The AI Divide: Who Wins and Who Gets Replaced — ft. Bill Gurley

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Today's number, $100,000. I'm already laughing. Today's number, $100,000. That's how much a German terrorist sued New York City chain Los Tagos. Number one, due to physical injuries from spicy salsa. Ed, how did Hitler rise to power? He brat out the worst in people. I don't know why I find that so funny. Get it? Bratwurst? He brat out the worst in people.

You probably got to say he brought out the worst in people to sort of get it. Bratwurst? Bratwurst?

Okay, true story. I just told a very funny but very dirty joke and the team wouldn't let me do it because we have Bill Gurley, a famous venture capitalist on. So fucking VCs continue to ruin my life. Anyways, what are you up to?

Just got back from Vegas. Oh, how was that? Guys' weekend. Guys' weekend, bachelor party. It was awesome. We did a lot of gambling, played a lot of blackjack, played a lot of craps, lost a lot of money. Did what we're supposed to do. We stayed at the Wynn. We stayed at the Encore. We had dinner at Zuma.

Let's just pause right there, you entitled spoiled bitch. When I was your age and I would go to Vegas, I would stay at the Golden Nugget downtown with my friend Otis. We would make sure we saved $5 so we had enough gas to get home. And we would eat twice the whole weekend, both times for $9.99 at the Golden Nugget's all-you-can-eat buffet. And then we would... We would bet all night long at these $2 blackjack tables. And that was it. And by the way, it was amazing. But no, there was no Wynn. There was no Zuma. We did it right. We balled out. And yeah, it was a good time. It's like Jimmy Carr says that people don't realize how fortunate they are today to just be able to take a hot shower. You are literally constantly taking a hot shower, and I'm worried you don't appreciate it enough.

Claire? Yeah. Do you think Ed really appreciates how fortunate he is?

No comment. I'm not taking sides on this one.

Claire, you're also part of this entitled generation, right? Claire's a little bit older. You're 28.

Is that right, Claire? I am 27, 28 in June.

Oh, you're both 27 now. Claire, what did you do this weekend?

Slept a lot. And I went to an art fair, made some purchases, bought a couple of photographs. One of my favorite things to spend money on is art. So that was my big event of the weekend. Oh, I had friends over for a Shabbat dinner Friday. So that was nice.

Oh my God, Claire wins. Let me get this. Ed goes to Vegas. Wait, hold on. I go to Tulum and buy Molly from a woman in the bathroom, and Claire goes and buys photography and has Shabbat dinner.

Okay. Yeah. Claire wins. Claire wins. I think we're doing it right. Should we get on with the show? Let's do it. Let's get into our conversation with Bill Gurley, general partner at Benchmark Capital and author of the new book, Running Down a Dream. Bill, so good to have you on the show. A lot of people have been interested in having you on. I'm glad we have you on today. You are a legendary investor. But I want to start with your book, Running Down a Dream. It was based on a talk that you gave at UT Austin. And it's essentially your advice to young people, your career advice. Let's just start with what is your career advice to young people? What do you talk about in the book?

I had this moment in my life almost 10 years ago where I was reading biographies, a lot of biographies, and I noticed a through line through some of them. I'm a former blogger. As a venture capitalist, I look for patterns and ideas, and this thing kind of synthesized for me. And all of these people started at the bottom rung, and all of these people were working in fields your parents would probably tell you not to go into. And I think the single synthesis of the whole thing is that if you can find something where you have just immense curiosity, that you end up in this learning loop that's self-reinforcing. And almost all the people we profiled are lifelong learners, like just constantly learning in their field.

And when I decided to turn it into a book, a bunch of people noticed the presentation. James Clear was one of them that reposted it, and that's part of what pushed me to go do the book. But we probably studied 100 more biographies. We went through all the academic literature. We talked to Angela Duckworth and Adam Grant and Daniel Pink and all the people that are known in the field, got a lot of help from all of them. And so there was a lot more work. And we also did a study with Wharton about people and whether they end up in a job that they're happy with or not. And so there's a lot more synthesis, a lot more data in the book that relates to that.

People should go read it if they want the full story. But if you could tell us, what are a few of the main things that you saw across every successful person you profiled? Curiosity, it sounds like, is the big one. Are there any other things that you noticed?

Yeah, I mean, identifying something that you have that much curiosity about is difficult, and it's not easy. And Angela Duckworth, six years after she wrote Grit, said if she were doing it over again—she had said Grit was half passion, half perseverance—and she said, 'Many kids we've taught to persevere, especially with the state of the kind of resume arms race that goes into the college application, but then they burn out.' And the thing is, if you find something that you have this fascination with, then that lifelong honing goes forever. It's just really hard to find. I have a number of examples in the book that I borrowed mostly from other people that have written books in the career space on trying to identify that thing.

