Jeff Wang: Sequoia Capital's $9BN Global Equities Fund on The Future for NVIDIA, Google & Meta|E1212

1. 0:00 – 1:12

   Intro

   1. JWJeff Wang0:00

      I do think there are more threats on Google's business than there have been ever in the company's history. I think NVIDIA's price is reasonable if you think it's gonna continue to keep going. For us, 70% of our research process is actually up front on the theme and only 30% on the actual company. You have to be a pirate interpreting a treasure map. We need to sail to the right island. Now, if we don't sail to the right island, it doesn't really matter which ship you picked. Those are just not good investments.

   2. HSHarry Stebbings0:28

      Ready to go? (instrumental music plays) Jeff, I am so excited for this, dude. Listen, I spoke to Mike, I spoke to Doug, I spoke to Pat, many of our mutual friends. So, thank you so much for joining me today.

   3. JWJeff Wang0:50

      Oh, thank you so much for having me on the pod. Uh, by the way, I did see your tweet the other day about your frustration with folks going on the podcast circuit. This is my first podcast ever and I don't expect to do them regularly, so I've been listening to your pod for a long time. Sequoia folks have had such good things to say about you, and so I'm super excited to be on.

   4. HSHarry Stebbings1:08

      I pay them a lot of money to say-

   5. JWJeff Wang1:10

      (laughs)

   6. HSHarry Stebbings1:10

      ... certain nice things, and that's, that's a

2. 1:12 – 2:59

   The Offer Moment in SCGE

   1. HSHarry Stebbings1:12

      big spend. Uh, listen, I wanna start in the early days, which is, how did you come to join SCG? And just take me to that aha moment and the joining.

   2. JWJeff Wang1:23

      So, we started SCGE, or, or Sequoia Capital Global Equities, in 2009. Uh, and it was really hatched actually by Jim Goetz, originally, so he worked with Michael, Doug, and Roelof to really get it off the ground. And I joined a year later, in 2010, before we externally launched and, and raised money from LPs. And I think I joined for the same reason that most people join a startup. So, I believed in the mission, uh, and this was to build a world-class public equities business, partnered with Sequoia Capital, which, which I believed at the time and still consider to be the best venture capital firm in the world. And so I joined as an early employee. Uh, we had 50 million of internal capital. Uh, we now manage about 9 billion of mostly external LP capital, but that internal capital amount is also now about a billion. Uh, the portfolio is about two thirds public and then one third private, and that one third private is almost exclusively co-investments with Sequoia. And so, when the SCG opportunity came along, I was super intrigued because it was a chance to go build a public equities business that had true ecosystem advantages in technology, and I believe those advantages would translate into the public markets. And then, I was also encouraged by the support and backing that SCG had from Sequoia's most senior leaders, like Jim and Doug and Michael and Roelof. On the flip side, though, uh, I was taking a 70% pay cut, uh, and there was a real risk of failure, right? Most hedge fund launches don't survive. And so my career prospects, if it failed, wouldn't have looked very good. I took the plunge to try to build something

3. 2:59 – 6:51

   Transitioning from Shorts to Longs

   1. JWJeff Wang2:59

      special.

   2. HSHarry Stebbings2:59

      I have to ask, I, I spoke to Doug before, and he said that when you started, you were very much a, a shorts guy, uh, focusing on shorts.

   3. JWJeff Wang3:08

      Yeah, yeah.

   4. HSHarry Stebbings3:09

      Um, he said that you then showed this, specifically nose for longs-

   5. JWJeff Wang3:14

      Yeah.

   6. HSHarry Stebbings3:14

      ... and had this unique ability to make the transition between the two. How did you make the transition so successfully between the shorts to longs, and how do you assess that today?

   7. JWJeff Wang3:23

      The way we short is a bit different from how other hedge funds do it. So, we are not looking for frauds. We are not looking for valuation arbitrage. We're looking to further express a disruptive thematic viewpoint that we hold on the long side, albeit on the short side. So, it's really important to see these trends early. And so, uh, the view into the private ecosystem is actually quite valuable for that. So, for example, if you hold a positive view on SpaceX and Starlink, what does that mean for other satellite businesses? What does that mean for rural telcos? If you are bullish on AI, what does that mean about call centers? So, our shorting is really expressing further conviction in the longs, albeit in the other direction.

   8. HSHarry Stebbings4:07

      I'm so sorry for being naive. I specialize in venture, where we're risk-on all the time. Institutions allocate towards hedge funds in large part because of volatility minimization, and hedging is in the name.

   9. JWJeff Wang4:20

      Yeah.

   10. HSHarry Stebbings4:21

       This long/short approach really concentrates risk profiles, no?

   11. JWJeff Wang4:26

       That's right. So, but you can, I think you could take risk in different formats, right? So, if you are a, if you are Citadel, if you are another hedge fund that takes a lot of leverage, I do think you need to have low volatility because you're amplifying it with, say, 6X leverage. In our model of the world, we don't take a lot of leverage. And so what we're trying to do is express more of a specific viewpoint with low leverage.

   12. HSHarry Stebbings4:52

       Why do you not take leverage where many others do?

   13. JWJeff Wang4:55

       You could take leverage, but then you're taking more volatility. And, uh, and I just don't think, in technology, where you already have a lot of data, you already have a lot of volatility, you don't need to take a lot of, uh, you don't need to take a lot of leverage, especially because there is the power law in, even in the public markets. Uh, not as much as in the venture capital world, but if you get a stock right, there should be a power law that helps you deliver and drive great returns over time without a lot of leverage. It's not-

   14. HSHarry Stebbings5:24

       How-

   15. JWJeff Wang5:24

       ... that we don't take any, but it's that we take low leverage.

   16. HSHarry Stebbings5:28

       Have you ever had this combination of long and short be very wrong?

   17. JWJeff Wang5:33

       Yes.

   18. HSHarry Stebbings5:33

       And what did you learn from that?

   19. JWJeff Wang5:35

       There are definitely moments in time where the markets will say, "We used to love growth. We now love value." And if you think about how we are positioned as a fund, it's generally long growth and short value, right? The, the value companies are, in general, the ones that the growth companies are disrupting. So, there are moments in time where the markets rotate, and that's typically a function of, say, rates, or maybe macro scares, where you wanna be in more defensive companies. And that's...... uh, that is tough for our portfolio. But that's why I think about performance over the long term. Those, those rotations are very painful but they happen in, in a sh- typically pretty short period. Let's say it's three months. We may have a very rough three months, but if I look out over the span of ... now we've been in business now 15 years, we've had one down year over that 15-year timeframe and, and I think you build your business in a way that you can weather these storms. So one of the, one of the key things for us is we, uh, partner with an LP base that is long-term oriented. A, a lot of them, as, as I mentioned, are Sequoia LPs, and so they know how we invest, they know our product, uh, they know that technology can be volatile.

4. 6:51 – 11:09

   When to Call a Decision Wrong vs. Waiting for More Data

   1. JWJeff Wang6:51

   2. HSHarry Stebbings6:51

      Okay. You get it wrong and it goes the opposite of what you think. It could be up or it could be down, depending on your long or short. (laughs) How do you know when to call the decision wrong versus when to need more data to see if you were wrong?

   3. JWJeff Wang7:07

      I think it's hard. I think it's hard to know, and, and this is part of the being emotional and attached or not. I think it's really important to be dispassionate and look at the data in a way that, uh, really, uh, synthesizes it for what it is. So if it's good, we have to really call it good. If it's bad, we have to really call it bad. And so one of the things that we've done is we've actually pulled in our data science team as an extension of the investment team, and so we are ... uh, they join our weekly pipeline meetings. Uh, we have them very tightly integrated with, with our investment team to make sure that, I think, we have that data science angle, uh, in, in all of our processes.

   4. HSHarry Stebbings7:50

      Totally get you. What are they bringing that you didn't have without them?

   5. JWJeff Wang7:53

      What we have as investors is a thesis, right? We have a thesis. On the private side, you can get a lot of data to go verify that thesis, right? You're under NDA or you're on the board and you have depth of information that you can then go verify a thesis. We don't have that in the public markets. The data that you have in the public markets is the same as every other investor. That's Reg FD, right? So the smallest investor to the largest investor in a company, you don't have any different information. So to the extent that we can, from the outside in, verify a thesis, that is very helpful for validating, how big do we wanna make that position? Is, is that thesis actually still holding true? Has something changed? Has competition come in and knocked us off, off the top seat? So I think that is very helpful for our investment process.

   6. HSHarry Stebbings8:42

      Jeff, what thesis did you have that proved to be wrong and what did you learn from it?

