Which Businesses Will Survive AI? | Michael Dempsey

Um, sticking with 2021, so there's this thing from, um- This guy Charles Hudson-

Yeah

... who, um, I think it was Turner Novak posted this on Twitter, and I, I actually have a quote on my computer from it.

Um, uh, "That's my lesson from 2021, because it's not as if the people who were sober and restrained during '21 have gotten a lot of credit from their LPs for having not participated in the circus." So I'm like, is that really what modern venture is today? If there's a speculative frenzy, the rational thing to do, if your goal is to remain a VC, might be to just participate in the frenzy, even if you have deep skepticism about the final outcome.

The reason for this is you need to remain relevant, you need to remain in the business and be able to raise capital.

And to do that, your firm has to be relevant and feel like you get the message.

And if that's true, that leads you in a really different set of directions than if you were just like, "Hey, the people who go crazy and lose a bunch of money on bad things will be punished, and the punishment will, will be you will not raise another fund." The unfortunate truth is I really don't think it works like that.

I think that's partially, partially true.

Yeah.

Like, I think that all these things are like, there are institutions in venture that are too big to fail or that you get to a point of no return.

And why you get to that point of no return is because, like, your LPs also don't wanna look dumb.

And so when they, you know, when someone at the endowment office comes in who runs the private book and is like, "Look, you know, this new fund is the best fund," and, you know, they often come in and they're gonna say, "We're gonna deploy $20 million over three funds over the next, you know, three vintages," and that's gonna take eight years, say.

Um, to do it after one year and be like, "Actually, you know, I, I kinda messed up and this person's not good," is, like, bad for their career too.

Yep.

Instead, they can be like, "Hey, everybody was doing it," so, you know, they're just the same as-

Mm-hmm

... a placement as everyone else.

Um, I just, like, don't operate in the framing of, like, if everyone else does the thing, then we should too.

Like, it just, like, doesn't make sense.

Yeah, yeah.

It's like...

Uh, and also I think the other thing, which is, um, it goes both ways for us.

We raise our funds every four to five years, and so-

Mm

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