My guest today is Josh Kushner, founder and managing partner of venture firm, Thrive Capital. Josh started Thrive in 2010 and launched its first institutional fund in 2011. That first institutional fund was $40 million and, in it, Thrive led Warby Parker’s Series A, invested in Instagram, and incubated a business, which Josh co-founded, called Oscar. Thrive has gone from strength to strength since then and now manages $15 billion with a small team of 9 investors. Their portfolio is stage agnostic and their track record includes many of the best known businesses from the past decade, including Spotify, Unity, Stripe, and Twitch among many more. Josh rarely speaks in public about the firm and their philosophy so it was a blast to do this with him. Please enjoy my great conversation with Josh Kushner.

Founders Podcast
Founders Episode 136 - Estee Lauder
Founders Episode 288 - Ralph Lauren

For the full show notes, transcript, and links to mentioned content, check out the episode page here.

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This episode is brought to you by Tegus. Tegus is the modern research platform for leading investors, and provider of Canalyst. Tired of calculating fully-diluted shares outstanding? Access every publicly-reported datapoint and industry-specific KPI through their database of over 4,000 driveable global models handbuilt by a team of sector-focused analysts, 35+ industry comp sheets, and Excel add-ins that let you use their industry-leading data in your own spreadsheets. Tegus’ models automatically update each quarter, including hard to calculate KPIs like stock-based compensation and organic growth rates, empowering investors to bypass the friction of sourcing, building and updating models. Make efficiency your competitive advantage and take back your time today. As a listener, you can trial Canalyst by Tegus for free by visiting tegus.co/patrick.

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Invest Like the Best is a property of Colossus, LLC. For more episodes of Invest Like the Best, visit joincolossus.com/episodes. 

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Show Notes
(00:03:14) - (First question) - Why do this podcast
(00:06:14) - The development of taste and quality 
(00:10:20) - CS Lewis tweet; The Inner Ring
(00:11:53) - Founders being heroes and motivating quietly from the background
(00:16:14) - Overview the founding story of Oscar Health
(00:21:30) - Is a big business different from a small one
(00:23:18) - Learning to identify good problems and creating a business to solve it 
(00:25:43) - The birth story of Thrive Capital 
(00:30:14) - Lessons learned from creating the first three Thrive funds
(00:33:35) - Industry wide competition today and models for building a firm in general 
(00:37:44) - Talent, recruiting and seeing potential in younger generations of people
(00:45:40) - Investments he made during the early foundation of Thrive that had significant impact 
(00:49:12) - His analogy for investing in early versus late stage
(00:54:22) - The current macro environment
(00:57:52) - Giving AI companies computing power instead of money
(00:58:57) - Why he sold small stakes of Thrive 
(01:03:10) - His philosophy on what makes a good product
(01:05:20) - What he thinks about the models like Mobile and Cloud 
(01:08:10) - His absence from crypto and why he refrained during the boom in 2021
(01:10:33) - Thoughts about the opportunity set in FinTech today writ large
(01:12:04) - Other potential opportunity sets beyond what’s already been discussed
(01:13:39) - Lessons learned from his time spent with Marc Andreessen, Stan Druckenmiller, Henry Kravis, and David Geffen
(01:21:59) - Balancing magnitudes of capital between investment funds 
(01:23:32) - Why founders choose Thrive
(01:29:15) - Vision as a key ingredient for founders
(01:32:19) - His view of the investment industry in the world today writ large 
(01:40:19) - Other investment firms he would invest in
(01:42:48) - The kindest thing anyone has ever done for him

This episode is brought to you by Tegas, the modern research platform for leading investors and the provider of Catalyst.

Tired of calculating fully diluted shares outstanding?

Access every publicly reported data point and industry-specific KPI through their database of over 4, 000 drivable global models hand-built by a team of sector-focused analysts, 35-plus industry comp sheets, and Excel add-ins that let you use their industry-leading data in your own spreadsheets.

Tegas's models automatically update each quarter, including hard-to-calculate KPIs like stock-based comp and organic growth rates, empowering investors to bypass the friction of sourcing, building and updating models.

Make efficiency your competitive advantage and take back your time today.

As a listener, you can trial Catalyst by Tegas for free by visiting tegas.co slash Patrick.

Before we transition to the episode, I want to highlight the Founders Podcast, which is part of our Colossus Network.

David Senra, who hosts Founders, has devoted his life to learning from history's greatest entrepreneurs and every week he distills the lessons of a different founder.

