1/ We lost a brilliant, accomplished, self-effacing, humble, kind, compassionate, truth-seeking HUMAN certain only of uncertainty, child like wonder cataloging our fallabilities

I last had dinner with Danny some weeks back (we talked about...
washingtonpost.com/obituaries/202… 2/ We ate🍽 at brilliant friend+ 🎬artist (Moneyball, Capote, Foxcatcher) Bennett Miller's apt + talked ketamine & psychedelics (Danny had done), the pain of conflict in the mideast**, how both free will + consciousness were in Danny's POV total illusions even if useful ones

1/ new Q4 2023 Lux LP quarterly letter—2pgs per post 📖

•Has VC learned lesson?
•cost of capital 📈
•reigning in far-flung fanciful +fraudulent ideas
•when more are racing🏎️ to fund far FUTURE like fusion/ quantum/space elevators🙄

👇Lux funding the neglected: MAINTENANCE…

…Over the next decade, we don’t need FUSION, we need more FISSION. We don’t need quantum computers, we need more chip production. We don’t need snake oil salesmen peddling longevity schemes, we need secure reliable production of medicines in scant supply. We don’t need to build space elevators, we need to rebuild our arsenal of democracy to better equip ourselves and our allies to deter our adversaries.

The breakthroughs of the future cannot—and will not—lie on the breakdowns of the present and a break up with the past. 2/
•the merit + marvel of MAINTENANCE
• recall capex has 2 parts: growth + MAINTENANCE, often in competition with each other…

•…meanwhile contrary to expectations––a HARD LANDING hardly seems improbable

consider:
-the concentration of capital in the 10 largest stocks of the S&P is the highest it’s been since the 1970s Nifty Fifty.

-across all public companies, earnings fell more than sales growth, with margins compressing and record bond issuances increasing corporate indebtedness. A rising focus on margins has led to layoffs at over 1,000 tech companies totaling more than 250,000 workers last year

-such concentration within the S&P’s components means that a handful of companies doing well can mask the weakness in hundreds of other stocks. Investor expectations have soared around AI, and this year will show whether the fundamentals follow and the tech giants cement their dominant positions or lose hundreds of billions as investors flee. Should the market caps of the ‘Magnificent Seven’ fall, we expect it will deepen pressure for cutting-edge AI/ML research groups to spin out voluntarily to maintain their momentum as independent ventures or else depart involuntarily due to internal fiscal discipline or external activist pressure.

-The consensus as recently as Q2 2023 was an economic hard landing following a period of heightened inflation, rising rates, collapsing banks and high volatility. That pessimism has since transitioned to widespread belief in a soft landing alongside robust employment figures and expectations of the Fed cutting rates to maintain economic prosperity. Prediction markets have Trump leading Biden, and some investors believe the market has been rallying in anticipation of pro-business policies should Trump win or in response to Yellen offering an abundance of liquidity. Yet, a soft landing is hardly assured. Many surveys suggest people—despite having empirically higher incomes and net worths—feel worse emotionally due in part to sticker shock from the higher prices of everyday goods. Real estate, a key part of people’s net worths, saw sales drop to the lowest level in nearly 30 years, with 7% mortgages all but unaffordable for new homebuyers, increasing pressure on the rental market. A recent analysis by the New York Fed found credit delinquencies rising, particularly for auto loans. With elevated interest rates, consumers may struggle to maintain their mortgages, auto loans and credit card debts, leading to a cutback on essential purchases and triggering a recession. Nationally, an inverted yield curve (3-month and 10-year) continues to send a warning signal, and globally, debt is now at a record high of over $300 trillion. In just the past three years, there have been nearly 20 sovereign defaults across 10 countries, more than all defaults in the last two decades. The risk of distressed debt rippling chaos out of emerging countries is high.

A hard landing hardly seems improbable.

1/ THE TURNAROUND
Something changed recently, making many abuzz with confidence + optimism for the FUTURE of San Francisco—

—What changed? @DanielLurie will be Mayor.

