10 Black Swans All at Once: How China’s AI Disrupt’s EVERYTHING

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In this episode, Ryan Miller and renowned venture capitalist Jeremy Kranz explore the future of global investing and fund management. They reveal how emerging markets, particularly China, have outpaced Silicon Valley in real-world AI adoption and commercialization. Jeremy argues that a series of "Black Swans"—like the tokenization of capital markets and advancements in quantum computing—are poised to reshape the financial landscape and create trillion-dollar opportunities hiding in plain sight.

This is a must-watch for startup founders, private equity investors, and anyone interested in the future of technology trends and business leadership. 

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[THE GUEST]: Jeremy Kranz created the Bridge Forum and now Sentinel Labs, to assist US startups seeking to go global. With over 25 years of venture investing globally and more than 18 venture investments exited via IPO, founded platforms to connect Silicon Valley to international markets in digital assets & AI he is an expert in supply chain optimization and coined the term "interoperable commerce".  ​ 

[THE HOST]: Ryan Miller is an Angel investor

Transcript

Ryan Miller  

My name is Ryan Miller, and for the past 15 years, I've helped hundreds of people to raise millions of dollars for their funds and for their startups. If you're serious about raising money, launching your business or taking your life to the next level, this show will give you the answers so that you too can enjoy your pursuit of Making Billions. Let's get into it. 

Ryan Miller  

What if everything you know about global investing is about to become obsolete in the next 60 Minutes, Jeremy Kranz and I are going to reveal how emerging markets are rewriting the rules of investing and fund management, but revealing how there are 10 black swans that are happening all at once, coming in hard, but they will also create the next trillion dollar opportunity hiding in plain sight, and most investors won't even see it coming until it's too late. All this and more coming right now. Here we go.

Ryan Miller  

Jeremy, welcome to the show, man. 

Jeremy Kranz  

Thank you, Ryan, it is a pleasure to be here.

Ryan Miller  

Yeah, it's a pleasure to have you, buddy. You know, let's, let's jump right into it man, you have been on the forefront of venture capital, sovereign wealth funds, you have had a career. So let's just jump right into it. Why do you think China outpaced Silicon Valley in real world AI adoption.

Jeremy Kranz  

Okay, so as a preface here, because I'm this is for me and a privilege to be with you, I will say that your podcast is one where we can get from sound bites to insights in a way that I'm going to give you, like an answer that's a bit multiple layered, all right, and feel free to bear with me or poke and prod me along the way, because I know you and your audience, they want depth. So here's the depth. I would say that hidden in plain sight right now are all the examples we need to know China's unique acumen, maybe even leadership in the world around AI implementation. So let me take you back a few years pre covid. If we were sitting around talking about social media, and I said to you, who's going to compete with Facebook over the next five years, we could have had two answers, either nobody, or we would have picked like a US company. And what happened was the company that was the most impactful of Facebook was Tiktok, which I was the original venture investor in the company in China that got shut down, that then became Tiktok, called ByteDance. And I can tell you that while it's a great team that did many things well, they did not have a better marketing team. They did not have a better understanding of teenagers the United States, it was the prosecution of AI in social media that set them apart. And that's narrative I'm going to push out here, which is that China has for the longest time not gotten the credit as a researcher, how many papers they write, how many patents. But I would argue, just look at the outcomes, look at the commercialization of their research. And Tiktok, to me, is a dramatic example, but it's not the only one. 

Jeremy Kranz  

So let's go further. If five years ago, right before covid, were like, who's going to compete with Amazon and E commerce, we would have said Walmart, for good reason. We could have come up with a bunch of others on list, but the two that were nibbling at their feet were Chinese, Temu and Shein. Now, do you think they were better at fulfillment in the United States or package delivery or marketing or recommendation engines, it's a complicated explanation of what made them good, but I can simplify it. They commercialized AI and E commerce before Amazon did, and it goes into other domains. So I was an early investor in DJI, which they make drones. And if you've heard of them, my guess is, if I named you five more drone companies that were built in the US, that's not Anduril, you would say I've never heard of them. So how is it that one Chinese company became, for the consumer, the dominating company? Well, on the R&D front, DJI had an accumulation of R&D on a given year that was probably greater than all the US venture backdrop companies combined but more importantly, the commercialization of that. So they were the first to make a drone run longer and collision, avoid the branches and fly more than four miles out of sight, and then, you know, adapt your phone to be the controller, that is AI. That is a complicated commercialization of AI. So I would say, like hidden in plain sight, the market leader in commercialization of AI, for the longest time, has already been China. We're going to catch up, but, but we got to give credit where credit is due. They came here and they ran circles around us using AI in the industries we thought were impenetrable, E commerce, social media, drones, delivery, that's my answer.

