Ideas from Josh Wolfe
I admire Josh Wolfe and have learned a lot from him over the past year. I couldn’t find a good collection of Josh’s ideas online so I had a stab at summarising them myself. Everything great is down to Josh. All errors and omissions are mine entirely.
Randomness and Optionality
Everyone can explain their life decisions perfectly ex-post facto. We see a consistent linear chain. Success feels like destiny – we earned it. But this is far from the truth. In reality, success and failure hinge on random decisions: being in the right place, at the right time. Josh highlights two: Financier Bill Conway’s investment to get Lux Capital off the ground, and meeting his wife at work. Being aware of randomness allows you to harness it: as Louis Pasteur said, “Fortune favours the prepared mind”.
Sci-Fi to Sci-Fact
Everything, from our built environment to the keyboard I use to type this sentence, was invented by someone. But before invention is the spark of an idea — maybe this is possible?
Many inventors and technologists are inspired by fiction. Ideas from sci-fi writers predate inventions by 20 years or more. It doesn’t take a genius to guess who Motorola were emulating when they released the StarTAC phone. Siri and Alexa are like HAL from Arthur C Clarke’s novels, and Microsoft’s virtual assistant, Cortana, is borrowed directly from the video game Halo. Far-fetched ideas from writers like Clarke and Isaac Asimov inspired the engineers of yesterday. Neal Stephenson and Cixin Liu are today’s sci-fi authors. Their ideas will become the sci-fact of tomorrow.
The Half-Life of Technological Intimacy
The future is notoriously difficult to predict, but some things do have an arrow of progress: computers are getting closer to the human body. They used to be the size of entire rooms, but as Moore’s law marched on computers shrunk down. Smartphones are as powerful as 1990s supercomputers, and we’ve been carrying them in our pockets for years. Today our intimacy is even more noticeable in people wearing smart watches, Fitbits, and Airpods. With companies like Neuralink growing, the smart money is on an ever closer union with technology as time goes on.
The Pampers Effect
The most important trait in a founder is storytelling. Storytelling is almost a panacea: recruiting, raising capital, and guiding employees under a common vision come easy to a master storyteller. Josh calls the power of a great storyteller “the Pampers effect”. Mesmerised by narrative, listeners find themselves so willing to part with their money that they almost wet themselves. Investing in storytellers is a double edged sword, though. The best storytellers are also the best con-artists. Thus a founder who is great at convincing sophisticated investors to part with their money is more likely to be a fraud. Invest with care.
A good way to find new business ideas is to wade into a new industry and ask: What sucks? What is uncomfortable? What is slow? What is painful? When Josh studied nuclear energy, this question led him to waste removal. It was inefficient and expensive. He helped found a company called Kurion, whose mission was to make this process quicker and more effective. Their startup was timely: they led the cleanup of the Fukushima reactor.
Today, Josh thinks tattoos suck. They are painful, and they are permanent. What once seemed cool is later embarrassing. Wouldn’t it be great if they hurt a bit less, and lasted only five years, instead of your whole life? If you’ve solved this problem, give Lux a call.
Lux Capital’s thesis as a venture capital firm is both contrarian and contradictory:
- 100: They are 100% certain they’ll be investing in the most state-of-the-art, bleeding-edge technologies.
- 0: But they have zero idea of what those technologies will be.
- 100: However, they are 100% sure where they’ll find people working on them: at the edge of Lux’s existing portfolio of company and industry partnerships. This blend of extreme arrogance and humility is 100-0-100.
The Scarcity Triptych
A great investment has three qualities: A scarcity of people, attention, and capital:
- A good investment is cutting-edge, so by definition few people actually understand the technology.
- A good investment is scarce. Where is no one else looking? During the cleantech mania of the early noughties, when all eyes were on solar, Josh focused on nuclear. This bet paid off handsomely when Lux’s company Kurion sold for $400m.
- Finally, a great investment isn’t being chased by many investors. This leaves company valuations low, and provided your bet is right, creates high returns.
The Criteria of Fraud
An industry is ripe for frauds if it satisfies the following:
- People don’t understand it.
- It has hype, which drives FOMO in consumers and investors.
Theranos satisfied both of these qualities in spades. Where does Josh think the next big fraud will be? Quantum computing.
X, Tesla and Elon Musk
Josh is a Musk skeptic, but he has a crazy idea that all of Musk’s companies will eventually merge. His thesis: To and from space, again and again. Solar City takes energy from the sun and brings it to earth. It powers Tesla cars which are used on earth. SpaceX takes people to space and back again. All companies will join. The name of the merged entity? X, the name of Musk’s first big company and a domain name he owns to this day.
The game is rigged
There’s always a game being played. There’s always a secret that people making the most money keep to themselves. In the late 90s the distribution of IPOs in the dotcom bubble was rigged. In the financial crisis the ratings of mortgage backed securities and CDOs were rigged. Right now the valuations of companies like Uber and WeWork are rigged. Some part of the system is always rigged. Try to find it.
“Avoid Boring People”
The quote from Jim Watson is a statement on how to treat people as well as who to spend time with.