(Transcript) Steve Jurvetson 2020 Commencement Speech // Saint Mark’s School

Over the years, I’ve found that commencement speeches are, word for word, some of the most wisdom-dense content one can consume. There is no shortage of legendary speeches – David Foster Wallace at Kenyon, Peter Thiel at Hamilton, Steve Jobs at Stanford, Elon Musk at Cal-Tech, Paul Tudor Jones at Buckley School – just to name a few.

I believe this speech, given by Steve Jurvetson to the Saint Marks Class of 2020, is one of the greats. I’ve transcribed the video for your convenience. The opening (which was cut from the video) is taken from Steve’s blog, and you can find the video here.

*Transcribed 6/24/2020
**Any mistakes should be attributed to me.

Steve Jurvetson ’85 // Distinguish Alumnus // Future Ventures, SpaceX, and Tesla

“The Saint Mark’s Class of 2020 has contributed greatly to our school community – in the classroom, in the arts, on the playing fields – and they’ve also led with courage, integrity, resilience, and with heart. Notwithstanding the adversity and significant disruption to their senior year, these Marksmen have set a great example and made us very proud.”

That is how your headmaster described you to me. He is proud of you. Your parents are proud of you. The long lineage of alumni that came before you are proud of you. This physical separation of our presence does not in any way gainsay your accomplishments. But it might feel a little strange.

So what to make of all this extra time at home? One of my children is also a senior this year. And it’s a blessing for me as a parent to have some interrupted blocks of time to think about the transition to come and to interact as adults. This may seem like the last thing you’d want more of, on the precipice of graduation, independence, and collegiate life.

But once you’re on the other side of this transition, you may realize how precious and rare these opportunities are. Tim Urban recently tabulated the days of our lives to the shocking realization that by the time you graduate high school, 93% of all of your in-person time with your parents will be behind you. The entire rest of your life is but 7%. Treat this sequestered time for what it is. Something precious. Be mindful, and kind, and grateful, if you can. This transition of yours is their proudest and most poignant passage. It will be something that causes them to cry as you go, whether they show it or not.

The repetition of life at home also affords an opportunity to reflect on what you choose to do each day. Will you start each day with exercise? Will you stay sober? Will you read a good book each night, or watch a screen? These simple choices, compounded over a decade, can make all the difference in the world for your professional advancement, happiness, and health. We know this to be true.

But it’s hard to see day-to-day. Think of the power of compounded interest. Let me say it more forcefully. Spend less time focused on the goals for your life. Spend more time on the habits and simple iterative algorithms that will improve your life. This obsession on goals is misplaced. Consider any competitive sporting event. The losers have the same goals as the winners. Right?

Learning from our heroes’ goals reflects a sample selection bias, since no one does a post-game interview of the losers to ask them about their goals. And they’re the same. And it’s the same in business. Elon Musk believes this dearly. The process of innovation is more important than the product of innovation. This is why he made all the Tesla patents opensource. To help recruit and motivate the best engineers to build the next product. He prioritizes a process of continuous innovation over protecting the products of the past.

You will also find happiness elusive if you focus on goals. It’s the journey of life that’s the reward, not a goalpost destination. Focus on your daily acts, your systems [that] become habits, and your identity will follow. Are you a runner? A lifelong learner? A caring soul? Your tombstone virtues will include none of your resume virtues – the goals and prizes you may seek today.

James Clear summarized it well: “You do not rise to the level of your goals. You fall to the level of your systems.” Once you enter the magical playground of college, it might be hard to establish those systems with so much change afoot. It might be hard to resonate with your identity when myriad horizons open anew.

So, as you’re entering this wild and wonderful world out there, I want to leave you some more thoughts:

10 years ago, I gave the St. Mark’s commencement speech to the graduating seniors, much like yourselves. I told them to, quote, “Rest assured we are entering an intellectual renaissance, interwoven across the sciences. There is no better time to be a student [of] technology, no better time to start a company, no better time to learn something new. Individuals with good ideas are empowered as never before” – I told them.

That is even more true today. The accelerating pace of technology-driven progress has compounded 1000-fold over the past decade – doubling each year for 10 years. Major improvements are just beginning in energy and sustainability, decoding the information systems of biology, and re-engineering the cellular production of meat without slaughter, polymers, and chemicals without oil. The iterative algorithms of evolution and machine learning are revolutionizing AI and the broad category of complex systems design. The resulting algorithmic advances in AI themselves are breathtaking, and remarkably easy to learn – once you shift the locus of learning from product to process, from the artifacts of creation to the methods of creation.

Later this month, SpaceX will return astronauts to space, and before you graduate college, we will have a permanent lunar settlement, and have sent our first landing party to Mars. As we expand outward on the final frontier, we find it representative of the palpable excitement on all the frontiers of the unknown – from neuroscience to AI to synthetic biology.

Now you may have noticed I haven’t said nothing about the tumult in the economy around us. It turns out that market disruption in needed for new entrants and new ideas. It’s an essential precursor for progress.

Tesla launched in the peak of the Great Recession of 2008. What better time to compete with the incumbent gas-burning car companies than when they’re going bankrupt and selling off all their assets? It turns out that starting a new business works best in a recession. Companies can focus on iterating with customers rather than racing off to the financial markets. If you look at the companies in the Dow Jones Industrial Average, two-thirds of them were founded in a recession. That was true in 2010, and it’s true today.

New entrants forge the future. They always have. They are the source of all meaningful change. And that is true for new companies, as well as new intellects – such as yourself – entering the world stage.

So I want to share my excitement for your future – oh, to be in your shoes again. I think, I will wish you the best in this. That you may skip forward on your future path, with playful curiosity, and consider your potential on this planet as something grand. You can change the world for the better, and find the sublime satisfaction of symbolic immortality.

Thank you, and all the best, from Steve Jurvetson, Class of ’85.

Thanks.

(Transcript) Electricity as Medicine – Renee Ryan // Cala Health

Ever since I befriended the scientist who developed the cochlear implant and was an early developer of remote neuromuscular stimulators, I’ve been fascinated by neuromodulation. While I was looking at minimally invasive procedures, non-invasive methods didn’t even cross my mind. While non-invasive methods are focused on assuage, they do not cure. Even so, I was very pleasantly surprised to learn of Cala Health, and I really enjoyed Renee Ryan’s (Cala CEO) talk with Josh Wolfe (Lux Capital).  

Lux has a Medium Page where they share transcripts of all the Futura episodes, but they haven’t published this one yet, so sharing mine here. You can watch the full video here.

If you want a recap of Season 1, check out this tweetstorm.

*Any transcription mistakes should be attributed to me.
*Transcribed 6/16/2020

Josh: Hey everyone, I’m Josh Wolfe, Managing Partner and Co-founder of Lux Capital, a firm that invests in emerging science and technology ventures at the outer most edges of what’s possible. We’re back with season two of our new web series Futura, where you’ll be meeting the rebels of science and invention. We’re turning Sci-fi, into Sci-fact. This season we’re taking you inside with the futuristic founders and inventors who are bringing their cutting-edge ideas to life.

I’m here today with Renee Ryan, the CEO of Cala Health, which is merging breakthroughs in neuroscience and technology to deliver individualized peripheral nerve stimulation. Wearable electronic medicine isn’t science fiction anymore.

So one of the very cool things about you is that you started out as an investor. We were both on the same side in one of the great successes, Auris, which was originally invested in by J&J, and then sold to J&J. But tell me about your transition from the buy side to identifying a mutual portfolio company, and then going to lead it.

Renee: Well, it was interesting. I realized that large companies, like J&J, don’t really have a cash problem. They have an innovation problem. So the idea of starting your own companies, or becoming farmers versus fishermen, was really sort of a mind shift that I had. And the summer that I started Verb Surgical, which was really this sort of breakthrough innovation, not just in surgical robotics but really digital surgery and transforming the O.R. for the 21st century. But that summer was the same summer that Lux and J&J got together to found Cala as well. So exciting times, but the mindset was about doing things differently, right? And the ability to create opportunities like wearable neuromodulation or surgical robotics.

Josh: To explain neuromodulation very simply, in lay terms—

Renee: Simply put, it’s using electricity as medicine.

Josh: Electricity as medicine.

Renee: Mm-hmm.

Josh: I mean, that sounds sort of crazy. But this is something that we’ve talked about.

Renee: Yeah, no. Not new at all. I mean, if you think about the history there, it goes back to pacemakers. And then we moved into cardiac defibrillators and lower back pain stimulators. Now we treat obesity and sleep apnea and all sorts of conditions using implantable neuromodulation. Cala was the first time I had seen anything to do it in a body-worn electronics.

Josh: So instead of requiring surgery or some sort of invasive technique, this is something that is going on like a wristwatch equivalent, more sophisticated of course.

Renee: Hopefully, yes.

Josh: Tell me about the technology in Cala’s case. What are the components of it, how does it come together, what’s the hardware, what’s the software, and then what’s the implication for a patient.

Renee: So the insight that Kate had was really the ability to stimulate over two nerves – at the wrist – but generate the signal in the Central Tremor Network in the brain. So it wasn’t just a simple electrical pulse, it was the idea of having a patterned pulsing across two nerves, that was the real innovation that she discovered.

Josh: And the implication for patients – of course, essential tremors are shaking, manifest from Parkinson’s and other neurodegenerative diseases – what is the implication when you put on a device like what Cala has made?

Renee: Yeah, you know, we’re not curative in any way, but we are reducing the tremor burden. So we ran the largest study ever done for an essential tremor therapy, and 263 patients across three months. And what we saw was that about 92% of our patients actually derived some level of benefit. What you’re able to do is restore people to their activities of daily living. So anecdotally, we have patients who want to play the guitar, they want to paint, they want to feed themselves. Restoration of those types of activities are what our goal is.