   7. JWJeff Wang8:47

      So (laughs) Shopify is, uh, has been one of our biggest winners. It is also one of my bigger regrets in terms of, uh, post-COVID. And so coming out of COVID, we simply modeled a baseline that still had the post-COVID trend continuing to go up and to the right, and that was the case for a lot of e-commerce companies, right? So I think one thing that we got wrong is a lot of things returned back to pre-COVID. Humans don't really change that much, or they change more slowly, and so e-commerce really returned back to the pre-COVID trend line. Shopify is still continuing to gain share against the total e-commerce and the total retail pie in a very nice, solid way. But to model this, you know, 800 basis point step up in a year and to say that that was gonna continue from that trend, that was obviously incorrect, and we saw that in the data. We started to see that in the data and, you know, being detached to a company, uh, really liking the management team there, um, having it be one of our biggest winners, I think it's, you have to be dispassionate when you see the data changing. And we held out hope for longer that, okay, this is just a blip in the data. It's gonna get better again. It's gonna return back to this very positive trend line we had. And instead, it stepped down. It's still a great business. It's still continued to grow against a very positive trend in e-commerce taking, you know, share from overall retail spend. But that trend line was, was simply lower than, than we thought.

   8. HSHarry Stebbings10:19

      So how does that experience impact your go-forward mindset?

   9. JWJeff Wang10:23

      It just makes you focus on being dispassionate in a way that I think if I can get help from data science, if I can get help from my partners, I think that helps us be better. And so one of the things that we do is we have a quarterly review of the entire portfolio where we do a re-underwrite of every single position. Because right, u- unlike the venture world, we can buy and sell every day, every minute. Typically, the re-underwrite's driven by the teams that, the team, the, uh, individual partner and the analyst who are supporting a particular investment. In the controversial investments, one thing that we will do is we will have a fresh underwrite from a different partner where you have a devil's advocate position. And I think that's important for helping us be dep-

5. 11:09 – 18:39

   Global Equities in 2016

   1. JWJeff Wang11:09

      dispassionate.

   2. HSHarry Stebbings11:10

      In 2016, there was a leadership transition-

   3. JWJeff Wang11:12

      Yeah.

   4. HSHarry Stebbings11:12

      ... which I think was a tough moment. Doug told me they did not know whether to keep global equities and made you earn it.

   5. JWJeff Wang11:20

      Yeah.

   6. HSHarry Stebbings11:20

      I was writing down vociferously. Talk to me about that. What happened there, Jeff?

   7. JWJeff Wang11:24

      So y- y- you've probably listened to the Sequoia Crucible Moments podcast where Roelof dives into these difficult moments in a company's journey that, th- you know, require a lot of fortitude but ultimately set the company in a better direction. That was 2016 for SEG. So I'm, I'm not a founder, um, but I did help guide SEG E through what I call a re-founding moment. So Sequoia had hired an original portfolio manager for SEG E, um, you know, i- in 2009, who was a smart, hardworking guy, but didn't really unlock the synergies that we should have within our ecosystem. So, um, really, he, he had the same playbook at his prior hedge fund, and so in a lot of ways, was trying to recreate his prior hedge fund, even investing in, in non-tech areas, for example.... as opposed to building something special and unique to Sequoia. And so, performance was good. It was not great. And so there's this crucible moment in 2016 where Sequoia decided to part ways with the original PM and actually consider shutting down the business entirely. So, as the senior-most, uh, partner remaining on the team, I was asked to come up with a business plan and convince the broader partnership why version 2.0 would be better. Uh, and for us, it was a incredibly unifying moment because we were really fighting for our survival, right? And so the team actually, we actually all left the office. We rented some co-working space down at the Hana House in downtown Palo Alto, just to get some space and clari- for clarity of thinking. And ultimately, the, the prescription, the strategy was pretty simple. It was just simply focus on the areas where we have an advantage. That is investing in growth tech, with a meaningful thematic overlap with broader Sequoia, and co-investing alongside in late-stage privates. So, gone were the days of investing in lodging companies, port infrastructure. We even invested in an airline miles program. And so we were just focused on the Sequoia sweet spot. And, uh, when you looked at the pro forma analysis of those returns, it was actually very strong if we just removed all the non-tech areas. And so what we did, we pulled together a 50-page PowerPoint strategy presentation, and I had to sit down in front of the partnership in the main, m- in the Menlo Park office, in the main Ford Conference Room, in the hot seat for founders, and present to the partnership.

   8. HSHarry Stebbings13:54

      How did you feel?

   9. JWJeff Wang13:55

      I was terrified.

   10. HSHarry Stebbings13:57

       (laughs)

   11. JWJeff Wang13:57

       I was terrified. And I didn't, I didn't really know if it would really work. But I give, I give Mike Moritz, uh, all the credit for this. The way he suggested framing it was, yes, this is a leap of faith to invest behind this team and this strategy now. But it is way less of a leap of faith than back in 2009, when we didn't have a team, we didn't have any capital or LPs, no back-office function, no clarity on whether we would have any ecosystem advantages in the public markets. And now, we have all these things, and we have a team that's bonded together that believes in it.

   12. HSHarry Stebbings14:31

       I mean this respectfully. What's the leap of faith? Removing the non-tech activities and really staying core to what Sequoia does best. My question more is, why do we need a separate team to do it? This feels just like a continuation fund.

   13. JWJeff Wang14:43

       You know, I think the public markets, especially when you're trading actively like we do, is actually a very different discipline from a continuation fund. So, in a continuation fund, right, you're, what you're typically doing is saying, "This company that I've known for a long time, do I, do I b- do I sell it or distribute the shares over time?" And I think that, you know, most funds, most venture funds can be very good at that. What we do is different. So, there is a portion of our business that, our portfolio that is prior or existing Sequoia portfolio companies, right? That's maybe about a third of the portfolio is that. There's a lot of our business that is not. There, we own, for example, Shopify was not a Sequoia portfolio company. It's a company that we admired in the private markets, but we did not invest in the private markets. And our first chance to invest is when they go public, right? So that, that is a very different discipline. And then also having, uh, having the discipline to go know when to buy and sell specific companies. You know, I was talking to Pat Grady about this the other day. We're not just judged on, okay, did we sell this company at the right time? But then did we go buy something else because we sold this company that outperformed this company that w- th- when we sold at that time, right? I mean, it's, you have to be deploying capital all the time. It's not just, it's a continuation fund ...

   14. HSHarry Stebbings16:05

       Is that not a dangerous mindset to take? Because if you're always looking for the opportunity cost of capital increase, in other words, that if I sell here, I can put it elsewhere, it could force you to sell something you shouldn't or keep something that you shouldn't.

   15. JWJeff Wang16:20

       Yeah, and so our bias is definitely, I'd say, to keep something because you just know it best, you, uh, you know the team, you have a lot of confidence in what they're doing. I think that is really hard to say, sell something that's 10% too expensive, hope to buy it back when it comes down 10%, and then continue to ride it. That is a very hard discipline. So, I don't focus on the short term. I, I think that those are the small dials. I, I tell my team, "Don't tell me if, you know, service now is 10% too expensive." If we have a three- to five-year investment hold period, you know, 10%, i- if you get six months ahead of yourself in terms of the pricing, it's not gonna impact your IRR that much. Where we have to be careful, though, is if it's now 18 months ahead in a three- to five-year investment time horizon. Because now it really starts to impact your IRRs, and then we have to really think about trimming it back and maybe potentially rotating into something else. But, you know, if it's 10% too expensive, I, I, I don't sweat those details. I think about the big dials, and the big dials are really, are you making the right investments? Are you ma- are, is your investment process working? Is this company going to be a much bigger company over the next five years?

   16. HSHarry Stebbings17:32

       Where was it 10% and it didn't matter, actually? And where was it 18 months ahead of time and we needed to make a transition or a change?

   17. JWJeff Wang17:41

       I think most of the time, it's 10% and it doesn't matter. I think 2022 was a period where a lot of these stocks got ahead of themselves, and we should have, we, we had to trim. We trimmed a bunch, but we should have trimmed more. I'm, I mentioned the Shopify example, where Shopify, you know, from the 2022 price is still back to, I think about halfway to the peak, right? Whereas, you know, you have other companies, say, a ServiceNow that is now above the peak. So, y- you do need to make those choices very actively.

   18. HSHarry Stebbings18:13

       Which portfolio has performed better, the...... buy and hold of portfolio company stock from Sequoia's existing portfolio or they're net new?

