#215 - What Venture Capital Will Look Like in the Future

If you want to bet on the future of humanity and where a lot of growth is going to come from, investing in technology is the way to do it. I feel like I could rule the world. I know I could be what I want to.

I put my all in it like no days off. On the road, let's travel, never looking back. All right, this is one of the best episodes I think we've done in a long time. I'm going to tell you everything that we talked about, but first, Spotify, just has this like new feature. I want to see how great it is. So basically if you're on Spotify, go to pull the app up, look at it, look at our My First Million page and you're going to see a little bell. Do me a favor, hit that bell. I want to see if you'll be notified when we have our next episode. I want to see if this thing works. If it does work, sign up, click the bell and then tweet at me and tell me if it works and I'll like give you a retweet or something like that in exchange for clicking it. But click that for me and let me know if it works. So today's episode, I think, is one of the best episodes we've done in a very, very long time. We talk about the Amazon liquidation business. I'm actually gonna record myself buying from one of these websites. It's a fascinating business where they sell you a bunch of return stuff, but it's packed in a mystery package. We talk about fake data. There's this new company called Tonic that's selling fake data to help you test your stuff. Crazy fascinating business. And then my favorite topic is this guy called Harold Alfond. He's the Billy of the Week, this amazing billionaire that started a shoe company and eventually gave away most of his money, but incredibly fascinating. We talk about a few other stuff like, like how Tiger Global is making all this money in the future of VC. That's pretty fascinating. But my favorite part was the Billy of the Week. Check it out. And by the way, on your phone, you're probably listening to this on your phone. Go to Spotify, click that bell. I think they just released this recently. Someone was telling me about it. Tell me if you get notified, like send like a, like a click the bell and then just send me a screenshot when the next episode comes out and tell me if it works. Uh, @thesamparr on Twitter. I wanna know if this works. I'll retweet you if you, um, send it to me. All right. Enjoy the episode. Okay. So what did you think about the Ramit episode?

I thought it was pretty good. I thought, uh, he does a good job. Like, I guess I always break it up into two categories. How interesting is the stuff you're saying? And then how interesting are you at saying it? So he was like, I thought he was very interesting in how he says things. Like he brings energy. He is not afraid to like call something stupid. Like, you know, he brings a little bit of that flair that you need for something to be fun. In terms of the info, I thought it was pretty good. I think Yeah, we talked a lot about courses and I just think not like we are interested in courses because we can make courses that might be successful. And so, and he already does that. I don't know how many other people really care as much about how much we nerded out about it, but I don't really care because I wanted to know it. And so it was useful.

Uh, let me tell you really quick about this book I'm reading. It's called Empire of the Summer Moon. Have you heard of this?

No, but it sounds very, uh, it sounds like a teenage girl book.

No, it's about the Comanches, the Comanche Indians. Do you know what the Comanches are?

No.

What is that? All right. So let me, this is just a quick breakdown. Hold on.

How much time do you spend reading? I feel like every time you get on the pod, you're reading a different book. Are you reading like 4 hours a day? What's happening?

I, it's, when I say reading, it's audiobooks and I could do at least one a week. So wow. Like, yeah. Like I, if I exercise, if I go for a walk, I'll listen to it. So, and I listen to it at like 1.2 speed. So like a 10-hour book ends up becoming like 8 hours. And so I could do that in a week easy.

Is this a problem for you? When I listen to an audiobook and it's read by like a professional narrator, I just hate it and I can't get into it. But when it's the author reading it, I'm like, okay, I'm kind of down with that. Is that a problem just for me? Because it seems like most are professional narrator, professional voiceover actors or whatever they call them.

It's actually is a huge problem for me. So I do two things. The first, if I find a narrator that I like, I go, oh, oh, was that my—

you find their other books that they've read?

Yeah. So if I find it— sorry, my phone was going off.

If I find it like— who's your favorite narrator? Like some random guy who nobody's ever heard of. You're like, yeah, I love Craig Smith.

Ron Chernow. Ron Chernow is a great author. He's— he wrote Titan. He wrote House of Morgan. I'll go and read books. He gets— he has a great narrator that I like. The second thing, so if I find a narrator that I like, I'll go and I'll read something that they've done. The second thing that I do is I think more celebrities should narrate books. So I just read this amazing book. I loved it. It was by John Steinbeck. It was like part fiction, part nonfiction, and it was read by Lieutenant Dan from Forrest Gump.

Okay.

You know what I'm talking about? His name's Gary Reesick or Reesick or something. And it made the book so much better. So lately I've been trying to find books. Sine, I don't even know how to say his name. Sinus is his name. I want to go and find books only by like certain celebrities that I know, and that makes the book more fun. So I actually find, and you know what's funny? I always think about this. Sometimes it's like the reason I don't like, I don't really read like self-helpy business books that much anymore. And the reason I don't is I found this one author that narrated literally like 200 like self-helpy books. And I looked at what he was doing now and he like still wasn't doing much. I'm like, well, if this fucker read all this stuff, then it should have worked. Like you would.

Oh, you, I thought you were gonna say they all sound the same, but you're saying this guy read all these books and he's still, you know, an average Joe. So fuck it, it doesn't work.

Yeah. Like I looked up like how much he charged to read a book and I'm like, dude, what the heck? Like you're making like 50 grand a year and you just read yourself. Yeah. What, what the hell is going on? So I'm reading this book right now called Empire of the Sun, uh, of the Summer, Empire of the Summer Moon. It's about the Comanche Indians. The Comanche Indians was like 20,000 Indians in America, but they were like in the Colorado and West area. Area. But when you think of Indians, like you stereotype as like, like when I, in my head, I have this picture of like the pilgrims and the Indians coming together and then eventually the white people like mess 'em up. So the, the Comanches were badass. So they were just like normal. They were kind of normal. They weren't like that particularly special, but then they got ahold of horses in the 1500s and they mastered horses so much so that a Comanche on a horse, what they could do is they could get, they could be riding the horse. Lean to the side so you can't see them, and then pop up and shoot 20 arrows faster than one person could fire one bullet and then reload it and fire another. And they were wild. They were wild, wild, wild. They didn't even have the word surrender in their language. Like it wasn't a word.

And this is great. I'm now— that's my criteria now. When I— what do you look for in founders when you invest? Could you have been a Comanche Indian, right? Are you a Comanche or not? I want a Comanche as a founder that I'm investing in.