Josh: Are there any stories that you can share about patients that are actually using the device – that have maybe positively impacted their lives.

Renee: About two weeks after we launched here in California, we were offering a telemedicine option to patients. This patient showed up, she got an appointment on the doctor’s calendar. She was scheduled to have deep brain surgery in about three weeks.

Josh: So, being put under massive invasivesurgery.

Renee: Correct. And she wanted to try theCala trio device as a potential optionfor her. And we found out that she didpostpone her surgery for about fourmonths. And, so far, it’s looking verypromising that the Cala trio is workingfor her.

Josh: That’s amazing. Congratulations.

Renee: Yeah, and her – she was so simple in her needs. All she wanted to do was restore her dignity to feed herself.

Josh: When you think about the talent that has been assembled under your leadership, what are the disciplines that you’re drawing from? Where are people coming from?

Renee: Yeah, I think like many startups in medical devices, we have traditional mechanical engineers and electrical engineers, but what makes Cala, I think, more unique, is that we also attract a wealth of phenomenal data scientists and neuroscientists. Oftentimes we have combination degrees of both a data scientist’s, but also neuroscientist’s, background.

Josh: It’s fascinating – the signal processing in both ways – between being able to read the neurons and essentially write to them – and the intersection between brain science and computer science. Truly remarkable.

Renee: Yeah.

Josh: Now, we love rebel scientists at Lux. We love rebel founders. We love people that are breaking rules in some ways. Are there any rules, whether it’s in the manufacturing or the distribution of your devices, that you’re thinking about this in a different way than people might expect?

Renee: Since the earliest days, when J&J and Lux and Kate all got together, this was about doing it differently. This was about putting the patient at the center of care, and delivering our therapy directly to that patient. Now, it was complicated because we have a prescription involved. So we do need a physician’s endorsement of the technology. But once we, Cala, get the prescription, we are both the manufacturer and the distributor of the device. And we directly ship to patients.

So that engagement, when we bring a patient in, when we train that patient, it’s all done by us directly with our patients.

Josh: So you’ve got the Trio, which is the first device. But what are some of the other devices that we might expect coming down the pipeline?

Renee: About a year ago, we in-licensed work out of Massachusetts General Hospital, out of Harvard, for an auricular based stimulation, which is at the ear. And, we believe that there’s additional neurology and cardiology types of applications using that platform.

Josh: Truly appreciative of the work that you’re doing. I can’t tell you how many times I have people reach out and say can you put me in touch with Cala because they have a brother or sister, a mother or father, a loved one who is afflicted with essential tremors.

And so we always say that we like to invest in technology that matters. Matter that matters. And very grateful to be partnered with you and the future that you’re building.

Renee: And thanks for the support.

Josh: That’s it from us today. I want to thank the rebel inventors at Cala Health for giving us a sneak peek of the future. If you want to get in touch with us, reach out to us at Futura@lux.vc. We’d love to hear your crazy ideas and inspirations.

If you enjoyed this, and want to learn more about Josh, check out my compilation of him. And if you want to keep up with what I’m reading, you can find me on Twitter at @kgao1412.

Keeping Up with China for the English-speaking World

As a Westerner who has lived/worked/studied in China, I often stress how important it is to pay attention to what’s going on in Asia, especially in China. Unfortunately, it’s a bit daunting for the non-Chinese person. To help you with that, I’ve put together a list of the English-friendly resources I use to stay on top of things.

Remember, as with ANY journalism, take everything you read with a grain of salt, do your own analysis, and draw your own conclusions. Rarely is anything as it seems.

*Note: The English-language websites often have different content than the Chinese websites. I highly recommend visiting the Chinese websites and using a translation plugin in addition to visiting the English sites.

**Note2: This list is categorized, but in no particular order.

Business/Economics

Caixin Global

  • The most popular and arguably most respected english-language media company in China. Caixin was founded by Shuli Hu, a former Knight Fellow in journalism at Stanford (previously founded Caijing). Style will be very familiar for westerners.
  • English Link: https://www.caixinglobal.com/
  • Chinese Link: http://www.caixin.com/?HOLDZH

Caijing

  • Known as the “Bloomberg” of China. Known for its independent reporting and criticism of topics others don’t cover (has been the very important exception to the rule about strictures/llimits on Chinese domestic press). Founded by Shuli Hu before she left to start Caixin.
  • English Link: http://english.caijing.com.cn/
  • Chinese Link: http://www.caijing.com.cn/

Week in China

  • Independent Hong Kong-based publication providing context/commentary on key business trends emerging from China and a combination of Chinese and English language sources in press and internet. Exclusively sponsored by HSBC.
  • English Link: https://www.weekinchina.com/

South China Morning Post

Financial Times Chinese

  • Chinese language coverage by the Financial Times. Different content from Western Financial Times.
  • Chinese Link: http://www.ftchinese.com/

PE Daily

Politics

People’s Daily

Global Times

  • Newspaper under the People’s Daily. The Economist calls it a “remarkable innovation,” which addresses “realms once thought taboo.” The Wall Street Journal praises its “insightful stories.”
  • English Link: https://www.globaltimes.cn/
  • Chinese Link: https://www.huanqiu.com/

Xinhua

  • China’s official state-run press agency (China’s AP). Called the biggest and most influential media organization in China, as well as the largest news agency in the world in terms of correspondents. It is a ministry-level institution subordinate to the State Council and highest ranking state media organ alongside People’s Daily. It’s president is a member of the central committee of the CCP. Publisher and News Agency.
  • English Link: http://www.news.cn/english/
  • Chinese Link: http://news.cn/

China Radio International (CRI)

China Central Television (CCTV)

Lijian Zhao

Xijin Hu

Lawfare Blog

  • US-based blog dedicated to national security issues, published in cooperation with Brooking Institution. Covers China from a Western, defense perspective.
  • English Link: https://www.lawfareblog.com/

ChinaTalk

Macro Polo

  • The in-house think tank of the Paulson Institute, focused on decoding China’s economic arrival across different mediums (commentary, digital projects, analysis, multimedia).
  • English Link: https://macropolo.org/

Sinocism

  • Written by Bill Bishop, an entrepreneur and former media executive with over a decade’s experience living and decoding China. Arguably the most consistent and comprehensive China commentary source from a Westerner.
  • English Link: https://sinocism.com/
  • Twitter Link: https://twitter.com/niubi

China Law Translate

Startups/VC

36kr

  • Hands-down the top tech/startup media platform in China. Must read.
  • Chinese Link: https://36kr.com/

Kr-Asia

  • 36Kr’s english-language effort. Covers the tech/startup ecosystems in China, Southeast Asia, and India.
  • English Link: https://kr-asia.com/

Abacus

China Tech Blog

  • Started by Schwarzman Scholars. Provides on-the-ground coverage over China’s tech/entrepreneurship ecosystem from a global viewpoint.
  • English Link: https://www.chinatechblog.org/

China Money Network

Connie Chan

Avery Segal

Tech

Qbitai

Jiqizhixin

Institute for Interdisciplinary Information Sciences

  • The first education and research institution dedicated to interdisciplinary information sciences in mainland China. Led by Turing Laureate Andrew Yao, it is known for the world famous “Yao Class,” which counts the founders of Face++ and Pony.ai among its alumni. Great for keeping up with research in China.
  • English Link: https://iiis.tsinghua.edu.cn/en/
  • Chinese Link: https://iiis.tsinghua.edu.cn/

8BTC

  • All things crypto in China. The oldest and most influential independent paltform for bitcoin, blockchain, and cryptocurrency news in China.
  • Chinese Link: https://www.8btc.com/

Jeffrey Towson

  • Private equity investor, Peking University professor, and best-selling author. One of the rare Western analysts living in China. Solid content.
  • English Link: https://jefftowson.com/

Matt Sheehan

  • Fellow at Macro Polo and author of “The Transpacific Experiment: How CHina and California Collaborate and Compete for Our Future.” Focuses on China-US AI relations.
  • Twitter Link: https://twitter.com/mattsheehan88

Research/Educational Institutions

Tsinghua University

Beijing University (Beida)

Culture

Jing Daily

Radii

  • Independent media platform dedicated to understanding and sharing vibrant stories around culture, innovation, and life.
  • English Link: https://radiichina.com/

Elephant Room

  • Independent media project focused on contemporary China’s social, cultural, and business innovations.
  • English Link: http://elephant-room.com/

General Media Platforms

Wechat

  • Tecent’s iconic “super-app.” Essential for living in China and following the news through group chats, moments, and Top Stories feed. Best way to get “on-the-ground” info.
  • App-only. English version available and chats have a built-in translator, but you’d need to have existing friends in China and the news/content is almost exclusively in Chinese.

Weibo

Toutiao

  • Bytedance’s main product. Reading recommendation platform powered by machine learning.
  • Chinese Links: https://www.toutiao.com/

Douyin

  • Bytedance’s video product. Short videos. Although seemingly the same product as TikTok (international version), the two entities are completely separate. May be (probably) powered by the same technology, but content completely different.
  • Need Chinese phone number

(Transcript) The Fleet of the Future Mapping the Planet — Sebastian de Halleux // Saildrone

Ever since my time at DJI, I’ve been obsessed with drones, mapping, information collection, and data analysis. I came Saildrone a while back, so it was an absolute pleasure watching Sebastian de Halleux (Saildrone COO) be interviewed by Josh Wolfe (Lux Capital).

