← Money Rehab with Nicole Lapin
Money Rehab with Nicole Lapin
Legendary Venture Capitalist Bill Gurley on the AI Bubble, Why IPOs Feel Rigged and How to Find Your Dream Job
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- [00:00]
Podcast Host
I'm listening to how to Keep House While Drowning and it feels like forgiveness. I picked it up thinking it would have a few tips on organizing my home while working more than full time and being a wife and mother. Don't get me wrong, it does have tips and tricks, but it's also a masterclass in understanding why organizing the bathroom counter is a little harder for some people than others and what to do when that's you. It's time to take care of you. Who better to help you do that than the top voices in well being on Audible? You can level up your parenting, career, finances, sleep, relationships or mindset. The Audible well Being collection has everything to inspire and support you every step of the way. Hear the latest from bestselling authors Brene Brown and Jay Shetty, Master Nutrition with chef Jamie Oliver, hear nature sleep sounds from the Sleeping World or get on top of your finances with Rachel Rogers. Plus, you'll find all the best parenting guides like Raising Good Humans. With this at your fingertips, you can imagine more for yourself and your family. Kickstart your well being journey with your first audiobook. Free when you sign up for a free 30 day trial at audible.commnn Membership is $14.95 a month. After 30 days, cancel anytime. Listening to the top voices in well being sounds like self care to us. Audible there's more to imagine when you listen. You've heard me talk about BILT as the loyalty program that lets you earn points on rent wherever you live and they just up even more. As of 2026, homeowners can also earn up to 1.25x points on their mortgage payments. This is thanks to Bilt's three new credit cards, the Palladium Card, Obsidian Card and Blue Card. All three turn your housing payments, rent or mortgage into flexible rewards so you can choose the card that fits your lifestyle without missing out on points and exclusive benefits. Built points can be redeemed at top airlines and hotels, Amazon.com purchases, future rent payments and more. Built points have also been ranked by top publications as the industry's most valuable point currency. Your housing payment is already your biggest expense. Make it your most rewarding. Find the card that fits your lifestyle and apply today at joinbuilt.com moneyrehab that's J-O-I-N-B-I-L-T.com moneyrehab make sure to use our URL so they know we sent you. Terms and limitations apply subject to approval and eligibility. Built cards are issued by column n a Member FDIC pursuant to license from MasterCard International, Inc. If you've listened to this show for any amount of time, you know that my favorite form of cardio is negotiation. Whenever someone gives me a price, my first instinct is to try to talk them into a lower one. And you would be amazed how often it works. But I understand that there are people who would rather run five miles than negotiate a bill. If that's you, then you need to know about today's sponsor, Experian. You could save money by letting Experian negotiate the rates on your bills. They'll keep an eye out for new deals and savings opportunities and will negotiate directly with your provider on your behalf. But that's not the only pain point they've solved. If you hate going through your accounts to see what subscriptions are still active, don't worry. Experian can take the pain out of canceling subscriptions by handling it for you. Just keep the ones you want and put money back in your pocket. Over 200 subscriptions are cancelable. Here's the best part. You keep 100% of your savings. Get started with the Experian app. Now. Results will vary. Not all bills or subscriptions eligible. Savings not guaranteed Paid membership with connected payment account required. See experian.com for details. This episode was taped in the Money News Network studio, brought to you by US Bank.
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Nicole Lapin
Are we in an AI bubble?
- [03:52]
Bill Gurley
Yes.
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Nicole Lapin
Modern IPOs are way overhyped. Do you feel like the system is rigged?
- [03:57]
Bill Gurley
They handpick a price, the retail investors get screwed.
- [04:00]
Nicole Lapin
Bill Gurley is a legend on Wall street and in Silicon Valley. He was the lead analyst on the Amazon ipo. And then he went on to make a name for himself in VC as an early investor in Uber, Zillow, and grubhub. Today, Bill answers some of the most important questions for investors right now.
- [04:18]
Bill Gurley
I really like this battery manufacturer in China. I think China is extremely well positioned to serve solar and battery demand across the world. We don't have any competitive products whatsoever
- [04:30]
Nicole Lapin
in the US and we even cover his secret to thrive in a career you actually love.
- [04:35]
Bill Gurley
I reflected and asked myself the question, do I want to do this for the next 30 years? And in both cases, I reached a point where the answer was no.
- [04:44]
Nicole Lapin
I'm Nicole Lapvan, the only financial expert. You don't need a dictionary to understand. It's time for some Money Rehab. Bill Gurley, welcome to Money Rehab.
- [05:00]
Bill Gurley
Thanks for having me on, Nicole. Appreciate it.
- [05:03]
Nicole Lapin
So excited to talk about your book Running Down a Dream. But first, I really want to talk about News that just came out yesterday. We're talking on the day after Elon said SpaceX is acquiring X ahead of the potential IPO, which could be the biggest one in history. Ahead of everything. A company formerly known as Facebook. Alibaba. What are your initial thoughts?
