← School of Hard Knocks Podcast
School of Hard Knocks Podcast
Bill Gurley | Legendary Investor on Missing Google, Backing Uber, and What Makes Billion-Dollar Founders
00:57:16
Bill Gurley, legendary venture capitalist and early investor in Uber and Zillow, shares the principles behind identifying billion-dollar companies. He reflects on missing the Google opportunity, lessons from evaluating thousands of founders, and why e...
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- [00:00]
James
One of the most renowned and greatest venture capitalists in the entire world, Bill Gurley, talking about companies like Uber, like Zillow, the companies that people use on a regular basis.
- [00:09]
Jack
You had the idea to get involved in that industry before Uber even touched your desk.
- [00:14]
James
What did you see in that moment that all of your peers did not necessarily see and believe in?
- [00:19]
Bill Gurley
This is a punchline. You've been waiting patiently for this long answer. But there's this phrase that Josh Wolfe of Lux Capital has. He says, chips on shoulders put chips in pockets.
- [00:30]
Jack
You had an opportunity to invest in Google when they had about 25 employees. When it came across your desk, why did you make the decision to not invest into Google at that time?
- [00:39]
Bill Gurley
And by the way, this concept of chips on shoulders, had I done that, like, my venture career might have ended a lot soon.
- [00:47]
Josh
Ideas are cool, but execution is everything. You're evaluating thousands, if not tens of thousands of deals that come across your desk. What are the traits that you look at that makes you want to lean in versus, like, this guy doesn't have it?
- [00:59]
Bill Gurley
I'll give you a few. One I borrowed from Jeff Bezos.
- [01:02]
James
If me and you died tomorrow and you had one more message to leave with the younger generation, what would that be? What's going on, everyone? Welcome back to the School of Hard Knocks podcast. I'm James. I'm here with Jack and Josh, and we are out in Austin, Texas, with a phenomenal guest for you all today, one of the most renowned and greatest venture capitalists in the entire world, Bill Gurley. Bill, you took bets on some of the biggest companies in the world early on, right? We're talking about companies like Uber, like Zillow, like the companies that people use on a regular basis, man. So I first want to say thank you so much for being with us today, my friend.
- [01:36]
Bill Gurley
I'm glad to be here. Absolutely.
- [01:38]
James
So you went from Wall street to then going into venture capital, right? Going to different parts of the world where I want to get things started. And we'll touch on a whole bunch of things today. Take us back to 2011, right? You're in the boardroom. You're sitting across the table from, at the time, a scrappy startup, right? What was like a niche black car service that a lot of people believed, but you were willing to put your reputation on the line as an investor. You backed Uber in 2011, which went on to become one of the greatest bets in venture capital history. What did you see in that moment that all of your peers did not necessarily see and believe in?
- [02:16]
Bill Gurley
The main thing is that I had been fortunate enough to be involved with a different company a short time before that called OpenTable, where you make reservations for restaurants. And the bet that we made when we back to OpenTable there'd be a network effect that if you got more people on the system, the rest you'd get more restaurants on the system. You got more restaurants on the system, be more compelling to get people on the system and that you'd basically build a have a very high likelihood of a network effect where it would tilt towards there being a single player. And when we made that bet, a couple of my partners pushed back and said, you know, no one's made money selling tech to restaurants because SMB sale. You know, the economics are tough and our pushback to them was. But if the network effect works, the sales will get easier. And I could tell you a story that was a proof point on that. That's really cool if you want, but I'm going to get to your question next. I then started thinking to myself, if you could put a digital infrastructure on top of other industries, in what ways would that unlock power? And in the restaurant case with OpenTable you can say I have eight people and we want to eat Mexican on Thursday night at 8pm and do a parametric search before OpenTable you not do that. You'd have to call each one of them like it. And so it unlocked a consumer value proposition that didn't exist. And the more I thought about that problem and at the, at the time I was, I was traveling as a venture capitalist and visit a city and I had traveled as a sell side analyst on Wall street and you know, I don't know if you got. Well, you can't, you don't know because you only have lived in Uber but before Uber you would go to Chicago and you would, you know, you couldn't really get a rental car because the parking's too harsh. So you'd have to hire a black car service and you'd get back to the office and be going through your 10Es and you would have spent as much on the black car that day as the plane flight back and forth. And 90% of the time the driver's just sitting there waiting for you to come out of your meeting. You know, and so it dawned on me that, that if you could have a fabric on top of of that that you would have this hyper level of efficiency unlocked that you, that would. And I went and met with. This is a very long answer to your question. I went and met with all of the startups at the time that were thinking about that and the vast majority were in the taxi space. And so they were trying to put a layer on top of taxis. And the more I looked at those, there was a couple problems that were really big, which is one, in most markets, taxis are either a monopoly or a duopoly. So there's these, these people that have a power that aren't going to listen to you. It's regulated so you couldn't move the price up and down. And I knew that if you wanted to create a digital marketplace, you want to use price to cause liquidity, to get courage, drivers to come out at the right time. You'd hate to give up price in a digital marketplace or auction like you never would. And then they're a crappy user experience and putting a network on top of it wasn't going to get rid of that. And I think they're a crappy user experience because it's a duopoly or a monopoly. Like you don't have true competition, regular regulatory lock in. So this is a punchline. You've been waiting patiently for this long answer. But I said to my partners, if we ever see a company that's putting a layer on top of the black cars, we should run at it. We sought the investment pretty hard and that's what happened.
- [05:52]
Jack
So you saw, you had the idea not for Uber, obviously, but to get involved in that industry before Uber even touched your desk.
- [06:00]
Bill Gurley
Well, and Garrett Campbel, who was the co founder with Travis, probably had the same idea. Like, I don't. One thing that I believe about startups is ideas are a dime a dozen. A lot of people have the same idea at the same time. A lot of founders will go, they ripped me off, they copied it. But you know, things happen. Like you guys start a podcast, other people start podcast. Like it's not, it's not unique. It's the execution that differentiates who's the winner.
