Should Small Teams Raise Money, And How: Interview with Miko Matsumura, Managing Partner, gumi Cryptos Capital

WEBVTT
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So the thing that's interesting is from an entrepreneurial
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view, a 5x return is sort of a life -changing
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difference. But to a venture portfolio, it's
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sort of, it's a rounding error. Like it's basically
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like, so in a sense, the venture funds incentives
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are to just drive for the, you know, the megacore,
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right? And so I guess what I'm trying to say
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is that people are making deals that they don't
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understand the implications of. They're making...
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deals with a very asymmetric partner who has
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very different goals from them and that there
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may be a temporary alignment where there's kind
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of the world is puffy and filled with promise.
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But like it may be that at some point they might
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regret making the promises they made. Presented
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by Zapier, the AI automation company. Hello and
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welcome to the small team big scale podcast.
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The Shore, we talk about how tiny teams with
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big ambitions are doing more with less, scaling
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smarter, not harder, and building big businesses
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with teams that could fit around a dinner table.
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I'm your host, Ron Schmelzer, and on today's
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episode, we're tackling a question that every
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small team founder wrestles with. Can a truly
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small, high leverage company actually raise venture
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capital? Should it and how? And our guest is
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Miko Matsumura, who is the managing partner at
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Gummy Cryptos Capital, and he's going to to give
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us the honest answer from both sides of the VC
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table. And of course, insights into what's happening
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with Web3, Tiny Teams, and AI, which is saying,
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if you're not doing AI and you're a Tiny Team,
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you're not doing it right. So hey, Miko, thank
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you so much for joining us. Yeah, I'm excited
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to talk about it. Yeah, this is fantastic. So
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before we jump in, I want to let you all know
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that Miko and I, we go way back decades. I don't
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even know if I want to say how many. Yeah, that's
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some big stuff here. So in my past life, I ran
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an analyst firm called ZapThink, and Miko was
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a client, his company was a client, and we worked
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together during the SOA days. Some of you may
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remember that service oriented architecture back
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when that was the hot thing that everyone was
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trying to figure out, at least in the enterprise.
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nowhere near as hot as AI, by the way. If I asked
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my mom about social, she'd be like, but if you
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talk to her about AI, she's like, oh yeah, look
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what I just did. So anyway, so this is more than
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just an interview for me. I really respect Miko.
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I've been following him for a long time now,
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decades, and I really wanted to see how he thinks
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about leverage and ecosystems up close. That's
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why I wanted him on the show. He was posting
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recently, I'm like, I gotta talk to him. He's
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gotta be on here. And one thing you may or may
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not know about Miko, in 1990, while the rest
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of the world was still figuring out email, he
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was building a 33 parameter back propagation
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neural network at Yale. And he went on to lead
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Java evangelism at Sun Microsystems, grew that
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developer community from thousands to millions,
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raised over 50 million as a founder, then flipped
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the script to become a VC, deploying $130 million,
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picking unicorns like OpenSea and Yield Guild
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games before anyone had ever heard of them. Maybe
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you've heard of them, maybe you haven't. But
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in the Web3 space, they're definitely big. really
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want to dig into today is what all of this means
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for the small team founder, because the venture
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industry was built for scale, for sure, investing,
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taking risks, taking small amounts of money and
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making them big. That's the game, right? But
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it was really built for companies that scaled
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in. I would say more traditional way. It's weird
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to say that, but the venture world is built on
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this traditional headcount focused growth method.
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And the whole model really assumes that you're
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going to scale by hiring. But what does that
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mean for the small teams now, the solo founders,
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which have actually traditionally been frowned
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upon by the venture universe? One team, one founder.
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That seems risky, right? The three person company
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that's already generating real revenue. Do they
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even have a shot or need for raising? And is
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VC even the machine that everyone wants to get
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into? So we're going to get into all that sort
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of stuff. We're going to wrestle with it. But
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enough from me. I think you want to hear about
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Miko. Miko, tell us a little bit about Gummy
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Cryptos Capital as well and kind of bring us
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up to speed with kind of who you are and what
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you're doing and why you're here. Yeah absolutely
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so you know back in twenty eighteen you know
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we pretty much kicked off this initial fun vehicle
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twenty one million dollar crypto fun you know
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knocked out some really really early stage stuff
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and some pretty deep tech speculative things
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in web three obviously you mentioned some of
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them you know one inch and open see probably
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a total of about eight. or so unicorn scale outcomes
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out of that FUN vehicle. We are in our second
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vintage with FUN 2, which is a $110 million vehicle.
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And, you know, from our vantage point, a lot
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of what you're describing is foundational and
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transformational, especially with the advent
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of these machine, you know, sophisticated machine
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intelligences, you know, that are on this kind
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of hyper scaling cycle. Right. So, you know,
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in a way like huge transfer I think you mentioned,
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you know my Yale neuroscience You know degree
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and part of the thing that happened between that
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time and today is the Transformers paper, right?
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So the Essentially people are talking about intelligence
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as a monolithic construct, right? but the thing
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that's really interesting when you think about
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attention is People talk about machine intelligence
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and machine learning right, but they don't really
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talk about machine attention as being foundational,
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right? They're not like, oh, like, you know,
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let's talk about artificial attention. And it's
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like this artificial attention is the biggest
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thing to happen. Right. Because the backpropagation
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of error was known in like the late 1980s. Right.
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And so we were, you know, so in terms of what
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people call machine learning is effectively the
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backpropagation of error through an abstract.
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you know neural network right so the thing that
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changed is really the is is artificial attention
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is is that what happens within this Boltzmann
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is that you can basically do gradient descent
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around this paradigm of the dot product right
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so if you've studied Simple kind of vectorization.
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You understand this cosine similarity, which
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is you understand this kind of 3072 dimensional
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matryoshka vector embedding, you know, this kind
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of vibe, right? You understand it, right? You
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understand how a cat and a dog are different,
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right? It's like they're both pets. And like
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one of them is they're both furry, but like,
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you know, so you start to understand these multiple
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dimensional vectors, right? But the thing that
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attention added is the dot product, right? Which
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is basically the that the vector actually has
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a length, right? So the length of the vector
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is not just the angle where it's like these two
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things are similar, but it's like these two things
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are similar, but this one's important. The length
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of the dot product, right? So the machine attention
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was really the thing that changed. So like...
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People talk about GPT, transformers are the T,
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right? The concept of it being generative and
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the construct of it being pre -trained, it's
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all back prop. It's the same thing. So since
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1990, that's the one thing that has materially
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changed. Obviously, the availability of compute
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obviously has changed, right? So there's a map,
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the amount of compute is insane, right? Jensen
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delivered crazy GPU is insane, right? The amount
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of data that's just lying around in piles is
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insane, right? So I'm not saying nothing changed,
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but what changed in the kind of AI neuroscience
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world is attention. Like that's what changed.
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That's the biggest change. And, you know, algorithmically.
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So we're here. So the reason why I'm giving all
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this kind of preamble is that I think what's
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most important is to understand exactly what
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you said, which is what is the leverage? Like
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what happens when you confer attention onto machines,
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right? And people who are thinking about this
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in a very coarsely grained way are just reasoning
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that the machines have become intelligent, right?
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And by how? Not by accruing the ability to learn,
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which they already have. It's actually by the
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ability to attend, right? That attention, that's
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the thing. So the question becomes, what's the
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leverage in machine attention? Turns out it's
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pretty big. Pretty big. Well, good. Well, I do
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for our listeners, some of them might seem a
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little technical. I'm just going to sort of compact
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all of that for you. I'm going to perform the
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job of a large learning, sorry, a large language
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model right now. I'm going to compact that conversation
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a little bit for you here. But basically long
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and short, all of that technical discussion was
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mainly to say that we've trained these machines,
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we've been doing machine, this training of machines.
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for a really long time and building these models,
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honestly, for a very long time. But that seminal
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paper, the attention is all you need paper, the
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one that basically kicked off the chat GPT revolution,
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which, as you mentioned, is just an application
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of this pre -trained large pre -trained model.
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Yeah, before it was it was chat GPT. Right. There
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was no transformer. That's what the T is. This
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actually goes back to the previous company that
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I sold, Cognitica, was that the big transformation
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also wasn't just that these models were available,
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but it also shifted the amount of complexity
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that the user needed. Because for a long time,
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you needed to be a data scientist and a machine
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learning engineer to really get anything, honestly,
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of value out of any sort of model. But what happened
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was that with the idea of attention, I'm going
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to sort of put it back here, is that you could
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enter a small amount of text, a prompt, and you
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can get a huge amount of text or a different
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amount of text or whatever transformation of
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that text into something else. And that's what
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we're grappling at now. And of course what's
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happened is that people can speak, people can
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do language, people can think. And so when they
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apply their speaking in their language and thinking
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to models, they get these what seem to be magical.
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outcomes even though we are the thing I actually
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like the word magic because When you know how
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a magic trick works, you know that nobody defied
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the laws of physics. We didn't magically make
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something Disappear from one location and reappear
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another location or chop somebody actually have
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you're like, oh, that's how the trick works I
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think more people should understand how the magic
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trick works of large language models, but A lot
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of it does come to these are models trained on
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a lot of data, which they may or may not always
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have had the rights to use, but nonetheless,
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they're in the model. So. That's actually big.
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So let's get back into this transformation. And
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I think this leverage. So that's what this podcast
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is all about is that, hey, this is putting the
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power of all of this capability into the hands
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of individuals. And I think that is fundamentally
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changing the landscape of venture, because it
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used to be just like you had to be a data scientist,
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a machine learning engineer to do something with
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the eye. You had to be a developer to build applications.
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You had to be a designer to build stuff. You
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had to be a copy. right person to write stuff.
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Now you don't. So the question is, well, do we
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need to have money leveraged or is the technology
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leverage all we really need? We don't. Is that
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kind of all we need right now? Sort of just attention?
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Yeah, yeah, yeah, yeah. I mean, I feel like the
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thing that you're describing is tremendous. If
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you go back to Guy Kawasaki's rules for revolutionaries,
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one of the rules was eat like a bird, shit like
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an elephant. Right. So this this idea of creating
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outsized impact with undersized investment, right,
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really is 100 % leverage and leverage only. Right.
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So the thing that I think becomes so important
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becomes that the scope of the value chain kind
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of gets collapsed into a singularity. Right.
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Because effectively, when you look at like a
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four pillar startup, it's like engineering, and
00:11:56.950 --> 00:11:59.889
then there's, you know, product and then there's
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sales and then there's marketing right and it's
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essentially like yeah those are all skill domains
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right but the thing that's fascinating about
00:12:07.460 --> 00:12:09.840
what happened today is that you can have a solo
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founder that can do everything you know because
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why shouldn't they they can do their own engineering
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they can do their own product they can do their
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own you know and obviously it up levels the skill
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of Having good taste right up levels the moat
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of like understanding the world you know and
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a lot of these types of skills become more skills
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that actually swing all the way back towards
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things like the humanities right where you understanding.
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Problems, you know, like what are problems? What
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is a problem? Like, how do you think about problems?
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How do you solve problems? Right? All of these
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things, you know, and in a sense, the how becomes
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sort of subordinate to the why, right? Which
00:12:50.840 --> 00:12:53.940
is understanding reasons, right? Because people
00:12:53.940 --> 00:12:56.659
exhibit things like behaviors, right? Like purchasing
00:12:56.659 --> 00:12:59.740
behaviors, like customer behaviors, retention
00:12:59.740 --> 00:13:03.039
behaviors, whatever it is, all of these behaviors.
00:13:03.440 --> 00:13:06.039
Are purposeful right people all have their own
00:13:06.039 --> 00:13:08.500
behaviors in the world right so understanding
00:13:08.500 --> 00:13:11.980
and you know meaning and these kinds of things
00:13:11.980 --> 00:13:16.840
become really powerful framing within which entrepreneurs
00:13:16.840 --> 00:13:19.639
can create tremendous leverage. Yeah, and I think
00:13:19.639 --> 00:13:22.340
it's interesting that you bring that up. You
00:13:22.340 --> 00:13:23.879
mentioned the word taste, which is kind of an
00:13:23.879 --> 00:13:26.620
interesting word that kind of sets me off in
00:13:26.620 --> 00:13:28.820
a couple of directions because I actually wrote
00:13:28.820 --> 00:13:31.139
about this actually for a piece in Forbes once,
00:13:31.179 --> 00:13:33.259
and that is that a lot of things you're talking
00:13:33.259 --> 00:13:35.200
about are the intangibles, which is critical
00:13:35.200 --> 00:13:37.759
thinking and creativity and common sense, which
00:13:37.759 --> 00:13:39.820
machines are still not really very good at any
00:13:39.820 --> 00:13:43.149
of those things. But when you talk about... you
00:13:43.149 --> 00:13:44.929
know, things like taste to these intangibles.
