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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 (#651)

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“The minute you set a very hard rule, you might be setting yourself up for a mistake. And venture, I have found, is a world where that happens frequently.”

— Bill Gurley

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!

Listen to the episode on Apple Podcasts, Spotify, Overcast, Podcast Addict, Pocket Casts, Castbox, Google Podcasts, Stitcher, Amazon Music, or on your favorite podcast platform. You can watch the interview on YouTube here.

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. 

The transcript of this episode can be found here. Transcripts of all episodes can be found here.

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#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

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This episode is 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 AG1 further covers my bases with vitamins, minerals, and whole-food-sourced micronutrients that support gut health and the immune system. 

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Want to hear another podcast episode with a world-class investor? Have a listen to my most recent conversation with Oaktree Capital Management’s co-founder Howard Marks, in which we discussed navigating unprecedented uncertainties, crowded versus uncrowded opportunities, the state of the American economy, finding higher-signal sources of information, and much more.

#431: Howard Marks on the US Dollar, Three Ways to Add Defense, and Good Questions

What was your favorite quote or lesson from this episode? Please let me know in the comments.

SCROLL BELOW FOR LINKS AND SHOW NOTES…

SELECTED LINKS FROM THE EPISODE

  • Connect with Bill Gurley:

Twitter | LinkedIn

SHOW NOTES

  • [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.
  • [44:04] Equal partnership over hierarchy.
  • [50:08] Lessons learned from partners.
  • [52:57] Recommended resources.
  • [58:46] Problems open source can solve.
  • [1:09:28] Building a better network with the interest graph.
  • [1:13:42] Dissecting Bill’s Twitter thread about risks and sudden valuation resets.
  • [1:23:50] The Metaverse.
  • [1:29:00] Revenue and earnings quality matter.
  • [1:31:02] Undervalued competitive advantages.
  • [1:35:02] Jeff Bezos: corporate mad scientist?
  • [1:40:42] The counterintuitive condemnation of company camaraderie.
  • [1:45:37] Tobi Lütke.
  • [1:48:51] Books Bill has gifted frequently.
  • [1:52:29] The Santa Fe Institute.
  • [1:54:35] Bill’s board.
  • [1:56:32] Cultivating anti-tribalism.
  • [1:58:13] Twitter: what is it good for?
  • [2:01:14] Newsletters and other resources Bill relies on.
  • [2:03:05] Bill’s book in progress.
  • [2:04:12] Regulatory capture.
  • [2:09:10] Predicting what America will look like in 10-20 years.
  • [2:10:50] Parting thoughts.

MORE BILL GURLEY QUOTES FROM THE INTERVIEW

“The minute you set a very hard rule, you might be setting yourself up for a mistake. And venture, I have found, is a world where that happens frequently.”

— Bill Gurley

“The process through which you actually put the words to paper and structure the paragraphs, structure the argument, you get smarter. Sometimes you decide, ‘Oops, I was wrong.’ You learn by putting it all together.”

— Bill Gurley

“If you’re starting a company because you think it’s going to be a good lifestyle, holy shit. You’re in for a rude awakening.”

— Bill Gurley

“Open source is way better at complex problems than simple problems.”

— Bill Gurley

“Why do we use government dollars to fund stuff that becomes proprietary?”

— Bill Gurley

“Be less tribal.”

— Bill Gurley

PEOPLE MENTIONED

The Tim Ferriss Show is one of the most popular podcasts in the world with more than 900 million downloads. It has been selected for "Best of Apple Podcasts" three times, it is often the #1 interview podcast across all of Apple Podcasts, and it's been ranked #1 out of 400,000+ podcasts on many occasions. To listen to any of the past episodes for free, check out this page.

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4 Replies to “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 (#651)”

  1. Does it bother you that your guests are predominantly white males? What could be gained by including more women & minorities? Just a thought. Thanks.

    Reply

  4. Hi Tim! Loved this episode. I really value the recommendations made during the episode and appreciate you and your team creating the list of links to different content / media. I’ve got an idea for how to make these recommendations more actionable. I’m going to put together an MVP and I’d love to show you how this works when ready. Cheers!

    Reply