- [05:23]
Bill Gurley
There's a lot going on that one could use to argue why this would happen. There are a number of investors that invested in Twitter and X along the way that have kind of been rolled into each of these things and this certainly increases their likelihood of success, you know, so to the extent that Elon had a particular, particular reason to care about the people that stood up and backed him when he did the Twitter deal and if you remember the, the price of Twitter went way down afterwards and kind of worked its way back. The second thing I thought about this morning that I hadn't really considered before, but I saw that a, somewhere in the EU they're, they're coming after him for some of the GROK images. And starlink in particular has a lot of political power, like the fact that you can offer high speed Internet, especially rurally in any country. It's just a, it's a, it's a chip, you know, that, that you know, help trade if you're fighting those kind of battles, global political battles. So that could be part of it too. But it, that makes more sense about why you might merge a starlink and a Twitter and a Grok. It gives you a little bit more power. It is probably the most anticipated IPO and they've said that they plan to continue on path and we've had a dearth and absence of IPOs. So yeah, it could be pretty successful. And then I guess lastly the OpenAI has made it clear that they're going to raise lots and lots and lots of money. So if you want to be in the, if you want to compete on the consumer side of AI, you need to have deep pockets.
- [07:08]
Nicole Lapin
That touches on a big concern, especially among young people, that some of the greatest companies of our time, from Space X to OpenAI and Stripe are private and therefore you're not an accredited investor. You don't get access to them, you know, real wealth like the generation before us did with Apple and Google. You know, I know you have a lot of issues with the IPO system.
- [07:28]
Bill Gurley
Yeah.
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Nicole Lapin
Which we can get into. But could this open the door to the public markets and access that most investors have been.
- [07:36]
Bill Gurley
Shut up. I mean, they've signaled that the M and A Trend transaction went down at over a trillion dollars. So I think you've already missed. I mean I worked on the Amazon ipo. It was under a billion dollars. Like so that's one thousandth of this and like this window that there used to be for everyday consumers to trade these tech companies in their growth phase. I think you're right. I think it's being, they're being taken out of the market and I think it's caused by primarily by the behavior of the late stage VC industry. They're begging these companies not to go public and does create the problem you described. I think unfortunately their answer to it's going to be to try and get the regulators to let retail investors invest in their vehicle, not to get the companies public sooner. Which is exactly what's happening in the PE market right now. They're trying to put 401ks into pen funds. Yeah, I think they've gotten a legal waiver to do that.
- [08:37]
Nicole Lapin
They have. Which is a whole other can of worms.
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Bill Gurley
I think this would be a can of worms too by the way. I, I think like a lot of the efforts to allow retail access to non public companies would be best solved by having these companies just go public sooner because there's a level of rigor and responsibility and being public that's not there when it's not public. And if we allow a whole bunch of people to play in private companies there will be, there will be a lot of people burned. Because you know when you invest in private companies like you see PowerPoints with financials that aren't audit like constantly and the players like myself that are doing that, you know that going in and so you double and triple check things but the retail investor is not going to have any like ability to manage that problem.
- [09:33]
Nicole Lapin
Yeah, or double click on the charts that go up and to the right. You know not every company is Google or Amazon either. And when Sigma IPO'd last year I did a video about some of your tweets that modern IPOs are way overhyped and inefficient because of supply and demand issues. Can you explain, do you feel like the system is rigged there?
- [09:56]
Bill Gurley
Well yeah, I mean it's definitely Greg. They don't match supply and demand. I mean automated trading was implemented in the late 50s and match supply and demand is understood by any first year comp size student or first year finance student. And yet that's not how they allocate. It's not how they determine prices, not how they allocate shares. So regardless of the Figma IPO or any IPO that traded up or down the Right. And fair thing to do on an initial offering is to let price win, you know, and to allocate shares based on whoever is willing to pay the highest price. It's how every stock opens for trading every single day, like these techniques are known. And it's how direct listing works. And ironically it's how an initial coin offering works. So that's how you know, anyone in the crypto world would, would match supply and demand. And we've just gotten used to that not being the case in the public markets. And, and these stocks are all mispriced because you, and, and here's another huge irony. The next morning, it's like an hour to open, they're opening it the way you do a direct listing. That next day they do match supply and demand. And, and the reason there's a gap is because they didn't do it the night before. It's really sad. I'm surprised, I'm personally surprised that more people aren't astonished at it and I'm surprised that people aren't embarrassed by it. But the long term clients of the investment bank get a free one day pop and then they give some of that money back through overpriced trading. So they, they, the money flows back to the investment bank.
- [11:41]
Nicole Lapin
Yeah, but not to the people that jump in on day one.
- [11:45]
Bill Gurley
Yeah, no, the retail investors get screwed because they, they, they set the price the next day. If they had been part of the, the initial bundle, you know, you would have had an entirely different situation. And the big clients of the investment bank aren't locked up at all. So they can sell into that retail demand the next day and they make a one day like windfall profit. It makes no sense. The SEC should be more upset about it and they're not. They got a lot on their plate. But I'm hopeful, oddly that tokenization could solve this problem. That's my latest leaning.
- [12:26]
Nicole Lapin
Let me just sort of paraphrase what you're saying to break down what the issue is. So Figma, for example, way over subscribed, so there was 30 buyers for every one share. And you're saying that this is engineered like the banks behind the scenes did this by setting the price lower than what the market would pay. So that generates a bunch of demand and then the stock price jumps. But the institutions are the ones that are holding the really valuable shares.
