Josh Wolfe - This is Who You Are Up Against

**Patrick O'Shaughnessy** (0:00)
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Hello and welcome everyone. I'm Patrick O'Shaughnessy and this is Invest Like the Best. This show is an open-ended exploration of markets, ideas, methods, stories and of strategies that will help you better invest both your time and your money. You can learn more and stay up to date at investorfieldguide.com.

**SPEAKER_2** (0:59)
Patrick O'Shaughnessy is the CEO of O'Shaughnessy Asset Management. All opinions expressed by Patrick and podcast guests are solely their own opinions and do not reflect the opinion of O'Shaughnessy Asset Management. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions.
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**Patrick O'Shaughnessy** (1:24)
Longtime listeners will have heard me joke before that this podcast should really be called This Is Who You're Up Against. I've been waiting for the right episode to deploy the joke as a title and this week we have it. The joke's meant to convey how incredibly impressive these people are who we get to hear from every week. My guest this week is Josh Wolfe, a founding and managing partner at Lux Capital in New York City. Lux is a venture capital firm but a highly unique one. They've spent more time in the hard sciences and interesting nooks and crannies of the market than a typical VC firm.
Some of investing is zero sum. My outperformance is someone else's underperformance. Sometimes though investing is positive sum. The combination of capital, ideas, people, drive and raw energy leads to amazing new things. I think the best investing and the best investors of the future will be more collaborative than competitive. After finishing with Josh, I couldn't stop thinking, God, do I want to be involved in whatever he's doing if only just to learn.
This conversation made me rethink my joke. Now I won't think of it as a zero sum joke, but instead as a reminder. This is the kind of person who is out there. You better find your niche and still be the absolute best you can within that niche. Please enjoy this amazing conversation. Josh and I cover just about everything.
So Josh, we were talking before we hit record about the many things that Lux Capital does and that'll be a great place to start just to give people a frame of reference for the sorts of investments that you've made over the years and then we'll go very deep into a number of different disparate topics that I know we're both very interested in.

**Josh Wolfe** (2:49)
The firm is pretty rangy. We're a billion and a half and most recent fund was 400 million. We got a $300 million co-invest fund and we do everything from super early seed stage things where you've got an entrepreneur in a garage, although often they're in our office, to a large division of a corporation that we're gonna spin out and recapitalize. And generally it's along three areas. So we considered energy materials is one bucket and then healthcare is another bucket, which is everything from healthcare IT, which is generally low barriers and capital efficient. I tend not to love that stuff as much. And then I really love the things where it's like really hard and typically really expensive. So robotic surgery and med devices and biotech. And then the final third is core technology, which is more defined by what we don't do. So very little, if anything, in internet, social media, mobile, ad tech, video games, things that generally every other VC is doing. And really it's for two reasons. One that's intellectually honest and germane to us and one about the field. So if you're an amazing internet entrepreneur, you should be going to Sequoia or Accel or Benchmark. And we've always wanted to sort of avoid the adverse selection. But if you're intellectually honest about the space, the great virtue that everybody talks about is it's really cheap and capital efficient to start these businesses, which is true. But the corresponding vices that you get, you know, 5,000 global competitors to companies like Groupon. And so as an investor, then you either spray and pray, which is buy really cheap lottery tickets and hope for a high magnitude payoff that are improbable.