But if you do, then you have just this immense learning machine that goes on where, I like to say, one way to test if you're really in that lane or not: would you study about your field at night instead of watching Breaking Bad? Like, does it compete with what you would consider to be free-time activities? Because for most of the people that are really... on top of this thing, if a new article pops up, it's something they want to consume right away. And that work, or what some people would think of as work, doesn't require energy. In fact, I think it emits energy when they're able to think about this thing that they love so much. And so that's really the foundational block. After that, I'm a big believer in peer groups, which is something I don't think a lot of other people had really explored as much.

And so finding people that are on the journey with you at the same time and embracing them. And we have some incredible examples in the book of people that did that early on and went on—the whole group went on to success. I think a lot of our learning from how to think about your career climb comes from zero-sum games, comes from athletics and that kind of thing. And so some people come in sharp-elbowed, and there's no reason to. There's tons and tons of winners in any career path, and peers can be super helpful along the way. We added a chapter that wasn't in the presentation about going to the epicenter, and probably have gotten some of the most positive feedback about that. There's a lot of reasons why a human would be afraid, for instance, to go launch their film career in L.A. or to just up and move to Silicon Valley.

But I really think, and I could go into detail, I think there's just tons of reasons why that's going to maximize optionality for the individual. And then lastly, the last principle—there's six principles in the book—has to do with having a give-back mindset from the very beginning. And I think that there's a self-reinforcing loop that happens when you do that.

What would you say to the people who take your views, take the knowledge, take the lessons, but then they say, 'Well, AI is here now. And if we've got AI leaders telling us that half of entry-level white-collar work is going to be wiped out in the next one to five years'—something that we have literally heard from people like Dario Amodei and other AI leaders—'that the rules of the game have just entirely changed now. If there were things that worked for you in your career, and we know that your career was a massive success, well, maybe it's not going to work this time round.' What would you say to those people?

There are a number of people—I think there was a Gallup Poll survey in 2023 that said 59% of people were, they use this word, 'quiet quitting,' but I would say, you know, ambivalent about their job or indifferent. They're not engaged or passionate about their job. And to me, those are the ones, and unfortunately, it's a really big group of people, that are most at risk from AI. If you think about it, the rote, best-practice approach of yesterday is exactly what's in the models, right? Like, they studied the best practice, what's in the textbooks, and it's put it in the models. The thing that's not in there is the stuff that's on the edge, you know, the creativity, the ideation of trying to understand the nuance in your field.

And that kind of artisan mindset is, I think, part and parcel with these people that are fascinated by what they do. They're just constantly studying on the edge. And in some ways, I would say people with high agency that are really fascinated about what they do, their life is accelerated by AI. There's the people that you meet where they go, 'You won't believe what I did today. I got Claude to do this.' I've met a lot of what I might call local entrepreneurs who run businesses like, you know, storage facilities and whatnot. And they're like, 'Oh, I needed a third location, and I asked it to map the city and what intersection was best.' And they're like bouncing off the walls, you know, hyper-excited about how their life's going to be easier with this, with this solution.

And so, um, I think the answer is if you're high agency and super curious, it's an accelerator. But the unfortunate reality is I'd say the vast majority of people, at least in the U.S., aren't in that place.

Which seems to, for those people, if you're not curious, if you're not enthusiastic, if you're low agency, it's probably an accelerator to the downside, which seems like it will widen the gap even more.

It certainly would seem to me that you'd be more at risk in that case. Like, ambivalence becomes a bit of a problem. And the other thing that I would say, which is not something that's necessarily in the book, which is the best way to inoculate yourself against AI risk is to be the most AI-enabled version of yourself you can possibly be. And so to know in your field what it's capable of, and even just you can be more prescriptive. Let's say there are 30 people in your role at your company. Let's say you're the one that knows the most about what AI can do in that functional group. You're the least at risk. Like, you're the one they're going to talk to about how to get leverage. So, the worst thing you could possibly do would be to be skeptical about AI and angry about AI and to, you know, have blinders and not even try and play with it.

Bill, it's good to see you. I have a story about how we actually met, and I'll use that as a lead into a question because I don't know if you've listened to the pod, but it's basically an excuse. It's basically an excuse for me to talk about me. So from '92 to 2000, I felt like I was at Sand Hill Road pitching some nice white dude every week, every week. And in '99, I was starting an e-commerce incubator in New York, and it was backed by Goldman and J.P. Morgan and Maveron. And I thought, I need a Silicon Valley investor. And I met with a guy named Andy Rachleff.

Yep.

And he said, it was either late '99 or early 2000. He said, 'I want you to meet one of our new partners.' And I rolled by and I shook your hand. And all I remember thinking was, 'This guy is taller than me sitting down.' And I think we met for like 10 seconds, but that was back in literally late '99, early 2000. I think you'd just joined Benchmark. Anyway, I haven't been back to Sand Hill Road in 26 years. If I were to go back now as an entrepreneur and try to raise money, how has the business changed? How have the entrepreneurs changed? How have the companies that are the winners changed? Like, give me a vision of Sand Hill Road and the dynamics and the underpinnings in 2000 and then fast-forward it to 2026.

