My First Million: #191 with Mike Maples - 4 Big Trends and $0 to $1 Billion Startup Idea Frameworks

Let's say everybody's selling a banana. You can't say I'm a 5x better banana. You instead you should come out and say

I'm an apple and not everybody's gonna watch your apple

But a hundred percent of the people who prefer apples are gonna want what you have

I feel like I can rule the world. I know I could be what I want to

Put my all in it like no days on on the road. Let's travel never looking back

All right. Yeah, Sean this I was playing this pop podcast pretty good

How'd you feel?

It was good. It was like we showed up. No no context like what are we gonna talk about?

Do I need to do I need to talk about Bitcoin? Do I need to have something smart to say about Bitcoin because I kind of just

You know, I believe I buy I hold right. I'm like a monkey in this space

I'm not like, you know one of these experts, but um, but we talked about solo biggest solo capitalist

solopreneur and

Some of the different kind of like things around that so I thought I thought it was actually pretty good conversation

Ben was there and he goes like I liked this one because I feel like everything you said in this was

Something new that I had never heard you say before he's like whereas, you know

Once you listen to somebody for like hundreds of hours, you kind of hear the same greatest hits over and over again

He's like this felt like new stuff

Speaking of listening to us for hundreds of hours or listening to you at least we had a good episode

We just interviewed this guy named Mike Maples Mike was pretty cool

So Mike is a little under the radar, but he started this thing called floodgate

Which is a really big venture capital firm, but really fascinating guy. What what all have they done? They've done

lift twitch

Twitter cruise

Octa which is like a giant enterprise company. That's public. So yeah, bunch of bunch of big winners that he was an investor in pretty early

considered

One of the best venture capital firms there is so real insightful guy

He kind of had a hint of biology a little bit. I mean, he was like real high IQ

I've been using the word high functioning

He's like a real high functioning high functioning

Southerner, right? He had this disarming way of talking because he's got this, you know, kind of like

I don't know. It was a southern or midwestern accent. Yeah, and you know, very very relatable likable guy

But then the things he was saying each one was like, you know, like sort of a bullet into you know

Of an idea of an insight and he definitely had like a few refined ideas of where he thinks the puck is going

And I appreciate that. I like that. He gave us basically these four waves

He's like, you know, I believe these four inflections are happening right now

And that's going to create a bunch of opportunity and that's what I look for is like

How is the world changing and then what's what's going to be new because of these inflection points?

Yeah, I was taking notes the four things are blockchain

Cloud office America next the cloud culture for consumers. So those are like the four things and we went into like

We didn't actually go into each one entirely

But he talked a little bit about each one and we delve we went deep into cloud office and he talked about the opportunities there

I thought it was great. What do you think? I loved it. I loved the way he had some phrases for things

I thought at the beginning, uh, he was like a little bit too intellectual for me

I was like, okay, wait, where do I go with this? But um, it was interesting, but I didn't know how to attach it to like

Uh, a concrete idea and then I thought about, you know, that was maybe the first 25 percent and then the next 75 percent

I thought were fantastic where

um

Yeah, I came down to earth and also he has these this is kind of amazing way of talking. I'm kind of jealous

Dude, you you are like that

I know but I I because I because I try to be like that when I see somebody who's really good at it

I'm like, oh, shit. You're good at this thing. Most people don't even care about this thing

He had these little phrases coined terms for either himself or his fund or his philosophy or his mental models

And uh, you know, he'd be like, you know startup is like a jazz band not a marching band

And then he was explaining the analogy and then he was like, you know, he was like

I want people to

Choose not compare which is hard to understand

But once he explains it then it's like, oh, that's actually a wonderful mental framework

It's like that uh Kanye song where it's like, what does it mean? It's like, I don't know what it means

But it sounds provocative and that's how I felt with a lot of his things was like

I was like immediately interested

I leaned in when he would say one of those phrases

Even though my brain hadn't figured out exactly what it means yet and then he would explain it

So anyways, I thought it was really good and super nice, dude. I really thought he came, you know, he's so humble

Uh, and and very likable. So I don't know great episode. I liked him a lot

I agree and he offered to come back. I couldn't tell if

Like when guys are being nice. I'm like, well, if you have time, let's just keep going

But I could tell if he was being kind. We'll have to have him back on. Uh, he was awesome

Right, uh, how did you feel about uh, when you hit him up for some intros there?

Was that smooth?

Uh, I thought it was pretty smooth. Yeah, you gave him the opportunity to be a hero and if not, it was totally okay

Yeah, I asked him. I'm gonna start asking every guest that the the question I'm gonna start asking is, uh

Who do you think would be an awesome guest?

Like who would be good for those podcasts and then uh, what do you think's the best way to get in touch with them?

Right, and then they have that opportunity to be like, yeah, just reach out. He's a nice guy or

Yeah, let me just shoot him a note right now. I'll tell him, uh, I'll intrigue you guys

Right, I thought that was a great angle. I know I wanted to call it out because people are listening

They get this sort of behind the scenes of

As I heard you say it. I was like, oh

smooth

smooth guy sam going for the intro

Well, we didn't get the kill on this time, but uh, we got I I feel as though we've built enough rapport with him

I can I'll email Mike and maybe he'll help he'll hook it up. But yeah, uh, he did a good job

All right quick break to tell you about another podcast that we're interested in right now

HubSpot just launched a shark tank rewatch podcast called another bite every week

The host relived the latest and greatest pitches from shark tank from squatty potty

To the mench on a bench to ring doorbell and they break down why these pitches were winners or losers

And each companies go to market strategy branding pricing valuation everything basically all the things you want to know about

How to survive the tank and scale your company on your own if you want to give it a listen

You can find another bite on whatever podcast app you listen to like apple or spotify or whatever you're using right now

All right back to the show

There we go. So Mike, do you um, I was connected to you because my friend my good friend Noah Kagan was like

I got a holler at this guy. He's pretty interesting and I'd known about you as well because Tim Ferriss, um,

lived near me and was a friend of mine

And he told me that he's like there's like two people or three people whose advice I listen to when it comes to investing

One is Neval the founder of angel list

Two is Scott Belsky who started Behance and is now probably going to be the CEO of adobe

And three was you

And and I was like that's kind of interesting, you know, I I have not really heard of Mike too much