- [06:29]
Josh
You know, and that's what I think is so interesting is like, ideas are cool, but execution is everything. And especially when you look at like from a VC lens, you're evaluating thousands, if not tens of thousands of deals that come across your desk. What are like the traits that you look at within a founder that makes you want to lean in versus like this guy doesn't have.
- [06:50]
Bill Gurley
I'll give you a few. And the first one I, I borrowed from, from Jeff Bezos, I had the opportunity to, I've had the opportunity to chat with him a number of times, but One time I asked him, how in the world have you made so many incre angel bets while you're running Amazon? Because it's not like he's got a lot of free time. He said, I only look for one thing, the determinism of the founder. He said, I want to believe this person's going to go do this come hell or high water. Whether I get involved or not, nothing's going to stop them. And that's the trade he's looking for. I thought that was interesting. The second thing I would say is the job, the founder job requires salesmanship at a level that's probably easy to underestimate and very hard to achieve. If you are the founder, you are, first of all, you're selling the customers you're selling to. Second, you're selling to get investors. Third, you're selling to get employees. You're also the chief culture officer for the company and that's a sales job. And then you're also the chief PR person, which is the external audience and that's a sales job. So you're just, you, you have to be good at some form of sales. Different people sell in different ways. There are quiet killers that sell, you know, that way and there are people that pound the table that sell that way. There's lots of ways, but you have to be good at it. So you brought up, and if you, if you fund a timid founder, you're gonna, you're gonna lose.
- [08:15]
James
You brought up the determination that that founder has. But at what point does that person also have a track record and credibility? Right? Because somebody may have that burning desire and the fire in your eyes, but is there a certain level of, you look to make sure that they've had a track record, had an exit before, built a successful company?
- [08:32]
Bill Gurley
I don't, I might push back on. I'm going to add two things and then come to your point. It took me probably my entire career to fully come to grips with this. They have to be good at product. And it's just, it's just real. Like most of these companies are able to break through because of some technology dislocation or disruption. And being good at product means you can see through that better than others. And so that's important, really important. And lastly, they're almost all hyper curious learners. And so the only way you can navigate the new thing, AI is the new thing now is to, to be in it every day. Like, like if, if you have a founder that hasn't put a clawbot together yet, like that's A problem. The thing I was going to say to you about had they done it before? You know, one of the amazing things about Travis, the founder of Uber, is his previous two didn't work out. And there's this, there's this phrase that Josh Wolf of Lux Capital has. He says, chips on shoulders, put chips in pockets. And so, like, like, it may just be that, that having not succeeded before gave you more firepower, more of that first thing, the determinism. So I wouldn't sort only on that. If someone failed five times, like, and, and also you can look at how they failed. Like, like, was it effort or was it the market didn't pan out like, the way you thought it would and that kind of thing. I, I, I, in the first three or four years working with Travis, I, I had this sense that he recognized the uniqueness of the, of, of what had been built, of what he had built, and that those first two tries didn't have that, like, you could have put the best operator on top of what they were doing and it wouldn't have mattered. But, and that he, I think I said publicly once, he, like, felt an obligation to the entrepreneurial society of the, of America, which doesn't exist, but as an idea to give it everything he had because he knew these kind of pitches don't come along all the time. Does that make sense?
- [10:47]
Josh
One of my favorite things, probably one of my favorite quotes on Hard Knocks history, one of the things you just drop right there, chips on shoulders, put chips in pockets.
- [10:55]
Bill Gurley
I borrowed it from Josh Wolfe. Like, to be fair.
- [10:58]
Josh
Well, I'll just say, I mean, I even, like, look at my own story. Like, I mean, I had a couple failed ventures before Hard Knocks, but all through every single venture was a lesson and a skill that I learned to enable, you know, like one of, like, enable the success of part of the reason that we're here today.
- [11:16]
Bill Gurley
Yeah.
- [11:16]
Josh
And what I look for, what I think is just so interesting, is like, that chip on the shoulder mentality is just so important. But, like, another thing is, you said that you want a founder that is obsessed with product. Yeah, but that is one side of a business. One of the other businesses I want to look at is like a physical product business. We're in a podcast studio right now.
- [11:35]
Bill Gurley
Yeah.
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Josh
And so there's not really a huge product per se. It's more of a service in a way. If you were looking to launch a podcast franchise and you're looking to bring in, hey, I need, I need an operator. I want an operator to come in and scale this. What are the qualities that you would look for within that founder for a physical product business or I'm sorry, a physical service?
- [11:56]
Bill Gurley
Yeah. One of the things that you develop as a venture capitalist is a instinct for the types of businesses that can scale and be valuable. And one of the benefits I believe I had of working on Wall street for four years before I bec venture capitalist is I had a sense of the type of business structure that could scale and become really, really big. And so I haven't spent a ton of time in the type of business you're in. I'm going to give it a go. But I with, with that qualification going in. Obviously the king of the kings is, is Jimmy donaldson, you know, Mr. Beast. Like, like he, he's actually profiled in my book, which I hope we get to talk about. But, but an affection for YouTube, like he had a very strong affection for YouTube and I think considered it a game of sorts and how do you win the game? And I think that's true in this category as well. There's, there's, there are people that are good at it, part of the product. And by the way, I would, I would add one more thing to that list earlier of founders, many of our best founders had a go to market advantage. They figured out some structural way to get customers in an advantageous way to whatever the traditional method was. I'll give a little behind the scenes in promoting my book. I was approached by Cold called by someone I had never met who said you're really good at X and Twitter but you have no profile on Instagram whatsoever. And he said let me work for 30 days free and see what I can do. He's done it. I went from 50 to 15,000 followers in four weeks. And so there are tools, I mean there, there anytime you're in a new world and by the way there's, there are techniques of the craft that will let you soar higher and faster. And in a service business, you know, it's hard to tell the difference between go to market and product and because those things get all intertwined and how you promote yourself and whatnot.
- [14:01]
James
Could you actually tell us your turning point? Going from being a very successful Wall street analyst at the bank you worked at to then going into venture capital.
- [14:08]
Bill Gurley
Yeah.
