Have you had any companies come to you that you funded that didn't work out but which
you still think, wow, that could have been something extraordinary?
Because there must be some that don't fail because they're a good idea.
They don't fail-- they just happen to not be at the right time.
Well, you know, Bill Gross at Idealab did a study of 200 companies and what was the
key element in failure?
Was it product?
Was it market?
What-- and it turned out that the biggest failure element was timing.
In 2000, at Idealab, we had all of the same companies that became unicorns 10 years later.
But we had 20 million people on dial up internet at 50 kilobytes.
And so we started a company called Z-com, which was basically YouTube entertainment,
but you couldn't really run video over that dial up internet.
And so timing was a critical factor.
You know, Andrew Weinrich started Six Degrees, which was Facebook, if you will, too early.
So timing is, in fact, the most important factor in these things.
But we've had a lot of companies that have failed that we've thought, gee, this was a
great idea.
Otherwise, we wouldn't have invested in it.
But I like to quote Stephen Sondheim, who in one of his songs says, having just the
vision's no solution.
Everything depends on execution.
And it's really true that three people with the same idea, the one who will win is the
one who executes well.
And that means really sticking to it, being really quick about that execution, and doing
iterative-- being iterative very quickly.
We're big believers in-- Idealab calls it sense and respond.
That is, build your product.
It's not perfect.
But measure everything and then make the changes very quickly.
At Google, everything that you see in Google is the result of trying a whole bunch of experiments.
And they'll take 1% of the Google users for a day.
And they'll say, we're going to change this box from green to blue.
Does that make for more or less?
And they say, oh, more.
OK.
We'll make it green.
We'll change this box-- we'll move this box three inches to the right.
Does that do better or worse?
Everything is tested.
Everything is measured.
And that's the mark of a great entrepreneur.
They execute, but they measure so that they can iterate.
So I'm going to ask you this question the other way around in terms of how you counsel
the entrepreneurs whose businesses fail, oftentimes, just down to timing, not through fault of
their own necessarily.
How did you guys get yourselves to the point where you understand that the majority, in
many cases, of VC investments are going to fail?
It's the one that-- it's 20% that you talk about that-- how do you get yourself to that
position?
Because, as an investor, that's not the mindset you come into this business with.
You have to change the way you look at things, and be OK with this higher failure rates.
Right.
Well, I'd say, first of all, we're fortunate it's not it's not 80% failure rate.
Our failure rate's more in the 30% range.
But we can usually tell within nine months.
So we start out with an idea, and we start out with the entrepreneur.
And we say, how are we going to measure if this is working?
And within nine months, sometimes 12, we know whether this is going to be a rocket ship
or it's not.
And, at that point, if it's not, then the question is, is it going to be a 1X return?
Can we get our money back?
Sell this and move on.
Or is this going to be a limp along for a long time because the entrepreneur is just
too wedded to the idea?
And we try to counsel the ones that are counsel-able.
One of the attributes we look for in an entrepreneur is coachability.
Do they listen?
And some do, and some don't.
And, you know, yes, you need persistence to be successful.
But it's not the only quality.
So we're here at the TIGER 21.
And I'm interested to learn how you got involved in this fantastic program.
What was your first contact with TIGER 21?
Interesting enough, my first contact came through somebody at the office who was using
LinkedIn to look for people.
And they reached out to me.
And then I found out that I had some friends who had been in TIGER 21, although I'd never
known about it.
And I looked into what they were doing.
And for me, I was just getting to the point where I was setting up family office, and
I was worried about the issues of how do I get my grandchildren and my children involved
in all-- in this and dealing with the wealth.
Although they'd actually done quite well.
My middle daughter is now the Treasurer at Goldman Sachs.
She's got some family wealth.
My oldest daughter has some family wealth of her own through her husband and his hedge
fund, and her work at McKinsey.
But I was worried about those issues.
And wanted to find a place to talk about it.
And I also knew that my fortune was in technology.
And I had to diversify.
And wanted to find some hints on how to do that.
So I went to a meeting.
And I said, hm, this is kind of interesting.
And I really liked it.
And then I went to join the group in New York.
And the people there were just diverse, interesting, and they all had a story.
And the fact that we had this intimate setting, completely confidential, where we could, you
know, bare our financial souls, and some other parts of our souls, as well, really, really
resonated with me.
Well, I mean, talk a bit about-- because I mean people-- I've spoken to Michael Sonnenfeldt,
obviously, the founder of TIGER 21.
