Invest Like The Best
Episode 45 The Deployment Age, Power Laws, and Venture Capital
Invest Like The Best

Episode 45: The Deployment Age, Power Laws, and Venture Capital

The Deployment Age, Power Laws, and Venture Capital

Jerry Neumann is a New York City-based venture capitalist. We cover the Deployment Age, the power laws that govern venture capital, and what makes a good venture capitalist.

This podcast is sponsored by:

The CFA Institute. The CFA Institute is the global association of investment professionals whose mission is to lead the investment profession by promoting the highest standards of ethics, education, and professional excellence for the ultimate benefit of society. CFA Institute serves a global community of investment professionals working to build an investment industry where investors' interests come first, financial markets function at their best, and economies grow. The Chartered Financial Analyst credential is the most respected and recognized investment management designation in the world. The views expressed in this podcast do not necessarily represent the views of the CFA Institute.

[00:03:27] – (first question) – Start with Jerry’s essay on the Deployment Age and a look at what it means for where we sit today (looking forward as investors)?

[00:09:28] – What time in history can you compare our current deployment age to and what does that say about the next 10, 20, and 30 years?

[00:15:36] – How have your views evolved over time and how do you square the 1950s-time period for venture capitalists?

[00:20:40] – What lessons should venture capitalists make from these deployment age cycles

[00:24:10] – Exploring how powerlaws govern returns for venture capital

[00:26:50] – Howard Mark’s 2×2 matrix of superior investment results

[00:32:19] – Providing context and understanding to Alpha within Powerlaws:

[00:32:56] – Nassim Taleb: Power-law

[00:39:18] – Portfolio concentration and scaling

[00:44:34] – How have you have actually done this, Jerry? What is your process like and your focuses?

[00:54:00] – Are there any circumstances where it is wise for friends and family to make venture investments?

[00:59:20] – What is this idea of who profits from innovations?

[01:02:57] – Understanding complementary assets

[01:05:06] – Porter’s Five Forces

[01:09:24] – Are Augmented and Virtual Reality interesting areas for venture capital and why?

[01:15:28] – What makes a successful venture capitalist? What makes you special?

[01:23:43] – What is the most memorable day in your career in venture?

[01:26:03] – Kindest thing anyone has ever done for Jerry

The Deployment Age, Power Laws, and Venture Capital

Introduction

Patrick
I am drawn to a group of investors that I call practitioner philosophers. These are people who have gotten their hands dirty in their respective fields, but despite being doers, they still often sit back and ponder the big questions. My guest this week is one such practitioner philosopher, New York City-based venture capitalist Jerry Neumann. I came across Jerry's essays a year ago. And he is on a very short list of writers whose work I read without fail and almost always more than once. You can think about this conversation on business investing and venture capital as a big funnel, we start very broadly discussing where we might be in a large 70-year economic cycle. We then break down the so-called power law, which seems to govern venture capital returns and business outcomes, then we get even more specific discussing Jerry's process for evaluating early-stage companies and the particulars of what might make a good venture capitalist. I say might, because as Jerry explains often, nothing is certain and luck may always play a huge role. I just love this conversation.

It is the type that without the podcast as an excuse, would be a very odd and intense one if I were just meeting Jerry, for the first time. You'll find no small talk or even medium talk here. This is a meaty discussion with one of the smartest and most straightforward people I've come across. Let's dive in.

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