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James
Was that always something that you set out when you went out of school that the end game was going into invest in businesses or could you tell us what was the transition?
- [14:15]
Bill Gurley
Yeah, and this, this, this eventually like it could even tie into the book. But I had Two careers before venture capital. You know, I was a computer scientist in as an undergraduate degree, I worked as an engineer for two years at Compaq Computer Corporation in Houston, then got my mba, then did four years as a sell side analyst before I became a venture capitalist. When I in that, when I was at the MBA program here at the University of Te Is, I thought about being a venture capital and couldn't figure out a way to affect it. And so I had this other fascination with the people that were doing the research on the public tech companies. And I found my way over there and into that career both in the engineering career and in the sell side analyst career. After a couple of years I asked myself, I didn't read a book that said do this. I just somehow did it instinctively. I said one day I just reflected, is this what I want to be doing 30 years from now? And in both those cases, after a couple years of working there, it was no. And it was pretty clear in my brain. Bezos has this thing called the regret minimization framework. I don't know if you heard about it, but when he was thinking about starting Amazon, he was a very successful employee at D.E. shaw, one of the top hedge funds. And David Shaw was trying to talk him out of leaving and he said to himself, he came up with this idea, he said, if I were 80 and giving myself advice, what would I do? And I think they're similar mines from bottom up and his from top down. But like, like the answer was no. And, and so once I realized that, I started looking for what was next. I'd always had in the back of my mind this little like tinkling and interest in venture capital. And I got a phone call while I was proactively thinking I'm going to leave that they gave me an opportunity to move to the Bay Area and I, I jumped at it.
- [16:05]
Jack
I love the saying that it, you know, it's your 80 year old self giving you advice. I always like to think of when I make life decisions, is this going to make my 8 year old self and my 80 year old self proud?
- [16:15]
Bill Gurley
That's smart.
- [16:16]
Jack
At the end of the day, can it inspire younger me and will my older me look back on this and be proud of this decision?
- [16:23]
Bill Gurley
Stephen Covey, who is famous well before you were born, but has this book, the Seven Habits. Seven Habits, yeah. And one of them is begin with the end in mind and imagine yourself at the funeral. So there's a through line in all those concepts.
- [16:37]
Jack
Absolutely. I actually want to ask you about because I Believe you had an opportunity to invest in Google when they had about, about 25 employees, when it came across your desk, why did you make the decision to not invest into Google at that time?
- [16:49]
Bill Gurley
And by the way, this concept of chips on shoulders, like, like, had I done that, like, my venture career might have ended a lot sooner. But, yeah, I mean, it took me forever to realize that some of the best venture capitalists have this miss list. And the reason they have the missed list is because they're really effective at putting themselves in the right position to have the opportunity, which is a prerequisite to actually making the great investments. And so I was able to forgive myself a little bit in the years that followed because of that. And you're not going to bat a thousand. There's no way. It's a great learning exercise that that happens. So, yeah, I met Larry and Sergey. I was very early in my career. I brought them into the partnership and they presented and we failed to lay Chase. And I always use that phrase because someone said, you passed. Well, if I say I passed, it meant I had a chance. Like, I don't know if we could have got to the finish line. But after we failed to lay Chase, two of the best venture capitalists in the history of venture capital, John Doerr, Mike Moritz, did the deal. And so talk about a moment of reflection, like, you know, as a young venture capitalist, like, okay, I got to the right place. I was pursuing this thing, and then I stepped back. Our firm did, and they ran at it. And so, you know, I gotta start taking notes like I did something wrong. There were a lot of. Venture capital is a weird world where you start to build mental models. You know, it becomes a game of pattern recognition. But if you build too many of those, you're going to miss something. When you miss something, it has an asymmetric return. So if I, If I invest 5 million, it goes to zero. I lost one times my money. If I fail to put 5 million in Google, it's a much bigger number by like three orders of magnitude. You have to learn to bias yourself. My partner, Bruce Dunleavy, came up with a phrase. What could go right? Like, you have to. You have to think that way. And I will tell you, in the history of Benchmark no. 1, we didn't spend much time sweating why we made a bet that didn't work. But we would obsess over why we missed the winners. We would analyze it four times a year. We would study the deals our competitors did. You know, at the time, Yahoo stock had so this is a search company. Yahoo stock had Yahoo. What you may not know this. Yahoo was considered a precursor as a search leader to Google incumbent, if you will. Their stock had fallen from 82 to 10 part of the dot com crash. The company was excite. Another player in that space was going bankrupt. And so you had some market signals that were not positive. Larry and Sergey were two PhD students that were insisting on being co CEOs. PhD students as CEOs and co CEOs are both red flags now they ended up working that out, you know, but it's a red flag. And so you have, there's two data points, you know, that, that weren't positive. Yeah, made the wrong decision. But like I, maybe it was fuel for the rest of my career.
- [20:15]
James
Could you tell us how you went about building your team at Benchmark? Right, because VC is a game where you have to have multiple players in place, right. Like it's not a solo journey when you're building that firm. How did you go about, you know, bringing in the right partners to build that firm?
- [20:30]
Bill Gurley
Well, so I tell you, I have to give all of the credit to the founders of Benchmark, of which I am not one. So I was one of the first non founders to be asked to join. But the founders had worked in what are traditionally hierarchical partnerships. So a lot of law firms, a lot of professional service firms are structured in a hierarchical way. And what that means is there's entry level, mid level, junior partner, senior partner, managing partner, and, and, and all those people make a different salary and all those people have a different set of the economics. They believed that at those firms they were, at the young people were doing the majority of the work and the senior people were taking the majority of the economics. So when they founded Benchmark now the
- [21:15]
James
senior people though, they were the one that were putting up the majority of the funds though, is that correct?
- [21:18]
Bill Gurley
No, not in venture because you, you mostly use external money.
- [21:22]
James
Okay.
- [21:23]
Bill Gurley
Limited partners. They had an idea when they birthed Benchmark that it was going to be an equal partnership and that everyone would make the exact same economic, have the exact same decision making power. And I got invited into that, which was awesome.