Lux has a Medium Page where they share transcripts of all the Futura episodes, but they haven’t published this one yet, so sharing mine here. You can watch the full video here.

If you want a recap of Season 1, check out this tweetstorm.

*Any transcription mistakes should be attributed to me.
*Transcribed 5/20/2020

Josh: Hey everyone, I’m Josh Wolfe, Managing Partner and Co-founder of Lux Capital, a firm that invests in emerging science and technology ventures at the outer most edges of what’s possible. We’re back with season two of our new web series Futura, where you’ll be meeting the rebels of science and invention. We’re turning Sci-fi, into Sci-fact. This season we’re taking you inside with the futuristic founders and inventors who are bringing their cutting-edge ideas to life.

I’m here with Sebastian de Halleux, the COO of Saildrone. No longer science fiction, they have a robotic fleet of daring drones on ocean missions at the extreme edges of the globe.

So we’ve got drones in space, we’ve got drones in the sky, we have drones on the ground, but we’ve never really had drones at the ocean. And you are changing all of that. Tell us about the origins of Saildrone.

Sebastian: It was born in [in desert] out of research in high-performance aerodynamics to break the land speed record in the land yacht. The real invention that came from that effort was a propulsion method that uses wind, but reuses only three watts of electricity to control a very powerful wind propulsion system. That was then adapted to a marine vehicle, and the Saildrone was born.

Josh: So you’ve got the physical frame, which is an innovation itself, but what about all the technology inside?

Sebastian: Inside you really have the innovation that has been made possible by miniaturization. So you know, high performance IMU, GPS, satellite modems, and the satellite constellation itself that enables the data extraction from all those vehicles in real time back to the cloud. So many things had to come together to make the Saildrone possible, which is an effort that would have been inconceivable even ten years ago.

Josh: Now when we first invested there was, I think, one vessel. How many are now out at sea?

Sebastian: The goal of the company, as you know, is to try to quantify the entire planet. And so the ocean is 360 million square kilometres. So we divide this in small domains: six by six degrees. And if you do this, you get a thousand such domains. And so, our goal has always been trying to build a thousand, you know, vehicles. And so right now, we have a hundred active Saildrones.

Josh: You also set a record. I mean, you guys were the first to produce autonomous navigation around the Arctic Circle.

Sebastian: That’s right. So in the Arctic — we’ve been going there for five years — we have been further north than any unmanned vehicle. 76 degrees North, which is really really high up. And these oceans have never been sailed since the dawn of humanity because it had never been ice-free.

But something I’m even more proud of is the circumnavigation of Antarctica. So it’s hard to believe, but it’s only 120 years ago that humans first overwintered in Antarctica — in a sailing boat, actually. Half the crew died. It was, you know, just the early days of exploration. And we were the first robotics company to sail around Antarctica unassisted. 196 days from New Zealand to New Zealand. Now think about this. This is the Southern Ocean, you know, where 60-foot waves happen every other day, where the vehicles get rolled. We had a collision with an iceberg.

Josh: And have there been any crazy encounters?

Sebastian: We have had episode of seals taking rides on Saildrones up in the High Arctic avoiding orcas that are chasing them. Collisions with eight mile long icebergs in big storms in the ocean.

Josh: Seals have used Saildrones as refuge?

Sebastian: That’s right. We joke it’s like the Uber for the Arctic.

Josh: Now, at Lux we love rebel scientists and rebel founders who are trying to break some rules. In some way they look at the system they find a way to hack it. What are some of the rules at Saildrone that you had to throw out?

Sebastian: Well if you’d walk into any of our meeting rooms, you know, you’d smile because we talk a lot about the high seas, which is where we operate, you know, which is beyond any national jurisdiction. This is the land of parrots, you know, and this is pretty much where the Saildrone fleet operates.

So we’d [normally] break many rules, but very few rules exist where we operate, which is a frontier that’s just, you know, on our doorstep here.

Josh: Truly, Jules Verne would be inspired.

Sebastian: Absolutely. I think he would be proud.

Josh: So you go from the desert to the ocean. And the vessels go from small to large. Tell me, from the current state of the fleet of the Saildrones today, what can we expect in the future?

Sebastian: The original idea was this network of a thousand, you know, Saildrones — 23 feet in length. But for some jobs, you just, these are not gonna cut it. You have some sensors which are just too power hungry or too big to be carried by those vehicles. So for that, we are about to release something called the Saildrone Surveyor. Imagine a 72-foot robot with a 60-foot tall sail that can cruise at 10 knots with peak speed of 20 knots and carry one and a half ton of a equipment.

Josh: If there’s one spot that you personally could spend all of your time in the world on the ocean, where in the world would that be?

Sebastian: So you know, this is how I first came into Saildrone. I love the ocean. It’s on our doorstep. I’ve worked in technology, so the ocean is my refuge. And I’ve been to Hawaii a few times, but I’ve never taken a plane. I always sail from San Francisco to Hawaii. It’s just fascinating, because you can look at it, but understanding it is a whole other, sort of, realm. And the questions about the oceans have never changed. But the technology that we use to address those questions is evolving so rapidly that we’re finding new answers.

Josh: If there were three big questions, three big answers, that you would be proud in a decade hence, Saildrone has solved or answered, what would they be? As they relate to the ocean.

Sebastian: Better understanding of the ocean resources like fish and fish [stock]. Being able to sustainably manage fisheries that feed 20% of the world population. That would be one.

The second one is improving weather forecasts and extending it over time to give people a better grip around what’s going to happen in the future of the planet.

And the third one, and that’s the big one, is understanding the carbon cycle and the heat cycle which is currently rapidly changing. It’s going to be key to our survival.

So understanding what’s happening, and how we can hopefully use the ocean as a solution to our own future would really be an amazing legacy.

Josh: It’s very inspiring against a backdrop of so much dystopian tales of the climate and the earth, to see the engineering and forward-thinking future that you are building to help solve the crisis.

Sebastian: There’s pretty much, you know, no part of the economy that’s not touched by the weather, which is the short-term manifestation of the state of the planet, or by climate, which is its long-term analogue. Right? We talk about an Arctic ice-free ocean within our lifetime. We talk about extreme weather disrupting companies in creating billion-dollar, you know, damage events, you know, ten times more frequently than ten years ago. So, how do we understand a fast-changing world? We need more data, and stimulation of data into models that can predict what’s going to happen in the future.

Josh: The people that you are hiring at Saildrone. Are they oceanographers, are they computer scientists, are they engineers? What are the talents and the disciplines that you’re starting to see and that you’re recruiting from?

Sebastian: So you know, we are truly a full-stack company. Literally, it starts with the mechanical engineers and composite technicians and system designers, electronics engineer, all the way up to machine learning in AI experts, as well as oceanographers. People come from the best companies in the world and in the Valley.

Josh: Well I think the scale of the mission has attracted extraordinary people, and we’re very proud to be part of it.

Sebastian: Great, Josh.

Josh: That’s it from us today. I want to thank the rebel inventors at Saildrone for giving us a sneak peek of the future. If you want to get in touch with us, reach out to us at Futura@lux.vc. We’d love to hear your crazy ideas and inspirations.

If you enjoyed this, and want to learn more about Josh, check out my compilation of him. And if you want to keep up with what I’m reading, you can find me on Twitter at @kgao1412.

(Transcript) Renegades of Defense — Palmer Luckey // Anduril

As anyone visiting this website knows, I’m a huge fan of Josh Wolfe (Lux Capital) and Peter Thiel (Founders Fund), and their focus on deep tech and defense. Previously, I’ve written a tweetstorm sharing my favorite takeaways from season 1 of Lux Capital’s web series Futura. I initially wanted to wait till season 2 wrapped up so I could binge watch the whole thing.

However, after re-reading some of Teledyne’s old annual reports, I kept thinking of Anduril, the subject of this episode and in my opinion the spiritual successor to Teledyne. It didn’t help that Anduril is backed by BOTH Lux and Founders Fund, or that the interview was conducted personally by Josh. Lux has a Medium Page where they share transcripts of all the Futura episodes, but they haven’t published this one yet, so sharing it here first. You can watch the full video here.

*Any transcription mistakes should be attributed to me.
*Transcribed 5/11/2020

Josh: Hey everyone, I’m Josh Wolfe, Managing Partner and Co-founder of Lux Capital, a firm that invests in emerging science and technology ventures at the outer most edges of what’s possible. We’re back with season two of our new web series Futura, where you’ll be meeting the rebels of science and invention. We’re turning Sci-fi, into Sci-fact. This season we’re taking you inside with the futuristic founders and inventors who are bringing their cutting-edge ideas to life.

Today I’m here with Palmer Luckey, founder of Anduril, who is developing some of the most cutting-edge technology in both hardware and software specifically for the defense sector.

So, one of the things that we absolutely love is this decreasing gap between science fiction and science fact. And I feel like a lot of the things that you’ve invented and created as an entrepreneur have been premised on sci-fi. What is — is that true?

Palmer: Everything I’ve ever built has been something that has been in dozens if not hundreds of sci-fi novels, movies, comics, you name it. The things that I’m building are mostly a matter of knowing when to take an idea that used to not be feasible, and then say, “hey, it’s finally feasible. We can finally work on it.” I mean, Oculus wasn’t about new science, new materials, new physics. It was about things that already existed being put together in a smart way.

Josh: I love the idea that new things come from the combinations of old things. How do you decide the priority of the portfolio that you’re building? Because I know the pipeline is really rich, with some really cool things. But the first few things that you decided to emphasize and prioritize?

Palmer: Well, the core thing that we’ve build is called Lattice. It’s an AI-powered sensor fusion network that can take data from thousands of different sources, merge into a real-time 3D-models of very large areas, and then tag everything in that model with metadata. So you can sort it, filter it, run predictive analytics on it.

