The Tim Ferriss Show

chevron_right

#651: Legendary Investor Bill Gurley on Investing Rules, Finding Outliers, Insights from Jeff Bezos and Howard Marks, Must-Read Books, Creating True Competitive Advantages, Open-Source Strategies, Adapting Mental Models to New Realities, and More

whatshot 2021 snips

Jan 25, 2023

Guest

Bill Gurley

In this engaging conversation, Bill Gurley, general partner at Benchmark, shares over 20 years of venture capital wisdom. He discusses the importance of spotting market outliers and adapting mental models to new realities. Gurley highlights key insights from renowned investors like Jeff Bezos and Howard Marks, stressing the significance of strategic networking and understanding revenue quality. He also emphasizes creating competitive advantages through innovative strategies and challenges listeners to recognize biases in political discourse. A must-listen for aspiring investors!

02:17:04

forum

Ask episode

web_stories

AI Snips

view_agenda

Chapters

menu_book

Books

auto_awesome

Transcript

info_circle

Episode notes

question_answer

ANECDOTE

Inheriting Financial Models

When top PC analysts retired, Bill Gurley received their company-specific financial models.
These models provided valuable insights into companies like Dell, Compaq, and Microsoft.

insights

INSIGHT

Reflecting on Missing Google

Missing Google was a significant career mistake for Bill Gurley, influenced by market conditions and founder profiles.
Top VCs also missed Google, highlighting the difficulty of predicting outlier success.

volunteer_activism

ADVICE

Asymmetric Returns and Outliers

In venture capital, focus on potential upside due to asymmetric returns.
Prioritize finding outlier successes, even if it means missing some.

Get the Snipd Podcast app to discover more snips from this episode

Insights from Competitive Strategy: A Guide for Entrepreneurs

05:52 • 2min

chevron_right

Understanding Sell-Side and Buy-Side Analysts

07:32 • 13min

chevron_right

Building Networks and Investment Insights

20:59 • 20min

chevron_right

Investing Strategies: Bet Sizing and Market Dynamics

41:02 • 3min

chevron_right

The Power of Equal Partnership in Venture Capital Dynamics

43:40 • 4min

chevron_right

Strategic Insights for Startups

48:10 • 21min

chevron_right

Navigating Market Dynamics and Innovation

01:09:00 • 20min

chevron_right

Understanding Revenue and Earnings Quality in Investing

01:29:00 • 2min

chevron_right

Innovative Strategies and Competitive Advantage

01:31:03 • 23min

chevron_right

Breaking Down Tribalism

01:54:29 • 4min

chevron_right

Twitter: The Networking Frontier

01:58:15 • 6min

chevron_right

Understanding Regulatory Capture

02:04:14 • 7min

chevron_right

Closing Remarks and Promotions

02:10:53 • 6min

chevron_right

#23613

• Mentioned in 2 episodes

MR. CHINA

A Memoir

TIM CLISSOLD

In 'Mr. China', Tim Clissold recounts his journey as a young entrepreneur in China during the 1990s. The book details his adventures and challenges as he navigated the complexities of Chinese business culture and economy.

#1519

• Mentioned in 27 episodes

The most important thing

Jean Ure

While specific details about the plot are not readily available, Jean Ure's books generally delve into the lives of young characters navigating various challenges and learning valuable life lessons. This book is likely to follow a similar pattern, focusing on the emotional and social development of its characters.

#516

• Mentioned in 59 episodes

A Random Walk Down Wall Street

Burton G. Malkiel

In this book, Burton G. Malkiel argues that stock market prices are essentially random and unpredictable, aligning with the efficient market hypothesis. He discusses historical financial bubbles, the futility of trying to beat the market through technical or fundamental analysis, and the importance of a diversified portfolio. The book also covers various investing techniques and theories, including modern portfolio theory, and advises investors to adopt a long-term, disciplined approach to investing.

#888

• Mentioned in 41 episodes

Ready Player One

Trivia-on-Books Staff

In 'Ready Player One', Ernest Cline introduces Wade Watts, an 18-year-old living in a dystopian future where people escape their harsh reality through the OASIS, a vast virtual reality world. The story revolves around Wade's quest to find an Easter egg hidden by the OASIS's creator, James Halliday, which would grant the finder immense wealth and control over the OASIS. Wade, known as Parzival in the OASIS, must compete against other 'gunters' and the corporate-sponsored Sixers to achieve this goal. The novel is filled with 1980s pop culture references, adventure, and social commentary, making it a deeply engaging and nostalgic read.

#92

• Mentioned in 186 episodes

The hard thing about hard things

building a business when there are no easy answers

Ben Horowitz

In this book, Ben Horowitz shares his personal and often humbling experiences in the tech industry to offer essential advice and practical wisdom. He addresses various hard decisions and challenges that business leaders face, such as firing friends, managing company culture, handling layoffs, and making tough strategic decisions. Horowitz emphasizes the importance of honesty, resilience, and adaptability in leadership, drawing from his experiences with companies like Loudcloud and Andreessen Horowitz.

