The guest
Bill Gurley: General partner at Benchmark for 20+ years (eBay, Uber, OpenTable, GrubHub, Stitch Fix, Zillow); former top-ranked Wall Street sell-side analyst at Credit Suisse First Boston; trustee at the Santa Fe Institute.
What this episode covers
Bill Gurley walks Tim Ferriss through the frameworks behind his venture career, from Michael Porter's Competitive Strategy to network effects and return-on-invested-capital analysis that made his name covering Dell. He recounts his biggest mistake (passing on Google in 2002), how Benchmark's equal partnership and 'what could go right?' mindset shape decisions, and how he learned to ignore conservative TAM estimates on OpenTable and Uber. A major segment dissects open source as a 'defensive corporate strategy' (Android, Kubernetes, Open Compute) and the 2022 valuation reset, explaining why Silicon Valley's mental models built during a 13-year bull run must be unlearned. He closes with strong views on Bezos and Tobi Lutke, anti-tribalism, and regulatory capture as a threat where capitalism and democracy may eventually destroy one another.
Recommended on this episode
BookRecommendedISBN verified
Competitive Strategy: Techniques for Analyzing Industries and Competitors
Michael Porter
“I would say 80 percent or 90 percent of the entrepreneurs I meet would benefit greatly by reading the first three chapters of this book”
“Michael Porter's book Competitive Strategy: Techniques for Analyzing Industries and Competitors, which you have described I believe as the most efficient short-form MBA”— Tim Ferriss
BookRecommendedISBN verified
The Rational Optimist
Matt Ridley
“they're just fantastic and spectacular. They're much higher level, but they're really, really good.”
“I think Ridley's two books, The Rational Optimist and How Innovation Works, they're just fantastic and spectacular.”— Bill Gurley
BookRecommendedISBN verified
How Innovation Works
Matt Ridley
“they're just fantastic and spectacular. They're much higher level, but they're really, really good.”
“I think Ridley's two books, The Rational Optimist and How Innovation Works, they're just fantastic and spectacular.”— Bill Gurley
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The Innovator's Dilemma
Clayton Christensen
“which does an amazing job of describing why startups can compete with big companies. Amazing.”
“I would put as next level right on top of Competitive Strategy or Innovator's Dilemma, which does an amazing job of describing why startups can compete with big companies. Amazing.”— Bill Gurley
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Crossing the Chasm
Geoffrey Moore
“which does a really good job of explaining how a startup should kind of sequence their customer base as they grow. And they're both fundamental.”
“And Crossing the Chasm, which does a really good job of explaining how a startup should kind of sequence their customer base as they grow. And they're both fundamental.”— Bill Gurley
BookRecommended
Startup: A Silicon Valley Adventure
Jerry Kaplan
“There's a book I love called Startup by Kaplan. ... Yeah, it's just fantastic.”
“There's a book I love called Startup by Kaplan.”— Bill Gurley
BookRecommended
Build
Tony Fadell
“And on Tony, I'd read his new book, Build.”
“And on Tony, I'd read his new book, Build. ... And it's got a lot of frameworks, and you can agree with them or not agree with them.”— Bill Gurley
BookRecommendedISBN verified
Shoe Dog
Phil Knight
“I would mention Shoe Dog. ... it's good to see the tenacity you need.”
“I would mention Shoe Dog. ... it's good to see the tenacity you need. This is the Phil Knight Nike book, but the tenacity you need to make it is high.”— Bill Gurley
BookRecommendedISBN verified
Open
Andre Agassi
“the autobiography of Agassi, which is another spectacular book.”
“the same person who did Open, the autobiography of Agassi, which is another spectacular book.”— Tim Ferriss
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Snow Crash
Neal Stephenson
“Thought it was the best thing that I had ever consumed. And I was in hook, line, and sinker.”
“years ago, I read Snow Crash when it came out. ... Thought it was the best thing that I had ever consumed. And I was in hook, line, and sinker.”— Bill Gurley
BookRecommended
Complexity
Mitchell Waldrop
“The first one that I've gifted the most is called Complexity by Mitchell Waldrop ... It's beautifully written. Great writer, Mr. Waldrop.”
“The first one that I've gifted the most is called Complexity by Mitchell Waldrop, which is about the rise of the Santa Fe Institute.”— Bill Gurley
BookRecommendedISBN verified
Mr. China
Tim Clissold
“This book, Mr. China is fantastic.”
“This book, Mr. China is fantastic. He went to China in the mid '90s and started a fund to privatize a bunch of industries.”— Bill Gurley
BookRecommendedISBN verified
Range: Why Generalists Triumph in a Specialized World
David Epstein
“the book that I've been fascinated with the past five years, four or five years is Epstein's Range.”