Most of the products that we build are either feeding data into Lattice, or they’re taking data from Lattice and acting on it. For example, our sentry towers. They have a 2-mile range where they look around themselves and they detect all the people, all the vehicles, all the animals that are moving through that space. And they identify them, track them, and can tell you what they’re doing and where they’re going.

An example of a product that acts on data from Lattice would be Anvil, which is our counter drone system. When one of our towers detects an enemy drone that is in an area it shouldn’t be, it can send a notification to a human operator. The person can push one button, and Anvil will take that information, fly out, reacquire the target with its own terminal guidance sensor, accelerate, run into it, and destroy it.

Both of those products are far more valuable because of the other. So what we’re really trying to build is the tool that allows people to do what people do best and machines to do best. And for humans and machines to work side by side very effectively.

Josh: Was there some technological breakthrough that occurred in the past 5-7 years, whether it’s at the cloud layer, infrastructure layer, hardware, or software, that *this* made it possible today that it would have been impossible a decade ago?

Palmer: Machine learning. Machine learning has become incredibly powerful over just the last few years. The ability to train it quickly and efficiently has made all of our products possible.

Josh: One of the things that we love at Lux is backing rebel scientists, entrepreneurs, and founders, which you embody. What are some of the rules that you had to throw out, either technologically or systematically, with Anduril?

Palmer: I mean, when we started the company, we basically threw out the rulebook on how defense procurement is normally done. You know, it’s normally very much focused on cost-plus contracting, where a company gets paid for time and materials — like a fixed cost. And then a fixed profit margin on top of that. The problem is, that incentivizes companies to spend as long as they can doing something. And I didn’t want to start a company that had those natural incentives.

The problem is that they say “How can we develop this product in such a way that congressmen can’t vote to kill it?” And the answer of us is, “Don’t rely on money from congressmen to get the thing built.” Use your own money.

Josh: This is rational and rare and risk-seeking, because — if I may — it’s sort of like the big old contractors are basically saying, “We will bid in the hopes of building.”

Palmer: Yup.

Josh: Whereas you guys are saying, “We will build, in the hope that the government, our customer, DoD, is going to buy.

Palmer: I want to set up a company so that when we fail to make a product that works, we don’t get paid. That seems obvious, but it is not the way that it works in the defense space.

Josh: What are some of the technological things on your wish list? Things that don’t yet exist for a variety of reason, either technologically they haven’t been invented or too expensive, that you wish existed?

Palmer: First, I’d say high-energy-density battery systems. Another thing on my wish list is just cheaper access to space. I think there’s a lot of applications for things that will be in low-earth orbit, geosynchronous orbit, and then out beyond into the solar system, that today are totally cost-prohibitive, and are going to change the way that we use technologies.

Josh: I love the idea that you were talking about before, which I call the adjacent possible, where something is being innovated or developed in a different area, and then smart guys like you are able to go and reach in, be like “Oh, I can use that for my—”

Palmer: And that’s why I keep my eyes on everything. Because a lot of times, the things that make our products possible come out of new advancements in those other fields.

Josh: There’s this directional arrow of progress in technology, where you get higher and higher resolution, and higher and higher precision. And I’m of the view that the greater your technological precision, the greater your moral precision — particularly in defense. What’s your view on this?

Palmer: I mean, in defense, it’s obviously true. The more options you have, the more likely you are to be able to take the right option. And so, I’m a big fan of not trying to limit the military through crippling them, and saying “I don’t want you to have that technology because it *could* be used for bad.” It’s like “no, no, no.” Build the technology, and just make sure hat we have the strict controls in place to make sure that it’s used for good.

Josh: The diversity of the technologies you work on is very impressive. The diversity of the people that are here is very impressive. Tell me about their backgrounds and where they come from and why they’re here joining you in this mission.

Palmer: We hire people from all over the place. We hire people from large tech companies that want to work on defense problems. We have people coming from the defense space, that want to work faster than they’ve been able to work. We get a lot of new grads. I will say, the common trend between almost all the people in our company, is that they are people who are interested in working on things even outside of school. Even outside of their job. And when I hire people, that’s the first thing I look for.

Josh: Well, you embody this in that you were technologically extraordinarily successful, financially extraordinarily successful. You didn’t have to go and start another company. But you were driven by this passion to do this. But you’re also driven by a philosophical mission around this. What — what is the purpose of Anduril?

Palmer: The purpose of Anduril is to build a next-generation defense company that fills the holes left by all the other people that should be filling it. For the first time in history, the most innovative, most talent-dense companies in the United States are refusing to do work with DoD. The rest of the world is smart. They know what technologies are coming next.

Josh: And they’re racing ahead.

Palmer: And they’re racing ahead. With or without us. I want to make sure we have a seat at the table so that we’re the ones that are defining the rules of how this game is played.

Josh: Palmer, absolutely thrilled to be partnered with you on this mission. I’m really proud of the work you’re doing.

Palmer: We love working with you too, Josh.

Josh: That’s it from us today. I want to thank the rebel inventors at Anduril for giving us a sneak peak of the future. And if you want to get in touch with us, reach out to futura@lux.vc. We’d love to hear your crazy ideas and inspirations.

If you enjoyed this, and want to learn more about Josh, check out my compilation of him. And if you want to keep up with what I’m reading, you can find me on Twitter at @kgao1412.

Rare Interview: Neil Shen (Sequoia China) and Stephen Schwarzman (Blackstone) Part IV

Last week, I came across a live discussion between Neil Shen (Founder of Venture Capital firm Sequoia Capital China and #1 on the Forbes Midas List in 2018, 2019, and 2020) and Stephen Schwarzman (Founder and CEO of private equity firm The Blackstone Group). In this wide-ranging conversation, these two giants of their respective fields discuss everything from China’s economy and the impact of COVID-19 to the core traits an entrepreneur should have and what to look for when hiring.

No recording, but I’m sharing my transcription for easy consumption.

In this section, the pair discuss principles for investing and life, and give advice to those starting their careers or businesses in uncertain times.

This is Part 4 of 4. 

For more fun stuff, you can follow me on twitter @kgao1412. And definitely check out my compilations page.

Part III: Why Culture is more important than Management

4/23/2020

Part 4: Principles for Life and for Investing

Neil Shen: Well, that’s a very good suggestion how businesses [“seasons”] interested should talking to potential candidates. Obviously, the very reason you can make those decisions and make those calls when you interview them, is because you obviously come from a history of successful investments. So let’s get into that part of the conversation now.

So in the book, you mention one of your guiding principles is “Never lose money.” Can you elaborate on that? Are there any other investment principles you’d like to share with the audience, with the younger generation?

Stephen Schwarzman: Yeah, sure. “Don’t lose is money” is like this famous saying for a doctor, “Do no harm.” In other words, you don’t have somebody come into your office, do some things to him, and kill the patient, right? So, I’ve learned, from the third investment that we made, in the steel distribution business that went wrong, investors hate it when you lose money. If you don’t make so much on some things, it’s okay. That’s just a mistake. If you lose their money, they get astonishingly angry at you, and they’ll almost never give you more money. So you have to be very careful when you make a decision. That doesn’t mean you don’t take risk. But when you make any decision, you have to believe that you’re not taking risk.

And the reason you would believe that is either because you’re stupid in the first place, and you just sort of feel like believing that, or you’ve done the work to show where things can go wrong. And you’ve discussed it, and planned, to take those things that obviously can hurt any new business, any new organization, any new investment, and you’ve engineered those out.

I think it’s important that investments are not balanced — that the chance of losing money is equal to the chance of making money — that’s a ridiculous approach in my view, even if it’s a lot of money. I’m not in the venture business, like you are, where people do that all the time. And sometimes they do astonishingly well. What I’ve learned, is when you’re handling large amounts of money — like we have, over $500B of money that’s a huge amount of money for private investments, the biggest in the world, actually, at Blackstone with no other company close to our size — that our responsibility is always doing a great job for people. And using the process I talked about earlier, where we openly debate the basic assumptions of everything, enables us to, for the most part, to avoid loss

Before the financial crisis that we now have — we’ll see how we all come out of that — our last 700 investments, we only had had one bankruptcy. One catastrophic loss. And that’s a pretty amazing record, when you buy a lot of things, and you borrow a lot of money for each one. To only have one that collapsed out of 700 shows that you can do that.

Neil Shen: Absolutely. I think, I guess every single one of the 700 has some embedded downside risk, but somehow you analyze it and you manage it. That’s an amazing number and record. Other than “Never lose money,” any other investment principles? You pick one to share with the audience.

Stephen Schwarzman: Yeah. Go into industries that have growth. If you’re investing in something where that whole field is doing well, and is going to do better in the future than it is the day you invest in — in that kind of field — you will find your way to success. If you’re investing in something that you think is quite cheap, but has very little growth, then when something goes wrong, you don’t have a way to fight your way to success. So that would be the other thing I would say.

So for example, Neil, in the real estate business, we sold our large shopping centers and malls when we saw the internet coming in. In the Western world, that was a very smart thing, to not own those. And we took the money, new money, and bought warehouses. Now why did we buy warehouses? Because all the Internet sellers, whether they’re the Alibabas or JDs, doesn’t matter, they all need warehouse space for their goods to ship them to customers. And so warehouses, throughout the world, ended up being best asset class in real estate. Now, we were the largest purchaser of warehouses in the world over the last 10 years. So what we did is, we looked at the way the growth was going to be, where society was changing, got out of things that we thought weren’t going to work, and made huge commitments to the things we did.