00:13:44.950 --> 00:13:47.149
And like I've heard like investors like we're
00:13:47.149 --> 00:13:49.450
investing on ideas. It tastes like what does
00:13:49.450 --> 00:13:51.789
that mean? What is that actually? Is it more
00:13:51.789 --> 00:13:54.570
just like you have a strong opinion about the
00:13:54.570 --> 00:13:58.269
way something should work? Yeah. Yeah. So I think
00:13:58.269 --> 00:14:03.409
the biggest moat becomes taste is more like a
00:14:03.409 --> 00:14:06.409
buzzword. Right. But the thing that I think is
00:14:06.409 --> 00:14:10.009
the real moat is more like mindset. Right. Like,
00:14:10.009 --> 00:14:13.629
for example, like I am a big fan. of like Homer
00:14:13.629 --> 00:14:16.909
and like the Odyssey right now. I think it was
00:14:16.909 --> 00:14:18.730
like the Odyssey or Simpson. I was going to go
00:14:18.730 --> 00:14:22.169
to see. And when I was younger, it was Simpson.
00:14:22.309 --> 00:14:24.269
No, when I was younger, it was the Iliad, actually.
00:14:24.389 --> 00:14:26.289
Right. But now, now that I'm a little older,
00:14:26.409 --> 00:14:29.049
it's about the Odyssey. But the point I'm trying
00:14:29.049 --> 00:14:33.549
to make is that there are ancient books. And
00:14:33.549 --> 00:14:35.570
when you pick up an ancient book, right, you're
00:14:35.570 --> 00:14:39.389
mostly reading winners. And what I mean by winners
00:14:39.389 --> 00:14:42.230
is Homer's a winner because, like, Christopher
00:14:42.230 --> 00:14:45.769
Nolan is making a movie in 2026 about freaking
00:14:45.769 --> 00:14:48.330
Odysseus, right? Like, what the hell is even
00:14:48.330 --> 00:14:50.110
happening, right? Like, what I'm trying to say
00:14:50.110 --> 00:14:53.450
is that, like, the losers are all gone, right?
00:14:53.490 --> 00:14:56.490
Like, there's probably a billion books that have
00:14:56.490 --> 00:14:58.850
been written by humans and, like, almost all
00:14:58.850 --> 00:15:00.769
of them are, like, forever forgotten because
00:15:00.769 --> 00:15:03.429
they're pretty useless or whatever, right? Whereas,
00:15:03.549 --> 00:15:06.879
like, so... Why am i talking about this the reason
00:15:06.879 --> 00:15:09.059
i'm talking about it is there are books that
00:15:09.059 --> 00:15:11.659
people can read over and over and over and over
00:15:11.659 --> 00:15:14.120
for their entire life and every time they read
00:15:14.120 --> 00:15:18.299
it again this book produces more meaning and
00:15:18.299 --> 00:15:20.700
then they're more excited and then they're more
00:15:20.700 --> 00:15:22.860
excited to even read it again another time right
00:15:22.860 --> 00:15:27.080
what why what is it why why is this true it's
00:15:27.080 --> 00:15:30.070
true because it's a mindset that there's a deep
00:15:30.070 --> 00:15:33.070
mindset that there's culture there's encoded
00:15:33.070 --> 00:15:36.809
knowledge there's traditions there's like philosophy
00:15:36.809 --> 00:15:39.429
there's linguistics there's like everything's
00:15:39.429 --> 00:15:42.059
embedded in these in these ancient Texts that
00:15:42.059 --> 00:15:45.799
are so vital to humankind. I think you know every
00:15:45.799 --> 00:15:49.440
major world spiritual tradition Is kind of forced
00:15:49.440 --> 00:15:52.019
to answer the question of like why is it bad
00:15:52.019 --> 00:15:54.620
here? You know and and they all take a crack
00:15:54.620 --> 00:15:56.779
at it and they all have their own way of explaining
00:15:56.779 --> 00:15:59.120
the answer to that question Those books people
00:15:59.120 --> 00:16:01.559
read them every day and they just you know, these
00:16:01.559 --> 00:16:05.139
are kind of like uh one billion monthly active
00:16:05.139 --> 00:16:09.000
users, you know, with with year 2000 retention,
00:16:09.000 --> 00:16:11.860
you know, level, you know, success stories, right,
00:16:11.919 --> 00:16:14.419
in terms of the, you know, if you think of these
00:16:14.419 --> 00:16:16.940
as apps, right. So I guess what I'm trying to
00:16:16.940 --> 00:16:21.139
argue is that mindset is really productive of
00:16:21.139 --> 00:16:24.779
outcomes, right, where if the person has of a
00:16:24.779 --> 00:16:27.639
good mindset, then that mindset becomes something
00:16:27.639 --> 00:16:29.759
because how do you replicate the mindset, right?
00:16:29.840 --> 00:16:32.120
Like the mindset is something that a person has
00:16:32.120 --> 00:16:34.620
developed over their entire life. So in a way,
00:16:35.299 --> 00:16:37.860
like, you know, mindset becomes about taste is
00:16:37.860 --> 00:16:40.080
really downstream of mindset. So, you know, in
00:16:40.080 --> 00:16:42.600
a way, like if you have a really interesting
00:16:42.600 --> 00:16:46.120
mindset, you know, then what comes out are all
00:16:46.120 --> 00:16:48.200
of these things that people value, but they're
00:16:48.200 --> 00:16:51.360
downstream, like contrarianism. Is downstream
00:16:51.360 --> 00:16:54.740
of your mindset right like you know taste is
00:16:54.740 --> 00:16:57.200
downstream of your mindset and all of your output
00:16:57.200 --> 00:16:59.440
is downstream of your mindset right so to me
00:16:59.440 --> 00:17:02.559
like mindset is really big and i can tell you
00:17:02.559 --> 00:17:05.960
one of the biggest mindset that i think. Is impactful
00:17:05.960 --> 00:17:08.500
is the mindset of continuous improvement right
00:17:08.500 --> 00:17:10.799
like you have the mindset of continuous improvement
00:17:10.799 --> 00:17:14.799
like the leverage is just you know it's it's
00:17:14.799 --> 00:17:17.990
insane. Yeah, there's this common theme out there
00:17:17.990 --> 00:17:19.930
for those of you who I've seen it probably on
00:17:19.930 --> 00:17:22.009
LinkedIn or wherever else is that 1 % thing,
00:17:22.130 --> 00:17:23.309
which is like, well, all you got to do is just
00:17:23.309 --> 00:17:25.990
be 1 % better. I don't know what the time frame
00:17:25.990 --> 00:17:27.829
is. This is not a daily, weekly, monthly. I don't
00:17:27.829 --> 00:17:30.069
know. But the idea is this compounding of the
00:17:30.069 --> 00:17:31.970
compounding interest, the compounding of leverage.
00:17:32.170 --> 00:17:34.150
If you're just if you get one percent better
00:17:34.150 --> 00:17:35.750
and you do it over and over again soon enough,
00:17:35.869 --> 00:17:38.490
that one percent becomes pretty huge. Right.
00:17:38.670 --> 00:17:40.849
So I don't I don't know if you all read like
00:17:40.849 --> 00:17:43.970
atomic habits. Right. James Clear. But like it's
00:17:43.970 --> 00:17:45.890
absolutely the core insight. Right. Which is
00:17:45.890 --> 00:17:49.569
if you have a one percent compounding improvement.
00:17:49.569 --> 00:17:53.950
Right. What happens is that curve. As asymptotic
00:17:53.950 --> 00:17:56.750
to the vertical, like that's what that 1 % compounding
00:17:56.750 --> 00:18:00.089
is, right? If you have a 1 % decrease that compound,
00:18:00.269 --> 00:18:03.210
you asymptote the horizontal. You have asymptote
00:18:03.210 --> 00:18:05.289
the horizontal, like the thing that's cool about
00:18:05.289 --> 00:18:07.630
it is... The exponentially up or the exponentially
00:18:07.630 --> 00:18:09.589
down for all of us? Yeah, it's either vertical
00:18:09.589 --> 00:18:11.690
or horizontal, right? The thing that's interesting
00:18:11.690 --> 00:18:13.710
is this though, which is that the good news about
00:18:13.710 --> 00:18:16.769
asymptoting the horizontal is that the rate at
00:18:16.769 --> 00:18:20.190
which you descend actually slows, right? As you
00:18:20.190 --> 00:18:22.660
get closer and closer to zero, right? But like,
00:18:22.660 --> 00:18:24.599
you know, but in a sense, they'll never hit the
00:18:24.599 --> 00:18:27.440
bottom, but you just slowly get there. But but
00:18:27.440 --> 00:18:29.660
the idea that you can asymptote the vertical,
00:18:29.819 --> 00:18:32.539
obviously the idea of any organic system going
00:18:32.539 --> 00:18:35.079
vertical is like, you know, obviously, you know,
00:18:35.180 --> 00:18:37.940
a purely vertical asymptote means you go up by
00:18:37.940 --> 00:18:41.339
infinity percent, you know, like an instantaneous
00:18:41.339 --> 00:18:44.339
basis. Right. So, you know, natural systems don't
00:18:44.339 --> 00:18:46.720
become vertical. They don't go vertical on the
00:18:46.720 --> 00:18:50.450
slope. But like. To me, that kind of idea of
00:18:50.450 --> 00:18:54.470
compounding is really the core idea of the production
00:18:54.470 --> 00:18:56.809
of leverage, which to me, when you think about
00:18:56.809 --> 00:18:59.890
systems that learn, the systems that learn are
00:18:59.890 --> 00:19:03.549
so intriguing because you have the ability for
00:19:03.920 --> 00:19:07.119
this loop of continuous improvement to be embodied
00:19:07.119 --> 00:19:09.519
within a system. So that's the excitement, I
00:19:09.519 --> 00:19:13.500
think, around these types of attention -bearing
00:19:13.500 --> 00:19:16.480
continuous improvement and self -learning systems.
00:19:16.819 --> 00:19:19.259
Those are super exciting because ultimately it
00:19:19.259 --> 00:19:21.700
comes out into frameworks. So a lot of what you
00:19:21.700 --> 00:19:24.880
described in terms of my career history really
00:19:24.880 --> 00:19:27.319
are things like complex emergent systems. Like
00:19:27.319 --> 00:19:30.309
when you think about Java, the Java language,
00:19:30.369 --> 00:19:32.670
the relationship between the Java language platform
00:19:32.670 --> 00:19:35.849
and developers, right? The emergence of things
00:19:35.849 --> 00:19:37.650
like service oriented architecture and the kind
00:19:37.650 --> 00:19:40.369
of multiplicative and combinatoric complexity
00:19:40.369 --> 00:19:43.150
of deploying services and then combinatorically
00:19:43.150 --> 00:19:46.390
consuming services. Like that's another mechanism
00:19:46.390 --> 00:19:49.029
of like platform thinking, right? And then obviously,
00:19:49.109 --> 00:19:50.930
when you think about this emergence of this idea
00:19:50.930 --> 00:19:55.349
of a platform, right? The idea becomes that Ultimately,
00:19:55.390 --> 00:19:59.029
these complex systems form data compression and
00:19:59.029 --> 00:20:01.690
they form essentially these almost linguistic
00:20:01.690 --> 00:20:04.529
boundaries where intelligence transmits across
00:20:04.529 --> 00:20:07.509
the sort of fundamental units, right? So you
00:20:07.509 --> 00:20:09.170
have all these little units and then the units
00:20:09.170 --> 00:20:12.130
basically form this kind of data compression
00:20:12.130 --> 00:20:14.809
construct where they're all self -communicative.
00:20:15.509 --> 00:20:17.869
You can see it in biological evolution. Yeah,
00:20:18.210 --> 00:20:22.589
clusters. So, Miko, obviously not talking like
00:20:22.589 --> 00:20:26.970
an investor. Fair enough, which is which is good,
00:20:27.089 --> 00:20:28.529
which is good. Nothing wrong with that at all.
00:20:28.529 --> 00:20:30.230
And I think for many people, you know, people
00:20:30.230 --> 00:20:32.910
understand at different levels of that complexity
00:20:32.910 --> 00:20:35.450
curve. I encourage people to listen to this podcast
00:20:35.450 --> 00:20:38.230
at least 20 or 30 times, maybe not as many times
00:20:38.230 --> 00:20:41.630
as you as you listen to the Odyssey here or Homer,
00:20:41.630 --> 00:20:43.210
you know, whatever you need to listen to there.
00:20:43.650 --> 00:20:47.210
But I want to get into that investor mindset
00:20:47.210 --> 00:20:49.549
a little bit here. And I'll put this I'll put
00:20:49.549 --> 00:20:51.670
this out a little bit because, you know, having
00:20:51.670 --> 00:20:55.170
gone through different Instances of this myself
00:20:55.170 --> 00:20:57.490
so channel wave that first company we raised
00:20:57.490 --> 00:20:59.609
the traditional round of venture capital grew
00:20:59.609 --> 00:21:02.390
really big were acquired by a public company
00:21:02.390 --> 00:21:06.390
had so many preferences in there that you know
00:21:06.390 --> 00:21:08.609
liquidation preferences which which gives the
00:21:08.609 --> 00:21:10.170
venture for those that understand that gives
00:21:10.170 --> 00:21:13.369
the venture capital there or they get a guaranteed
00:21:13.369 --> 00:21:17.049
amount out of any exit transaction before anybody
00:21:17.049 --> 00:21:18.430
else gets anything and there can be multiples
00:21:18.430 --> 00:21:21.109
they get a guaranteed 2x of their return or 3x
00:21:21.109 --> 00:21:22.869
of the return and when you raise a lot of money
00:21:22.869 --> 00:21:25.099
these These things kind of stack on each other.