- [12:51]
Bill Gurley
Yeah, look, I mean the fact that when they run an ipo, the investment banks put out and put their clients and say hooray, look What a great IPO it was 25, 30 times oversubscribed. It's just like the irony that that's a marketing message is just, I can't believe it's lost on so many people. They've mispriced it. They, they're telling you if there's 25 times the demand for the shares, raise the price. Like you're not. This isn't hard but, but it's what we've evolved to. It's, it's a real shame. A lot of people on Wall street and in the SEC like to say that we're, that the, the US capital markets are the gold standard of the world and we're just not. I mean playing these stupid games is, is by far not the gold standard. But the reason I'm hopeful is, you know, I don't know if you've talked about tokenization on your show, but there's this growing idea of using the blockchain to basically keep track of trades, which is actually a pretty good use for the blockchain. And we now stable coin transacting at volumes where the rails have been tested. Right. They're really tested at very high volumes. And the next step people want to do, and the SEC seems to be behind it, is to let stocks trade on chain when the markets are closed. And that just gets you in a position to where you could theoretically think about doing an on chain offering. And as I already mentioned, all of the initial coin offerings that have ever been done to date match supply and demand the way you would in a direct listing.
- [14:30]
Nicole Lapin
Let's fast forward for the rest of the year. Let's say SpaceX goes public. What should retail investors be wary of? And that, I mean SpaceX is a way different beast than Figma.
- [14:41]
Bill Gurley
Yeah. I mean one thing that's been true in the past, this was true of Uber. These really, really, really big IPOs, they're so large that it's harder to game the system. Like it's harder to underprice them. You need too much like if they go public, what are they going to raise in the offering? You know, 20 billion or something. And the people that, that stand up and say they're going to do it, they, they need them to be able to, to write the checks. And so I think people get more conservative on these bigger deals. I think you're less likely to see a pop.
- [15:13]
Nicole Lapin
What about for a retail investor?
- [15:15]
Bill Gurley
It's just hard. I mean I haven't seen the financials and so I'd really want to wait and see those before I opine like I don't know if it's, you know, they say it's trading at a trillion, but I don't know what the revenues look like. I don't know what the cash flows look like. I'd want to see that stuff before opine on what someone should do. It is a, it is a highly speculative time right now and there are a lot of, there's a lot of money flashing around, especially in the venture world at very high prices. And so I would be cautious in general as a retail investor even towards AI if you, if you own the max, if you own. There's one. Another irony is if you own the index, you have pretty good AI exposure already. Like the index is. Nvidia is a big part of it. Microsoft's a big part of it, Google's a big part of it. And post AI, even just simply being an index investor.
- [16:13]
Nicole Lapin
Yeah, the Mag 7 and then there's the rest of the S and P,
- [16:17]
Bill Gurley
but they're just so overweighted.
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Nicole Lapin
I mean, I would love to actually go behind the scenes, if you don't mind, take us into the room where it happened, so to speak, because you were on the Deutsche team that won and led, as you mentioned, the underwriting position for the Amazon ipo. So I'd love to hear, you know what, what happens in those rooms. How did you make the Amazon IPO strategy and solve for that supply demand mismatch that you're talking about?
- [16:42]
Bill Gurley
Well, it is a funny thing and, and keep in mind that was whatever 1998, 99. So long, long time ago, 20, 28 years ago. Jeff. Jeff Bezos, unlike a lot of people, is a very independently minded individual and he put a lot of pressure on us to price it high and he didn't care if it broke issue. It did in fact break issue. It traded under for a couple months. And so he pushed us for more perfect pricing because he cared about the long term and he didn't have this silly hang up about whether it went down or not. Part of the reason these companies are getting a position where they can be taken advantage of is the press likes to talk about a pop as a win. Oh look, it's so people wanted it so much, but the company sold stock at a price below. It's, I mean, would you feel good if you sold your house and the next day it traded at 2x the price to somebody else or would you feel stupid? Like that's how you should think about it from the company side.
- [17:53]
Nicole Lapin
It's a good analogy too. Like yeah, you Know if you know that your house is going to trade for 2 million, but you price it at 1 million and start some bidding war to. To push the price up.
- [18:05]
Bill Gurley
Yeah, but imagine if instead you price. You put a price out on Zillow and that's the price. And your Realtor comes to us, you say, we have 25 people that want to buy at that price and we're going to close with one of them because they're reputable, wouldn't you be pissed? You'd be like, no, we're going to ask for auctions and raise the price. Of course. That's what you do. Yeah, it's pretty simple anyway.
- [18:29]
Nicole Lapin
But it's interesting to kind of go behind the scenes.
- [18:32]
Bill Gurley
Yeah. Bezos pushed us up on price, so this didn't happen. It didn't pop. It actually went down because we'd priced it so high.
- [18:40]
Nicole Lapin
And you guys are homies, right? Did he tell you personally that you won the bid?
- [18:45]
Bill Gurley
Yes. The team that won the deal was at an investment bank called Deutsche Morgan Gromfeld. So Frank Quattrone had left Morgan Stanley and we were competing with Goldman and Morgan. So, yes, we won the mandate. But it was a. It was a pretty. Once again, Jeff, being independently minded, it was pretty risky bet to bet on a bank that no one knew. We did have Frank Quattrone, who was the most experienced guy in the business, but that's what happened. Good trivia question. Which bank took Amazon public? Most people can't get that one.
- [19:16]
Nicole Lapin
I don't know that. Definitely a trivia night in the Valley. But let's zoom out on AI. I mean, the biggest market question, you alluded to it earlier, that I'm sure you're getting, I'm getting over the last six months is we could probably say it in unison. Are we in an AI bubble?
