Letter #236: Josh Kushner and Alyson Shontell (2024)
Founder of Thrive Capital and Editor-in-Chief & Chief Content Officer of Fortune | How Josh Kushner Quietly Propelled the AI Revolution
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Josh Kushner is the Founder and Managing Partner of Thrive Capital, where he has invested in companies such as Instacart, Instagram, Skims, Slack, Spotify, Stripe, and OpenAI, and incubated companies such as Oscar and Cadre. Prior to founding Thrive, Josh spent a year in Goldman Sach’s private equity arm, where he focused on distressed debt. He had also been a cofounder of Vostu and Unithrive.
Alyson Shontell is the Editor-in-Chief and Chief Content Officer of Fortune. Prior to joining Fortune, she was the Editor-in-Chief of Business Insider, which she joined as the company’s sixth employee, first as a sales planner, then a startup reporter, then a senior correspondent, then executive editor. When she was appointed Editor-in-Chief of Business Insider, she became the youngest, and only, woman to run a global business publication, and grew the business division to hundreds of millions of monthly readers. Alyson started her career with an internship at Conde Nast.
In this conversation, Josh tells Alyson why he thinks we’re in the biggest paradigm shift of his career, what is “little tech” and what Trump’s winning the Presidency means for the venture and startup ecosystems, the importance of disconnecting liquidity and progress in terms of technology, what Elon Musk’s influence in the White House means for OpenAI and if it makes him worried for his investment, what he thinks of Elon Musk, why he invested in OpenAI at a $157bn valuation, how he thinks about investing, shares his investment philosophy, why/how he’s always calm and collected, whether he will be on the board of OpenAI after it transitions to a for-profit, and why he actively looks to recruit inexperienced investors, before ending by sharing what artificial general intelligence (AGI) means, whether it is coming in 2025, and what’s coming next.
I hope you enjoy this conversation as much as I did!
Related Resources
Thrive Capital
Journalists/Columnists
Fortune
Time Magazine
Forbes
Transcript
Alyson Shontell: All right, we're on. This is great. Hi everybody. How are you? Awesome. So Josh, thank you for joining us today. I know you don't usually do interviews, so we're lucky to have you live in person. The first thing I want to talk to you about is: you've said we're in the biggest paradigm shift of your career – granted – we're both middle aged now, it's not the longest career ever, but it's still a long career for you, 20 years in venture, about. Why do you say that? What's going on right now?
Josh Kushner: Yeah, so when I started Thrive, we were in a very exciting moment in that the Internet was starting to kind of gain a tremendous amount of distribution through mobile phones and cloud infrastructure was taking off. Right now with AI, I think it's a very exciting moment, primarily because the foundation for the entire ecosystem has been set. I think as a firm, we get incredibly excited about this moment just because of one, the second and third order implications of a lot of this technology in terms of how it will impact consumers, how it will impact enterprises – but also we're kind of living in this exponential moment where things are just happening so much quicker, and I think the rate of progress that is ahead of us is just going to be tremendously exciting.
Alyson Shontell: So there was one other paradigm shift that happened last week in the United States. A lot has changed. We have now an idea of, well, we know now who our next president will be. It'll be President Trump. There was a lot of feelings in Silicon Valley and in the tech world about Trump versus Kamala, and a lot of people were saying Trump is great for little tech. First off, like, what the heck is little tech? And what does this mean for the venture and startup community?
Josh Kushner: Yeah, so I think – my vantage point is, irrespective of who our president is, it's very important that we're all patriotic. And I think America's greatest export is innovation. And I think in this moment, it's really important that we continue to kind of lean into thinking about how we can all support the ecosystem in every single way possible. When I think about how the technologies that are built here are impacting the rest of the world, I think it's a moment for us all to kind of rally behind the technology industry, to kind of make sure that we're pushing the world forward in the right way.
Alyson Shontell: But it should be a good thing for the industry. I mean, there's a lot of people who felt like there's no exits happening, the IPO market is down, mergers and acquisitions are getting blocked. This feels like maybe this could be good for venture.
Josh Kushner: I think the industry at large – you have to kind of like disconnect liquidity from progress in terms of technology. If you think about public markets, there are good times, there are bad times. It kind of doesn't matter what administration is involved. And when you think about kind of the rate of progress in terms of the things that are being built, I would say the last couple of years have been amongst the most exciting in my career. You're seeing founders dream in terms of what is possible, and when you think about some of these things, whether it be robotics or life sciences, or some of the things that we're all using every day with regards to AI, things that seem somewhat impossible a couple of years ago feel very, very, very real, and in front of us. And I'm very excited about kind of what is being built and the impact that it's going to make on the world.