00:21:25.460 --> 00:21:28.480
And of course, we raised a lot of money. It was
00:21:28.480 --> 00:21:30.200
required for a bunch of money. And I basically
00:21:30.200 --> 00:21:33.039
saw very little of it at the end, even though
00:21:33.039 --> 00:21:34.720
I was one of the founders. I was like almost
00:21:34.720 --> 00:21:37.960
a 50 % founder. Second company, Zafthink, which
00:21:37.960 --> 00:21:40.519
you all know, didn't raise a penny. Bootstrapped
00:21:40.519 --> 00:21:43.220
that thing, grew to multiple millions of dollars
00:21:43.220 --> 00:21:46.119
in revenue. We were acquired by a professional
00:21:46.119 --> 00:21:49.759
consulting firm. sold it for cash. I had no lock,
00:21:49.799 --> 00:21:51.880
which meant I can walk away the next day. And
00:21:51.880 --> 00:21:54.259
I did. And I dumped my other co -founder there,
00:21:54.400 --> 00:21:56.579
Jason. He ended up working for the company for
00:21:56.579 --> 00:21:59.819
years before he left. And then I started another
00:21:59.819 --> 00:22:05.119
company and I did some angel investing myself
00:22:05.119 --> 00:22:07.900
and very mixed returns. And I have to say, I
00:22:07.900 --> 00:22:11.420
have a very mixed feeling about venture capital
00:22:11.420 --> 00:22:14.200
and people who have seen me write about it, especially
00:22:14.200 --> 00:22:16.559
the writings on the Scalabrate site, see that
00:22:16.559 --> 00:22:18.839
I'm not actually that positive about it. I think
00:22:18.839 --> 00:22:21.359
there's a lot of issues with venture capital
00:22:21.359 --> 00:22:23.500
and one that there's a very small number of winners,
00:22:23.500 --> 00:22:25.619
obviously. That's just the way that power law
00:22:25.619 --> 00:22:28.920
works. And I think when the winners happen, the
00:22:28.920 --> 00:22:31.940
outcomes are highly, you know, like the investors
00:22:31.940 --> 00:22:35.500
went out the most, the early founders, if there
00:22:35.500 --> 00:22:38.740
are any, they win a bunch, and then everybody
00:22:38.740 --> 00:22:41.119
else kind of gets screwed, to be totally honest,
00:22:41.160 --> 00:22:44.339
like all the other employees, the customers,
00:22:44.779 --> 00:22:46.880
you know, you've heard everything about insidification,
00:22:47.240 --> 00:22:50.460
that systems just over time just get worse, private
00:22:50.460 --> 00:22:53.079
equity is like a slur word, and if you talk to
00:22:53.079 --> 00:22:55.460
people on VC, I don't think people are that positive
00:22:55.460 --> 00:23:01.079
about it, so. Bring me into your mindset. So
00:23:01.079 --> 00:23:04.799
I've been in 25 years in entrepreneurship and
00:23:04.799 --> 00:23:06.980
then an additional past eight years in venture.
00:23:07.279 --> 00:23:13.180
And I think to me, it's really important to understand
00:23:13.180 --> 00:23:17.460
that both of these things are businesses. That
00:23:17.460 --> 00:23:20.940
venture capital is a business and that entrepreneurship
00:23:21.230 --> 00:23:24.170
is a business startups are a business right there
00:23:24.170 --> 00:23:28.029
businesses right and businesses have to be constituted
00:23:28.029 --> 00:23:30.789
to make money right and effectively the thing
00:23:30.789 --> 00:23:34.470
that i think is important to understand are the
00:23:34.470 --> 00:23:38.309
incentives and how each of these organisms become
00:23:38.309 --> 00:23:41.349
successful. Because if you think about them as
00:23:41.349 --> 00:23:43.369
economic organisms, then what they're doing is
00:23:43.369 --> 00:23:45.670
they're exchanging energy in the form of dollars.
00:23:46.390 --> 00:23:49.190
And the thing that, why do they do it? Why do
00:23:49.190 --> 00:23:53.609
VCs act the way they do? And it's simple. It's
00:23:53.609 --> 00:23:56.970
just their economics and the way they're incentivized
00:23:56.970 --> 00:24:00.670
drives certain behaviors. And it's natural. So
00:24:00.670 --> 00:24:03.630
to me, I think one of the things that entrepreneurs
00:24:03.630 --> 00:24:08.799
may be don't think through that clearly is how
00:24:08.799 --> 00:24:12.619
do they make their partner successful under the
00:24:12.619 --> 00:24:16.059
terms that their partner needs, right? And then
00:24:16.059 --> 00:24:19.339
if they really understood the end -to -end model,
00:24:19.720 --> 00:24:21.759
would they even enter into an agreement like
00:24:21.759 --> 00:24:24.599
that, right? And so the answer oftentimes is
00:24:24.599 --> 00:24:26.640
no, right? Oftentimes what happens is that there's
00:24:26.640 --> 00:24:29.160
a lot of flowery promises on both sides, right?
00:24:29.160 --> 00:24:31.539
But the way that the model works in venture is
00:24:31.539 --> 00:24:33.599
very clear, right? Which is that you swing for
00:24:33.599 --> 00:24:36.900
the fences every single time, right? And most
00:24:36.900 --> 00:24:39.640
of them don't, because there's this concept of,
00:24:39.640 --> 00:24:42.259
there's a simple concept of fund returner, right?
00:24:42.259 --> 00:24:45.000
Which is effectively that you make one investment
00:24:45.000 --> 00:24:47.680
and that investment has such a high multiple,
00:24:48.079 --> 00:24:51.460
even given your Considerably minority position
00:24:51.460 --> 00:24:53.400
in that right because you invested, you know,
00:24:53.559 --> 00:24:55.460
whatever you invested some millions of dollars
00:24:55.460 --> 00:24:58.099
or whatever But like you don't own that much
00:24:58.099 --> 00:25:00.440
of this company even at IPO right because there's
00:25:00.440 --> 00:25:03.440
dilution etc, etc Right. So the point I'm trying
00:25:03.440 --> 00:25:07.039
to make is that the outcomes have to be 100x
00:25:07.039 --> 00:25:11.180
1000x 10 ,000x like they have to be cosmologically
00:25:11.180 --> 00:25:14.740
large Right. And so the point I'm trying to argue
00:25:14.740 --> 00:25:19.009
is that to me if you look at the funds portfolio
00:25:19.009 --> 00:25:22.009
composition right the thing that's funny about
00:25:22.009 --> 00:25:24.750
the incentives are is that when you look at the
00:25:24.750 --> 00:25:27.309
fund returners being a thousand x ten thousand
00:25:27.309 --> 00:25:30.490
x returns right then the thing that's funny becomes
00:25:30.490 --> 00:25:33.369
that mathematically a five x return or three
00:25:33.369 --> 00:25:36.369
x return or two x return or one x return or zero
00:25:36.369 --> 00:25:39.720
x return or mathematically very similar. to a
00:25:39.720 --> 00:25:42.400
VC, right? So the thing that's interesting is
00:25:42.400 --> 00:25:45.180
from an entrepreneurial view, a 5X return is
00:25:45.180 --> 00:25:47.680
sort of a life -changing difference. But to a
00:25:47.680 --> 00:25:50.279
venture portfolio, it's sort of, it's a rounding
00:25:50.279 --> 00:25:52.700
error. Like it's basically like, so in a sense,
00:25:52.819 --> 00:25:56.380
the venture funds incentives are to just drive
00:25:56.380 --> 00:26:00.480
for the, you know, the megacorn, right? And so
00:26:00.480 --> 00:26:04.180
I guess what I'm trying to say is that people
00:26:04.180 --> 00:26:06.539
are making deals that they don't understand the
00:26:06.539 --> 00:26:09.940
implications of. They're making deals with a
00:26:09.940 --> 00:26:13.160
very asymmetric partner who has very different
00:26:13.160 --> 00:26:16.160
goals from them and that there may be a temporary
00:26:16.160 --> 00:26:18.539
alignment where there's kind of the world is
00:26:18.539 --> 00:26:21.000
puffy and filled with promise but like it may
00:26:21.000 --> 00:26:24.119
be that at some point they might regret making
00:26:24.119 --> 00:26:26.259
the promises they made right so you know in a
00:26:26.259 --> 00:26:28.079
way i feel like the thing that's interesting
00:26:28.079 --> 00:26:30.740
becomes if you don't like the consequences don't
00:26:30.740 --> 00:26:33.180
make the promises right and don't take the money
00:26:33.180 --> 00:26:36.799
from someone who who's going to want the kinds
00:26:36.799 --> 00:26:38.220
of returns that they're going to want. Right.
00:26:38.339 --> 00:26:42.339
So I guess what I'm trying to say is there's
00:26:42.339 --> 00:26:45.960
a world of misunderstanding between VCs and entrepreneurs,
00:26:46.160 --> 00:26:48.279
a world of misunderstanding. Yeah. And I feel
00:26:48.279 --> 00:26:50.579
like, you know, I feel like there's a lot of
00:26:50.579 --> 00:26:53.000
words that get tossed around like evil. And it's
00:26:53.000 --> 00:26:56.200
basically like, well, I won't use those words.
00:26:56.299 --> 00:26:58.359
I won't use those words, but we use those words.
00:26:58.660 --> 00:27:01.519
And then there's probably some reasons why they
00:27:01.519 --> 00:27:03.740
use this word. But I think that Instead of using
00:27:03.740 --> 00:27:05.299
the words evil or good, because that doesn't
00:27:05.299 --> 00:27:06.920
make any sense. You're right. These are businesses.
00:27:07.420 --> 00:27:09.539
And so businesses are businesses. They have motivations.
00:27:09.779 --> 00:27:13.099
They want to succeed. But it's but the sort of
00:27:13.099 --> 00:27:14.640
the so there's a couple of couple of things and
00:27:14.640 --> 00:27:16.380
a lot of things in there. I think the first thing
00:27:16.380 --> 00:27:18.720
is that the motivations, obviously, for entrepreneurs
00:27:18.720 --> 00:27:21.039
and venture capital are not aligned. And probably
00:27:21.039 --> 00:27:23.859
like, as you mentioned, in like, I would say
00:27:23.859 --> 00:27:28.940
this in many cases, in almost all cases, they're
00:27:28.940 --> 00:27:32.769
not. But in the rare cases, in rare cases, they
00:27:32.769 --> 00:27:36.109
are wildly aligned. Right. And I think I think
00:27:36.109 --> 00:27:38.690
what I think what has happened is that the story
00:27:38.690 --> 00:27:40.730
of entrepreneurship, especially the story of
00:27:40.730 --> 00:27:42.970
tech entrepreneurship, has been that the venture
00:27:42.970 --> 00:27:46.269
path is the preferred path as the primary path.
00:27:46.309 --> 00:27:49.529
But as you mentioned, as you know, for most organizations
00:27:49.529 --> 00:27:53.230
doesn't make any sense. And like the way I like
00:27:53.230 --> 00:27:56.490
to think about it, the way I like to think about
00:27:56.490 --> 00:27:59.900
it is that From a venture perspective, the product,
00:27:59.960 --> 00:28:02.259
if you want to think of it, that is being sold.
00:28:02.680 --> 00:28:04.140
You want to think of it this way, because a venture
00:28:04.140 --> 00:28:06.640
company is investing, is buying a product, right?
00:28:07.140 --> 00:28:08.660
And they're buying a product for one. Financial
00:28:08.660 --> 00:28:11.500
product, equity. Yeah, and exactly. Or equity
00:28:11.500 --> 00:28:13.980
-like instruments. Exactly. That's exactly right.
00:28:14.259 --> 00:28:17.079
So this product that a company is selling is
00:28:17.079 --> 00:28:19.039
not the product that they sell to their customers.
00:28:19.180 --> 00:28:21.299
The product they're selling is a portion of their
00:28:21.299 --> 00:28:23.779
company. The equity is the product, right? And
00:28:23.779 --> 00:28:26.519
their job is to make that product worth more
00:28:26.519 --> 00:28:29.369
because because the venture business is to take
00:28:29.369 --> 00:28:32.710
the product that they own at one price and find
00:28:32.710 --> 00:28:35.869
some way. Yeah, exactly. Not that much. That's
00:28:35.869 --> 00:28:39.769
very difficult. When you're saying like, I'm
00:28:39.769 --> 00:28:40.849
agreeing with you. I mean, a lot of these things
00:28:40.849 --> 00:28:43.910
are not disagreements. They're just more mindset,
00:28:44.130 --> 00:28:46.470
right? We get back to mindset, right? And I think
00:28:46.470 --> 00:28:47.950
people say, hey, you know, you shouldn't really
00:28:47.950 --> 00:28:49.789
be investing if you don't know the product, right?
