MiB: Sebastian Mallaby on the History of Venture Investing

 

 

This week, we speak with journalist Sebastian Mallaby about his new book, “The Power Law: Venture Capital and the Making of the New Future.” Mallaby, a two-time Pulitzer Prize finalist, is a senior fellow at the Council on Foreign Relations. He is also the author of “More Money Than God: Hedge Funds and the Making of a New Elite.”

We discuss how modern venture capital traces its history back to Arthur Rock, who is described as the father of venture capital. Mallaby explains how the concept of “liberation capital” was used to free the “traitorous eight” from Shockley Semiconductor to set up Fairchild Semiconductor. Years later, he liberated two Fairchild execs — Gordon Moore and Robert Noyce — to create Intel.

Mallaby describes the differences between East and West coast VCs — embracing risk and failure is the key to Silicon Valley successes, while the East coast is more about stewardship of assets under the “prudent man rule;” Even the names of investment firms, such as Prudential or Fidelity,  reflected a form of risk aversion still persisting since the Great Depression.

He also explains why California’s legal system that does not allow standard non-compete agreements created a cluster of tech engineers and human capital. The net result was an entire system of talent that circulated rapidly from start-up to start-up.

A list of his favorite books is here; A transcript of our conversation is available here Monday.

All of our prior interviews related to Venture Capital can be found here.

You can stream and download our full conversation, including the podcast extras on iTunes, Spotify, Stitcher, Google, Bloomberg, and Acast. All of our earlier podcasts on your favorite pod hosts can be found here.

Be sure to check out our Masters in Business next week with David Kotok, who co-founded Cumberland Advisors in 1973. The firm manages $4 billion in assets. Kotok is Program Chairman of the Global Interdependence Center (GIC), and was on the Treasury Transition Teams for New Jersey Governors Tom Kean and Christine Whitman, but is probably best known as the creator of Camp Kotok. His recent research is on the Economic Consequences of Pandemics, and What Long Covid Means for Financial Markets.

 

 

Sebastien Mallaby’s Favorite Books

The Money Game by Adam Smith

A Little Life by Hanya Yanagihara

Black Edge: Inside Information, Dirty Money, and the Quest to Bring Down the Most Wanted Man on Wall Street by Sheelah Kolhatkar

Digital Gold: Bitcoin and the Inside Story of the Misfits and Millionaires Trying to Reinvent Money by Nathaniel Popper

 

Sebastian Mallaby’s Authored Books

The Power Law: Venture Capital and the Making of the New Future by Sebastian Mallaby

More Money Than God: Hedge Funds and the Making of a New Elite by Sebastian Mallaby

The Man Who Knew: The Life and Times of Alan Greenspan by Sebastian Mallaby

The World’s Banker: A Story of Failed States, Financial Crises, and the Wealth and Poverty of Nations (Council on Foreign Relations Books by Sebastian Mallaby

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