Alyson Shontell: Great. So I want to talk about though, one startup in particular – of course, OpenAI. Elon Musk is now the center force of business in the White House. We just came out with our most powerful people in business list today – he is indisputably number one. He has a competitive startup to OpenAI – x.AI has raised billions of dollars. He does not like Sam, your founder for OpenAI, Sam Altman. They are in a – quite a public spat in lawsuits and things. Are you worried about your investment now? Like, what does this mean for OpenAI that Elon is there?
Josh Kushner: So first off, I have like deep admiration and respect for Elon.
Alyson Shontell: And you're a SpaceX investor.
Josh Kushner: We feel very grateful to be. Yeah. And I think my understanding of him – first off, he has defied expectations on everything that he's ever been a part of, and, no pun intended, gravity. And my core belief is that he leads with intentionality and with an orientation with regards to kind of what is best for humanity and for everyone. My interpretation –
Alyson Shontell: But not for Sam.
Josh Kushner: My interpretation of his excitement to kind of participate in the government is very much driven by his desire to do right by everyone. And based on what I know of him – and to be self aware, there are others who know him better – I think he always leads with good intentions, and I have extreme confidence that he is always going to do what he thinks is right for all Americans.
Alyson Shontell: Well, maybe you will broker a treaty between the two of them, some peace between Elon and Sam.
Josh Kushner: I know for certain that both Sam and Greg have deep respect and an immense amount of gratitude for all that Elon has done for not just OpenAI, but for the rest of the world and humanity.
Alyson Shontell: So, okay, let's talk about what's going on at OpenAI and the valuation. So you guys just put in 1.25bn – not the first billion dollar check you've written in this company. That's more than Microsoft put in this last round, more than Nvidia, more than Khosla. I mean, you are like all in on this company. I know that you have a rigorous back and forth at Thrive – should we invest, should we not invest? What's the case for this $157bn valuation where all your chips are in versus -- I'm sure there were people arguing the other side. What are both sides?
Josh Kushner: Yeah, it might make sense to kind of take a step back to explain who we are and what we do. So we started the firm in 2011, and when I started, everyone that I met with on the investor side said no to us. So we kind of took a step back and said, okay, given that we have nothing to lose, what is the right strategy for us? And we kind of created this vehicle that was incredibly opportunistic. It was agnostic to stage, sector, geography. And since day one as a firm, we have been very much oriented towards being extremely concentrated in people and ideas. We have been of the belief that there's a very small line of companies that one should be a part of. You need to be their most meaningful partner, you need to be extremely long term. And we've always believed in the Munger/Buffett way of the world, power of compounding, one of the wonders of the world, and hold these companies for a very long period of time. So since then, day one, we've incubated businesses, we've invested early, and in extremely concentrated ways, we've invested in later stage businesses. And over the last couple of years, we've written multiple billion dollar checks in companies, like Stripe and others that you're aware of. With regards to OpenAI, our framework has always been that there are really four things that matter in this new paradigm shift. There's research and talent, there is compute and capital, there's data, and there's distribution. From our framing, OpenAI is the number one model and research company. It's the number one enterprise company. And it's also the number one consumer company, with a half a billion people using their product. When we kind of think about the valuations associated with some of these large language models, obviously you can value the enterprise business, but our orientation has always been towards kind of the application layer and the capacity for consumers to kind of utilize these products in ways in which are improving their life. And the exponential growth of that user base has been quite stunning and is fairly unprecedented compared to anything else that has existed. To kind of frame it in the context of numbers, if you kind of look at cloud infrastructure, I think there was about 12bn of spend about a decade ago. Now it's about a $220bn run rate. That should yield about $2tn of enterprise value, and I think that will grow towards $5tn over the next five years. If you kind of project forward, our view is there's going to be multiple winners in this space. We have deep respect for Google and Meta and X.AI, but our belief is that OpenAI is going to be one of those, and we feel very lucky to be partnered with them.
Alyson Shontell: You have an approach that's about quality, and that quality is scarcity. Like you have a thing you say about Fifth Avenue: Always invest in Fifth Avenue – you always are paying a good price for it.
Josh Kushner: Yeah, I think one of the things that I've once told Allison is I always try my best to kind of explain to my mom what I do. She gets it now, but a couple of years ago she thought I fixed computers for a living. And what I try my best to kind of express to her was, at the earlier stages we're looking for the new and upcoming community. These are areas that people are just starting to find interesting. And at the later stages, our view is you want to invest in Fifth Avenue, you want to be in the high quality companies that you want to own for decades to come. In our world, there's an ephemerality to technology. Those assets are fairly limited. But I think most importantly, it's so driven by the person who's running those businesses. We kind of live in a world in which the founders of these companies are really the heroes. They are really the ones deserving the credit. They're the ones who are operating these businesses. So as I expressed earlier, we're both concentrated in ideas and in people. A lot of people who do what I do think that if they were to be involved in something, it would make a difference. We try our best to be unrelentingly supportive to those that we work with and do our best to support them in every way possible, but we have a tremendous amount of self awareness that at the end of the day, they're the ones who deserve all the credit and deserve to be on stages like this.
