A lot of the most successful people are learn-it-alls. They're not know-it-alls. And the only way they can likely do that is if they have intellectual curiosity. - There's sometimes a stigma in companies where the people that ask the questions don't know anything. - I think the opposite. As a matter of fact, the CEO of Wealthfront became the CEO because he asked such tough questions.

The best judge of how good someone is probably be how quickly have they ascended in their career. - In this day and age, I constantly see people just want more benefits, more work-life balance, all this stuff. - I think work-life balance is really hard if you wanna be really successful.

Again, really successful. Every book on entrepreneurship would lead you to believe that successful companies start by looking for a problem and developing a solution. In practice, that's not how the great technology companies were founded. It's the exact opposite. I'm a big believer that you learn far more from success than you do from failure professionally.

I think you learn more from failure personally. In my experience, the person who rises the fastest is... - Andy, thanks for being here. - My pleasure. - Last time we talked a lot about investing and we'll have a few investing questions. But when I think of all the advice I've gotten from you, everything I've learned from you over the years, there's all these little pieces of things that I'm like, ooh, I wanna draw on that.

It's almost like even as an employee without a one-on-one relationship, I've heard multiple people be like, gosh, Andy's mentored me so much in the wise knowledge he has. I wanna start with one bit of things you've said. You've said that intellectual curiosity is above all the thing you value.

Why have you leveled that up to be the most important thing? - I am a big fan of learn-it-alls versus know-it-alls. Learn-it-alls get better, know-it-alls don't. And so when you hire someone or work with someone, you want someone who has a big ceiling or a very tall ceiling that they can grow into.

And the only way for them to grow is for them to better themselves. And the only way they can likely do that is if they have intellectual curiosity. - And can someone kind of change their habits to be more intellectually curious, or is it kind of ingrained in who we are?

- But I would imagine if it's important enough, you can prioritize it. When raising our children, it was really important to my wife and me to ingrain that in our kids. - And how did you do that? - By constantly encouraging questions. - Of any type? - Of any type.

Some people discourage questions. They think that it's annoying. And I think it's great. I love when people ask me questions. And my kids are pretty inquisitive. For example, I remember my son's, a number of the coaches of my son's teams would start a season out by saying, "You don't ask me questions.

I ask you questions." That's really dumb. (laughs) How's the kid gonna get better? - I think there's sometimes a stigma in companies where the people that ask the questions don't know anything. I think the opposite. As a matter of fact, the CEO of Wealthfront became the CEO because he asked such tough questions.

So he joined us when he was 24 years old as a junior engineer. Every tech company typically has a weekly all-hands. And there's always one or two engineers who ask really annoying questions. And they're annoying because they hit the raw nerve. There's usually an issue with every decision that a management team makes.

And there's always one or two people who know how to find it. And David Fortunato was the guy who always found the raw nerve. And after a year of taking these questions, I made him the CTO. (laughs) At 25, and he's now our CEO, and he's a much better CEO than I ever was.

- And when it comes to asking questions, is that an important skill to develop? - I think so, absolutely. - Is it about listening more? Is it about thinking more, preparing in advance? - I think all of the above. - When you would go into board meetings, since I know you've sat on a lot, to ask questions, did you plan for those meetings?

How much preparation do you put into your work in advance versus kind of just paying attention in the moment? - I tried pre-internet to read as much as I possibly could about my companies through analyst reports or back when journalists actually wrote objective articles. But I would try to be as well prepared as I could.

And so that I could ask questions. And I used to take copious notes, and that was before we were told we couldn't because of lawsuits, which was really frustrating for me. But I always made sure to read the materials in advance and be prepared. Now, a board meeting isn't necessarily the place where you want to interrupt the flow with a lot of questions.

So maybe the questions are better asked privately versus during the board meeting. - Okay, and you talked about taking notes, but one of the things I think I evolved my work style working with you is the importance of writing. And I was never really a big memo writer or writer about anything.

And that evolved a lot. You had written a ton. - I never wrote before I founded WealthThreat. - Okay, so what changed? Because I-- - Well, as an investor, I didn't have to do it. I would take notes. I would always keep notes on what were the five most important issues that each of my portfolio companies had to address.

But I didn't have to write beyond that. But I always encouraged my CEOs to write their thought, their strategy down because the process of writing something down causes you to think through it much better. Business plans were fantastic because they really forced you to think everything through. When I was in business school, I remember Don Valentine, the founder of Sequoia Capital, came and spoke in our class.

And the topic that he focused on was a recently introduced product called Lotus 1-2-3, which was an electronic spreadsheet. And he said electronic spreadsheets have ruined entrepreneurship. And the reason why was prior to electronic spreadsheets, you would do a financial plan on what was known as columnar paper. When I used to teach a class on venture capital at Stanford Graduate School of Business, I would bring it.

And you would create a financial plan on this columnar paper, just like you would with a spreadsheet with rows and columns. But if you were going to write it down, you had better have thought everything through in a way that you don't with an electronic spreadsheet. You can get lazy because you can quickly change an assumption and it flows through the entire plan.

But when you have to write it down with a pencil on columnar paper, you really had to have thought through your assumptions. So being purposeful about it led to a far better thought out financial plan than when you did it with an electronic spreadsheet. And this is what really annoyed Don.

And I think just as it's really valuable for doing a financial plan, it's really valuable for doing the strategic plan. What's important? Why is it important? How does it impact other functions? And writing these things down, PowerPoint doesn't for, it's like the spreadsheet. You don't have to think it through when you write bullets.

- And do you apply that at all in your personal life? Like what are our goals as a, you know, family or anything like that and use it there or do you just use it in work? - Just work. - Do you think it would have an impact in your personal life if you wrote down what do we want to accomplish this year?

- Oh, I'd be a real grind if I did that. - Okay, okay. - I tend not to have long-term goals 'cause they change so much every year based on what's going on. - So I think that's probably a hot take, which is I talk to lots of people and they're like, here are my goals and here's what I'm gonna take steps to get to them and here's how I'm planning out life and everything, no long-term goals.

How do you, especially earlier in your career, how do you think, where do I want to go? Are you just thinking about what's next? - Well, you know, it's really funny. When I was younger in the school year, I would sort of pick a topic, something that I wanted to get better at and I would focus on that for the year.

And I started getting too busy to do that around 45. - I wonder, I mean, Zuckerberg did this for a while where he's like, this is the year I'm gonna hunt. This is the year I'm gonna do the, you know, learn a language. - Yes, I used to do that.

- It seems like he fits your intellectual curiosity. - Oh, he's the biggest sponge I've ever heard about. I haven't met him, but the people I know who know him well describe that as his greatest attribute. - And would you say that's a common thread amongst people you've met that are either successful or fulfilled?