The industry has only systematically gotten more competitive through my entire career. And it was more competitive when I joined than it was 20 years before that when it was very oligopolistic. And it's way more competitive now as I move away from the venture industry. And that competitive dynamic in its current form has resulted in really, really big checks going into any company that looks like it's breaking away. And most of those rounds now are done preemptively, meaning the company didn't decide to go out and raise money. There are investors with billion-dollar funds who may not have that bumper sticker on their car who are calling saying, "Please, please take my money." And that's just a very different reality from when I started.

And today, you'll read about a $300 million Series B. The numbers were very small back in those days. I mean, these companies were going public with $1 or $2 million a quarter in revenue and not having raised that much money, like $20 million or something. Today, every company that is being identified as a winner is ingesting $400 or $500 million minimum before they even think about going public, if they're ever going to think about that. So it's institutionalized in a way, somewhat similar to what happened to the PE industry, you know, private equity industry 10 or 15 years ago. There are cycles of mania, and obviously that timeframe you were talking about was a peak cycle in that way. And certainly one could argue things are manic today for a lot of different reasons.

I think the big theme here is the money has gotten unbelievably big in a way that it wasn't before. To the point where, and this is something that Scott and I have discussed on our show, and I believe it's something you've talked about too, companies don't really need to go public anymore. At least that's not what we're seeing with OpenAI. That's not what we're seeing with Anthropic. We're seeing these ridiculous rounds. We're seeing Series L rounds. We're seeing companies raising at $800 billion valuations. Like, these are insane numbers. And I try to think about, like, why has this happened and what are the implications of this? It seems as though the institutions and the most moneyed individuals, right...

...realized that there are a lot of gains to be had in the venture market. And so they poured into that market, and it has resulted in coming at the expense of, say, retail investors, where the way they would get into a great company like Amazon or Apple, as you say, who went public at far lower valuations—I think Amazon was like a billion dollars when it went public—they had that opportunity early. But they don't have that anymore. That's something that I worry about. I wonder if it's something that you worry about too.

I do. I worry about it quite a bit. And there's a number of data points. So the number of public companies in the US is less than half of peak. And so we've really had a falloff in the number of companies that are actually public. Partially, you could blame that on just a bureaucratic creep, and I would say kind of a legal creep, right? The number of weird derivative lawsuits that are allowed are part of what causes it to be expensive to be public. There was another thing that happened. There used to be a shareholder threshold that would force you to go public. And there were a number of companies that literally had to file as a result of that mechanism. That has been whittled away and taken down.

And then I'd say more, if you're going to point the finger more directly, I would say the late-stage funds have come up with a pretty clever premise, which is if they can intercept those growth years that used to be in the public markets and keep it for themselves in an oligarchic kind of way—there, there's, there's only a handful of these really, really big funds—then, um, then they get that growth. They, they get to steal that, that economic upside. Maybe steal's a strong word, but, but... And simultaneously with telling the founder, 'You don't ever need to go public,' they'll go around to the LP community, the endowments and foundations, and say, 'Look, these companies are no longer going public. If you want exposure to those growth years, guess who you need to give money to?'

And so it becomes self-reinforcing, and that's what's been happening. I also—one other thing that I think—the venture industry used to go through these periods and cycles where it would get reset and people would learn that you're taking too much risk and you'd get wiped out. From like '01 to '08, the number of venture capitalists got cut in half. I think we were headed towards a correction like that coming off the ZERP years, the zero interest rate period. And right when it was about to be a correction, this AI wave took off and the money just flowed back in. So it's almost like I felt like we missed a bit of a correction, and there's just risk-seeking dollars everywhere. The thing that would cause it to stop is if somehow the money ran out.

There was fear of an endowment tax causing a liquidity crisis at some of the foundations. Harvard and Yale, I think, got into the secondary market last year. And so there was a sign that, 'Oh, wait, this could cause a liquidity crunch.' And I think there's a reasonable argument, by the way, that both the commercial real estate, the venture capital, and the PE marks are all too high at all of those endowments and foundations. But that's a whole other story.

We'll be right back after the break. And if you're enjoying the show so far, please send it to a friend and follow us if you haven't already.

Yeah, it wasn't.

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Years ago, Netflix said that its main competitor wasn't some other streaming service. It was sleep. And maybe that explains why all of a sudden Netflix has games, it has tons of reality shows, it has video podcasts, and maybe going forward, it even has YouTube videos. This week on The Vergecast, we try to figure out what Netflix is going forward and whether it's still a streaming service we want. Plus, the future of smart glasses, what's going on with quantum computing, and yes, we have a dumb phone. All that on The Vergecast, wherever you get podcasts.

We're back with Prof G Markets. What do you think would happen? I mean, how would a correction play out? Are you worried that we are maybe about to face one in this market? I know there are concerns in the private credit markets. There were seemingly concerns about AI that there was a bubble. Now that's slightly dissipated. We're seeing the value. We're seeing these incredible tools. What are your thoughts on the possibility of a correction? What would it look like?