- [21:36]
James
Is that a pretty uncommon structure in Silicon Valley?
- [21:38]
Bill Gurley
It was at the time for sure. It's been mimicked a little bit since then and there's some downsides to it, which I could tell you about, but that was the structure as a young person entering the business. I worked for a year and a half at a firm that was hierarchical and I was the junior person and when they came after me like it was such an easy. Yes because you were just going to all of a sudden be advanced to you know, the level that they were at. And there are like 10amazing positive dynamics of that structure that I believe strongly in and there are a few negatives but what a wonderful place to get invited in because I had four very experienced people that were rooting for me because if I found great investments they got to share in that success. Whereas in that hierarchical firm the young people come in pretty sharp elbowed because it's up or out, you know, and I gotta climb or I win, you lose kind of thing. It doesn't exist. That culture was amazing. Could you talk about never look over your shoulder.
- [22:37]
James
Could you talk about the downside of that structure though?
- [22:39]
Bill Gurley
Yeah, yeah. We couldn't scale anything if you. Have you been to our website? No, it's just a flash page. We are completely ineffective at any execution on our own. But it's good because that. I remember Matt Kohler joined us. He said I want to make the website great. And we said go for it. He realized no one else was going to do. Do any work on it. And after a while it got unwieldy and all this stuff and he came into a partner meeting. He said I'm going to take down the website. And we said okay. They put a flash page up and venture business is a service business and the less we have overhead of running our business meant more time in the field with founders. So I think it was a great decision. It was, it was a. It created an amazing culture for someone who is a go getter on their own. Like, like because you're out like trying to find new investments. You're out working with the companies. We're together on Monday but that's it. And then you're outside. And if you're a self starter and someone who's comfortable with that, if you're. Somebody needs to learn and needs structure and all that. It's not that. And they just hired Jack Altman, you know, so it also tilts towards youth.
- [23:51]
Jack
You, you had mentioned that Network Effects is something that is huge for you when you look at potential.
- [23:57]
Bill Gurley
Yeah.
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Jack
Companies to invest in as well as obviously looking at the founder and if they unbelievable determination to make it happen regardless if. I'm sure you see thousands of deals. What are some of those other things? If I was a startup founder and I brought you that. It's like these need to check the box in order for. For yourself to be like this is a home run for me, yeah.
- [24:17]
Bill Gurley
Industry structures want a ton of people miss. I tell, you know, everybody likes to shit on MBAs out in Silicon Valley, but like, there's some good business and there's some bad businesses and like, knowing that is important. And I always tell people to read the first two chapter of Competitive Strategy by Michael Portner because, like, if you're building a product and trying to sell into a consolidated industry, it's really tough. Like you want a fragmented industry where you can sell into. Part of what I loved about both OpenTable and Uber. It's easier to build a network effect if supply is not, if supply is limited. I can't. You know how many people have tilted against Ticketmaster and whatnot. You just can't get the venues on because they're already committed to this other thing. It's not disruptive enough. And Live nations rolled them all up. Like that makes it tough. And so industry structure is one that I think a lot of entrepreneurs don't think through. You know, they just don't know. It's not, it's not stupidity, it's ignorance.
- [25:17]
James
You know, you, you were a pioneer for investing in a lot of these, like, marketplaces, right? Zillow, Uber.
- [25:23]
Bill Gurley
Yep.
- [25:24]
James
You know, OpenTable.
- [25:25]
Bill Gurley
It started with OpenTable, but yeah, a
- [25:28]
James
whole bunch of them though, was that always something that maintained at your core is like, focus on like those specific types of businesses or did you ultimately kind of diversify your investments to other companies?
- [25:39]
Bill Gurley
You know, every venture capitalist is gonna, that starts to have success if they have a reputation in an area. There's a bit of a mini network effect there because the founders know, you know more about it, but they also know that you validate them if you back it. And so it, it's. And, and you know, Ashim Chandra Greylock insecurity, like this guy's run a truck through it, like, and he security company wants to stand out. Boy, if Ashim backs them next, you know, so that, that becomes a little network effect in and of itself. And I think it just related to the timing of when I entered the business, what disruption was allowing for at that moment in time. Getting these smartphones out in everybody's hands, it just was a kind of a perfect storm for me to develop an expertise in.
- [26:31]
James
Yeah. So over the next decade, when you think of all the industries that exist right now, is there one industry that most people, a lot of investors even would consider stable that you think is going to get disrupted big time in the next decade?
- [26:42]
Bill Gurley
I stopped doing new investments four years ago and focused on this book. So I'm going to eventually be an old fogey that can't answer that question. From where I sit, 98% of venture capitalists are only looking at AI and they're AI all day long. They don't want to see another business. And in the past five weeks, the valuations on the non AI companies have been cut in half. And so that mentality is going to be reinforced even more. So there's just no oxygen. If you ran a PE firm, like, maybe you should run around and roll up some of these older businesses because the venture capitalists could give a shit. Like, they do not care if you're not AI right now. I could take both sides. I could debate both sides of whether that's smart or not. From defending the industry point of view, the most money in venture capital is always made when the new wave happens and the incumbents are put at three threat and your ability to jump in front of the wave and ride it. It's just been reinforced over and over and over again. Can you give us that's happening now?
- [27:47]
James
Can you give us that perspective as to why it's not smart, though, to think that way?
- [27:50]
Bill Gurley
Oh, group think. You know, contrarian investing is where you can make the most money. Those would be the reasons not to. But it is what it is. Like, the one thing I would advise any entrepreneur is if you think you can somehow sell around that or get over that, you're fooling yourself. Like that is the game on the field right now.
- [28:10]
James
And you mentioned that these last four years, a big focus of yours is you're releasing a book here super soon.
- [28:15]
Bill Gurley
That is correct. Tuesday.
- [28:17]
James
Okay. Talk to. That's the February 24th.
- [28:20]
Bill Gurley
Yes.
- [28:20]
James
Talk to us about the inspiration behind that and what some of the young entrepreneurs listening right now can expect to get out of this book.
