MIKE GREEN: The market is no longer the market as people think about it. There are exploitable phenomenon, but it requires a complete rethinking of how you approach the problems.

JOSH WOLFE: The skill level is rising, and so the variation between investors is increasingly attributed to luck. Then, like you say, the undulating landscape changes and suddenly the game that you thought you were playing, you're no longer playing. Something like 95% of companies that are now reporting non-GAAP earnings, they're making up funny metrics. Now, we saw this in WeWork on the private side when you had community adjusted EBITDA, Tesla is like ground zero of like ridiculous terms like, what are delivery sales? What does that actually mean? There's a lot of companies that are just using funny language because in a bull market, people are less scrutinizing and so I think that's really a ripe situation where you have lots of non-GAAP accounting terms that are signifiers of risk.

ED HARRISON: Hi, Ed Harrison here for Real Vision. Now, in today's interview, we have two Real Vision favorites. We're going to have Mike Green interviewing Josh Wolfe. They're going to be talking about elevated valuations in the private markets, but they're also going to be talking about public markets as well. With the liquidity risk that comes alongside private equity and passive indexation to wide ranging conversation that addresses politics, the labor markets, Tesla, and what they call the first mover disadvantage, it all makes for a fascinating conversation that you won't want to miss. Enjoy.

MIKE GREEN: Well, you can tell by the smile on my face, I'm happy to be here. I'm sitting down with one of my best friends, Josh Wolfe, so excited to be back here in New York and chatting with you. Welcome back to Real Vision.

JOSH WOLFE: Symmetrical happiness. Always thrilled to be with you.

MIKE GREEN: Every time you come on the show, we get to talk about a new success. Last time, we talked about the magic. You were so excited about CTRL-labs, and pushed you on the idea that maybe you were falling in love with something and where's my sales commission?

JOSH WOLFE: Man, we got to do these interviews more often. It's been a streak of good luck.

MIKE GREEN: With CTRL-labs, now, you sold it to Facebook. Remind people what CTRL-labs is, remind me why you're begrudging in the sale. What do you think Facebook wants to do with something like this?

JOSH WOLFE: The thesis behind CTRL-labs which led to three nights of sleepless nights in pursuit of this entrepreneur, Thomas Reardon and Patrick Kaifosh, his co-founder, was premised with this intercepting phenomenon that I call these two arrows, one of inevitability, and one of the perception of the impossibility. Inevitability is this directional arrow of progress where it doesn't necessarily tell you who the entrepreneur is or what the company is but there's this inevitable high probability that this is the way that technology is trending. The impossibility is when everybody else in the field, peer VCs, just don't see it. They think, oh, that'll never work. It's impossible. Impossibility ends up dictating low prices or less competition and inevitability raises our confidence and conviction.

In this case, the arrow of progress, the inevitable, was the idea that something we call the half-life of technology intimacy. This buzzword that we coined but basically 50 years ago, you had a giant ENIAC computer, you physically went up and pulled some plugs and buttons. First half-life, 25 years ago, you have a personal computer and you're tickling the keys, you're touching the monitor, you're flipping the power switch on the back. 12 and a quarter years ago, the next half-life, you have a laptop, physically touching your thighs, becoming a little bit more intimate with you, you trade the mouse for a trackpad.

Six and a quarter years ago, now you've got your phone cradled in your hand. First thing you touch in the morning, last thing you touch tonight, separated from your body only by a thin film of fabric. Three and a half years ago, your iWatch. 24 hours a day on your hand or 18 hours a day. A year and a half ago, AirPods with a computer inside for voice recognition.

That directional arrow of progress, the inevitability was computability was becoming more and more intimate and close to you. We shared that thesis with a lot of people and then we ended up meeting this researcher at one of our other companies, Charles Zucker, who's a PhD neuroscientist. He said you got to meet this guy, Reardon. Reardon was the inventor of this technology that we use called Internet Explorer when he was at Microsoft as a young guy.

He was one of 17 kids, 10 biological, seven adopted. Just insane family situation. Bill Gates taps him, he goes and works at Microsoft for a decade from '90 to 2000. He's also Bill's right hand guy during the monopoly DOJ trial. Then after making a lot of money and being technologically renowned and reasonably wealthy, he does what anybody would do in his shoes, he starts another company, Openwave, which ends up creating a mobile browser that we all use and then goes back to college and gets a degree in Classics in Latin.

Then spends the next near decade getting a PhD in Neuroscience, where the thesis he was working on is this myoelectric response. The idea that you could detect from the surface of your skin, the roughly 15,000 neurons, that innervate roughly 14 muscles in your hand, which is important because if I'm typing, my brain is telling my fingers to do something. If I am turning a knob or switch or a lever or doing anything, my brain is subconsciously telling my hand to move.

He figured out how you could take that signal, detect it and map it to the technological devices we use. Instead of having to type on a keyboard, instead of having to type a switch, instead of having to turn a thermostat, I could effectively either do that motion in free space, or, and this was the crazy part, think about making that motion and I can control the devices.