Having spent time with Daniel I am 💯convinced…

1 he truly ❤️ LOVES SF 🌉

2 he will make SF safe again👮👮‍♂️ 3. That means *refunding* police👮—while being compassionate for those w/mental health problems—yet tough on crime to stop it + make everyday working families feel safe & secure

4. Just how Mike Bloomberg saved NYC
Daniel’s wealth means a very important thing—HE CAN’T BE BOUGHT

1/ INDIA. 🇮🇳

"Hey I'm walking here!!!!" 2/ 🇮🇳

1/ New Lux Capital letter to LPs — Q3 2023

theme: “ REALISM ”

let’s get real… 2/
-The history of science is the evolution of INSTRUMENTS––our invention of them, our inquiry of the natural world using them

-The human discovery of REALITY––science––is darkness dazzled by the excesses of light

-…watching an algorithmic feed that highlights the most heinous activities humanity has ever undertaken even as it suppresses stories of the pervasive goodness radiating from our multitude of multitudes.

My morning reading––replica editions

with editorial layout of ton of national + local papers

Why? Because the most important stories are often the ones the editor says are less important (hidden on like page C22) but i find higher signal/more important than front page
2/ I use Pressreader (on ipad + desktop)

Here is one EXAMPLE
Not front page news––but a small article on pg.13 of The Guardian

To me reading between the lines i see higher probability than people expect of major disruptive UNION/LABOR STRIKES in UK leading up to Christmas...

1/ From insiders close to war cabinet I learned this wk

1—horrific tragic loss of innocent lives unfairly in a time/place of WAR is real, will grow + will be terribly painful + sad

2 Israel military will be unprecedented intense + unyielding to public or foreign pressure… 2/ Over 20yrs + 5 leaders––Israel stance was “deterrence”: tolerate Iran + Hamas fiery rhetoric + threat of genocide but never take it literally, until Oct 7

Hamas would attack (2010, ’12, ’14, ’18, ’21) then Israel would block+counter, heat up, die down then few yrs of ‘peace’

1/ Sharing our new Letter to Our Partners

[ Lux Q2 2023 LP Letter ]

“Drifting Upwards…” 2/ “Quarrelsome questions abound

-Imminent recssion or improbably dodged one?
-world united vs revanchist treats or more divided?
-will AI hype fade or be existential threat?

…Those who don’t know history––are mistakenly nostaligc or ignorant of how awful most of it was…”

1/ VERY cool new SCIENCE paper via GSK scientists

They ACCIDENTALLY discovered (as most great science happens, followed by the words ‘huh. that’s odd!’) that a bacteria “TC1” 🦠inside the gut of mosquito🦟––can get rid of malaria parasite–––that causes 600,000 deaths a year… 2/ They filed patent on it claiming the discovery for reducing MALARIA transmission…

1/ Future of finance + VC

Lux partner @deenashakir 🔥with USV partner @rebeccakaden + @business📺 @CarolineHydeTV

A few clips... 2/ @deenashakir on Lux early AI investments in @huggingface + @runwayml

1/ Releasing NEW Lux quarterly letter to LPs––Q1 2023

This letter has two parts:

I. An optimistic part I that we call ‘FUTUREFORMING’📈

II. Cautious + skeptical part II we call ‘RISKGAMING’. 📉 2/
*Lux now manages $5B+ and will write a founders first $100,000 check as well as a doubleing down war-chest building $100million high-conviction investment

*We are ADVISING⚠️—PULL back to PUSH ahead

*SPEND to SAVE: spend the ⏱️time + effort 💪to save an additional 10-15% of… twitter.com/i/web/status/1…

Congressional question for TikTok CEO:

1/ With such widespread influence bringing joy to people why has TikTok blocked videos about human rights in China—particularly those that on Xinjiang internment camps and Uyghur genocide—disabling accounts of users who post them?

https://twitter.com/KenRoth/status/1638807159629824000

2/ Why has TikTok down weighted posts deemed sensitive by the Chinese government and Chinese Communist Party, LGBTQ+ people, disabled people, and certain African-American hashtags?

1/What is objection to promoting everyone have non-lethal home tasers + widespread "gun clubs" 🔫(which can also have distributed but locked 🔫 depots protected by 4+ armed guards to ensure self regulation of a well regulated militia if needed to fight threat of govt tyranny? 2/ You can go to Skip Barber racing or wherever and drive 200mph and then you go home and don't drag race on the roads...

and still respect variety of Speed Limits and speed bumps and road rules and School Zones because we don't want kids or innocent people killed...