Ryan Miller  

So when you went to because I know you've you visited out there, you told me a very interesting story about the three Red Dragons. I'm wondering if you could tell that story.

Jeremy Kranz  

All right, so in China, the government decided more than 10 years ago that they were going to ensure that certain areas of AI would develop quickly. And one of them was around visual AIs. They created three Red Dragons. Mind you, in my career, I've gone to Asia for 25 years, you know, up until covid, 10 to 15 weeks a year, and China was my primary stop. So it was part of my nature and my work to go and visit the new cool thing. And when I visited Three Red Dragons, what I saw was amazing. I'm going to tell you what I saw. But remember, this is pre 2015, that's how far back this is all right, if open AI was like three years ago this is a lot longer back. So the first company was a visual company that allowed Alibaba, what became Alipay, which had digital banking license, to create a Virtual bank location. So basically a bank teller machine. So you use your face. I know Apple face ID looks simple today, but back then, no one had ever done this where you could use facial recognition for a billion people and know that that person can unlock their bank account and make a transaction without ever going to an actual location. So that was pretty cool, that was one of the Red Dragons. The second Red Dragon had this famous story attached to it. China, put 320 million cameras around the country. I want to say that again, 320 million cameras. Somebody had to take all those feeds and find, let's say, the FBI, most wanted equivalent. And the famous story was, there was a stadium full of 80,000 people watching a soccer game, and within five minutes of the game starting, the police came and took a guy out of the stadium. They picked out the guy who was wanted. Now to make matters more complicated, I was once in Beijing around that time, and I was taking one of those, like, kick scooters you can rent with my team and I was a bit brash from the East Coast, so I was like, jumping on it and going and running red lights and my team was screaming, Jeremy, don't do it, why? Because all those cameras will figure out it's you, your credit card, you're plane. You can't get out of here. It's that intense and for us, it's really bad. They can freeze our bank accounts and have a permanent demerit against us in society, that's number two. But number three, well, that was really interesting, and number three really hasn't become much of a public story, so I'll be a little bit light on the details. But number three company, what they did is they created fake images. I could probably stop there, and your brain and your audience can probably extrapolate why that proved you so useful with 10 years of development.

Ryan Miller  

Holy cow. So the three Red Dragons really helped to I think that set a common focus for that part of the country to develop AI and to bring a lot of that to the forefront. Now that's a hot topic today, but let's not forget, you said this was around 10 years ago. I mean, I'm mostly in the North America side, I never heard of this 10 years ago. It was only a year or two ago, right, all of a sudden, open AI, and the Western culture would be like, Wow, this is great. Look at America leading the charge. And you're saying, cool, but them leading. That's a, that's a stretch it sounds like. So then I guess my next question is, what should the US, what should they do, to do differently, to catch up?

Jeremy Kranz  

The good news is that since the open eye moment, I feel like most countries are mobilized between government, academia and private sector. And I would remind you that, like an LLM is not the same as all versions of AI we there are many flavors here. And what the Chinese were doing with the three Red Dragons was machine learning, and an LLM is sort of an exponentially intense version of machine learning. So these are all kind of increments of each other. The cool thing about the United States market is we don't have the tech debt, so now we're spending, I mean, there are, I think, four companies spending something like $100 billion a quarter on their AI development between data centers and power and everything else. So I'll say we're not lacking in expenditures, in intensity of activity and coordination among the big boys, whether it be the apples, the Microsofts, the open eye anthropics, there's plenty of that going on. But if I had to say, like, there's, there's a degree of blind, spottedness and arrogance, you know, like we do look at ourselves here in the valley as being the center of it all, and what are we going to go through next? And I do appreciate that in other markets that have major advancements, they're the sneaky ones who give us a tick tock, who give us a Temu, who give us a DJI. And I think there's a lot more sneaky stuff coming in commercialization from other markets here that we just don't really suspect. Is like, what's the big deal about that? So I think the US is, you know, doing its job to provide the world and outs and and proliferate unique applications and capabilities. But I do think it's a pretty competitive petri dish, and the center doesn't revolve around the valley.

Ryan Miller  

Brilliant. You know, I remember listening to an interview by Jeff Bezos when he was talking about Blue Origin, and he said, you know, when I started Amazon, I the only reason why I was able to be successful with Amazon was because there were so many people that built the infrastructure before me. I didn't create the internet, I didn't create the books, but I didn't create online payment systems, I didn't create any of that. Yet, I was still able to build Amazon, because I was able to stand on the shoulders of those who came before me and built the infrastructure. What do you see, so now we're in this new phase, right? So we got the internet, and it's just kind of like every day, right? We're glued to our phones, but my theory is that there's infrastructure investments that are also happening, but also required. And so my question for you is, what do you see as some of those infrastructure investments that are going to support the rise of AI, whether it's China, whether it's America, what are those foundational things that need to be in place for all of these brilliant AI researchers to really take it to the next level. 

