Sam Lessin on Venture Capital & Investing

Essays

From the Podcast

Yeah, it was. Well, this was about a decade ago. But I was, like, really hot and heavy angry about investing in Zipline because it was, like, completely out of scope for our fund, and Dave was like, "We're doing this." And we did it, but we didn't do enough. But Dave, that's my mea culpa to you there.

— Sam Lessin, More or Less Ep 170

Look, typically, I'm an early stage venture capitalist. I think it's extremely fun. I also don't like the idea of having a book I have to look at every day, because I like my relaxation time, right? Like, I'm not, I'm not envious of the hedge fund people. But you just read their letters and, like, they're pretty good. I don't normally read them, but, like, I'm an investor in a bunch of these funds. You know, they, they... I've just been getting a bunch of quarter letters, and I was like, "This world is so weird. I'm actually curious what these managers are saying." And it's just really interesting. Like, I think they have really sophisticated takes.

— Sam Lessin, More or Less Ep 170

But, like, the average venture capitalist I don't think is that smart. I guess that might be true of the average person trading on Wall Street, but the average hedge fund manager, I think, is just, like, smarter.

— Sam Lessin, More or Less Ep 170

Well, I just generally think that people who do venture capital, the average IQ is pretty low, right? That doesn't mean there aren't-

— Sam Lessin, More or Less Ep 170

I feel like half LPs in the world only do early stage investing for the option on possibly getting, like, co-invest later.

— Sam Lessin, More or Less Ep 170

If I'm an LP in a fund and you use my capital to find the thing, I'd kinda want you to offer it to me as an SPV before you give it to an entirely different investor stack.

— Sam Lessin, More or Less Ep 170

Well, it's usually what actually makes the deal work. Like, that's the irony of a lot of things is, like, a seed fund without any follow-on, the math, especially in these capital-consumptive days, unless you're in, like, a crypto project, really is pretty damn hard if you can't follow on.

— Sam Lessin, More or Less Ep 170

Here's the thing I find funny about this. So when Slow Ventures does seed deals, we always put pro rata rights in.

— Sam Lessin, More or Less Ep 170

This is the ultimate wild part of capitalism, right? Is that it's such a good system 'cause it encourages people to push the edge and invent new things and meet the market. But the whole point is that it tends towards zero profit, which is why you have to keep doing new stuff to meet the market and kind of the edge, right? Like, that's the fundamental con- It's so cool, right? But that is, like, the structure of it. And the problem is, is if you collapse relationships to zero and everything becomes commoditized, then Hilton has to figure out how to innovate, or they can't afford to, or they can't afford to provide their service.

— Sam Lessin, More or Less Ep 170

This is, like, the downfall of Open Graph. This is the same story over and over and over, right? Which is, like, the technology is not a... When you talk about all these agents spinning up, we don't have a technical problem. We can send bots on the internet to do lots of commerce for us now, right? Like, and everyone can do it. There's no... I mean, and, and Muse might be slightly better, but, like, it's all the same stuff. The question is now business and politics. You either have a set of people who are like, "Look, I need volume at all costs. And by the way, maybe I'm a hired gun CEO, so I only care about the next three years anyway, and then I'm gonna retire. So fuck it, let's, like, let everyone rip on our website and book whatever they want." Or you have people who are, like, stewards of capital in companies who are like, "Eh, like, I kinda need that relationship to the customer myself, right? Like, I can't be part of a perfect market."

— Sam Lessin, More or Less Ep 170

Agreed. But then it kind of, the crypto thinking plus a lot of the stuff br- came into the AI story. Now you have these two interesting infinities and zeros. Infinity and zero-one was like the Sam Altman original pitch, which is we will own everything. Whoever gets the AGI first owns infinity. There are no more businesses except for us, and it can only go to zero, right? And so you're like, "Okay, well, the average of infinity and zero is still infinity, so I guess we should invest in this. Who cares what the price is? Who cares how much capital it needs?" Like that was infection one. Now we have the inverse going on, which I think is to be taken very seriously, which is it might be that, it's actually not, and like that was a silly narrative when you think about it, but people believed it enough.

— Sam Lessin, More or Less Ep 170

Well, they were, they were even better because they were no dilution, they were totally capital light. Like we talk about the whole like setup of them. But you had this kind of like set of compounding narratives. I, I actually gave a talk about this last week and about how like, you know, this is like, if you really wanna understand what's going on with the labs and these stories and the capital allocation, it's basically the West's really lack of comfort with the concept of zero and infinity. It doesn't fit in like a Western framework, which is why we went around killing all the Pythagoreans in the times of the Greeks. It's why the church fought zero so hard. There's like this long history of the Western tradition hating on zero and infinity 'cause it like breaks all logic.

— Sam Lessin, More or Less Ep 170

Although it's a recent phenomenon, right? Because like even as far as ten, 15 years ago, the businesses that Silicon Valley generated were like unbelievably capitalistic. You know what I mean? Like it wasn't about like moving heavy dollars. Like that's kind of a recent Bitcoin style. There's a series of things. I, I honestly think a lot of like what's gone on has been people learning the wrong lessons from like Bitcoin and religion effectively in this era, right? Where if you think about like this dynamic, it's like you had the era of Google and Facebook, which everyone got wrong from like a storytelling perspective, largely because like, well, how big could they possibly... Even I got this wrong. Like I was like, what is the thing that is more than a hundred billion dollar company? That's unfathomably large in historical context. And so people got, "Oh my God, things can be huge." Then Bitcoin, which again, I was early on, you know, Dave, you were too, and like then Ripple and Solana and like all this stuff taught people the lesson of like effectively the aver-- which I love this line, 'cause it's true, which is the average of zero to infinity is infinity, which is like-

— Sam Lessin, More or Less Ep 170

Ah, so you own a luxury venture firm. But the basic point is, like, that is the status symbol is I don't need to be online all the time.

— Sam Lessin, More or Less Ep 169

The thing that I think is just interesting is you look at these businesses, and you're like, generally speaking, these public companies, especially at this scale, there's like two things. You're investing in a core business- That has some properties that you believe in, and then you're buying option value on top, right? Which is there's six things that might happen to make them super valuable. I think the, the core anthropic business, which is can you sell premium tokens to people effectively? Like, can you sell it at a higher price than the open models because, like, what you're doing is so valuable? Like, the... And it- people will sink infinite amounts of money into marginally better tokens. That's the core business. It's been totally true for the last bunch of months. It's flat lining. Are there certain people that will pay infinitely forever for slightly marginally better tokens? Maybe. But, like, that's, like, the weakness of the core business is that whole conversation. And I think things like Muse, which again, can argue are not as advanced as Feeble, but are clearly sufficient for, like, what normal people need, right? Kind of put a dent in that story.

— Sam Lessin, More or Less Ep 169

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