- I think a lot of the most successful people are learn-it-alls. They're not know-it-alls. I think there's an enormous difference between someone who's a promoter, an outstanding promoter, versus someone who is really good at what they do. - One of the things I've heard you say in the past is that one of the only ways to make money is to be non-consensus.

It seems like you have a lot of non-consensus takes. In general, today it seems like everything around us is trying to show us content that's similar to how we believe. How do you force yourself to do that? - I'm intellectually curious. It all comes back to the first point.

So, I don't accept what I'll see. I mean, I don't use social media very much, barely at all anymore. So, I don't believe what someone pushes in front of me. I wanna do my independent homework, and I wanna do my homework by going to experts, not my friends. One of the biggest differences I notice in the millennial generation versus a baby boomer, and I'm a baby boomer, is that baby boomers go to experts for advice, whereas millennials, my kids are millennials, they go to their friends.

Well, what do your friends know? It makes no sense to me. I would go to my friends to find the experts, but I wouldn't go to my friends for advice. - Interesting. I'm trying to think about how this plays out. It's like, is it because it became a popularity thing, where it's like, what I actually want is actually the thing my friends care about?

- I don't know. I don't know if it's partially enabled by the prevalence of social media, that you're so used to asking your friends so many things, why not ask them for advice about, should I change jobs? What kind of job should I change to? How should I think about doing something?

It's amazing to me how many people, how many of my students at Stanford rely on what their friends tell them, and their friends are not well-versed, or how many people I've attempted to recruit to Wealthfront, or people who've worked at Wealthfront have based decisions based on what their friends, who really don't have any expertise, have told them.

So, for example, a lot of people in Silicon Valley believe in this narrative that you should have experience in small companies and large companies. That makes no sense to me. The way that I've observed is you're either a small company person or a big company person. The things that make you enjoy small companies would make you not like working in a big company, and vice versa.

So the idea that you should have both experiences is crazy to me, but it's a very common narrative, and it's reinforced by friend networks of people who haven't necessarily had success. - And to push a little bit on the big versus small company thing, I think I found I didn't work well in a big company.

Is it possible if someone thinks they don't do well in one, the answer is the other, or are there traits of someone who does well in big versus small? - I think the latter. - Okay. - And if you talk to somebody who understood the two and could help you think it through, they might actually help you understand that sooner.

- Are there any traits you've seen of people that enjoy one or the other? - Yes, and there's no value judgment in this. If you enjoy being a hero, you're gonna enjoy being in a small company more. If you enjoy being associated with success and you wanna be part of an organization that can move the market, you'll like big companies.

You can't have, you can't be part of an organization that moves the markets and be a hero. They're really in conflict with one another. - Unless maybe you're the person running the organization, but I imagine most people listening aren't in a position to immediately become a person running a company that moves markets.

- Right. - You mentioned companies that are moving the markets, companies that are successful. - By the way, there's different strokes for different folks. So I'm not trying to comment on one is better than the other. I think you need to be intellectually honest about yourself to determine where you should be.

- So you're talking about companies that are successful. How important for someone in their career do you think it is to experience working at a successful company versus seeing more failures at a company they're working at? - All right, I have strong opinions on this. I think I know what you're getting at.

So I have another very non-consensus point of view on this topic. I'm a big believer that you learn far more from success than you do from failure professionally. I think you learn more from failure personally. I think that the general worldview is you learn more from failure. But if I'm interviewing you to come work for me, I don't want to hire someone who knows what not to do.

I wanna hire someone who knows what to do. I want you to bring your expertise, your special skill that you learned from success and apply it to my company. There's far more leverage from lessons of success. And so I am way biased toward people who've worked at successful companies.

And I think that most people don't understand that knowledgeable hiring managers have that bias. - And so if you're someone who's working at a company that was a failure and you wanna overcome that bias in your direction, are there things to highlight? - Yes, you might take a little bit later stage job at something that you think has a very high likelihood of being success.

You have to be a little bit more patient because you might get less financial reward for doing that, but you have to re-cloak yourself in success. One of the things that I see some former students of mine do, which I think is an enormous mistake, is they join companies pre-product market fit.

And I think this is an intelligence test because you only get a little bit less equity joining a company post-product market fit than pre. So why would you ever join pre? It doesn't make any sense. And the best people know that they can command a job a company that has lower risk by virtue of it having gotten product market fit.

The vast majority of companies do not find product market fit and therefore fail. I think it's the biggest determinant of success. And then they see their peers from business school, their classmates, and their friends might've moved on to now commanding a title of director. And they think, you know, I'm three or four years post-graduation, I should be a director.

Well, no good company that has a lot of momentum is gonna hire from a crappy company. So the only place they can command that title is another crappy company. So they sort of reinforce this thing and they never find success. And once you do it two times, it's almost impossible to dig yourself out of that hole.

- And do you think titles even matter? Should that person even care whether- - I don't believe they should. Because if you work for a company that becomes really successful, A, you get more value from your equity than you expected. And B, you get heavily pursued by recruiters because they think those are the best people.

And you can parlay that into a best next job. - Would you think that in today's day and age, I think there's been a lot of influence from just the way technology companies have managed. Also, I think so many companies are starting to act like technology companies that aren't.

- They think they're acting like technology companies. - But if someone were working at, you know, on the corporate side of Walmart or Costco, the equity piece might not matter as much, but are a lot of these lessons still similar, you think? Guess. I've got to believe that lessons of success matter and that one should prioritize that in recruiting.

- So someone might identify, I'm interested in bigger companies. I'm interested in smaller companies. I want to get some good experience. Should I go work at OpenAI, even though I have no interest in AI? And not speculating on that company in particular, but how important when someone's trying to figure out what to do and where to work is actually loving or believing in or being passionate about what that company does versus it's the right size, it's the right type of experience I can get.

- Well, this is a topic near and dear to my heart because I get asked this all the time by my students. I've been teaching at Stanford Graduate School of Business for 19 years now. And I took that advice and I codified it into a series of blog posts for Wealthfront that we ultimately made into an e-book called the Silicon Valley Career Guide, which is about 20 or 25 pages.

And it's a free download if you want to Google it. And basically what I tell people is you should prioritize the industry in which you want to work. And hopefully it's one that you can work in for 20 or 30 years, but something about which you're incredibly passionate because I'll always take the more passionate over the more talented person if the passionate person has enough talent.

I want the person who's more passionate because they're more likely to invest the time and effort to get better. So three years hence, the passionate person who might be slightly behind the talented person and talent will be above. And I have a number of case studies for that. So pick an area where you're gonna wanna spend the time getting better.