- [28:26]
Bill Gurley
Yeah. So I spent the majority of my career using writing as a differentiator, it turns out. I also think it helps you think think. I think Bezos would agree with that. He has an annual letter and Buffett has an annual letter. Like I think you some people say, like, teaching is the best way to learn. And I think when you write your ideas down, it forces you to think about are they intellectually consistent, how would someone think if they read this? But it also creates flypaper for deal flow and your reputation and network. I mean a lot of VCs are doing podcasts for that reason. And so I had always done that and I developed a habit of keeping ideas and like I, I, I had idea folders for probably 3 or 4x the number of things that eventually ended up being a blog post. So when ideas would come in my head, I would write them down. I got in the habit of that. One day I was reading biographies and I read. There was a window in my time when I really was obsessed with biographies. And I read these three in a row that were seemingly very different businesses, business or they were in different fields. But I saw this through line and I wrote down one of those notes as if I might do a blog post. And this was 10 years ago. It wasn't recent. I just let it sit there to see if it would germinate or not. And I knew it didn't have anything to do with venture. All my other blog posts were about technology and founders and that kind of thing. One day, the University of Texas where I went to school, the dean of the business school asked if I would talk to the MBA students. And I said, hey, I've got this idea I'd like to, to put in front of him. Is that okay? He said, sure. And so I developed it a little more into a presentation which I gave at the University of Texas on this, called Running Down a Dream about how to, how to succeed and thrive in your dream job. Any of your entrepreneurs or any of your listeners that want to excel, I think this book, I think will really speak to them. Anyway, they put that on YouTube. People started to see it and notice it and people started telling me, you should really make that a book. One of those people that noticed it was James Clear, who might be the best selling nonfiction author right now. Atomic habits has sold 20 million copies, I think still number two on the how to list at New York Times five years later. And he posted it on his website. So that's like a little, hey, maybe, maybe this is interesting.
- [30:48]
James
And, and what's the name of the book?
- [30:49]
Bill Gurley
The name of the book's Running Down a Dream.
- [30:51]
James
Running down a Dream.
- [30:52]
Bill Gurley
And after I had made the decision to hang up my, my venture capital booths, it gave me time to really, really dive into this. It became a bit of a passion project for me. I, I probably spent five years turning that presentation into a book and combing through hundreds of other biographies, went through all the academic literature on career and happiness and career success and even talked to the best authors in the field. I was able to talk to Adam Grant and James Clear and Angela Duckworth and Daniel Pink, John Haidt. And so I put a lot into it. Like, I really put a lot into it. And my, Can I tell You a quick story?
- [31:33]
James
Yeah, absolutely.
- [31:35]
Bill Gurley
This story kind of epitomizes what I hope the book can do. So fellow Austinite Matthew McConaughey in his book Green Lights, when he was young, he used to tell his father he was going to be a lawyer, and his father would tell other people in the community. And so there was some weight to this promise. And he got in the University of Texas, he was pre law tracked, and he met some people in the film school and really loved it and made this decision in his brain that he was going to switch to being a film major. But he knew, you know, he had this weight of anxiety that he had to tell his dad, and he was worried about it. And so it took a few weeks to get the phone call schedule. He's very nervous. You can imagine that situation. And he tells his dad, and his dad pauses for a moment and his dad says, well, don't half ass it. And McConaughey says it was the last thing he expected him to say and the best thing he could have possibly said. And the reason I tell that story is my singular goal for the book is that it serves that same inspiration that Matthew's dad did when he said, okay, man, if you want to run at it, that's awesome, and go for it. And I think we've evolved as a society, especially with what I call the college industrial complex. I also refer to it as a conveyor belt. I think we're, we're churning out people that are widgets, that are highly commoditized, and we're not allowing people enough to find the craft that they love. And if you approach whatever you do as a craft and an obsession, you're going to be spectacular.
- [33:13]
James
Are you a football fan? You watch?
- [33:14]
Bill Gurley
Sure.
- [33:15]
James
So I just recently interviewed Miles Garrett, who's, you know, just this past season, broke the single season sack record, no sacks of anybody in a single season history. And I asked him the best advice he ever received. And he talked about how back in high school, his football coach and athletic director sat him down with his parents. And the piece of advice that he gave him, that was the most pivotal part of his life. Because at the Miles Garrett was one of those freak athletes that could have gone prone basketball, could have gone pro in football, Right? But he, the advice that he got from the athletic director, the football coaches go all in or all out. And that's exactly what you're saying. It's like you have to literally go, you, you. There's no plan B. Pretty much.
- [33:53]
Jack
Another thing too is, is that to your point, there's so many young people out there when they're coming up trying to pick a career, they pick what their parents want them to do.
- [34:03]
Bill Gurley
There's no doubt. And that's what makes what McConaughey's dad did so spectacular. Because I think I have three young adults myself. And how old are they? They're all in their 20s. The youngest is a senior in college. So. But I will tell you that the instinct to be worried about the economic stability of the child is like in every human. And it's not, it's all well intentioned.
- [34:30]
Jack
It's because. It's because they love them.
- [34:32]
Bill Gurley
They love them and they worry that they won't be economically stable. And unfortunately, that along with how the US educational system has evolved and become hyper competitive creates a. It's a poor mix for finding creativity for discovery and falling in love with a career. It's a poor mix. And those two, those two things, unfortunately,
- [34:57]
Jack
you know, a lot of people that go down that path where they do what their parents wanted to and not what they felt was like their actual mission and purpose is they ultimately will probably end up resenting their parents. At the end of the day, I
- [35:10]
Bill Gurley
hope it doesn't get that bad. I find that, you know, I'm older than you guys, like with people moving to their 30s and 40s, those kind of emotions, you realize, oh, are bad for you, they're bad for everybody. But to your point, there's a father that reached out to me recently who had seen the original presentation, has a son who is in college and is on a finance track and was spending every last minute when he wasn't doing the homework, studying basketball and studying modern day valuation of basketball players, which is now creeping into college, college with how nil payments work, was obsessive about it. His father said that he went through like four stages of nervous accepting and finally got to supporting. The kid's now going to go try and do a career in this way. But he said to me that first, the minute he got to supporting, he saw the confidence in the child like rise tremendously. But I also think, think the second point to the other side of what you said. The relationship got better, you know, which is awesome.