- [19:35]
Bill Gurley
Yes. So there's a great book by Carlotta Perez where she talks, she studies tech, innovation and waves for over 400 years. And I think this is like, I think this is beautifully elegant. But what she says is if the wave is real and there's people getting rich quick, which is true here, you eventually are going to track charlatans and speculators. So the. The most people want to put you in a box and say if you. Do you think it's real or a bubble? And what she says, if it's real, there will be a bubble associated with it. And I agree with her analysis. So I think AI is real and there's bubblish behavior that's a consequence of it being Real. And I think we've already seen some speculators. We had late here in Texas. We had the Rick Perry data center spac that went up and down already. That's an outsider trying to glom on to a, to a new, you know, thing that's happening. I think the circular deals are really bad. I think they smell bad. I think you can, I did this thing where I just described them to chat gbt. I didn't tell it what industry it was. I just described the structure of the deals and it immediately said, oh that's like Enron and like, you know, it brought up these names. So I don't know why they got started with that. It was the Microsoft OpenAI, the very first deal, which was one where they gave them credits, you know, to use back. But you shouldn't be able to, you shouldn't be able to boost your income statement by leveraging your balance sheet. Like and the reason we know about this stuff is the auditors forced them to disclose it. But when it, when we go over the top and there's a correction which will happen at some point, everyone's going to point to these deals. So there's, look, I, I believe AI is real, it's disruptive, it's fun, it's, my behavior has completely changed. I use open AI 30 or 40 times a day. So. But there's also business behavior that's speculative.
- [21:38]
Nicole Lapin
They're both true and yeah, so, so both can be true at the same time. But the circular spending is a concern. It's not necessarily illegal, it just smells bad. So can you explain like in the Microsoft OpenAI example, just follow the money trail.
- [21:54]
Bill Gurley
Yeah, yeah, so, and by the way, I, I, you know, this is an argument to have with, with some super experienced auditor, although they typically won't go on podcast and talk. I've tried to have auditors come talk. Like people think that auditing is this black or white thing, but there are many gray areas and I can assure you not from knowledge. But just once the Microsoft deal happened, the next person, their auditor probably said I'm not sure. And they go, well Microsoft did it. Like they pressure them to say it's okay, but here's, here's what Microsoft did. So in the very first deal with OpenAI, Microsoft invests x billion dollars. Let's just say it's 500 million. But instead of giving OpenAI cash, they give them credits to use Azure. And so they in, by making this investment they're assuring they're going to have revenue down the line and then, and then OpenAI uses those credits and Microsoft counts that as revenue. But guess what? There was no, there was no cash flow. So it's cash flowless revenue for Microsoft and that should be questionable. It's certainly low revenue quality. You're right. I can't prove it's illegal, but it's extremely low revenue quality for a reason. And now it's, it's all over the place. I mean just, I guess Nvidia committing $2 billion to Core Weave when Core Weave may not have another source of funds like, and it's just, it's not good. It's, it's, it's very non ideal.
- [23:31]
Nicole Lapin
Not money laundering.
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Bill Gurley
I don't know, that's a pretty strong word, money laundering. But it, it is, you're using your balance sheet to prop up your revenue, you know, and, and those, when you do that, the revenue that you get in the future doesn't create positive cash flow for you. Like if you give credits, it certainly doesn't. And, and in the case of, if, if Nvidia invests in Core, we're giving them the money, but then they're giving it back, you know, and so there's no incremental cash flow. So you have revenue without incremental cash flow. And if, I mean that's, I think Buffett would, would puke all over that.
- [24:11]
Nicole Lapin
And there's so much comparison to the dot com bubble. You were at benchmark at the P. Yeah. How do you see it being similar or different to what we're seeing right now?
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Bill Gurley
Well, it's, I think you can point to certain things in both directions. I think the, there were, the revenues weren't as big in the companies back then. And so a bull would say that there's more real spend here from the end customers, the enterprises and the consumers. One thing I would say, most of the circular deals back then involved debt. So they were loaning. Cisco was giving loans to companies to buy their products. But debt comes due fairly quickly. Using equity to do it would allow for it to run for longer because you don't have to pay it back. And, and so in some ways it's more speculative to use investments than loans for that reason.
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Nicole Lapin
You mentioned being on chat GPT 20 times a day. So you're a chat GBT guy.
- [25:15]
Bill Gurley
I try and use them all. And, and there was a time where for current things, perplexity was better. But then chat GBT caught up a little bit on, you know, doing a search like recognizing you're looking for something current, doing A search and coming back at you. So that differentiation I felt got closed. But I do try, and I do try and jump around.
- [25:39]
Nicole Lapin
It seems like all the SO are ravenously running toward AGI. What do you think that looks like? And who do you think wins?
- [25:47]
Bill Gurley
I'm probably on the other side of this one, Nicole. I just, I think there's a lot of rhetoric in the U. S. Model business, and I think a lot of that rhetoric is purposeful to try and attract regulatory capture. And I'm not as convinced that, that the sentient AI is right around the corner. So. And there are other people that are smarter than me about this that agree with me, and of course there are other people on the, on the other side, but I'm not, I'm not personally sitting around worried about it.
- [26:21]
Nicole Lapin
So what are you sitting around worried about right now? What scares you about this market outside of AI, where do you see the opportunities?
- [26:29]
Bill Gurley
Yeah, I mean, I would say one thing that, that I use the word scare. I. I think the venture capital industry, you know, from the day I entered to the day I left, only got more competitive. And since I've stopped doing new investments, I would say it's gotten even more competitive, competitive. And what, how that manifests itself in the markets is the vast majority of new investments in successful companies are preemptive and proactive, which means the company didn't go out looking to raise money. The investor came to the company and insisted they take their money. And I experienced this in the Uber lift situation. It is, it creates a situation where these companies have burn rates that are much bigger than anyone before them. And you know, it's funny, when, when Uber was burning 1 or 2 billion a year, everybody thought we were crazy. And now open AI is burning a number that's a multiple of that. And so that, that means you're in these businesses where it's kind of a sport of kings and you got to get comfortable with massive burn rates. And you're not allowed as a founder or an investor to say, hey, let's just sit around and be disciplined. We're not going to do that. So if you take like the legal AI category, you can have ChatGPT do this analysis for you, but there's like eight companies that have raised over $100 million. So if you're, if you're an entrepreneur, 14 entering this market and you think like, you know, you're just, you're dead. You're dead man walking, like, you got no shot, because there's just going to be so much Money spent.
