On this special segment of The Full Ratchet, the following Investors are featured:
- David Garcia
- Bradley Tusk
- Ted Seides
We asked guests to discuss the factor that could cause the most disruption to the industry going forward and how that will change the next decade of venture.
The host of The Full Ratchet is Nick Moran of New Stack Ventures, a venture capital firm committed to investing in founders outside of the Bay Area.
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Transcribed with AI:
0:19
Welcome back to TFR on today’s special segment, we ask guests to discuss the factor that could cause the most disruption to the industry going forward, and how that will change the next decade of venture here’s the segment called disruptive forces.
0:38
On today’s special segment, we have David Garcia of digit. David, what factor could cause the most disruption or changes to FinTech, and how will that make the next 10 years look different than the last 10 Yeah, I mean, I think
0:53
the most obvious answer, and it’s AI, I mean, but I would say AI has already been transforming FinTech for many years now, it’s not only llms and all of the potential of llms, but like all of that has done in terms of machine learning for underwriting collections and many areas in financial services. But I think now this new set of like tools with Gen AI and llms could definitely result in the most cost efficient and the most profitable financial companies that we have seen in history, and hopefully that can result in the best products for consumers as a result, as well. And beyond that, I would say that it’s also very interesting to see everything that’s going on around pay by bank. Many people think that like BSAS and MasterCard, business models will finally be disrupted. I think that’s yet to be seen. I wouldn’t bet strongly on that, but it would. It’s very definitely, it’s definitely very interesting to see all of like the products and new technologies and that could be developed with these new rails.
2:00
On today’s special segment, we have Bradley tusk of Tusk ventures. Bradley, what factor could cause the most disruption to the VC industry, and how will that make the next 10 years of VC look different than the last 10 Yeah. So
2:10
one, as we’ve discussed, an unrealized gain tax will just be absolutely debilitating. Two, I think, would be what happens with interest rates, and whether we ever get back to sort of a zero rate environment again, and it’s gonna have a huge impact either way, right? So what we saw is, with interest rates at 6% 7% all of that liquidity was terrible, and then activity was bad for a bunch of reasons, but that was certainly one of them. IPOs were few and far between. Now a zero rate environment may also be problematic, right? Because when we work is value that 47 billion, or the fuck monster did it on the back of a napkin, like, that’s also bad. And so the question to me is, what’s that number that will promote investment and liquidity and M A and IPOs and at the same time not have that, you know, rational exuberance, Alan Greenspan talked about, that sort of leads to really bad decision making, overvaluation of companies, you know, tremendous greed and everything else. And so, you know, the Fed is going to be a huge part of this. And honestly, you know, we were talking earlier about Trump and Harris, one reason why, to me, Harris is a safer choice is, I think she probably reappoints her own Powell. And I think, generally speaking, a steady hand at the Fed is critical. And the problem with Trump is, you know, he could appoint someone good, but you just have no idea. He’s such a wild card. He’s such a maverick that you know, when it’s chaos all the time, you know he’s going to appoint someone who he thinks is good for him personally, Donald Trump, not what’s good for the economy as a whole. And if the Fed gets all screwed up and as a result, interest rates, you know, either go wildly in the wrong direction, or being cut or raised for purely political purposes, you know, that screws up everything. And so I think who is going to run the Fed is a really critical outcome.
4:02
You on today’s special segment, we have Ted saidies of capital, allocators. Ted, what factor could cause the most disruption to allocation or private equity, and how will that make the next 10 years look different than the last 10
4:19
so allocation, private equity quite different. I mean, I think on the allocation side, it’s impossible to go through your day to day without thinking that there’s some AI bot somewhere that’s going to figure out stuff that you have it. I don’t know yet, like how that could impact that process of allocation. But even if you think about allocation to private equity, and I alluded to this earlier, there are data sets available that could be pretty darn indicative of like, okay, there’s returns from Blackstone. Fine, but Blackstone is made of a bunch of people. People are on deal teams. Which deal teams were successful? How’d they find those deals? What happened to the companies when they owned them? And is there a pattern within that that would tell you, No, it’s those two. People, Jane and John at Blackstone, who are the drivers of returns. And an individual, if you have a lot of data, might be able to figure that out. Is that something someday that could become like automated I have no idea, but you have seen, you certainly seen in the public markets with increased availability of data, more and more efficiency, and sometimes that drives inefficiency, but it tends to be in pockets, whereas when I started my career, it was a joke if you couldn’t beat the market, because most of the people were doing stupid things, and if you understood what you’re doing, you could maybe that happens in the private markets private equity side, I imagine it’s the same thing, because private equity firms own businesses, and businesses are facing depending on what they’re doing and what that future is. We’re all facing a future driven by AI that we don’t really know what it looks like. And even a business like Google, where three years ago, we would have all said, Boy, that search is an inalienable mode. It’s not that. It’s not, but you have to scratch your head and say, well, is like perplexity going to be a better search engine than Google in the future? I don’t know, but there’s actually a potential threat to Google’s golden, golden goose of search. So
6:14
great insights, and like, your point around Blackstone, and like, who’s you know, the winning team there, and how do we discover them? It makes me think about a conversation I had with an old boss from Danaher, about the system versus the people, right? And some have built this great system can plug good people into it, and those people can be very successful regardless. And then some people, you know, it’s, it’s more about the people that are in it than the system, and they can go anywhere and be successful. But we’ve seen examples where you take, like in sports, for instance, you take Russell Wilson out of Seattle, you put him in Denver, and he’s no longer very successful, right? And so there’s kind of this interesting question, and one that, you know, I’ve grappled with, you know, is, is it the people or the system? And how do those two things interact? Yeah,
7:07
you know, it’s funny. I just said a podcast with Mike Maples at floodgate, yeah, who’s written this book, pattern breakers. And it was his attempt to look at venture and say, Okay, I know we’ve been successful in air quotes. Have we been lucky or skillful? And he came out of it with at least a framework for thinking about what types of companies are more likely to be breakout successes in the venture world. And it’s I haven’t heard of anything like it before. As he lays it out. It’s an incredibly insightful framework for thinking about, like, these types of companies that fit these types of characteristics seem to be ones that are the big breakout winners. The fascinating concept of like, how do we know? You know? Is it the system, or is it the person?
8:03
It’s fascinating. I just saw a post the other day on LinkedIn from one of the founders of alpaca, which is like a seed fund in New York. And he was talking about all these insights from all this data from a few funds over the years. And one of his key takeaways was the selection process I don’t really have anything to share on that. It’s kind of a crapshoot. But all the other stuff, the sourcing and the helping of companies he had, you know, really good feedback on it was, it was kind of interesting.
8:37
That will conclude this installment of investor stories. If you’re enjoying the program and would like to see it continue, take a moment and leave a five star review in iTunes. Okay, that will wrap things up for today until next time over. Prepare, choose carefully and invest confidently. Thanks for joining me.
