Capitalism is a fantastically good thing. It aligns interests, it draws talent, it can organize productive outcomes that no other mechanism that I know of can do. But there’s a difference between short term profiteering and long term profit. And people don’t have the patience for the latter. So everyone over-optimizes for the former.

Asking, “Why would you charge someone 7.5% when you could charge them 12%?” The reason is because you want to own them for 30 years, not 3! I think it was Warren Buffett who said, “The greatest invention of all time was compound interest.”

You give people the ability to do right, do well, pay less, be an earnest participant of the economy, and they’ll be with you for years. And you’ll make money. You’ll have a much more sustainable product, and the more important thing is that person will be more sustainable, productive, and predictable in society. (54:55)

Worldview Implementation

Capitalism is an economic system, but it is a philosophy as well. It is a philosophy that says, we will vote for the change we intend based on the views that we have. When you look at the most successful people that operate in these tentacles, that’s what they do. Look at the Koch brothers, that’s what they do. They have built a network of influence based on capital. Their worldview is propogated into the world in an unbelievably aggressive rate that has been compounding for decades. That is genius. It is genius.

It doesn’t matter whether you agree with their worldview, the question is: What’s the counterweight to their worldview? Can you name one? Can you name a group of people that operate in the exact same way, methodically, meticulously, assembling capital, influence, assets, who believe the opposite? Irrespective of what you think of the Kochs, you want both views out in the world, at scale.

Get the money, and don’t lose your moral compass when you do. (29:45)


Smart people will always be there to arbitrage markets. The best example of that is the Rothschilds. How do you build a dynasty?

“I care not what puppet is placed upon the throne of England to rule the Empire on which the sun never sets. The man who controls the British money supply controls the British Empire, and I control the British money supply.” -Nathan Rothschild.

That’s the unfortunate place we are today in how Capitalism has been perverted. (54:20)

Money as a Vote

Take a step back. What function do capitalists serve? In a well-functioning economy, you have these two things that should come together. You have an economic model and you have a political model. The economic model that’s worked for centuries, as far as we can tell, is capitalism. The political model that’s worked in scale is democracy. Often well, when they’re both combined, is where you have these amazing outcomes like America.

Now, the problem is that a bunch of these things are decaying. In fact, now we see both are decaying. Capitalists have a very important job to do, they vote with their money about what they want to exist in the future. And when they vote for rockets, SpaceX exists, and when they vote for other things that are not nearly as interesting as rockets, then those things can exist.

The way that we do our jobs, though, as capitalists, despite now all of the complexity that you have to deal with, hasn’t changed. If you think about the thousands of years leading up to 1985, you had mostly dudes making decisions with the sum total of a pencil, a piece of paper, and some combination of an abacus or a calculator.

Not to take anything away from how decisions were made back then, but an investor or a capitalist could actually do their job because the complexity of the businesses and the things that they had to figure out was actually not that meaningful. These things weren’t dynamic, they weren’t changing. Then, somewhere in 1985 the whole world changed, and capitalism completely changed. The reason was because of this weird little tool called Excel.

And if you really think about the advent of the mortgage-backed industry, the savings and loan industry, then the savings and loan crisis, then the great financial crisis, the boom in hedge funds, the boom in private equity, what is that? Well, that was a migration from a person to teams of people, and from paper and pencil and a calculator to Excel.

That was fine for the last 30 to 40 years, but now things are even more complicated. How do you Excel your way to understanding, for example, a company like Tesla? It’s impossible. You have to have a more profound operational sense of what they’re doing, and you have to look at fundamentally leading indicators. And when you boil things down to a cell and try to get a numerical answer to really dynamic companies, you tend to have bad outcomes.

So my perspective is, our job is increasingly more important because at the same time as companies are more dynamic, the other side of our equation, the governance model, is breaking. So we actually have an even more important job to do. If the government is not gonna fix health care, we need to fix it. If they’re not gonna fix education, we need to do it. So how do you do it?

My perspective is, instead of teams of financial analysts, you now have to have teams of really skilled operators. People who have built companies.

Instead of using Excel, you have to use the things that other great companies use to build great outcomes, which is really now software, data science, machine learning.

My whole orientation about our organization is one where I’m asking ourselves, okay, the next generation great financial services organization, the next great form of capitalism, will be folks like myself, Tony Bates, Mike Ghaffary, and Arjun Sethi, folks that have run businesses figuring out how to put money to work, backed by a deep operational understanding of how to build companies.

I think that historical artifact was fine for a while, but think of now what is possible. This is what I’m saying is, I guess you could continue to do your job that way, [as a seller of money,] but that’s just to me so bland and lacks such courage. Because what you could otherwise be saying is the following: Okay, here’s a great entrepreneur who wants to help, who wants to go and change something in the world and do something really interesting. Here we are, as folks that have been in their shoes in one point in the past.

And at the same time, not only can we give them money, but the expertise of that, which is frankly the same, but now there’s something else you can give which is to say, “Hey, we’ve spent time deploying code, aggregating data deep inside the bowels of hundreds of companies, thousands of companies before you, and what that’s left us with are these artifacts. It’s a knowledge base that basically says when you try this, it works. When you try this, it doesn’t work, across sector, stage, geography.” Now, all of a sudden, you can actually give people like a punch list of things to help make their business better, but you can only do that with software. You can only do that with machine learning and data science. (2:25)

Seizing Governance

Peace and prosperity comes from a combination of great governance and great capitalism. Democracy and capitalism. In a world where we see what’s happening on the governance side, we have to take things into our own hands and just build the things we need.