If you want an entry point, I highly recommend starting with episode 136 on Estee Lauder or episode 288 on Ralph Lauren.

I hosted David on Invest Like the Best last summer and it's hard not to walk away insanely energized after listening to any episode with him.

You can find a link to founders and those episodes in the show notes of this conversation.

You can also search all past transcripts on our website, joincolossus.com.

I'm Patrick O'Shaughnessy and this is Invest Like The Best.

This show is an open-ended exploration of markets, ideas, stories, and strategies that will help you better invest both your time and your money.

Invest Like The Best is part of the Colossus family of podcasts, and you can access all our podcasts, including edited transcripts, show notes, and other resources to keep learning at joincolossus.com.

Patrick O'Shaughnessy is the CEO and founding partner of Positive Sum and 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 Positive Sum or O'Shaughnessy Asset Management.

This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions.

Clients of positive sum or O'Shaughnessy asset management may maintain positions in the securities discussed in this podcast.

My guest today is Josh Kushner, founder and managing partner of venture firm Thrive Capital.

Josh started Thrive in 2010 and launched its first institutional fund in 2011.

That first institutional fund was $40 million and in it Thrive led Warby Parker Series A, invested in Instagram and incubated the business, which Josh co-founded called Oscar.

Thrive has gone from strength to strength since and now manages $15 billion with a small team of 9 investors.

Their portfolio is stage agnostic and their track record includes many of the best known businesses from the past decade, including Spotify, Unity, Stripe, and Twitch among many more.

Josh rarely speaks in public about the firm and their philosophy, so it was a blast to do this with him.

Please enjoy my conversation with Josh Kushner.

I have a strange opening question for you, which is about, it's a very meta question about the nature of this interview in the first place.

And I think you literally at 1 point wrote a note to yourself about why you might do this.

And when, and if we publish this, I think it will represent probably 80% of the total minutes of you being recorded in a conversation.

Everything else we'll talk about, I think is somewhat downstream of some very deliberate choices you've made, your style, your personal style.

I've really enjoyed getting to understand.

And so I'm just curious in that note, what were you saying to yourself?

Well, I think as a firm, we've always taken a very different approach with regards to how we present ourselves to the world, and I think that has come from a couple of different frameworks.

The first is, and most important, our belief that the founders are heroes and the idea of taking credit for their success is not something that we've ever wanted to do.

I think Personally, the construct of seeking validation from others is not something that we've ever believed would lead to us getting to the right conclusions on things that we do.

We've always been different in that we don't apply to the Midas list or things like that, just because even internally forget about how we would want to be perceived externally.

Every single win that we have is the entire firm's win.

And every single loss that we have is the entire firm's loss.

I know you've had Shane Battier on the show before, and we all quote the no stat all-star often.

There's a great story that we remind the entire organization about often, which is I led investment in Slack.

I was the person who ultimately decided when we should exit the company.

But as we were talking about it as a team, I was extremely nervous about the price that we were about to pay.

And my partner, Kareem, who was not involved in the underwriting process, who had never met Stuart, who did not join the board, was the 1 who actually convinced me that we should do the deal.

I think if you have that mindset, the idea of being out there in the ways in which others are in our industry is something that we've always gravitated away from why do this?

There are negative aspects of the fact that we're not out there and that some people don't really know what we do.

Some people think that we just incubate companies.

Some people think that we just make early stage investments.

Some people think that we only make later stage investments.

So a mentor of mine said to me recently, if you don't tell your story, someone else will tell it for you.

I feel grateful to have the opportunity to do it with you, but having the ability to articulate to the world what we do and how we do it and why we do it is something that I'm excited to do.

1 of the things that comes up, if you ask around about you and Thrive is, if I say like, what questions should I ask Josh?

Several people will say, talk about the taste on the consumer side that developed early, because for the most part, Thrive invested in the consumer space, which on average didn't do that great, but leading companies did very, very well, and Thrive was often invested in those things.

How do you think about the development of taste?

Taste is something that you should always question at the same time.

Understanding quality and understanding taste and having a deep appreciation for that is something that is fundamentally important, but that doesn't mean that you're always going to get it right.

Good design does have some basic principles.

It's the people who can, I would say, understand how that design applies to lots of different industries and sectors and have the capacity to kind of think outside of the box that are ultimately able to thread those common principles through lots of different things?