Neil Shen: Yes. It’s a lot better to be in a growth industry. They enjoy the tailwinds. Instead of meeting the headwinds. So many young people in China are reading your book, not only for investment, but also for advice on their career life. So if you can only offer one suggestion to them, what would that be?

Stephen Schwarzman: I think one of the suggestions, particularly for younger people, is go into something that you love. What you find in life, is if you find something where you are a natural fit, your interests and your capabilities fit a certain type of activity, you can be really great at doing that. So one funny example, in our country, is we had a basketball player named Michael Jordan, who was probably the best basketball player who ever played. Remarkable athlete. His father died and he became very depressed. He quit basketball and tried to play another sport, called baseball. And Michael Jordan was a terrible baseball player. Here was the best person in a sport, who went into another sport and was mediocre.

How is that possible? They’re both athletic. But after a year and a half, he decided to go back and play basketball. And I was at his second game, he hadn’t played in almost two years, and he scored 40 points. In his second game. Which is an exceptionally high score. Because he was gifted. And each of us have something we like, that we’re better at than other things. And if you stick to where you have a gift, you’ll find that you’ll have a more successful life, you’ll be happier, and you’ll probably be much more successful.

So I think I’d like to ask you, what your number one career advice is for people, given the disruption in the economy today, in China.

I would say, whether there is disruption or not, I think the same rule actually applies. And you have said that so well. I think you need to be enthusiastic your job, and your career, and something you truly love. And in addition, I think you can choose an industry where there is a lot of exciting development, I would say, not only in the short term, but also in the medium-to-longer term. I think I would advise young college graduates to look at those criteria. Those are much more important than just compensation.

Neil Shen: For young entrepreneurs, which I know many of them are just starting a company, it is not an easy time. I would suggest them to focus on survival during this very [“significant?”] time. And I think the most important thing is, attend to your cash flows. Because that’s the only way you can make sure the company will survive. And also, like any startup, focus on product. I think the crisis will be over, and if you have a truly differentiated product, you’re going to come out as someone who is much stronger in the sector. And I just feel like you need to be resilient, in terms of, in markets like that, because many great companies actually have been built during special periods of time, like… (interrupted).

Stephen Schwarzman: But I told our younger people, that they’re actually quite lucky to be involved in our industry, which is the investment industry, at this stage, of really huge, economic dislocation. Because they’re going to learn to never trust anything that somebody tells them about what the future’s going to be.

As you said, make sure you have enough cash and cash flow so you don’t get in trouble. When young people start, they look at the world, they look at models, they build expectations, and they don’t always plan for everything going wrong. When I started — I first started in 1969, then I went to business school and came back and started again in 1972 at Lehman Brothers — there was no equity increase for 10 years in the United States. So I learned, equities don’t go up, automatically. And if they do, it’s a gift. And it may be temporary. So my whole career — because I learned at that time —

Neil Shen: Yup. Yup.

Stephen Schwarzman:  — is not believe what everybody tells you. Always assume it can go wrong. Always protect the business.

Neil Shen: And prepare for the really [“long”] (interrupted)

Stephen Schwarzman: Right. And so what happens is, the young people now, who are starting out, and other people, who have businesses, will learn discipline and what academics call “risk control” in a way that will benefit them for the next 10, 20, or 30 years of their careers. And even though it’s tougher times now, they have to look at it as educational time, where they will learn rules that will help make them success.

Neil Shen: Great. Really enjoyed talking with you. We are running overtime — but I hope that you could actually come back to China soon, so that you can physically see the audience who will become big fans of your book.

Stephen Schwarzman: Well, I’d love to come back soon. I have the Schwarzman Scholars program at Tsinghua University. Right now, everybody is scattered around the world. From the foreign students’ perspective, everybody would like to come back. We all need to be safe. That’s the job of our governments, to help provide that safe environment. But it’ll be great to come back as soon as I can.

Neil Shen: Great. Thank you so much for your time. And stay safe!

This is Part 4 of 4.

For more fun stuff, you can follow me on twitter @kgao1412. And definitely check out my compilations page.

Rare Interview: Neil Shen (Sequoia China) and Stephen Schwarzman (Blackstone) Part III

Earlier this week, I came across a live discussion between Neil Shen (Founder of Venture Capital firm Sequoia Capital China and #1 on the Forbes Midas List in 2018, 2019, and 2020) and Stephen Schwarzman (Founder and CEO of private equity firm The Blackstone Group). In this wide-ranging conversation, these two giants of their respective fields discuss everything from China’s economy and the impact of COVID-19 to the core traits an entrepreneur should have and what to look for when hiring.

No recording, but I’m sharing my transcription for easy consumption.

In this section, the pair discuss why culture takes precedence over management, and Schwarzman dives deep into Blackstone’s culture, discussing their “zero-defect culture,” why he dislikes “paid audiences,” and how he assesses talent.

This is Part 3 of 4. Part 4 will be posted tomorrow, and cover principles for life and investing.

For more fun stuff, you can follow me on twitter @kgao1412. And definitely check out my compilations page.

Part III: Why Culture is more important than Management

4/23/2020

Neil Shen: You mentioned in your book that corporate culture is more important that management. Can you elaborate on this philosophy? And how does Blackstone’s culture differentiate itself from others? And what have you been doing to build this very unique culture?

Stephen Schwarzman: Well, what you learn is that no one person, no matter how good they are, can do what everybody does. And you can’t control what everybody does, other than by teaching them good values, teaching them what you believe so that they can keep the core of what you believe and enjoy themselves. So at Blackstone, we have a variety of things that you just have to have. If we’re hiring people, we have to hire very smart people. We have to have people who are honest and have high integrity. We believe that high levels of cooperation. I believe in the “zero-defect culture.” And what that means, is you can make mistakes in judgement, but you can’t make mistakes in your work. It always has to be accurate. Anything that leaves your desk that goes to someone else, has to be perfect.

I believe, and we teach everyone, that groups can make better decisions that just one person. And decisions should be made based on intensive analysis, laying out all the risk factors in any decision, and then assembling a group of six to eight very smart people, and having them analyze that information in an open way.

And we have a culture where no one is an observer. If you’re in the room, you must talk. And you must tell people what you think. Not what somebody else thinks.

I don’t believe in what I call, and I hope this can translate, “paid audiences” of people in a business. If you’re at a table, you’re there to make a contribution. You are not there to watch other people intellectually work. And so we have these very vigorous debates. It’s part of the culture. It happens on every decision. But it’s not personal. Because in most organizations, if you say something that disagrees with someone else, then the person is going to view it as attacking the other person. And that doesn’t work well. So people are reluctant to say the truth.

We’ve created an environment where you have to tell the truth, and what you think. And it’s impersonal. And once everybody knows every meeting is going to work like that, then you have the benefit of everyone’s intelligence, which is very important. And we also have other core values, which is helping society so that people have a chance to help their organization outside of the business. And we treat everyone in the business as if they’re family.

I view the business as if it’s a small business. Now right now we have over 500,000 people with our parent company, which has about 3,000, and the other businesses and assets that we own. But I try and make sure that our senior management group, on Monday, is on video with everyone in each of our individual business lines. Because if you’re going to transmit your values and what you are thinking about the world, you can’t just send out an email. You have to be in-person. And video has transformed the way to manage businesses. And so, if all of your people for example in private equity, and after private equity meets, our real estate business meets, and then our credit business, and then our tactical opportunities business all day, four of us, sit in the same room, and the equivalent of 250-[“20 hundred”] professionals meet with us for each of those businesses. We go over everything in the world that’s happened so that every person knows everything. Even if you’re 23 years old, you know as much as the senior person in the entire business. We try and treat everyone as if they’re the most important person in the business. It’s a very American type of style. Very horizontal. Not vertical.

And what happens is when you take very talented people, and treat them as if they are extremely important, then they will do almost anything to the benefit of the business because they think like you. So that style of constructing an organization is exceptionally powerful. And each one of those people, when they’re in a situation alone, will reflect your values. You don’t have to tell them what to say. They will know what to say.

Neil Shen: That’s a very very unique culture. And it’s clearly not easy for a large organization like yourself, and still, everyone feels that they are a family member. It’s just a very very powerful culture. You did mention a couple times about talent, and you want to hire the best team members and talent. So, in the book, you talk about to build a winning firm with nines, with people who have the score nine, but people who are 10s, who can take the business in new directions without being told to do so. So how do you know someone is a perfect 10? How do you evaluate talent?

Stephen Schwarzman: Well, you’re a 10. So how would I know that you’re a 10? Well, one way I would know, is that for people who are older than 40 years old, they are their reputation. What I see doesn’t matter much. If everyone who knows you says you’re amazing, what I’ve learned in life, is you are amazing.

Neil Shen: They are.

Stephen Schwarzman: And when people are younger, it’s harder to judge that, because they aren’t fully formed yet. So I’ve interviewed huge number of people over my life. I’ve been in business over 50 years, and it’s one of the parts I enjoy the most. And I enjoy it because when a person comes in, it’s hard to know what’s going to happen, so it’s an adventure. It’s not like the normal part of your day. And usually, I get a resume, or a CV you might call it, and usually, at least in the West, particularly with younger people, they have their background, and at the bottom they have something that says interests. Either they’ve climbed Mt. Everest or they’re the best swimmer, they won a silver medal in the Olympics, or they are the Number 1 chess champion in the United States under the age of four. Some funny thing. So what I’ve learned, they put that there so you’ll ask them about it. I always ask them about it, because that’s my way of being friendly, since they’ve sort of asked me to do that. And then that conversation goes someplace. And I’ll take it wherever it goes.