- [36:19]
James
Did you deal with that at all growing up? Did you have any pressure to go down a certain path?
- [36:23]
Bill Gurley
No, I gotta tell you, I mean, some of this is discussed in, in Jonathan Heighten and Greg Lukianoff's book Coddling of the American Mind, which is super popular book. He, he, he, he talks about Back when some of this is in the anxious generation as well. When I was young, your parents would let you roam around, you ride your bike 5 mil. They didn't know where we were. Like, there was just less of this pressure to do what every other student's doing. And this modern world where everyone's worried about getting into college by the time you're in sixth grade. Haik calls it the resume arms race. You're getting ultra program. You know, cello lessons, lacrosse lessons, chess lessons, foreign language lessons. Go volunteer at the spc. Like, they're building your resume as a kid and you're not out playing, playing. Rick Rubin talks about. He has a couple chapters in his book where he says, like, we forgot to let them play. And I think there's one of. In coddling, one of the chapters is titled, like, the lack of Play. And so, no, I didn't have that. Like, I didn't have any weight like that at all. And in fact, my father. This is such a. I was so fortunate. My father fell in love with model airplanes when he was young. Gas airplanes on a rural. Lived in a rural town in North Carolina. But they used to these Cox airplanes you would fly. State aeronautical engineer was working in an air tunnel in Langley Air Force base. Him and 40, 50 of his colleagues got approached and said, would you like to move to Houston and help start NASA? And he jumped at it. And so the reason I grew up in Houston, the reason I'm a Texan, is because he took that leap. And I think knowing that he had done that, you know, I went to school in Florida. I. I went and moved to New York City by myself. I went to the University of Florida.
- [38:16]
James
Okay, nice.
- [38:16]
Bill Gurley
I rode the bench in Florida.
- [38:18]
James
Okay, you played some ball.
- [38:20]
Bill Gurley
Well, I practiced.
- [38:24]
Josh
And for those who don't know. How tall are you?
- [38:26]
Bill Gurley
I'm six foot eight. Yeah, six foot eight. But the point I'm making is I jumped to New York and I jumped to Silicon Valley and didn't think much of it. So both know my parents weren't overbearing in any way whatsoever about what I should do. And two, I knew my dad had. Had taken these chances, and so I didn't feel any of this thing that I think is a problem now.
- [38:50]
James
So I think that this is a great kind of segue. You know, one of the things that we were talking about before the podcast started was just location and just various cities. We can all, I would say, agree the best decision that we made was moving out of our hometown. We grew up in the Washington D.C. northern Virginia area.
- [39:06]
Bill Gurley
Yeah.
- [39:06]
James
All military families. Our dad, he was the garrison commander. So he ran the largest overseas military base in the world. So it was structured, you know, the D.C. virginia area. You're not going to, you're not going to build a company that you're not going to be an entrepreneur and thrive there.
- [39:19]
Bill Gurley
Right.
- [39:19]
James
And so we moved to Austin, Texas, where you're exposed to these people that think a lot bigger. It's a lot more collaborative, it's a lot more entrepreneurial from your perspective.
- [39:28]
Bill Gurley
Right.
- [39:28]
James
One of my favorite sayings and pieces of advice is like, follow the money. Right. You went to New York because every dollar in the world flows to New York City. If you want to go into the entertainment business, you go to L. A. I mean, now it's kind of shifting a little bit out of L. A. But what are some cities from your perspective in today's world? If you were a young person, hungry person wanting to build that you would think, say, go, go to these places. I'm going to kind of just get
- [39:50]
Bill Gurley
your take for the people. Yeah. And I, I'm, I'm gonna, I'm gonna back up just a bit and then go right at your thing. So my book is structured in a very unique way there. It's divided between profiles and principles. Profiles are stories of success. And they're, they all are a chapter. They read like a great Atlantic article, you know, about one person. And then the principles are my. What are what I believe are the tools for success. Okay. And they interleaved, which is kind of unique. They alternate back and forth. I think it makes it more readable and, and helps you retain it. Principle 5 is called go to the epicenter. Like, and is about this question you asked precisely about the question. And I would, you know, I don't, I tend to think more about finding your dream job is recognizing that any job can be a craft. And I don't think about it as follow the money, but go to where all the other craft craftspeople are so that you can learn from them. And you, you brought up a few examples already. You know, I went to New York not to follow the money, but I decided I was going to be a sell side analyst. There are some sell side analysts that work in Nashville or Dallas or whatever, but the best ones work in New York. Like, that's where it all is. That's where all the clients of the like that you're going to be talking to are. If you want to be a songwriter, you should go to next Nashville, like flat out you know there's a great documentary on Netflix about songwriters. I'm not talking about like musical artists, some of the lyricists. Right. And, and they all are in Nashville. You know, if you're going to go to Hollywood, go to Hollywood. Three. Three of my other principles are hone your craft, continuous learning, embrace your peers, which is about collaboration with like minded people and mentorship. And all three of those other principles are hyper accelerated. When you go to the epicenter.
- [41:45]
Jack
I like that you brough like minded people and collaborating with them. I believe. On another podcast you'd mentioned how like Mr. Beast, Jimmy Donaldson, like he'd hop on with four other top, like three other top YouTubers and they would, they would just share with best practices even though that like they're all kind of competing for that top spot. But they would do that and almost saying that like hey, if you were just a fly on the wall in that meeting, like you yourself would have became a millionaire in the.