00:28:49.869 --> 00:28:51.789
You shouldn't be selling your product if you
00:28:51.789 --> 00:28:53.029
don't know who you're selling it to and what
00:28:53.029 --> 00:28:56.519
they want from the product. These are all logical
00:28:56.519 --> 00:28:59.519
perspectives, but they start to now when we get
00:28:59.519 --> 00:29:00.980
back to where we started from this whole idea
00:29:00.980 --> 00:29:03.339
of leverage for scaling, which is that now people
00:29:03.339 --> 00:29:05.839
have so much control over leverage in their own
00:29:05.839 --> 00:29:08.160
hands, it makes people wonder like, well, should
00:29:08.160 --> 00:29:12.319
I be so should I focus my efforts on selling
00:29:12.319 --> 00:29:14.740
the primary product, which is the goods and services
00:29:14.740 --> 00:29:17.400
that I'm selling? Or should I be trying to sell
00:29:17.400 --> 00:29:20.420
the other product, which is a piece of my company
00:29:20.420 --> 00:29:23.680
when the likelihoods when sort of like I would
00:29:23.680 --> 00:29:25.890
be You're right. I would be totally happy with
00:29:25.890 --> 00:29:29.349
a 10x return, a 20x return, a 50x return would
00:29:29.349 --> 00:29:34.009
be fantastic. But when you're talking about scales,
00:29:34.089 --> 00:29:35.210
you're like, wait a second, we've got to start
00:29:35.210 --> 00:29:39.769
at 1000x, 2000x. I mean, a 5x return is a 500
00:29:39.769 --> 00:29:42.950
% return on investment, right? Like, that is
00:29:42.950 --> 00:29:46.009
appreciable. Like, that is potentially life changing.
00:29:46.170 --> 00:29:49.269
Like, that is good. For the founder. Yeah, yeah.
00:29:49.410 --> 00:29:53.690
Just if you are a business and you do 500%. return
00:29:53.690 --> 00:29:56.109
on investment on your business. You are a good
00:29:56.109 --> 00:30:00.009
business, right? Now, yeah, you know, in a venture
00:30:00.009 --> 00:30:03.650
portfolio, you you're a dog. You're pretty close
00:30:03.650 --> 00:30:06.980
to the same as zero. Yeah, exactly. Which is
00:30:06.980 --> 00:30:09.420
I think is why a lot of people are starting to
00:30:09.420 --> 00:30:11.900
question it. Now, when people say venture is
00:30:11.900 --> 00:30:13.900
evil, I don't think venture or private equity,
00:30:14.220 --> 00:30:16.220
because people do think of both of those things.
00:30:16.480 --> 00:30:19.259
I think they look at what happens to the companies
00:30:19.259 --> 00:30:22.339
after that's what they're looking at. They're
00:30:22.339 --> 00:30:24.460
looking at the outcomes. And I think a lot to
00:30:24.460 --> 00:30:26.160
be said there because, and I think the reason
00:30:26.160 --> 00:30:28.119
why intensification is such a thing for those
00:30:28.119 --> 00:30:30.769
who don't. Nobody should learn about it, which
00:30:30.769 --> 00:30:33.230
is the idea that over time products just get
00:30:33.230 --> 00:30:37.349
worse because the sort of the benefits need to
00:30:37.349 --> 00:30:39.730
accrue not to the customers, but to accrue the
00:30:39.730 --> 00:30:43.960
investors. Cory Doctorow. Yes. And it's made
00:30:43.960 --> 00:30:46.380
its way into like the vernacular. So let's think
00:30:46.380 --> 00:30:48.940
about it that way. Let's sort of, you know, sort
00:30:48.940 --> 00:30:51.180
of shift the boat here. Is there perhaps just
00:30:51.180 --> 00:30:53.900
a different model? Is there just a perhaps a
00:30:53.900 --> 00:30:55.680
different way where investors could say, hey,
00:30:55.900 --> 00:30:59.839
I want to participate in these high growth companies?
00:31:00.039 --> 00:31:01.740
These high growth companies don't need a lot
00:31:01.740 --> 00:31:04.680
of capital. The exits might be a lot smaller,
00:31:04.680 --> 00:31:08.160
but maybe there is a world in which a five to
00:31:08.160 --> 00:31:11.119
10 to 50 extra turn would be just as phenomenal
00:31:11.119 --> 00:31:14.500
for the investor to. No, no, no, no, no. I believe
00:31:14.500 --> 00:31:16.819
there is. And honestly, one of the things that
00:31:16.819 --> 00:31:20.420
I believe is that there is a new deal or a new
00:31:20.420 --> 00:31:23.039
economic, a novel economic organism and that
00:31:23.039 --> 00:31:26.960
there, to me, I feel like the Japanese karetsu
00:31:26.960 --> 00:31:29.859
style of business, right? The shared economic
00:31:29.859 --> 00:31:33.750
concern that's represented. by the kind of equity
00:31:33.750 --> 00:31:37.670
swaps and these kinds of slightly more protectionistic
00:31:37.670 --> 00:31:41.049
or maybe you could call them feudalistic types
00:31:41.049 --> 00:31:44.450
of structures I think are resurgent. So I feel
00:31:44.450 --> 00:31:46.630
like one of the things that I think could be
00:31:46.630 --> 00:31:49.569
resurgent, because to me, there's two elements
00:31:49.569 --> 00:31:52.369
that are involved in things like the death of
00:31:52.369 --> 00:31:55.759
Sass. software. Right. And I'm a subscriber.
00:31:55.900 --> 00:31:57.559
I think there's a lot of people that are kind
00:31:57.559 --> 00:32:00.420
of screaming against this thesis, but I think
00:32:00.420 --> 00:32:03.859
it's true, you know, which is that there's the
00:32:03.859 --> 00:32:07.039
thing about what is that SAS is I'm smarter than
00:32:07.039 --> 00:32:10.160
you, which means that I can extract an ever growing
00:32:10.160 --> 00:32:12.700
tax on your dumbness. Right. That's what the
00:32:12.700 --> 00:32:15.680
thesis is for SAS. Right. And the thing that's
00:32:15.680 --> 00:32:18.640
funny is when you when you commoditize the availability
00:32:18.640 --> 00:32:21.960
of intelligence, it falls apart. Which is basically
00:32:21.960 --> 00:32:24.859
like well now we're all equally intelligent and
00:32:24.859 --> 00:32:27.339
you can't do anything to me Well, yeah, I might
00:32:27.339 --> 00:32:28.920
put it in a slightly different way I mean the
00:32:28.920 --> 00:32:31.579
way I would like to think about it is that when
00:32:31.579 --> 00:32:34.259
building is hard when development is difficult
00:32:34.259 --> 00:32:37.519
and when Things like managing infrastructure
00:32:37.519 --> 00:32:40.180
and dealing with lots of customers is difficult
00:32:40.180 --> 00:32:45.559
then sort of Buying capability on a monthly basis
00:32:45.559 --> 00:32:47.980
or whatever the subscription basis becomes a
00:32:47.980 --> 00:32:50.839
good economic argument. That's fine. You're making
00:32:50.839 --> 00:32:54.740
it. You're making a nuance and mindset driven
00:32:54.740 --> 00:32:57.880
adjustment to what I said. But I don't just agree
00:32:57.880 --> 00:33:01.880
with me. I agree with you about the where we
00:33:01.880 --> 00:33:03.559
where this may end up. The conclusion. Yeah.
00:33:03.839 --> 00:33:06.000
But let me let me go one step further. Right.
00:33:06.059 --> 00:33:09.900
Which is. It means that we might enter an era
00:33:09.900 --> 00:33:13.220
that's AI driven where effectively the corporate
00:33:13.220 --> 00:33:16.059
investor becomes really strategic and interesting,
00:33:16.059 --> 00:33:18.539
right? Where people used to use the phrase strategic
00:33:18.539 --> 00:33:20.539
investor. But the thing that's really interesting
00:33:20.539 --> 00:33:23.799
is what if your company is delivering existential
00:33:23.799 --> 00:33:26.500
AI software, right? Because think about this.
00:33:26.880 --> 00:33:28.859
The asteroid has hit. The asteroid has already
00:33:28.859 --> 00:33:31.299
hit. So like if you're a dinosaur, what do you
00:33:31.299 --> 00:33:35.559
do, right? Now, evolution actually has the playbook.
00:33:35.579 --> 00:33:38.279
Right, which is if you're a dinosaur evolution
00:33:38.279 --> 00:33:40.819
says take to the air grow some feathers get up
00:33:40.819 --> 00:33:43.839
off the ground Decrease your body size, right?
00:33:43.880 --> 00:33:46.559
Just get out of this business, right? Like don't
00:33:46.559 --> 00:33:49.259
be so large like it's not going to work out Well,
00:33:49.259 --> 00:33:51.619
right now if you're a mammal, it's like become
00:33:51.619 --> 00:33:54.819
furry and become social, you know Cuz that's
00:33:54.819 --> 00:33:58.019
good and become smart right like grow grow up
00:33:58.039 --> 00:34:03.059
absurdly large brain that consumes 20 to 25 percent
00:34:03.059 --> 00:34:05.980
of your metabolic energy head explodes right
00:34:05.980 --> 00:34:08.719
if you're a baby it consumes 30 to 40 percent
00:34:08.719 --> 00:34:11.969
of your metabolic energy your brain Right. And
00:34:11.969 --> 00:34:13.929
it's not even very, it's not even very amazing
00:34:13.929 --> 00:34:15.809
when you're a baby. Like your brain is actually,
00:34:15.889 --> 00:34:19.010
you know, it's just, it's highly consumptive.
00:34:19.170 --> 00:34:21.389
It's growing very fast. Yeah. And you're, and
00:34:21.389 --> 00:34:23.369
you're doing a lot of like - Making a lot of
00:34:23.369 --> 00:34:24.849
connections, right? Exactly. Yeah. You're doing
00:34:24.849 --> 00:34:27.010
a lot of back propagation almost constantly,
00:34:27.190 --> 00:34:29.550
right? So it's tough to be a baby. But what am
00:34:29.550 --> 00:34:33.010
I arguing? What I'm arguing is if your AI product
00:34:33.010 --> 00:34:35.909
is existential to one of these dinosaurs and
00:34:35.909 --> 00:34:39.750
transforming them, right? Then why shouldn't
00:34:39.750 --> 00:34:43.090
they give you Millions of dollars, right? But
00:34:43.090 --> 00:34:45.349
the point about giving you millions of dollars
00:34:45.349 --> 00:34:47.329
is they're not gonna give it to you on the revenue
00:34:47.329 --> 00:34:49.849
line. That makes no sense. It makes no sense
00:34:49.849 --> 00:34:52.769
at all. They cannot give you millions of dollars
00:34:52.769 --> 00:34:55.710
in SaaS fees. They're not going to do that, right?
00:34:55.730 --> 00:35:00.150
But the product is valuable. The product is whether
00:35:00.150 --> 00:35:03.250
they grow a brain or whether the enterprise lives
00:35:03.250 --> 00:35:06.170
or dies, right? So if it's an existential product,
00:35:06.590 --> 00:35:08.530
what they should do is they should become a strategic
00:35:08.530 --> 00:35:11.119
investor, right? And when you go... to your IPO
00:35:11.119 --> 00:35:13.460
they should make a boatload of money off of your
00:35:13.460 --> 00:35:15.820
success right because what happens is that's
00:35:15.820 --> 00:35:19.119
more like the Japanese karetsu model right whereas
00:35:19.119 --> 00:35:22.239
effectively what happens that the misalignment
00:35:22.239 --> 00:35:24.619
goes away where you're now a shared economic
00:35:24.619 --> 00:35:26.980
concern right where the provider of the intelligence
00:35:26.980 --> 00:35:30.219
is now Part of the same tribe. You're part of
00:35:30.219 --> 00:35:32.199
the same tribe. You have shared interests. You
00:35:32.199 --> 00:35:34.900
both want success for each other, right? This
00:35:34.900 --> 00:35:37.159
is a big change. So, you know, I feel like, but
00:35:37.159 --> 00:35:40.679
I feel like this type of model is something that
00:35:40.679 --> 00:35:43.099
we'll see that's more emergent, right? If you
00:35:43.099 --> 00:35:46.460
look at the PE segment, right? There's actually
00:35:46.460 --> 00:35:49.880
an opportunity for non -predatory PE. private
00:35:49.880 --> 00:35:52.400
equity, right? There's an opportunity for it.