You know, you're kind of you kind of you kind of keep a low profile and I looked it up

So you start floodgate, which eventually you guys have messed it in like twitter

um

twitch lift all types of amazing stuff, but

We so we have this podcast showing that it's pretty popular

You know millions of people listen and all we do is this brainstorm interesting ideas

And so we thought you know, we got to get you on to come and talk about some stuff

And so here we are let's give it a shot. Why not? Thanks for having me

And by the way, I've listened to your podcast a bunch of times

I remember the the episode with the with kevin sister from instagram is one of my favorite ones. So

Uh, I forgot what's the exact name starting starting greatness or staring starting greatness. Yeah starting greatness

And it's it's kind of a labor of love, you know, I uh

Some of the people that work at floodgate occasionally we'd have some hallway conversation or in a meeting

They're like dude, I wish we could have recorded that right. So so in many ways the

the guests not only

Help with the the the content but but we're trying to

Help help the some of the key ideas of starting greatness come alive through the voices of the guests

Because I think there's some some counterintuitive lessons of starting a great startup. They're not obvious to people

Right and you have a you have a good voice and then be your intros are great on the pod you uh

It always has like I don't I don't know how much time you spend on that

But the intros are great compared to us. We put we're sort of famous for we barely do an intro

Like you'll be 10 minutes in and be like who the hell is this guest and then um, you know

Sometimes at the end we do the sort of irish goodbye where we're like, okay, that's it

We sort of like we end it we go about our day

And so people have like started making fun of us making shirts about the the irish goodbye because they're like, dude

I also hate saying goodbyes. It's it's you know the hate the unwind of a conversation

I like how you guys just leave and

And so that's that's kind of our thing

But what we want I guess when we start with we could talk about kind of like all the great stuff you've invested in

But I guess

I'm more curious about what's got you excited now. What space is what?

Trends are you seeing where you're like, huh? I don't fully I don't fully know what's there

But there's enough there for me to be interested

Yeah, and it might be kind of a good segue into how I think about

What the next big thing will be because there's this there's this thing that I say to founders

Which is very in count. It's very counterintuitive. I say if you want to start a great startup

Don't try to think of a startup

and uh, the reason for that is that

Great startup founders are like time travelers

and they they get out of the present

And they visualize different futures that are a breakthrough that break free from the present

And when you try to think of a startup right now

You tend to orient yourself in the world of the present

And so you tend to come up with incremental conventional ideas rather than

Breakthrough ideas that sort of change the arc of the present to a different future

And so um and that gets to the areas that I'm interested in so what I what I encourage founders to think about are

What are the inflections? What are the waves of change?

They're going to be so massive

That uh, it's going to allow an entrepreneur to change the subject about the future

Because on some level these waves are the gathering power

It's like all the power of the ocean when you surf

Uh, you you've got to catch the right wave to have a chance to do great things

And uh, it's these waves or these inflections

They allow the entrepreneur to wage asymmetric warfare on the present

Uh, only with big inflections does an entrepreneur

go from being

Uh disadvantage to incumbents to having a fundamental advantage piece of the incumbents

And so then in terms of the areas that I'm interested in

I tend to go with the inflections and so

Um one inflection I'm interested in obviously is the blockchains

Uh with crypto

I think that that if I was starting a startup today, that's probably where I would spend most of my time

another another area of interest for me is um

The the transition from what I like to call office culture to cloud culture

And so in the past the cloud was sort of more of a delivery mechanism

Uh and a business model for application software, but now what we see happening is that um

The the you know microsoft office literally is a metaphor of the office and it's files and memos and file drawers

And that's what our desktop looks like

But now people

You know, it's it's not the editor that matters as much anymore as the comment system and the versioning

It's kind of more like github meets knowledge work

And so, you know, when you when you have cloud culture rather than office culture

You you can take advantage of a lot of arbitrage time arbitrage talent arbitrage

Geography arbitrage, you know that very tim ferris, you know, we talked about him a little bit earlier

Uh and then the other thing that I'm interested in is um, what I loosely refer to is america next

And so on some level, I think that 2020 was the first real year of the 20th century or 21st century

and why is that uh, I think that

There were a lot of uh issues that uh, people were paying lip service to

Uh, a lot of stagnation that people were paying lip service to and I think that 2020

helped people understand, uh

Our military needs have become more agile and more tech forward that are

Research in drugs and drug discovery that our ability to get

Uh life-saving uh remedies to market faster. We need to take seriously. There's just, you know, china as a geopolitical

Challenger and so as a result, I think that um

They're and you know now people talk about build back better

But I just believe fundamentally the united states the western world are going to decide they need to invest for real

In tech forward infrastructure and then on the flip side of that

They're going to realize our infrastructure is vulnerable to cyber hackers and ransomware and things like that

Whether it's organized by rogue gangs or nation states. So so those are I'd say those three areas plus also

I'd say uh cloud culture applied to consumer which some call the metaverse

But those are those are the main things that i'm chasing right now

And you know, obviously I have a lot of colleagues as well at floodgate. So we you know, we go after cyber security and

Uh cloud infrastructure and other things but the areas that I described are the ones that I'm

Most accurate most actively going after that for that cloud office one. What what products are you looking at that excite you?

Yeah, so I'll kind of give you an example. So um one company i'm involved with is called almanac

And uh, it allows uh teams of people to create documents. But like if you think about it, um

This has already happened in uh code and in design

So in code you had github

And in the past you just had code snippets that you shipped around and had some version control

But github made code social and you could branch and fork and uh, you know

Collaborate as a team at the center rather than as an afterthought and then figma did the same thing with design

Right. So figma and so so what what we believe is that in a world where

Talent can live anywhere in the world

It's going to matter more that you write things down and get consensus

Uh and part of how you get consensus is you have a paradigm that's not office centric in documentation

But it's cloud centric and so, you know, why shouldn't you just like github be able to?

branch and merge and fork documents and be able to within that one document know

Every version of that document that every ever existed and everybody's and you know, if somebody forks it and uses it

Let's say it's an employee handbook. If somebody uses it for their next company. Why not want to know that as well?

and so

But but that's just one of many examples of where I believe that in the future you're going to have

all these different products that uh

Presuppose that people will collaborate, you know, what else do I think will happen?