“the book that I've been fascinated with the past five years, four or five years is Epstein's Range. David Epstein wrote a book called Range”— Bill Gurley
BookRecommendedISBN verified
The Sports Gene: Inside the Science of Extraordinary Athletic Performance
David Epstein
“Inside the Science of Extraordinary Athletic Performance, which is a great book.”
“another book, which is The Sports Gene. ... Inside the Science of Extraordinary Athletic Performance, which is a great book.”— Tim Ferriss
MediaRecommended
General Magic (documentary)
“you should probably also simultaneously watch the General Magic documentary.”
“you should probably also simultaneously watch the General Magic documentary. ... Because they were a competitor with GO”— Bill Gurley
BookRecommendedISBN verified
The Cathedral and the Bazaar
Eric S. Raymond
“There's a great piece of writing, an incredible piece of writing called The Cathedral and the Bazaar”
“There's a great piece of writing, an incredible piece of writing called The Cathedral and the Bazaar that was the first kind of magnum opus on why this open source thing might work.”— Bill Gurley
ProductRecommended
Shop (app)
Shopify
“I thought what they did with the shop app was super cool. ... I thought it was just super cool that they pulled that off.”
“I thought what they did with the shop app was super cool. ... websites I'd never been to before, knew who I was and allowed one click checkout.”— Bill Gurley
ProductRecommended
Techmeme
“Oh, yeah, it's great. ... Yeah, it's really well done. In the industry, I go there.”
“There's a website called Techmeme where Gabe has this curated news rank, including Twitter comments people have made about that article.”— Bill Gurley
MediaRecommended
Eric Newcomer (venture capital Substack)
Eric Newcomer
“that's something to follow”
“Eric Newcomer does a venture capital Substack. And so just being in the industry, that's something to follow.”— Bill Gurley
ProductRecommended
Spotify
“that's one of the benefits of Spotify as a podcast listener, I think it cues and organizes easier than some of the others”
“that's one of the benefits of Spotify as a podcast listener, I think it cues and organizes easier than some of the others.”— Bill Gurley
Also referenced (named, not recommended)
BookReferencedISBN verified
One Up On Wall Street
Peter Lynch
“You can go through all the Buffett letters as an example. You can read Peter Lynch's One Up On Wall Street.”— Bill Gurley
BookReferencedISBN verified
A Random Walk Down Wall Street
Burton Malkiel
“A Random Walk Down Wall Street by Burton Malkiel. And then you build your bedrock and then you're out there and you're looking for an opportunity.”— Bill Gurley
BookReferenced
Think Twice: Harnessing the Power of Counterintuition
Michael J. Mauboussin
“Did he write a book called Think Twice: Harnessing the Power of Counterintuition, or is that a different Michael?”— Tim Ferriss
BookReferencedISBN verified
Valuation
McKinsey
“McKinsey had a book called Valuation, they still do, that uses this type of analysis.”— Bill Gurley
BookReferencedISBN verified
Spare
Prince Harry
“And apparently the new Harry book that I — ... J.D. Moehringer, yeah, yeah. He's fantastic.”— Bill Gurley
BookReferencedISBN verified
Ready Player One
Ernest Cline
“it reminds you that both Snow Crash and Ready Player One were dystopian novels, right?”— Bill Gurley
BookReferencedISBN verified
Red Notice
Bill Browder
“It sounds kind of like the Red Notice by Bill Browder equivalent, but in China.”— Tim Ferriss
BookReferencedISBN verified
Thinking, Fast and Slow
Daniel Kahneman
“All the books that have been written on bias and all the Kahneman [inaudible] and Thinking, Fast and Slow, and all the Nobel prizes for that stuff.”— Bill Gurley
MediaReferenced
Jodorowsky's Dune (documentary)
“It's like the Jodorowsky's Dune where Giger, who went on to create the iconic design for Alien and Aliens.”— Tim Ferriss
ProductReferenced
WordPress
Automattic
“Matt, who's been on the show multiple times, was a lead developer of WordPress, very familiar with open source”— Tim Ferriss
ProductReferenced
Palm Pilot
Palm
“this was around the time where the Palm Pilot launched. And so in the lobby of the conference was they were selling them.”— Bill Gurley
ProductReferenced
Linux
“Linux being the most well known. It's over 20 years old now. It's clearly the most used operating system in the world.”— Bill Gurley
ProductReferenced
MySQL
“MySQL is an example. Google and Yahoo were two of the biggest customers, never paid us a penny.”— Bill Gurley
ProductReferenced
MongoDB
“we started to see that in MySQL and there've been others like MongoDB and we're in one called Elastic”— Bill Gurley
ProductReferenced
Elastic
“there've been others like MongoDB and we're in one called Elastic and there've been a lot of successful companies around single software frameworks.”— Bill Gurley