They're crazy. These guys were like were bad to the bone and a lot of stuff they didn't do was like great. Like, like in their, in their culture, it was okay to torture and kill captives and they would kidnap people. And so they're wild. But the whole story is about the history of them. And then also it centers around— they kidnap a family or they like take a family, like a white family, and they kill most of the family, but they keep this 12-year-old girl and they end up like raising her and she marries the chief and she gives birth to someone who eventually becomes the chief. And the white people, America, after like 25 years, get her, get her. And they think that they're saving her and they bring her back and she's like, no, I want to go back. And they're like, no, look, lady, you don't know what you're talking about. You need to be here. And she's like, no, no, no, no, no. Like that, they're my family now. And so out of protest, because she like inherited these, like, these, like, you know, these values of toughness, she was like, fine. And she starved herself and died.

Wow.

It's, it's the craziest book I've been reading. You'll have to read it. It's called Empire of the Summer Moon.

It's about the Comanche. I can tell you right now, not going to read the book. Definitely not going to read the book. But I loved that story and I feel like I already got the win. I feel like if I go in and read it now, I'm going to do a whole bunch of work and not really get that much more out of it than I already have. I'm so happy with what you just gave me.

Well, I got like on this kick where I was reading about Navy SEALs and I was like, all right, who else is badass? And then I got to the Comanches.

So is it because you met what's-her-name's husband and he's an ex-Navy SEAL?

100%.

Yes. I met him the other day. He's awesome. You went? Okay, great.

That's good. All right. We have a lot to go through. This is going to be interesting. I could— what do you want to start? You want to start with Harold?

No, let's save him for a little bit later. Let's do some cool ideas. I have a couple. You have a couple, I think. You want to go first? You want me to go?

I want you to.

Okay. Let's start with this. I think this one is one of the more interesting ideas. It's kind of random. So I'll start with that. It's pretty fucking random, but it's this thing called Tonic Fake Data. And so I'm trying to chase this guy down because I really want to invest in this company now after I heard about it. So I have a cousin, I got a couple cousins that are in tech. I got 3, I think 3 or 4 cousins that are in tech. One of them, my cousin Samir, tweeted this and I think his tweet literally has 2 likes, which is just a shame because like, this is actually like an amazing Twitter thread. I'll retweet it right now so people can go see it. It's on my Twitter feed now. But he's like, you've heard about big data, but what about fake data? You ever heard of fake data? I had never heard of this. So he's like, check out this company called Tonic Fake Data. And they grew about 600% this last year. And he starts to like tie some things together. So he's like, you remember when HBO had that thing where the intern accidentally sent an email to every subscriber. And it's because they were doing a test of some software system, the email system or whatever it is. But when a developer's doing a test, they have to input some dummy data, some information. And so typically a developer will just kind of make it up. It'll be like first comma last name. They're just trying to get through the task quickly. So they're just inputting fake data just from their head. And so if you think about this at a bigger level, let's say you're testing, you're Uber and you have a new feature in your app. And so he gives this example, basically, let's say you're Uber and you are releasing this new thing about notifications. And so there's this process of quality control testing, right? So they'll they'll try to like, okay, sign up as a new user and try it. Okay, let's say you're already a user, log out, log back in, pretend you got a new phone, right? There's all these, like, if you have a product that has hundreds of millions of users that are living normal, weird lives, there's all these random different paths a user can take and you kind of need to test your product through each. And so there was a guy, this is kind of the famous thing is, there was a guy who he had logged out of his account on his wife's phone., but even when he logged out, she kept getting the notifications because of just this, like the developer didn't test the feature properly of this use case. You go to a new phone, you log in, you accept notifications, then you log out. You're still getting notifications somehow.

And so, which we did all the time. I would walk around and be like, hey, who here at the office has an Android? Let me see it real quick. Right.

Yeah. Yeah. Yeah, exactly. Who's got an Android? Okay. I think we tested all of Android. It's like, dude, there's like 200 models of this thing. It's like 2,000 models. You think you just tested Android because, you know, the one guy who's an Android bro, like, you know, used it for a second. So what happened with this Uber guy is his wife got a notification that he was going somewhere or like, you know, your ride is ready or whatever. And she's like, wait, he's supposed to be at some other place. And she found out he was cheating. He ends up suing Uber $47 million because, you know, wife found out about this, left him, blah, blah, blah. The cheater sued Uber, which is hilarious. And so he's giving all these little examples. I don't know if you won or not. It's not in the thread. I haven't done more than that. So, so he gives another example. Let's say, here's the last example. It's 2008. The financial system is crashing. Banks are failing. And banks owned at that time, if you remember, like the subprime mortgage crisis, they had basically on their books a whole bunch of mortgages that they needed to get rid of. And so they needed to sell them super fast because they were like They were at risk of going bankrupt. And so they set up a call center that any real estate investor or buyer could call in and make an offer on one of the mortgages they had. Because it's like an auction, it's like closing, final sale, everything must go was the idea. And so they hire Palantir, the big data company that Peter Thiel started, and they say, hey, come up with a recommendation engine that will figure out what offer we should accept because we don't have time to vet each offer as they come in. It needs to be quick, like a garage sale type decisions of like, hey, I'll give you $2 for it. Will you take it? Yeah, go, go ahead, take it. Everything must go. And so, so the developers were like, okay, we need to like test our recommendation engine for like, should we or should we not accept the offer? But they couldn't use the data because the data had like all this personal sensitive information, right? It's a person's name, credit score, their income, their address, like It was too much information. The bank couldn't just give it to Palantir and say, hey, use this real data to figure out what offers we should and shouldn't accept. And so what they did was the developers went to the bank's office, they go inside the building and they looked at the data and they said, okay, we understand we can't take this data and use it for our models, but we can replicate this. So like the way a mannequin is a replication replica of a human body or whatever, they did that to the, to the real bank data system of all these mortgages. And so they created a replica that would have the same, like, let's say, distribution and outliers and whatnot, but it was all dummy data. It was all fake data. And so they'd use this, they go back, they create this thing, they create the model, it's all successful, it all works. So what happened is, I think the guy from Palantir took the— I think he's for ex-Palantir. He spun out.