I think people will say

If it can go in the cloud, it should if it can be asynchronous

It should because if I put things in the cloud and make them asynchronous. I can take advantage of all those different forms of arbitrage

To run my company better

Whereas if I'm a meeting centric culture, I have to be in the room where it happened

When a decision got made and I just think that that's an outmoded way of thinking about things in today's world

What so Sean and I are similar or almost the same age. We or we are the same age. We um

Like when we started work, I mean we use google docs right away

But you're a little bit older than us and like that was that was you probably didn't I mean that was kind of kind of interesting

Do you right when that when that first came around?

So when you say like what needs to be in the cloud in my head? I'm like, wait, are you kidding me?

Isn't everything already like that?

What specifically for example, there's there's startups that are doing like

Virtual office, so they're like great. Everybody's remote. You have all these advantages remote

What do you miss out on you miss out on being able to socialize and get to know each other and build trust?

outside of the you know the water cooler the what you the conversations that used to happen in the break room

So there's these crazy startups that are saying basically like like online town and stuff like that that are like

Here's a virtual office. You can literally walk around. You can bump into people

I don't know if any of these work, right?

But they're like taking stabs at trying to move the like physical office into the cloud too, sam

So it's not just docs are in the cloud, but hanging out is in the cloud, right?

But wouldn't it be at co-workers in the hallways in the cloud? Yeah, and the problem with most cloud offerings today

Is that they're basically rehosted office culture, right? So like zoom zoom is a meeting, but it's a meeting online

It's not like it's a synchronous in any way

It's not it you're just rehosting the meeting rather than redefining how work happens now

With zoom you can take advantage of

Geography arbitrage, I suppose so that is a good thing

But you're not able to take advantage of time and talent arbitrage as easily

But like like what I what I believe ends up happening at the limit is in in office culture

everybody has a job description

and

And what I think in cloud culture, you know people have already talked about this but this idea of

Jobs to be done theory and so like when you think about it all of us don't just have one job

All of us do a whole bunch of jobs like if you take even a very

Very simple example. Let's say that I work at a flower shop. I might type things into the computer to manage customer records

I might take reservations in orders. I might some parts of the day arrange the flowers

Well, when you really think about it

The principle of comparative advantage would suggest that any parts of that any of those jobs to be done that can be done

Asynchronously or in the cloud you should try to do that if you can because then you could take advantage of

labor arbitrage time arbitrage and geography arbitrage and then if I'm a great flower arranger

That's what I should be spending my time on is the thing that I'm really good at and so what I think cloud culture

lets people do at the limit is

Broadcast their comparative advantage to the world

and

Get paid by the network for giving the network what it wants

So I think that it'll you know the reason I call it cloud culture as well is

Who says everybody has to work at a company right like people said that robots are going to eat the jobs

But I think that's precisely the opposite of what's true. I think that software is going to

Reduce the need for people to think they need to work at companies because it's going to all the things I would have had to

possess

To have a job. I'm not going to need those things anymore

By working at a company. I'm going to be able to have all those things in software on my own

And so I think more and more people are going to people are going to realize that really

there is a

Aggregate of jobs that people do and all of them could be thought of as like almost like a derivative that could be

assembled in different ways and then move to the cloud or you know, let you specialize and I think that that'll over time

Change the fundamental culture of how teams work

And tell me if I'm misunderstanding this but I think one thing that you just said in there is that

This idea that one person belongs to one firm

is potentially now an outdated and you know, suboptimal idea that instead

You said like a user basically contributes to the network and gets paid for that contribution to the network

And so one person might belong to multiple firms

Um, and you know firm might change. So so what does that look like? You're the time traveler. Yes, let's say we fast forward 10 years

A smart guy like me. Well, how does my like today, you know, my company got acquired by twitch

I got a day job at twitch

Uh, you know, great. That's that's you know, something I do and I know before COVID

Thanks for your efforts there by the way. I mean we we monetize that a little while ago, but thanks for your efforts

Of course anything I can do for you. By the way, uh, a vcc we monetize that is a wonder that that's a really cool flex

I'm gonna show that one

So, okay, so then what 10 years from now. So like maybe maybe I should

Start from the beginning there. So what do I think is really happening, right that underlies all my investing?

I basically believe that

starting around 1850

We had centralized means of production mass distribution mass production

And what that allowed us to do is to create the modern corporation, but in

1870 there was no accounting. There were no org charts

None of this stuff that we take for granted as a company really existed

But mass production mass distribution had a tendency to to centralize things

Because you got supply side economies of scale and mass distribution allows you to get things out to people

I think what started to happen

Uh, probably in the late 70s early 80s with the microprocessor

Is now the economy is animated by mass computation and mass connectivity and those two, uh, those two attributes

tend to decentralize the means of production. And so, you know, I think we've moved from

River Rouge plant for Ford Model T's to personal 3d printers in the future

And I think we've moved from peak centralization of three tv networks in the late 50s early 60s to now

Anybody can be their own publisher or media company that goes direct

and so

There's a lot of very basic assumptions we have about companies

That are just 150 year artifacts of time like somebody in 1820 wouldn't recognize a normal company of today

There weren't there weren't any companies more than 20 people in the u.s

You know in 1820 hardly maybe a few spinning looms of the hundred people

But so what I believe is now the idea is

The the social contract between a person and a big company

People assume that it's not gonna that it's going to persist. I think it's going to be radically different. So

In the in the 1900s, you know, you had

People wanting to be at a company for a very long time and you had large country companies because

The coordination advantages of having a large organization at scale with supply side

Economics was valid and created abundance. Then the same happened with the military then the same thing happened with the government

media all of our major institutions, but now I think the pendulum is

Uh swinging in the other direction towards, um

A worldwide network where everybody on the network every individual is a note on that network and every individual

Has a note on that network has a comparative advantage

And they get they get paid by the network when they give the network what it wants

Uh, and that's true for money. It's true for jobs. It's true for everything in my view

Are there examples of startups now that are that are executing this?

Yeah, so in the early days our investments were in these pure play networks, twitter, twitch

Uh companies like that. What does that mean pure play a pure play network would be you're not really reimagining a part of the economy

So like twitch was a whole new thing that you could argue that twitters had a big impact on the media

But but that wasn't the thesis when we invested

But then we started to get interested in this idea of well, perhaps every sector of the economy is going to be

Reimagined around

um sort of the

The the micro means of production and so rather than economies of scale. It's going to be

local economies of algorithmic

computation and

Networks that span the globe and so why did we invest in lift?