- [28:12]
Nicole Lapin
I mean I wish it was the sport or game of queens, but it's not.
- [28:16]
Bill Gurley
Yes, that's, that's a fair, that's a fair pushback on the term. But, but what I meant was that everyone out there has massive amounts of money and you're very unlikely to be able to compete if you don't, if you, if you don't have access to a similar amount of money whether you like it or not.
- [28:37]
Nicole Lapin
I think everybody would like to have more money.
- [28:39]
Bill Gurley
It's dilutive. It's dilutive. You, it pushes up your valuation. Your valuation really represents discounted future expectations. So now if you raise money at really high prices, you got to perform higher or you run the risk of a down round. Down rounds in private companies are messy as all get out. I, I'm not, I'm not convinced that for a founder always having more money is a good thing. I think there are a lot of negative consequences.
- [29:07]
Nicole Lapin
So outside of tech and AI, do you see other opportunities? Ray Dalio who's been on the show, you know, has his all weather portfolio that stocks and long term bonds and intermediate bonds and gold and commodities.
- [29:21]
Bill Gurley
I've spent my life as a venture capitalist, not as a lp. So I mean I've generally every time someone asks me for investment advice, I ask them if they've read a random Walk down Wall street by Burton McHale and if you haven't like go read that and then let's have a conversation. But I generally believe unless you have a reason to know that you have an edge in a particular field, you should run a well balanced portfolio as Burton would suggest, you know. And so whether or not someone knows want have an edge is really a question for them, not me. But in general that's, that's, that's how I feel. If I were to say one thing, the SAS companies have been beat up pretty bad late recently, very recently. And if you had a correction that was caused by AI that took them down even further like that would be I think an incredible entry point for some pretty strong positive cash flowing stocks. And I, and I'm, I'm also somewhat skeptical of this argument. Some people have made that because AI can write code they won't buy software anymore. And I just like, I can't imagine someone saying like replacing SAP with you know, just telling AI, oh well, we'll just dump our transactions into AI and see it. Like I really can't see. I don't think the auditors would be okay with it. It's just too cute. It's a step too far. So I would, I would watch and wait for a bit more of a correction. And then I think you can get some real bargains in non AI stocks, B2B stuff.
- [31:01]
Nicole Lapin
So you're talking about the sales forces of the world?
- [31:03]
Bill Gurley
Yes. Yeah, yeah. I mean, I think you could, like there are certain companies like Adobe where you may be more susceptible to AI risk. But yeah, I'm talking about, you know, workday SAP, those kind of things. Yeah, if those get beat up even further, I think you're picking up stuff really cheap.
- [31:21]
Nicole Lapin
How often do you check your portfolio?
- [31:23]
Bill Gurley
Not as much as I should at this point. Not as much as I should at this point. There's another trade I like which is here I say you should all index and then I'm going to give specific names. I really like this battery manufacturer in China. I think China is extremely well positioned to serve solar and battery demand across the world. We don't have any competitive products whatsoever in the US and you know, Elon recently when he was at Davos, he said we should cover like a small fraction of Utah, Nevada with solar panels and we could serve the whole energy in the US and the person said, well, why won't that happen? And he said, because we can't import these Chinese products because of tariffs. And so that's a, that's a big hint to me that the rest of the world's going to buy a ton of this stuff. And this, this, this company is particularly innovative. So it's an innovative exporter in China.
- [32:21]
Nicole Lapin
Say the ticker one more time.
- [32:23]
Bill Gurley
It's catl. It trades on the Hong Kong exchange.
- [32:26]
Nicole Lapin
And just as a reminder, not financial advice, research.
- [32:31]
Bill Gurley
And I do own it for full disclosure.
- [32:33]
Nicole Lapin
Thank you for that. My next question, you know, we talk about this idea of private markets being risky, but another way that people have exposure to private equity or private company stock is being employed by them. And you talk in your book about how you were offered stock options for the very first time and you're in compacts. One of the most popular episodes we've had on the show is actually how to assess stock options as an employee. When you're joining a company and you're being offered base salary plus options, what are good things to look for in order to see if it's worth taking a smaller salary in exchange for?
- [33:12]
Bill Gurley
Yeah, so I mean, I could imagine all the different kind of things you guys could have talked about because it's quite complex. Most people that take stock options probably have no idea how many total shares Outstanding they are, which is a really important thing to know if you're going to try to attempt to value what you're getting. Unfortunately, there's this practice called 409A where you try and have an opinion of what this company is actually worth. And I think from a, just purely from a financial rigor standpoint, that process is really sadly imperfect. And so that number is not something I think you can hold much weight on. I mean it, it's, it's important to know what the strike price you're being offered is compared to what you think the company's worth. And you need to know total shares outstanding to pull that off.
- [34:08]
Nicole Lapin
I think compared is the interesting word there or just context in general, because I think people see a big number or a bunch of shares and they're like, oh my God, I'm going to be rich. And then end of story. In the episode we talked for sure about the number of shares outstanding, the founders goals for liquidation events.