1/
Last year Lux––having been thru cycles of equity + credit bubbles—shared 3 strategies we see winning this next cycle. I’ll keep a thread on #3 of these:

CONSOLIDATION

(where our existing co’s follow good governance + capital allocation in M&A to consolidate their sectors)…

https://twitter.com/wolfejosh/status/1561123831850442753

2/ Fundamental strong + cash rich Lux family co @AppliedInt—led by brilliant Qasar Younis

—Acquires SceneBoxAI…

https://twitter.com/AppliedInt/status/1638208174112256001

PROTECT CUSTOMERS

NO bailout for banks
Failed banks should fail
Investors in failed business should fail
Mismanaged or bad business should fail

protect customer cash accounts from predators
CPR Act❣️= Cash dePosit Recovery Act
ONLY customers get their cash back BREAKING from Treasury/Fed/FDIC

*SVB: fully protects ALL depositors
*Signature: closed. ALL depositors will be made whole

NO bailout
Management removed
Shareholders + unsecured debtholders will not be protected
NO losses to taxpayers
YES special assessment on banks to cover

1/ Use this simple framework to figure out the AI craze

*ABUNDANCE
*SCARCITY

The “directional arrow of progress”proceeds from Auto-generated Gmail replies >>which presaged imminent Microsoft CoPilot full generated emails… 2/…whose frequency + volume sent by salespeople + marketers (if not sent by CSV sheets auto scraped and uploaded to CRMs) will make you wistful for Nigerian Spam emails…

1/ Just released. New Lux LP letter. Q4 2022…

(a few LPs have said it has ome of our boldest calls + positioning in a decade––based on what we believe happens next in MARKETS + MACRO—even as cutting-edge science + technology marches ahead…) 2/ from STRIFE to STRIVE

-Lux top 10 co’s have warchests nearly $5B of cash
-PAST prudence ought lead to powerful FUTURE potential
-new rounds 50-80% LOWER
-ownership (entry price) x outcome (exit price) x positiong sizing (based on incremental returns on incremental capital)

1/ low-barrier-to-entry proliferation of co's in a given category leads to
-competition that LOWERS📉prices + RAISES📈quality + features for CONSUMERS
-followed by laggard incumbent M&A of early leaders
-then 2nd place cult followers
-then INVESTOR loss, collapse + consolidation 2/ Fitbit was early category leader, Google laggged and knew Apple watch was going to be category leader, so...

predictable M&A...

1/ Out of STEALTH.

Some very BIG news in genetic medicine with some very serious people and some very serious funding ($193M)—introducing Lux family co…

AERA
businesswire.com/news/home/2023… 2/ While last 10yrs of excitement + Nobel prize for CRISPR
gave us tools to EDIT (cut/copy/paste)
we lacked the tools to DELIVER

like having shears + super glue from Home Depot
BUT not FedEx or UPS or Uber or Lyft!—UNTIL NOW

Aera—founded by CRISPR codiscover FENG ZHANG
is… twitter.com/i/web/status/1…

1/ In downturns the biggest FUTURE
outcomes will come from NEW companies
funded by deep-pocketed investors
giving warchest balance sheets
in tech + healthcare

revealing Lux's newest family--𝗣𝗔𝗥𝗔𝗗𝗜𝗚𝗠

Ken Frazier + CEO Ken Thoelke
with $200M from Lux, ARCH, GC, GV + more 2/Last year over there were over 430,000 clinical trials globally––vs just over 2,000 trials in 2000!

And Big Pharma paid out ~$50 billion last year to CROs to recruit patients for drug trials + administer them.

Great reveal from NYT on Lux family co 𝗣𝗔𝗥𝗔𝗗𝗜𝗚𝗠...

1/ Out of stealth—new Lux family co

OSMO

$60M founding round led by Lux +
GV, Amazon, Bill & Melinda Gates Foundation, Exor, Two Sigma, Henry Kravis, Robert Downey Jr + more

true—while negotiating spin out of Google—I LOST my sense of
SMELL via covid! wired.trib.al/lHDigXM 2/ our machines can SEE (cameras) + HEAR (microphones)—but not SMELL

with hardware + software

OSMO will work both ways to

-generate new smells designed in silico
-create a Shazam for odors
-detect human health from breath
-serve diverse industries detecting range of molecules