And was like, I'm going to create this Yeah, Ian Coe. I'm gonna create this for any business because businesses need to be able to generate fake datasets to test all their scenarios from, like the Uber example. Show me all the things that users do, all the different, like they do this step, then this step, then this step, then this step. Cool, I need to be able to simulate those steps accurately. And so what they do is they basically say, all right, people are pretty sensitive about privacy and data nowadays. You got GDPR. So companies can't be using their data for these things or giving data to other groups for it. So Tonic Fake Data can basically analyze your data, create dummy data, and then let your developers or other developers use that fake data that mirrors the real data. And so I thought this is like such a niche problem that you would only understand if you'd ever been through this. But then once you've been through it, you're like, shit, this solves a big problem that they have no other way to solve., and I love this. This is the opposite of guy who can code makes a to-do list app or makes a music streaming, you know, like a playlist generator based on the music you like, right? Those are the ideas everyone has that everyone can do. This is an idea no one has that pretty much no one could do. And so I'm like, dude, I'm like super bullish on this idea. And I love this. I love this. And especially now with machine learning, With machine learning, you need a lot of input data to make recommendation engines better. Well, how do you do that? How do you get more data? Well, you can simulate or, or create fake data that mirrors a small sample of real data. So I just think it's awesome. It goes on two big mega trends, privacy and machine learning. And I just love that I had never even thought about this.

This is amazing. How are they doing?

That's what your cousin does?

So what's he do now? He teaches people how to get a gig?

So he's basically like, yo, you want to break into tech and get a sales job? Like, cool. Most people don't know how to interview for this or how to do well at this. So he takes you for one month, he tells you, here's a bunch of good companies like that you haven't heard of, Tonic Fake Data. They need sales reps, they have a great product. It's a technical—

Dude, really?

I'll help you. I'll help you understand it and I'll help you get, do the job interview well. And I only make money once I place you. And so he's like a one-man recruiting firm right now for this. I think it's kind of an awesome idea. I don't know. I think he's just getting started. So I think he's got like, you know, 5 people at a time right now per month that he's helping get jobs, like very boutique at the moment. I'll give him a shout. So his Twitter handle is Samir_Johar. Unfortunately, no one's going to know how to spell any of those things. But if you go to my Twitter feed, you'll see I retweeted his tweet just now.

And I said, that's great. I, I, Samir is more interesting almost than, than Tonic.

I, I always thought you're going to say than me.

Well, he might be. You're pretty interesting, but this guy sounds great too. He, I've always thought that you should, that, that job that your cousin's doing, Samir's doing, that, that could exist. For all types of positions. Because I've had— when I was just breaking into Silicon Valley and living there, and I would have so many people email me and they would say, which company should I apply to? And for this, for this role or that role, I've always— I always thought that that could be a cool service. That's so cool that he's doing that. And he's got to take a cut, like a, like a percentage of their first year's earnings.

I've got a buddy who was an executive recruiter for years and we, he eventually needed to, he was like, I want to start my own thing. And I was like, all right, I'll hire you. I'll be your first client. I was his first client. Client. In his first 18 months, he's done close to $1 million of sales. Wow. Just from recruiting, a one-person recruiting. Of course, he has like 10 years of experience and he's been doing it for— so it's not like it's just like he just popped into it. But recruiting's an amazing business. It's a really good business for, uh, uh, like if you have a 1 to 3 person shop, I think you could kill it. It's pretty ridiculous.

Uh, yeah, of the, of the like agency servicey type businesses, headhunting, executive recruiting, executive placements seems to be like one of the best. If you're gonna go into service, that's like one of the best service industries to do.

Yeah, I completely agree. What's Amazon liquidation? 'Cause you've been talking to Jack about it. I saw the messages, you were hollering at him.

Whenever I drive by a library, a university, or a church or a school and I see someone— it's named after someone— I'm always looking them up on Wikipedia. I'm like, right, right, right. Where did this come from? Because if you— if you have a library named after you, you're a baller.

And we have the Billy of the Week. I'm going to talk about this week is exactly that. So, all right. So anyways, the idea is you see business everywhere. So same thing happens with ads. Now, every time you see an ad, it's not this annoying thing to scroll by. It's like, huh, who are you that you can spend money to get in front of me? Are you making money? Who, what is this business? So I saw this ad on TikTok that was basically like, it was somebody receiving at their doorstep, not a package, but a pallet of packages. Like a normal person was like so excited to open their door and they like, you know, like you see it like a shipyard, like a pallet of boxes just taped up and they're all like a mishmash of boxes. It wasn't even like it didn't look good. So I was like, what's that? And he said, get a pallet of Amazon. It was like Amazon liquidation. Get a pallet of Amazon goods for like $10. So ridiculous. Ridiculous. Like, claim. And the one, the one that I was looking at was—

Do you remember what the service was called?

Okay, so look up this, this URL. Charming. So C-H-A-R-M-I-N-G. CharmingZR.shop, right? So you already know this is some fucking dropshipper motherfucker who is doing this. This is not a long-term brand they are investing into.

CharmingZR.shop. Okay.

Okay.

Okay. Yeah. So it's like a drop. Yes. It's just shit. They're just—

it's just crap, right?

Okay, so the crappy leggings that you see on TikTok.

So look in the thread that me and— look in the thread that me and Jack and you are in and, uh, look, click that exact link. So this says huge value backlog, picking liquidation package, $9.99. And then you see these giant, like, from an Amazon warehouse packages, and it's basically returns, uh, and you can get like the medium value, you get the large, you get the super large. Let's do a super large one, which I think or the whole thing, which is what the picture is of, is $60. So $60 for the whole thing. And so here's what it says. If you just scroll down their site and you know it's good, 'cause look at this, it has like the flashing yellow and red text. So like this is some, again, dropshipper motherfucker who's like, I'm gonna optimize this limited stock. It's flashing red. And he goes, in the United States and Europe, Amazon, eBay, and other e-commerce platforms have too many returns and there's no redundant warehouses to accommodate those returns. Therefore, as a top liquidation company, we've collected these returns at a very low price and put them repackaged into pallets for sale. Some of the packages in the pallets lack the outer packaging, like there's no box, um, some of them, and the functions are normal and do not affect the use at all. This is why we can sell these at low prices. And it says, this is a mixed pallet of Amazon bulk, which is also like junk. There's just a whole bunch of random things and it's like you get what you get and you don't get upset. You know, that's the only thing.

Listen to their— listen to their sizing. It's medium, large, and super large.

With 3 fire emojis, by the way.

And the picture is like a pallet wrapped in plastic. It looks like a— like a Nintendo and like an oven, a coffee maker. We have to buy this, right?