   19. JWJeff Wang18:22

       It's surprisingly... We've looked at this, and it's surprisingly consistent. I'm not really sure why that's the case, but it's surprisingly consistent. And the, the area where we have done really well, actually, are some of these, uh, private companies where we can partner

6. 18:39 – 21:37

   The Move into the Private Markets

   1. JWJeff Wang18:39

      with the growth team primarily and co-invest alongside early on. And so, I think the private portfolio has done really nicely, and then you ride into the public portfolio.

   2. HSHarry Stebbings18:49

      Well, I- dude, I gotta talk about that. Uh, why-

   3. JWJeff Wang18:51

      Yeah.

   4. HSHarry Stebbings18:51

      ... why, why, why do that? That seems to kind of muddy the waters a little bit. Suddenly, we're now a crossover fund. We're moving into, like, late growth rounds, which were traditionally-

   5. JWJeff Wang19:00

      Yeah.

   6. HSHarry Stebbings19:00

      ... much less data. Um, pricing is not great, actually. We still haven't reached that kind of, uh, realization moment, in a lot of cases, quite yet of public markets. Why decide to make that move into the pub- uh, private markets?

   7. JWJeff Wang19:13

      A couple reasons. So I think, one, the crossover thesis of investing in late-stage private companies, getting to know them well, and then having a better view on whether to own them into the public markets is still fundamentally very sound. So, uh-

   8. HSHarry Stebbings19:28

      Do you r- do you really get to know them better? And if so-

   9. JWJeff Wang19:30

      I do... yes, I, I do think so.

   10. HSHarry Stebbings19:33

       ... what do you get to know?

   11. JWJeff Wang19:33

       So I'll give you an example. So Nubank, uh, is a Sequo- Sequoia portfolio company. As you know, Doug is on the board. Daveed and I joined Sequoia at around the same time. SCG led in a, a, uh, investment in a secondary round in 2019. We participated in later rounds, again at the IPO. We even bought shares in post-IPO, right, just in the straight public markets. There's now a top-five position in the portfolio, and if we were doing our jobs right, I think we should know that company better than anyone else in the world.

   12. HSHarry Stebbings20:02

       Would you not have had that existing from Doug's partnership with them? My question is, does it need your attendance at the pre-IPO stage if you just have great tie-ins with the Sequoia board member?

   13. JWJeff Wang20:13

       I, I think it still helps. I mean, I've known, for example, I've known Daveed, but I've also known, uh, the CFO, Lago, for a long time, before he was the CFO at the company. Just, I mean, just growing up, uh, even internally at Sequoia, there's only so much that Doug can say, "Look, go help this person," or, "Go help that person. Go, go make these connections." There's a part of it that just has to be organic.

   14. HSHarry Stebbings20:36

       Okay, so that was one. What, what were the other reasons? Sorry, I interrupted you on why the crossover move.

   15. JWJeff Wang20:40

       Yeah, so I think also having a perspective on these companies from a competitive standpoint also helps us inform public market investing and vice versa, and then we're also able to allocate between publics and privates based on where we see the best opportunities at that specific moment. And so right now, for example, we do not see, for SCGE, as many opportunities in the private markets, and so most of our attention is actually on the public markets. And so we can flex between those depending on where we see the opportunity set. And then I, I'd say one other thing is over the last few years, there have been a lot of tourists, as you know, a lot of tourists, uh, mostly on the hedge fund side who have dabbled in private markets and they've gotten burned. Those tourists are out of the market. We don't see them anymore. And so I do think the crossover market is getting more attractive, and it's getting more attractive as just, one, tourists exit and, two, as the IPO markets open up again.

7. 21:37 – 27:38

   Will Private Markets Overtake Public Markets?

   1. JWJeff Wang21:37

   2. HSHarry Stebbings21:37

      I mean, that's a mic drop. I mean, you could-

   3. JWJeff Wang21:39

      (laughs)

   4. HSHarry Stebbings21:39

      ... you left me, you left me with a lot to go with that. I have to ask, with the crossover in mind, do you think private markets ultimately are gonna compete and overtake public markets when it comes to volume, depth of activity in various asset classes?

   5. JWJeff Wang21:52

      I'm not sure because the public markets are still the biggest... I mean, they're the biggest capital markets. It is freely tradable. Liquidity is important for a lot of institutions. And I do think there is still, for companies, still a big branding event when you go public. I do think there will be value to companies going public. I don't know when some of these big companies that have stayed private for a long time are going to go public. But look, I look at, say, a Klarna. I mean, Sebastian clearly wants to go public. There, there are a lot of reasons for that and, and I think employees want these companies to go public, right? They're excited about it.

   6. HSHarry Stebbings22:31

      I mean, I think he's also doing the most brilliant rebranding with his kind of removal of all software products and customer service products, uh, brilliant founder brand being created there. Uh, are continuation funds helpful or do you think they're just adding to the pre-IPO backlog that we have?

   7. JWJeff Wang22:45

      I'm not sure if continuation funds are a permanent or a cyclical feature, right?

   8. HSHarry Stebbings22:52

      Wow.

   9. JWJeff Wang22:52

      So... Well, so right now, uh, the IPO markets have not been open. We have not gotten a lot of liquidity. I don't know what it looks like when the IPO markets do reopen, and I mean, right now, we are still well, well below, obviously, the 2020, 2021 levels for the IPO markets, but we're also well below the pre-2020, uh, you know, 2021 levels, right? We're below 2019-

   10. HSHarry Stebbings23:15

       Um, Phanip- Phanip Laffont published this kind of IPO data, and it was actually showing that we're actually worse than the financial crisis in terms of number of IPOs.

   11. JWJeff Wang23:23

       Yeah, yeah, so I mean, I think these continuation funds exist, some of them exist today because there's no liquidity, right? And so it's effectively a way to get some of these LPs' liquidity at a time where the IPO markets are shut. I do expect the IPO markets to open, say, back half of this year into next year. We'll see, but, you know, we have a number of companies on file. Sebastian, as you know, has been very vocal about going public. I think there will be a number of other companies that test the public markets, and one of the things that we've seen over the last couple years is that it took a couple years for these companies to right the ship in terms of the financial profile, right? And now a lot of these companies, I think, are ready. They... uh, you know, the, the days of rule 40, you're gone out at 60 negative 20, tho- those are gone. You have to be a 30 and 10, 40 and 0 kind of growing into a, a nice profitability curve in order to get public, and it took a couple years for the companies to get there. It also took a couple years, I think, for a lot of these companies to get to a level of predictability, uh-... of their revenue that, that the public markets expect, right? So if you're coming off COVID, you have all these just weird headwinds, tailwinds to your business that make it really hard to project. And so now, I think we've rolled forward a couple years. The markets are more stable. These companies are more IPO-ready. And so I do think the IPO market will open as, as we look into next year.

   12. HSHarry Stebbings24:55

       Why would you?

   13. JWJeff Wang24:57

       (laughs) Why would you what?

   14. HSHarry Stebbings24:57

       So if you are Starlink, or you're Stripe, or you're any of these great firms, y- you can bluntly finance in private markets for as long as you need to. There is such a supply side if, if you're a great company, and they've shown that. Why would you go public even if you could?

   15. JWJeff Wang25:14

       I think that's kind of the deal that you made with investors and employees. I mean, I don't... Is that-

   16. HSHarry Stebbings25:21

       I don't know. With secondary markets being as, as transactional as they are today, are y- many people are getting secondaries on all of their stakes.

   17. JWJeff Wang25:31

       I think there are a couple companies that can do that. But do you think the $5 billion SaaS company that's a good, it's not maybe the best company in the world can really do that?

   18. HSHarry Stebbings25:43

       No.

   19. JWJeff Wang25:44

       Right? So, like, I think there are maybe a certain set of companies out there that can pull off what you're talking about. But for 99% of the companies out there, I think that's really difficult.

   20. HSHarry Stebbings25:55

       So with this realization actually that right now we see more opportunity in public markets, okay, uh, in your seat, and we're gonna stay away from, like, late-stage privates for now, what does that reshaping, resizing as a portfolio look like in reality then?

   21. JWJeff Wang26:09

       I think it's actually pretty natural and organic for us, because we're, we're at about a third of the portfolio that is private. That is probably more than I wanna be steady state, and that's a function of some of these companies just not going, you know, public in the, in the timeframe that we thought they would. But-

   22. HSHarry Stebbings26:25

       What would you like to be steady state?

   23. JWJeff Wang26:27

       I think closer to 20% to 25% would be more comfortable, 'cause then that gives us an opportunity to add. I think if we are focused primarily on the public markets, is that let's say if we had 50% of the portfolio private, that would feel too illiquid to me. So 20% to 25% feels like a pretty comfortable level.