00:35:52.480 --> 00:35:55.219
Right. Which is that instead of just scrape,
00:35:55.440 --> 00:35:58.239
instead of putting lipstick on pigs, making companies
00:35:58.239 --> 00:36:00.460
look like one thing through financial engineering
00:36:00.460 --> 00:36:02.960
that they're not. And then trying to strip out
00:36:02.960 --> 00:36:05.480
the cost by firing all the humans like they don't
00:36:05.480 --> 00:36:07.360
have to do that anymore. They can actually take
00:36:07.360 --> 00:36:10.539
like a really amazing AI brain. They can amplify
00:36:10.539 --> 00:36:13.760
like an incredible like founder who actually
00:36:13.760 --> 00:36:15.639
understands the customers, you know, and they
00:36:15.639 --> 00:36:17.820
can basically have that person become the center
00:36:17.820 --> 00:36:20.719
of this like You know federated almost roll up
00:36:20.719 --> 00:36:22.940
company or this with an AI brain. So I guess
00:36:22.940 --> 00:36:26.019
what I'm arguing is that like Your thesis, I
00:36:26.019 --> 00:36:28.539
think is spot on right, which is I think that
00:36:28.539 --> 00:36:32.059
the flow of capital Is will change fundamentally
00:36:32.059 --> 00:36:35.940
and you're seeing you're seeing like super amazing
00:36:36.740 --> 00:36:39.559
VCs like Kozla that were like super early into
00:36:39.559 --> 00:36:41.980
things like open AI, right? Like you're seeing
00:36:41.980 --> 00:36:44.199
them actually going into private equity, right?
00:36:44.400 --> 00:36:46.659
You're seeing things like simultaneously open
00:36:46.659 --> 00:36:50.260
AI and anthropic Building joint ventures with
00:36:50.260 --> 00:36:53.019
Wall Street to do private equity. Yeah, and there
00:36:53.019 --> 00:36:56.059
may be a new private equity. That's less rapacious
00:36:56.059 --> 00:37:00.039
That's less purely kind of fire all the humans
00:37:02.340 --> 00:37:07.940
Extracting. So to me, I feel like new economic
00:37:07.940 --> 00:37:10.940
agreements are rising. There's so much in there.
00:37:11.019 --> 00:37:14.619
I have to unpack. There's so much there. And
00:37:14.619 --> 00:37:17.059
I want to be mindful of our listeners here. And
00:37:17.059 --> 00:37:19.679
I want to dig into a couple of things. So first
00:37:19.679 --> 00:37:23.079
of all, the Koretsu idea, right? The thing that,
00:37:23.079 --> 00:37:24.619
you know, I think a lot of people aren't familiar
00:37:24.619 --> 00:37:26.780
with this, but basically these aren't necessarily
00:37:26.780 --> 00:37:29.840
customers in the sense of customers that you
00:37:29.840 --> 00:37:33.420
have sort of an alliance if you go between companies.
00:37:34.239 --> 00:37:37.019
Yeah, basically companies who have a vested interest
00:37:37.019 --> 00:37:39.679
in each other existing but aren't necessarily
00:37:39.679 --> 00:37:42.219
in each other's business. So let me unpack it.
00:37:42.440 --> 00:37:45.460
So the word kuretsu is Japanese word and one
00:37:45.460 --> 00:37:50.010
of the famous ones is Mitsubishi. Most people
00:37:50.010 --> 00:37:52.210
have seen Mitsubishi sometimes. Oh, it's a car
00:37:52.210 --> 00:37:54.110
company or whatever. Right. And it turns out,
00:37:54.110 --> 00:37:56.329
oh, it's also a bank. Yeah. And they make ships.
00:37:56.489 --> 00:37:58.349
They make ships. Yeah. And it's like, what is
00:37:58.349 --> 00:37:59.769
happening? Right. So it's sort of like these
00:37:59.769 --> 00:38:03.090
classical Japanese industrial conglomerate thing.
00:38:03.130 --> 00:38:05.250
Right. Like when you look. So in Korea, they're
00:38:05.250 --> 00:38:08.030
called Chibo, which is like Samsung or all these
00:38:08.030 --> 00:38:09.829
different things. Right. But at the base, there's
00:38:09.829 --> 00:38:12.190
like a bank. Right. And what happens is, is that
00:38:12.190 --> 00:38:14.909
these companies all swap equity with each other.
00:38:14.949 --> 00:38:16.869
Right. So, for example, what happens that's crazy
00:38:16.869 --> 00:38:19.960
is, is that they become money spinners, right?
00:38:20.039 --> 00:38:21.960
So if you look at something like Mitsubishi Motors,
00:38:22.340 --> 00:38:26.340
they're like, oh, I need millions of yen to buy
00:38:26.340 --> 00:38:28.940
auto parts from Mitsubishi Parts, right? So what
00:38:28.940 --> 00:38:31.480
happens is Mitsubishi Bank loans the money to
00:38:31.480 --> 00:38:33.940
Mitsubishi Motors, Mitsubishi Motors gives the
00:38:33.940 --> 00:38:36.159
money to Mitsubishi Parts, and then Mitsubishi
00:38:36.159 --> 00:38:40.860
Parts puts it back in the bank. It's a pure money
00:38:40.860 --> 00:38:44.380
spinner. Well, what's confusing that they share
00:38:44.380 --> 00:38:47.000
the same name Mitsubishi, but in that relationship,
00:38:47.219 --> 00:38:49.179
there are distinct entities because otherwise
00:38:49.179 --> 00:38:51.380
they would just be internally passing the money
00:38:51.380 --> 00:38:53.219
around. There wouldn't be like a banking relationship
00:38:53.219 --> 00:38:56.139
because if they were the correct model. So at
00:38:56.139 --> 00:38:58.559
the beginning, at the beginning, there is a model
00:38:58.559 --> 00:39:01.900
called Zaibatsu. And this goes back to the days
00:39:01.900 --> 00:39:04.400
of the Shogun. Right. Because the thing that's
00:39:04.400 --> 00:39:06.880
crazy, when you look at the Mitsubishi. Mitsu
00:39:06.880 --> 00:39:09.840
is three, bishi is like this rhombus, this diamond
00:39:09.840 --> 00:39:12.719
shape. So if you look at the logo on a car, Mitsubishi
00:39:12.719 --> 00:39:16.519
car, it's three diamonds, right? This is actually
00:39:16.519 --> 00:39:20.139
the mon, it's the family crest of the Mitsubishi
00:39:20.139 --> 00:39:23.559
family. So if you go back to the dynasty, in
00:39:23.559 --> 00:39:26.199
the battle flag, they're flying the Mitsubishi,
00:39:26.340 --> 00:39:30.800
right? So the zaibatsu were actually, so zaibatsu
00:39:30.800 --> 00:39:34.179
means family wealth concern, right? So it used
00:39:34.179 --> 00:39:37.940
to be... conglomerated under the central power,
00:39:38.039 --> 00:39:40.599
which is the family, right? And the family had
00:39:40.599 --> 00:39:43.400
100 % control over every single company. And
00:39:43.400 --> 00:39:45.940
then what happened after World War II is they
00:39:45.940 --> 00:39:48.800
evolved into this thing called kuretsu. And what
00:39:48.800 --> 00:39:53.519
a kuretsu is, is it's equity swaps. And the thing
00:39:53.519 --> 00:39:56.059
that's the difference is this. It's the difference
00:39:56.059 --> 00:39:59.719
between feudalism and federalism. Which is essentially
00:39:59.719 --> 00:40:03.039
that in feudalism, The central power wins by
00:40:03.039 --> 00:40:05.940
fiat. So if there's ever any dispute, the central
00:40:05.940 --> 00:40:08.059
power just crushes the regional power and says,
00:40:08.420 --> 00:40:12.420
I'm the king, you're not. The end. Right? In
00:40:12.420 --> 00:40:14.579
the karetsu model, which is a federal model,
00:40:14.980 --> 00:40:18.250
what happens is the economy decides. So if the
00:40:18.250 --> 00:40:21.030
thing wants to drift away from the central and
00:40:21.030 --> 00:40:22.750
sell equity to the public, or do whatever they
00:40:22.750 --> 00:40:26.050
want, and they want to kind of break out, the
00:40:26.050 --> 00:40:29.289
economy decides. Whatever's economically sensible
00:40:29.289 --> 00:40:33.030
will be the result. So that's the Koretso model.
00:40:33.530 --> 00:40:36.289
But in the Koretso model, there's still shared
00:40:36.289 --> 00:40:38.690
economic interest. And when you think about something
00:40:38.690 --> 00:40:41.449
like the lowest risk adjusted cost of capital,
00:40:41.590 --> 00:40:44.070
there isn't one for the motor company to get
00:40:44.070 --> 00:40:46.400
the loan. Like, there's no, there's no source
00:40:46.400 --> 00:40:49.039
of capital that has a better risk adjusted cost
00:40:49.039 --> 00:40:51.019
of capital than Mitsubishi Bank. Like, they're
00:40:51.019 --> 00:40:53.880
the ones. They're like, no, we know you. We know
00:40:53.880 --> 00:40:55.719
your balance sheet. We understand your company.
00:40:56.000 --> 00:40:58.019
We know your operations. Like, we know everything.
00:40:58.539 --> 00:41:00.559
This is the best risk adjusted cost of capital.
00:41:00.880 --> 00:41:02.900
Here's your money. And by the way, it comes straight
00:41:02.900 --> 00:41:04.940
back into the bank, as I pointed out, right,
00:41:04.960 --> 00:41:07.420
which is amazing. Well, the reason why the light
00:41:07.420 --> 00:41:10.599
bulb moment went off for me, and this is probably
00:41:11.280 --> 00:41:14.420
Not strictly in the Koretsu model right now in
00:41:14.420 --> 00:41:17.440
that classic sense, right? But if you think about
00:41:17.440 --> 00:41:19.880
what's been happening in AI? Right. And you've
00:41:19.880 --> 00:41:21.519
been thinking about the relationships. I know
00:41:21.519 --> 00:41:23.340
you know this because you've been seeing this.
00:41:23.519 --> 00:41:25.480
You know that there's a relationship between
00:41:25.480 --> 00:41:30.800
OpenAI and Nvidia in Microsoft. And they are
00:41:30.800 --> 00:41:34.940
both customers, but also investors. And there's
00:41:34.940 --> 00:41:37.260
this funny little meme that's going around. I
00:41:37.260 --> 00:41:40.199
think it's a three stooges meme where, you know,
00:41:40.619 --> 00:41:43.960
Moog says, I owe you 20 bucks. Here's 10. But
00:41:43.960 --> 00:41:45.480
I owe you later. Then it's like on the most like,
00:41:45.480 --> 00:41:47.380
oh, wait, I owe you 20 bucks. Here's 10. But
00:41:47.380 --> 00:41:48.949
we later than Larry's. He's like, oh, wait, I
00:41:48.949 --> 00:41:50.670
owe you 20 bucks. Here's 10 of you later. And
00:41:50.670 --> 00:41:52.550
then all of a sudden it goes around like, yeah,
00:41:52.690 --> 00:41:54.210
well, I guess we all paid each other back. And
00:41:54.210 --> 00:41:56.809
it's the same money just kind of transferring
00:41:56.809 --> 00:41:59.250
its way around. It's feeling like, wait a second.
00:41:59.309 --> 00:42:02.230
Are we building? These aren't investors in the
00:42:02.230 --> 00:42:05.690
classic sense. These are sort of like shareholders
00:42:05.690 --> 00:42:08.429
with vested interests, not invested interest.
00:42:08.849 --> 00:42:11.429
Right. 100 percent. When you look at the compute
00:42:11.429 --> 00:42:14.420
providers, right, when you look at. Google Cloud,
00:42:14.579 --> 00:42:17.239
you look at Amazon, you look at Amazon Anthropic,
00:42:17.519 --> 00:42:19.579
you look at Microsoft, you look at Azure, you
00:42:19.579 --> 00:42:21.840
look at all of these things, like you look at
00:42:21.840 --> 00:42:25.250
like Colossus, which is obviously Elon. You know
00:42:25.250 --> 00:42:28.449
all of these things are all forming these effectively
00:42:28.449 --> 00:42:31.909
cartel like structures right where they're essentially
00:42:31.909 --> 00:42:35.050
creating money spinners right so this is part
00:42:35.050 --> 00:42:39.030
of sort of the new novel emergent economic federation
00:42:39.030 --> 00:42:42.269
but i feel like from a scaling perspective the
00:42:42.269 --> 00:42:46.170
beauty of this becomes scale invariants. So scale
00:42:46.170 --> 00:42:48.389
and variance is super important, which is what
00:42:48.389 --> 00:42:50.389
you need to look for as organizing principles
00:42:50.389 --> 00:42:53.250
are ratios, right? So the thing that's really
00:42:53.250 --> 00:42:56.030
fascinating is things like a P &L ratio is a
00:42:56.030 --> 00:42:59.309
ratio. So another one is the reserve to float
00:42:59.309 --> 00:43:01.469
ratio. When you think about things like reserve
00:43:01.469 --> 00:43:03.909
banking, equity buybacks, when you think about
00:43:03.909 --> 00:43:07.380
these structures, those are again. ratios. The
00:43:07.380 --> 00:43:09.460
reason why I'm talking about the importance of
00:43:09.460 --> 00:43:12.079
ratios is a ratio of scale invariant. It's scale
00:43:12.079 --> 00:43:15.239
invariant, which means that the same things that
00:43:15.239 --> 00:43:17.559
these giant companies are doing, any company
00:43:17.559 --> 00:43:19.500
can do. Yeah, well, let's actually bring it.
