Josh Wolfe Discusses Innovative Investments | Masters In Business Podcast

If you don’t grow up with money you want it. I think the best entrepreneurs— if you can find the people with a chip on their shoulder — that came from some sort of messed up background — it is almost predictive that they will be very ambitious. [3:14]

Growing up in Coney Island made me super skeptical, and cynical of human nature. I’m fond of the Shakespeare quote: There are daggers in men’s smiles. [3:34]

Everything in my life I would describe as randomness and optionality. Ex post facto I can explain everything. A priori you never know. [4:20]

If you are going to be skeptical of other people then you have to be a little skeptical of yourself. [4:46]

For a huge number of the companies that we have invested in the ideas behind them, the technologies, the design — were modeled on things that happened 20, 30, 40 years ago in science fiction. [6:28]

He [Lux cofounder] is the optimist. I am the pessimist. It is just my disposition. I expect the worst. He expects the best. If you had an entire firm that was like me, we would be a bunch of cynical short-sellers just trying to spot the frauds. If you had a firm entirely like him, we would be lemming growth investors paying any price, and going off the cliff. [11:46]

If two people think the same one of them is unnecessary. [13:28]

We want really high scientific and technical complexity. Not because we want to tackle things that are really hard. It’s because we don’t want competition. [14:01]

The problem with funding [and doing] easy things is you get hundreds of competitors. [14:23]

I’m psychotic about competitive advantage. [15:34]

The single best trait of an entrepreneur is someone who can tell a story. Somebody who has that narrative power. [20:32]

E.O. Wilson had the biggest impact on me intellectually. His book Consilience: The Unity of Knowledge was modern renaissance thinking. Wilson turned me on to Charlie Munger. [I’ve learned from] Charlie’s view of renaissance thinking and worldly mental models, and Wilson’s view of the unity of hard sciences and soft sciences. Finding patterns helps you identify some universal truths. If you can continue to find those first principle, universal truths, I think that sets you on a good path to making good decisions. [21:45]

I have given so many people copies of Poor Charlie Almanack: The Wit and Wisdom of Charlie Munger. [Founders #78 and #79 are about Charlie Munger] [22:10]

Somebody asked Charlie Munger, “What is the single thing you would attribute your success to?’ He said, “Being rational.” [22:25]

Even being aware of every cognitive bias humans have won’t stop you from falling victim to them. You can look at an illusion, know it is an illusion, yet it still works on you. [24:00]

There is a barbell to capital allocation today. There is money going to very small funds. I call them minnows. At the other extreme is the Megas. The people that are raising billions of dollars. [It is the same for companies. One of my favorite Jeff Bezos quotes: On the Internet, companies are scale businesses, characterized by high fixed costs and relatively low variable costs. You can be two sizes: You can be big, or you can be small. It's very hard to be medium. A lot of medium-sized companies had the financing rug pulled out from under them before they could get big.] [25:30]

We put a total of $3 million into this company that cleaned up nuclear waste. In the first year they did about $1 million in revenue. Then there was a negative black swan: The Fukushima Disaster. Revenue then went to $40 million, 80 million, 160 million. We sold the company for $400 million. [49:30]

I think military technology is one of the most exciting and important areas in the next five years. In part because the vast number of big tech companies —Google on down —are eschewing working with the military. It is creating a giant, gaping hole where there is a tremendous opportunity for some of the smartest technologists to work on these problems in defense. [1:05:45]

I like people that have this gritty, rebel side to them. [1:09:32]

Reading great books is like having conversations with the best minds of history. [1:10:10]

So many of my mentors I have never met. They are dead. They are alive in pulp [books] and ideas. [1:10:35]

I have read anything I could from Charlie Munger and Warren Buffett. It gives you a grounding sense of a true business, and markets, and human psychology. If you haven’t studied those greats you have a massive deficit. [1:12:54]

Book recommendations: How The Mind Works, I loved The Operator: David Geffen Builds, Buys, and Sells the New Hollywood. I like reading biographies. Why Zebra’s Don’t Get Ulcers, Elephant In The Brain, The Magus: A Novel, the writing of Rachel Cusk, The Overstory, The Diamond Age. [1:13:30]

Stay close to the money. Find where the capital is flowing and stay close to it. That was one of the best early advice I got from somebody. [1:19:10]

What do you know today that you wish you knew 20 years ago? I wish I would have known how rigged the game is. Every system at every point is rigged. There is always a game being played. There is a secret that the people who are making the most money keep. They won’t acknowledge publicly until after the fact. Appreciate that and look for it. [1:20:05]

Full podcast here: Masters in Business Podcast: Josh Wolfe, Lux Capital