#144

• Mentioned in 141 episodes

One Up On Wall Street

Peter Lynch

In 'One Up On Wall Street,' Peter Lynch explains how average investors can outperform professionals by leveraging their everyday experiences and knowledge. Lynch advocates for investing in companies and products that are familiar and understandable, rather than following trendy or complex investments. He provides easy-to-follow advice on analyzing financial statements, identifying different types of companies (such as cyclical, turnaround, and fast-growing companies), and maintaining a long-term investment strategy. The book emphasizes the importance of simplicity, patience, and fundamental analysis in achieving successful investments.

#2609

• Mentioned in 17 episodes

Complexity

The Emerging Science at the Edge of Order and Chaos

M. Mitchell Waldrop

M. Mitchell Waldrop's book delves into the world of complexity science, exploring how individual elements spontaneously form intricate systems like ecosystems and economies. It highlights the work of luminaries at the Santa Fe Institute, including Nobel laureates Murray Gell-Mann and Kenneth Arrow, and their revolutionary discoveries that could transform multiple scientific disciplines. The book offers a compelling narrative about the scientists behind this emerging field and their quest to understand complex systems.

#196

• Mentioned in 116 episodes

Snow Crash

Neal Stephenson

Published in 1992, 'Snow Crash' is a science fiction novel by Neal Stephenson that delves into a future where the United States has fragmented into corporate city-states and the internet has evolved into a virtual reality called the Metaverse. The story follows Hiro Protagonist, a pizza delivery driver and part-time hacker, and Y.T. , a teenage skateboard courier, as they navigate a complex world threatened by a mysterious computer virus and a powerful drug known as Snow Crash. The novel explores themes of history, linguistics, anthropology, and computer science, and is noted for its prescient vision of the metaverse and its influence on Silicon Valley innovators.

#1392

• Mentioned in 29 episodes

How Innovation Works

And Why It Flourishes in Freedom

Matt Ridley

In 'How Innovation Works', Matt Ridley argues that innovation is a collective, collaborative, and gradual process that turns inventions into practical and affordable solutions. He emphasizes that innovation is distinct from invention and requires freedom to exchange, experiment, and fail. Ridley draws on numerous historical examples, from steam engines to search engines, to illustrate how innovation speeds up in some sectors and slows down in others. He also highlights the importance of trial and error, persistence, and the role of many individuals rather than solitary geniuses in the innovation process. The book underscores that innovation is crucial for modern prosperity and warns that it can be easily discouraged by political interference.

#456

• Mentioned in 64 episodes

The Rational Optimist

How Prosperity Evolves

Matt Ridley

In 'The Rational Optimist', Matt Ridley presents a bold and provocative interpretation of economic history, arguing that the innate human tendency to trade goods and services, along with specialization, is the source of modern human civilization. The book covers the entire sweep of human history from the Stone Age to the Internet, highlighting how life is improving at an accelerating rate through increased food availability, income, and life span, while disease, child mortality, and violence are decreasing globally. Ridley emphasizes the role of free trade, individual rights, and innovation in enhancing human prosperity and natural biodiversity despite potential setbacks.

#24

• Mentioned in 344 episodes

The big short

Inside the Doomsday Machine

Michael Lewis

The Big Short tells the story of the 2007-08 financial crisis through the lens of several key players who predicted and profited from the collapse of the housing market. The book focuses on characters such as Steve Eisman, Mike Burry, Greg Lippmann, and the founders of Cornwall Capital, who saw the impending disaster and made significant gains by shorting the market. Lewis explains the complex financial instruments and the systemic failures that led to the crisis, making the narrative both accessible and engaging.

#60

• Mentioned in 234 episodes

Range

Why Generalists Triumph in a Specialized World

David Epstein

In this book, David Epstein examines the success of generalists in various fields, including sports, arts, music, invention, forecasting, and science. He argues that generalists, who often find their path late and juggle multiple interests, are more creative, agile, and able to make connections that specialists cannot. Epstein uses stories and research studies to show that wide sampling and late specialization can be more valuable than early specialization, especially in complex and unpredictable environments. He also discusses the distinction between 'kind' and 'wicked' learning environments and the importance of balancing specialization with range for long-term success.

#103

• Mentioned in 167 episodes

The Lean Startup

Eric Ries

The Lean Startup introduces a revolutionary approach to building and scaling businesses, emphasizing continuous innovation, customer feedback, and scientific experimentation. Eric Ries defines a startup as an organization dedicated to creating something new under conditions of extreme uncertainty. The book advocates for 'validated learning,' rapid experimentation, and the Build-Measure-Learn feedback loop to shorten product development cycles and measure actual progress. It also stresses the importance of pivoting or persevering based on data and customer needs, making it an essential read for anyone involved in starting or growing a business.