00:43:19.539 --> 00:43:20.960
Let's bring it back to brass texture, because
00:43:20.960 --> 00:43:22.880
I want to think about this, because I you might
00:43:22.880 --> 00:43:24.599
think, well, wait a second. This may make you
00:43:24.599 --> 00:43:26.079
feel powerless. You're like, wait a second. I
00:43:26.079 --> 00:43:27.860
have no control. I have no power. These are large
00:43:27.860 --> 00:43:30.159
companies doing large company things with large
00:43:30.159 --> 00:43:31.579
amounts of money. There's no way I can play in
00:43:31.579 --> 00:43:33.780
that. I'm thinking, wait, two can play at this
00:43:33.780 --> 00:43:36.500
game. So if we're thinking about the point. Yeah,
00:43:36.559 --> 00:43:38.519
if we're a bunch of small. We're a bunch of small
00:43:38.519 --> 00:43:40.920
companies. We don't as said, we don't need to
00:43:40.920 --> 00:43:43.920
scale to the same levels. I'm happy being a 10
00:43:43.920 --> 00:43:45.940
million dollar, 20 million dollar, 50 million
00:43:45.940 --> 00:43:49.500
dollar company. But can we as a group sort of.
00:43:50.039 --> 00:43:52.380
I don't want to use 100 % Lude, but like it's
00:43:52.380 --> 00:43:53.940
because we as a group kind of go together like,
00:43:54.099 --> 00:43:56.300
you know what? Hey, let's do this in a smart
00:43:56.300 --> 00:43:58.800
way. I don't need to. Yes, I can use your revenue.
00:43:58.800 --> 00:44:00.519
I can use it as a customer, but I would much
00:44:00.519 --> 00:44:03.179
rather have you as a member of my alliance. You
00:44:03.179 --> 00:44:04.639
know, when I started Scalabrate originally, I
00:44:04.639 --> 00:44:07.280
called it the Scalabrate Alliance, and I think
00:44:07.280 --> 00:44:09.159
that. made people think it was weird. So I just
00:44:09.159 --> 00:44:12.460
call it the hub. But basically, it's this idea
00:44:12.460 --> 00:44:15.840
that maybe together as small groups, that we're
00:44:15.840 --> 00:44:18.820
happy with, I would say limited amounts of scale,
00:44:19.340 --> 00:44:21.380
significant scale, but we don't need, we don't
00:44:21.380 --> 00:44:24.420
have to get to unicorn level, right? We don't
00:44:24.420 --> 00:44:26.960
have, but we can achieve together as a collection
00:44:26.960 --> 00:44:28.739
much more than we can apart. So the question
00:44:28.739 --> 00:44:31.780
is, then how does that, we do need a different
00:44:31.780 --> 00:44:33.739
funding. Like we can't do the same, you just
00:44:33.739 --> 00:44:36.719
had risk adjusted returns. We can't do the swing
00:44:36.719 --> 00:44:39.440
for the. We can't do the thousand X returns because
00:44:39.440 --> 00:44:42.420
we have to because of the power laws. There's
00:44:42.420 --> 00:44:44.519
got to be something different. So here's what
00:44:44.519 --> 00:44:46.719
I here's what I propose. Right. Which is one
00:44:46.719 --> 00:44:50.380
of the areas where we're seeing major collapses
00:44:50.380 --> 00:44:53.820
like Blue Owl. Right. Is private credit. Right.
00:44:54.019 --> 00:44:56.760
And the thing that the private credit industry
00:44:56.760 --> 00:45:00.079
didn't quite predict, although in hindsight,
00:45:00.380 --> 00:45:04.489
it's super obvious. Is that the borrowers went
00:45:04.489 --> 00:45:07.590
completely feral and the lenders went completely
00:45:07.590 --> 00:45:10.869
feral, right? So the point is that like everybody's
00:45:10.869 --> 00:45:13.869
lying to everybody else, right? And so what's
00:45:13.869 --> 00:45:16.269
happening is just toxic debt piling up, you know,
00:45:16.289 --> 00:45:18.849
and it's kind of the reason why people are really
00:45:18.849 --> 00:45:20.989
nervous about private credit is because they're
00:45:20.989 --> 00:45:24.929
remembering 2008, right? Like when you see toxic
00:45:24.929 --> 00:45:28.679
assets piling up in a corner You start to feel
00:45:28.679 --> 00:45:30.559
a little nervous because you're basically like
00:45:30.559 --> 00:45:34.239
if that blows up like who's holding the bag And
00:45:34.239 --> 00:45:36.880
what are the ripple effects and how much derivative
00:45:36.880 --> 00:45:39.809
leverage? is there on top of the base asset,
00:45:39.889 --> 00:45:43.150
right? And if the base assets toxic, what happens
00:45:43.150 --> 00:45:45.269
to all of us, right? Like, are we going to die
00:45:45.269 --> 00:45:48.309
now as an economy? So the point I'm trying to
00:45:48.309 --> 00:45:50.230
make is when you look at this idea of something
00:45:50.230 --> 00:45:52.369
like the kuretsu model, right? The thing that's
00:45:52.369 --> 00:45:56.690
exciting becomes that this idea of the risk adjusted
00:45:56.690 --> 00:46:00.219
cost of capital Right is so interesting because
00:46:00.219 --> 00:46:03.480
what I'll tell you the amazing thing that's happened
00:46:03.480 --> 00:46:07.059
in my segment, right? It's really the genius
00:46:07.059 --> 00:46:10.760
which is effectively the idea of the issuance
00:46:10.760 --> 00:46:15.739
of regulated fully backed stable coins like a
00:46:15.739 --> 00:46:19.019
stable coin issuer is a bank And so the thing
00:46:19.019 --> 00:46:22.239
that's really insane becomes that we have the
00:46:22.239 --> 00:46:25.420
opportunity to create these kuretsu banks. So
00:46:25.420 --> 00:46:28.099
you can create your own Mitsubishi bank and you
00:46:28.099 --> 00:46:31.900
can effectively enable the dynamic circulation
00:46:31.900 --> 00:46:35.880
and the wildly capital -efficient circulation
00:46:35.880 --> 00:46:39.829
of private credit within a federation. So that
00:46:39.829 --> 00:46:44.349
becomes a really interesting opportunity for
00:46:44.349 --> 00:46:47.389
redistributing capital. And to me, the thing
00:46:47.389 --> 00:46:49.710
that's fascinating is this, is not only is the
00:46:49.710 --> 00:46:53.400
stablecoin act interesting, which enables you
00:46:53.400 --> 00:46:57.000
to deal with essentially the P &L ratio, which
00:46:57.000 --> 00:47:00.480
is really the lending equation, which is the
00:47:00.480 --> 00:47:03.820
lending equation has to do with P &L. But when
00:47:03.820 --> 00:47:06.380
I talked about things like stock buybacks and
00:47:06.380 --> 00:47:10.380
I talked about the reserve to float ratio, Right.
00:47:10.639 --> 00:47:12.960
The thing that's super fascinating is the upcoming
00:47:12.960 --> 00:47:16.019
Clarity Act because what the Clarity Act unlocks
00:47:16.019 --> 00:47:19.659
is so -called real -world assets Including equities
00:47:19.659 --> 00:47:21.480
and the thing that's so fascinating about what
00:47:21.480 --> 00:47:25.300
happens there is not only are you now able to
00:47:25.300 --> 00:47:29.280
have a fully captive Mitsubishi Bank But you're
00:47:29.280 --> 00:47:32.440
able to create a fully captive bank of Japan,
00:47:32.440 --> 00:47:34.920
right? Because what happens then is that you
00:47:34.920 --> 00:47:38.320
begin to handle your own reserve assets. You
00:47:38.320 --> 00:47:40.960
begin to do your own central banking and you
00:47:40.960 --> 00:47:44.860
basically buy and sell the equities of the Federation
00:47:44.860 --> 00:47:47.420
members. And that becomes the economic driver
00:47:47.420 --> 00:47:50.679
for this Koretsu model. So to me, I feel like
00:47:50.679 --> 00:47:52.659
it's pretty fascinating because then you have
00:47:52.659 --> 00:47:55.280
a reserve bank or central bank and you have a
00:47:55.280 --> 00:47:57.710
merchant bank. Right. So all of these things
00:47:57.710 --> 00:48:00.130
effectively can become essentially captives,
00:48:00.269 --> 00:48:02.510
right? Where you can essentially create an economic
00:48:02.510 --> 00:48:05.949
federation where these two resources are utilities
00:48:05.949 --> 00:48:09.929
that kind of power. This is a bigger conversation
00:48:09.929 --> 00:48:14.190
because now now now we're basically saying I'm
00:48:14.190 --> 00:48:16.409
not necessarily disagreeing with you. And this
00:48:16.409 --> 00:48:18.449
is this is really a much bigger conversation.
00:48:18.570 --> 00:48:21.289
But we may be saying that we may need a new economic
00:48:21.289 --> 00:48:25.329
model. In general to sustain when I say new like
00:48:25.329 --> 00:48:27.860
I'm going back to like ancient Japanese history.
00:48:28.039 --> 00:48:31.280
So like some of this isn't that new. Some of
00:48:31.280 --> 00:48:33.300
the mechanisms are new. And I think for, you
00:48:33.300 --> 00:48:35.500
know, I think this does ring a lot of bells for
00:48:35.500 --> 00:48:37.280
people who talk about things like late stage
00:48:37.280 --> 00:48:39.460
capitalism, where I think there's the feeling
00:48:39.460 --> 00:48:43.460
that right now the winning accrues to a small
00:48:43.460 --> 00:48:45.880
number of people. And I think to go back to that's
00:48:45.880 --> 00:48:48.119
the reason why people say I'm not necessarily
00:48:48.119 --> 00:48:50.280
saying that this is everybody says, but the people
00:48:50.280 --> 00:48:52.980
do say that things like private equity and venture
00:48:52.980 --> 00:48:56.320
capital on the balance. Between good and not
00:48:56.320 --> 00:48:59.119
good our balance towards not good because these
00:48:59.119 --> 00:49:04.179
outcomes are basically They do that, but they
00:49:04.179 --> 00:49:07.079
also for those who are trying to to win if you
00:49:07.079 --> 00:49:09.380
will at the entrepreneurship game It's hard to
00:49:09.380 --> 00:49:12.920
win when you're competing against I'll put it
00:49:12.920 --> 00:49:14.940
straight like if you're trying to sell software
00:49:14.940 --> 00:49:16.579
as a service Let's just say we'll talk about
00:49:16.579 --> 00:49:18.460
the future of software service later But like
00:49:18.460 --> 00:49:20.159
just say something for something for 50 bucks
00:49:20.159 --> 00:49:21.599
a month and just like I just want to you know
00:49:21.599 --> 00:49:24.380
I don't I don't want a 1000 extra turn. I'm happy
00:49:24.199 --> 00:49:26.800
the 10x, 20x, 50x, I want a sustainable, I want
00:49:26.800 --> 00:49:28.760
to get to $2 million a year, $5 million, $10
00:49:28.760 --> 00:49:31.280
million, I'll be happy at $20 million, you know,
00:49:31.300 --> 00:49:33.539
et cetera. But what happens is you go up against
00:49:33.539 --> 00:49:35.460
a venture -backed competitor. The venture -backed
00:49:35.460 --> 00:49:36.599
competitor, what they do is they... Of course,
00:49:36.599 --> 00:49:38.679
the earth. Yeah, they did go, I'll give it away
00:49:38.679 --> 00:49:41.199
for free. Well, and then what ends up happening
00:49:41.199 --> 00:49:43.320
is that there's that sucking sound, all the customers
00:49:43.320 --> 00:49:45.599
who would much rather not pay at all. They kind
00:49:45.599 --> 00:49:47.099
of go to the venture company. And then what happens
00:49:47.099 --> 00:49:48.579
is the venture companies, the instantification
00:49:48.579 --> 00:49:50.320
happens at that point. Thank you very much for
00:49:50.320 --> 00:49:52.159
your customers. Then they basically make sure
00:49:52.159 --> 00:49:54.440
that the competitors go away. Then they basically
00:49:54.440 --> 00:49:56.480
put on the squeeze. The features get worse over
00:49:56.480 --> 00:49:58.539
time. The prices go up. And this is happening
00:49:58.539 --> 00:50:00.039
everywhere. As a matter of fact, there's a big
00:50:00.039 --> 00:50:01.780
conversation about this happening right now at
00:50:01.780 --> 00:50:04.860
Substack and how Substack has gone from the old.