The people that I respect the most that have the most extraordinary taste, whether it be Bob Iger's ability to understand the difference between what movie is gonna work and what movie is not gonna work and appreciating creatives or You and I've talked a lot about Rick Rubin why he's able to understand why 1 musician is better than another is something that is Not teachable, but I think always questioning yourself is something that we constantly do.

You and I think are both in love, you turned me on to it, this chapter in his book called Rules.

Can you tell me why you love that chapter so much?

What it says and why you love it so much?

I highly recommend people go listen to it.

Rick Rubin has this incredible line in his book, which is pay attention to what you notice, but when no 1 else sees.

And I actually think there's this orientation that rules are things that we learn as adults.

And in reality, when you're younger, you're completely unconstrained with regards to the ways in which you see the world.

And I actually think naivety is such a powerful thing.

A lot of people in our industry talk about pattern recognition as a positive attribute.

We actually talk about pattern recognition as a negative attribute.

It actually prevents you from seeing the world differently.

It prevents you from seeing what the world can be.

And I actually think rules are things that can be deeply constraining.

And actually I think in many respects, the ways in which we think about the firm have always pushed the boundaries in terms of what conventional wisdom is for the industry.

There have been so many times that we've been told this is not what a venture capital firm is meant to do.

Yeah, our orientation is, well, if we actually think in first principles around what we're trying to create, we're always gonna ask why.

And I actually think as a result of our orientations around constantly questioning the norms, we've created something that I think has, in many respects, pushed the boundaries of what we can do, and our ambition is to continue to think outside the box in the ways in which we can continue to build a firm.

First time we met, you told me this amazing line.

I think 1 of your parents told you about tall buildings.

Yeah, the line is, lightning strikes the tallest building.

And I've always tried to live my life with having my actions speak louder than my words and keep to myself.

In addition to that, I just think it's a lot more fun to listen than it is to talk.

When I was in Omaha for the Berkshire Hathaway, this meeting, I had the opportunity to spend time with Charlie Munger and he had this great line to me, which really has stuck with me and resonated with me, which was what's the point in telling everyone all that you know?

It's a lot more fun to learn about things that you don't know.

So that's the framework that I have, a lot more listening than talking.

I promise This is my last preliminary philosophy question, but I think you tweet about once a year or so, so consistent with what you've said so far, the most recent precious use of 1 of your annual slots was to share a story from CS Lewis called inner ring, which I'm familiar with and love, and I think it's just a fantastic little, I don't know what to call it, essay story or something.

What's the gist of that and why has impacted the way you think about the world?

So the inner ring is an essay written by CS Lewis.

The summarized version is there are rings of people.

And when you're on the outside of these rings, you'd want to be on the inside.

It's this desire to be a part of something.

And those that actually chase these rings, they do whatever they can to get inside.

And once they're inside, they realize that it's not all that they thought it was meant to be.

So then they start chasing for the next ring, and the next ring, and the next ring.

And the essay concludes that effectively, the goal of life should be to not try to chase anything, but rather focus on your craft, focus on the people that you love the most.

And unbeknownst to you, you will appear as if you're safe and sound within a ring to the outside world, but you will have absolutely no idea.

And I think, for me, I have that framed in my office.

Actually, I try to live my life every day by focusing on the things that I'm passionate about, my family, people that I love, my closest friends, and just trying to get better at the things that I do every day and try to not get distracted about the outside world.

What have you learned about the different sources of drive and motivation, especially in the context of founders, you called them heroes earlier of the stories of their businesses and you wanting to not get in the way of that story and really be supporting quietly, which is a very nice notion.

Motivation seems like a critical thing, like psychology and motivation to understand when partnering with these people, especially if it's a very early young business.

And you just talked about inner rings as maybe a pernicious form of motivation of trying to get something, but it being the wrong direction to be pointing.

What have you learned about good, bad, healthy, unhealthy motivators and what drive people to do exceptional things?

1 of the values of thrive is to focus on the inputs, not the outputs.

I think if you're chasing success, then you're unlikely to realize it.

And if you are focused on a problem that needs to be solved, you will likely achieve success.

So I think the people that we view as the most driven are the ones that are entirely focused on improving themselves constantly.

It's this level of self-motivation and self-awareness that is entirely a competition between them and themselves.

And I think that is the thing that I've seen from the best founders that I've ever worked with.

Those that are motivated by how the world will ultimately perceive them will likely make bad decisions.

Those that are motivated by a mission or a cause or the ambition to solve a problem are the ones that will ultimately achieve it.