- [42:11]
Bill Gurley
He said that on Rogan. He said if there had been a fifth person on the Skype call, they would have made a million dollars also independently of whether they were good at it or not. Just because the information they were uncovering at the time was so unique. And the other thing about that story is at the time YouTube was not well understood and they were figuring out the hacks, the tricks that you. And if you listen to any interviews with Jimmy, they're down to what's the color on the thumbnail? You know, this is esoteric detail that they're running experiments on across four people. So it's accelerated learning because of that many people get to their career and I think especially young people today who are burned out from that intense process we just talked about. And they think, oh man, I don't have to study anymore, I'm just going to go work. And the truth of the matter is if you want to stay on top of your field, you need to be constantly learning, learning about whatever the edge is. They were learning about a surface area with YouTube that turned out to be worth a ton. Like it was super valuable. Someone I read an article today that Beast Games is going to have a hundred million dollar budget. Think about that. Like those are the cost. One last thing and then I want your question. There's an edge to any field. There is an edge to any, any field, especially with AI AI. It creates a new edge for any field. And if you want to be the best in your field, you need to be good at whatever the edge is, whatever the new things are that are changing the dynamic of what it means to compete in that field.
- [43:55]
Josh
One of the things that I love about that is there's outlying principles. One of my favorite books is, it's a book called Outliers. And if you look at Steve Jobs or Bill Gates, they had access to technology at an early age, or how most professional hockey players are born within a couple span of a couple months. The most successful founders that you have studied and read their books and learned from, is there any outlying principles that you've noticed maybe about their upbringing or things that they've been exposed to?
- [44:23]
Bill Gurley
If you move away just from entrepreneurs and look at people, I mean, that's kind of one of the purposes of the whole book is especially with the profiles, to study people like this. And I think the first principle in the book is chase your curiosity. And I'm trying to help people find and realize whatever it is that they're obsessed with. And the reason that's important is the second principle is hone your craft and talks about continuous learning. They reflect on one another. If, if, if I were to tell you, in order to be successful in podcasts, I think you should go write a report on the 12 most successful podcasters of all time. And, and, and to deeply understand what differentiates them. And you said to me, man, I don't want to do that. That'd be boring. I would say you should get out of podcasting. And so, but that could be applied to anything, right? And so it aligns with what you
- [45:20]
Jack
said earlier about exceptional founders. Like, they're tremendous learners.
- [45:24]
Bill Gurley
They are. And they're obsessed. They're obsessed with the edge, they're obsessed with technology, they're obsessed with disruption. I was just this morning while I was working out, listening to Brett Taylor, who's one of my favorite people in Silicon Valley. He was co CEO of Salesforce, but now he started Sierra, this AI customer service. And you can just hear it. You can listen to him and hear the other person that embodies this in such a elegant and beautiful way is Toby at Shopify. And if Toby does a podcast or an interview, I'm listening to it immediately, you know, because he's so curious and so interested in where the world's going. And it's, and it's, it's fascinating, but they all do that. Like they have this obsessive curiosity, curiosity. And they have to, because the company is going to succeed because it's riding this new wave. And the new wave has new techniques. It's no different than Jimmy with YouTube. They're just figuring it out for AI he was figuring it out for YouTube.
- [46:24]
Jack
There's a young guy I believe in the VC space right now. I think he's in his 20s and he has this massive VC firm that I think is investing in OpenAI and Skims and all these other big companies. I forget his name, otherwise it'd probably ring a bell.
- [46:38]
Bill Gurley
Put it in the show notes.
- [46:40]
Jack
Yes, but my question is I look at this guy and I'm like, hey, young guy, getting into these opportunities and building this fund to invest into a bunch of companies. And for us, we know a ton of young successful entrepreneurs like ourselves that like man, how do you get access to that kind of deal flow? And so my question for you would be is like kind of two sided, like for you guys obviously at Benchmark, how did, how were you guys able to get access to like tons of deals like the ones at Uber? I'm sure relationships come into a big play there. On the flip side for young entrepreneurs that are, that make good money today, how could they get involved in getting a lot of deal flow to potentially invest in the company?
- [47:22]
Bill Gurley
So I would tell you two things that tie both those questions together. One, different venture capitalists differentiate themselves in different ways. Some of them are very public, some of them aren't public at all. But you have to have deal flow. It's imperative for you to be successful. People like myself created a blog, you know, I'm sure I would be doing a podcast today and if I were still chasing deal flow. I did one BG2 for a couple years and Jack Altman who just joined Benchmark has one called Uncapped. And so like that's a way to, to, to create inbound like flypaper. Some people network obsessively. Some people develop a vertical expertise. Like I mentioned Ashim Shanran Security and so those, there's a bunch of different techniques, but you need deal flow. Some people try and be Geo Geogr Geographic kings. I don't see that one as much as an older technique like Austin Ventures used to be here in town. And so you just got to find a way to have differentiated deal flow. Now I want to tie in the second part. I'm a huge believer that venture capital bends towards youth. I think it's very hard to be a venture capitalist as you get older. And I think it's very easy to break into venture capital as a young person. And the two main reasons for that one, many of the best founders are that age. And so, so you know, one element of getting close to Them is being in their peer group and being, you know, someone they might relate to. The second thing is the techniques and the tools of disruption are often better absorbed by younger people. And so the odds that you know how to reverse engineer TikTok are higher than the odds that I do. And for a certain type of founder that's really going to matter. Right. And then the third thing, I'll add a third one. As you get old in venture capital, you one, you get a little bit more or you get a lot more wealthy and you acquire maybe a second home or a third home and you have kids and like your ability to be obsessive 16 hours a day is harder for someone that wants to break in. By the way, one thing that I would offer as a important corollary, if you think like just being young will make you good at venture capital, that less wrong. But and it is a job that does not have a supply demand balance. There's way more people that want to get into venture than should. And, and so if you're going to do it, it's going to be hard as all get out. But I do believe if you obsess about something, let's pick something. Let's say new UIs for AI and you spend all day on it. I used to use the example of esports, but that's getting dated. If you meet a founder and you're young and that's all you do all day and you know the 10 people who are doing that at other companies and you've already become friends with them and you've started writing blogs or gathering notes on best practices, you can compete with a generalist like me who's in their 50s or 60s because I don't have the time to develop that depth. And for a lot of entrepreneurs that will resonate more than what I can bring bring to the table. Does that make sense? Like you'll meet this person and this is how the 20 year olds get deal flow like way more relic. But it's not just relationships, it's the data you have as well. You seem more relevant to them at this moment in time because the stuff they need is all new and you may know it more. Does that make sense? I mean, I don't mean you specifically 100%.