Okay. 5 to 14 businesses. Yeah, we need to do it. By the way, you want to grow the YouTube channel? Here's a stunt that becomes a YouTube video. That's— I ordered an Amazon liquidation thing for $60. Here's the unboxing of my liquidation. So I don't know where you're at. If not, if you don't want to do it, I'll do it. But, but we should do this and film it. And I think, I think you'd be great at this. Your American Pickers days are going to come back in handy here. All right. So let me just tell you a few other hilarious things. Oh, customer service. Guess what his customer service email is, Sam? What is it? Is it help at a help desk at Charming Zizi Shop? No. Is it subservice? Is it returns?

No. Is it like bigballer69?

Yeah. Speedarver— speedavillac96@gmail.com.

Oh my God.

This is awesome.

Did you saw a Facebook ad for this?

TikTok. I've been getting TikTok ads for this thing like crazy. So I bet you this guy's found some arbitrage where this is hitting on TikTok and he's just, he's just advertising or he's retargeting me at least, cuz I'm seeing quite a bit of it. But there is this market. And so I, I mentioned this to Jack cuz Jack, who is our clever friend, Jack Smith, who just finds shit like this before we do typically. He's, he's always like into interesting stuff. So he had told me about this like a year ago. He's like, yo, there's this Amazon liquidation thing. You should check this out. And I was like, what, what is that? And then he sent me something that was actually like the high-class version of this. So, uh, so Blue Lot. Yeah. So bluelots.com. So that's the YC version of this. I don't think it took off. What they were doing was they were taking these pallets, these liquidations, and they were just listing them for like an instant auction, like a live auction. It's like the retail price of these items would be $500. You can buy it for 14. Go, like, just click buy now. And they're just basically taking junk, I think, on kind of consignment and, and flipping it. And so this is like a flipper business of liquidations that I don't really know anything else about. I just thought this was funny and interesting. And I don't know, what do you think about this?

By the way, the unclaimed baggage thing, it says, cool bags get lost and then 99.5% of them like get back to their owners. But then it says less than 0.03% are never claimed.. And so they made an agreement with all the airlines that says, with, uh, says we will kind of give these bags a second life. We'll take it off your hands so you don't have these bags, unclaimed bags that are just sitting here. And we can resell, um, we can resell the items that are from it. They say only about a third, one-third of the unclaimed items can be resold. They go through like a kind of a QA process that says, and they have about 7,000 uniquely discounted items, uh, for sale each day. Where, where they got from, from unclaimed baggage. And then they have like an online store and they, they clean.

So what they do is they clean the clothes before they get them. They clean 70,000 clothing items a month and a million people go to the store every single year. And it's about 150 miles outside of Atlanta. So people are going like just for this store. It's like, it's like, it's like a schtick type of like cute thing to do.

In 2014, when I launched my first conference, HustleCon, I was like crazy cheap and I didn't have a lot of money. And Costco is famous for like taking so many returns. And I bought like, maybe it was the second conference, but I think I bought like $10,000 worth of stuff from Costco ranging from tables to tablecloths to like $2,000 worth of soda. And we didn't end up using a lot of it. And I was like, let's just return it. And I returned like $3,000 to $4,000 worth of stuff. And I was like, yeah, I'm so, I'm so cool. I'm like getting money back. So big deal. I'm saving. And one of it, I like to this day, I still lose sleep over this because I found out there the cashiers were like giving me a hard time. They're like, uh, looking at me funny. And, uh, the— and the reason why, and I kind of overheard them say it, they threw all of it away.

Oh really?

They just threw it right away. It was like— but I was like, but this is like a case of soda that's like still in the wrapper, like there's nothing wrong. And they're like, our rule is we just throw it all away. And I was devastated. That was one of the biggest regrets that I've ever had is returning $4,000 worth of stuff that was like consumables that they ended up just throwing away. Like, it, it breaks my heart that I did that.

And, uh, so at least you have an answer to the question of like, what's your biggest regret in life? You got your answer. Actually, this should be a thing people do. There's all these questions of like, oh, you know, what's the best, what's your favorite movie? What's the biggest regret you ever had? You know, what's the, what's been a turning point in your life? Whatever. This is random questions that you only get so often, but it's very fucking hard to think of a good answer on the spot. And so we should all just do ourselves a favor and like one day just be like, all right, I'm going to, I'm going to write down my answers to all these questions. And then you have them.

And I've got two.

Because if you have a great answer in that moment, you're like a star because nobody else can think of anything.

That's one of them. The second one was when I was in college, I went to tip a guy, like I was staying at a hotel and the shuttle was driving me around and I gave the guy like $20 and he goes, oh, Well, thank you. And I said, oh no, you need it. And I meant to say like, you earned it or something like that. And I say, oh no, you need it. And I was devastated.

I was like, oh my God, angry that I've been haunted by that.

I said, you need it. And I was like, oh my God, that was the worst thing I could have said. Just to say you deserve it or you earned it is stupid already. I don't know why.

Right, right. Already bad. Yeah.

Oh, it's like That's the thing I think about all the time. I'm like, what was I thinking?

Right. Yeah. That'll hit you once a week and you just have a wave of sadness. Like that's like the bad version of, you know, the flight attendant, or you check in at the front desk or whatever for your, at the airport. And they're like, hand you the boarding pass. Like, have a good flight. You're like, you too. And you walk away and you're like, fuck.

Fuck.

Fuck.

Yeah.

I can't believe you were making frameworks up when you were like 18.

Yeah. As I'm drunk on this booze cruise, this is what I was thinking about. I like made a mental note, never make this mistake as I saw her. Cause I would do this, I would come up with a clever idea and then it'd be like, I'd have like the most inconvenient night. So I, it resonated with me.

What Rami actually said something amazing that I, that I, it was just one line. And he said, when I think of copywriting, it's, he goes effective, not cute. You remember when he said something like that? Yeah.

Yeah. He's like effective, not cute, not clever. Something like that.

Yeah. And that was, and I think that's always the best. I'm like, whenever I see websites that are like, that's not effective. It's cute, not effective. Be effective. Don't be charming or whatever he said. Yeah, exactly. You want to do one more or you want to talk about— I'm eager to talk about Harold, but we could do one more if you want.