I mean, I always give credit to Carlota Perez, who wrote this book that says that bubbles follow waves that are real. So I disagree with this idea that, oh, it's either a bubble or it's real. Because when you say, oh, there's a bubble, people go, oh, you don't believe in AI. No, the fact that it's real... causes people to get rich quick. And when people get rich quick, charlatans and speculators flood in and things get overheated. And I think that certainly has happened. I don't have any crystal ball to predict what would cause it to reverse. I think the circular deals are horrific. I don't think the auditors should have approved them. And I think whenever you eventually have an unwinding, they're going to make it worse because they won't be sustainable.

You shouldn't be able to move cash from your balance sheet and create revenue on your income statement. I just don't think that should be okay. But they're all doing it. Every single one of the big players is doing it.

What would one of those big players say when you make that point to them? Because this is a point that some people have been making, especially in financial media—the circular deals where NVIDIA will invest in a company and the company pays them back. But your voice holds more weight in those rooms. And I'd be interested to hear how they respond when you say it.

I explain the type of deals without naming a company or industry. I just explain the structure of them to ChatGPT, and I would encourage anyone to go do this—like, it's an exercise anyone could do. And it immediately started talking about WorldCom and Enron, like, unprompted by me. Like, I just said, 'What do you think about these types of structures?' And, you know, you can go back to the very first deal, which was Microsoft and OpenAI, and there were credits involved. So, you get equity for credits and then those credits are used to run workloads on Azure. That is cashless revenue for Microsoft. Just think about it, there's zero cash flow whatsoever and they're booking revenue. At the very least, it's very low-quality revenue.

And I don't know why the auditors didn't get in front of it. I suspect when and if there is a reset, they'll all of a sudden become awakened and they'll change the rules and it won't be allowed in the future. But it's bad accounting. Like, it shouldn't be happening. And it's—it's unfortunately happening, you know, across the spectrum. Like all of the major players are doing it. And the push, you ask, what do they say? I mean, people have asked them. They say, 'Well, it's not material.' And I say, 'Well, if it's not material, you shouldn't do it because it's causing concerns that I think is hurting.' People want to understand why the NVIDIA multiple won't go higher. I think it's the circular deals.

Like if they're not material, don't do them. And then you'll be better off. But I do think, from the very beginning, I think NVIDIA has been concerned about customer concentration. And there's an odd amount of—distrust is a strong word, but there's a lack of trust amongst all these big players. Everyone's working with everyone's competitors.

Where do you think that comes from? Because it sounds like what you're describing is a culture in the tech community where this is normalized. And it has gradually become more and more normalized the more that we have seen it. And I would add to this list these sort of acquisitions that are fake acquisitions where you just you have a contract with a startup and then you hire the employee. It's what Microsoft did with Inflection. And it's basically an acquisition. And it seems to play into the same dynamic where you're kind of skirting around the rules. What is driving that?

I think that second thing is a different dynamic yet. I think that has to do with getting around regulatory approval and the long window that that has. But I agree. Once it becomes kind of normal, then the competitor—you know, imagine if you're in, you know, you work in AWS or you work in the Google Cloud business and you see that Microsoft deal and then you see them announce Azure's growing 35% and you've got pressure, you know, on yourself to compete in that market. You're going to go do the same deal. And they did go do the same deal. That's exactly what happened. They all did the same deals.

Which seems to be like the exact recipe for a bubble where you're all chasing the same fake thing, which is fake revenue. Or is that an unfair way to put it?

You don't necessarily have to call it fake. You could call it like souped-up revenue, right? Especially like in the NVIDIA case, they are giving money to a lot of nascent startups and actually, the thing that NVIDIA did that's probably most questionable is—so they propped up CoreWeave to once again expand the competitive set. But then they wrote a contract with CoreWeave where it said if CoreWeave ever has extra capacity, we'll buy that capacity, which presumably—helps it get more debt financing, that kind of thing. Boy, I don't know how you could sit there and say, well, oh, that's a normal way to do business. And if the market's so hot, why do you need to do all this? What's the point?

But I do think it's become normalized. I think your word's perfect. And it's going to stay normalized until it's not.

So let's go back to 2000. Early tech CEOs, Chambers, Meg Whitman, Jeff Bezos, they were sort of seen as gods, kind of modern-day heroes. And it's much different today. Now I would describe the perception of tech CEOs as they're Bond villains minus the charm. They're generally seen as having a victim complex, not being good for America, being so obsessed with shareholder value that they're willing to compromise the well-being of the commonwealth. Do you believe there's a fundamental change in the character and complexion of tech CEOs now versus, say, a quarter century ago? Or is it a perception problem?