   24. HSHarry Stebbings26:46

       How do you think about position sizing on a per-company basis?

   25. JWJeff Wang26:49

       We have pretty concentrated portfolio, so about 15 to 20 longs. I wanna make sure that the top longs can really move the portfolio in a major way. And as, as I mentioned, I think the power law still exists in the public markets, obviously, to a lesser extent than, than the private markets. But we want to have the top side of the portfolio be pretty chunky. And so about 15 to 20 longs, about, uh, top five are about 35%, 40% of the portfolio.

   26. HSHarry Stebbings27:18

       Wow.

   27. JWJeff Wang27:18

       So it's pretty meaningful.

   28. HSHarry Stebbings27:19

       Yeah.

   29. JWJeff Wang27:19

       And then what we'd like to do is to, um, you know, have the shorts just essentially fall out of that. Again, it's really how much more conviction do we wanna express on our longs, albeit on the other side? We're not necessarily trying to solve for the short side in a, you know, target a particular gross

8. 27:38 – 36:34

   Navigating Incongruous Long & Short Positions

   1. JWJeff Wang27:38

      or net.

   2. HSHarry Stebbings27:38

      Have you ever had it where both your long and your short were kind of in, in congress? And what I mean by that is, you know, y- if we said, "Hey," I'm just making it up here, totally making it up but staying on this, "I'm going to bet on Shopify and, as a result, I'm gonna short Amazon," and actually, you were right and you were wrong, but you've got e-commerce just grew and both went up.

   3. JWJeff Wang28:05

      So i- it's a really interesting question, and one of the things that... So one of the things that I believe, and this is a, this is a, uh, this is a visualization that I like to give to everyone who joins our team, you have to be a pirate interpreting a treasure map. So we, we need to sail to the right island, and if we get there, f- great. Fir- if we get their first, great. There is a massive amount of buried treasure. But if we're the second ship there, we're also doing pretty well. Even the third ship is gonna do pretty well. So if we get AI right, there will be a lot of good ships. NVIDIA's clearly the best ship today, but a lot of others are doing well also. Now, if we don't sail to the right island, it doesn't really matter which ship you picked. Those are just not good investments. So yes, we wanna pick the best company, but we definitely better pick the right theme. And so for us, 70% of our research process is actually upfront on the theme and only 30% on the a- on the actual company. And so the example that you gave there, I think we'd be, we're positive both Shopify and Amazon. I don't know which is the first ship to get there, but we are positive overall on that theme. And, you know, what we wanna avoid is we wanna avoid some of these themes that I don't think have legs, where companies, whether or not you do a lot of great company analysis, it just doesn't matter.

   4. HSHarry Stebbings29:32

      Okay. What theme did you swim towards in this pirate analogy, which I-

   5. JWJeff Wang29:36

      (laughs)

   6. HSHarry Stebbings29:36

      ... love so much? What theme did you swim towards, plant a flag, and the boat never came to that island?

   7. JWJeff Wang29:42

      Honestly, we, we haven't. We haven't, because I think, one, we spend so much time making sure the theme is actually working. And then two, we have, you know, pretty good, uh, insight from seeing what's happening at Sequoia. Uh, and Doug, Doug liked to say, uh, "You gotta look at what wiggles," right? "And you gotta go hit what wiggles."

   8. HSHarry Stebbings30:06

      What does that mean? Like from a-

   9. JWJeff Wang30:07

      So being able to see what wiggles, be it a company or theme, early, I think is really important, and, and then being able to see is that wiggle becoming a tremor? Is it becoming an earthquake? Is it getting to be more than a wiggle? But if you don't see the wiggle, you could do great analysis, but if you never see the wiggle, you, you're not doing any analysis on anything.

   10. HSHarry Stebbings30:27

       Can I ask you, what did you not see that you should have seen?

   11. JWJeff Wang30:31

       One, one of my bigger regrets and, and one of our bigger losers...... is, um, is in a company called Twilio. So Twilio initially was a very good investment for us and actually ended up being a, a decent investment overall. It could have been a legendary investment. Um, we held on for too long, um, and as competition started to eat away at the business... And we actually saw some signs of it, so gross margin was off a few points here or there, a couple questionable acquisitions, key executive departures. And I think each one of those things you can explain in a vacuum, right? You can pro forma analysis for this gross margin, this specific quarter, or you could say, "This executive left for a really good opportunity." But I think when you take them all together, I think clearly something was a little off. And so again, that's why I think it's important to regularly re- underwrite these investments each quarter and have a discussion with the full investment team. And so again, I think that's where one of the, one of the ones where the devil's advocate, uh, point of view actually was really f- helpful to get a fresh dispassionate perspective.

   12. HSHarry Stebbings31:39

       I actually share your mistake on that one.

   13. JWJeff Wang31:40

       Oh, yeah?

   14. HSHarry Stebbings31:41

       I did the same. Uh, and then everything was good, and then I saw Jeff laugh and I was like, "Right, I fucked it. I'm fucked."

   15. JWJeff Wang31:47

       (laughs)

   16. HSHarry Stebbings31:47

       Uh, like, yep, good, fuck. Uh, there's that moment when you're like, "Ah, bugger, that's the (clicks tongue) final nail," and you're like, "Mm-hmm."

   17. JWJeff Wang31:55

       Yeah.

   18. HSHarry Stebbings31:55

       Uh, it's still hard to sell then. I sold at a loss. Um...

   19. JWJeff Wang32:01

       A loss.

   20. HSHarry Stebbings32:01

       Yeah. Uh, I might have to take that ou-... I don't know if my compliance allows this. I thought your compliance was going to be the pain. My compliance may be harder on this now.

   21. JWJeff Wang32:08

       (laughs)

   22. HSHarry Stebbings32:08

       But like I sold at a loss, but it's still hard to sell. And I remember one of my oldest mentors told me, "Harry, be greedy when others are fearful, and fearful when others are greedy." Very famous saying. Do you buy that?

   23. JWJeff Wang32:23

       I definitely buy that. I think it's really hard to do in practice. I think most people are fearful when other people are fearful, and most people are greedy when other people are greedy. I try to combat that. I mean, you could do... You could try to be as dispassionate as you can and do all these, do all this analysis and try to make sure that... But ultimately, I think the best way to do it is just to be really long term about it. Just really long term, let's not trade all the time. You know, there was that day, uh, I think it was just last month where the Nikkei was down 12% in a day. I mean, we just don't trade those days. You know, you just sit there, try to figure out what's going on, be long term about it, and not overreact.

   24. HSHarry Stebbings33:06

       (coughs)

   25. JWJeff Wang33:06

       I think it's hard in those moments, but it's also hard to act in those moments, right? What, what are you trying to do? You're just running around with your, your head cut off.

   26. HSHarry Stebbings33:14

       Dude, this is why I think private and public at the same time, you're a fricking genius.

   27. JWJeff Wang33:17

       (laughs)

   28. HSHarry Stebbings33:18

       Because Harry sees CrowdStrike, you know, get hit to shit, and I'm like down 20%, still a great business, still love the management team, buy. Next day, legal lawsuits just like doosh, doosh, doosh, down another 20%. I'm like, "Oh." Maybe, maybe timing is important, you know?

   29. JWJeff Wang33:37

       I, I think you'll be right there. I think you'll be right there, by the way, but...

   30. HSHarry Stebbings33:41

       Thank you, I'm still down so I'll keep holding, holding out for that one. Uh, I, I, I absolutely love that. Can I just go back to a really interesting element for me though which is actually the building of the business side?
9. 36:34 – 46:58

   Managing Long-Term Business Planning with Monthly Redemptions

   1. HSHarry Stebbings36:34

      How on earth can anyone plan their business on a long term horizon when you have monthly redemptions?

   2. JWJeff Wang36:39

      I don't think you can. I- I think it's really hard to think about business building if you're making investments and you don't know what your capital base looks like in the next six months.

   3. HSHarry Stebbings36:47

      How does the rest of the business do it then? I'm sorry, I'm just- I don't understand that.