- [51:06]
Jack
So obviously you have to build the relationship with the people in that industry. But then too you have to, you can't just like waddle and be like all right, I want to invest in AI. Like you actually have to understand and seem like like a competent investor to Them of somebody that would like, hey, I would actually be interested in bringing you in on the cap table.
- [51:25]
Bill Gurley
And look, they may bring in multiple people in the cap table. So it also may not be a zero sum game where you have to beat me. You just have to stand out and look interesting to the founder.
- [51:34]
Jack
I have a follow up to that. So you mentioned that it's actually, actually better to be younger in venture capital than to be older.
- [51:40]
Bill Gurley
By the way, the average age of a new partner benchmark that becomes an equal partner is about 30.
- [51:46]
Jack
Really?
- [51:46]
Bill Gurley
Yes.
- [51:46]
Jack
Wow. Yeah, that one. That's incredible.
- [51:49]
Bill Gurley
Two and we just added another 30 year old.
- [51:53]
Jack
Jack. My question on that is like oftentimes maybe the younger person doesn't have all the money, the older venture capitalist does. Just probably on average, if I was a betting man, I'd say on average, probably, probably that would be the case
- [52:06]
Bill Gurley
when we put them in our firm. That's not true.
- [52:09]
Jack
For sure, for sure, for sure. More so. More so saying like, let's say young ambitious have a, like have a ton of industry knowledge. Like you're obsessed with it. How would you approach maybe like people with more tenure in the game that have more capital to potentially like raise a fund? Like how would you go about pitching that sort of thing? More so the raising capital side of things?
- [52:31]
Bill Gurley
Yeah, well, I. Look, if you are interested in being in venture capital and are this young person that we just breathed life into and gave this kind of Persona to, you should maybe look at firms who need, you know, you're a good puzzle fit for like and so you can study firms and see who's there. Like if you're a firm that's aging out and you know, all these new things are where the action is. Someone like that's going to look really compelling. Venture's not a job that is going to be easy to break into by saying, oh I'm going to go to Stanford and get an MBA and I'm going to go to indeed.com and look for the venture capitalists that are posting job openings. Like I don't think you, I don't think any venture capitalist got in that way. And one of the concepts I develop in the book is become a candidate of one. Like how can you differentiate yourself to any employer so that you might even a lot of the people in the book approach an employer who's not hired hiring as. Like I've got this stuff that's going to help you out. Like you're almost going to, you're, you're, you're Creating the job. You're not, you're not applying to a job. And one of the ironies I think of like tying all this together of the, that kind of college industrial complex is you create a bunch of people that are not very differentiated from one another. You maybe are creating people that are actually, that, you know, the, the stats on job happiness aren't that great right now. And you may also be creating people that, because they're not differentiated, are most susceptible to AI disruption. If you have these other people that are just hyper passionate, continuously learning, differentiated all by themselves, I just think you're in a better place for survival.
- [54:23]
James
Bill, we like to end these podcasts off with two questions for our guests. I'll start and then Jack will end us off. So my, my question for you, Bill, is if me and you died tomorrow and you had one more message to leave with the younger generation, what would.
- [54:36]
Bill Gurley
I can't hesitate but answer with a pitch for the book. But I would say do the work. You can't ignore whatever it is that you yearn to know more about on your own. Like, run at that.
- [54:48]
Jack
Bill, if tomorrow it was all said and done, how would you want to be remembered?
- [54:52]
Bill Gurley
It's funny, you know, if you'd have asked me that four years ago, you know, I think it would be about the mark that I had left on the venture capital world because. Cause I, I think I did it my own way. I think I was willing to call a spade a spade. Like, I didn't always go with the flow and I, and I, if I thought the industry was going the wrong way, I would say it. And I believe that one of the reasons I was able to develop a reputation was that independence, that mindful independence. And, and also because of, mainly because of the blog, but that I gave back. I didn't like, come in and take the money and run that I, you know, left the mark. If you will get a little more optimistic about the book, you know, Jason Calcanis posted, I think this will be your legacy. I wouldn't have thought that five years ago. So let's see how it plays out. But that wouldn't be bad either.
- [55:47]
James
Yeah, for sure.
- [55:48]
Jack
Running on a dream.
- [55:49]
Bill Gurley
Yeah, well, running down a dream.
- [55:51]
James
Running down a dream. Bill, this was an incredible episode. I want to thank you so much for the amazing insights advice. Thanks for having me on for the audience watching. Guys, we're going to put the link down in the description to get a copy of Running Down a Dream. Guys, let me be clear. Bill Gurley, you heard the insights. You heard the advice. I mean, one of the most incredible investors and renowned investors. So you're, you're, you're putting all your insights and stories from all that you learn of business inside of this book. So everybody go ahead and get a copy. It's out February 24th, which will be out by the time that this podcast drops. We're putting the link down in the description.
- [56:23]
Bill Gurley
By the way, some people, for reasons I don't fully understand from my podcast days, like my voice, I, I can tell the audience I did the audiobook took about 17 hours. Come on, you might, you might want the, the Kindle or Spotify.
- [56:36]
Jack
Those are always the best.
- [56:37]
Bill Gurley
Sp. Spotify now has audiobooks also.
- [56:39]
James
Let's go, everybody go ahead and grab a copy. We'll put the link in the description. And also, guys, be sure to like and subscribe for amazing content every week coming to the Hard Knocks podcast because we're bringing you guys the most incredible people, business folks, investors, you name it, to the School of Hard Knocks podcast. So go ahead and subscribe to not miss episodes like this ever again, as well as we're also going to put the link down in the description to get access to the number one most powerful entrepreneur, community and network in the entire world called the School of Mentors, where every week we host live calls with the eight, nine and ten figure entrepreneurs we interview on the School of Hard Knocks. So we can't wait to see you on the inside. With that being said, we'll see you in the next episode.