Lift was a more modern way to think about getting a ride than taxis. Taxis are a centralized

Command and control tops down dispatch driven technology

lift says hey

Riders and drivers can advertise their presence in real time on a network and algorithms will form an ad hoc connection

so it's kind of like this return of the invisible hand and uh now all of a sudden the invisible hand is done by algorithms rather than

Uh, you know kind of in the good old days of people trading fur for a musket or something like that

But like it's it, you know, that's what we see happening time and again, you know, ohm connect is another board. I'm on

they're trying to

create

incentives for people to use less electricity, but but they're basically

applying the ideas of software to find networks to

Subtracting energy that homes use during certain times of the day

And so I believe that every, you know, what is tesla really tesla is a car company that's animated by network capitalism

Not industrial capitalism, right? They've they it's a software to find car that's updated over the air

It leverages machine learning it leverages network effects with all the sensors in the network to help it self-drive better

Apple was a network capitalist centric phone compared to like

Nokia which thought we need to sell the best widget and so in sector after sector of our economy

The companies that are software to find at their core

I believe software to find network centric companies at their core are going to keep winning

and they're going to keep displacing the companies that think of

Computers as the thing that you did to make your industrial thing go faster

So, you know burger king isn't a software to find network even though it has computers

It uses computers to say how many hamburgers did I sell today?

But it doesn't use computers to reinvent food in any fundamental way and the companies that we're investing in are

Companies that leverage network capitalism to reimagine reinvent

markets from beginning

Damn big idea. Oh, that wasn't that may be a little bit out there, but that's kind of

It's such a big idea that it's hard to

How can I make this more practical for myself and the listeners of someone interested in this field?

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Yeah, and so the way I would say to make it more practical if you're a listener is

The tendency is to say, uh, what's my career

Path going to be but through the lens of the 20th century, you know, I'm gonna I'm gonna make a progressive set of steps and I'm gonna

Uh, you know, I'm gonna get rewarded as I

Do the things that I seem to need to do in society

But I would argue that it's more important in today's world

To figure out a what am I awesome at or maybe not even one of my the best in the world at but what is my

What am I best at among all other things? I'm good at what are my best at and then?

What does the world value and then what am I passionate about?

And it's like the intersection of that set of things is where you want to develop your talents because

Over time that's where your comparative advantage will be the highest

And that is where the network will pay you the most for contributing to the network

But I think sometimes it's useful to not think of not just what company do I want to join

Or what set of companies should I join my career instead?

You should say the entire world is a network. Everybody is a note in that network

How can I be the best version of myself as a note on that network?

How can I create the most possible value for that network so that I'll get

Recognized by it and paid paid for the value that I deliver

So how do you do that? So let's say let's take you for example. So let's say you look at the world this way as it's a giant network

and um

And you're trying to have your comparative competitive comparative advantage

So what's your comparative advantage?

Yeah, I would say that my job is to be

The very best partner for a super ambitious founder in the zero to one phase

So right like if you look at my podcast people say, hey, why don't you have this guest?

Why don't you have that guest but starting greatness is all about zero to one awesome startup super ambitious

What was it like before they succeeded?

And there's power. There's addition and subtraction, you know, like sometimes by

By saying what you're not for but like niching down

You're very powerful to the people who care about your niche

Because people say where have you been all my life?

And so what you're trying to do is find that set of like-minded co-conspirators

For the niche that you've really chosen to be great at

And and not get preoccupied with the fact that you can't do it all right. You're you're way better off understanding

What you can just stick the landing at

And and and develop your talent so you can do it even better and better through time

And today floodgate is more like a traditional firm, right? It's like a company kind of like let's say current world slash old world

Right, you have you have a brand you have multiple employees

You have a central fund you have your LP base

It's sort of static and then you're investing in a specific let's say set a criteria of companies

um, whereas

The way you're describing things. It's sort of field like correct me if I'm wrong

It sort of sounded like in the future what you 20 years from now what you might have done instead of set up floodgate is you would have set up

I don't know

You know a one person investing fund

Yourself or like a DAO or something like that

basically a trust that's going to invest in a whole bunch of things on the network and

And you wouldn't need this structure of of a fund with employees and with all these different things

So would you if you didn't have this already set up and you're setting it up for the next 20 years

Would you have set up your investing differently than you did with a kind of traditional VC fund?

Well, I I like the way we're set up because I think that when you're

When you're investing in these crazy risky startups too early way too early or legally ambiguously too early

It's good to have friends and it's good to have people to run ideas by but we have a very

I'm not saying I'm not sure our point of view works for everybody

So I don't even think a startup is a company, right? So I think a startup is

the the capabilities and talents of the founders and

They're inside about the future and what you're what you're betting is on two things

One is that their insights right and two is they're good enough to navigate the idea to a great product someday

But like lifts started a zim ride and twitter. They couldn't decide whether to call it voicemail 2.0 or twottr

Twitch started as justin.tv

Octa started as sasher

And so like what do you do with the fact that 90% of your profits come from things that started out different?

And so my my theory on that is

The way to succeed is to realize that a startup isn't a company at all

And that it's it's the insights and the founders and you're you you you make fun of your ability to predict what they're going to come

Up with that is false precision to even try but instead where you should be precise is can these people do the job and

is this is this uh

powerful enough breakthrough insight

you um

You I believe it's your partner. I looked up who the top

Venture capitalists were I think it was your partner. What's your what's her name?

And miraco. Yeah, yes, and is uh

I looked at like cb insights

2020 2019 2018 2017. I think she was in the top 10 sometimes number two or three and many many many of the years

um consistently you just showed me a

Sign or a a thing of dollar bills with steve blank, you know, who's like godfather of silky valley saying everything

Mike does turns into money

You uh, I wish what what makes you guys great. Uh, what makes you able to spot these interesting opportunities?

I think that uh, you know, it's funny if you if you had say, um

Warren Buffett uh on your show or you know, you've had stan drunken miller before on your show, right and um

When they talk about investments, you'll probably notice they talk about a few things. What's the operating history of the organization?

What is their competitive moat?