   4. JWJeff Wang36:51

      So, I think that's why most hedge funds fail. It is really hard to go build a- a real business. If you are one of the large hedge funds, like Citadel, you have strong LP relationships, you have lockups, you've- you've got an incredible long-term track record. That makes it a lot easier when you have periods that are not up to your expectations. But if you are a $100 million hedge fund today, you don't know if you're gonna be in business in a year, it's hard to go recruit, it's hard to go spend money and say, "We're gonna go build out a data science team," and you don't know, how much time do I spend on recruiting? How much time do I spend on management, business building, LP, relationships? A- and that's before you get to the investing, right? So I- I think it's very hard. I have a lot of respect for- for folks who are trying to do that. It is not easy. W- we obviously had to do it. And look, there is- there is a bit of- I think for us, one of the things that was most helpful, actually, i- in going through that period, is that Sequoia does a great job of injecting Sequoia DNA while also allowing these individual businesses to grow up in a way that fits their specific area. So, uh, w- Doug and Michael, and I give them a lot of credit for this, the way they set up the various businesses, so SEG, Sequoia China, now Hongsan, Sequoia India, now Peak 15, and Sequoia Heritage, was to give each individual team and set of partners full investment discretion. That's very different. So obviously, we shared brand, administrative functions, office space, leadership. So Doug's on the SEG bo- was on the SEG board, now it's Roelof. And we collaborated closely. But the day-to-day management and investment process is up to that specific team. And I think what it was, was it was a recognition that it is really hard for, uh, an American investor to go make great investment decisions about Chinese startups, right? Similarly, it is very hard for a venture investor to go make great decisions about managing a hedge fund or family office. It's just not what you're spending every minute of every day thinking about. It's also really hard to recruit great talent if you watch over and second-guess every single investment. But that said, there are also many aspects of running a first-class investment firm that do overlap, so for example, hiring the best talent. So instead, what Michael and Doug did was they were heavily and actively involved contributing through leadership and- and mentorship. So, Michael and- and Jim Goetz joined our portfolio reviews for the first several years from inception and helped us refine our investment process every week. Doug and Jim have been critical with LP relationships. Uh, with recruiting, Roelof still recru- interviews all our key hires. Michael's even come with me to meet public company CEO management teams. We've taken multiple international trips together, including several to China. So, it's just, you know, they helped inject Sequoia DNA in a way that was very, very valuable for us.

   5. HSHarry Stebbings39:48

      Mm-hmm.

   6. JWJeff Wang39:48

      Now, when I speak to other VC/PE funds that have reached out to me over the years to get advice about launching a similar effort, they almost never want to give up control. They want to dictate the investing. And I just don't think that's a recipe for success. It's, uh, when the fundamental discipline is so different from- from what they're doing at the core.

   7. HSHarry Stebbings40:11

      There are so many benefits to being tied to such great people and such a great brand. What are the negatives?

   8. JWJeff Wang40:18

      So yes, there are tons of great things. I think the biggest risk for us is being based here in Silicon Valley, you believe everything's gonna happen overnight. Mobile or cloud and now AI are taking over the world. There's just left- leave all this destruction in the wake. And the reality is these things usually happen very fast, but also much more slowly than peak enthusiasm would suggest, right? So as a hedge fund, we're- we're trading off the Wall Street echo chamber for the Silicon Valley venture echo chamber, and that certainly got puts and takes. One thing that we try to do is to, uh, to combat that is to host outside voices to speak on occasion. And so I forget if it was Doug or Roelof organized this, but we organized, for example, Charlie Munger before he passed to come in and talk to the partnership. Uh, we've had tr- Stan Druckenmiller come in and talk to us. They think in a very different way than we do.

   9. HSHarry Stebbings41:16

      And so you're saying the weakness is you can think like a venture investor.

   10. JWJeff Wang41:20

       Well, we get the benefit, right, of seeing things very early on. We get really excited about AI, how it's gonna take over the world. Maybe we put on a short that it's just too early, right? It- it's going to take time for some of these things to actually happen. There are areas within AI where I do think it's ver- happening very fast. I think there's going to be massive disruption, for example, in call centers. And I don't think that's gonna take a lot of time. There are other areas in AI, now, there's this- there's this narrative, uh, that I hear now that software companies are going away, right? AI is gonna write all- all software. And I just think that's a naive view. It may happen, you know, over the long term, but where we've-

   11. HSHarry Stebbings41:59

       Well, I mean, Kar- Kar- Klarna are helping to make that happen.

   12. JWJeff Wang42:01

       Yeah.

   13. HSHarry Stebbings42:02

       I mean, they are-

   14. JWJeff Wang42:02

       Well, look, and Klarna is a very tech-forward company. 99.9% of the companies in the world are not Klarna, right?

   15. HSHarry Stebbings42:09

       Also, by... Seb's gonna kill me for this, but fuck it, I've had him on the show and he can come on the show and argue with me if he wants to. Uh, uh, this is the start of their journey. Good luck doing a Workday competitor.

   16. JWJeff Wang42:20

       Right.

   17. HSHarry Stebbings42:21

       I wish you well.

   18. JWJeff Wang42:22

       Right. Right, right.

   19. HSHarry Stebbings42:23

       So I- I completely agree with you there, but I think there is still a tremen- tremendous amount of room to run. Is Mag7 sustainable? It is carrying so much of this market. Is it sustainable?

   20. JWJeff Wang42:36

       I think it is for some time. So when- when you think about AI today, productization of AI is a function of owning the customer and owning the data.Right? We are not in a world where AI has created a new distribution methodology. And so, if I think about some of the walled gardens like a Meta, you own the customer experience, you own the data, and so your ability to productize and roll out AI features and functionality to Instagram users very seamlessly is incredibly powerful. Because Meta has this auction marketplace for ads, you also have the ability to reprice your AI features very quickly, right? You... everyone, uh, all these merchants are getting a return on their ad spend.

   21. HSHarry Stebbings43:21

       Right.

   22. JWJeff Wang43:21

       And if someone is getting better return on ad spend, the CPMs for these ads go up. So, I think there's a massive moat for some of these largest companies. Now, what I worry about... well, or not, not worry about, but what I think it w- will happen over time is this will start to disperse more broadly, but at least in the initial stages of AI where your data and distribution are so important, I think the Mag 7 will continue to do quite well.

   23. HSHarry Stebbings43:48

       How does Zuck's cash cow, not being cloud, impact his freedom and flexibility to act?

   24. JWJeff Wang43:57

       I, I'd argue that maybe (laughs) he actually has a better cash cow today for AI because you could actually put... he can actually put AI into his products immediately, right? You can roll it out right away. If you are a software company, you can roll it out, then you have to go strike a new contract with your customer, convince them that it's delivering value, and how much you're gonna pay for it.

   25. HSHarry Stebbings44:19

       If you think about Google and Amazon, you've got Google Cloud, cash cow-

   26. JWJeff Wang44:23

       Yeah.

   27. HSHarry Stebbings44:23

       ... app, AWS, cash cow, and then Zuck is like, "Oh, Instagram is the cash cow, actually."

   28. JWJeff Wang44:30

       Yeah.

   29. HSHarry Stebbings44:30

       How does that change how he acts? 'Cause Google and Amazon do also have distribution.

   30. JWJeff Wang44:35

       They have distributio-... so on Google, I'd argue GCP is not the cash cow, right? It's, it's search. And with search, I'm not sure. I, I'm not sure how AI is gonna impact search. Where it is today, AI is really good at taking, uh, low signal data and translating into high value output. So in the case of Meta, taking what you're looking at on Instagram and figuring out, okay, you want to go buy this type of product, that is incredibly valuable. Google's got an incredibly valuable machine in that you type into the Google search bar exactly what you want, right? You type in skiing in Park City, well Guess what? I know you're, you wanna go skiing in Park City. Your intentionality is 100% known at that point for me. Whereas I think for Meta, I think the value of AI is, at least on the ad matching side, I look at a bunch of what you are, uh, browsing on Instagram, and I say, "Okay, Harry wants to go skiing. He hasn't decided yet that he wants to go to Park City, maybe he wants to go to Whistler. How do I then move you in, you know, that path to get you to a different location?" Right? Or maybe you're even earlier on in the funnel and you say, "I just, uh, Harry wants to go on vacation," and maybe you haven't even decide on skiing, maybe you wanna go on, uh, you w- you wanna go to the beach. So, I think AI has a lot of value for that. I'm not sure as much for Google how do you influence, how do you drive a material uplift in search when you have one of the most beautiful businesses out there ever, right? I tell you what I want. You know exactly what I want.
10. 46:58 – 52:50

    AI Integration: Boosting Revenue or Enhancing Customer Experience?

    1. JWJeff Wang46:58

    2. HSHarry Stebbings46:58

       A question that I am perpetually stuck by is will the infusion of AI into products lead to an increase in average revenue per user, or will it just lead to a better customer experience?