- [34:26]
Bill Gurley
I mean people don't know this, but a company can have as many shares outstanding as it wants. So some founders have made the argument that if they just say, okay, well we'll have 400 million shares, then when they, their offers to the individual will have more absolute shares. But then on the eve of the ipo, you might do a, a big ten to one reverse split to clean it up before you go public. And all of a sudden the number of shares that person has gets cut in by 10. And that happens frequently. So yeah, you really, you really need to know. Total shares outstanding. Probably the thing that matters most though is that the company's really well positioned and going places. And there's, there are multiple reasons, especially for someone early in their career to jump on a Jim Barstow. You say get in front of a parade. Like if, if, if the company's working really well, two things are going to happen regardless of how many shares you get. The, if it's growing really fast, the opportunity for advancement is really high. You know, if you're in a company that doesn't grow, in order for you to move up, someone's got to get fired or quit. Like because you're not hiring in these companies that are expanding aggressively. You know, if you're doubling headcount every year, there's management opportunities coming up all the time or the ability to move up. And then two, you're going to be around some of the brightest people that you could ever imagine being around. If you're at a hot company and those networks are going to give you Value long into your life. And so when young people, you know, ask me about and if they don't have some massive passion to like start a company themselves or whatever, you know, I think being a part of something that's really working for a year or two or three or four can be super helpful to an early resume.
- [36:23]
Nicole Lapin
But maybe beat low expectations like in your mind assume it could also be worth nothing.
- [36:31]
Bill Gurley
Yeah, oh yeah. But, but, but I'm making a different point I guess which is the long term impact to what you may be worth from merely improving your network and being exposed to great people might mean more than whatever the options are worth.
- [36:51]
Nicole Lapin
You're talking about the intangible value.
- [36:54]
Bill Gurley
Yes, yes, yes.
- [36:55]
Nicole Lapin
And a lot of our listeners are first time investors wanting to get into the market. I'd love to just briefly talk about your previous life as an analyst on both buy side and sell side. Yeah, decode for us when you hear in the headlines like analyst so and so changes stock, such and such from hold to buy or yeah, you know, whatever. Who is making those calls? How seriously should we be taking them?
- [37:21]
Bill Gurley
I wouldn't take it very seriously. So the, the spent four years of my career as a sell side analyst. So most of the people that are quoted that way are at sell side firms. And what the term sell side means is they're being paid by the companies that want you to trade stocks. And, and, and the, their, the purpose of what they're doing is to get you to trade stocks. Now it, the, the amount you can make for trading a stock used to be a lot higher before automated trading. And there were some famous things that happened during the dot com period that caused Elliot Spitzer to build this wall. And the sell side analysts don't make nearly as much as they used to, but they're still the ones that are most quoted. But, but I find that a lot of what they write is just a regurgitation of what the company told them to write. They don't have, I'd be much more interested. Personally. You can't get this information. But if the buy side was making a call. So the people that actually buy or sell the stock, like if you see, you know, an investor you respect like a capital group or Fidelity move out of a stock, that's a bigger signal, I think a more important signal. Unfortunately the media doesn't track that as much as they could. The filings are a little delayed. They're like 90 days delayed. They could not pay that much attention to it.
- [38:47]
Nicole Lapin
Yeah, we had to that point. We had A big fund manager on the show saying that it's a lagging indicator because of that delay. So, you know, but when you go onto a brokerage, you see a lot of, you know, reports and it's kind of fuzzy to see how much weight you should put.
- [39:04]
Bill Gurley
Yeah, yeah. Even though I came from that world and loved every minute of it and I would like to think I was differentiated, I, I just think you asked the question. I'm giving you my, my opinion. I wouldn't put that much weight on.
- [39:18]
Nicole Lapin
I appreciate it. Loving every minute of it. You've also said that you've gotten your dream job in vc. You talk about this realization in your book. Getting your dream job or even liking your job isn't necessarily a given that you have to continue to make it your dream job. How do you do that?
- [39:37]
Bill Gurley
Well, for me, I've discovered something in talking about the book that I didn't know because everybody likes to go through my journey. I didn't realize I was doing it, but my first job was as an engineer. My second job was as a sell site analyst. And in both cases, about two or three years in, I had a moment where I asked myself the question. I reflected and asked myself the question, do I want to do this for the next 30 years? And in both cases, I reached a point where the answer was no. And I don't know how many people take the time to ask that question. You get caught up in the moment. You're, you know, you're trying to get ahead, you're working. It's not a, it's not a question anybody provocatively tells you to ask yourself. But there's quite a bit of data that when people get towards the end of their life, their biggest regrets. Daniel Pink talks about this a lot. Their biggest regrets are regrets of inaction. They don't hold. They're not mad at themselves for the mistakes they made. They're mad at themselves for the things they didn't try. Daniel calls them boldness, regrets. And so if you want to, you know, life short. I have a phrase in the book, life is use it or lose it proposition. And I think it's awesome to explore. I think it's awesome to. I don't think anyone should be feel guilty if they're in a job they don't love. But, but give yourself the opportunity to move on and be flexible about. A lot of people change jobs, A lot of people change careers. Nothing set in stone. Plenty of people end up working in areas that are different from their major and so just Be fluid, be flexible, and ask yourself this question, you know, do I want to do this for 30 years? And if not, man, life short. Go do something else. Have fun.
