MANAGE VOLATILITY

“I'll see someone with their very, very first liquidity. They take it, and instead of doing something a little bit safe, in case there's a rainy day, they turn around, and you go put in a bunch of very early stage startups. You just sort of sit there, and you're like, listen, if you're going to do venture, at least try to do it in a systematic way. Do not take 80% of what you just got, and hand it to your three friends.”

“Volatility is not the enemy. A lot of people fret—volatility, I'm scared. But if you have a deep balance sheet and you've kept your portfolio at least somewhat liquid, volatility is a huge opportunity. It's like a fat pitch. You get assets that go on sale. Stock markets every four or five years have a 40% drawdown. That is a blue light sale.”

“SpaceX is rumored and reported, too, to have merely a $2 trillion IPO incoming. It'll be an interesting test of the markets, if they can sort of—I mean, that would be the largest IPO ever, for the markets to digest that. It'll be really interesting to watch. And I think there's a lot of other very large startups waiting in the wings who will be watching this super carefully.”

“The large asset management firms, you know, of hedge funds, PE shops—those guys, their biggest clients are non-profits. So their pensions, endowments, foundations, or wealth funds—all these people don't pay tax. So they are not at all focused on the taxable element. And if you're an individual, you're paying, especially in this state, you're paying 50 plus percent tax. So the easiest alpha to get is a tax alpha.”

“Most of the independent firms have spun out of banks. Banks themselves don't train people to be professional investors. These people are trained to be service providers. They're trained to be responsive, helpful. But actual investment acumen, when you're at a large bank, sits in a separate group. You're rewarded as a wealth manager by how much you grow your book of business.”

“If you're trying to build a multi-asset class portfolio, you're going to need to hire a bunch of these professional investors. I don't know, you need five, six, seven of them across different asset classes. How are you going to do that and pay these people if your balance sheet isn't very big? I mean billions. Otherwise, the compensation you're paying to this team is eating up whatever benefit you might be getting.”

“If you look at the different asset classes and the dispersion of returns—the worst manager to the best manager—venture is the biggest dispersion of all the asset classes. And so, to your point, that means that who you pick is super important. If you pick the bottom half, well, that's a problem. You should have just avoided the illiquidity, avoided the fees, and just bought QQQ or something.”

“When banks and law and all these laws were built in the 20s, 30s, 40s, all there was was real assets. People weren't—there were no internet companies, they were buying buildings and factories. So the tax code is very beneficial to real assets. And you can therefore get a solid teens return on a tax-adjusted basis out of real assets and real estate.”