Then choose the best company in that space and title should be, the position should be the last point. No company has enough good people. And so if you're really passionate and you really improve yourself and you do a great job, you'll be able to transition into whatever job you ultimately want.

This is really hard advice to take. And my students who've taken this advice have done exceptionally well. - Does that mean that if one day I wanna be a product manager and the only job I can get is working on the research team or something, but I can do it in a field I'm passionate about at a company that seems like it'll suit me well and is growing, that that might be a good path?

- I would recommend that, yes. - And so what you do is less important? - I believe that, yes. - Is there a minimum amount of excitement for what someone, you know, I don't care about, you know, I'm making this up, like I'm not interested in marketing or PR, but that's the only job I can get.

- You had better be really passionate about the field to overcome that. - Okay. But if it is a field-- - But they wouldn't have hired you into that function had they not thought you had some relevant skill. - What about this concept of specializing versus going broad in your career, learning five or six different skill sets versus trying to hone your craft at one?

- In my experience, the person who rises the fastest is the specialist, is the expert. So you wanna become really great at one thing and you hire for all the other stuff. - Okay. And is that who you would look for to be a leader in the company? - Absolutely, every time.

- You mentioned asking questions with David, someone who's a deep specialist, which having worked with David, I can confirm, was definitely a specialist. Other things you look for in people that you wanna elevate at a company? - Well, I think those two things lead to upside. So I don't understand people who hire people who can fill the job today.

I think that's a huge mistake, that don't have upside. - And meaning take the time to find the right person. - It's gonna be more work, but it will be well worth your while over time. And this is why one of the four values of Wealthfront is endurance. (laughs) - And if someone's on the other side of this, is like, "I really want this role," from all the people that you've seen reach out to you, are there things that stand out as ways for people to get in front of a company?

- Prove that you're passionate. I can't tell you how many people I've interviewed who haven't spent a minute learning about the company. And it's just clear that they're window shopping, or they're trying to collect offers. So as you learned, if we feel like we're one of five companies that someone's talking to, we no longer spend time with them, because we want people who are excited about what we do.

And they make themselves known. And some people get upset with us, like, "It's my right to look at a lot of other companies." And we say, "It absolutely is your right to look at all, "but it's our right not to wanna spend "any more time with you too." - You know, what would you tell someone who they know the company they're excited about, but odds are not always in your favor?

Can you be excited about a few different companies? Not necessarily because-- - Within the same field, I believe, but if they're in disparate fields, like when I was a venture capitalist, I would meet someone who was interviewing at a big company and a small company. And the interview was immediately over in my mind, because if they didn't know what they wanted, why should I spend time and effort on them?

They clearly weren't passionate about what we were doing. They were taking the meeting to sort of educate themselves. I'm not here to educate you. - It's a great way to save time as a manager. - Well, then you never have enough time. - Yeah. - Now, some people don't like this.

I'm a really efficient user of time. And I don't wanna spend time on something that's not likely to yield. Now, there are type two errors. So I'm gonna miss some people that maybe we should have gotten. But from a probability standpoint, I'm gonna be better off and I'm happy playing the odds.

- So you said you're an efficient user of time. That's an example. Are there other things that you do in your work, life, career? - I have really short emails. (laughs) - As someone who loves to read or write. - I didn't say I love to write. I think it's really valuable to.

So everyone in my family makes fun of me about how short my text messages are and my emails. - And I think sometimes people who are writing emails, let's say they're writing an email to you and they're like, or five years ago, you're at Wealthfront, they wanna work at Wealthfront.

They hear your email, they wanna send you an email. They think, gosh, I've gotta write this email where it's, hey, I'm so excited. I really love Wealthfront. They end up with four paragraphs and they send it to you. Is that really the most productive email they can send you?

- It depends. How long does it take to express the critical point that they want to express? In my class on product market fit at Stanford, I have, the students have to do a lot of reading for each class and they have to turn in a one to two page paper on a written assignment that you can't do unless you've done the reading.

Well, I didn't say it has to be two pages. Some of the best papers are one paragraph. If you can get the point across in one paragraph, that shows unbelievable command. So a lesson that I learned from one of my partners at Benchmark, Alex Balkansky, that I use often is he, it was a result of his childhood.

So Alex grew up in Paris and he's the son of a fairly renowned physicist. And so whenever physicists in his dad's field would visit Paris, his dad would invite them over for dinner with his family. And one of the things that Alex noticed was that truly exceptional physicists explain complex issues in simple terms.

Very good physicists explain complex issues in complex terms and good physicists couldn't explain what they were doing at all. So I actually took that to heart at the end of my venture capital career that the best entrepreneurs have such great command of their subject that they can explain complex issues in really, really simple terms.

So I think that actually is a core part of seed investing where you're really investing in the person, not the idea. Maybe the insight, but being able to succinctly explain the power of the insight is something that only one with tremendous command can do. - Okay, if I wanna evaluate myself as an entrepreneur and I'm speaking for anyone listening, do I have high intellectual curiosity?

That would be a plus one in the camp. Can I be succinct to explain things? - You can only be succinct if you have incredible command. - Okay. - And those things maybe put you in a better position to recognize an inflection point in technology that will enable an insight.

So one of the most controversial points that I make in my product market fit class is that every book on entrepreneurship would lead you to believe that successful companies start by an entrepreneur observing a market, looking for a problem and developing a solution. In practice, that's not how the great technology companies were founded, it's the exact opposite.

The founder typically recognized an inflection point in technology that enabled them to build a new kind of product and then they had to find somebody who cared about it. So in effect, it was a solution in search of a problem and you keep iterating on the markets till you find a group that's desperate for what you have.

But you have to have a really powerful insight in order for that to work. - You've said product market fit a lot. I know the definition because we've worked together, but for anyone listening who kind of missed the implied definition, how would you think of defining that term? - You have found a market that's desperate for your product.

- And what question would you ask during an interview to find out whether the company you're potentially gonna work for actually has it? Or would you not even ask the company? - I would absolutely ask the question. So over more than 25 years of maniacally studying this topic, I have come to two heuristics that I think are pretty good indicators of whether or not you found this.

So in a consumer business, exponential organic growth and in an enterprise business, a company that sells to businesses, a sales yield greater than one. So let me give you a quick fleshing out of that. So the two most important things to prove that you have found an audience that's desperate for your product are word of mouth and retention.

Well, how do you know if there's word of mouth? And word of mouth is five to 10 times more valuable than retention. So how do you measure that? Well, in a consumer business, the one metric that really captures it is exponential organic growth. Not total growth, 'cause you can game growth.

You can pay for growth. You can acquire customers, but they might not stick around. And they might not tell other people to come, in which case, once you turn off the faucet, the paid marketing faucet or advertising, the business goes away. The only way that a company can grow exponentially organically is word of mouth, 'cause delight is the greatest form of virality, and retention.