- [41:26]
Nicole Lapin
I thought it was really interesting in the book that you have the study with Wharton that said nearly six in 10 people would do things differently if they could start over. They had wished they had followed their interests, but also a ton of people in the survey said they wish they made more money.
- [41:42]
Bill Gurley
I think there's quite a bit of data, through a bunch of different research, that money doesn't drive happiness. Like, and. And one of, one of the things I was careful to do in the book, we have a number of stories. In fact, every other chapter is a story. And I was very careful to pick industries that are the kind of jobs where your parents might tell you not to go into them. Because I think one of the problems we've gotten to is parents with, with very strong positive intentions push people towards jobs where they can make money. But if you're. If you're unhappy, like, I just don't think it's going to matter how much money you have. And one of the things that I hope I uncovered with the stories in the book, if you go into a sector that may not be one that's known for making money, but you thrive and you really love it, the wealth tends to follow. And so I would, at this point in time, with all the data from all these surveys. There's another survey in the book, you didn't mention the Gallup poll survey that only, like, 23% of people would call themselves engaged at work and like, 59% are quiet quitting. Like, that's not ideal. Like, that's not an ideal way to go through your whole life.
- [43:03]
Nicole Lapin
I just worry a little bit, Bill, about this. Follow your passion rallying called, because I think there has to be a baseline. Unless you're from a privileged position or family, you know, there's no shame in obviously needing money to feed yourself or your family. And sometimes your interests don't lead to even that baseline. So that makes people feel bad that they're optimizing for money.
- [43:27]
Bill Gurley
Here's what I would say. I would not. I would not hold out to you the argument that the point of the book is to be a operating manual for every human on the planet for every job. The goal of the book is to help unlock human potential, to give those people who have the little bit of inkling or a little bit of spark or a little bit of fire the permission to go do what they love. And I think for those people, they're going to have a much more satisfied life if they do it. And I think the money will follow. And, and one important corollary and caveat to that is they're gonna have to work their butt off, you know, and so though all those things have to line. I know, but, but I, I do think that if we have more of those types of people in the world, the world's a better place. I think they're the ones that will dent the universe. They're the ones that will change their fields. They're the ones that, that you'll be inspired by. And so the goal of the book is to create more of those types of people. And certainly I think a number of people won't qualify for that for that mission.
- [44:38]
Nicole Lapin
I mean, for me personally, I made my job, my dream job out of necessity. I started as a poetry major, and so continuing on that passion wasn't going to pay the bills. But once I got into business news, I sort of found the shaded part of the Venn diagram of what I love to do. And then these I had. So I started writing like I incorporated some of what I wanted to do into, you know, the jobs that I had to pay the bills, no doubt.
- [45:06]
Bill Gurley
And look, there's a number of you said which I double click on. First of all, a lot of podcasters are in their dream job, like they love. They get to talk to interesting people, they love it. And most of them, and you, I doubt you're probably similar, kind of created the job yourself, right? You didn't apply to be a podcaster somewhere, right? This is something you went out and hustled and made happen. We use a phrase in the book, be a candidate of one. And so many of the stories are people that are purposefully creating the job they want. A good friend of mine, his name, Mike Mobison. Mike loves reading books about the brain and investing and talking about investing. And he has found a way for 30 years now to get paid to read everything he possibly can and to synthesize it. And his career is very non traditional. He's, you know, found people to hire him that appreciate that he does that. But he's got to do what he loves, you know, his entire life. And that's the kind of thing I'm talking about, like helping people to unlock that. The, the example you used about thinking about what you're good at and what you love. There's a story in the book about this gentleman who lives here in Austin, Texas, that was a seismologist undergrad, did that for a while, became a mortgage broker. He's 40 years old. He's watching a PBS show. And someone has an exercise where they take a blank sheet of paper, they draw a line down the middle, put what they're good at on one side, what they love to do on the other, and try and find an intersection. And that is how Tito's Vodka was started. That. Him doing that simple example with that sheet of paper. Most successful spirit brand in America. He owns 100% of it. It all started from that exercise. And this gets back to my point about, like, if. If someone said the day, the time stamp date, when, When Tito started Tito's, I'm going to start a beverage company in Austin, Texas, they would tell you, you're not going to make money doing that. You're going to fail. That's a. That's a quixotic thing to go do. And he's one of the richest people in America today. And I just. I have examples in the book that are more realistic that maybe relate to your major. But, like, there's a gentleman who fell in love with the Grand Canyon and started writing about it, and he's published several books now and has a podcast. And, like, he has enough listener. He gets, you know, he's doing fine, you know, and. And loves what he does. There's another one that does the same thing for Texas horticulture. And if you can do it in those fields, I think you can do it in almost any field. You do have to love it. I had this argument, a similar argument, about whether you should chase your dreams or not with a counselor at one of the top universities in the country, and brought up poetry, and I brought up these examples, and she said, yeah, but you'd have to work really hard. And I said, yes, absolutely, you'd have to work really hard. Yeah, look, one of. One of the big points we make in the book is that if you can find something you're fascinated by that you're extremely curious about, it won't feel like a grind. You'll be out there doing continuous learning all the time. And that means when working hard won't feel like working hard and you'll be successful. And by the way, the flip side of it is an interesting lens to which to evaluate. You send someone into a job they don't love, if they're competing with someone that does love that job, that other person's going to be out there doing continuous learning, doing the networking, the mentorship, connecting with peers, and you're not going to. You're going to fall behind and because the other person's just going to be more motivated. So that's a dangerous trap, I would argue, of just going into a job because you think it's safe.