#2158

• Mentioned in 20 episodes

Competitive strategy

Techniques for Analyzing Industries and Competitors

Michael Porter

This book by Michael E. Porter provides a detailed analysis of the competitive landscape by introducing the Five Forces framework: threat of new entrants, intensity of rivalry among existing competitors, pressure from substitute products, bargaining power of buyers, and bargaining power of suppliers. Porter also presents three generic strategies—cost leadership, differentiation, and focus—which help companies position themselves competitively. The book has been highly influential in shaping the discipline of competitor assessment and has been widely adopted by managers, analysts, and scholars worldwide.

#109

• Mentioned in 165 episodes

Shoe Dog

Phil Knight

Shoe Dog is a memoir that chronicles the journey of Phil Knight as he builds Nike from its humble beginnings as Blue Ribbon Sports. The book is a personal and detailed account of Knight's experiences, from his early days selling Japanese running shoes out of the trunk of his car to the global brand Nike is today. It highlights his relentless work ethic, the challenges he faced, and the key relationships with his partners and employees that were crucial to the company's success. The memoir also touches on Knight's personal life, including his family and the emotional struggles he encountered along the way.

Brought to you by Protekt's REST sleep supplement, Athletic Greens's AG1 all-in-one nutritional supplement, and Shopify global commerce platform providing tools to start, grow, market, and manage a retail business.

Bill Gurley (@bgurley) has spent more than 20 years as a general partner at Benchmark. Before entering the venture capital business, Bill spent four years on Wall Street as a top-ranked research analyst, including three years at Credit Suisse First Boston.

Bill also maintains a blog on the evolution and economics of high technology businesses called Above the Crowd.

Over his venture career, he has worked with such companies as GrubHub, Nextdoor, OpenTable, Stitch Fix, Uber, and Zillow.

Bill has a BS in computer science from the University of Florida and an MBA from the University of Texas. He is also a chartered financial analyst. Bill is a board trustee at the Santa Fe Institute, a research and education center focused on the study and understanding of complex adaptive systems.

Please enjoy!

This episode is brought to you by Shopify! Shopify is one of my favorite platforms and one of my favorite companies. Shopify is designed for anyone to sell anywhere, giving entrepreneurs the resources once reserved for big business. In no time flat, you can have a great-looking online store that brings your ideas to life, and you can have the tools to manage your day-to-day and drive sales. No coding or design experience required.

Go to shopify.com/tim to sign up for a one dollar per month trial period. It’s a great deal for a great service, so I encourage you to check it out. Take your business to the next level today by visiting shopify.com/tim.

This episode is also brought to you by Protekt’s REST supplement! Protekt's REST is a new take on getting deeper, more restorative sleep. Protekt's REST supplement helps provide consistent, restful sleep without any habit-forming ingredients or groggy side effects. Simply add it to your last glass of water before bed, and it goes to work.

REST has no added sugars, artificial sweeteners, or artificial ingredients. Protekt is veteran-owned, and they make all of their products right here in the USA. Protekt is offering you 30% off both flavors of their REST formula! Visit Protekt.com/Tim to claim this special offer today and use code TIM at checkout.

This episode is also brought to you by Athletic Greens. I get asked all the time, “If you could use only one supplement, what would it be?” My answer is usually AG1 by Athletic Greens, my all-in-one nutritional insurance. I recommended it in The 4-Hour Body in 2010 and did not get paid to do so. I do my best with nutrient-dense meals, of course, but AG further covers my bases with vitamins, minerals, and whole-food-sourced micronutrients that support gut health and the immune system.

Right now, Athletic Greens is offering you their Vitamin D Liquid Formula free with your first subscription purchase—a vital nutrient for a strong immune system and strong bones. Visit AthleticGreens.com/Tim to claim this special offer today and receive the free Vitamin D Liquid Formula (and five free travel packs) with your first subscription purchase! That’s up to a one-year supply of Vitamin D as added value when you try their delicious and comprehensive all-in-one daily greens product.

[05:51] The book Bill calls "the most efficient short-form MBA one can find."

[07:31] Sell-side analysts vs. buy-side analysts.

[09:45] Financial models, rules of thumb, and making (sometimes wrong) decisions.

[17:28] Howard Marks and Stan Druckenmiller.

[19:26] Micro vs. macro investing.

[20:40] Institutional Investor's All-America Research Team.

[24:16] Expanding distribution.

[27:04] Return On Invested Capital (ROIC).

[33:10] Repurposing good ideas for alternative applications.

[37:01] The conviction of network effects.

[38:58] SaaS and open source.

[42:40] Bet sizing.