Yeah, I don't see anything that I would say is wildly different in the personality or characteristics of the leaders. I've listened to you guys talk about this fear-mongering that comes out of Anthropic. I've never seen anything like that in my entire life. Yeah. I think you guys mentioned this, but the polling on AI fear in China is like 20% or something like that, and it's like 80% here in America. And I don't know of another reason for that other than some of the doomerism is loudest within the community itself. Some of the founders. Yeah, and it's starting to have ramifications for the industry. A number of data center projects has been stopped. There's this weird situation where—and there was an article yesterday, I think, where half of the AI community is funding

Like one set of lobbyists do a Super PAC and the other one's on the other side, and they're like thrashing amongst the regulators. I mean, prior to SBF, I have never seen a startup worry about regulation this much from the very beginning. And now we're seeing it again here. It's pretty foreign to what—and I gave a speech a few years back about regulatory capture, and I said that the reason Silicon Valley works so well is it's so far away from Washington. These guys are rolling around in it.

So just along the lines of public policy, there's, I mean, a bunch of new tax proposals and some specific to California, specifically the proposed wealth tax has gotten a lot of attention. And then there's a narrative that if these taxes continue to go through, there's going to be an enormous exodus out of California. Do you sense or see personally amongst your peer group an exodus? Because to date, I don't think there's a lot of evidence of it. The people with the most options in the world—

That would be my caveat.

Well, Bezos did leave Washington. But anyways, whenever I go to California, the only question I have is why did I leave? But when you're there and you're rolling with these people, do you think it's a real issue or do you think it's overinflated?

Well, I think Silicon Valley is, you know, going back to the chapter in my book, 'Go Where the Action Is,' is an incredibly special place to be an entrepreneur. And the amount of learning and mentoring and partnering and, like, your ability to jump from one job to the other—it's like no other place on the planet. And it'll take a lot to upset that apple cart. I have a bit of a fresh perspective on the tax issue that comes from spending quite a bit of time in China over the years, which is one of the things China has done to kind of reach the level of success they have is the provinces competing with one another. And I went back and read a bit about, like, John Adams in the Federalist Papers was talking about state-versus-state competition.

And I wonder if the best way to think about this is to shine a spotlight on what policies are working in certain states and which policies aren't working in certain states, and almost amplify the different approaches to see what is best practice. I mean, as an example, not everyone knows this, but in Austin, Texas, rental rates have fallen for four or five years in a row, while it's one of the fastest-growing cities in the country. And so I happen to know people that fought for the NIMBY policies that were changed here. And that's an example of a policy that appears to be working. A lot of people like to talk about housing prices and a concern, and they pass policies where, like, government builds buildings for $500,000 a unit or something.

And there's no proof that works. And so I like this idea of, like, state-versus-state competition.

It's such an interesting point, the way that politics has played into the AI story, especially recently, in contrast with your previous point, which was your view on Silicon Valley and Silicon Valley's success is it was very, very far away from D.C. These were very separate worlds. And it does, you bring up this point, it's got me thinking, like, it does seem as though the worlds of Silicon Valley and Washington are starting to kind of mesh into one another. And we're even seeing, you know, many tech executives, tech investors—David Sacks would be an example—moving into Washington, taking up positions in government, and the two are becoming intertwined. I just naturally have, like, an uneasiness, I guess, about that concept, but I'm not exactly sure why.

So I'd be interested to hear what you make of that. Why is that happening? And what does it mean for the future?

I mean, I share that unease with you, Ed, but it comes from a place of—there was a phrase I think Andreessen Horowitz used a lot called "Little Tech." And what they mean is the two-person entrepreneur, you know, and there's this idealism that many of us that have lived in Silicon Valley and practiced venture capital love to believe: that two people on a PowerPoint can create a new idea and become disruptive and create this, you know, huge company and economic wealth and whatnot. If every new category is immensely regulated, that kind of goes away, right? Because you need people with connections. And part of what's driving what you're talking about is crypto, which got started without it, but now is heavily dependent on whether or not regulation goes a certain way.

Many venture capitalists have gotten comfortable with funding military equipment companies, which wasn't a thing ever during my career as a venture capitalist. That requires connections and approvals and spending tons of time, you know, at the Pentagon. So there's these new areas there. And now AI, where very young companies are begging for regulation, which is not anything I've seen in my career either. So I agree that it's happening. It makes me uneasy because I like to believe in this more idealistic world than one where who you know matters to get a startup off the ground. And there's places in between, like... I think the fact that I can earn 4% on my Circle stablecoin via Coinbase is awesome and disruptive to a heavily regulatory-captured finance industry that's been that way for 50 years.

And there's an article out today where the Circle stock is down because there's a draft that wants to make it illegal for them to pay that yield. So that's one where I'm kind of in the middle. I think the bigger regulatory capture is the actual banks and not crypto. I think stablecoins could be wildly disruptive. But once those stablecoin companies become big, will they turn around and use regulatory capture against the next one? Probably. I think regulatory capture in the U.S. is a huge problem, unrelated to whether Silicon Valley is a part of it or not.

