaker 1 And he takes this private market lens into the public markets. What else did you learn from Philippe?

Speaker 2 Another thing that

Speaker 2 I sort of blatantly ripped out of the Philippe Lafont playbook, but I'm proud to say that I did is that he would have us rank

Speaker 2 every investment that we brought to him as a one to five from a gut score. And that was literally what it was identified in the internal kind of CRM and portfolio tracking tools.

Speaker 2 You actually had to input a number one through five.

Speaker 2 And so I think, you know, and I think that the best investors in the world will admit that intuition, which is really what kind of gut, you know, meant, plays a huge part, if not probably one of the biggest parts of true alpha.

Speaker 2 And because whenever we brought something to Philippe, we actually had to put in that gut score of one through five, and five being the best.

Speaker 2 And then, of course, that would give him the benefit of being able to say, well, okay, well, Jamie brought this five to me, and I can regress that versus the performance of his stock picks.

Speaker 2 And, you know, it would give him a good lens into our own sense of intuition. We've taken the same thing to Tamarack.

Speaker 2 We take the same level of approach, and the results and the correlations are pretty striking. And, you know, I'll just give you an example, David.

Speaker 2 That if you're just, if you're debating whether it's a four or a five, you kind of know that in your head.

Speaker 2 You're like, well, they kind of were, they were kind of so-so on this, and they were kind of a four on that. But I really did like this part of the business, and that's more of a five.

Speaker 2 You can talk yourself into it being a five and make the investment.

Speaker 2 And most of the time, it doesn't work out.

Speaker 2 But when you see a five and you know a five, it's like every fiber of your being, you know, you feel it at the deepest part of your gut and you just know it's a five.

Speaker 2 And you take a look at that data versus the ones where you were at like a 4.5 or talked yourself into a five. It's pretty striking.
And, you know, I read

Speaker 2 an interesting quote from, I think it was from Josh Krushner from Thrive recently that I'm going to paraphrase here, but he said something basically like,

Speaker 2 my deepest insecurity is that I will oftentimes have intuitions about

Speaker 2 a certain thing or a certain company that I cannot explain to anybody else, but I just have to invest and I love it. And he rattled off a few four examples and they were,

Speaker 2 I think it was Instagram, Spotify, and OpenAI. And I think that that was a big learning that, you know, it basically goes back to what we're saying, which is an intuition.

Speaker 2 And, you know, do you have it or do you not have it? And I think the best have it.

Speaker 2 And it's something that it's another thing I'll be eternally thankful that Philippe Tommy.

Speaker 1 I think about two things there. One is the Ashton Kutcher rule.

Speaker 1 So Ashton Kutcher has this rule that if during a pitch with a startup, even for one second, he has the idea of I should quit what I'm doing and go work for this founder.

Speaker 1 That's a signal for him to invest because the hardest thing at the seat stage is recruiting. That is the highest form of alpha.

Speaker 1 Taken to the extreme, you could have a completely nonsensical business, recruit the greatest minds in Silicon Valley, and you'll iterate your way into a $100 billion company.

Speaker 1 The second aspect of that is this mismatch between gut and words.

Speaker 1 So if you think about what does it mean you have this gut instinct, it's not something that comes from outer space or from outside of your body. It's inside your brain.

Speaker 1 Our brains are fully encapsulated systems. So we have parts of our neurobiology that's syncing together to tell us that this is good.
What we lack is actually

Speaker 1 the ability to fully articulate. why we're feeling this way.
So the information is there. The information, our gut is essentially our information.

Speaker 1 Step two is being able to articulate that information, but step two is not necessary.

Speaker 1 What's necessary is that you have that gut because the gut is the synthesis of all the information that you have as an investor. And as long as you have it in your gut, you could articulate it.

Speaker 1 This applies to factors outside of investing.

Speaker 1 If you're in a subway, if a woman sometimes will be on a subway and will feel uncomfortable, She may or may not able to articulate why she feels uncomfortable.

Speaker 1 But more often than not, there's a good reason for why she feels uncomfortable. And it's, again, this intuition, the synthesization of information in her head that leads her to this uncomfortable.

Speaker 1 So the gut is an undervalued aspect. Now, you could obviously corrupt that and you could say, this is my gut.
This is why I'm banging the table.

Speaker 1 Maybe it's really your ego or you have an incentive that's not. aligned with the rest of your partnership.
And you could obviously corrupt this ability to say it's my gut.

Speaker 1 When taken in the positive and when not misaligned with incentives, it could be extremely powerful.

Speaker 2 That's all 100% true. And I think that where you nailed it is in that inability to communicate it, but you just sort of know it, but you may have trouble synthesizing it.