    3. JWJeff Wang47:11

       I think it's already delivering incremental ARPU, uh, and I think it'll happen first in companies like Meta, like I said, because you have an auction marketplace, this gets repriced immediately. And so if I look at Meta, we estimate that it's not just delivering revenue. I think it's already delivering about 15 billion of incremental EBIT, EBIT for Meta, right? Just in, in the form of more content recommendation means you have more time on Meta properties, equals more ad inventory, and better ad matching equals higher CPMs. And higher CPMs just, you know, it's straight flow through to the bottom line. So it's, it's beautiful already for Meta. Now, uh, I look at the software companies and I just think it will take more time because you have to go out to your customer and say, "Look, I'm delivering you this value. Here's the data. And when your contract comes up again, we're gonna raise your prices." I- it's just a harder conversation. But what you have seen, even since w- you recorded the pod with, uh, with David, Canva, which you mentioned, has raised prices on its enterprise plan by 3X. 3X. A lot of flow through, I think.

    4. HSHarry Stebbings48:18

       Can I ask, on the infrastructure layer, do you agree with, with David in terms of like the $600 billion question and the divergence between revenue and capex, what, how do you feel about that?

    5. JWJeff Wang48:29

       I do agree with it. Wh- where I share his view is that there is a $600 billion AI problem in the sense that ultimately application companies need to deliver positive ROI from these massive investments. Where I'm probably more optimistic is, is, uh, in the pace that these application companies can actually realize that ROI. We've already talked about Meta, we've already talked about Canva, I think ServiceNow will start to really...... flow through some of the Pro+ price increases later this year and into next year as well. I think you're starting to see the initial hints that AI is gonna come through in terms of, uh, incremental ARPU for a lot of these companies. Now, it's happened probably a little bit more slowly than I would have guessed. I probably would have been more first half this year as opposed to back half this year. But I definitely think you're starting to see it, and I think you're starting to see it because y- you see the features that can be productized and the clarity from other companies. Uh, what I mean by that, so if you look at... W- what Meta has done is really just take what ByteDance has done, right? With the recommendation engine now, like, I'm plugging a bunch of GPUs into it, I'm copying the same thing, and then just rolling it out to my customers. Copilots, I think you will be able to use what you see at GitHub and be able to roll it out across many different companies. Uh, if you look at enterprise semantic search, if you look at case summarization, these are all features that have been proven to deliver ROI, uh, at certain companies, and now you can just pull that into other companies' other products. I think that's gonna deliver value. Now, what I don't know, and this is where I do agree with David, there is a massive amount of capital that's going into not the productization side but the model training research side, right? That is where all of the capital is going.

    6. HSHarry Stebbings50:18

       Larry Ellison yesterday said, "How much do you think it is?" To the audience. "How much do you think it is?" I don't know if you saw this clip.

    7. JWJeff Wang50:25

       Yeah, yeah, I saw that.

    8. HSHarry Stebbings50:26

       And they got up, and then he goes, "100 billion-

    9. JWJeff Wang50:28

       Yeah.

    10. HSHarry Stebbings50:28

        ... just to play the game, just to enter."

    11. JWJeff Wang50:31

        Right. Yeah.

    12. HSHarry Stebbings50:31

        Do you really think that's right?

    13. JWJeff Wang50:33

        I've been surprised at how, uh, the scaling has continued, how just throwing more compute, more data has improved these models. I don't know where that ultimately gets to, but I do think 100 billion, there are not a lot of companies out there that can spend 100 billion. What I do believe is you don't need 10 foundation models out there. I think you need certainly more than one just for the sake of humanity, and I think China will have one. I think the Western world will have at least one. So, maybe there's three to five foundation models in the world. It's not gonna be 10. It's not gonna be 20. Uh, and so I do think that the pool of spend is going to shrink in terms of the number of companies. But the amount that each individual company is going to spend is also gonna go up. So for us, I mean, there is real over-investment risk, I think.

    14. HSHarry Stebbings51:27

        Yeah.

    15. JWJeff Wang51:27

        Um, and so the way that we've decided to invest in AI in the public markets is to... W- we have some investments that are semiconductor or hardware stocks that power AI, but we more so invest in the application companies that over time I think will profitably infuse AI into their products. So, um, if you can buy a nice core business with a call option on an AI, I think that is a very good way to play it. And-

    16. HSHarry Stebbings51:52

        What's an example of that?

    17. JWJeff Wang51:54

        So I think for us, the... ServiceNow is a really interesting way to play it. So it's got obviously a very good underlying core business. And I don't know that ServiceNow has necessarily the biggest opportunity in AI, but it's a very clear opportunity, right? IT ticket deflection is purpose-built for AI, right? I mean, to be able to deflect tickets, to resolve them automatically, that is very clear. That is a very, very clear use case in my mind. I don't know if it will be the biggest use case right now with all the, all the incremental innovation that there is in models. I think coding will obviously, could obviously be a much bigger use case. But in terms of clarity, ServiceNow's opportunity I think is one of the most clear. And so then I'd also argue that over-investment in the semiconductor and foundation model layer actually should accrue to application companies over time in the form of more, better AI capabilities that we can infuse at lower cost.

11. 52:50 – 55:19

    Why NVIDIA’s Price Today is Reasonable

    1. HSHarry Stebbings52:50

       The other thing that I... stuck out to me at Larry Ellison's talk was when he said, "It was me and Elon sitting down-"

    2. JWJeff Wang52:56

       Right.

    3. HSHarry Stebbings52:56

       ... "in Nobu with Jensen, and we were both just trying to buy GPUs." And, you know, your natural takeaway is, holy shit, when you have Larry Ellison and Elon Musk begging a provider, "Please take my money," invest in the provider.

    4. JWJeff Wang53:12

       Right.

    5. HSHarry Stebbings53:14

       (laughs) But NVIDIA's price is so high.

    6. JWJeff Wang53:17

       I think NVIDIA's price is reasonable if you think it's gonna continue to keep going. So NVIDIA trades at, what, 25 times next year earnings? And I think the bigger question is, what does '26 look like? You know hyperscaler CapEx is going up. I think it, it's going up at a rate that is surprising to us. Uh, it's grown, what, 50% year over year this year. I don't know what's gonna grow next year, but is '26 up another? Let's say '25 grows another 30%. Is '26-

    7. HSHarry Stebbings53:44

       I-

    8. JWJeff Wang53:44

       ... up another 30%?

    9. HSHarry Stebbings53:45

       I spoke to one of them the other day who will remain nameless, otherwise I will literally be sued. Uh, (laughs) uh, they were like, "It's like the Manhattan Project, Harry."

    10. JWJeff Wang53:53

        Yeah.

    11. HSHarry Stebbings53:53

        "We can't back out now."

    12. JWJeff Wang53:56

        Right.

    13. HSHarry Stebbings53:56

        So '26 is gonna be higher?

    14. JWJeff Wang53:58

        Is it 30% higher? I mean, 30% higher I think would effectively eat away every single dollar of, uh, Google EBIT.

    15. HSHarry Stebbings54:07

        So what does happen?

    16. JWJeff Wang54:10

        I think it's a great question. I think it's a great question.

    17. HSHarry Stebbings54:12

        But you're, you're much more, you're much more educated than me, Jeff. (laughs) I promise you.

    18. JWJeff Wang54:16

        No, uh, this is where being a hedge fund is actually helpful for investing in something like AI. So we can invest obviously, as I mentioned, in the application companies, but the way we invest in the semiconductor hardware companies is, we can be long NVIDIA because I do think NVIDIA is... has the best position. And whether or not NVIDIA has 100% market share in, you know, three years like it does today, I don't know, but it will still have very, very good market share. And so if you believe the market is growing, and I don't know if data center, you know, GPU spend is 100 billion or 200 or 300 billion, but we can go long NVIDIA and then we can short a bunch of the companies that I think don't have the depth of moats that NVIDIA has. So if you think about some of these server hardware companies, for example, where I think they're gonna get beat up on gross margins because...You know, NVIDIA now has a reference design. You have a smaller shrinking pool of customers that are getting more sophisticated. They're gonna- that are gonna do their own server design. So, that's how we've chosen to play, um, AI and I do think there is over-investment risk, but we can be hedged on that.

12. 55:19 – 57:59

    Exploring Infrastructure & Data Center Deployment

    1. JWJeff Wang55:19

    2. HSHarry Stebbings55:19

       Have you gone into the infrastructure establishment category? Uh, I talked about it with David Cohn on the show.

    3. JWJeff Wang55:25

       Yeah.

    4. HSHarry Stebbings55:25

       He called it steel servers and-

    5. JWJeff Wang55:28

       Yep, yep.