Yeah, it sounds like we probably all agree that what is best is for a market where disruption is readily available and it's frequent, where that can happen. You can have a new guy enter the scene, burst onto the scene, and then create real disruption, create real value. And when you look at the most valuable companies in the world today, it's like they're all kind of the same handful of companies and they're all acquiring the same talent in the AI space. I mean, I guess the new players are OpenAI as an example, but then you look at the shareholders of OpenAI, Microsoft being one of them who owns a significant portion of their profits. It's like it all seems to be the same handful of players. And I guess the next question becomes, how do you...

address that? Like, if we want to create a world, especially in the venture capital industry, where young, new talent can succeed and they can take on the big players like Meta, like Microsoft, how do you actually create that environment?

A skeptic would push back on you, Ed, and say OpenAI and Anthropic came out of nowhere and they're already huge. Someone, I think, could even make the argument that they may have done to their host what Microsoft did to IBM. It's not clear to me that owning a piece of the thing protects you against disruption, right? And there's a chance that they've already birthed these two companies into a place where they're going to turn around and be disruptive to the people that gave them the money. I think that's possible. If you separate those two things and just look at maybe the Mag 7 pre-AI and look at how big they got, I've talked to a few people in the public policy world that look at that type of problem.

And I do kind of think that breaking stuff up is the better alternative to trying to regulate them. Because when they regulate them, the incumbents help write the regulations. I think it just further ensconces them. There was a period where they broke up AT&T and disqualified their patent portfolio. And that birthed all kinds of innovation. I think that had Microsoft not been under threat in the late '90s, you may not have seen Amazon or Google or a lot of companies you may not have seen if they had been allowed to push through the browser the way they had moved up the app stack, and they were certainly capable of it. But there was a ring fence put around the browser. So if we believe network effects or something are making these companies

too big and you want to do something. And I'm not arguing you have to, but you want to do something. I think the dismantling, doing something abrupt, one time, that changes the field is better than trying to say, "Prove to us you're not"—people try this with Google all the time—"prove to us you're not favoring your own products over the competitors in Google Search." The ability to enforce that over the long run is very difficult.

What happens when you make that claim in Silicon Valley? Because I feel like it's been—people have pushed for it, but it's been shut down because it's too much. It's overbearing. You can't just come in and break things up. How do people in Silicon Valley, the leaders and the decision-makers, react when you suggest that that might actually be a good idea?

I mean, I don't think they talk about it a lot. The people that are sitting in the positions of power at those big companies are obviously going to push back and tell you how competitive their world is and say, you know, if you're Sundar, you're going to say, "Look, OpenAI is competing with Search. Like, they just came out of nowhere. Like, this is highly competitive." I don't know that you're going to get any unique insight out of them. But look, the point of—there's a concept in economic theory called pure competition, and there's a Wikipedia page on it. But the idea is that if you have—like, capitalism thrives when you have pure competition and marginal revenue goes down to marginal cost.

And if we have companies that are extracting excessive rent for extremely long periods of time and have really, really high margins, it's indicative—I would argue, I don't think you're going to get a lot of other people in Silicon Valley that would be willing to say this, but it might be indicative of market failure rather than market success.

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When you think about an ecosystem, well, I'm going to ask a more specific question. Not necessarily your best investment, but your most famous investment is Uber. And autonomous is getting a ton of attention right now. And I said on Pivot that I thought the biggest winner, and I'm talking your book a little bit here, the biggest winner in autonomous may not be Waymo, it may be Uber. And I'm curious, I would love to just get your—recognizing, I don't know if you've sold out your shares, but recognizing you're going to have a bit of a bias here—break down for us, who you think is someone who's been early to the game, not in autonomous, but in ride-hailing, who you think the winners and losers will be in autonomous.

Well, I think it depends heavily on whether or not there is demonstrable differentiation at different levels in the stack. So all things being equal, I would say that the network effect of the Uber system, which is what I think led to the wild success, would stay intact. If there were one vendor in Autonomous that got... so far out in front of everyone else, then that person's gonna have the ability to disrupt up to a certain level. And so the peak from, or the difference from peak to trough every day is about four X. And so it's pretty easy for a Waymo to compete in the first 25% of a market. As you try and go up, you'd have to ask yourself questions about how active you want and utilization rates that you want because you can't really build a fleet to peak, if you understand what I'm saying.

And so, you know, we'll see. I mean, obviously, what Dara is doing is running out and partnering with every AV vendor possible he can. The approach that I had been pushing for, which didn't play out, but was one where you would actually embrace open-source ideals around the autonomous stack in as many places as you can. Because if that piece of the stack is more of a commodity, then the network will win. There's just no doubt about it.

So, distinct from professional advice around what industry to go into, what advice would you have for a lot of young people listening to the show, especially young men? What advice, maybe on a more personal level, would you offer to your 25-year-old self?