Well, let's do Harold because it's actually— it actually relates to the liquidation, Amazon liquidation thing. I'll tell you why. So, okay. So where did this come from? This is the cue the music. Billy of the week is this guy Harold Alfond. I had never heard of this guy. Did you know, did you know this name before I wrote this here?

No, and I added a bunch of stuff though for you.

Okay, great. So let me give you kind of like the brief story and then you fill in the gaps of what you found interesting. So here's the brief story. I, or I'll go backwards Tarantino style. Last time we were on here or two podcasts ago, something like that. We talked about universal basic income, which is this idea of like every year you would just get like a $10,000 check and like, oh, why? Like, oh, so, you know, everybody, it's like social, well, social service or whatever. Social Security for everybody, including non-retired people, unemployed people, everybody. So I had said, oh, I heard this interesting idea. And I forgot that it was Chamath who had said this, that I heard it from, of a birth dividend instead, which is basically giving somebody some money at birth. If you're a citizen, the government gives you X dollars at birth. And the beauty of it is it's going to compound over 18 years. So by the time you're 18, they only had to give you $1,000. It was invested in the economy., and then it grows over time to this larger amount. By the time you're 18, you wanna go for college, you have something there. So two things happened. A bunch of people on Twitter were tagging me saying, dude, I actually did this for my kid, uh, and look at this. And so some guy was sharing screenshots of like, I put in, I think it was a, put in $1,000 or something like that. And then he's like, and then I added, um, I think it was $50 or $100 a month. And he showed that the balance was now $93,000 that was in this.

And he's like, how much, how much have they invested?

Crazy that it grew. I don't know. I don't know all the details, but he was basically saying like, yeah, I did this for my kid. And you know, it was a great idea for me. And I thought, okay, that's interesting. And so then I saw that somebody, somebody goes, yeah, it's like Harold Alfond in Maine. I said, okay, I don't even know what any of those words mean. What are you talking about? So I Google it. And basically there's this guy, Harold Alfond. He was kind of like a shoe mogul, basically. He, he, uh, wor— he started off as a shoe boy working in a shoe store. I don't even know what the job title is, but he went from like shoe boy to manager. Then he left and him and his dad buy a factory. They buy a factory, a shoe factory, and they flip it in 3 years to a larger company. And then he goes and he buys another factory called the Dexter, either like the place is called Dexter or something like that, but it's like the Dexter Shoe Factory, something like that. And he becomes, becomes a, a private labeler. So he's making the shoes that are being sold in JCPenney and Sears and a bunch of other like department stores nationwide. And so that, that grew pretty fast as he became their shoe, their shoe provider. And, and then he says, all right, it's, I'm, I'm so worried. Like if JCPenney cuts me off or they're always putting price pressure on me cuz they know I'm, they're, they're my big customer. Like screw it, I'm going direct. So this guy hires a sales force. Creates a public-facing brand called Dexter Shoes or whatever, and takes it like kind of nationwide himself, starts to be successful. But the thing that's interesting is, or there's two things. So his business story gets interesting because he actually ended up inventing the outlet store, which is similar to what we were talking about with the liquidation thing. So in any factory, he knew this cuz he owned factories, in any factory, not 100% of the shoes are like up to snuff, up to standard, right? So what do you do with the like non-first-grade shoes that were made, uh, he's like, you would either throw them away like you mentioned, or you would sell it to— we called like a jobber. I don't know what that means, but you'd sell it to a jobber for a dollar. He would go mark it up and sell it for $5 somewhere. He's like, hey, that's pretty good, like 5x. Uh, why don't I just do that myself?

A jobber is typically— it's just a company that distributes. So it's a— they have shelf space at Kmart and they just need stuff to fill it.

The quote was, we lost our entire investment, which we could afford, but many workers lost a livelihood that they could not replace. Uh, okay, good, good, good guy, Warren Buffett. All right. So, so, okay, this is where, okay, Harold, Harold, uh, Alphonse now has a bunch of money, a bunch of Berkshire stock. Berkshire stock continues to appreciate over time. So he sold it in 1993. Berkshire has just continued to grow and grow and grow over the years.

So anyways, I think he owned over 1% of Berkshire Hathaway stock.

And I think his son is like a senator in Maine, right?

I think like, that's right. Grandson.

Uh, so the family is— I mean, I guess they're legends in Maine. That's pretty baller. This makes me want to like get wealthy just for that reason.

You're going to go back to St. Louis and do a little something or what?

I don't know, I've been out for so long. But did you—

you can make a big donation to Belmont. You're Belmont's finest alumni.

Did you, um— I'll put you on the spot. Did you donate anything to the Haiti thing or the Afghanistan or any other cause this year?

Uh, we did a bunch of stuff for the wildfires, which I don't know if that was this year or not. Uh, and then the other one was, uh, Charity: Water. We try to support. I don't know if we did it this year or not. Um, and then the last one, uh, Sonya, if she sees anything that's like for like animals or like, it's like she's a vegan. So she, if she sees the animals are like distressed somewhere, she really wants to give. And so we'll give a little bit there, but we're not big givers. I actually, we were talking about this the other day. It's like, we have this idea, like, my wife really wants to open up an orphanage in India. This has been her dream since we were dating. She's been talking about this, like, she wants to have, like, if you go to India, you see these, like, tiny, tiny kids on the street begging. It's heartbreaking. So she wants to open up an orphanage where, you know, they can kind of have a place and not be on the street. And, and I told her, I was like, you know, like, I feel like we made it. And she's like, no, like, when we really make it, I was like, you know, that time will never come. We should just start giving now. Proportionally, whatever we can give now. And then like when the time comes that we can open up a full orphanage, great, we'll already have been like doing the thing and taking some suffering away for some people. And so we were literally just talking about this.