But you're not gonna tell your friends you gotta use this product if you're not gonna stay with the product also, right? So it does an amazing job of capturing it. On the enterprise side, one of my teaching partners, Mark Leslie, wrote an amazing article called "The Sales Learning Curve" in the Harvard Business Review.

And in it, he found that when companies selling to businesses get started, it takes them a while 'til they figure out the recipe of how to sell the product or who the target audience is. Who's, in my words, who's desperate. Because better doesn't matter. If there's a good enough alternative, people are gonna buy the good enough alternative from the incumbent because they're trustworthy.

Why should they buy from you for better? The only way they're gonna buy from you is if they're desperate. So it takes a while before you discover who's desperate. When you do, your sales yield goes to one. And sales yield is defined by the dollar contribution per average sales rep divided by the cost to field a sales team.

So in a direct sales business in technology, you typically pay a sales rep between salary and commission on the order of $250,000. And then they typically have a sales engineer who does the technical part of the sale. And they typically earn on the order of $150,000 to $200,000 total cut.

And then there's a fraction of an inside sales rep who does qualification. And then there's T&E and other expenses like that. And then finally, you have to amortize the cost of management across sales teams. So the all-in cost is around $600,000. And what Mark Leslie and Chuck Holloway, his co-author, found was that until the contribution margin is at least equal to the cost to field a team, so until you generate a contribution margin of at least $600,000, it doesn't take off.

But once you get to a yield of one, for some reason there's an inflection point. And it's incredibly consistent. And then it goes up to two, and then there's an inflection point that slows down. And Mark and Chuck found that you should hire a different type of rep pre-achieving sales yield of one.

It's sort of a hybrid marketer and salesperson. You don't want to hire a whole sales force until you get to the yield of one because then you waste a lot of money. So they call that the renaissance rep. Then you hire an enlightened rep, a classic rep, who can sell the merits of a product.

And then once you get to a sales yield of two and things start to plateau, then you just hire order takers. And they call those coin-operated reps. So you really need to know where you are in this phase. But for some reason, there's an inflection point at one. Inflections matter more than almost anything in business.

Wherever you see an inflection, drop everything and focus on that. So that tells me that you're out of the discovery phase and you've found product-market fit. - So do you think companies can just answer these? Oh, what is the sales yield? - Good companies can. Companies that don't want to answer those questions generally don't want to because they can't answer them well.

- So is that a red flag or a yellow flag? - I think red. - Okay. - Now, many companies would say, if you hear, "Oh, that's confidential," that's bullshit. (laughs) - Yeah, I mean, sometimes maybe the hiring person you're talking to doesn't know the answer and they can go get it.

- Well, then do you want to work for somebody who lies? Instead of saying, "I don't know. "Let me find out and I'll get back to you," that's a high-quality person, the person who says it's confidential because they're insecure. Do you want to work for a company that employs people like that?

I don't. - Well, you probably don't want to work anywhere anymore. - Yeah, but even when I was working, I wouldn't want to work with people like that. - As you're talking about some of these lessons for tech companies, I think about a few friends of mine work outside of tech, and one of them works in oil and gas, but they're running it like a tech company now, and in many ways- - What does that mean?

- So a little bit that the way they think about management, the way they think about leveling, it just is all the same language that I've heard in this industry that we've worked in. I also think that these days, some of these companies, it's hard to tell what a tech company is because if it's actually selling oil and gas technology to, it is a tech company, it just happens to be in this other industry, and I think it's interesting that I don't want people to be too turned off by us talking about tech companies and think, "Well, this is just small tech startups that you can work at," 'cause you might not necessarily have the experience outside of Silicon Valley to know that these lessons transition, but my instinct is that a lot of what we're talking about would be relevant in many other industries.

- I'll let you make that assertion. I try to stick to what I know, and I'm not a fan of people who are know-it-alls. I said that earlier. So I haven't learned about those fields. I'm not gonna make any assertions. - You mentioned a little earlier some of these heuristics of people that, or companies that are successful.

What about other heuristics of either companies or managers that people should look at of what makes people successful in their roles? - I think the best judge of how good someone is is if you only had one metric to look at, would probably be how quickly have they ascended in their career.

- Which is a very easy thing to get data on. - Very easy, but very few people ask about it. So one of the things that I used to ask executives who I interviewed for portfolio companies when I was a venture capitalist also was, tell me about the best person who ever worked for you.

What do they do now? And if they were still below them, that didn't speak well of the executive because they didn't develop people. If they could tell me a story about someone who might even be at a higher level than they today, that was really powerful. So that was true of, that's true of more senior people.

But in general, I would say the rate at which one ascends in their career. - We talked a lot about management, managers, hiring. What role in work is there for people who don't want to manage, but want to excel in their career and their craft? - Boy, I'm having a hard time with that one.

This is something that is particularly timely to me because I don't understand how someone becomes a VP of engineering today in a software company because most good engineers, and I'm saying most, not all, have no respect for managers (laughs) and often think of managers as an HR position. It's an administrative position.

And therefore, they aspire to be tech leads and not managers. They aspire to lead a project, but technically lead it, not manage it. Well, I don't know what career path that leads to being a chief technical officer because you can't become a VP of engineering. You want to be a tech lead who also can manage people.

So perhaps we need hybrid tech lead managers, but the trend today in most software companies is towards separating managers from tech leads. So I'm thoroughly confused about how one ascends in their career in engineering. - And even outside of engineering, do you think management is a required stop on the seniority level system?

- Yes, but again, I think you want to focus on the skill at which you're a killer and hire the rest. So if you're a marketer and you happen to be a superb product marketer, then you don't necessarily have to be the best at paid marketing or marketing to the existing customers, programs of that sort.

You can, I think, do really well by aspiring to hire in to manage people who do those things. But if you're great at one thing, you're much more likely to be promoted quickly, which leads back to the metric I talked about. - Yeah, I just wonder if sometimes people end up in a place where, wow, you're so good at this thing.

We're going to elevate you. Now you run the team. And that's just a totally different skillset. - Well, this gets back to tech lead. So let's draw the analogy that that's why I think the ideal manager is both a technical expert and a manager. If they're just a manager and they're not an expert in their function, I don't think that usually leads to good outcomes.

- Okay, so if you're taking on too many employees under you that you don't have any time to actually do the work. - Or think about it. - Okay. - Where you can help someone below you at what they do. So imagine you manage product managers. Well, you better have some really good instincts about products to be able to help them, the people who report to you.