In many respects, having the firm based in New York City has been very much driven by the idea of us, I would say, being out of an echo chamber or an ecosystem so that we can actually have true independent thought.

And I think these are human emotions that you feel when you're in the middle of something.

When I was in college, I had the opportunity to go to a Knicks game with someone who worked in finance in New York City.

And he looked over 5 seats to his right and he said, my seats are good, but this guy's seats are better.

That was a really important moment for me because it made me realize that the way to ultimately do my job really well is to create the right boundaries for me to actually be on the outside and have true independent thought.

A large portion of our investments are out West there every month.

But I think in some respects, the idea of not being there every day has enabled me to focus on just be a lot more clear on my thinking.

Talk about the relationship between starting and investing in companies for Thrive, which as I understand it is deep in the DNA.

We were talking at lunch about this idea that excellence is the capacity to take pain and that the experience of pain as an entrepreneur is probably a huge competitive advantage as an investor.

And I think you started Oscar health the same year as you started thrive or are very close.

Obviously you're an entrepreneur having started thrive too, but dual tracking the investor entrepreneur

styles at the same time and have ever since.

What has that interplay meant to you and to the firm?

What that experience taught me is that being a founder is incredibly romanticized And the pain that is taken in order to ultimately achieve success is just extraordinary.

I feel like the ability to do both is something that I just feel so fortunate to do because I feel like being a founder has enabled me to appreciate all of those that Thrive is fortunate enough to invest in.

And the ability to be exposed to so many extraordinary founders by being a part of Thrive has enabled me to be a much better founder myself.

But as a firm, we have definitely created a culture of building.

Thrive is a product, we just happen to invest in other companies and our ambition is to be the most meaningful partner to our founders and we need to constantly iterate and tinker in terms of ways in which we can do that.

But also, every single person on the investment team, in some respects, is building.

And I think that gives them a true appreciation of the founder's struggle and the entrepreneur's struggle.

I'd love you to tell the Oscar story specifically, the actual story for how the thing got started.

Work our way towards a general set of lessons on how do you identify an interesting problem and how do you help take something from 0 to 1.

With all that in mind, tell us about how Oscar itself got started.

I went to the hospital, went through the traditional experience.

I remember getting home and getting my insurance bill and realizing that I had absolutely no idea what it meant.

I had just started Thrive, and I didn't know what my benefits were, what doctors or hospitals I had access to, how to pay a claim.

I said to myself, how is it that the internet and software and data and design are transforming every single industry around us?

There's this relationship that is so fundamentally important to so many people in the country, both from a human perspective, but also from a financial perspective.

And what would be the way in which we can take this relationship and make it simple and transparent and understandable through technology, data, and design.

When I had thought about this idea, the Affordable Care Act was just being introduced.

And the reason why this was so exciting was because healthcare had traditionally been sold in a B2B capacity.

People were not making decisions for themselves.

And the Affordable Care Act was taking the largest industry in our country, which represents a little less than 20% of GDP, and transforming it from B2B to B2C.

And when people can actually make decisions for themselves, they usually choose the product that has the perfect combination of cost and quality.

And there are so many examples of consumer choice transforming industries.

That could be the shift from businesses giving their employees BlackBerrys to employees choosing iPhones for themselves or defined benefit moving to defined contribution through 401k.

And I think as a result of this new market being created where there are so many people flooding to the market at the same time, the barriers to entry which had traditionally been so high in a world in which there's probably a trillion dollars of enterprise value were lowered at 1 moment and there was just 1 moment where a new brand could be created to create trust for consumers.

Almost at the exact time that I had this poor consumer experience, Mario, who is my co-founder at Fos2, had his first kid and he equally had a terrible experience.

And I remember calling him and saying, Mario, I really think that there needs to be a new type of health insurance company.

We both read the Affordable Care Act over a weekend, which is light reading, and we got going.

And the experience has been extraordinary.

In this story, the why now is unbelievably clear, both in terms of your experience, but even bigger picture in terms of the affordable care act under what conditions does the why now matter to less or more to you in investing and around incubations.

Does there always need to be some galvanizing change like that, that enables the new opportunity.

The why now is always fundamentally important because irrespective of people on capital, you always need tailwinds.

So I think it's always a fundamental part of our conversation.

The why now and Oscar was so extreme, but I also think the interesting part about Oscar was a recognition entering the founding of a company that it would be something that we would do for decades because we knew how fundamentally difficult it would be.