So I don't really give either. I— we gave low-digit thousands to the Haiti and Afghan stuff. And that was like a big— that was the biggest donation I've ever made. Right. And maybe— sorry, it was It might've been $2,000, I think, $1,000 each. And I tipped, that's new. We don't ever do that. And I realized that's a huge mistake. That is such a huge mistake. And I think it's a huge mistake for one major reason, two major reasons. One, it makes you feel so good to do that. Even, you know, no one has to know, but I guess I'm breaking that rule. I'm telling a bunch of people. But the second thing, it can like, giving away money, I think will make you earn more. So John Rockefeller was famous. He actually gave 10% of his income. Every single year starting at age like 12, like the year he started making money, he always gave it away. We talked to— we joke about Mormons. They do this a ton. A lot of Christians, they do tithing. I guess that's 10%. I don't know how different other— I don't know how other religions do it. I'm sure each religion has like their version of this. We should totally give more and we don't. And it's kind of messed up. It is. I think it's wrong. I like kind of convinced myself I'm like, well, if I— I'll just tip a lot. Which is like kind of bullshit, but it's not entirely bullshit, but it's half bullshit. We should totally give more. We don't give nearly enough. And so that's cool to read the story. Whenever I read these stories, I'm like, I want to get wealthier just to do this. There's a guy who— what was the guy's name in San Francisco? And there was this amazing article. It was called The Billionaire Who Gave It All Away. You know, I'm talking about his name was Patrick Feeney, I think. Is his name Patrick Feeney? Um, let me look it up. So anyway, he— his name is Chuck Feeney. So he created the— basically the stores that you— I'm going off of memory. I read his book a while ago. He's 90 years old. He currently lives in San Francisco. I, uh, I'm reading this, uh, the billionaire—

we did a Billy of the Week on him, Chuck Feeney.

I remember you brought up Feeney, the billionaire who wanted to, to die broke and is now— and did it basically. And he's now worth $2 million.

At his height, he was worth Somebody wrote a book called Die with Zero or something like that.

That's a different topic, but also good. But basically the idea is like a lot of people wait to give all their money away. This guy did it when he was alive. His name was Chuck Feeney. He basically created— when you're— if you go to China and you're— not China, he did Japan. If you're on your way back from Japan, you can go to the duty-free shop. He basically invented that. And now he's got a bunch of duty-free shops. They're quite famous. I can't remember what they are, but his, uh, it was cash flowing like crazy. And so at its height, he had something like, it was multiple digit billions, I believe $8 billion. And that's how much he's given it away. So he's given all of it away except for $2 million. And he currently has an apartment in San Francisco that costs him $4,000 or $5,000 a month. And that $2 million is all he's got left. Crazy. Fascinating. I remember reading about him and I was like, I want to get rich just to do that. So pretty cool. But like a lot of people, when they start making money, I'm like, ooh, I don't know that. Let's, you know, yeah, I don't even know what, what is the thought?

There is some thought that like kind of like blocks you, but what I can't even put my finger on it. It's not like I can say, well, I'm thinking about it this way, but that's the wrong way. It's like, I don't, I think I'm just not thinking about it or I'm, I'm, I'm thinking about it and then it kind of becomes a heavy topic cuz I think I should do more and then I feel guilty and then I just move on with my life and I just do nothing.

I distract myself, you know, I don't want to blow up his spot too much. But the guest we just had on, Ramit, I've heard stories. I've heard that he is a very good giver.

Oh yeah, I like hearing how people give. I have a friend who, as soon as he made a bunch of money, gave a ton of laptops away. And I thought that, you know, there's like a— there's something really cool about when you give somebody a knowledge engine or like a monetization engine. It's like, you know, it's sort of like a teach a man to fish thing, but you're not teaching anybody anything. You're just giving them a tool that if used well can generate like kind of an infinite number of returns. And so I like that idea of like, you know, whether it's microlending or it's, or it's, uh, you know, what was that project where they dropped a tablet off? You remember this? They dropped a tablet off in the middle of Africa with no instructions. And you know what I'm talking about? No. So I might butcher some of the They ran this experiment. They left an Android tablet, which I think had like nothing, like kind of like nothing on it. I think it was like a wiped reset thing. Maybe it was just like the boot sequence and they just left it in this like village in Africa. And, uh, and then they came back like a year later and like the whole village had learned how to use this, how to use the tablet. They had like found it, booted it up, got an operating system on it, had apps. It was like running. They had put all these education games on it or whatever. It was like, yeah, Dan just linked to here. I didn't remember the exact story. So I guess it's Ethiopia. So a box of Zoom tablets was dropped off in Ethiopian village to kids who had never seen a computer before. And by the time they came back, they had not only taught themselves how to use it, they were modifying the Android operating system on it to work better for themselves. It was kind of this really inspiring story. It was almost so inspiring that I'm like, all right, is this a little bit of bullshit or what? Like, I kind of don't really care, but I like that. I think that's— that just shows how much power there is in such a simple act.

Yeah, I think it's great. Well, we should have— we should organize something for like our listeners to like—

yeah, we should do something via the pod. Let's give some— let's give something fun via the pod.

Well, the way that we gave to the Afghanistan— I think we only gave him $1,000, so it wasn't like that big of a deal, but the guy, his name is Sol, uh, S-O-L space and then Orwell is his last name. He owns, uh, examine.com. He just tweeted out that he was going to do this and he was like, I'm going to give away— he's like, I vetted this. I know where the money is going to go to for this. I know exactly what's happening. You, if you trust me, then you'll, then you can trust that this is going to be good. And he raised $400,000 off a couple of tweets. Um, and that was pretty amazing. Yeah. And it sounds badass. So we'll have to do something like that. I think there's a lot of work to vetting in Haiti. Sarah's mom, you know, Haiti had this massive earthquake, you know, that— yeah, yeah. And my mother-in-law is from Haiti and she's got this brother. So my, my, my mother-in-law's brother. Yeah. No, my brother. Yeah, my uncle, I guess he is a Haitian immigrant. And one— and when another earthquake happened, what he did was he got all of his friends to donate a little bit of money. Collectively added up to like $100,000. So he had $100,000, maybe had $200,000, something like that. A lot, but not enough that it's like too much. And he took $100 grand in cash and $1 bills and $5 bills. And then he hired a private plane and they bought tons of toilet paper, paper towels, and peanut butter. They flew into Haiti, they gave out the peanut butter and gave out the toilet paper. And then he had all this cash and he's like, dude, they just needed money to buy shit. And like US currency was good. So I just started giving everyone $5 bills. Anyone I could find, I would just give them $5 bills. And then he goes, and then we stayed there for a day and we gave it all away. And then we just came right back. And I was like, wow, that's pretty baller. That's pretty great. Uh, and so I don't know, something like that. It's inspiring to hear. So we're going to have to do something about that.

If somebody's listening to this and they have a good idea of a way for us to give that, I would say is what my hope is that it's kind of like in line with the values of the pod. Like if you listen to this, you kind of know what we're all about, what we we respect, like I respect that kind of like tablet, giving tablets to people who never had a computer before.

Right.