Well, I have a hard time not reflecting on the book that I've been talking so much about in this window. And I've come to believe that if you are pointed at something that you just have a remarkable obsession with—and other people have made that statement. Paul Graham has this statement about disinterested obsession— You're going to have all this energy to excel yourself past everyone else. And it may be that that's impossible for some, like they just don't have that thing that they're most obsessed with. But I think your job security is higher being differentiated and being a constant learner in almost any field than if you are picking a field because you think the field is safe if you enter that field and you're ambivalent about whether you're making yourself better or not.

Yes.

Any thoughts or any advice to young dads?

I mean, I listen to a lot of your stuff, Scott, and I agree with most of what you say. Like, there is a... And we've gotten ourselves in this game. Jonathan Haidt calls it the resume arms race, where starting in sixth grade, we're so worried about the child getting into a good school that we start overpacking their schedule with lacrosse lessons and Mandarin lessons and volunteering at the SPCA. The kids today... Their schedules are so booked relative to when I grew up, and there's not a lot of free time. And by the time they get to the end of their senior year in college, they're so tired. They're just tired of grinding that they want to just take a year off, or they just want to relax, or they're really burnt out.

And so... This is part of the reason why I tilt towards this fascination thing is it just doesn't feel like a grind. Like if you can get someone in a lane doing something that they really get emotional, you hear this word flow. If that's part of what they're doing, then I think they got a better chance of feeling fulfilled than not having anxiety.

What would be your advice to someone who is trying to seek that flow state? Like, they know that in order to win, especially in a world of AI, they need to be enthusiastic and have a lot of interest, curiosity, high energy, but they can't locate that. What would be your advice to them? Keep exploring. Keep looking.

Like, don't... There's a... Dave Evans has these stats that, like... Five years after college, 40% of people are no longer in their major. And like 10 years after, it's a much higher number. And so I worry that we put these children through so much of a grind. They have almost a sunk cost fallacy that they have to deliver in that lane. And it's just not true. So I think being open-minded to the notion that you can move around and explore is useful. There's a... a really cool idea I stole from one of the Acquired podcast hosts, where he created a side hustle at every job he went to, which is a pretty unique idea. But when he would land, he would say, if I'm willing to work extra, will you let me do this other thing also?

So he got two shots on goal, if you will, at the same time. And at Microsoft, he helped create the Microsoft Garage, which was differentiating for him and caused him to meet a bunch of entrepreneurs he wouldn't have met otherwise. That got him into a job as a venture capitalist at Maveron, and he asked them as a side hustle if he could do a podcast. And you can see where that took him there. And so that's just one. There's many other ideas in the book, but keep exploring, keep moving around, keep looking for it. And even in that movement process, I think you can differentiate yourself.

My final question. This is ultimately a Prof G Markets show where we try to understand markets and try to get rich. You are a legendary investor. What is the difference between a good investor and a great investor in your view?

The first thing that popped in my mind, Ed, is just being a student of the game and studying. And this is advice I have in my book for anyone in any field. But there are a handful of investors who have read all Buffett's letters and kind of hang on every word when Howard Marks puts out a new letter. There's a ton of information out there about investing and people orating. Today, I mean, one of the most amazing things about this AI world is if you want to learn something, it's never been easier in the history of the world to go learn and study. There's podcasts with people like yourselves. There's YouTube videos, interviews with people like... you can go study, study, study. I think, I think Tobi from Shopify, someone asked him his number one piece of advice, he just said, 'Read more books.' And I, I, I really, for me, that's the thing. Like, the people that are best at it are students of it, like constantly studying it. And, and, and by the way, if you have that mindset,

And you make a wrong investment, or someone invests in a company that you said no to, it triggers in your brain, 'Oh, shit, I've got something else to learn.' And that creates anxiety. 'Oh, I got to go understand why that smart investor thought differently than I did.' So it all goes back to that infinite curiosity in your field.

Bill Gurley has been general partner at Benchmark Capital since 1999. Prior to Benchmark, Bill was a partner with Hummer Winblad Venture Partners and a top-ranked research analyst on Wall Street. Before his investment career, Bill was a design engineer at Compaq Computer. Bill authors the long-running Above the Crowd blog, which focuses on the evolution and economics of high-technology businesses. His new book, Running Down a Dream: How to Thrive in a Career You Actually Love, is available now. Bill, this was a pleasure. Thank you so much.

Thanks for having me on.

Thanks, Bill. Nice to see you.

Ed, what'd you think? I'm a big fan of this guy. I think he's a legend of the game, and I was kind of... I was happy to hear him speak candidly about the problems in the industry that seem to have grown. I just think it's always refreshing when a leader is able to kind of just be unrestrained and say, 'This is a real problem,' especially when you talked about the circular deals. I think the question increasingly becomes, what are we gonna do about it? Maybe it's just gonna be that you need a self-correcting mechanism in the same way that it's always been, but I appreciate his willingness to just discuss it so openly. And I think his advice to young people is also great. I totally agree with his views on curiosity and how essential that is in an AI era.

What did you think?