But in order to do that, people shouldn’t be job-hopping every two years. People should take bets on folks, people should trust folks that they’re well-intentioned, people should try to learn from their past mistakes. All of these things can be more systematic. If you do that then you’ve got a chance.

That’s what I would hope for, because I think we need it more than ever, and there are folks who will put a lot of our own money behind trying to make it so. And then along the way it’s gonna roil a bunch of people and piss a lot of people off, but it’s the right thing to do. (1:11:00)

Inefficient System

Democracy is under attack. And the reason is because, democracy creates a framework of personal freedom. You and I can basically do whatever we want. And the net result of that is both of us decide to allocate our resources, however which way we choose. Your time, my money, people’s abilities. Some people become foremen, some people become nurses, some start companies, some become artists. Right?

And in that process, society becomes more mature, self-actualized, there’s more peace, there’s prosperity. So it all works. So it sits on top of lubricant called capitalism. And the problem today is capitalism is just fundamentally broken, because of two reasons:

One is the law, so in countries like the United States we’ve bastardized and perverted the ability for a few of us with capital to completely change the system to the way that we want it to work. And so we can walk around in our own little utopic world and say, “This is how I want this system to work, that system to work, and I can make it so.” And there’s a couple thousand of us that can do that.

And the second part about it, which I think is fundamentally broken is this idea that in that world where the law is perverted, you have technology which then accelerates that even faster than you could have ever imagined. We have these articles today, if you’ve been reading the paper: autonomous vehicles. On the one hand it’s like wow, autonomous vehicles are good and there’s two or three companies that can invest and make it so, and on the other hand there are four million people with jobs related to driving just in the United States. Well if those four million people went out of work, you know, the unemployment rate is 11%, oh, by the way, most of those people are men between the ages of 22 and 34. Well, if, you know, four million people between the ages of 22 and 34 were hanging around with nothing to do and we were in Syria, that would be called ISIS.

And so you have to really internalize, there are structural things that are happening here, that to me says, we’re in an inefficient system.

So I believe part of our responsibility is to reallocate capital more equitably. And so I try to find systems that I think represent inequity that are broken where I can, with a reasonable allocation of capital, fix them to be more equitable for as many people.

So, in that: health care, so the binary act of living and dying.

Education: how can you acquire skills so that you are that much closer to being self-actualized and the ability to pursue your own passion?

Financial services: so how do you get access to the functional lubricant that allows you to do it, which is money, for better or for worse?

And then we have a couple of other areas. We have this area that we call Frontier which is a catchall for everything absolutely crazy that we can’t bucket eloquently.

We do a lot of stuff in enterprise software. Why? And people say, “In that grandiosity where does enterprise fit in?” Because all of us spend 10 hours in a company and most of us interact with horrible shitty software, it’s the equivalent of being stuck in traffic except for 10 hours.

And so you get home and you’re just angry. You’re angry at your kids, you’re angry at your wife, you’re just angry at everything!

If you’re gonna fix the system you have to fix it at a moral and ethical level, but also at a very practical level. So those are like four or five areas that we spend inordinate amounts of time.

So, healthcare. We love chronic disease. Why? Because that is a very tractable set of conditions that we can solve in our lifetime. Diabetes, asthma, obesity, heart disease.

In education, we love this idea of breaking this notion that the only way to get a good job is through very roped, linear models of pedagogy and education. And for many, many people, we should be able to find a way to celebrate the vocational worker as much as we celebrate the graduate from Harvard. Because there are eight billion people in the world and there’s only ever going to be 1500 graduates from Harvard a year. It cannot be that everybody else has no value.

So, there are all these systems now we need to rework, but it’s done in this lens of we’re gonna use our ability and our place in the capitalism food chain, because we’re, for better or for worse, closer to the top of that totem pole, to try to help democracy get a little bit going; it’s a little sluggish right now. It’s not doing what it was supposed to be doing. And it’s playing out, by the way, in real time in the United States right now.

We’re eight weeks from what could be a cataclysmic, train wreck of an outcome, but when you understand why that’s happening, those are real people, that are functionally frustrated because they believe a system they’ve invested their whole lives, that their kids go and fight for, that they die for, isn’t working. And so those are the kinds of things that [we’re interested in], and how we frame, how we allocate our time, and our money. (9:35)

Redefine Success

Let’s not have such a brittle definition of success so that it’s only by money, which is stupid, but it’s also great literature, it’s beautiful art, it’s the things that you create, it’s the people that provide care to the elderly because they believe in that. It’s the person that teaches second grade and he or she loves it.

And that’s like, again, elevating our common consciousness. It only happens by having a discussion about it, and there’s a silent majority of us that all believe in this, but many of us don’t have a currency to vocalize it, and you devolve into the randomness of the tactical issues. (39:35)

Diverse Wealth

My point is right now, four people are on a path to [make a trillion dollars]. 400 people should be on a path. The reality is that capital will accrue to people, and they will accrue around ideas. That’s just the inevitability of capitalism and the system in which we all live. Now the point is, let’s get more people in a position where now they have to figure it out amongst the group where there’s more diversity of thoughts and opinions. In that, there will be these interesting compromises that actually make the world structurally more predictable and better. And you eliminate a lot of tail-risk that way. (36:50)