I think that's kind of amazing. And so if you can think of a good way for us to do this, where you kind of, you know, where the money's going, you know, it's legit, you know, that this is going to like actually help people. Um, definitely hit us up, hit us up on Twitter or whatever. Give us ideas.

Can we go a little bit over? Can I ask, can I, there's one, something you want? I have a lot of stuff on here. Did you see, I did a ton of research on a a variety of different stuff and you totally overlapped with a lot of my stuff. Scroll down, look at all that stuff. I'm not gonna get through it all. It's like so much work that I put in. We're gonna have to get to it next week. But can, can we wrap up with the theory of, of the future of venture capital?

Yeah.

Because I'm curious what your opinion is. Is that why you're saying this?

Is that one of the things you research or you want me to spiel?

I want you to tell me your opinion.

Okay. So I was thinking about this, um, Basically, I was like, alright, venture capital, I think, is a great place to be. Because I think technology is driving a ton of progress. So you basically, if you want to bet on the future of humanity and where a lot of growth is going to come from, investing in technology is the way to do it. That's pretty clear. Alright. So within that, how do you perform well? So I was thinking about, alright, you have venture capital, and venture capital is kind of changing. And people like to talk about this So here's my theory. Why is it changing? It's changing because, uh, like, A, there's this new, like, the secret's out that you should be investing in technology. So you have like SoftBank coming over the top with the $100 billion Vision Fund. And then you have Tiger Global. Do you know what's going on with Tiger?

Well, I just know that I see Tiger Global everywhere. I believe Tiger Global, it started by a guy named Chase Coleman. His wife was in like some, uh, actually documentary about being like filthy rich years ago. Go. And he— it was a hedge fund at first. It was just a hedge fund, like a boring, like maybe high-speed trading hedge fund, right?

Yeah, high-frequency trading. You got to read this Substack. I mean, obviously not now we're on the pod, but it's called Playing Different Games. It's by this guy Everett Randall. Phenomenal, phenomenal blog post about what Tiger is doing and how they're playing a different game. And it basically—

what it talks about is like, Uh, what's the most beautiful headline, by the way? If you want to learn about how to package content into good stuff, this is a beautiful headline. It says, playing different games, the Tiger phenomenon. Beautiful headline.

How are they solving the hard problem of making sure that the companies are going to collectively do 18% IRR?

Well, they're sort of saying, look, if the best guys who are selective are going to hit 30%, 40%, we can hit 18 just by getting— we can hit 18 by doing a lot of deals and sort of like a law of large numbers. We should still get there because technology in aggregate, the index is going to do something close to 18. And plus, as we develop this reputation of being, we are a trusted, fast dealmaker. You want money? Come to Tiger Global. We'll get you money in 24 hours. We'll get you a lot of money. You don't have to do this whole dance with the other VCs and they're going to debate, bring you to—

and they overpay.

And they're like, yeah, cool. What's your— what valuation you want? 50? Make it 60. And it's like, oh, okay, cool. I'll take your money. So they're getting into a lot of deals and a lot of deals because they're not price sensitive, they're fast, and they're aggressive, and they're building a track record. Because when you do so many deals, they're going to have a bunch they can point to as like, yeah, Tiger was the one behind this winner, and they'll just sweep all their losers under the table and you don't have to worry about that. So they'll build reputation fast too. So I thought this was kind of interesting. So I would say there's a whole bunch of reasons why VC changes. This is actually not even what I was talking about. My, my thought was, if you're creating a fund today, you really, the winning strategies are, um, you, you play a different game, which is the Tiger one. So that's, that's strategy one. You play by a different set of rules than everybody else.

I love that strategy though.

Another example of that is, uh, when Chamath moved upmarket to SPACs. So Chamath was doing early stage tech investing, Series A, Series B, he's competing with Sequoia and Benchmark and everybody else. And then he's like, oh dude, SPACs? SPACs weren't in vogue until he started to make them in vogue. The mechanism had been around, but they weren't popularized and not everybody was trying to do a SPAC. And then he started this wave because he's like, huh, there's a bunch of companies that want to go public. I can take them public faster and get them a higher valuation. And basically I can do late, super late stage stuff and basically make 10x my money in one year. And so he does one SPAC. He's like, oh, this is amazing. He did SPAC A. Then he trademarked SPAC B, SPAC C, SPAC D, all the way through SPAC Z. Trademarked 26 of these. He's like, dude, this is a money printer. I'm 10x-ing my money. I'm going to, I'm going to do this 26 times if I can.

But the verdict's still out on that, on that strategy, I believe, right?

The sponsors, the sponsors are making their money, dude. They make their money regardless. It's the retail investor who joins in and says, I'm going to invest in, in this SPAC. They are getting a questionable return. Return. But the sponsor, Chamath, what he's doing— so here's the model, by the way. I learned this recently. So I might be oversimplifying it. I might have some details wrong. I was at a dinner with somebody who was doing a SPAC and I was like, yo, can you say who? No. I was like, tell me the numbers behind this. I was like, are these guys getting filthy rich? I feel like they're making a lot of money doing this because just of how many they're trying to do, this must be a money— he's like, it's unbelievable. So here's how the economics of a SPAC You, let's say you're Chamath, you have a great reputation. So for those who don't know what a SPAC is, a SPAC is a special purpose acquisition corporation or something. So it's basically a blank check holding company. So you go to the public market and you list your SPAC there and you say, give me $400 million. I'm going to take that $400 million and I'm going to go find a company to invest in. And so he goes to the public market. He says, I don't know who I'm going to invest in, I'm going to invest in somebody. But his reputation was strong enough that he was able to raise $400, $500, $1 billion. Bill Ackman, I think, raised $7 billion or something crazy for their SPACs. So they don't even know who they're going to acquire.

You have a deadline.

You have a 2-year, I think, clock, 18 months to 2 years, something like that.

You have a deadline. And if you don't pay, if you don't buy a company, you have to buy it back plus a certain amount of interest.

If you're just a sponsor, I think you can make a lot of money. There's a lot of money to be made if you are a certain couple of people, a certain handful of people.

Which, by the way, is why it's so funny when people like Chamath, and I like Chamath, I think he's great, but I think he's a virtue signaler. Like, I think he loves to say the things that make him sound like the people's champion.

It's a Robin Hood.