Alyson Shontell: Yeah. I think a smart investment philosophy is to invest in people and the people running companies. And clearly you were Sam's first phone call when he was raising venture capital, and it goes back to a relationship you guys have had for a dozen years. I imagine, though, you had a not so minor heart attack when he was almost fired. He was fired for 48 hours. And to me, if I'm you, that's like, oh, my God, my investment might just go totally to zero. That's a big poof for my LPs. What did that moment teach you about investing? Yeah, I mean, Microsoft looks like they were like, we're never gonna let that happen again. They diversified. But you're still – I know you have other AI investments, but you're still, like, all in.
Josh Kushner: Yeah. Listen, my wife jokes with me all the time that I'm calm and collected at most times, and I don't know if it's a feature or a bug, to use an engineering term. But my framing is: every problem has a solution, and there's no hope at a better past, and there's nothing you can gain from freaking out about anything, and you just have to look at the play on the field and do your best to write things to where they ultimately should be. So feel very grateful that we were able to play a small part, as others were, in that very specific moment. And we try our best to kind of do that for all the people that we're lucky enough to work with, in moments of Crisis.
Alyson Shontell: Okay, last OpenAI question, I promise. Will you be on the board after it's done transitioning to a for profit? And how's that going?
Josh Kushner: No comment.
Alyson Shontell: No comment. Okay, maybe. Maybe. I take that as a maybe. That's my analysis. Okay, we'll stay tuned. Okay, so one thing about the firm – you guys are very young. And that's on purpose now. At first, I think we talked about, in a story that I wrote on you, it was sort of like the feature, not the bug. It was hard to recruit. But now you actually look for people with less than four years of investing experience. Why? Like, don't people benefit from pattern recognition in investing, seeing cycles, knowing cycles?
Josh Kushner: Yeah, so when I started the firm, I was 26 years old, and we were fortunate enough to be seated by the Princeton Endowment. And they really believed in us, and what we stood for in our approach and orientation. As we started to meet with other investors, people pushed us to kind of hire people with more experience, and my line at the time was, anyone who has experience that is talented will never want to work with a 26 year old. So there's an adverse selection dynamic associated with the types of people that we could ultimately hire. So what we ended up doing was just kind of aggregating the smartest people that we knew that were our ages, our close friends from college, people that they knew from different work experiences. And I think if I were to orient back to kind of what has gotten us to where we are today, it's been driven by first principles thinking, humility, like an incredible drive to do whatever is necessary to kind of understand different topics, be there for founders. And we have found that instead of trying to hire the experienced person today, we'd rather just find that young, hungry person who's willing to run through walls like we were 10 years ago, and teach them our way, and help them grow, and help them become the best versions of themselves.
Alyson Shontell: That's great. So in the time that we have left, I want to know two things, really. One, Sam gave an interview recently and he said, What are you excited about in 2025? And he said, first, I'm having a kid, which, yay, Sam, that's great. Two is he thinks that AGI is coming in 2025. Can you explain what is AGI to everybody and is it coming next year?
Josh Kushner: I think there's a lot of different interpretations of what AGI is, but I think the most simplistic way to describe it is this idea that on certain tasks, computers will be smarter than humans. And it feels like we're making a tremendous amount of headway towards that being the case. And I think as a result of that, there's going to be a tremendous amount of innovation that is going to occur, and my framework on life is that with any innovation, there's good and bad. I'm an optimist, so I focus on the good things. When I think about What Demis at DeepMind has done with AlphaFold and the impact that protein folding can make in terms of drug discovery – that is like an extraordinary innovation that's coming out of large language models. Things that can come with regards to robotics and other things like that. So we're very excited about the transformations that are happening, and obviously, as I expressed, there's going to be a tremendous amount of exponential growth ahead of us. But we have a tremendous amount of confidence, not just in OpenAI, but the other people who are kind of pushing forward on this frontier, that they're going to steer it in the right direction.
Alyson Shontell: Well, I was going to ask you about what's next, but you sort of answered it there with the robotics. So Josh, thank you so much for the time, for being here today.
Josh Kushner: Thank you.
Alyson Shontell: Thanks to you. Yeah.
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