Sometimes I’ll walk in a room, and have done something very interesting, like this video, that’ll be all over China. And I’ll say to the next person who sees me, “I just did the most amazing thing! I just was talking to maybe 100MM people in China. How interesting!” And if they don’t respond, that’s sort of odd, because this is not an everyday thing that somebody would do. So I’ve learned, if they don’t respond at all, that means they don’t have a lot of curiosity. So I’m looking for people who are [“mally-o-laud,” maybe “malleable?”], they’re smart, they’re flexible, they’re curious.

If you start talking about something that they don’t know, and don’t have a background, they’ll either try to play along and make a mess, or they’ll say, “You know what? I have absolutely no background in that area. Here’s what I can say, but this isn’t an area I’ll be very good.”

I’m looking for people who are stable under pressure. It’s very easy to be sort of self-possessed when there’s no pressure on you, and you can figure that out just because the interview setting is tension producing to them, not for me. So I try and figure out how they’re doing under that pressure. Did they enjoy it? Did they come alive? Or if you ask them some things, do you see them sitting further back in their chair, symbolically trying to get away from you. If that’s the case, there’s no hope.

I sort of imagine that this person is already working at the firm, at Blackstone. Would I want to see this person again? Are they showing me something that maybe I don’t know. A different way of looking at something, where I’m not an expert. And so what happens, is you can very quickly figure out how good somebody is.

By the time I interview people now, the fact they know how to do their work well, somebody else has figured out. People just don’t come in and see me. Usually, in our system, they’ve met 15 or 20 other people before they get to me. So my judgement, in this stage in my career, is “What is their potential to be great?” And if I see someone, which I did about nine months ago, to start one of our new areas in Growth Equity, just an extraordinary person. I was supposed to see him for a half an hour, I just couldn’t stop talking to him. So after an hour and a half, I said, “Look, I haven’t checked with everybody else, everybody thinks you’re great, you’re hired. You’re amazing. And I can’t wait to be working with you.” Now that doesn’t happen that often, because people who are 10s are pretty rare. But hiring people and knowing what their capability and potential is, is one of the things that makes a great organization, as you would know.

That’s what you do that for a living. You interview people constantly to try and figure out [“whether it’s a 10 that you have”], and the drive, talent, intelligence, flexibility will get you to something great. Sometimes, if you have a great person, in the venture business, and their idea seems great but the world changes, that one investment might not be as good. But they’ll be successful doing something else the second time. Because basically they’re enormous pieces of talent.

This is Part 3 of 4. Part 4 will be posted tomorrow, and cover principles for life and investing.

For more fun stuff, you can follow me on twitter @kgao1412. And definitely check out my compilations page.

Rare Interview: Neil Shen (Sequoia China) and Stephen Schwarzman (Blackstone) Part II

Earlier this week, I came across a live discussion between Neil Shen (Founder of Venture Capital firm Sequoia Capital China and #1 on the Forbes Midas List in 2018, 2019, and 2020) and Stephen Schwarzman (Founder and CEO of private equity firm The Blackstone Group). In this wide-ranging conversation, these two giants of their respective fields discuss everything from China’s economy and the impact of COVID-19 to the core traits an entrepreneur should have and what to look for when hiring.

No recording, but I’m sharing my transcription for easy consumption.

In this section, the pair discuss the core values an entrepreneur should have, as well as recommendations for entrepreneurs navigating uncertain environments.

This is Part 2 of 4. Part 3 will be posted tomorrow, and cover why culture is more important than management.

For more fun stuff, you can follow me on twitter @kgao1412. And definitely check out my compilations page.

Part II: Entrepreneurship in an Increasingly Uncertain World

4/23/2020

Neil Shen: Yeah. Let’s go back to the book. You talk a lot about the core value, the culture, etc. So, what are the core values required for successful entrepreneurs? What should entrepreneurs do to deal with the current world, which is obviously increasingly uncertain?

Stephen Schwarzman: Well, I think, as you know from working with entrepreneurs and being one yourself, there are a number of core values.

The first, is you have to be able to take a lot of setbacks, a lot of pain. You need to be very psychologically strong, emotionally stable, and you need to have enormous amounts of energy. Because you constantly have setbacks.

Secondly, you need to learn and adapt from mistakes. And we all make mistakes. But most people may pretend those mistakes didn’t happen. They don’t analyze them. They don’t look at them to figure out what went wrong, so it’ll never go wrong again. So I think that’s the second part of an entrepreneur.

The third, is to have a worthy dream. Just going out and doing something everyone else is doing, is okay, but it’s not sufficient to have a great dream. So I think that entrepreneurs need to look at the world, and figure out how their talents can be best used to create something that doesn’t exist now, but that other people will want, once you point it out to them.

Another core value, core competency, is entrepreneurs typically have to be convincing. They have to convince customers, they have to convince suppliers, and they have to convince people to join them. So its very hard for an entrepreneur to be successful just as a single person. They have to have all of these groups form a system, and so they have to recognize what it takes to deal with other people. So all of those, and it’s helpful, in many cases, to have some basic understanding of finance and numbers to make sure they don’t run out of money.

The final thing, is fear. Fear is a very good thing, because it makes you work harder, but it also helps you avoid areas where things might really go wrong. And if you’re scared of failing, you’ll take that fear, and adapt it to de-risk types of decisions that you might normally not think so much about, that taken could go wrong.

So those are elements of what makes a terrific entrepreneur.

Neil Shen: Yeah, I think these are very good suggestions on traits. I found it interesting that when you’re look at US entrepreneurs and Chinese entrepreneurs, the very top ones share very many similarities, in terms of their entrepreneurial traits.

Stephen Schwarzman: I enjoy meeting with all of the great Chinese entrepreneurs, and in fact, other than the language — which is different. But many of them know English as well. The American ones don’t know Chinese, but we don’t know many languages at all, other than English — that the similarities are really overwhelming.

Neil Shen: Yeah. What’s your suggestion to them? Now we’re getting to a world with so much uncertainty compared with before. Any specific suggestions for those entrepreneurs?

Stephen Schwarzman: Sure. Well, I’ve been through a lot of downturns, probably five or six in my life. And they’re all scary at the time. This is so extreme, that maybe you have to look at this and say, “Okay. Humans were not meant to be hiding in their houses. They are social creatures. They are going to come out of their houses. And they will want to go back to work.” So, since we know that is going to happen, and we know that the virus has a life of maybe a year and half, maximum. In the meanwhile, the medical people and the drugs are going to get better and better. So in effect, we know there’s going to be a movement of people back into the workplace. We know, with pretty good certainty, that once that starts, economies are going to get better all over the world. So it’s important to not have an emotional response to this, but to look at it and say, “What’s going to come back first? What’s going to come back last? What’s going to change, and not go back?”

So there’s going to be much more on the internet, people meeting virtually, just like you and I are. So that’s going to hurt, maybe travel, but it’s going to help technology. And what that does for an entrepreneur, is you have to have a view of what the new world is going to be, where the demand is going to be, where you can get capital to do something in the areas that are unique to this. And then, when you think through something specific, you just go there. And you go there with 100-120% total commitment. And you’ll be successful. And other people will be frozen.

And it’s the pre-disposition to action, when you see major trends that are going to be happening. And if you put yourself in front of that major trend, odds are, you are going to be successful. Most people will be scared and do nothing.

This is Part 2 of 4. Part 3 will be posted tomorrow, and cover why culture is more important than management.

For more fun stuff, you can follow me on twitter @kgao1412. And definitely check out my compilations page.

Rare Interview: Neil Shen (Sequoia China) and Stephen Schwarzman (Blackstone) Part I

Yesterday, I came across a live discussion between Neil Shen (Founder of Venture Capital firm Sequoia Capital China and #1 on the Forbes Midas List in 2018, 2019, and 2020) and Stephen Schwarzman (Founder and CEO of private equity firm The Blackstone Group). In this wide-ranging conversation, these two giants of their respective fields discuss everything from China’s economy and the impact of COVID-19 to the core traits an entrepreneur should have and what to look for when hiring.

No recording, but I’m sharing my transcription for easy consumption.

In this section, the pair discuss a series of macro themes, including COVID’s impact on China’s and the world’s economies, globalization, returning to work, supply chains, and what sectors are ripe for investment and innovation.

This is Part 1 of 4. Part 2 will be posted tomorrow, and cover entrepreneurship in a world of uncertainty.

For more fun stuff, you can follow me on twitter @kgao1412. And definitely check out my compilations page.

Part I: The World After COVID-19: Where Are Our Economies Headed?

4/23/2020

Neil Shen: Hi! I’m Neil Shen, steward of Sequoia Capital. I’m excited to be joined by Steve Schwarzman, Chairman, CEO, and co-Founder of Blackstone, one of the world’s leading investment firms. Steve’s New York Times best-selling book, “What It Takes: Lessons in the Pursuit of Excellency” which draws on his experience in business, philanthropy, and public service has just been translated and published in China by [China publisher]. I look forward to discussing some of the lessons from his book, as well as his views and tips on managing businesses and investing in the current economic environment.

Stephen Schwarzman: Hi Neil, how are you.

Neil Shen: Good! Good evening from Hong Kong. So maybe we should start from, talk about the general economic landscape. Steve, what should we do to help the global economy regain its growth, and people to regain their confidence after this pandemic?

Well the situation we are now seeing, economically, is unprecedented. Countries, everywhere around the world, have asked their economies to be shut so that they can control the spread of the virus. Now, it’s time — much like China has controlled the virus — to restart the economies. So, I think a few things are necessary.