Jeremy Kranz  

Okay, I have like two parts, two ways of answering this. The first one is direct, and the other one is rather evasive and kind of confrontational. So the direct answer would be that we are at a point where the expectation of AI exceeds its capability, and the gap we assume is going to be filled. So I like tell people that there's probably $10 of AI offense to every $1 of defense. And I think in general, that infrastructure needs to rebalance for the realities of where AI doesn't quite meet the perfect standard and it needs to. So if you take all of your health care records and you put in ChatGPT, and you're like, my doctor was wrong all along, you know the possibility that there's some element of what you think is right that is actually wrong, the hallucination, the error that comes is pretty real, and there's a huge amount of infrastructure to deal with that problem that has to be rolled out, and also user expectations. So people talk about these vibe coding tools, and you hear these reports from public companies that these coders just vibe code everything, and 50% of our code was done. I suspect that this is a bit more marketing than reality, and there's a lot of human in the loop to go and inspect, you know, and make sure and making corrections. But who wouldn't want to have the prideful saying of like, I really wrote the code, but I think the error rates are just so high. So that's on the infrastructure side. There's a lot to go on there, but the more provocative answer is, are you assuming, Ryan, that AI is the most important thing because it may not be.

Ryan Miller  

That's a great question. Jeremy, I would say it feel and I'm just trying to put myself in position as a general society, especially on a western culture, it feels right, I'll speak from the heart. It feels like it's the most important thing. But then when I honestly, when I go to my head, I go, I go back to that infrastructure. I was like, cool without the right infrastructure to build up, like the something's going to crash and implode unless we have those foundational things.

Jeremy Kranz  

Yeah, so, but that assumes that the infrastructure needs to be built specifically for the things that we know exist today. So I'll make this argument that the the big black swans are plentiful. And the idea that, you know, what will ChatGPT 7 look like, is extremely exhilarating for all of us. It's like, I can't wait to try it. 

Ryan Miller  

Yeah. 

Jeremy Kranz  

But there are some orthogonal things that also have implications, that they could end up a bigger black swan than AI itself. Ai kind of kicks, kicks and catalyzes it. So give an example would be fusion power. I studied in college, I nearly dedicated my life to it. Thank God I didn't, because so many decades later, it's still not here, but there is now an effort, in part because AI infrastructure requires infinite power, and we don't have it that you can expect maybe better progress along that curve. And if we have fusion power, there's a lot bigger questions than just like, oh, we can power data centers, you can also have a Death Star, you know, literally, that's beauty of it.  Another one would be is quantum computers and quantum computers outperform a classical computer, not 10-1, not 1000-1, but like 10 000 000-1 and they solve different problems, they're really for a different use. At Sentinel, we have a view that the QPU, or the quantum processing unit, paired with the GPU, the thing that does your LLMs and the CPU, which we all use for everything else, like the combination of those three, is actually AI. It isn't the isn't just this, like Nvidia gives us a thing, and it does. It's a more complicated architecture that hasn't yet unfolded, but there's a more immediate Black Swan. So if it's not fusion and quantum, because you think it's too far out, and probably we can agree it's not tomorrow in 2025- 26 and 27 what looks pretty clear to me is the tokenization of capital markets, and we could talk about that later, but that, in itself, might have more disruptive elements to our economy in the near term than our exuberance over AI. So it's always good to question the question, just as a good practice in business, is like, I worry about AI infrastructure, but I also think about $100 billion a quarter multiple companies like maybe there, everyone's gonna pivot really quickly to this other set of considerations and black swans. And I leave out the possibility, I leave open the possibility that that's a real risk or opportunity as a venture capitalist, I make sure to cover these other black swans too.

Ryan Miller  

And that's, that's, that's what we were here to do is to look around corners, as I like to say, that's what our investors are trusting us with. So So with that, we have a lot of things going on, both on upside as well as downside as well as sideways and infrastructure there's so many exciting things, and I think every one of them is a likely rabbit hole here. But now I'm curious, I want to maybe zoom out of that one subject, and I'm curious about you, and I'm sure others are as well, is what was that true ambition,  because you clearly know this area. So now I'm curious, what was the true ambition that made you build your firm Sentinel?

Jeremy Kranz  

The long term ambition is the fun one, which is, I believe, actually one of my role models. I have the book from Dave Swenson, Pioneering Portfolio Management. And given the uniqueness of this podcast, probably a lot of people in your audience know about it and read it and know Dave Swenson is so I won't even bother saying.

Ryan Miller  

It's on my bookshelf right now as we're recording. 

Jeremy Kranz  

Okay? And may your rest in peace. He truly was a legend. 