Yeah, I'm a Robin Hood, I'm saving, and everybody else is playing these bullshit games. Why don't we do real hard work and solve real problems and cut out the bullshit? He's all about that, like those rhetoric. He's very good at those speeches. But if you look at what he did, it's like, dude, you're playing the game just as hard as anybody else, in my opinion. You might believe you have better intentions about why you're playing the game, but like, let's be clear. And I don't have a lot of— you're an insider and you're an elite. You're not the everyman, everyday man that you're you try— he tries to kind of champion for, but I can't blame him. Like, that's a good strategy. Instead of saying I'm a rich billionaire, like, with insider access, you know, that doesn't play over so well.

And I don't know if this is true today, but I think it was true. I believe that his SPACs, Chamath's SPACs, are like the— in aggregate of all across all of them, like the most shorted stocks on the stock market.

Maybe they are now. I don't know. I haven't— I haven't looked at that. But yeah, definitely people have cooled off on on some of the— because if you look, the thing is you look 18 months later after they do their acquisition target, you're like, how are they doing? So the typical SPAC curve was they list at $10 before they find a target, they trade up to $12, $13, $14, $15, $16. So you're getting this return before anything has happened. This is just greed. And then they find the target and then it either pops or it starts to shrink depending on how people feel about the target. And then 18 months later, where is that stock? Is it at 10? Is it above or is it below? I think people are doing some good analysis on this. I'm not super up to speed because I didn't plan to talk about SPACs today.

But anyways, I think one example is Opendoor. Have you looked at Opendoor's stock? I think that's one of his SPACs.

Is it doing well now?

Just look at it. It's the exact arc. So you guys didn't— couldn't see this, but Sean's— what's that arc called? It's just like a, like a, like a standard deviation cycle. Yeah, like a standard deviation looking like chart. And that's exactly what Opendoor looks like. It's like, starts small, gets huge, goes back.

Yeah, lists at $10, runs up to $34, and it's currently trading at $17, $15 to $17. Um, and so, you know, there— if you were in the $10 bucket, yeah, you got it. You gotta— you do have the gains right now. So I'm not saying SPACs are good or bad. I guess what I'm saying is If you're— my main theory here was you got to do something different. That's one way. If you found a different game, now people are going to copy you just like they've ripped Chamath to his credit, figured out that this is a good model, was the first one doing it. And then there's just been a flood of SPACs since then. Everybody and their mom who can SPAC will SPAC right now. And even startups who can't really raise well or aren't strong enough to go public, they can go public via a SPAC. And then all of a sudden, hey, we got liquid. Great. So there's definitely a lot of like lipstick on the pig going on.

Wait, so we have to wrap up this segment, which was VC, you do the Tiger thing, you become like Chamath or do something different.

And those are one, those are play a different game. Tiger and SPACing, that's an example of playing a different game. The second one is you're the big brand. So Sequoia, Benchmark, Andreessen, they're always going to get the best deals, or they're going to get allocation if they want in the best deals because of their brand name. And those funds are so big and you can't even invest in them if you wanted to.

If you're— that seems like the hardest one to do.

Well, yeah, because, okay, great. It's like saying start off in checkmate, you know, like, how do I do that? How do I become that brand? That's obviously that takes time, but they'll do well. I'm just talking about who's going to do well. People playing a different game, then the big brands, then the niche specialists. So this is like, I'm a VC fund focused on cannabis. I'm a VC fund focused on automation and machine learning. I'm a VC fund focused on, let's call it SaaS software, like David Sacks' Craft Ventures. So there's a whole bunch of these, right? Vice Ventures. They brand themselves as specialists in this one thing. You could do a media one if you wanted to. And basically what happens is if you picked a vertical that works, like SaaS is a good vertical, automation's a great vertical, right? You're going to see more deals than anybody else in that vertical than a generalist because You say no to everything else that's not this. So you're only spending your time here. You build your brand there by creating a bunch of content. You're blogging, you're podcasting about why automation's the future, why self-driving cars are the future, blah, blah, blah. So those founders will come find you. And then also, they'll keep you in deals. So even if Sequoia or Benchmark wants to do a deal, the founder will add you for that credibility because you're a specialist in that niche. And by you stamping them, it's valuable. And they think you'll add value because you are more knowledgeable about this domain than anybody else. So I think the niche specialist can do well. Then there's celebrity angels. That's like Naval, Balaji, same sort of thing as the big brand. And then the last one is called venture services. What are venture services? Are you familiar with Tusk Ventures? Do you know what Tusk Ventures is?

No.

There's a— This guy, Bradley Tusk, he's got a book that that you might have read. He was, I think he's like an ex-Washington policy guy.

I don't know his story.

Yeah, yeah, yeah.

I know Brad.

Service.

Just exactly this. Yeah, exactly. The sort of policy, legal, regulatory advice, lawyer, basically lawyer, but specifically with like public policy, I think. So like lawmakers more so than like drafting your shareholder agreements. And so, you know, built this really successful services business, but didn't leave it as a service business, added a venture arm to it. And because of that, you own equity and things that ended up being very, very valuable.

And a lot of ad agencies try doing this and they only do okay. They only do okay. I think that if you did it with a different, a different shtick like what this guy Tusk was doing, then it could be interesting. A lot of ad agencies that do that, like even you remember Red Antler and all those guys? Yeah, I think they took a sliver of equity. You had to give them like, like there was a minimum. It was like $50 grand plus some type of equity.

Right. Well, friend of the pod, Andrew Wilkinson, he was doing this with Tiny, right? Or sorry, with Meta Lab, the design agency. So design agency. And so Slack is paying him cash to design the first Slack client. Could have took equity also, or could have had an equity arm that says, great, let me also invest in your next round or in this round with you separately. We'll take the cash on the balance sheet that we're making from consulting and we will invest it into the projects that we believe in. That are in, in this portfolio would have done phenomenally well, but didn't do that. In his case, he used it to go buy businesses separately.

I like it. Yeah. Basically, I think there's this model of venture services, which is, you know, Bobby Goodlatte is doing this with design. Bain did this back in the day. So you have Bain Co., the consulting company, and then Bain Capital was their venture arm that they used. So I think that investors who— you can't just say, you know, I'm good at this, I'll give you advice. It's like, I think there's going to be investors that say, yeah, use my— like, I have a company that does this as an agency, as a conser— as a services company, and then we also invest. And that combination I think is gonna be pretty powerful. I feel like I could rule the world. I know I could be what I want to.

I put my all in it like no days off. On the road, let's travel, never looking back.