- Yeah. - If you're just managing them, then your reports aren't going to get a lot of value from you. And I don't think you're that valuable. - Rates of leaders that you've worked with or seen are valuable. - Perhaps the two most important characteristics of a good leader are their ability to set expectations well, because do you want to follow someone who doesn't set good expectations and someone who communicates really well?

- And if you are an employee somewhere listening to this. - And then I guess the third point would be they put others ahead of themselves. So I'm going to make that three points. - And can you influence those as someone who reports to that person, if they're not setting expectations, is it find a new manager or is it?

- Well, you can ask to transfer. - But kind of influencing and changing your manager's style. - Just like I don't believe in pips. - Okay, say more. - I've seldom if ever seen a performance improvement program ever work. That once you start questioning whether someone who works for you is up to the task, you've made up your mind.

You know the answer actually. - And is the right move there as a manager to just let them know that and let them go? - Yes, and help them find something where they can excel. It's not usually a bad person. It just might not be a great fit. - So I think very rarely does someone have a manager who's like, ah, you're not cut out for this job.

- They should. - Let me help you. No, no, no. The first part I think you might hear frequently, but the let me help you. I think you've talked about the golden rule a lot. Is that where that belief comes from? - I just think it's the right thing to do.

- Yeah, I mean, I just feel like in-- - Treat, I guess you're right. So as you said, I'm an enormous believer in the golden rule of treating others the way you'd like to be treated. And if I had a boss, that's what I would want them to do for me.

So yeah, absolutely. - And do you, I know you've said intellectual-- - Thank you for leading me through this, Chris. (laughing) - I did a lot of homework. - I just know that you talk about that in a lot of the ways you make decisions. You just think about it from other people's perspective.

- Exactly. And don't you wish the world operated that way? Wouldn't we have avoided a lot of the problems that we have in this country? If everyone treated others the way they would like to be treated, God, we're going in the opposite direction. - And what can we do about that?

- I don't know. We need leaders. (laughing) We need really good leaders to set examples, but our leaders are doing the opposite. - And is there a thing, are there short-term fixes? I mean, a long-term fix is, oh, if you think you could do the opposite, become a leader, but does the system kind of corrupt your leadership along the way?

- Perhaps, at least politically, I think that's really challenging today. - And do you see any path forward? - I know very little about politics, so I'm not going to comment on that. - Okay, okay. (laughing) Well, I actually had a point that maybe politics will bring up, which without talking about it is, I haven't heard you talk much about optimism and pessimism and how important one side or the other is in business.

- I'm an optimist. David Fortunato, Wealthfront's CEO, comes across as a pessimist. I don't think he really is. (laughing) - Is that his questioning nature? - Perhaps. He's skeptical and somewhat cynical. - Yeah, I've heard people- - It's hard to have a growth mindset if you're a pessimist. - When I think about intellectual curiosity, it's like, I want to know if there's a better answer.

I want to know how to do this. - David Fortunato, who I talked about earlier, our CEO, I'm in awe of him. I mean, he's unbelievably well-read, learned and all, and just has a voracious appetite to add to his knowledge. And he is loathe to comment on things about which he is not educated, and tries to surround himself with people who are.

- We asked about whether asking questions makes you look bad. I think I know the answer to this question, but- - By the way, one of the things that is terrible, you have two little girls, I have a daughter, and when my daughter was in middle school, her friends would say, "Stop raising your hand.

You shouldn't be doing that. It's like, it's inappropriate." There's a bunch of social mores that make it really hard for women to stand out and do some of the things that I think are needed for them to achieve everything they're capable of achieving. - So is your advice to your daughter, just don't listen to that, raise your hand, ask the question.

- Absolutely. But to a middle schooler, that's really, really hard. - Yeah, I haven't had to give advice to a middle school daughter. - Oh, let me tell you, middle school is awful. - But we talked earlier about how some people feel like asking questions looks bad. I think another one is not knowing the answer.

But here, multiple times your answer has been, "Well, I don't know enough about that to answer." And I think so many people- - Do you respect people more who admit what they don't know? - I do, but I think people are always afraid to not know the answer and they feel like they're gonna look bad.

- Again, makes no sense to me. - I wonder if it comes- - Again, applying the golden rule, how would you like to be treated? You want someone to bullshit you? - No, no, so many things that you've said are so obvious, but I think oftentimes we worry, "Oh, how will people look at me?" And maybe this goes back to me being the millennial looking for my friend's advice, caring more about what they think than what matters.

But I wouldn't say I embody that, but if I don't know the answer, I guess my curiosity leads me to, "Well, I don't know, but let's go find out." - Let's go find out, right. - And I think one fortunate thing is if you don't know, it's a lot easier to find the answer.

I wonder if 20 years ago, you could get away with making up an answer a lot easier 'cause it wasn't as easy to fact check. I don't know. - Yeah, but people also didn't make up answers the way they do today. (laughs) Because if you write well, you can publish something on the internet that people will believe.

- Yes. - You don't have to be an expert. - No, I think finding experts is probably a lot harder now than it has been. I think you've mentioned, I wrote down a bunch of names, people you've worked with, people you looked up to that have all kind of been experts or mentors or partners.

How did you create those relationships and foster them? Because I think all of us, myself included, hope that one day when I'm having conversations like this on your side, that I have all those people to lean on and say, "Oh, this person who taught me all of this, this person who taught me all of this." - Someone didn't necessarily teach me, I might have observed.

And using some of the lessons that I shared to filter, you might find some people in your life who are really, really good. Boy, you ought to pay a lot of attention to them. I'm 65 years old, and I've been on the board of directors of the University of Pennsylvania for 19 years now.

So I joined when I was 46. I absolutely adore one of our former chairman, who was the vice chair of T. Rowe Price. And I'm like a puppy dog in his case. And I'm like a puppy dog in his company. So even when I was 60 years old or 62 years old, if I had an opportunity to sit next to him at a bar and just soak up his lessons, to this day I keep learning from him.

So when you find someone who's really good, boy, pay attention to them. - And have the people who've done that to you stood out by just asking good questions? - Yeah, absolutely, all it really takes. And I have infinite time for people who do that. - Be careful what you wish for.

We've got lots of people listening. - I understand, but there have to be people I know. So I often get asked to engage with people on LinkedIn or things like that. And I tell them, I'm sorry, but I only do this with people I know. And I'm amazed by the number of people who don't understand you should always be introduced.

Never cold call anyone. Like venture, one of the first lessons I learned as a venture capitalist is never engage with anyone who cold calls you. Because imagine what they'll do when they're an entrepreneur. If they cold call customers, they're never gonna get them to engage. So it's sort of a test.

If you can't find someone who knows me, then you might not be creative enough or the appropriate person to start a company. - But does that lesson apply to someone who doesn't necessarily want to start a company, but you think the same rule applies is always find the introduction?