The first, is people are sometimes scared of going back to work, for fear they will catch the virus from someone else. Particularly in the West now, and China may be through this stage, is that what we need is mass testing. If you know the person to your left, and the person to your right, does not have a problem, then you know you will not get the virus. So, I think there’s going to be enormous effort to make sure the testing is dramatically increased. If it is, people will come back to work much faster instead of recovery being very very slow. You will have a much faster recovery. People will also have much more confidence, and they will be able to go back to their normal life. So I think that testing is very important.

Also, because the West is behind China, in terms of recovery, that in the West at least, breakthroughs in medicine to treat the disease have finally a vaccine, which will probably be available in a year to year and a half. And so for the world itself, if you look out a year to year and a half, people should not be scared at all. They should go back to work. The recovery will not be smooth, because not all parts of an economy go to work at exactly the same time, with the same success. The more we can accelerate that, the better the world is going to be.

China is already in a different phase. China has done a very strong job with the virus. But this morning, US time at least, China reported that its economy in the first quarter went down 6.7%. This is the first time in anybody’s records that the Chinese economy has gone down. And so one should look at that as a bottom, and a great opportunity for growth in the future in China.

Neil Shen: A couple countries are planning to move their production and supply chain back home. What do you think about this? Is this a sign that the world is going against globalization? What’s your take on where the world should be headed.

Stephen Schwarzman: I don’t think it’s a globalization statement, per se. I think what happened, is that a lot of companies have experienced a severe dislocation in terms of its ability to get goods, from China in particular, because China is the manufacturing capital of the world. I had one CEO, somebody in the fashion industry, who said, “100% of my supply comes from China, and I can’t get anything. I’m going to go out of business because I can’t get any merchandise.”

So once you experience that kind of situation, and it doesn’t have to do with government directives, a normal businessperson would say, “I can’t leave myself exposed to any place, doesn’t matter what the name of the country is. I need to have a more diversified supply chain.” And I think that that lesson was learned around the world, and it didn’t have to be directed at China.

It could be other countries that shut its borders, which happened for the first time in, certainly in my lifetime, other than a world war, where you couldn’t get goods from other places. This is the first time. So what that meant, is that it woke up almost every businessperson to at least evaluate what their supply chain is. Now, what I think may happen, is rather than remove existing operations, growth may go to locations that are closer. Because different businesspeople say, “I just don’t want to be as concentrated in any one country.”

Neil Shen: So basically, you are suggesting that both the industry as well as the countries, all should try to optimize their supply chain, and to avoid, obviously, too much of a concentration. That’s not always to the best benefit of the country and industry.  

Stephen Schwarzman: Yes, I think so. But it will still be the super-competitive countries, like China, in an advantaged position. The only question will be, “How much of the supply chain will they get in the future?” Of course, there are countries that have moved manufacturing facilities to China for Chinese consumption. And China will come out of this downturn from the virus, probably as the strongest growing country in the world. So China has natural advantages for its own economy as it continues to internalize it.

Neil Shen: Agreed. I think clearly that there is still a lot of great advantages for the industries in China in many ways.

Stephen Schwarzman: In terms of China itself, you’re one of the top experts in the world in terms of looking for investment opportunities there. What do you see, in terms of industries that you think would be interesting now and areas of the country? So I can learn a little about that.

Neil Shen: Oh, thank you. You guys have also been very active in China. I’ve been investing in China for the last 15 years, and have seen several cycles of ups and downs. Many leading companies came out of such tough times, because they become even stronger players in their respective sectors. They take advantage of the “dark moments” and make many effective moves in gaining more market share.

And I think it’s the same for the investors. The current environment actually provides some great opportunities for us to back those long-distance champions in different industries. If there’s any sort of successful formula for us in the last 10, 15 years in China, it’s because we consistently long China. And obviously now, its probably time to double down on China in many sectors. And I think there are many, obviously, attractive investment themes in China. Probably the most important ones are around technology and innovation.  

Digital technologies, as you know, include Internet, AI, IoT, transforming many service and manufacturing industries in China. And the recent coronavirus might actually accelerate some of those transformation processes.

And in China, clearly, the public health system will be further upgraded. The healthcare industry, will enjoy higher growth as investment from both the private and public sector will increase. It’s going to include vaccines, innovative drugs, medical devices, [hospitalities?], etc. We’re going to see quite some new areas of innovation and growth in the broader healthcare area.

Stephen Schwarzman: I was thinking about this myself, because I know I was going to ask you that question. I agree that technology and healthcare are going to be really sort of precarious.

This is Part 1 of 4. Part 2 will be posted tomorrow, and cover entrepreneurship in a world of uncertainty.

For more fun stuff, you can follow me on twitter @kgao1412. And definitely check out my compilations page.

Carson Block Interview (4/15)

Tencent recently published an interview conducted with famed US short seller Carson Block of Muddy Waters Research on April 15th, 2020. The interview covers a lot of ground, including several of Block’s current and former positions (Luckin, IQiyi, Anta, TAL), short selling strategies, China capital flows, and teambuilding.

*While the article and transcription were published in Chinese, the interview itself was done in English. This is my transcription (lightly edited for grammar and fillers).

For more fun stuff, you can follow me on twitter @kgao1412. And definitely check out my compilations page.

Some people say that Snow Lake Capital is your partner is China. Is that an accurate description?

We don’t have partners in China, but I certainly know who Snow Lake is. I’ve talked to the principal a few times over the years, but we don’t have a partnership by any means. We don’t have a partnership with anybody in China.

Before reaching short sellers, the report was sent to shareholders on the secondary market. But that didn’t move the stock price. Did that particular make Luckin a very difficult short target for you?

So I think there’s a hidden question here, right? You’re asking me who’s behind the Luckin report? That’s really your question. I’m not going to comment on who’s really behind the Luckin report. But I will tell you that I knew who the author was, so in my tweet that I sent out I referred to the report as unattributed as opposed to anonymous. So I knew who the author was. It’s somebody whom I’ve known for some years, and I felt is very credible in the space. It’s somebody who I found was very measured in what he said.

We got access to a data room behind this report, so we were able to do a sampling in order to validate the work. And then there were aspects of this report, I mean, on the cover page it talked about how the author stated that he suspected that one of the ways they round tripped money was by working with Focus Media. So look, anytime you want to talk corruption, you have me at Focus Media. We exposed them in 2011. They were able to go private. Carlyle and another PE firm, Fountainvest, drove the getaway car. But they still after going private, settled with the SEC for about $56MM. So, I think that’s an admission of something. But in any event, you have me at Focus Media.

Yes, but my question is that other shareholders also got the report even before you. And actually, after your tweet on January 31st, their stock price still went up. So what did you do then?

Okay, so, a couple of things. I’d never tweeted out somebody else’s report and saying we’re short. But we knew that a lot of other people had this report. We figured it’s only a matter of time before it gets out, and we also thought we were up against the clock, so to speak, because we thought it would get out anyway. So we made the decision to put it out ourselves.

Now, why didn’t the stock continue to go down? If you look at most of the page one holders, and this goes back to what I was saying earlier. I think they felt that the report was correct. They just felt it didn’t matter. You’ll have these large, sophisticated hedge funds say, “Yeah. It’s a fraud. It’s a big fraud. But whatever. We should still own it.”

After January 31st, the stock price remained stable. What did you do back then? Did you keep building or  selling your position?

No. Most of our positions we now try to beta hedge. We had a very manageable position, and wanted to see what would happen. The way that short activism works when it’s successful, the analogy I’ve often used is, you’re knocking over a bunch of dominoes when you begin your campaign. How many dominoes will continue to fall, which dominoes will continue to fall, is very difficult to predict. But a lot of times, the vast majority of times, when we go activist on something, a lot of dominoes do fall. And things inside the company start to break. And those things that break can be, maybe the auditor decides to do its job, which in this case, is what I think happened. Maybe board members or managers get uncomfortable and they won’t continue to commit fraud or do things that are very aggressive.

So, things broke. But we don’t, especially when it’s not our report. The only thing that was really, that factored into how we ran the position was, “It’s not our campaign.” It wasn’t clear to me that the author of the Luckin report would do anything to follow up. So that was one risk factor that factored into how we ran the position.

Did you expect the size of the fraud to be so big? $300MM?

Oh. [chuckles]. Yeah. [chuckles]. And I think there’s more to what actually happened than what’s been released. I don’t believe that it’s one guy. That doesn’t hold water. And I suspect it’s larger than that in terms of the revenue.

What is a derivative of a company that’s committing fraud at the most senior levels of management worth? I think zero. But like I said, other people might have different views there.

Do you think David Li and Er-Hai Liu were both well aware of the big fraud of the company?

They probably are the big problem. [chuckles]. That’s my view.

20 years ago, with the Enron scandal, one of the big five auditing firms disappeared. Do you think history repeats again?

No. So first of all, two things changed since then.

Number one: It seems like immediately after that happened, the US government and policy makers came to feel that it was a bad idea to put an entire auditor out of business, or an entire firm out of business. And that’s one of the reasons why enforcement since the Enron days has been pretty loose. That’s number one.

Number two. What the auditors did was, they set up what I really think are legal fictions, but they’re now structured as these networks of independent entities. And look, I hate the auditing profession. I think it has absolutely bamboozled investors and continues to do so. Because up until the moment something goes wrong, Partners move, people move freely from one entity to another. They’re seconded. And money moves freely. And the global partners will make money off of these local affiliates. The moment something goes wrong though, the story totally changes. “Oh, no. That was our local affiliate. You can’t hold us in the US or in the UK, the global groups, you can’t hold us responsible.”