MIKE GREEN: We talked about this last time. You highlighted that even if we go back and look at the Tom Cruise film, Minority Report, where he has this dynamic and he's moving this, he's wearing gloves, he's making the gestures, et cetera, what Thomas Rutan figured out was that that subconscious thought was actually sending a signal that they are then restricting and so the process of learning how to type on Mavis Beacon is actually just your brain sending those signals to your fingers, your fingers then figuring out how to do it, and you're training that interface back and forth. CTRL-labs basically shortcuts that process.

JOSH WOLFE: In fact, they had a maddening demo, which we may have talked about, where you try to hit the button before the device knows that you intend to hit the button and you can't do it.

MIKE GREEN: That's amazing.

JOSH WOLFE: It can detect your intention to fire your muscle and move it before you actually move it, which makes that, because if you have 1000 neurons that are activating a single muscle, if there's 100 of them, and if you were to do this now and you think about just moving a finger, you get the sensation, this feeling of that finger, and it can detect that. I became obsessed with the entrepreneur, I lost sleep in pursuit of the deal for three nights. My wife, when she finally met Reardon was like you, you're responsible for this household duress.

It was an amazing experience, but it was too short. It was too short. It was about a year and a half, almost two years and Facebook made an entry on the company, which we rejected. Zuckerberg came back and made a more persuasive entry. These founders, some of whom, unlike Reardon, had never made money before. It was very compelling, the amount of capital that Facebook was going to invest into the company on an ongoing basis, as well as the liquidity that people were going to get now.

I wish we would have held it longer. I truly think this would have been a $10 billion business instead of something a little under a billion dollars, but it was a great outcome for our investors and a thrill to be part of what I think is going to be a historic technology that we will all be using.

MIKE GREEN: Now, I want to come back to this but this also brings up another topic that you and I've discussed before, which is basically the concentration of capability inside companies. What we have very clearly seen are companies like Google and Facebook, Apple, Microsoft, have become very acquisitive. They have an extraordinarily low cost of capital and have been able to buy these. Do you think for Thomas Reardon as he thinks about going inside Facebook, that that creates a limitation or that that changes the trajectory of the technology versus its original vision?

JOSH WOLFE: I'll give you two answers because I tried the no answer. I tried the moral suasion. I tried-- and this was at a time when Zuck was in front of Congress being lambasted as a poster child of technological excess and election meddling. I'm trying to make the case, my God, you are going to take a technology that can capture your neural intention and give it to Facebook? You're going to spend the next two years in front of Congressional committees yourself. I tried emotional suasion with my kids, saying don't sell, sending videos to the board. We don't trust Facebook. I tried financial suasion to do a secondary in capitalized business.

In the end, I think Reardon actually had a very rational view of this. Again, he worked for Bill Gates at Microsoft when Microsoft was arguably the evil empire. His view was back then, Bill Gates was a lot more powerful, and Microsoft was a lot more powerful than Facebook is today. Bill today is considered a president of the world in many ways. He's curing malaria, he's taking on poverty, he's doing big global things in a way that many of our other elected leaders are not and there's no reason that you couldn't imagine a decade hence, as hard as it is, that XOC because of Chan Zuckerberg Initiative might find a cure to Alzheimer's or something and suddenly be in that same position.

I think the idea that there's going to be the monopolistic power concentrated, he felt was overblown. The thing that I think was really appealing to him, when you get bit by the bug of taking Internet Explorer from one person to a billion users, the idea that you could take this technology and its ability to let humans express themselves and control the world around them, from one person or in our case, a few dozen people to 8 billion people, which is his goal, you want a platform like a Facebook.

I think that the world will be better off with this scaling and I think it will unleash many technologies in almost this moral imperative case to invent so that genius can get unleashed and unlocked, that a lot of genius will get unlocked as people start to use this and discover what they can create with it. Again, I just wish it was still in my hands for a few more years at a much higher multiple.

MIKE GREEN: I wish it was to actually, but you didn't try the physical violence approach, which might have been my return. Last time we got together, we had a similar discussion. This time, it was John-- that time, it was Johnson and Johnson acquiring the robotic surgical company--

JOSH WOLFE: Auris for just under 6 billion.

MIKE GREEN: Yes. Exactly. I haven't had a robot operate on me yet. Do you keep tabs on how that progress is developing, how that technology is developing and what the next stages are when you exit these vehicles or just the bandwidth that that would consume?

JOSH WOLFE: No, we continue to track that because again, the thesis is sound and the idea that the skill of a human in the operating room is the rate limiting factor to be able to scale surgeries, particularly if you are a highly skilled surgeon. The ones that make the most money, they're the most sought after for the most sophisticated procedures. I think that that's going to start to go away and the sophistication of the surgeon will be embedded in the machine.

We see that across the history of technology where somebody that has manual dexterity, that has precision replicability, rather than that being the implicit knowledge of the surgeon through many experiences, why should they not be able to effectively download that into a machine so that that can scale and reach many?