Uh, you know, they they have a set of factors, you know, um that cause them to think that a company is a good investment or not

um

What's interesting is in our world none of those mental models apply

And so because a startup is not a company there is no operating history. There there's no moat. They don't even have a product yet

They got no customers. And so

What I think we're better at than most is a understanding. That's true

and b

Then asking, okay, so what should the mental models be right if if charlie munger and warren buffett have 90 mental models

And they don't apply to startup investing. Well, what are the mental models for startup investing then?

And so we've spent years right just being students of that question

And you know, we probably got about 30 or so that we've developed

but we try to we try to

Evaluate the startup through the lens of those mental models rather than make the mistake of thinking that a startup is a rehosted company

and it's not one or two of those mental models that we wouldn't expect right like, uh, you know

I might expect somebody to say, you know, we want to be in a

Uh a big market with customers really love your products like, okay. Yeah, great, you know

Um, we want to be growing, you know extremely fast exponential growth. Well, yeah, it's obvious at that point

I also enjoy checkmate. Uh, so so what's a what's a mental model?

That's not so obvious where 100 people in a room would nod their heads and immediately say I already do that

I already think that way when I when it comes to investing for me

Yeah, so I'll just give a few examples, you know, so I'd say

At a meta level, we have a set of mental models about founding teams

And then we have a set of mental models about insights

and um founding team a good example would be, um

Jazz band and not a marching band

So in companies you have org charge you have people who want sheet music and dance steps

And if you don't give that to them the the organization is going to be a chaotic mess and all screwed up and discombobulated

In a startup, it's more like when you go to the french quarter and you watch a jazz band there

The got the lead goes on a riff and everybody else just goes with it

And you'll never hear that too in the same way ever again

But everybody knows that that's what they're in it for and nobody's saying hey, that's not on my sheet music

You didn't say that was going to happen. That's that's the way they like to

Offer their art to the world

And so I like to say when a when a startup starts it goes through this breakthrough sequence

It has to have a great insight

Which is something about the future that's not obvious that most people don't know

And then after that they have to create a product breakthrough where they get product market fit in zero to one

And then they have to have a growth breakthrough where they get escape velocity

And then and only then do they earn the right to someday be in the pantheon of companies

But it's but it's wrong-headed to give startup founders

Big company advice at any of those stages. In fact, all of those stages are different

It'd be bad to give growth advice to an insight developer, for example, because it would be precisely wrong

So that would be an example on the team side

To me the on the insight perspective it would be

Um

Don't be market first because there is no market yet

And so rather than trying to think of a startup market

We want to arrive at startup markets by following inflections

We want to we want to say okay cost of an ai prediction

Is going down exponentially

How is power going to shift in the industry because of that?

And like what what new markets might arise that had never existed before

Um, these inflections they they power your why now. So like um with lift

Um gps has got included for free in smartphones

And we believe that everybody's going to have smartphones someday even though in 2010 only 10% did

So you could say wow now I can see a world in the future where

Drivers and riders will be able to locate each other on a network

And every and there will be a network effect because there'll be all these people have these phones

You could have been right about that before then but you would have still failed

Because you wouldn't have had enough people with the phones and they wouldn't have been able to find each other

And so I'd say that's the other counterintuitive thing is that

You can't you can't look at the company's tangible operating history because there is none

What you have to do instead is imagine a world where

their inflections

Change the future in a dramatic way

And that that you know change the rules and like all the stuff that people think is going to happen

Something very radically difference going to happen. And why do I believe this entrepreneur?

What what is it that they've discovered about the world that could cause me to take that bet?

What you're describing is is awesome and it's like

But but it's it's a it's a narrow

It's a narrow but wonderful outlook. So what you're describing about inflections and looking at the world in 20 years

It's definitely about disruption and these are things that are this is what?

Allows an uber or an air of bnb to go from not even an idea to a small idea to a

50 to 100 billion dollar company. These are like truly disruptive and trans transformative things

but then on the other side there's

Like on the podcast actually aired today

Shawna interviewed this guy named brine who owns 100 percent of 1 800 got junk the revenue might be

4 or 500 million dollars and he owns all of it

So he's who knows he's probably worth 2 or 3 billion dollars and has probably a pretty calm life

And he's not doing anything probably probably innovative at all

I mean, maybe there's like micro innovations like you know

Our supply chain is a little bit interesting or the way that we dispatch people is a little bit interesting or

Or it could just be operational excellence meaning our website ranks number one or uh, we know how to gain

Name, right?

How do you

So like you're all you're what we just discussed was far on one end

Do you ever look at the other side or or for your job?

Do you only care about one side?

And maybe you just like the for shoot the shit or talking to your friends who want to get wealthy

Do you say like yeah, but this side's actually

Kind of interesting too. Yeah, and it's funny because we alluded to this earlier

Um, I don't try to be for everybody

Uh, I try to be the the very best at the thing I try to be good at and so my view is that uh

I want to go

very focused on

breakthrough startups

And in that zero to one phase and how they so I like to say I'm a rocket fuel salesman

And I go I go to founders and I say don't take my fuel

If you don't want to achieve escape velocity with that rocket that's on the launchpad

Because if you're not sure it's a rocket this fuel isn't going to be good for your vehicle

Right, I mean just that's in your scooter, right?

And so like I probably don't deserve too much credit when it does escape

But I probably don't deserve too much of the blame when it doesn't right?

I'm just like just be clear about what I'm selling here

And and people say well, you know, it's not realistic that

That everybody should build one of the 20 billion dollar plus exit startups of the year

And I'm like and you're you're correct about that like I'm not saying that my advice or my approach is mainstream or even normal

In fact, I would say it's hyper not normal

But like but in that area in that area of

I sell rocket fuel to people who want to blast their rockets into outer space and get escape velocity

I try to be the very best period

And so like that's that's what I'm in it for so a lot of your listeners might be like, oh, that's interesting and kind of

Intellectually interesting, but I'm not I'm not one of those

But that's okay. There's lots of ways to get rich in this world

And there's lots of lots of ways to succeed in business every comes back to everybody should know

What's my comparative advantage?

And not be preoccupied by all the things you can't be the best at so you're not even close to the guy who sees like

Oh, wow, there's a ton of really poorly run

laundry

Stores or laundry mats we should buy all of them and put a back end software

I mean that that doesn't even kind of closely. Uh, or that doesn't even even get you excited

Well, and not only that like if somebody said, hey, can you give me some advice on how to grow this?