00:50:05.460 --> 00:50:10.489
That's why. I'm so interested in the equity swapping
00:50:10.489 --> 00:50:12.929
element, right? Because with the equity swapping
00:50:12.929 --> 00:50:15.530
element, it places everyone into the same boat,
00:50:15.530 --> 00:50:17.690
right? Where the customer wishes for the vendor
00:50:17.690 --> 00:50:19.969
success and the vendor wishes for the customer
00:50:19.969 --> 00:50:22.869
success. And everybody's now tied together, right?
00:50:22.969 --> 00:50:26.309
Because if your business is choking out your
00:50:26.309 --> 00:50:29.599
customer, right? The result is... You're you
00:50:29.599 --> 00:50:31.440
choked out your customer. I like that, you know,
00:50:31.639 --> 00:50:33.239
like that, like you're not going to love the
00:50:33.239 --> 00:50:35.559
result. OK, you have dead customers. And this
00:50:35.559 --> 00:50:37.039
brings us back. We'll say because I have so many
00:50:37.039 --> 00:50:39.239
questions for you. I want to be mindful of your
00:50:39.239 --> 00:50:44.739
time and my time. And and I want to open up a
00:50:44.739 --> 00:50:47.239
big can of worms. Let's just talk about everything.
00:50:47.260 --> 00:50:50.329
Why don't we? But this actually does get back
00:50:50.329 --> 00:50:53.469
to the story about the SAS and I'll tell you
00:50:53.469 --> 00:50:55.750
sort of like not a personal story, but my personal
00:50:55.750 --> 00:50:58.489
experience. I think a lot of the reason why people
00:50:58.489 --> 00:51:00.369
have been talking about the end of SAS is not
00:51:00.369 --> 00:51:01.929
because software as a service is going to go
00:51:01.929 --> 00:51:03.289
away. I mean, obviously, we're going to have
00:51:03.289 --> 00:51:06.050
software as a service. The thing is, like a lot
00:51:06.050 --> 00:51:08.349
of the large SAS vendors have been doing exactly
00:51:08.349 --> 00:51:09.909
what you've been saying, which is kind of choking
00:51:09.909 --> 00:51:12.349
out the customer, whether you're a HubSpot or
00:51:12.349 --> 00:51:15.789
a Salesforce or wherever it is. There's the feeling
00:51:15.789 --> 00:51:18.530
that it's extracting. It's not adding value.
00:51:19.050 --> 00:51:22.289
And here's the thing. Now with AI, the power
00:51:22.289 --> 00:51:25.469
dynamic has shifted. And in a very specific case,
00:51:25.510 --> 00:51:28.130
I had a situation where I was using this platform.
00:51:28.489 --> 00:51:31.710
It did not have what I wanted to have. The price
00:51:31.710 --> 00:51:34.210
was going up. It was not going down. And I just
00:51:34.210 --> 00:51:38.050
decided, screw it. I understand that maybe building
00:51:38.050 --> 00:51:39.969
something is not necessarily the smartest decision
00:51:39.969 --> 00:51:42.110
I could be making because I have to weigh my
00:51:42.110 --> 00:51:44.590
cost and my time. But it was more like I just
00:51:44.590 --> 00:51:48.139
hit the wall. I'm like, I'm not willing. to invest
00:51:48.139 --> 00:51:50.840
anymore in the other company's platform. I'm
00:51:50.840 --> 00:51:56.940
not willing to be a SaaS slave where the features
00:51:56.940 --> 00:51:59.340
will just get worse over time, and I'll be squeezed
00:51:59.340 --> 00:52:02.780
to pay more for less. And I think that's what
00:52:02.780 --> 00:52:04.500
people are missing in the SaaS argument. It's
00:52:04.500 --> 00:52:06.380
like, nobody's going to build their own software
00:52:06.380 --> 00:52:08.159
because the functionality is going to be the
00:52:08.159 --> 00:52:09.840
same, and you have to manage it. It's like, you're
00:52:09.840 --> 00:52:12.159
forgetting the direction that if I keep telling
00:52:12.159 --> 00:52:13.940
you that the SaaS alternative is just going to
00:52:13.940 --> 00:52:16.480
get more expensive with less capability over
00:52:16.480 --> 00:52:20.840
time, that rate of return, risk adjusted. Yeah,
00:52:21.059 --> 00:52:26.000
yeah, yeah. So to me, the thing that I am calling
00:52:26.000 --> 00:52:30.460
for is not just these generic commodity utilities
00:52:30.460 --> 00:52:33.599
of merchant banking and reserve banking, right?
00:52:33.940 --> 00:52:37.820
But what I'm also calling for is that providers
00:52:37.820 --> 00:52:41.519
of software become part of the nucleus of a federation,
00:52:41.559 --> 00:52:43.820
right? Because in a sense, it's the brains of
00:52:43.820 --> 00:52:46.900
the organization, right? So as you begin to federate
00:52:46.900 --> 00:52:50.139
a collection of companies, that the sources of
00:52:50.139 --> 00:52:52.780
data management and intelligence actually become
00:52:52.780 --> 00:52:55.690
organically part of the organism. Right. So,
00:52:55.769 --> 00:52:57.929
you know, it's fascinating because people talk
00:52:57.929 --> 00:53:01.070
about extractive and predatory business models
00:53:01.070 --> 00:53:03.050
and this type of thing. Right. And they're really
00:53:03.050 --> 00:53:06.650
talking about the history of competition. Right.
00:53:06.730 --> 00:53:08.889
And the history of egocentrism. Right. Which
00:53:08.889 --> 00:53:12.079
is if you go back in evolutionary times. To the
00:53:12.079 --> 00:53:15.480
last universal common ancestor, right? The really
00:53:15.480 --> 00:53:18.460
the commonality of this organism is basically
00:53:18.460 --> 00:53:21.320
individual survival, right? So that so, you know,
00:53:21.519 --> 00:53:24.420
everyone looks at evolution as a story of darwinism
00:53:24.420 --> 00:53:27.099
And like this kind of individual survival, which
00:53:27.099 --> 00:53:29.599
is a very old impulse to be perfectly honest,
00:53:29.780 --> 00:53:31.940
right? But the thing that i've been studying
00:53:31.940 --> 00:53:35.980
is not social primates is primate ism, which
00:53:35.980 --> 00:53:38.440
is sort of this idea of like, let's work together,
00:53:38.599 --> 00:53:41.380
you know, apes together strong, right? But it's
00:53:41.380 --> 00:53:44.800
more going back to the origins of multicellularity,
00:53:44.900 --> 00:53:48.300
right? Where multicellularity is like, oh, like
00:53:48.300 --> 00:53:51.840
you you pump out ATP and all build us an immune
00:53:51.840 --> 00:53:53.730
system. You know, and it's like, okay, cool,
00:53:53.750 --> 00:53:55.809
right? And the guy who's pumping out ATP isn't
00:53:55.809 --> 00:53:58.150
like, why the hell am I giving this guy my ATP?
00:53:58.409 --> 00:54:01.369
It's like, bro, like, he's giving you an immune
00:54:01.369 --> 00:54:04.050
system, like, you know, you better deliver, like,
00:54:04.150 --> 00:54:06.210
give him the stuff, right? And it's sort of like,
00:54:06.269 --> 00:54:08.670
ATP is money, like, this energy is money, why
00:54:08.670 --> 00:54:10.170
am I giving away my money? And it's like, bro,
00:54:10.170 --> 00:54:11.989
you're not giving away your money, like, you're
00:54:11.989 --> 00:54:14.250
getting an immune system. So it's sort of like,
00:54:14.449 --> 00:54:17.510
if you go back to the origins of multicellularity,
00:54:17.829 --> 00:54:21.389
like, this is really deep cooperation. So, you
00:54:21.389 --> 00:54:23.340
know, I I feel like that's the picture I want
00:54:23.340 --> 00:54:27.420
to paint to kind of close out is that economic
00:54:27.420 --> 00:54:30.519
federation is possible. We can do it. We can
00:54:30.519 --> 00:54:34.039
build regenerative economies. We can build powerful
00:54:34.039 --> 00:54:36.679
economies and we can do it with scale and variance.
00:54:36.909 --> 00:54:38.869
Like, I think that's the key is look for these
00:54:38.869 --> 00:54:41.789
golden ratios. Don't just sit there like with
00:54:41.789 --> 00:54:44.210
powerless and think that the big guy is always
00:54:44.210 --> 00:54:46.889
going to win. Like, you know, the power, the
00:54:46.889 --> 00:54:49.289
magic power is this is percentage of growth,
00:54:49.289 --> 00:54:52.469
right? Like I can grow if I grow my revenue from
00:54:52.469 --> 00:54:56.250
zero cents to one cent. Yeah, I just had one
00:54:56.250 --> 00:54:58.909
percent growth, infinity percent growth. Like,
00:54:58.969 --> 00:55:01.030
do you think Google can get infinity percent
00:55:01.030 --> 00:55:03.590
growth? No, I don't think they can. Right. Obviously,
00:55:03.590 --> 00:55:05.849
if you get to two pennies, it's, you know, 100
00:55:05.849 --> 00:55:08.090
percent. growth over your first penny, right?
00:55:08.190 --> 00:55:12.010
So like, you know, so to me, that's how the little
00:55:12.010 --> 00:55:15.869
guy can win. Yeah. Well, hey, I had like about
00:55:15.869 --> 00:55:17.590
15 questions. I just threw out all the questions.
00:55:19.489 --> 00:55:21.510
We got into a lot of it. I think this is great.
00:55:21.610 --> 00:55:23.170
I think this hopefully for listeners Hopefully
00:55:23.170 --> 00:55:25.449
this gives you a lot of things to chew on this
00:55:25.449 --> 00:55:27.670
is some really interesting stuff now We all have
00:55:27.670 --> 00:55:29.530
I have rapid for our questions I got to ask the
00:55:29.530 --> 00:55:32.050
same three rapid for our questions ask everybody
00:55:32.050 --> 00:55:33.769
fire They're all the key. They're gonna be real
00:55:33.769 --> 00:55:35.809
simple, but like let's get into tools So the
00:55:35.809 --> 00:55:38.630
first one is what is one tool or automation that
00:55:38.630 --> 00:55:40.690
you absolutely can't run your business without
00:55:40.690 --> 00:55:46.030
the one that gives you your team So this is gonna
00:55:46.030 --> 00:55:50.369
sound so like mid -curve, right? But honest to
00:55:50.369 --> 00:55:52.869
Pete, it's like Claude code. Okay. You know,
00:55:53.230 --> 00:55:56.130
honest to Pete, it's like 20x max, like I'm token
00:55:56.130 --> 00:56:00.150
maxing every day and like, I'm, you know, it's,
00:56:00.230 --> 00:56:02.380
yeah, that's what I... It's doing it for a lot
00:56:02.380 --> 00:56:04.619
of people. It's essential. It is essential. That's
00:56:04.619 --> 00:56:07.519
fantastic. Like, how are you? Like, what's some
00:56:07.519 --> 00:56:09.400
maybe one way you're using it that you may think
00:56:09.400 --> 00:56:11.679
people may not have considered for their own
00:56:11.679 --> 00:56:14.079
use of Claude? Nah, it's all mid -curve stuff.
00:56:14.159 --> 00:56:16.780
Like, I'm just banging out software. Like, obviously
00:56:16.780 --> 00:56:20.599
software coding is a lot more personal in the
00:56:20.599 --> 00:56:23.579
sense that it's software about kind of either
00:56:23.579 --> 00:56:27.820
discovery. You know fafo discovery mode or or
00:56:27.820 --> 00:56:31.000
it's just make personal effectiveness right so
00:56:31.000 --> 00:56:33.960
you know but i feel like that's personal interest
00:56:33.960 --> 00:56:36.980
and personal productivity basically nothing wrong
00:56:36.980 --> 00:56:40.099
with that. That's what software's for. Now a
00:56:40.099 --> 00:56:42.820
process question. So what is, especially from,
00:56:42.880 --> 00:56:45.019
we didn't have time to talk about some of your
00:56:45.019 --> 00:56:46.460
portfolio companies, especially the ones that
00:56:46.460 --> 00:56:49.059
have been really growing very well, scaling really
00:56:49.059 --> 00:56:50.400
fast and been doing a lot of stuff we've been
00:56:50.400 --> 00:56:52.480
talking about. So this is that process question.
00:56:52.739 --> 00:56:55.559
What's one system or process do you think every
00:56:55.559 --> 00:56:58.000
lean leverage first team should have in place?
00:56:58.059 --> 00:56:59.800
By the time they hit their first million dollars
00:56:59.800 --> 00:57:02.280
in revenue, that separates the scalers, the ones
00:57:02.280 --> 00:57:04.320
who are getting that compound leverage, from
00:57:04.320 --> 00:57:06.239
the grinders. They worked really hard to get
00:57:06.239 --> 00:57:08.579
that first million, Don't work twice as hard
00:57:08.579 --> 00:57:10.400
to get that second million. That's not scaling.