But talk a little bit about what a typical meeting, what it's like.
Because people will be hearing this and not understanding how it works.
We started meetings with a little bit of what's happened to us.
You know, have we made some new investments?
What's happened to our families?
And we started this year with what our goals for the year were, for example.
And then we look at world affairs and world events, what in the macro world could affect
us?
And then we'll typically have one or two presentations.
It could be an investment presentation by some investment group.
I've never done much real estate.
A lot of TIGER members have done real estate.
I had never done much and three years ago, now I've started to do that.
I've learned about the tax benefits of it, and some of the long-term wealth creation
benefits of it.
So I've really explore-- expanded my role there.
And then we'll have what's called the portfolio defense, where once a year you lay out your
entire portfolio with the numbers, and the other members take pot shots.
And they say, you know, gee, you don't have enough insurance.
You're too much of a cowboy.
They have a scale from sort of cowboy to conservative, and I'm very close to the edge of the cowboy
scale there.
I guess because of all my venture investing and my quant investing.
Yeah, sure.
But everyone's respectful.
But they're saying, gee, you know, you don't have enough of this.
You've got to look at insurance.
You know, do you have insurance to cover estate taxes?
And they'll talk about how your portfolio has changed.
The criticism this year to me was, you have too many investments.
Because it's, you know, the portfolio goes on for three pages.
And they say, that's just too many for you to manage.
How are you going to do that?
And I have to start thinking about that.
So that the meetings give you a really good lesson and schooling in your own behavior,
which you often don't hear from anyone else.
Well, you know, I've met lots of TIGER 21 members, and I've spoken to various chapters
around the country, and, I mean, they're a remarkable group of people.
And I've been really amazed by the openness with which they talk to each other, and you
guys, you know everything about everybody-- I mean, everyone's lives.
It's not just about investment.
No.
This is about family, and lifestyle-- And in our group, we told one member that
they had been waiting too long to get the divorce final.
They really had to get it done.
And they did.
And they thanked us.
A few months later, they really thanked us for that.
So, yeah, we do talk about the families.
We talk about, how do you deal with your sons-in-law?
I have three sons-in-law.
And with one of our other members, he's got a son who is kind of a cowboy-ish kind of
guy.
But it's all done in a way that everyone knows it's confidential.
And you don't share it outside of the confines of that TIGER meeting.
So for this year, for you, as a VC who's there to incubate, to help people, and to give them
advice, into TIGER 21 where you're like-minded people who do the same thing for each other,
and for people that don't have the wealth to be a member of TIGER 21, for example, who
haven't had the success yet, who haven't been able to get themselves VC funding, how should
they go about thinking about building that network in their own lives?
Because it's important to have people around you that you can be open and honest with,
and can critique you, but do so in a way that's constructive.
It's a difficult thing to build.
It is.
There are organize-- other organizations for people at different levels in their lives
and so on that try to do this.
We-- if you're a private company owner or a builder, we tell-- and I tell my friends
this, to build their own board of directors, as it were.
Maybe it's their lawyer.
Maybe a lawyer and an accountant and some-- somebody who might be a trustee of an estate
for their kids.
But you should build a group of people.
It's just hard to find, the way that TIGER does for you, a group of people who you don't
have to see everyday socially.
So you don't have to feel any-- oh, I just told them such and such.
Yeah, yeah.
And so you really need that separation, which TIGER gives you.
Although you do still then become friends with people.
But it's not quite the same as it would be if you were just taking your best friend and
baring your soul.
So I am going to have to ask you this, and I'd take this inside the meeting.
If it's confidential, you can tell me.
But when you-- at the last meeting, you talked about the macro views, and the things that
might affect you guys as members.
What's the thing that's uppermost in people's minds at the moment?
Well we have a lot of political stuff, obviously.
We have-- my group has, I'd say, 75% Democrats and 25% Republicans, a few of whom are staunch
Trump supporters.
And that leads to some interesting discussions at times.
I think we're all concerned about the possibility of a recession in the next year and a half,
two years because of the situation both in America and elsewhere with-- if you look back
cyclically at the '30s, you see what happened after the Great Depression point.
And if you believe in these sort of Kondratiev cycles and so on, we're in that isolationist
piece of the cycle.
And it's not a great piece for the world.
And it's not a great piece for investment.
So you have to become more defensive in your investing policy.
And we talked about that.