- Absolutely. If you're gonna make an introduction for someone, first ask the person to whom you're making the introduction if they're open to it. - Yes. - 'Cause otherwise you're gonna annoy them. And I'm amazed by the number of people who, when someone says, will you introduce me to Chris?

And I'll say, well, I'll just let me check. But many people will just send a forward the email as an introduction. Well, that's a pain in the ass for you. If I were to, it's not treating you the way I would want to be treated. So be conscious of these things.

But ask for an introduction. Why should someone spend time with someone that they don't know? I don't understand. - I think the one place I'll push back is if you are able to offer a ton of value to someone, I think you can overcome the cold call problem. - Well, then you have to be well-known.

- Or someone at a company I worked at really loved the company, wanted to be involved in the company and said, they sent an email to a few people and said, I just spent six hours going through your product. And I have all of this feedback for you. And you don't know me.

- But they spent a lot of time, okay, I respect that. I agree with you on that. - So I think if you're young and you have time on your hand, but you don't have your network yet, I think putting in the time and energy to add value to that person.

- Okay, completely agree. We actually had an employee at our company who did that on Twitter. That he kept defending the company against trolls over and over and over again. His name is Tyler Hogue. And I reached out to Tyler because I really appreciated what he did. And he said, I'd love to come to work for Wealthfront.

And it was clear that he had spent the time and effort. He didn't ask, based on what he did, I went to him. I had a sales background and we don't have a sales function. So I said, if you're willing to start in product support, which is what we call customer service, I'll make sure that you have a shot to move into another function, as we described earlier.

And he said, absolutely, which most people wouldn't say. So he joined us and then within a year and a half, he moved into product. He's from Utah and he was recruited by a startup in Utah that was willing to make him the VP of product. That company I think was sold for over a billion dollars.

He did exceptionally well. And now he's a Utah-based venture capitalist. But he put the time and effort in. - And was willing to take a role that some people might think was too small. - But was beneath them. - Yeah. - And every step of the way, he put in the extra effort because he was so passionate.

- Do you think that the key to leveling up is just putting in the effort? We talk a lot about work-life balance. - You have to have enough talent. - Enough talent, but I think in this day and age, I constantly see people talking, oh, today people just want more benefits, more work-life balance, all this stuff.

- I think work-life balance is really hard if you want to be really successful. Again, really successful. That doesn't mean that it's bad to not be really successful. I'm not saying that. But it's really hard to have a work-life balance if you want to be really successful. You can get the leisure time after you're successful.

- You know, we talk about ways to be successful. How much of it- - And by the way, success isn't money. It's being absolutely, by excelling in whatever you do. - How much of that is not just work, but luck? - I think there's an article that I love sharing with my students in my product market fit class that's written by my investment idol, a guy named Howard Marks, who is a famous distressed debt investor from Oak Tree Capital.

And he's equally as well-known for his quarterly letters to his investors. And they're always very thought-provoking. And he wrote this one letter called "You Bet" that talked about success in investing is very similar to certain types of gambling in that people confuse outcomes with good decisions. That outcomes are a function of the quality of the decision process, the extent to which you take maximum advantage of the data available to you, because there's hidden information, and luck.

Now, roulette is a pure game of luck, but poker is a function of the three. Investing is a function of the three. I think entrepreneurship is a function of the three. You can have a, if you really focus on your product process, just like you really focus on your investment process, you won't always be successful, but you really improve your probability of success.

And that's why at Wealthfront, we spend a lot of time, as you know, focused on our product process. - Yeah, I think-- - So this is true in one's career as well. I think if you really focus on the process of becoming a learn-it-all, you take maximum advantage of the information that's available to you.

If there's a surprise, you savor it. Odds are you're going to do well, but you can run into bad luck. - Yeah. So you talked about judging your decisions and ways to look at things in hindsight. How do you make decisions? - What do you mean? - Do you have a process for making big decisions in life or work?

- Well, there are decisions made under uncertainty and decisions made under certainty. So under certainty means you have a lot of data. Those are the easiest decisions, and they actually are the least impactful 'cause anybody can make those decisions. The hardest decisions and the most impactful ones are the ones made under uncertainty.

So that comes down to judgment. - Okay, so let's talk about judgment 'cause I know when I first joined Wealthfront, it was something that you mentioned was like a very important characteristic, someone's judgment. - To success. - Yes. And what does judgment mean? How do you think about? - Well, judgment to me is decision-making under uncertainty, which means there's a bunch of luck involved, but some people show evidence of having better judgment than others.

- And is it just a feeling? Is it looking at how someone makes a decision sometime and there's no process, but it's a gut feeling? - This was another thing I spent a lot of time on in interviews. Tell me about some decisions you made under uncertainty, the ones that worked and the ones that didn't.

And I wanted to know how they came to the conclusion. And what was the quality of their thinking, thinking through the logic of the challenge? To me, job choice was the best proxy for judgment. - And just seeing what people have done in their career in the past, or?

- What companies they chose and the success of those companies. - And with enough data points, you can kind of get rid of the luck. If they've had one job and one role and it was unsuccessful, you wouldn't fault them for that. - I wouldn't fault them for that.

But if they had three straight really successful companies, they have taste. Taste is another way of saying judgment. - Okay. - And they would tell me what characteristics they would look for. - And seeing how they think through things. So really it's in the same way that you would judge a decision based on the process you followed, the information you used.

It's really judgment is just, how do you make decisions? - Well, some people think it's pattern matching. There are a number of people who don't like pattern matching but it's a really, really important way to make a decision. You just have to make sure that there aren't biases involved.

And you have to be very, very conscious of not allowing biases into that process. - And how would you do that? - Just by being conscious of it. - Just calling them out in advance of whatever that process is. - Yeah. - Do you have an example? I'm trying to think through what that would look like.

- Well, there's confirmation bias. We see what we're looking for. There's desirability bias. The bias toward the outcome that we want. So just being conscious about these things keeps you honest and helps you make better decisions. - Okay. I feel like I wrote a lot of things down. We got through almost all of them.

There's a couple random ones. You talked about, David, at Wealthfront being a voracious reader. Do you think reading is a skill or a trait of someone who's successful? Do you read a lot? How do you think about where reading-- - My wife would kid me that I never read anything without staples in it.

So until I effectively retired, which is the stage I'm at, I haven't had a ton of time to read fiction and nonfiction. Most of my time was spent reading about business stuff, work-life balance that we talked about before. I watch a lot of TV and movies, so it's not like I'm a total dullard who only is focused on business.

But I think if you wanna get better at what you do, there's a lot of value in meeting the principles because everyone revises history in public forums. You have to be careful that I'm not revising history here as I'm speaking to you. But every successful company has revised history on how they actually got to success because consumers or buyers prefer buying from companies who always intended to serve them.