- [49:14]
Nicole Lapin
Well, you mentioned a dream job being podcasting, and you have an excellent, the most excellent podcast voice. Uh, but I think you know that. And you did an episode of the BG2 pod that you used to co host where you talked about the next phase of your life is all about giving back. You said that this was something you were looking to do not only with the book, but quote in the next project after the book.
- [49:42]
Bill Gurley
Yeah.
- [49:43]
Nicole Lapin
So sounds like you already know what that project is, but can I guess?
- [49:46]
Bill Gurley
Yes, I do. Sure. Anything in politics, somewhat related. So, first of all, one of the things allowed me to focus on this book and people have asked me why, why I wrote a book about careers. Why didn't I write a book about vcs or investing or tech or any of those things. And once I decided to hang up my boots from venture investing and started thinking about what I do do with my life from here forward, I read this great book by Arthur, Books From Strength to Strength, which is really targeted writing for people where I am. And I think I did make a decision that finding a way to give back was what I wanted to do. And once that decision was made, this was really the only book I wanted to write. I had done the speech on this topic six years earlier and, and so I knew the content was there. But this book hopefully has ability to impact a way broader audience than writing a VC book would have. So I'm hopeful for that. I also, I'm going to turn my attention to a foundation that's associated with the book. So we're going to give out five thousand dollar grants to people that apply, that want to chase their dreams and need a financial boost. So I'll be doing that. But, but that's not the thing, that's not the thing you were asking about. And there's the last page in the book talks about the, the foundation and there's a website.
- [51:15]
Nicole Lapin
Well, at the end of the book, I appreciate that you say you could have written an Uber book or a memoir, but you didn't and you found this really cool niche and sweet spot and, and you're putting your money where your mouth is.
- [51:27]
Bill Gurley
My intention past the book is to start a policy institute. So there, there, there was something that happened in the past five years that I, I consider to be a, a win from a Policy perspective and that is, it relates to nuclear energy. So there were a, there were these huge voices that had decided that nuclear wasn't clean. And you had a bunch of people, you know, arguing to tear down nuclear plants. And unfortunately, places like Germany, they, they started decommissioning plants all over the place. And a number of voices, many of who I respect, like Steven Pinker and Elon Musk and, and the Collison brothers, pushed back and they were willing to go out despite the fact that the political winds were going the other direction and said this is silly. Like if. And Josh Wolf at Lux, Josh used to say if we had never had a nuclear bomb and we had just discovered nuclear energy, we'd have been like, oh my God, this solves all the world's problems. And we're sitting here worried about climate change. Anyway, there's also a woman here in Austin, Isabel. I can't. Bomiki, I can't pronounce her last name, but she's, she became like an influencer on this topic. And anyway, it shifted. There was a, there was a moment like a year or two ago where everyone kind of woke up and agreed, oops, that was a mistake and flip back the other way. And now there's a bunch of people that all agree nuclear is really smart. And so I'm going to be looking for opportunities that have that type of thing. I don't want to lobby, I don't want to get in and deal with little bitty state by state laws. But I'd like to find big ideas where some research and some synthesis can lead to better thoughts and decision making. Topics that interest me include nuclear, the US health care problem. I just want to go tilt at that. I don't, I really don't have an answer. I want to go learn for a long. But we got a real problem. US China relations, the K through 12 education system. In America. In America I think could use an overhaul. And I just want to figure out what those big top down type decisions that could be made that could potentially fix some of these things.
- [53:55]
Nicole Lapin
Fix it, Bill. Those are the biggest ones.
- [53:58]
Bill Gurley
I mean it might be a quixotic effort, but it's what I'd like to spend my brain time on.
- [54:04]
Nicole Lapin
Quixotic is an excellent word. You've used it twice and I really appreciate it. So it sounds like the dream that you're running down now is policy.
- [54:15]
Bill Gurley
Yeah. And by the way, it took me, and who knows, I may get into it and not like it, but it took me a while to come to that conclusion. A lot of people wanted me to go be an angel investor. A lot of people wanted me to manage my own money. A lot of, you know, there were. There were people pushing me in different directions, but this is the one. And it took. Took a couple years. And, And, And Arthur Brook's book really helped on this also.
- [54:41]
Nicole Lapin
He's been on the show, and I agree. I agree that the linkage there is really asking yourself, not everybody else.
- [54:48]
Bill Gurley
Yeah.
- [54:49]
Nicole Lapin
Will bring you happiness. We end all of our episodes, Bill, by asking our guests for a tip they can take straight to the bank.
- [54:56]
Bill Gurley
I'm gonna steal one from the book that we hinted at, but I. I fundamentally believe that the most advantaged people in any field are those that have this commitment to continuous learning. And I don't think you can fake it, and I don't think you can muscle your way through it, because you'll burn out. And Duckworth, Angela Duckworth has come out, like, 10 years after she wrote Grit and said, I probably should have put more weight on passion and perseverance because we've taught these kids how to grind. But eventually, like, they just burn out, like, if they don't love it. And people like to talk about AI taking jobs. And I'd like to make an argument that for those that are curious and are fast learners in their field, they're going to. They're going to. It's going to be an accelerant. They're going to move faster as a result of AI being out there. But you got to. You've got to want to learn. It's almost got to be for free. I've. I've used the phrase, like, it's got to compete with Netflix, like, do you want to go learn about this more than you want to watch a TV series? And if you can find that place, I think you're going to have an awesome life.
- [56:14]
Nicole Lapin
Well, the cool thing about learning is that the more you learn, the more you realize there is to learn. And so the cycle continues.