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come on sleepy the fascinating podcast a couple years ago with Kara Swisher and you've got a lot of interesting conversations with her and you talked a lot about Silicon Valley and about how the culture is broken and the system of capital formation is broken we'd love for you to talk a little bit about you know your your explanation of that theory as well as how you think the pandemic might even exacerbate that the shift that we're seeing out of Silicon Valley or some of the disillusionment that people in the tech industry are seeing with Silicon Valley so I think that there's a dispersion happening and that dispersion is not dissimilar to what's happening in the public markets if I had to characterize the public market dispersion it's essentially that we are separating the haves and the have-nots and the haves are companies that traffic in bits so you know Facebook Apple Amazon Microsoft Google above all others but then underneath them you know largely founder led technology businesses okay that have the 80 to 90 percent gross margins even if they're unprofitable so those are the haves the trafficking bits have nots or the companies have traffic and Adams you know if you're a hotel company an airline and auto business those businesses are incredibly impaired and there's been a dispersion and a spread where you could basically essentially if you if you bought the the weighted S&P index which essentially is a way of getting synthetically along these handful of tech businesses and shortened the unweighted index which is you know basically getting an equal weighting of everything else you can see this massive dispersion in spread of it that's happening in private markets as well except what we're looking at are companies that either are benefiting from the pandemic so tail winds that are driving positive growth and profitability so companies like you know coinbase or instacart or you know Palo Alto Networks which is public or netskope which is private you know internet security businesses or slack we don't which is a collaboration business so they're they're these companies a mixture of private and public and then businesses that we're second and third-tier also-rans are again just getting crushed and they're they're being forced to fire and lay people off underneath that dynamic is something that's been broken in the valley for while which is that the cycle of building and profiting from companies has taken too long it used to be the case that we would build a company for four to six years and then take it public and then the public markets would participate in the last two or three years of evolving the business now what happens is there's so much private money that these companies stagnate in the private markets for eight nine and ten years the problem is that for LPS it doesn't work because if you have these ten year fund lives and you know if you're a growth fund maybe a seven year fund life with a couple one-year renewals the timing mismatch now that it's creating is this massive overhang where you have these you know paper values and I are ours that can't be monetized and so that's feeding a cycle where even faster than normal Aldys are looking at secondary firms and saying let me sell some of these things I mean we balance my portfolio because my public's are getting crushed by you know if you look at private equity it's very challenged because they predominantly traffic in Adams you know they're buying industrials companies they're buying things that are real tangible things that you buy with you know current free cash flow that stuff is very very challenged and so as a result the IRR is that these pension funds and other LPS will see are going to be challenged they then look at their venture exposure and say wow I have way too much exposure and so then they're selling then the venture funds themselves are thinking to themselves wow I'm having a lot of trouble raising a new fund so it's a very complicated cycle John but that's what we're engaged in right now is is this essentially a massive multi-year long portfolio rebalancing and you know the public's are leading the way so that dispersion is creating a dislocation private equity is the next Domino to fall because when they really reset their portfolios and revalue them you know two three four orders now into the full scale breadth of the consumer demand shock that we're dealing with and then venture folks will have to take the back seat but it's going to make valuations very challenging in the public markets and you and you're gonna be rewarded for having money you
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