    6. HSHarry Stebbings55:29

       ... whatever David would call it.

    7. JWJeff Wang55:31

       Yeah.

    8. HSHarry Stebbings55:31

       Brilliant trio. Um-

    9. JWJeff Wang55:33

       Brilliant alliteration.

    10. HSHarry Stebbings55:34

        But if ... Yeah, yeah. Have- have you-

    11. JWJeff Wang55:35

        Yeah.

    12. HSHarry Stebbings55:35

        ... gone into really the data center deployment space?

    13. JWJeff Wang55:39

        You know, we haven't because I don't know that these ultimately are better businesses, uh, after, right? So, what you know now is that there's an incredible amount of demand. That demand is growing at very high levels. But if I'm talking about a power electronics company or a company- a construction company that builds data centers, let- let's say- let's say there's incredible growth over the next two years. That's gonna attract incremental competition. Are these really great sustainable businesses with deep moats? I think they're okay businesses. I- I think the stocks may work over the next two years, but in year two or three do I still wanna own them? And- and I just wanna think about these things as a long-term investor. I don't wanna be trading in and out of stocks, uh, as- as quickly as- as I can.

    14. HSHarry Stebbings56:30

        Can I ask, you've mentioned, um, Klarna several times, and Seb is an incredible entrepreneur. Everyone is beating the crap outta Europe right now. Degrowth, no growth, uh, unbelievable regulation. How do you think about the long-term prospects of Europe and how you think about resource allocation? Does Europe even matter?

    15. JWJeff Wang56:49

        That's a great question. For Klarna, I think Europe matters but is incrementally mattering less because they have broadened the business. They did a terrific job of expanding the business into the US and other markets.

    16. HSHarry Stebbings57:04

        Amazingly so. I mean, that is, you know, Revolut tried, Monzo tried, like, different products completely. But that is a very hard expansion.

    17. JWJeff Wang57:11

        I think for Klarna it matters less. But I do think if you are- if you are any company that can go global, you start in Europe, Europe is a very nice prize, but I think the best companies will want to go global and they want to go after the US opportunity. It is- you know, the US is still probably- it- it is the largest opportunity for software companies. It's probably the largest opportunity for fintech companies. You know, if I look at most software companies, you're probably two thirds kinda US/Canada in terms of revenue contribution and then one third everything else. So, you know, you- you have to succeed in Europe if you, you know, start out there, you're a European company. But man, the US, you know, is a pretty big

13. 57:59 – 59:41

    Concerns About Deglobalization & Its Impact on Investment Strategy

    1. JWJeff Wang57:59

       prize.

    2. HSHarry Stebbings58:00

       Do you worry that we're gonna go through a period of de-globalization? I worry about this intensely, which is like we've spent the last few decades obviously globalizing incredibly well and now we are more insular than ever before it seems.

    3. JWJeff Wang58:13

       I think it's already happened, right? It's already happened.

    4. HSHarry Stebbings58:17

       Does- does that impact how you invest?

    5. JWJeff Wang58:19

       I think it has to. It is- it has been more difficult for us, uh, to say invest in Chinese companies. And it's not just the macro, right? It's- it's these companies have been- become less transparent with us over time. Um, we know we appreciate less what's going on internally. So I- I- I think about a company like PDD. I think it's a great company. I- I don't know what's happening there in terms of why they decide to, you know, tank the stock because everything that we see on the ground is still very positive for PDD. And so those things I think do give me pause in terms of just not appreciating what's going on internally in those businesses.

    6. HSHarry Stebbings59:05

       Will China recover, do you think?

    7. JWJeff Wang59:07

       It has to. I mean, the level of just pure entrepreneurship, the level of just the founder quality, how smart and aggressive they are, it's just remarkable. And I just don't think that goes away. I mean, if you look at-

    8. HSHarry Stebbings59:22

       It doesn't, but under the current administration, that has clearly dissipated when you saw the net new company creation in the graph.

    9. JWJeff Wang59:30

       Sure.

    10. HSHarry Stebbings59:31

        It's destroyed.

    11. JWJeff Wang59:32

        But I think the best Chinese companies, like the best European companies, will also go glob- global. So PDD has gone global. Shein has gone global.

14. 59:41 – 1:01:02

    India's Promise: A Long-Awaited Opportunity

    1. JWJeff Wang59:41

    2. HSHarry Stebbings59:41

       Final one and then I promise we'll do a quick fire. Uh, everyone's so jacked up about India these days. India's kind of a bit like Europe in my mind, which everyone's kind of always going, "Now's the time."

    3. JWJeff Wang59:51

       Yeah.

    4. HSHarry Stebbings59:51

       "Now's the- wait for it, wait for it." And we're still waiting.

    5. JWJeff Wang59:55

       I'm optimistic. Overall, the market, it- it- it's- what it- what it has created is it's created great consumer companies, great financials companies. I think what we haven't yet seen is great technology companies, in part because some of the best technology founders come to the US. But I'm optimistic. I just- I just, uh, caught up with a couple of the GPs on, uh, the Peak 15 team last week and I think what they're seeing on the ground, I mean, I've been impressed, for example, by what Zomato has done, right? Zomato, I thought, right, like the- the stock price chart there is incredible. And to be able to, uh, go from the level of burn that they were doing, you know, early on to now really turning that into a profitable business, I think one of the things that we've seen in India is that that brutal level of competition that you saw, actually i- in the US right too, you saw in the US in the zero interest rate environment, that has subsided in India as well. And so that's allowed companies like a Zomato just to become more profitable, better businesses.

15. 1:01:02 – 1:06:47

    Lessons from Working with Doug Leone, Mike Moritz, and Roelof Botha

    1. JWJeff Wang1:01:02

    2. HSHarry Stebbings1:01:02

       You have had the chance to work with Doug, with Mike-

    3. JWJeff Wang1:01:06

       Yeah.

    4. HSHarry Stebbings1:01:06

       ... with Rodolphe, before we do the quick fire-

    5. JWJeff Wang1:01:08

       Yeah.

    6. HSHarry Stebbings1:01:09

       ... what is your single biggest lesson-

    7. ... from working with Doug?

    8. JWJeff Wang1:01:12

       With Doug, fir- first of all, Doug's an incredible human being. So he's so good at building trust. He's always generous with his time. I can get him on the phone no matter what continent he's on. He's traveled the world with me to meet with LPs, so I can tell you what Doug likes to eat in every city. If you get him to Boston, he will absolutely crush cherrystone clams.

    9. HSHarry Stebbings1:01:32

       (laughs)

    10. JWJeff Wang1:01:32

        He's just someone that you want to go with war, to war with on their side. Second, uh, Doug has what he calls a great sniffer. He has, uh, the, just incredible commercial instinct. Uh, you've, you've heard him say he likes to listen with his Dumbo ears. He's always listening out and keeping those ears open, looking for what's working and connecting the dots. Doug is exceptional at that. For Michael, I'd say Michael has super powers that I will never possess. He's got an incredible nose for talent. He's a terrific communicator. He's even an accomplished painter now. So one thing that I've learned from him is to borrow his super powers as opposed to trying to develop them on my own, right? Which is really a lesson in teamwork, except that Michael's the star player at almost every position on the team. Michael still helps me write my quarterly letters to this day. I recall flying out to Ottawa to meet, uh, Tobi at Shopify with him. And Michael walks out of that meeting and just says, "Look, Jeff, just squat in that investment and just set an alert for yourself if Tobi ever gets hit by a bus."

    11. HSHarry Stebbings1:02:37

        (laughs)

    12. JWJeff Wang1:02:37

        Right? And just so his, his nose for talent, I can borrow. The second, I'll tell you a quick story here, i- is really-

    13. HSHarry Stebbings1:02:43

        Who's got a better nose for talent, Mike or Doug?

    14. JWJeff Wang1:02:45

        I think Doug probably has a better nose for enterprise talent and Michael for consumer talent.

    15. HSHarry Stebbings1:02:50

        Good hage. (laughs)

    16. JWJeff Wang1:02:53

        (laughs)

    17. HSHarry Stebbings1:02:54

        Um, okay. Totally. Sorry, I interrupted you.

    18. JWJeff Wang1:02:56

        So quick story about Michael, um, and an important lesson that he taught me somewhat indirectly. So when I joined SCGE, obviously I had the interview with Michael. It was intimidating interview. So Michael back then had an office where he actually literally had the wall and door removed from one side. So three s- three walls, but one, one opens up to the entire floor. So I think he meant it as the ultimate open door policy. So some people have an open door policy. He had an open wall policy, right?