00:57:10.480 --> 00:57:12.820
That's not leverage. So what do you think? Maybe
00:57:12.820 --> 00:57:15.019
what would you tell people to stop doing that
00:57:15.019 --> 00:57:16.840
they might be doing that's preventing scale or
00:57:16.840 --> 00:57:18.820
something that they should start doing today?
00:57:18.940 --> 00:57:23.639
I mean, I really feel like weirdly culture is
00:57:23.639 --> 00:57:26.400
sort of an X factor, right? Because ultimately
00:57:26.400 --> 00:57:28.920
at some point there's inflection and ultimately
00:57:28.920 --> 00:57:31.579
at some point there's transformation. And ultimately
00:57:31.579 --> 00:57:34.280
what I'm talking about is the S shape. Right.
00:57:34.360 --> 00:57:36.780
Which is that there's stuff that works and that
00:57:36.780 --> 00:57:38.820
you're, you're, you're exponential, like you're
00:57:38.820 --> 00:57:42.400
a show, but then it's the S curve, right? It's
00:57:42.400 --> 00:57:44.300
not that it's not the hockey stick. It's the
00:57:44.300 --> 00:57:46.840
S right. So the question becomes What happens
00:57:46.840 --> 00:57:49.920
when the thing stops doing the thing? And what's
00:57:49.920 --> 00:57:52.500
the scale? Right. Because I talked about fractal
00:57:52.500 --> 00:57:54.400
scale invariance. Right. So there's some scale
00:57:54.400 --> 00:57:56.940
at which it becomes an S. Right. And like, you
00:57:56.940 --> 00:57:59.019
know, like the population of the Earth seems
00:57:59.019 --> 00:58:00.760
like it's like 10 and a half billion. Right.
00:58:00.800 --> 00:58:03.960
So there's some S's that are like big assets
00:58:03.960 --> 00:58:05.820
and there's some masses that are really small.
00:58:05.860 --> 00:58:07.920
Right. So you don't know. So to me, the thing
00:58:07.920 --> 00:58:10.219
that's really fascinating is it turns out that
00:58:10.219 --> 00:58:13.579
things like culture actually help you go through
00:58:13.579 --> 00:58:16.639
these messy transformations. where maybe the
00:58:16.639 --> 00:58:19.239
curve you thought was like 10 billion is actually
00:58:19.239 --> 00:58:22.059
much smaller, you know, and now you have to change
00:58:22.059 --> 00:58:24.000
right now you have to deal with the consequences,
00:58:24.000 --> 00:58:26.260
you know, because, you know, I think a lot of
00:58:26.260 --> 00:58:30.099
these are predicated on these infinitely exponential,
00:58:30.239 --> 00:58:33.699
there's no such thing as infinitely. All bounded
00:58:33.699 --> 00:58:35.940
earthly systems like cap out. So the question
00:58:35.940 --> 00:58:38.360
becomes, what do you do now? You know, that's
00:58:38.360 --> 00:58:40.500
actually a really fun way of thinking about things.
00:58:40.679 --> 00:58:42.780
We talked about these, like, exponential curves,
00:58:43.019 --> 00:58:45.360
exponential up, asymptotic vertical and asymptotic
00:58:45.360 --> 00:58:47.380
horizontal, right? Yeah. And I guess the best
00:58:47.380 --> 00:58:49.119
way for me to think about is that when you're
00:58:49.119 --> 00:58:51.260
starting your business, everything feels asymptotic,
00:58:51.420 --> 00:58:52.960
horizontal, like you're spending all of this
00:58:52.960 --> 00:58:54.760
time. You haven't seen the turn. and it's just
00:58:54.760 --> 00:58:56.760
going you're just like not making any progress
00:58:56.760 --> 00:58:58.780
and stuff is just kind of getting worse and worse
00:58:58.780 --> 00:59:00.500
and worse every day then all of a sudden something
00:59:00.500 --> 00:59:03.019
happens and then it's like we got that exponential
00:59:03.019 --> 00:59:05.239
the vertical which is like how things are growing
00:59:05.239 --> 00:59:07.739
and growing can i keep it growing but then the
00:59:07.739 --> 00:59:10.139
point of the s curve is that at some point that
00:59:10.139 --> 00:59:12.280
asymptotic vertical goes horizontal again, where
00:59:12.280 --> 00:59:14.760
it's like, no matter how much you try to improve,
00:59:15.139 --> 00:59:18.119
you're just going to hit that, you're hitting,
00:59:18.519 --> 00:59:21.559
it may not be horizontal at zero, but it's horizontal
00:59:21.559 --> 00:59:23.659
at some other point. So I really like the way
00:59:23.659 --> 00:59:26.119
you put that. And maybe people don't think about
00:59:26.119 --> 00:59:28.860
it from those mathematical perspective, but that's
00:59:28.860 --> 00:59:30.380
basically kind of what we're doing. They're all
00:59:30.380 --> 00:59:33.280
sigmoids. Everything is a sigmoid. That's good.
00:59:33.699 --> 00:59:35.960
And that's why we were making a lot of the economic
00:59:35.960 --> 00:59:37.340
argument. Well, what if we had a whole bunch
00:59:37.340 --> 00:59:39.250
of small sigmoids all collected together? instead
00:59:39.250 --> 00:59:41.949
of the one big one, and so that's... Could be
00:59:41.949 --> 00:59:44.090
beautiful. That could be a beautiful thing. I
00:59:44.090 --> 00:59:46.849
think we are in alignment on that. So the final
00:59:46.849 --> 00:59:49.269
thing is a tip. So if you can give one piece
00:59:49.269 --> 00:59:51.610
of advice to a founder who's running that dinner
00:59:51.610 --> 00:59:53.829
table size team right now, who wants to scale,
00:59:54.369 --> 00:59:56.610
maybe what would you share? Yeah, I mean, I think
00:59:56.610 --> 01:00:01.989
in this day and age, it really feels like the...
01:00:01.869 --> 01:00:05.130
Watch word is really what I would call FAFO,
01:00:05.130 --> 01:00:08.130
right? Which is F around and find out because
01:00:08.130 --> 01:00:11.190
the cost of effing around has been decreased,
01:00:11.190 --> 01:00:14.610
right? And because the experimentation is something
01:00:14.610 --> 01:00:16.690
that you can actually manifest in things like
01:00:16.690 --> 01:00:20.030
software, right? So you can speculatively spam
01:00:20.030 --> 01:00:23.050
out like 10 experiments that are maybe not going
01:00:23.050 --> 01:00:25.909
anywhere But maybe the 11th experiment goes somewhere,
01:00:25.909 --> 01:00:28.670
right? So to me like I'm big in the mood of this
01:00:28.670 --> 01:00:31.780
if you if you if you want to watch the know,
01:00:31.880 --> 01:00:35.300
like a really long podcast, right? Like Peter
01:00:35.300 --> 01:00:38.619
Steinberger, the open class guy, right? Like
01:00:38.619 --> 01:00:42.059
if you want to watch that podcast, there's like
01:00:42.059 --> 01:00:45.260
a three and a half hour long podcast, you know,
01:00:45.380 --> 01:00:47.880
with him, you know, talking about it. And the
01:00:47.880 --> 01:00:51.219
conclusion I came hearing that podcast was basically
01:00:51.219 --> 01:00:54.980
Fafo is king, right, which is which is this guy
01:00:54.980 --> 01:00:57.420
was basically like the reason I beat everyone.
01:00:57.800 --> 01:01:00.480
at this game is that my goal was to have the
01:01:00.480 --> 01:01:02.860
most fun for myself and that there were these
01:01:02.860 --> 01:01:06.099
giant companies and there were zero employees
01:01:06.099 --> 01:01:08.739
of any of the giant companies whose goal it was
01:01:08.739 --> 01:01:11.940
to have the most fun for themselves, right? And
01:01:11.940 --> 01:01:14.320
so when you think about that from an evolutionary
01:01:14.320 --> 01:01:16.860
perspective, that's bananas, right? Like that
01:01:16.860 --> 01:01:21.500
is major FAFO. Like that is someone in a weird
01:01:21.500 --> 01:01:23.900
corner of some weird universe doing some weird
01:01:23.900 --> 01:01:26.880
thing and just bang, like out of the blue, they
01:01:26.880 --> 01:01:29.619
hit They hit the numbers and they became a billion
01:01:29.619 --> 01:01:33.090
-dollar enterprise overnight. Whatever. Yeah.
01:01:33.349 --> 01:01:34.969
Well, that's great. Well, I tend not to think
01:01:34.969 --> 01:01:37.190
that is usually Fafo is like the negative thing.
01:01:37.190 --> 01:01:38.769
It's like you screw around. You're going to find
01:01:38.769 --> 01:01:41.289
out like claiming it. I am reclaiming the phrase.
01:01:41.510 --> 01:01:43.289
I like to think of it as trial and error. But,
01:01:43.429 --> 01:01:45.170
you know, I think I think I think this is good.
01:01:45.190 --> 01:01:47.409
I think this is good. Well, hey, this is definitely
01:01:47.409 --> 01:01:49.469
sparked a lot of conversation. Didn't necessarily
01:01:49.469 --> 01:01:53.530
go the way I think. But that's why I was like,
01:01:53.530 --> 01:01:55.210
I just wanted to pick your brain, kind of get
01:01:55.210 --> 01:01:57.869
again in your mindset how you were thinking about
01:01:57.869 --> 01:02:00.329
this. So, Miko, thanks again for joining us here
01:02:00.329 --> 01:02:02.239
on exponential scale podcast. I encourage people
01:02:02.239 --> 01:02:04.519
to reach out, reach out to you. So Mikko, tell
01:02:04.519 --> 01:02:06.260
us, where can people find out more about you,
01:02:06.360 --> 01:02:09.239
the fun, the things you're working on? Yeah,
01:02:09.500 --> 01:02:12.840
the easiest place is if you go to mikobits .com,
01:02:12.840 --> 01:02:16.099
M -I -K -O -B -I -T -S dot com, you can find
01:02:16.099 --> 01:02:19.420
my LinkedIn's or my socials, Twitter, wherever
01:02:19.420 --> 01:02:21.820
DMs open. So like, you know, you can just hit
01:02:21.820 --> 01:02:24.400
my web page and then you can go from there to
01:02:24.400 --> 01:02:27.139
anywhere. you want and you can basically chat
01:02:27.139 --> 01:02:30.280
me up and I'm happy to hear pitches. I'm happy
01:02:30.280 --> 01:02:32.559
to hear about your companies. I'm happy to hear
01:02:32.559 --> 01:02:34.639
about anything you want to talk about. Maybe
01:02:34.639 --> 01:02:38.440
we'll be starting a bank soon. Stay tuned. I
01:02:38.440 --> 01:02:40.579
wouldn't necessarily rule that out. But anyway,
01:02:40.880 --> 01:02:42.739
again, thank you, Mika, so much for joining us.
01:02:42.800 --> 01:02:44.980
And as usual, I always end with a mantra for
01:02:44.980 --> 01:02:47.340
the week and an outro for you all. And that is
01:02:47.340 --> 01:02:49.239
here's your mantra for the week. Trial and error.
01:02:49.849 --> 01:02:52.429
FAFO, if you want to think of it that way, is
01:02:52.429 --> 01:02:55.849
the best way to get from that horizontal exponent
01:02:55.849 --> 01:02:57.730
where all you can do is you're not going one
01:02:57.730 --> 01:02:59.409
percent up, you're just kind of going one percent
01:02:59.409 --> 01:03:02.070
down to get to the vertical. You get that vertical
01:03:02.070 --> 01:03:05.429
now. By the time it gets to the horizontal again,
01:03:05.969 --> 01:03:08.889
you really want to make it sustainable. And perhaps
01:03:08.889 --> 01:03:11.050
that's not necessarily a bad place to be. So
01:03:11.050 --> 01:03:13.070
I think if you've loved this interview with Miku
01:03:13.070 --> 01:03:15.429
Matsumura, I want you to hit that subscribe button,
01:03:15.570 --> 01:03:17.150
leave a review, and share with that founder friend
01:03:17.150 --> 01:03:19.210
who's still chasing the head count instead of
01:03:19.210 --> 01:03:22.369
leverage. I want you to think big, stay lean,
01:03:22.449 --> 01:03:25.329
and scale smarter. Small teams that scale big
01:03:25.329 --> 01:03:29.150
aren't the future. They're the now. If this episode
01:03:29.150 --> 01:03:31.969
has you inspired to learn more, hit that subscribe
01:03:31.969 --> 01:03:34.309
button, share it with your crew, and join the
01:03:34.309 --> 01:03:38.030
movement over at ScaleBraid .com. That's S -C
01:03:38.030 --> 01:03:42.409
-A -L -E -B -R -A -T -E .com. Until next time,
01:03:42.710 --> 01:03:46.449
think big, stay lean, and scale smarter. Because
01:03:46.449 --> 01:03:49.630
small teams have mega potential. And thanks for
01:03:49.630 --> 01:03:52.630
tuning in to the Small Team Big Scale podcast.