At the end of the day, you have to blame investors, right? Every year, every one of the big four will have a major blowup. And yet everybody thinks the big four brand means something. Every time we short a company, especially if we say it’s a fraud, I just see all of the responses on Twitter. And it’s all “Oh, but it’s audited by so and so.” Like, come on man. So and so last year had three major audit failures.

So anyway, the audit profession, it will continue, it will be business as usual. I think nothing will change in that respect.

You just mentioned the auditor of Luckin. There were also other Tier 1 agencies on the deal, like Credit Suisse, Morgan Stanley, CICC, Haitong. Are they also to be blamed? What’s their role in the whole thing? What will happen to them after this?

They’ll settle for some money. It’s a cost of doing business.

What’s their role? Years ago, right after we published Sino-Forest, I spoke with the credit analyst at one of Sino-Forest’s investment bankers. This analyst told me, “I figured out that Sino-Forest was a fraud over a year ago. I went to my boss, and I said that.” And my boss said, “Listen, you just be quiet. You don’t have to cover the company.” But, that’s it.

So on the equity side of the house, that firm, which is one of the major firms in the world, maintained a strong buy on the equity. That firm continued to do underwriting business for Sino-Forest. They don’t care. Caring is bad for business. They’ll pay settlements every now and then.

It’s kind of funny. I had a discussion several years ago with somebody at a major investment bank. We’d been talking to this investment bank about a prime brokerage relationship. They said, “I’m getting some pushback here because what you guys do, it’s sharp-elbowed, it’s kind of edgy.” I said, “You’re sitting in the headquarters in New York right now. You know at this minute, this very moment, somebody in that building is doing something that is going to lead to at least a $50MM penalty for the bank somewhere down the line.” He went, “Yeah. Yeah. It’s true.” But that’s the thing. Banks look at it as a cost of doing business when they occasionally have to settle for something that they do, like, in underwriting.

I don’t want to ask this question myself, but as you know, a lot of my friends always turn to me for this. Do you think Starbucks is behind the short selling of Luckin?

[Laughs out loud]. You know, every single time I shorted a Chinese company, that’s the defense. “Oh, it was the competitor.” No. I don’t think so. I don’t think Starbucks cared. [chuckles]. I don’t think so.

To what degree did you participate in Wolfpack’s investigation into IQiyi?

We did a decent portion of the research, and Wolfpack did some of the research. Wolfpack ended up directing a good portion of the research. We supported what they wanted us to do in certain areas. We were working on that one for literally a little more than a year.

The report of IQiyi only samples only 613 persons in Tier 1 cities, far from the 107MM members they published. Do you think it’s an appropriate sample size?

Actually, no. There were over 1500, approximately 1600 people sampled in Tier 1 cities. That might be referring to the percentage who responded that they’re VIP members.

So we ended up bringing in a statistician to help us evaluate whether the results were statistically significant. That’s something to which we were very sensitive. So there were certain data points where the sample size wasn’t big enough to draw a conclusion. There were certain questions where the sample size wasn’t big enough. But what we based those conclusions in the Wolfpack report on, were confirmed to be statistically significant because we were getting very tight ranges regardless of the day, regardless of the city. There were certain questions to which the answers were very consistent.

And also the report quoted only former employees for illustration. Do you think this is solid evidence?

So, if you were to go public and say, “I spoke to a former employee of IQiyi or XYZ Company, and that’s why I think it’s a fraud,” then that would be very, very poorly sourced and supported. And it would be highly problematic.

But when we looked at IQiyi, there are so many data points, and so many arguments, that support the conclusion that it’s a fraud. So citing the conversation with a former employee, was really just to try to further illustrate this and how this works as opposed to saying, “Aha! Here’s the proof! This former employee said XYZ.”

IQiyi doesn’t have, it’s not inventing 90% of its subscriber numbers. It’s not inventing 90% of its revenue. But it’s well north of that 30% bar that we want to clear.

So putting aside, that’s not inventing everything. The work, to me, the number of arguments, the amount of proof, that this company is inventing a substantial portion of its users and revenue is overwhelming.

So to single out just this one reference, I think really downplays the significance of everything else in the report.

What do you think about the fundamentals of Chinese stocks right now? They are quite different from Chinese companies that got listed 10 years ago, right?

I can’t really opine on fundamentals as opposed to, say, fraud risk. Do we think the revenue is substantially more than 30% fake? If so, can we prove it? What resources are needed to provide it? That’s really what the decision points are.

Now, when you look at TAL Education, which we wrote on two years ago, that’s not one where we attacked the revenue. We attacked the profit. We took a different angle there. Because we found periods in which the profit was substantially fake.

Sometimes we will break out of that framework. Because when we looked at TAL, we thought, “Ok, this is priced for perfection. This is a stock that everybody who’s invested in China loves. Yes, they really have learning centers. Yes, they really educate students. But, they’re lying.”

It turns out that that doesn’t really matter that much to investors in a bull market. It was worth a try. But anyways, here we are.

Speaking of TAL, you didn’t win in each and every case, like TAL and ANTA. They are still favorite kids of Wall Street. And also Pinduoduo, one of the most successful IPOs in recent years. What do you think of those so-called “failed cases.”

Ok, so we didn’t do Pinduoduo. That was not us. So yeah, Anta and TAL.

I wouldn’t call TAL totally unsuccessful. It wasn’t a win. It wasn’t a loss. TAL went down, and then it came back up with beta. So when people say, “Oh, but TAL’s back up,” I say, “Well yeah, but if you look at these PRC stocks since then, it pretty much came up in line, so [trails off]” Anyway.

Anta… Anta was a big loss. What can I say. It’s a fraud. I mean, it’s a real company. They’ve done impressive things. But the operating margins aren’t real.

But I think part of the problem for us when we look at Anta, and also when we look at TAL, is that you have so much money that is allocated to the China space. So these are decisions that are made by large allocators on a macro basis. “We’re going to be X percent US, Y percent Europe, Z percent China.” Ok, so now they’ve got Z amount of money going into China.  Well, “we need things that are large and liquid.” So that crosses off a lot of names. “We don’t want to be in state-owned enterprises.”  So that crosses off even more names. Ok, “What are we left with?” You’re left with a handful of companies that are just going to, no matter how problematic those companies are, I shouldn’t say no matter how problematic they are, but absent a showing of enormous problems, I guess, they’re going to continue to receive capital flows, at least in the environment that we had been in where central banks are just globally trying to force up asset prices as their economic playbook.

All these years of stimulating asset prices had really left investors, and not just investors, I think everybody in society in a way, but had really left investors anesthetized to risk. In other words, it’s like your brain has risk sensors, and for investors they’ve just been dulled, if not totally switched off by all these years of stimulus.

So in an environment in which people are reminded that there are risks, whether those are risks of things crashing, or financial assets crashing, or risks of global pandemics, or risks of natural disasters, or whatever, in that environment, I don’t know that this will continue to work. But obviously, the central banks, especially the Fed, are doing everything they can to push asset prices and make everybody forget about risk.

So we’ll see, next time around, whether these stocks, like a TAL, like an Anta, can continue to attract capital flows.

Given it seems that Chinese companies bear more risks, do you spend more time researching Chinese companies vs US counterparts?

The dynamics that I just laid out make it riskier for a short seller, because we don’t think there’s an issue that we proved, we don’t think there’s an issue that we proved that TAL has committed fraud. We don’t think there’s an issue with Anta having committed fraud. But, “do those things matter?” is the question.

That’s golden time for short sellers.

[chuckles]. It’s never a good time, right? Because everybody hates us. When the market’s going up, everybody’s trying to squeeze us, and everybody complains about us. And Elon Musk thinks that we’re the scourge of the planet. And then when stocks are going down, everybody hates us and blames us. So it’s never a good time to be a short seller.

You do it not because you say, “What’s the best way for me to make money in the stock market?”

You do it because you say, “I just feel like I know too much. I just don’t believe in so many of these stories that people chase in the equities market.” And that’s why you go into short selling.

After IQiyi and Luckin, do you think there will be another wave of attack on Chinese companies?

It’s tough to say. Effectively what I was saying earlier is, I don’t think that the incidence rate of fraud has really stopped. Now, the different between companies today and companies back in 2010 to 2012 is that those companies were 90%+ fraudulent top lines. We find a few of those now, we shorted China Internet Financial Services a few years ago, CIFS. That thing was as much as zero as NQ mobile or any of those other names.

But by and large, let’s say the universe of companies from China committing fraud. I think it’s still large. The amount of fraud is not, in terms of the percentage of revenues, is not what it was.

So the question really becomes, “Do investors think it matters?” That’s what we’re trying to figure out. Even outside of the world of China fraud, this is a question that we have to constantly answer. Because when we look at our bread and butter type of shorts, highly misleading accounting, etc. The bar has gotten higher each year because investors are just more and more unconcerned, just more and more oblivious, or deliberately oblivious to, risk.

So we’ve had to find things that are more shocking, or things that we think are more shocking or are just more problematic each year.

What’s the company size of Muddy Waters?

We’re now up at 7 core members of the team. But not everybody is working on China-related names.

What kind of roles do they play on your team?

We do have a former auditor.

We have somebody who has spent most of his career in manufacturing and sourcing. So he really helps us understand how people and material move through businesses.

We have somebody whose background was with a hedge fund in Hong Kong where he did a lot of behavioral type analysis. So he continues to do a lot of that behavioral  analysis for us.

We have a junior financial analyst who is pretty, he’s a very sharp guy, but maybe the most traditional finance pedigree.

We also have somebody whose background is in restructuring and complex capital structures.

And then myself. My background is first investing, then law, then real world entrepreneurship, and back to investing.

For more fun stuff, you can follow me on twitter @kgao1412. And definitely check out my compilations page.