Speaker 2 I remember taking a

Speaker 2 social psychology course back in undergrad, and it was basically a finding that people, on average,

Speaker 2 when there's public speaking, you know, if somebody's watching somebody speak at a panel or something like that

Speaker 2 they typically they make their decision on if they're going to listen to the person or not within the first three to eight seconds and that's what the studies show is that in that first three to eight seconds the person either grabbed their attention and had that sort of, you know, I go back again to that idea of grabbing toss and poise, or they didn't.

Speaker 2 And if you ask those people, like, why did you listen to that person or why did you not listen to that person, my sense is that they would not be able to articulate it.

Speaker 2 They just

Speaker 2 made a snap, snap judgment of like, this person's interesting or they're not.

Speaker 1 A lot of what becomes being a better investor, one is the input of more information, more iteration, more use cases, seeing what excellence looks like.

Speaker 1 But some of it is also learning to trust your instincts. And sometimes to this point, you just don't have,

Speaker 1 you can't wordsmith exactly where you're feeling. I had a funny example.

Speaker 1 I was at brunch with my business partner and we were meeting with someone and she was, she just spent too much energy smiling.

Speaker 1 And I just learned kind of, I learned to read micro facial expressions. I literally told my business partner, he said, well, she seems nice.
What did you think?

Speaker 1 I'm like, she spends too much energy, too much facial expressions smiling. I don't think she's authentic.
And I ended up being correct, not that I'm always correct.

Speaker 1 But, you know, these absurd kind of reasons for why you trust or distrust someone is actually wired in millions of years of evolutionary psychology and evolution biology.

Speaker 1 So sometimes they might be misleading, but sometimes they might be exactly on point, even if it sounds. arbitrary or sounds like you're being hypersensitive.

Speaker 2 I don't think you're being hypersensitive at all. And I think that

Speaker 2 those are exactly the cues that we kind of look for.

Speaker 2 And, you know, and I think in some sense, being an investor, you are sort of like a social psychologist or you are sort of an anthropologist or you are,

Speaker 2 you know, you're looking for all those cues. And I think, you know, excess smiling, I love that.
I love that as a potential, you know, negative.

Speaker 2 uh signal but where you know of course the optimist in me wants to say oh maybe david she was just a really friendly person and you kind of missed the mark on that one.

Speaker 2 But, you know, my sense is you probably didn't. And

Speaker 2 maybe, yeah.

Speaker 1 What's kind of a mind fuck, for lack of a better word, is

Speaker 1 I would always excuse these kind of behaviors and I would always

Speaker 1 kind of judge myself. Oh, man, you're being so harsh.
Maybe she's just, maybe her muscles are just more developed in her face.

Speaker 1 But the degree of precision and the degree of accuracy in these microfacial expressions may not be 100%, but it might as well be 100%.

Speaker 1 I'm also remembered in diligence. The only guest that's been on the podcast three times, Alex Edelson from Slipstream.
He's extremely good at diligencing. And

Speaker 1 through him, I've actually learned that diligencing managers and CEOs is certainly a skill. And one of the reasons for his edge is because he started out actually as a lawyer.

Speaker 1 And part of his job was to interrogate people. And he learned, to your point, these micro facial expressions, how to phrase questions in certain ways.

Speaker 1 And the reason it's such an important skill is one, is, I would argue, especially in manager selection and references in general, I would argue references are one of the most important sources of alpha.

Speaker 1 And because references are essentially game theory where the other person is disincentivized to tell you the truth, being able to be a top 10% or top 1% reference interviewer, I guess, is a seriously underrated skill and a significant source of alpha, in my opinion.

Speaker 2 I think what you said is

Speaker 2 100% true. And I think it translates directly into what makes a great interviewer because it's like...

Speaker 2 It's kind of like jazz, right? We're kind of riffing off of one another, right? You're kind of reading what I'm putting out and feeling what I'm putting out.

Speaker 2 And I'm, you know, trying to do the same with you. And if you are kind of in sync and in symphony and in orchestra with the other person, and that you might create something interesting.

Speaker 2 So I think, you know, but the ability to

Speaker 2 know when there's some dissonance in the room or when there's, you know, it's not really jiving or it's not really sinking because of that, you know, whatever it is, that note,

Speaker 2 whether it's a nose scratch or an excess smiling or, you know, look up and to the right or, you know, any of these things that buddies from the from the agency have taught me over the years as well.

Speaker 2 It's all those things. All those, it's pattern matching, right? It kind of brings me back to what Philippe had taught me.
That was the other thing. It was just, it was just pattern matching.
You know,

Speaker 2 you would tell him a story about a new company that you had just heard about and you thought this was the coolest new thing that he'd never heard of in his entire life. and he would be like,

Speaker 2 Yeah, it reminds me of a company I knew in the 90s really well. They tried the same thing and it failed for these three reasons.
And you'd be like,

Speaker 2 Well, shit, you know, okay,

Speaker 2 uh, he's probably right, and you know, he's kind of

Speaker 2 you know

Speaker 2 pretty, pretty good at this, but it's just it's pattern matching and it's being able to read between the lines, and it's intuition, and it's gut, and it's all of these things kind of put together.

