If you accept the argument that today’s artificial intelligence boom will lead to dramatic productivity gains, it follows that smaller companies will be able to accomplish things that only larger ones could in the past.
In a world like that, venture capitalists might need to change their approach to funding startups. So believes billionaire investor Chamath Palihapitiya, a former Facebook executive and the CEO of Silicon Valley VC firm Social Capital.
It “seems pretty reasonable and logical” that AI productivity gains will lead to tens or hundreds of millions of startups made up of only one or two people, he said on a Friday episode of the All-In Podcast.
“There’s a lot of sort of financial engineering that kind of goes away in that world,” he said. “I think the job of the venture capitalist changes really profoundly. I think there’s a reasonable case to make that it doesn’t exist.”
Palihapitiya became the face of the SPAC boom-and-bust a few years ago due to his involvement with special purpose acquisition companies. Also known as “blank check companies,” SPACs are shell corporations listed on a stock exchange that acquire a private company, thereby making it public while skipping the rigors of the IPO process.
At one point, Palihapitiya suggested that he might become his generation’s version of Berkshire Hathaway chairman Warren Buffett. “I do want to have a Berkshire-like instrument that is all things, you know, not to sound egotistical, but all things Chamath, all things Social Capital,” he said in early 2021.
Buffett’s right-hand man at Berkshire, Charlie Munger, recently expressed his disdain for venture capitalists. “You don’t want to make money by screwing your investors, and that’s what a lot of venture capitalists do,” the 99-year-old said on the Acquired podcast, adding, “To hell with them!”
Palihapitiya suggested that VCs might be replaced at some level by “an automated system of capital against objectives…you want to be making many, many, many small $100,000 [or] $500,000 bets.”
Once a tiny-team startup gets to certain level, it can “go and get the $100 and $200 million checks,” he said, adding, “I don’t know how else all of this gets supported financially.”
Many Silicon Valley leaders expect AI will lead to some types of jobs going away, but that overall it will result in greater productivity and more jobs. Among them is Jensen Huang, the billionaire CEO of Nvidia, which makes the chips that are in hot demand from companies racing to launch AI services.
“My sense is that it’s likely to generate jobs,” he recently told the Acquired podcast. “The first thing that happens with productivity is prosperity. When the companies get more successful, they hire more people, because they want to expand into more areas.”
He added, “humans have a lot of ideas.”