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Investing Game of Thrones. At 89 years old, Warren Buffett sits at the top.
When the seat is eventually vacated, who will rise above? I’m rooting for the 43 year old Chamath Palihapitiya.
tl;dr - Chamath is the internet’s investing king. His bold tech bets have been consistently right. He’s revered for calling out bullshit. He’s playing a game (of thrones) to reprogram society. We get into Chamath’s story, his investing style, and what we can take away.
Started from the bottom
Born in Sri Lanka, his family sought refuge in Canada when he was 6. He grew up poor and worked at Burger King to help pay the family bills.
“When I got my first job, it was at Burger King...I remember telling some of my friends, I went to a very good high school, kind of like the rich high school. Not the high school I should've gone to....and I would tell them, like, I would be so ashamed that I worked at Burger King. They would sometimes come by, and I would just be like fuck.”
“And then at some point, it was this release moment where I was, this is my life...and then the minute I accepted it, I wasn't ashamed anymore...I could start to actually be inside my head, like, what really matters?”
Frontline internet builder
This set him on a path of unparalleled experiences. Chamath was part of the internet’s ‘Night’s Watch.’ In 2004, while the rest of us used AOL Instant Messenger to optimize our away message, Chamath led the team behind the product. When we started using Facebook in the second half of the 2000s, Chamath was one of the five executives that ran FB. He became Facebook's longest tenured senior executive and amassed a rumored $1B+ fortune.
Internet investing King
At Facebook, Chamath helped build the plumbing for the internet. He saw how the internet had the potential to reshape things he thought mattered - education, healthcare, financial services. Yet, internet people weren’t investing in those sectors. So like Jon Snow leaving the Night’s Watch, Chamath left to do what he wanted. In 2011, he left FB and started his own investment fund, Social Capital.
While upending the major industries he initially sought out will take decades, Chamath has earned success across investing in internet adjacent companies. Most notably:
Amazon in 2014 (then ~$325 per share, now $2400+)
Chamath Palihapitiya @chamathMost investors lose sight of the big picture. Here is why we intend to own $AMZN for decades to come: http://t.co/dFv7L8l6eK
Not only does Chamath invest in the internet, he has won it over too. Redditors and Tweeters love that he’s calls out the unjust. This includes the unintended consequences of Facebook, stock buybacks, the venture capital industry playing a ponzi scheme, and most famously the pandemic bailouts of hedge funds.
Going for the Throne
Even though Chamath has more coin than the Iron Bank, money is not his singular end game.
Chamath wants to reprogram society and install his view on the world. Here’s how he plans to make it happen (this is a good clip):
“Here's the thing, there's about 150 people that run the world. Anybody who wants to go into politics, they're all fucking puppets, okay? Here are 150 and they're all men that run the world, period, full stop. They control most of the important assets, they control the money flows. And these are not the tech entrepreneurs.
Now they are going to get rolled over over the next five to ten years by the people that are really underneath pulling the strings. And when you get behind the curtain and see how that world works, what you realize is, it is unfairly set up for them and their progeny. Now, I'm not going to say that that's something that we can rip apart.
But the first order of business is, I want to break through and be at that table. That's the first order of business. And the way that I do that is by proving that I can do what they do as well as they do it and then do it better than how they do it.
Because at the end of the day, they are commercial fucking animals, okay? And they'll open the door out of curiosity and they'll let me stay because I add value.
And then once I'm there, I can open the door for other people who can try to do the same thing.
So my entire goal now is that - to be in a position to aggregate enough of the capital of the world and to then reallocate it against my world view.
And I'm not saying my worldview is the best or right, but it is mine.
And at the end of the day, there are 150 other fucking guys with their worldview and they don't give a shit what you think about their fucking worldview.
That's the truth.
And so, why not me?
Why not one of you?
And so in my life now I'm just kind of like, why not?
Why the fuck not?
Here’s his defined measuring stick of success.
“So my 2045 ambition for the organization is:
I would like us to employ at least ten million people through the businesses that we own,
I would like our businesses to positively affect at least a quarter of the world's population, and
I would like us to have made cumulatively about a trillion dollars.”
This is an explicit play for greed and power. Some may be turned off by it, but regardless, we can all benefit from it.