So if they started with an inflection point in technology, develop a product, and then they iterated through a bunch of markets till they found one that was desperate for what they had. When they tell the story on a podcast, it's always, you know, I saw this problem and I developed this solution because that's what people prefer to hear.

So it's challenging to reach conclusions based on what you hear on podcasts or what you read in blog posts, which is why I encourage my students to, wherever possible, meet the principles because people tend to be much more truthful when you talk to them in person than when they talk in a one-to-many environment.

- Do you think, you know, if you go back more historically-- - I benefited unbelievably in my career by meeting a lot of really, really interesting people and getting an introduction to the people I wanted to talk to. And with introductions, people are generally open to meeting. I think you wanted to meet me and you went through Nick Shalek.

- Yes, yeah. - So that's how we met. - Yes, and I think people who've had experience love sharing that experience. So when you approach someone, and I've often used the line of like, I just love to hear some of the wisdom you've picked up in your industry. People are like, I would love, I'd love to share some of my wisdom.

It's like a compliment, but offering them a chance to teach. - And it's usually unfiltered. - Yes. One thing we didn't talk about, you teach at Stanford in the Graduate School of Business. How do you think about graduate school as a stop in someone's career? - The job for which you hire a premier business school is number one, pivoting your career, number two, developing a network, and unfortunately a distant number three is education.

And I'm guilty of it too, when I went to Stanford GSB for my MBA. I think, because let's say you were an accountant and you wanna work for a software startup in marketing. No one's gonna interview you. Based on that resume, one month into going to a great business school.

- You can change their perspective. - You can get the meeting. You're the same person, but it matters. So I think the biggest reason to go to a premier business school and why it's worth the money is if you wanna pivot your career. - And so what would you say about a non-premier business school?

- It's hard to justify the cost because is it really gonna allow you to pivot your career? Then I think you're primarily going for the education. And I'm not sure you're gonna be that much further ahead on a net present value basis relative to the cost. And I know that's a controversial thing to say.

- No, I just wonder, there are a lot of graduate schools that publish all of their content online. In today's day and age, I wonder if you're paying for the discipline around the education more than the actual content itself. - We could speak for hours on this one. One of my teaching partners, Bill Barnett, who's a professor at Stanford GSB, likes to say there's no use, there's no benefit teaching dead knowledge.

There's a lot of benefit in teaching live knowledge. And he defines dead knowledge as something that's already well-known and understood. He said, you can read that. Live knowledge is something that you're, it's still in the process of being discovered, which means you can have really interesting conversations about that.

And so his point of view is that schools should focus class time on live knowledge. And I think that's a really fascinating point of view. - And you teach a class on product-market fit. Is that class more about the fundamentals? Or, 'cause I imagine if someone went and listened to every episode you've done of every podcast about product-market fit and heard all the references to the case studies, they could get some of the knowledge.

- Yes, but I view myself as not having come up with any novel ideas. So I credit Don Valentine with the concept. I put the name to it. So I coined the term product-market fit. But I learned the concept from Don Valentine at Sequoia because as a venture capitalist, I wanted to understand another great venture firm that did things very differently than we did it at Benchmark.

So as someone who likes to learn about these things, I tried to learn as much as I could. And I actually learned a lot more about it, teaching it to try to make things very simple, to be able to express the terms very simply. And so I see myself as a system integrator among a variety of books, each of which address a component of the challenges.

And one of the things I've found for my students is they might read a chapter of the book and not understand it at all because the understanding of that topic might have evolved since the book was published. And the fact that I know the authors and have talked to the authors about the topics, I actually know the latest thinking on it.

So I'll help them interpret it in a way that they weren't able to do themselves. - Okay. - That's my value added as a teacher. And that's why I think it's live knowledge. - But again, the number one and the number two, we're not the education and the knowledge as much as the network and the pivot.

- This is, for someone who's interested in education on this particular topic, it's valuable. Yeah. - Yeah. - But I think that for most people who attend good business schools, they're there for the pivot and the network, both of which are incredibly valuable. - Yeah, I'll share something that will directly go into the last question I have, which is around parenting.

But there's this product that recently launched, and it's an app on the iPad for teaching kids to read. And it's this company called Mentava. I think I got it right. We've been using it for four days. And they got launched into much earlier than they wanted to because someone got so upset that they were creating an app to help kids learn to read earlier.

And they thought, oh, Silicon Valley's trying to create these tools to go work at these companies and build robotic humans that are gonna be tech workers at age eight. And they were like-- - Wasn't there research that shows the age at which you start reading doesn't matter? - I think there is.

- I thought there was scholarly research to that. - So I was like, oh, let's try this app out. You get seven days for free. - By the way, I care a lot about peer-reviewed research, which unfortunately the world doesn't seem to care as much about anymore. - No, actually, I got an introduction to someone who their expertise is how to review peer-reviewed research.

And so I was thinking about doing an episode just to help everyone understand how do you actually look at research. So as a consumer in any field, how could you review that? But the interesting thing about this app was we use it for four days now. And I was like, the progress that our daughter has made in four days is mind-blowing.

Like taking four-letter words and saying them after seeing them in days. And the company has been critiqued heavily online for charging a lot for an app. So they have an app that helps your kid learn how to read. They charge $500 a month, which is, they say- - It's value-based pricing.

- And the most interesting thing was I both totally agree. And someone's like, $500 is crazy. He's like, you don't have to pay it. - Right. - If you don't wanna pay it, here's a book on Amazon that's $17. That will teach basically the same lessons. But you have to do the curriculum.

You have to curate it. You have to come up with the exercises and do it all. And it was just wild. I don't know why I'm bringing it up, but it made me think of both education and paying for education. - Well, this reminds me of information wants to be free.

You only pay for convenience. It's a great example, isn't it? - Yeah. - You could find the research that explains how to do all this. But if you provide the convenience of delivering it, if you make it convenient to do this, that's really providing a lot of value. - Yes.

We have three days left before we actually have to make a decision on whether we keep using this app. And the data I've seen shows that it doesn't really matter what age you learn this. So why do we need to push it? - It makes you feel better as a parent.

- I know, I know. And that was the last thing I wanted to ask you, right? We talked about a couple points about parenting, but I haven't met your children, but from what I've heard from you, they turned out great. - Well, I really am crazy about them. - Yes, and we all are.

- And I'm fortunate to have an amazing wife who is the better parent of the two. - But aside from encouraging and provoking intellectual curiosity, what other pieces of advice do you have for parents listening about taking some of your lessons going through that experience? - I think that would be arrogant of me to say that the way that I did this was the right way.