Speaker 1 And I want to take you back back a decade ago. You had been at Goldman Sachs for eight years.
You're at JP Morgan.

Speaker 1 You were just about to start at Code 2.

Speaker 1 What is one piece of advice that you would have given a younger Jamie just entering Code 2 that would have either accelerated your career or helped you avoid costly mistakes over the next decade?

Speaker 2 It's a great question. I would say take big risks and put yourself out there.
You know, take a big swing and take a big stance and prioritize conviction over caution.

Speaker 2 Like Stan Druckenmiller famously, you know, has said, put all your eggs in one basket and then watch that basket carefully.

Speaker 2 We're all pretty lucky to be involved in this game, whether it be venture, hedge fund,

Speaker 2 finance writ large, right? We're in a developed economy. We're all very lucky and blessed people.

Speaker 2 And we take our jobs at Tamarack very, you know, as fiduciaries, very, very seriously.

Speaker 2 But at the end of the day, especially early in your career, you know, the realistic worst case scenario to having a wrong stock pick,

Speaker 2 it's pretty low. The stakes are pretty low.

Speaker 2 I think that if I could give myself one piece of advice, you know, in going back, it would be when I felt like something was kind of a home run and I felt like it was just like a no-brainer, like pound the table, you know, wear your heart on your sleeve, even if it's out there.

Speaker 2 Because there's that bucket of investing, which we call it internal, we call it the weird and the wonderful.

Speaker 2 If you can find something that's, you know, weird and wonderful, you know, that goes back to that information asymmetry that we talked about earlier in this conversation.

Speaker 2 So I would say don't be afraid to take huge risks early in your career. That'd probably be the

Speaker 2 number one thing

Speaker 2 I would tell the earlier version of myself.

Speaker 1 Going back full circle, we started the podcast talking about how you guys have had 19.2% unicorn hit rate, according to Ilya Struvalov's rankings. You were number one of any fund.

Speaker 1 How sure were you in those breakouts, both in terms of the companies that could really become unicorns and then the ones that you thought could become the DECA unicorns?

Speaker 1 How much was your intuition able to predict those unicorn, DECA unicorn? outcomes in retrospect?

Speaker 2 In retrospect,

Speaker 2 obviously,

Speaker 2 it would be intellectually dishonest for me to say that I could say with 100% certainty that I knew that those ones were going to be unicorns or DECA unicorns, but I could say with a 100% degree of certainty that I felt pretty damn good about those ones being winning outcomes.

Speaker 2 You know, I gave the Tom Mueller example.

Speaker 2 The guy's one phone call away from Elon and he's building in space. You call that an unfair advantage.
I think that's like the definition of an unfair unfair advantage, right?

Speaker 2 Can you just kind of skip the queue and get on the next launch? Like, yeah, just text the guy, sure. Okay, done.

Speaker 2 You know, or I think about Chaos Industries and I think about John Tennett and Brett Cummings. And, you know,

Speaker 2 they've already co-founded a company, you know, in Epirus. They've multiple, multiple companies they've founded, exited Eparis at over a billion-dollar valuation.

Speaker 2 Do I think, John, and John's a dear friend, one of my best friends, and

Speaker 2 you know, he's an incredible founder. He's a bull in a china shop.
He is one of the most connected people in the world.

Speaker 2 And do I want to put another, if I'm another defense founder, do I want to go up against John Tennant? No

Speaker 2 is the answer. Like, do I think he's going to win? Yes, I do.

Speaker 2 So, like,

Speaker 2 I'm probably coming off as quite confident in these picks, but when I went into these, people said, you know, there were, these were not, these were not cheap valuation entry points at, you know, the earliest stages.

Speaker 2 But it's like drafting like an all-star NBA player, right?

Speaker 2 You're paying up a little bit for talent, but if you want to be sure that you're going to get that Decker corn, you know, kind of outcome, I felt very good about many of these. Same with Brett Adcock.

Speaker 2 We had already seated him when he was at Archer Aviation and exited that company at close to a $3 billion valuation.

Speaker 2 So we were his first phone call when he did figure AI and he said, hey, guess what, guys? We're doing robotics now. We're doing humanoids.
And we said,

Speaker 2 what's a humanoid? And that was three years ago now.

Speaker 2 And so, you know,

Speaker 2 I would say, honestly, David, without sounding braggadocious, I felt pretty confident about many of these companies.

Speaker 1 Well, Jamie, appreciate you jumping on the podcast. Look forward to sitting down in person very soon.

Speaker 2 David, thank you for having me. This has been great.

Speaker 2 Loved our conversation, and I really appreciate it. And yeah, let's get together soon.

Speaker 1 That's it for today's episode of How to Invest.

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