I would say you should not listen to me. I don't know what I'm talking about

I don't know how to do laundry mats at scale

Like it's not even a question of whether I'm interested. It's a question whether I'm competent

And I'm not I'm like I'm not and I don't try to be and I

Let go of the idea that I need to be

Yeah, I love I love your answer by the way, uh, I have something to say about that too, but I would say like

You know, you've made me realize that I think one of the things that we're trying to build our comparative advantages. It's like

um

We could have this we get on this podcast twice a week and we shoot the shit either just me and sam or bring

We're a great guest like you on and we talk about everything from I think one of the most popular episodes was

um

You know biology talking about like the future startups are cities and it's like wait what and you know

Biology will will bend your brain with the blockchain and then the next episode

So he's not probably the most listened to and the second most listened to is this side hustle this entrepreneur has where he's

We break down his business of vending machines. He's got 27 vending machines

Is making six figures of profit and you know, he got started with very little capital

And it's who doesn't take rocket science or rocket fuel to do it and our listeners like the um the breath of that

How we can hop from blue collar

We have a segment called the hillbilly side hustle, which is like, you know, just a blue collar

Kind of like a simple thing you can do all the way to okay. What is you know some disruptive idea?

You know, how does ai impact the space?

It is it okay if we talk about biology for a minute because I think he's like amazing

Let's do it. He's crazy. Yeah. So so like um, you know earlier. I mentioned this idea of cloud culture

I think biology probably has the best handle on this

Of anybody I talked to so like and and you know, I've listened to much of what he said

But like what I think happens at the limit is that all of these different cloud cultures are like their own societies

Yep

And so right now the main main organizing principle of society is the nation state, which is also an economies of scale

Centric model, right? But if you think about it, what is bitcoin really bitcoin is a society of people who care about sound money

And the protocol is what enables governance. And so these cloud

Societies at the limit. I think look more and more like the future version of countries, right?

You know, what is a country really? It's a bunch of people who decide what their boundaries are

Who decide who gets in the club and they have a constitution where they decide how to separate powers and how to protect the rights of individuals

Against the mob and the tyrant

Um, that's exactly what bitcoin does with its protocols and just to use some other examples

So bitcoin is the people who have this, you know, cult-like belief or religious belief around sound money

Ethereum is people who believe in programmable money and then you have wall street bets

Which is like, hey, let's just middle finger to, you know, uh, to the large, you know, to the incumbents

So how does, you know, David beat goliath and we're gonna we're basically going to screw around with them and make profits

While we do it. That's what we're here for

Uh, and we will we will assign ourselves names, you know, they call themselves retards and things like that because in their culture

That's okay, right

Burning man is a pop-up culture that happens for a week in the desert

Where all these people will go behave totally differently than they will the other 51 weeks out of the year

And so there's a whole bunch of these either pop-up cultures cloud cultures that all have different different virtues different

admissions criteria and and all the different pieces you you just described

And it's so interesting because it there's historical parallels, right? Like in the in the reformation

Uh, the pope used to declare all the answers and then all of a sudden the printing press comes out in double entry counting

And now martin luther can distribute the bible to lots of people

Uh, with in a permissionless way ironically

And then not only that the merchants of venice can trade with each other without a central authority because they can have double entry records and

Keep track of iou's and so to me like the internet and blockchain are just so amazingly parallel

To that and I and I think society ebbs and flows

It's like when you're too decentralized for too long gets chaotic

And so then then you have innovations that centralize the means of production, but then it gets too centralized and so

What we're seeing now, I believe is wall street bets perfect example

The people at the edge are saying the network should decide not the center

And if you read books like revolt of the republic and things like that

You see a world where the people at the edge are starting to say about the people at the center

You're illegitimate just like people at the edge back in the reformation started to say that about

The pope and some of the things that were happening

With um exclusionary, you know sort of insider only activities and so

And in the last two years, you know social media went from you know the edge to call it pointing at mainstream media

Mainstream media now is like synonymous with the with fake news, right? That wasn't even a thing five years ago, right?

Uh mainstream media is now used as a derogatory description of something which is

Kind of crazy, right? That's a that's a big change

And the important thing is like I try not to be too judgmental about it

So I don't sit there and say oh those mainstream media people are no good. I'm just like

It's inevitable that media is going to decentralize. It's inevitable that money will it's inevitable that politics will

It's inevitable that a lot of these things will

And it's like arguing for it or against it's kind of like arguing against the direction of the wind

It's it's just it's it's fruit

But but then back to the your listeners to me what that means writ large is

If the 20th century was about being the quote-of-quote organization man

And following the rules and progressing up the hierarchy

It doesn't exist anymore. Now you have to be

You have to take agency for your own life

and own your comparative advantage and

And

Understand that that is your responsibility

as a free person in this world and if you do that you're going to be

Incredibly rewarded in the 21st century, but if you wish that it's like the 20th. I got bad news for you

It's not going to be floodgate invested into refinery 29, right?

yeah

for those

Unfortunately, or I mean it is what it is a lot of our listeners are men

So they don't know refinery 29 is a huge media company geared for women refinery 29.com. They were pretty big, right?

They were like maybe 200 million dollars or 150 million dollars in revenue and then they sold or merged or something like that with vice, right?

yes

And vice is like a probably a billion dollar a year entity at this point with with everything they have going on

Do you think that media companies like that?

Given what you're saying about

I mean because vices at this point even though they were new

Vice and refinery 29 are probably almost like old school at this point

Do you think that those style of media companies are still going to be great companies given what you've just said?

Well, I think that there's going to be a very rich ecosystem of all types of media companies

but but to me the defining new characteristic will be

that media is no longer a function of

the credential elites telling you what to think

and that that was the real problem that we started to get in the media in my opinion is that

You you had a set of credential elites running these media companies of which there weren't very many and

These institutions are all inherited now rather than founded

And so the people running these institutions didn't really understand what made them great in the old days

And so they they started to get

worse over time

In their effectiveness and legitimacy. And so to me the real question about media is not so much

Is there one way it's going to happen versus not? I think that the winners will be those that um

Nitched down have a comparative advantage in the type of content that they cover

and attract uh

The attention of the people who care about that type of content and and the credentials won't define it because

the the old media companies had

The credential elites running them, but they also had a monopoly on distribution with the newspaper and how they how they got

print magazines out and things like that. So I think that all of that's going to change. Is there any media companies or um

Opportunities that you're looking at and you're like, oh, that's kind of interesting for us

I would I would say that my colleague Amira co is probably smarter about that than I am

You know, I and it's funny even within floodgate. I tend to stick to my areas that I'm excited about and I um

So there's a lot of exciting things that all that I'll miss probably

Um, but I'm gonna ask you a question

Yeah, I'm gonna ask you a question that might be hard to answer

Uh, because it's one of those things like oh, you know, how how are you you?