If an investment makes it through his filters, it's worth our time to look more into it. Chamath has had as much vision as the three eyed raven.
His investing style
The best way for Chamath to accumulate enough capital over time is to make great investing decisions. It’s like Daenarys growing her army by winning battles one by one.
Coming into 2020, Chamath has four public market positions: Virgin Galactic, Tesla, Amazon, and Slack.
What does he look for when picking these positions? He says it’s two things:
“I think if we do that [achieve the three benchmarks above], we are the modern face of capitalism for the next 50 years. So, how we do that now becomes really important. So if you think about building businesses today that could do any of those three things, you have to be technological, you absolutely just have to be. You are not going to build a brick and mortar business that gets anywhere close to those three things, number one.”
The beauty of tech businesses is that they can scale to everyone with minimal cost. If you are a business with money flowing in, you can reinvest as much as possible into improving your product. As I wrote in 2017, this approach is a virtuous cycle that can make these businesses unstoppable.
"People used to lambast Jeff Bezos for not being profitable, but when you looked under the hood, he was the single best investor of our generation, even better than Buffett, because he would take billions of dollars of free cash flow and invest it into the future." - Chamath
Investing in certain technology businesses is like joining an army that has a dragon.
Decades, not days
“Number two is, you have to think very broadly about building things that can stand the test of time.
Those businesses are by definition hard and non-obvious and so they compound in scale very slowly. And that's really counterintuitive to the overriding logic of Silicon Valley, which says, quick, fast, go, right?
But that kind of premature ejaculation doesn't work if you're trying to fucking be around forever.
You gotta be in the flow for decades, that is hard. It tests people's patience, it tests people's resolve, it tests people's really intellectual incision.
And this is where everybody gives up, everybody gives up.”
This means being patient and sticking with things you believe in. Like Hodor holding off the White Walkers for Bran.
Slack @SlackHQWe’re taking a big step in our partnership with @Atlassian to improve the experiences of hundreds of thousands of teams who use our products together. We’re also officially welcoming Hipchat and Stride users to Slack - glad you’re here! https://t.co/SpenERXrqa
A third, non-explicit piece is on the type of risk the business takes. I believe Chamath loves businesses that face execution risk, not market risk. Execution risk means there is demand for the product, but it’s unclear if it can be built. Market risk means the product can easily be built, but demand for it is unknown.
He expands on this a minute into this Bloomberg interview.
Bloomberg: “When you look at Amazon, versus Facebook, versus Google, versus Apple. Do you see a world where Amazon is head and shoulders above the rest?”
Chamath: “Absolutely. It is the most durable business being built anywhere in the world today.”
Bloomberg: “That says a lot given your history with Facebook.”
Chamath: “I think Facebook is a fantastic business. Facebook is about creating consumer intent and behavior. The problem with that is those ebb and flow. We know that. FB has done a fantastic job in acquiring these new sorts of expression that have emerged.
But, Amazon is in a fundamentally different business, where it’s this functional utility. I think they do such a good job, where there is no emotional reconsideration that happens.
At no point does a Prime subscriber think to themselves, ‘I’m going to get into my car now and drive to Target because that just makes me feel better.
So that is a different set of problems.
As long as Amazon invests in the customer experience, they will win.
Facebook unfortunately will be in an evolving arms race where they have to constantly look to see what are emergent behaviors they don't understand or own and then either build or buy those. It’s a much harder problem to solve over 20-30 years.”
Execution risks businesses are great in theory. You control your destiny. With technology and time, you’ll be able to figure it out.
Chamath’s forging his own path. He calls BS when he sees it. He’s publicly making his long term investments. He follows a checklist like the current King Warren.
It’s hard to not root for him.
Fortunately, given the internet, we all can support him in a way we wish. Aggressively, you can go all in like Chamath and hold for decades. Conservatively, you can inspect his bets and appreciate his candidness.
Chamath is mid-leap into his pursuit of reprogramming society (and of sitting atop the investing Iron Throne).
This is a decades long endeavor. Let’s see if he can pull it off.
Now our watch begins,
P.S. I’m starting to tweet about Witty throughout the week. Research gold is starting to surface. Interact with me there to see it in real time. Chamath does 😉