MIKE GREEN: It's interesting. Every time you and I talk, occasionally I get shivers down my back. I'm reminded of a paper by Mark Koyama describing the innovations that actually led to the creation of the Industrial Revolution. One of those innovations was actually the transition from needlepoint in designs and fabric to printed fabric can go. What they did was they introduced variety into the consumption basket of young women being courted by young men and that the young men had to enter into the labor force to obtain dollars so that they could actually go buy stuff dramatically changed the work habits of the world.

When you say something like that, and you highlight that type of technological development, I can only see the number of opportunities that it expands in terms of the capability to lower the costs, increase the ability of people to have the surgeries that they might otherwise not have in the United States, the developing world, et cetera. Really excited to see how that moves forward. My next bet for the one though, that's going to be acquired, is one you just started talking about, which is the Variant Pharma.

JOSH WOLFE: Yeah, this is early. It's consistent with the theme which we follow, which is the decreasing gap between science fiction and science fact. In this case, the inspiration really came from X-Men and Professor X puts on this helmet called Cerebro and is able, from a call crowd of mutants ridiculously, to spot the one in a million person who can shoot lasers out of their eyes and conjure fire from their fingers. He got us thinking, okay, if there's a one in a billion chance of some super rare phenotype, a trait, which has [indiscernible], seven people walking around that have extreme high oxygen saturation at high altitudes, they get into an accident, their bones don't break, they have extremely high metabolism, lots of interesting traits, and you just have to go and find them.

Now, the other interesting thing, and here's where there's this arbitrage is the vast majority of money and effort and research and talent has gone into sequencing, pale, male, stale white Europeans, people like us. Maybe not the stale part, but very few people have gone to the outer regions of the world because those people don't have money to find these outlier traits in these outlier regions. I think that there is an absolute genetic goldmine of these people who are quite literally mutants whose traits, and it's really important because the team here, the fourth or fifth person that they hired was a computational geneticist but the second and third was a cultural anthropologist and an ethicist because they want to get benefit sharing and have these people participate in both the economic profits but also the scientific progress that comes from finding these unique individuals.

You will take a minority mutant population and end up helping find cures for the masses. I think it's an area of medicine in genetics that has never been explored. We started the company, filled a team, they have now gone and it's interesting we call them at the moment Treks. There's a lot of thought-- T-R-E-K, like a trek. Which even they don't really love that, they killed the idea of a mission, because that has a connotation of expertise of your [indiscernible]. Lots of consideration about that even just like how do we approach these populations who are rightly skeptical from having been exploited in the past by big companies or explorers, or whatever. We don't call them explorations, we don't call expedition. There's a lot of thought into the etymology of what we call these--

MIKE GREEN: Extreme wokeness.

JOSH WOLFE: Yeah. They've done a handful of different partnerships, the ones that have been publicly announced, I've been with them, our recent New Zealand who have really interesting metabolic traits. Pakistan, which is a genetic island population and that Pakistan is not an island geographically, but there's a lot of interrelated marriages and cousins marrying cousins. Because of that, you get interesting traits, which are likely or more likely to have a monogenic condition, a similar gene that goes [indiscernible] and does something.

Then they just went to Nepal and were with the Sherpas and it was absolutely stunning. They brought back some video. They have a Nat Geo documentary person that's going around with them filming their treks. These Sherpas are going up with hundred pounds on their back and they're completely not out of breath and our team is dying and there is a genetic predisposition for that.

MIKE GREEN: You skipped one that actually caught my attention, was just the Samoan populations. Very quickly, like from reading about the Varian Pharma website, resistance to diabetes in the Samoan population run something like 30%. As a result, the statistics was to replicate a Variant Pharma study that required only 10,000 people in Samoa, would require roughly 10 million, if I got those numbers correct, in Europe?

JOSH WOLFE: Yes. Because you already have the traits manifest in the people. You're not searching for all this needle in haystack, you have all the needles.

MIKE GREEN: It's just absolutely incredible. I don't think people can fully appreciate the revolution that's in front of us from this standpoint. I have a number of friends that are in the biotech space. One who is going to join us tonight to drink after this event. They are highlighting that there's just this extraordinary advances coming in the biotech space as people approach things from a standpoint of how do we change the way we study it, not necessarily how do we change the tools? The '80s and the '90s were largely about innovations in terms of what are the tools?

JOSH WOLFE: Sequencing.

MIKE GREEN: Right, exactly. Now, you're talking about the redesign of the actual process of how do you think about the problem?

JOSH WOLFE: Exactly. In fact, the way that we think about it is search is really, arguably the first competitive advantage because you're trying to find and identify these populations, some of which they're not publicly disclosing. I'll share one with you, not where it is but what the traits are. Sequence, which is relatively as you point out, because the technological curves in this are commodity, then you want to go and basically develop and you're either going to partner with Big Pharma, or in some cases, develop your own clinical trials, and that's a lot more money.

It's really the search of how do you partner and develop a competitive advantage. Arguably, the most important competitive advantage is trust, with the reputation that you have, how you're contracting with local researchers, how you're treating the local population, how you're prioritizing them, how you're deprioritizing them, if that might be the case and what legacy you leave. One of the