He's right about the circular deals. The whole community has gotten so strange. I think that the community has basically said, 'We're over-invested. We can no longer get market returns for our LPs by doing what we're supposed to do, and that is find small companies and nurture them along the way and do the hard work. So we're going to basically migrate upwards.' And they have custody of the consumer, just the same way Uber has custody of the consumer and then can put in front of them whatever autonomous technology that Uber controls, or the same way Apple can extract $20 billion from a search engine, because they have custody of the billion wealthiest consumers in the world. VCs recognize they had custody of the relationship with the entrepreneur.

So what they said is, okay, if you're scaling, instead of handing you over to Goldman Sachs and the public markets, we're going to maintain that custody of the relationship and we're going to continue to fund you. So we're going to essentially maintain that custody of the relationship and the returns, until which point all the returns have been squeezed out of this shit, and then we'll foist our shit on the public markets as a last stop in the financing round. So they have migrated upstream. In order to do that, they now have to and can raise tens of billions of dollars and then put it to work in what traditionally would be the financing ecosystem of the public markets, which you have spoken a lot about that the downside of that is that the average retail investor no longer has access to those returns. I mean, I think when, I think when Google went public, it had a valuation of

Just a couple billion dollars, I think.

Inflation-adjusted.

Yeah. If Alphabet started today, it would have gone public when it was worth $2 trillion.

It would go public now, yeah.

Yeah. So it's an entirely different ecosystem. It's also incredible, like most industries, the Gini coefficient is really high. And that is, it's not only a small number of firms making all the returns, it's a small number of partners at a small number of firms. Because it's all about deal flow. Like when I was raising money, there were just two or three VC firms. If you got a term sheet from Kleiner, Sequoia, and then actually Benchmark was sort of the emerging Pepsi Generation. If you got a term sheet from one of those three, you took it because what it did was it connoted your ability to raise capital further down the road because of the Good Housekeeping Seal of Approval. Whereas when you go public, Goldman taking you public gets you a pop, but a year later, no one cares who took you public.

So it's now played out in spades. If you get a term sheet from General Catalyst, you're going to take their money because – and so as a result, they see everything. So the aggregation of capital or the returns have all been clustered. I mean, there are – there are so many VC funds. The kill zone, and this is true in private equity and hedge funds and in VCs, there's the titanic, iconic brands that are able to raise billions of dollars to get all the deal flow. There's the hyper-focused funds that do high-speed frequency trading for utility stocks in Spain that are just so focused. And then everyone in the middle is in the kill zone. They're just getting taken out. You know, God help you if you're a $400 million long/short hedge fund or a, you know, a $1 or $3 billion private equity fund right now that's not very focused.

It's just everyone wants to be in... you know, TPG or Citadel or General Catalyst, and then there's some tiny niche ones that are super focused, and everyone in the middle is just getting crushed.

It's so interesting because part of what he was describing when you asked that question to Bill about how has this industry changed, how has Silicon Valley changed, part of what he was describing was this transition from a world that was predicated on the underdog, the insurgent, versus the big players and the institutions, and over time slowly crystallizing into its own form of institutional bureaucracy of a different kind. Sort of the transition from Little Tech to Big Tech, where it used to be we want to disrupt, we want to disrupt, we want to take on the big dogs, and suddenly you wake up 20 years later and now we're the big dogs. And it's the same dynamic when it comes to what he described between D.C. versus Silicon Valley.

And his view was Silicon Valley was a great place because it got away from the regulators. It got away from the bureaucracy. It was the Wild West. We were the insurgents. And now we find them all migrating back into Washington. And now they are becoming part of the establishment. And so you could almost sense the cognitive dissonance in Bill, where he knows this isn't who we are. This is not what this was supposed to be. But suddenly in 2026, all of these players have become their own form of institutional bureaucracy. They are their own form of the big dogs. And we're all kind of sitting there like, well, what happened to the underdog? What happened to all the excitement about that and the disruptors coming in?

And he said it himself. The people in Silicon Valley don't want companies to get broken up. They don't want to see that disruption because they don't want to be disrupted. They are those companies now. It's a very interesting dynamic of power.

Also, the other interesting point was he said he felt there was a lot of catastrophizing around AI. That was interesting too.

Yeah. Well, good. I'm glad you enjoyed it.

And I just want you to go raise money from venture capitalists and have a down quarter and see how much you think they're great guys.

Yep. Yep. You're right. I should try it. I should try it. I'll play that role with you. You know what?

This bonus season, I'm going to act like a VC.

I like it. I like it. I'm going to impress you. I'm going to raise a big old bonus.

This episode was produced by Claire Miller and Alisan Weiss and engineered by Benjamin Spencer. Our video editor is Jorge Carati. Our research team is Dan Shilon, Isabella Kinsol, Kristen O'Donoghue, and Mia Silverio. Jake McPherson is our social producer. Drew Burrows is our technical director. And Catherine Dillon is our executive producer. Thank you for listening to Prof G Markets from Prof G Media. If you like what you heard, give us a follow and join us for a fresh take on markets on Monday.