ProductReferenced
Android
“So the most well known is probably Android. So Apple had come out with this smartphone, you could only get it on AT&T.”— Bill Gurley
ProductReferenced
Kubernetes
“they had a piece of technology called Kubernetes, and this was right around when Docker and containerization took off”— Bill Gurley
ProductReferenced
Docker
“this was right around when Docker and containerization took off, and Kubernetes was an orchestration layer for containers.”— Bill Gurley
ProductReferenced
AWS
Amazon
“Google was very afraid of Amazon running away with the cloud services business in AWS.”— Bill Gurley
ProductReferenced
RISC-V
“There's something called RISC-V, which is an open source processor, believe it or not, that has a lot of momentum now.”— Bill Gurley
ProductReferenced
Zoom
“Zoom obviously has massive network effects. So we started looking for those things because they tend to cause outlier outcomes.”— Bill Gurley
ProductReferenced
Microsoft Word
Microsoft
“And Brian talked about things just like the Microsoft UIs. You know how Word works, you get comfortable with how it works”— Bill Gurley
ProductReferenced
Snowflake
“you look at something like Snowflake. People just say, "This database does things no other database will do,"”— Bill Gurley
ProductReferenced
Second Life
Linden Lab
“so when Philip Rosedale started Second Life, I was knocking on his door. I served on that board for 12 years.”— Bill Gurley
Big reveals from this episode
- Gurley calls passing on Google in 2002 'the biggest mistake of my career', Benchmark never even chased the deal despite the asymmetric upside where you can lose 1x but make 10,000x.
- The ROIC framework borrowed from food analyst Michael Mauboussin revealed Dell's massive competitive advantage; Gurley went to a strong buy on a broken stock trading at six times earnings and it rose 100x.
- On OpenTable, a CFO quit because his model froze city penetration at 17%; Gurley insisted network effects would drive it to 99%, and one salesperson eventually closed 35 restaurants in a month in saturated San Francisco.
- Gurley frames open source as 'defensive corporate strategy', Android against Apple, Kubernetes against Amazon's AWS lock-in, and Facebook's Open Compute to commoditize hardware suppliers and avoid IP holdup.
- His spring 2022 tweet thread warned that an entire generation built valuation views during a 13-year bull run; the 'unlearning' would be painful, prior all-time highs are irrelevant, and 10x revenue should be an upper limit.
- Gurley says Meta's metaverse premise is wrong, if they shut down the VR effort (which burns $5-10 billion a year), the stock would double; he served on Second Life's board for 12 years and found immersive worlds appeal mainly to escapists.
- Gurley reveals he's writing a book on dream jobs, citing research that 70% of people have career regret, built from studying Bobby Knight, Bob Dylan, and restaurateur Danny Meyer.
- He recounts that getting a first meeting with a congressman required gathering 15 people each writing maximum donation checks, roughly $100,000, and says this happened to him three times.
Worth remembering
- Gurley's career-defining hack: at Stewart Alsop's Agenda conference he bought a $200-300 Palm Pilot preloaded with every attendee's contacts (~70 cents a name) and spammed his newsletter to the 400-500 most important people in tech.
- Benchmark was founded as an equal partnership, new partners get an equal seat and the pie is divided evenly, which Gurley credits for everyone's voice being heard and partners rooting for one another.
- The average window from meeting a company to closing a Benchmark investment is under 60 days, possibly closer to three weeks.
- The Linux Foundation acts as a nonprofit steward for open source projects, pulling in patents for defense; Gurley notes Linux 'has been a DAO for 25 years.'
- Twilio went from 70 times gross margin to three in a very short window during the valuation reset.
- NYU professor Aswath Damodaran argued Uber wouldn't be worth more than ~$2-3 billion; Gurley's rebuttal 'How to Miss by a Mile' noted Uber in San Francisco was already 20x bigger than the city's taxi market.
- McKinsey was once hired to calculate the global market for mobile phones and came back with 900,000 units.
- Tobi Lutke's meeting rule: when solving a problem, the status quo is off the table, you cannot leave the room choosing what you're currently doing.
- On anti-tribalism, Gurley argues George Floyd's death wouldn't have happened if the police union hadn't protected Derek Chauvin, who would otherwise have been off the force.
- Five industrialized nations have instant bank transfers (UK Faster Payments launched ~17 years ago) while US ACH still takes three days; FedNow has been blocked for a decade due to bank and Visa power.
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