So we're 10 years into the company, Oscar is a million members, 6 and a half billion of revenue.

But the first decade, in our opinion, is only a couple chapters through what the ultimate story is.

Oscar has been an incredible journey in terms of, we call it the 10 plagues of Oscar.

Affordable Care Act was extremely volatile.

I think there were 33 new insurance companies that were created as a part of the Affordable Care Act and only 2 are remaining.

There was obviously a new administration that was very opposed to the Affordable Care Act, which led to increased volatility.

When we started Oscar, I think 1 of the core insights that we had as we think about the next decade is if you were to start an e-commerce business today, you can launch on Shopify, you can plug in Stripe, you can plug in any basic data analytics service and you're ready to go.

If you were to start a health insurance company 10 years ago or even today, there is very limited technology that you can utilize.

So our idea was not only should we build a health insurance company that consumers loved, we also had this vision of what would it look like to actually create the operating system that would enable us to run a health insurance company end to end.

And as we actually think about the next decade, we are the only people that have created this end to end system that enables you to operate a health insurance company and have a longitudinal view of a member from end to end.

And as we think about deploying LLMs across this product, we get extremely excited about the transformations that are going to come.

Do the pleasures and the pain of running and helping run a mature platform like Oscar, Are those pleasures and pains very different from the pleasures and pains of the really early stages of businesses?

If there's 1 takeaway from founding businesses over my career, it's just as hard to start a small business as it is to start a large business.

And it only gets harder, the larger the business gets, it only gets more complex.

I remember it's probably 6 or 7 years ago.

We had made an offer to a CTO and I remember having dinner with Carly.

And I said to her, if he accepts, everything will be in a good place.

And she said, Josh, we've only been together for a couple of years now, but you've been saying that for a lot of things and you just have to accept the reality that the challenges are only going to increase.

She made me realize if you're building something and the ambition is

extraordinary, The challenges are only going to increase.

She made me realize if you're building something and the ambition is extraordinary, the challenges are only going to continue to come because the problem that you're trying to solve is only increasing over time.

So I think as we invest in any company at the early stages, or even invest in the companies at the later stages, our views are always oriented towards, we should only try to be a part of things that have really grand ambitions.

We should only invest in companies whose ambitions are to be standalone public companies, we should only invest in products that have the desire to truly transform an industry or create a new 1.

And I actually think going through the founder experience and still going through it today, I spent a decent portion of my weekend working on something for Oscar.

You just have to know that the bigger the business gets, the harder it gets, and as a result of that, the ambition for what you're ultimately trying to create should only be extraordinary from the start.

1 of my favorite snippets from all the interviews I've done was Joey Levine at IAC saying he once walked into Diller's office and had this opportunity said, you know, if we really do it right, we'll have a hundred million in revenue in this timeline.

And if we really do it right, it'll be a hundred million in profit.

And Diller looks at him and goes, why bother?

Like, why would we work on something so small?

I thought that was such a wonderful story around scope of ambition.

It brings to mind just all the other things you've done on the incubation side, where the lesson is, if you're going to do it, it's hard no matter what.

So go for something that can be really, really big.

How do you think about identifying good problems through that lens or that frame?

You've done it in healthcare several times.

What does a good problem look like and how do you think about bringing it from 0 to 1?

Now that you've done this more than 10 times, I think through Thrive.

Yeah, we've started over a dozen businesses and every single person on the investment team currently has been a part of an incubation at Thrive.

So every single person at the firm is building, everyone understands the pain the founders go through, they're experiencing it themselves.

I think our view is there are big markets, there are large markets, and there are infinite markets.

And I think the only places that you wanna play are in the infinite markets.

I think no differently than our investments, every single incubation that we create has a grand ambition, but there's usually a very specific product that we believe should be built from the beginning that ultimately creates a wedge into a much larger opportunity.

We would ultimately be dissatisfied if that larger opportunity is not captured.

And ultimately, no matter how thoughtful we are about identifying that opportunity alongside the partners that we're ultimately working with, if the person who is ultimately building that business is not N of

I think the last incubations at the firm have been created by Gaurav, Vince, and Kareem, And they have just an incredible amount of humility and self-awareness around the quality of the person that they ultimately want to work with.

I think they're extraordinary top-down thinkers in terms of thinking about what the opportunities are that could lead to outsized outcomes.

But at the end of the day, if we're not building alongside extraordinary people, nothing's ultimately going to realize its full potential.

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Josh Kushner - Building Thrive Capital