But uh, you um, you've said a couple things that caught my attention. You know, you have these nice phrases

So one is I didn't realize that I see this on your bio here. I didn't realize you coined the term thunder lizards

I've heard many investors talk about thunder lizards as something they want to invest in

Which is like sort of like, you know, the godzilla type companies that emerge every decade or so

And like that's what you've really chased because those are where all the returns are and those are what changed the world

Um, but you also said the kind of the rocket. I'm a rocket fuel salesman

Um, you are catchier than your average vc. You are um more

I don't know. You have a you have a little sort of gift there of coining these little

Mind viruses these little little phrases that stick with people rather than just saying a bunch of jargon

Um, is that a skill you learned consciously or is that just you know growing up your parents talk like that?

Where did that come from?

Uh, I don't know, but I guess the the way I look at things in this world is

You want to force a choice and not a comparison?

And and so like what do I mean by that? Like like you just did it again. You did it again. Yeah, exactly

Right. So so like like if I say, hey, we're investing in particularly disruptive types of companies

That's not the same as saying thunder lizards, right? And so

Why is it so important? Well, if you're trying to create a breakthrough by definition it breaks free from the present

So by definition it can't be compared to something in the present

Uh, because if it's comparable to what's in the present, it's too incremental. It's too conventional

And so like when I say force a choice and not a comparison. I said I say to founders

If let's say everybody's selling a banana. You can't say I'm

5x better banana you instead you should come out and say I'm an apple

And not everybody's gonna want your apple

But a hundred percent of the people who prefer apples are gonna want what you have

And like forget the guy wants the best banana. There's a thousand of those people

You need to waste not an org of energy on them

You need to spend your time on the people who potentially value your advantage and start a movement around that

You know earlier we talked about markets

Companies have markets that could be segmented sub-segmented and classified startups don't startups

They create movements. They create they have a secret about the future

They get early believers who co-conspire with them to create a co-create a different future

And the market emerges as a consequence of the movement succeeding

But in the early days, we just have to get people moving. We have to get people moving to somewhere different not better

And so as a result, we must force a choice and not a comparison

And as a seed investor, I have to do the same thing because there's 2000 seed funds now

And so it was innovative when they and I helped invent seed investing in 2006

But like now there's 2000 firms and so we have to come up with some way

For people to say, okay, I can't reconcile the choice of working with floodgate versus

brand X

And I think I'm shot at Sam writing writing checks with writing checks on the spot. That's how we differentiate

Well, I don't know, but I think there's a lot to be it relates to niching down

I think a lot of people would benefit from the idea of

How can I force a choice and not a comparison? It takes more courage

And it forces you to say no to more than you say yes to

But if you if you do it the right way the stuff you say yes to

I like to say it's less but better

Is the way to think about it

You've uh, you've had some amazing people in your podcast

You've invested in a ton of amazing companies and I bet you know just about everyone in this world

Of all these people that you've invested in or or did business with if you guys were put on a on a stranded island

Who do you think would come out on top? Who's the most formidable person that you've you've worked with?

Oh, there there've been so many great people

I think a lot of it would be a function of just uh, who had the right idea at the right time, you know, so much of this is just

I call it a founder future fit

It's just like, you know, like when it when andreason did mozilla

It was just he was the perfect person in the world at the perfect time to do that idea

And so, you know, it's not just how formidable is the person but it's also just

Was it was the timing right and were they just the right person the right time?

But I'm I'm obsessed with I'm obsessed with stories and I love interesting personality types

Is there anyone that fits that bill of

Of being incredibly formidable like to the point of like you you think how can you be more like that person or

I wish everyone thought a little bit more like this person

Yeah, so I I try to learn from everybody

But I never try to imitate or be like somebody else because then that that that defeats the purpose

I'm that now I'm comparing myself to somebody else. And so I never do that

I don't believe that people should compare themselves with anybody. I think they should learn from people

But I don't think they should compare themselves to others and I don't think they should have heroes

I think yeah, you mentioned a couple people that you've learned from, uh, you know, biology being one

um

You know tim ferris said he learned from you

Who are some other names, you know, if if people listen to this and they're like, you know, or me, right?

I've really enjoyed hearing you talk during this hour. Uh, I think you got a bunch of smart ideas

I want to know, you know, what's he eating basically? What's your information diet?

What are what are your sort of some of your favorite people to follow and learn from that?

You're getting a bunch of interesting information. That's not just like the rest

Yeah, so, um

Well, I like the the farm street blog a lot, uh with shane perish and and uh, and by the way

Just because I don't invest like buffett and munger doesn't mean I don't study them like crazy

Right because I think that when I when I read how they look at the world

I'll understand what's different about how they look at the world

But I'll also connect dots that will make the difference of my world more clear

um

I I read a ton. I probably read about one or two books a week just in general

um

What are some of the ones that I've

Look read recently that I liked one. I like a lot is called the courage to be disliked

Uh by a couple of Japanese authors. I think it's it's amazing. And so then I went down this rabbit hole of

The the psychiatrist, uh, Alfred Adler who who kind of came of age at the same time as Freud and young but uh,

Was it as famous? But I think he's I think that Alfred Adler's ideas

About individual agency are perfectly timed for the 21st century

Uh, so I've been liking uh everything that I can get my hands on about him

Um, and it's and it's weird because although I read a lot of books

There's there's always a subset that I come back to over and over again where I try to

Take notes and because I try to I try to make sure I really understand it so that I could explain it to somebody else

in a really clear way

Uh, so I so I like the courage to be disliked quite a bit

Uh, I've been reading a lot of stuff on stoicism lately

Uh, which I find to be very misunderstood

Um, but you know, what's the misunderstanding?