I recently, a year and a half ago, became a grandparent and every one of my friends who has recently become a grandparent has experienced the same thing, which is all of our kids tell us that the way that we brought our kids up was all wrong. So I'm not sure I can answer that question well.

- Okay. It's funny 'cause I have had that conversation with my parents. Oh, come on, we gotta do these things these different ways. What were you doing? - You seem to have turned out pretty well. - I know, so maybe it doesn't matter. - I don't know, but clearly the research has changed since my kids were born.

It's very funny to my wife and me and to our friends as we hear this from our kids. - I do think that some of what the research shows is just being around, like caring, being a parent that is interested in what your kids are doing. It's not what book, what time did you start reading lessons?

What layout was there room in? How did you paint the house? It's not these little things as much as it is just being there. So I haven't gone deep on parenting. I have an interview with someone who I think has thought about this far more than both of us, a woman named Emily Oster, who's written a bunch of books.

She's a professor at, I think, Brown. And she wrote this pregnancy book followed by the early childhood book, followed by a book that we're now reading called "The Family Firm," which is how to run a family in a productive way. And the thing I love about her work is she's like, I'm gonna go read all the peer-reviewed research and then just break down what my interpretation of it is.

You do what you want. - Well, I'm in awe of my wife because she practices unconditional love in a way that I can't get to. And I think that's what made her an amazing mom. And I think that that really resulted in two great kids. - That's amazing. Well, I'm working on that.

There, I'm sure, will be days between now and teenage girl years, as you mentioned, where it's trying, but so far it's great. The only other thing I'll ask is you try to be a very efficient user of time. Are there things that that has led you to do differently that you think maybe most people aren't doing who are poor users of time?

- I think one's greatest strength is usually one's greatest weakness. And in order to be the most efficient of time, you might be perceived as being rude because you cut someone off or you stopped a meeting or you didn't give them as much time as they might have felt that they deserved.

- And so does that mean you still do that, or? - Yeah, if I wanna be jealous of my time, I'm not gonna just keep going for the sake of continue, to make someone feel as good as they can possibly feel. Like I wanna treat someone the way I'd like to be treated.

There's the golden rule and there's the platinum rule. Treat someone the way they would like to be treated. That's really hard to do, I think. - Yeah, but I do think the time-- - Therein lies the trade-off. I think there's a time trade-off between the golden rule and the platinum rule.

- And how do you strike the balance? - I don't know if there is a right balance. I think that's where one needs to use judgment. - I do think when it comes to people's time, sometimes you think people will be offended in circumstances that they aren't. And I think we've probably brought up a few examples already about that, but if you're pitching a company and someone, investors, has decided after two minutes they're never gonna invest to let them pitch for an hour, is that as productive or not?

- Well, I'm not gonna cut the meeting off. There are a lot of really rude venture capitalists who have their assistants come in after 15 minutes with a fake phone call. And they'll decide, based on the quality of the first 15 minutes, whether or not they wanna continue. I would never do that.

But I might try to bring the meeting to an end after 30 minutes if it's not going anywhere, 'cause I don't wanna waste their time and I don't wanna waste mine. - I think a lot of people are afraid to do that. - So how do you do that nicely?

Now, you can make an enormous effort to be nice about it, and some people will feel badly because they didn't get an hour, no matter how nicely you delivered the message. So it depends. - My hack there is that you just schedule the meeting for a very short and then block extra time, so they don't have the expectation that they had an hour.

- Yeah, but how would you feel if somebody said you only have half an hour? You feel a little rushed. - I guess in the fundraising example, maybe that is true. In just generally a life phone call, a meeting, I don't know if everything has to be an hour.

- I would agree with you. And that's why I don't use invite apps. I don't want to set an expectation around how long the meeting is going to be. But for my students, I mean, I always set aside an hour because that's for them. That's not for me. - Okay.

- And after 30 minutes, they'll say, do we have any more time? And I'll say, I have all the time you want. - So I intentionally didn't bring up negotiating in the conversation because we talked about it last time when we talked about investing. So if anyone wants to hear your stance there, I'll say, go back and listen to that episode.

I'll link it in the show notes. But one thing I realized in that investing conversation that we didn't really cover, that I'll ask you about as a departure, which we started the conversation with, is about being non-consensus and how important that is in investing. Can you talk a little bit about why that is one of the ways the most successful investors invest?

- Sure. Well, I credit Howard Marks, who I referenced earlier. Almost all of his letters are premised on his belief that investing can be described with a two-by-two matrix. And I believe that this matrix is equally applicable to entrepreneurship as it is investing. On one dimension, you can be right or wrong.

And on the other dimension, you can be consensus or non-consensus. Now, obviously, if you're wrong, you don't make money. But what most people don't realize is if you're right in consensus, you don't earn outsized returns because they get arbitraged away. It's too obvious. The only way that you earn above market returns or outsized returns are by being right and non-consensus.

The challenge is you know you're non-consensus, you don't know if you're right. - Yes. - So you have to have, I think, tremendous command of your subject to be able to take the leap of faith to make that kind of bet. But in this world, you don't earn outsized, and the reason you earn outsized returns in that quadrant is because risk is correlated with return.

So you're taking more risk. Therefore, you should generally be compensated with more return. Should be, not always the case. There's always outliers to everything that I've said on this entire podcast. So I think about this a lot in venture capital. I think some firms outperform others consistently. There's about 20 firms whose returns, whose realized returns, not unrealized returns.

That's a big difference, are consistently in the top 20. And that's because they know which leaps of faith to take on which to be non-consensus. And I think that's the intellectual property that the premier firms have. So Bill Gurley turned me on to this framework soon after he joined Benchmark.

So this might have been in around 2000, 2001. And then I had the unbelievably good fortune to serve on the Penn Board of Trustees with Howard Marks. So one day, my first trustee meeting, the university secretary came over to me to introduce me to this fellow named Howard Marks.

And I said, "The investor?" And he said, "Yes." So as you might imagine, I spent a lot of time asking Howard Marks questions about this. - For anyone listening, all of these memos are available to anyone. So I'll link to them in the show notes, but- - They're unbelievable.

- Yes, I've read many of them. And to the point about Bill Gurley, Bill Gurley now has his own podcast. And so anyone that wants to go listen to his wisdom, he does that every two weeks. So I think one great thing is that a lot of the knowledge that you've talked about, people are now sharing even more than they were before.

Howard Marks has been writing for a while, but I think Bill Gurley is just a few months into a podcast. I don't know when your show's coming, but this will have to do for now. - Okay, good. - Andy, is there anything I didn't cover? My goal was to- - I'm not sure, maybe we'll have another episode.

- I love it. Andy, thanks for joining me. - Always a pleasure.