Gurley argues that VCs using cheap capital to enter new industries are actually funding low-return businesses.
“I overheard a VC on a panel say that now that capital's become so cheap, we as venture capitalists get to go after all these new industries.”
Gurley criticizes VCs who think cheap capital enables them to pursue low-return businesses in new industries.
“But I overheard a VC on a panel say that now that capital's become so cheap, we as venture capitalists get to go after all these new industries.”
Gurley argues Robinhood is glorifying speculation rather than democratizing investing.
“And so what what Robinhood's really doing, I think, is kinda glorifying speculation. They're not they're not democratizing investing.”
Gurley reveals personal position in Ethereum after studying crypto, says Ethereum crowd more pragmatic than Bitcoin.
“We are in chain analysis, which you referenced. And I'm swayed by the Ethereum crowd. The parties that are involved there seem to be way more pragmatic.”
Gurley discovered Dell had 20-to-1 ROIC advantage versus competitors using return on invested capital framework.
“It turned out just by happenstance that Dell stood out like a sore thumb with ridiculously high ROIC numbers versus the rest of the industry. Like, night and day, like, 20 to one.”
Gurley believes Facebook's stock would double if they shut down VR, which costs $5-10 billion annually.
“Wall Street's on my side on this one. I think if they shut down the VR effort, not only will the profitability would soar because they're spending real money, like 5 to 10,000,000,000 a”
Gurley says Dell's return on invested capital was 20 to 1 versus competitors, so extreme Mauboussin didn't believe it.
“Like, night and day, like, 20 to one. Wasn't even close. And in fact, it was so ridiculous. Like, the first time I showed him, he didn't Michael didn't believe it was true.”
Gurley found Dell's return on invested capital was 20 times higher than competitors, initially unbelievable.
“Like, night and day, like, 20 to one. Wasn't even close. And in fact, it was so ridiculous.”
Gurley says all investors must hold strong opinions loosely because variables constantly change.
“And Yes. I think I think all investors have to work within that framework because things change.”
Gurley argues increasing returns vary in strength, with some linear and some exponential, forming a scale of network effects.
“It's arguable there are levels of increasing returns. Like, you could come up with some kind of scale or index because some of them are more linear and some of them can go exponential.”
Gurley admits pattern recognition led VCs to miss HubSpot, Shopify, and Twilio due to anti-small-business bias from Intuit precedent.
“And so you develop this anti small business mindset, which keeps you out of HubSpot and Shopify and Twilio. Then miss massive amounts.”
Gurley warns retail investors that 100x AI returns already happened; current odds are very low.
“And that's not to say there won't be an incremental AI investment that makes money, I think there will. But your odds right now of that being the case are really, really low.”
Gurley quotes Bezos saying he only invests when founders will pursue their vision regardless of funding.
“I only look for one thing. I want to know that this person's gonna go do this thing come hell or high water, whether I invest or not.”
Gurley used return on invested capital analysis to identify Dell's ten to one advantage despite street hatred.
“Their laptop had caught on fire, and they had this option hedging strategy gone awry Uh-huh. That they had to do mea culpa to the street.”
Gurley emphasizes the person matters more than the concept, citing founders who pivoted 180 degrees.
“And we've seen incredible businesses be built by great founders who have pivoted a 180 degrees from the original idea.”
Gurley found Dell trading at six times earnings after laptop fire and option hedging problems.
“It was trading at six times earnings. Their laptop had caught on fire, and they had this option hedging strategy gone awry Uh-huh.”
Gurley says venture capital requires breaking your own rules or you'll say no to everything.
“venture capital is a game where you have to one of the reasons, group decision making works so well is you're you're gonna have to break one of your rules or you're gonna say no to everything.”
Gurley says Bezos only looks for one thing in founders: determinism that they'll succeed regardless of his involvement.
“Because it's not like he's got a lot of free time. He said, I only look for one thing, the determinism of the founder.”
Gurley asked Bezos how he made successful angel investments while running Amazon, learning his one criterion.
“have that? I'll give you a few. And the first one I borrowed from Jeff Bezos.”
Gurley quotes Bezos saying he only looks for determinism in founders who will succeed regardless of investment.
“He said, I wanna believe this person's gonna go do this, come hell or high water, whether I get involved or not, nothing's gonna stop him. And that's the trade he's looking for.”
Gurley explains venture capitalists live in fear of missing the one or two asymmetric deals each year.
“Once again, because of this asymmetric outcome thing, live in fear of missing this one or two deals a year. There's like, how could you possibly minimize the chance of not finding that?”
Gurley cites Uber shifting from burning $2B yearly to generating $10B in free cash flow through unit economics understanding.
“I mean, Uber was burning 2,000,000,000 a year and Dara had 10,000,000,000 in free cash flow last year. Being able to make that shift, it's gonna require an innate understanding of your true unit economics.”
“I’ve never met Leo, and from all I can gather he was an exceptional student. Well above top 1%. Probably > 1/10,000. That said I don’t think he was a “student of finance.” I asked ChatGPT to name the top 25 investing books of all time. And then asked what percentage of those https://t.co/vp2WkiAHKD”
“I’ve never met Leo, and from all I can gather he was an exceptional student. Well above top 1%. Probably > 1/10,000. That said I don’t think he was a “student of finance.” I asked ChatGPT to name the top 25 investing books of all time. And then asked what percentage of those https://t.co/vp2WkiAHKD”
Gurley references the book Fear Factor when discussing portfolio construction differences, suggesting some people lack certain risk factors
“@denmarkcap That’s another topic. Read the book “fear factor.” Some of us don’t have it.”