I think that most people think of stoics as, uh, you know, uh

Emotionless, uh, turn the other cheek when things go bad

And I actually find that when you read about the stoics and that there are actual philosophies in this world

They're actually quite optimistic and quite inspiring

And I find that uh, it's helpful for me to um internalize

So like things like some of the the lessons of stoicism and some of the lessons of alfred adler

I'll find myself reading those books over and over again

And and trying to make the list of things to learn and ask myself every day. Am I am I exercising those muscles?

And then there'll be other things where I'm like a friend of mine. I'll say this is a really good book

I'm like, oh, I should just read that so right, you know, that's just fun

It's great. All right, we're coming up on the hour so we can we can wrap it

Um, Mike, thanks for joining. This is great. Where do people find you if they want to get more?

So obviously the podcast, uh, so starting greatness. Where else should they uh follow to get more?

Yeah, I'm on twitter at m2jr

Uh, let's see where that's probably the best place. Yeah, or floodgate.com

You're you're a tweet machine. I haven't found you since uh, I talked to him years ago about you

Yeah, okay. Yeah, and and if you guys want to cover any other topics happy to I know that we kind of bounced around so, uh

I want the american next I feel like that would have been a interesting one that I think we should we if you're up for

We could do a round two around American. Yeah, I think there's a bunch that's there that

People aren't gonna tell about

Yeah, in all these themes, right? Like I think that the idea also of you know, blockchains and sort of thinking about

Um, the the future of money and how we're going to a currency governed by commons rather than fiat government is

interesting, I think that

you know the evolution of

You know, I like to say that computing uh phases you had mainframes and you had pcs and you had internet

And they always start with an enabling technology and they commoditize the prior so mainframes

Computers were expensive and then pcs computers were basically free

Uh proprietary software becomes valuable. Okay next thing the internet

software becomes open source

Amassing lots of proprietary data becomes valuable

And so one way I look at blockchains are they're the next wave of computing and that they're going to probably democratize

data and control

Uh of things back to networks and then what becomes a valuable thing my my instinct is it's about governance

And so there's there's like a lot of conversation

We could have about that that might be interesting and then I totally agree

America next all the stuff that I think is going to have to happen and for the the military to be more agile and

uh for us to kind of

Upgrade our thinking about stuff

You know when you're talking I'm like this is what I could be like if I could just focus on three things that I really believed in

And I just stopped thinking about other shit for like two years

I could have this level of clarity

And uh an insight and you're making me want to focus which sam and many others in my life

I've ever I've tried to get me to focus before and uh this may be the most effective way

Well, there's no one way, right? Like I like to be like a tea, right?

It's like a you want to be uh mile wide an inch deep so that you just

Can appropriate creative ideas from the world, but then I think you want to be a mile deep

Somewhere right so it's like a tea, right?

And it's like that's why you read several books at a time, but then you also go deep on a small number. They're truly great

Do you um who who should we invite next on this podcast?

Who do you think is some of the some is some of the are some of the best storytellers and prolific idea folks?

You had read hoffman. We're trying to get in touch with him

Is there anyone else that you think is is we should invite read hoffman and neval ravacont?

um

You know chris saka is always a good storyteller

um

I can think about that. You know the instagramers are fun

Andy radcliffe

It probably not as famous as some some of your guests and stuff, but boy is he a clear thinker

Uh a great communicator. What's the best way to get in touch with read?

Just to call him you think

probably uh, let's see

Um, or you just say that I've mentioned you guys and that it was a good show and then I enjoyed it

The people that you just mentioned

I'll email the people you just mentioned

and I'll say mike said you're the

Mike said you're the guy

I'll still you know, I haven't seen as much of chris saka lately

So I don't know if that would be as effective with him

But uh, but I think that uh, some of the other guys would would uh would recognize me pretty well

I showed up for chris one morning. He texted and he said hey, I gotta film a shark tank intro

We need some bodies in the background

Uh for my my intro and I left my job

I went to where he was at nine in the morning and I filmed a uh, I was a body double

I was I was an extra in the background for his uh shark tank intro. So I'll pull that favorite card and be like, hey chris

Uh, now's the time to pay it back. Yeah, I think if you haven't had mark cuban. I think he's really good

Uh, um, and and by the way on this so it's funny because you guys are using zencaster

Um, so does shane harris. So I was on his uh, sorry shane parish and on his um

after he listened to the

to the talk he's like

There's so many upfront questions. I wish I'd asked you

Uh, can we do this again? And so I was like sure so we ended up having a lot of content that he kind of

Have cut down but like if if if you find yourself in that position here. Let me know. I'm happy to uh,

Help you make it as you know, less but better, right? So if we can right, you know

If we're gonna ship a product it might as well be fucking awesome, right?

So I love you

Where are you from?

I was born in oklahoma, but moved all around because my dad was an ibm or yeah, and then worked at microsoft

Yeah, I feel like um, how old how old are you?

Uh early 53

So you're I'm 31 so you would have had to have me when you were quite young

But uh, I feel like you could you could I could you could be my uncle. I think

That's funny. That's what the founders call me their nickname for me is the crazy uncle

So yeah, I think we kind of looked the same. I could tell you I thought you would have been from the midwest or maybe the south

I'm from Missouri

Oh nice. Yep. Show me state

Yeah, and uh, my cousins uh live in oklahoma and fit uh in owens oklahoma where they buck bulls

Um, I I had a I have a feeling you and I we could we could be distance cut distant cousins. We don't even know it

Yeah, yeah, you never know

Coming from Missouri in oklahoma. You never know

Yeah, I appreciate this man. This is awesome. Sean, you got anything to say? No, my camera died. I'm at the overheating mark, but uh

Mike, this is great. Thank you for coming on. I enjoyed that. That was good. And you're in Austin

Uh now I live in uh, marin county. So I'm in northern california

Oh, I thought you lived in austin for some reason

No, I helped him though find his place. So when he decided to move I you know, I used to live in austin about

Up until about 15 years ago and my family's from there all my relatives and stuff and so

You know, I've you just the opposite of what everyone else did

It seems so and everybody keeps asking me when we're gonna move back to austin

I you know, I don't know. I'm pretty happy with where we live, but

You know, it's pretty crazy time. So you never know. We'll see. Well, thanks for being here. We'll talk soon

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