    19. HSHarry Stebbings1:03:27

        (laughs)

    20. JWJeff Wang1:03:27

        But that meant that everyone on the floor could hear everything that was said in his office, so i.e. my entire interview. So I walk in. I'm in my suit. Michael's peering over my resume. And the first thing he says to me... A- and by the way, don't forget that the only thing that I've done up to this point is really technology buyouts. So he says to me, "Do you think private equity has poisoned you?" Yikes, right? Like, the, the, the interview did not go well. So I tried to answer the best I could, but it was not a good start. And I'm sure that people around th- his office within earshot were cringing for me. So-

    21. HSHarry Stebbings1:04:03

        What did you answer?

    22. JWJeff Wang1:04:05

        I don't remember. I don't think it was a good answer because I had to interview with Michael again. Um, but I, I think his point, and it took me a couple years to understand it, was that just staring at the numbers isn't enough, right? Too much focus on EBITDA multiples or financial leverage isn't healthy. You have to have the dream gene, and you have to be able to dream about what a founder or company, a team can become over time, and it's just not static. And so I deeply appreciate that lesson, and I'm not even sure that he intended it to be a lesson.

    23. HSHarry Stebbings1:04:36

        Final one, Roelof.

    24. JWJeff Wang1:04:37

        Yeah.

    25. HSHarry Stebbings1:04:37

        What have you learned from Roelof? Now he's joined your board and replaced Doug in that position.

    26. JWJeff Wang1:04:42

        Yep. So I'd say I love how Roelof has forged a new path to take Sequoia into the next 50 years. So first, it's not easy to transition from great investor to great leader, as you know. It's also not easy to take over for a legend like Doug, right? So Doug led the firm from 2012 to 2022. The venture world was very different back then. And so Roelof led the development of the Scouts program. He supported the product team, data science team, ARK. The Sequoia Capital Fund is a good example of his long-term thinking. I'm also impressed by how focused he is on, uh, team and culture. So at our semi-annual, uh, what we used to call these steward council meetings, so it's like a management group, uh, we'd provide business updates to each other. So everyone else, incl- myself included, would come in with these long PowerPoint presentations. But Roelof would walk in with this two-page Word document, right? And s- yet somehow, he always put the most thought into the talents of both the investors and the functional leaders on his team and how to put them in the best position to succeed. And then at, at events like our holiday party where he makes a speech every year, he makes it a point to remember every single person within all of Sequoia who had a baby that year and the name of their child. He memorizes it, no cards. He's also super comfortable with the process of becoming excellent. So, um, the idea that it takes time, obviously that applies to Sequoia, but he just... It doesn't happen overnight. He doesn't get frustrated by it. And so, uh, uh, you know, Sequoia and all the initiatives, but also applies to his personal life. So I- I've obviously got to know him a little bit personally, played ping pong with him, pickleball with him, golf with him. We golfed actually just last week. I've been playing the game for a lot longer than he has, Harry. As you probably know, it is a tough game. He, he is frustrating, but he does not get frustrated. And I think it's because he's hyper-focused on that process of improvement. It's everything he does. It's from investing to pickleball, from leadership to golf. So it's... It's frustrating that he doesn't

16. 1:06:47 – 1:15:07

    Quick-Fire Round

    1. JWJeff Wang1:06:47

       get frustrated.

    2. HSHarry Stebbings1:06:48

       I want to do a quick fire with you, Jeff.

    3. JWJeff Wang1:06:49

       Yeah.

    4. HSHarry Stebbings1:06:50

       I can talk to you all day. What do you believe that most around you disbelieve?

    5. JWJeff Wang1:06:54

       I think that optionality is the most expensive thing you can buy. So both financial options, but also more importantly life options. So too many young people spend too much effort focused on preserving optionality in lieu of actually making decisions. So I find this problem to be most acute the more accomplished you are because your talent opens so many doors.... and, and a lot of folks just waste too much time and effort keeping those doors open as opposed to just choosing one to walk through.

    6. HSHarry Stebbings1:07:21

       Honestly, I had tunnel vision on being a VC since I was 13, and I'm so grateful for that because it was almost like there was no-

    7. JWJeff Wang1:07:27

       Yeah.

    8. HSHarry Stebbings1:07:27

       ... other option. (laughs) Um-

    9. JWJeff Wang1:07:29

       Well, it's worked out for you.

    10. HSHarry Stebbings1:07:32

        So far, I can't complain. Which venture investor or investor do you most respect and learn from outside of Sequoia?

    11. JWJeff Wang1:07:39

        I think on the venture side, I'd probably say Brad at Altimeter. Um, he's also got the public private strategy. I think he's a little bit heavier than us on the private side. But I love the way that he can connect dots across stage, industry, especially because he will go pretty early sometimes. And I think that flexibility of mindset is impressive.

    12. HSHarry Stebbings1:07:59

        I actually spoke to him before this show.

    13. JWJeff Wang1:08:01

        Oh, really? Wow.

    14. HSHarry Stebbings1:08:02

        Yeah. 'Cause I was like, right, who does private crossover that comes straight to mind, right? Brad. (laughs)

    15. JWJeff Wang1:08:07

        Yeah.

    16. HSHarry Stebbings1:08:07

        I- I go Jeff on, uh, he was very helpful. What's been the most challenging moment in the SCG journey other than the 2016 transition?

    17. JWJeff Wang1:08:16

        Nothing comes close to the 2016 transition, but certainly there are moments in time where, you know, performance is down. You question your process. What could we do better?

    18. HSHarry Stebbings1:08:24

        How do you not let a bad year hit your confidence and your investing mindset?

    19. JWJeff Wang1:08:31

        I think the only thing that you can do is focus on the long term. I mean, a bad year will happen. Um, we've, we're fortunate to only have had one down year, but man, that was a tough year. It was tough-

    20. HSHarry Stebbings1:08:42

        Which year was it?

    21. JWJeff Wang1:08:44

        ... 2022.

    22. HSHarry Stebbings1:08:45

        How do you rally a team in a down year?

    23. JWJeff Wang1:08:47

        It's really hard, right? Uh, uh, uh, you know, I think... So we do these surveys, uh, every, I think, uh, it's every six months, just to get a sense for how the... And they're anonymous, for how the team is doing. And man, the, you know, the initial, uh, I'd say right post-COVID, the surveys were very positive. You know, everyone was super happy. You know, everyone's feeling fulfilled. They're doing good work. And then y- you can see the surveys just getting worse and worse. And then in 2022, they're just downright awful. And I think one of the things that I've learned is that your mentality is so dictated by performance, and that's just... You can't, you can't live that way, right? You can't manage your business that way. You can't actually go make decisions that way. You have to ha- stay even keeled and say, like, "What is, what about my process is not working? Let me go fix that." But if you're, i- i- you know, and this is, this is the discussion about greed when, you know, you're, others are greedy. Fear when others are fearful, right? If you actually let that impact you in that way, you are going to make the wrong decisions. And so I think those surveys are actually quite helpful because it gives you a sense for the team's mindset and how it's impact... You could probably almost draw a line on, you know, the NASDAQ and the team survey.

    24. HSHarry Stebbings1:10:05

        The heaviest things in life are not iron or gold, but unmade decisions. What unmade decision rests on you most significantly?

    25. JWJeff Wang1:10:15

        Probably not taking Google more seriously. So I was at Stanford at the time of its founding. Uh, I was even a section leader for Marissa Mayer, uh, for a computer science class where she was a lecturer. And, and so I heard about it from her too, and I just thought to myself, "Have you heard of Yahoo? Have you heard of Infoseek?" You know, and, and so it's a good lesson in just not underestimating the disruption that can occur, especially early on in an industry's development.

    26. HSHarry Stebbings1:10:42

        How important is it to be the first?

    27. JWJeff Wang1:10:44

        I don't know it's, that it's that important. I think it's important to be early. But if I think about the public markets, we're talking about not years, but months, right? If you were... Because the public markets price something so quickly. If you figured out last year that hyperscaler CapEx was going to explode upwards and you're gonna buy a lot of GPUs, you could own NVIDIA at any point, you know, last year or even this year, and you will have made money, and you will have made very good money. So I, I think it's not important to be first, but it's important to be early. And again, it's months, not years.

    28. HSHarry Stebbings1:11:17

        Have you ever seen a technology environment like this before?

    29. JWJeff Wang1:11:20

        Yeah, it happens all the time. I mean, there's always, there's always a lot of enthusiasm. I, I'd say technology-

    30. HSHarry Stebbings1:11:27

        But you've never seen the explosion of CapEx. You've never seen-

Episode duration: 1:15:07