Ryan Miller  

He was a legend. 

Jeremy Kranz  

He wrote his book more than 25 years ago, and it basically set the stage for risk, reward and correlation and asset allocation, you know, and that there's the alternative asset classes and everything else. I know I look like a venture capitalist, I talk like a venture capitalist, but if you really could get into my soul, I believe we're seeing the disruption of the basic assumptions of Investment Management and let me take you back to the GFC. When the GFC happened, I was at GIC and like all and GIC was run like a super size endowment, you know, like, like the Yale endowment. It's run very well, but at a scale that is pretty unique. And when the GFC happened, there were these questions that came up for everyone investment management, what is the impact or how is it that sub prime loans ended up impacting real estate, impacting public markets? How did this cascading effect and the the taxonomy that arose was we need to be thematically minded. We can't just look at risk reward and correlation of asset classes. There are some themes that will, that will bleed through the system, that we have to see those thematic things in order to truly manage risk. 

Jeremy Kranz  

Fast forward to today, my ambition, and the reason, one of the reasons I formed Sentinel, is that I believe the alternative asset classes are being liquefied. The illiquids are becoming liquid or more accessible to a larger group of people, leaving room the possibility for new financial products that we had not considered. And in 2020 I mean, there was a venture fund here that was funded by a bunch of banks, and they housed an incubation project, which was the first, became the very first ETF. I remember when I was in the valley and that happened, and I was like, wow, an ETF was born out of a venture fund but it's actually like a financial product. I think we're ending, we're in a place now where investment management is going to see new asset classes and re bundling of asset classes, and what was a liquid to become a liquid. And in that world, it doesn't matter if I call myself a venture capitalist, what I need to be is on the right side of the curve of where things are going. And so I formed Sentinel with the ambition to invest in the infrastructure and the innovation that catalyzes a change in capital markets that changes the very nature of what a venture capitalist or private equity guy is. In the short term to get there, we have to study the tactical realities of how financial system works and how experiments have been working, like cryptocurrencies and other things. You have to look at all these ingredients and think of them like chess pieces. Whether it was the right move or not, you can still win the game because it advances you to a cause. And we believe we're on the precipice, somewhat, somewhat supported by an administration who is very daring around this that the tokenization of real world assets in itself might be the black swan that matters the most to investors, and we want to make sure we are on the forefront of that.

Ryan Miller  

Wow. So the tokenization of those assets, one I always say, the greatest export of the US is the dollar. And I'm curious is that one of those foundational kind of rewrites of the rules is the how the US dollar is exported and tokenized and all that, what are you seeing on there? 

Jeremy Kranz  

All right, I call this the the internet effect. What I mean by that is that the internet was built for communication. I can send you an email. You can send me a picture. It really wasn't built for finance. So many people who say they're a FinTech company, they will, they'll exchange in money, but really it's a bank on the back end offline, and the front end is just the numbers on the page. The reason why blockchain was exciting, there are many, but one of them was it was an expression of the finternet. You could you could have these protocol based systems, and you could infuse financial transactions the very fabric of the internet itself. I think you and I want that it's safe, right? Well, it hasn't been that safe up until now, we can agree on that. And what the crypto community was doing for the last 10 years was trying to make the most illiquid things liquid, like I'm going to tokenize a building and let all citizens own the Eiffel Tower, whatever it is, okay. So that didn't work, but what ended up happening was stable coins and what are stable coins? It is taking the most liquid asset class on Earth, the dollar, and making it more liquid. See, that wasn't on everyone's bingo card five years ago, but turns out that's the killer app and there are many reasons why that's valuable. Your audience understands that, but I will note that I told you my goal was to be part of what rewrites the script of investment management that is Pioneering Portfolio Management in 2028 kind of thing. 

Jeremy Kranz  

Well, here's the problem, the entire capitalist system is predicated on fractional banking. So I put my money in a bank, bank account, and they give me less than what the actual Treasury rate is, and in exchange, they put my money at risk, and when they blow it up, the FDIC comes and says, I can I got your back up to a certain amount. Okay, so young kids have walked grown up in the GFC. They've seen Silicon Valley Bank, and they're not happy with they don't think that's the safe way, like my grandfather would have thought the bank is safe. And so now we're in a time where stable coins are the beginning the gateway to tokenizing your bank account, allowing you to accrue interest on this digital dollar. And I'll leave you with this, we're entering in a domain where most of this, you could say, is decriminalized, not yet legalized. Okay, the Clarity Act would more or less legalize it, that's on the horizon. But more importantly is there's a day that's in, that's coming in the cycle where I can Venmo you $10 and attach to it as an interest so I'm giving you $10 like a tokenized money market fund that I get used as a payment for you. And we the mechanics are no longer a concern, it's a sort of like tax and is it legal? Is it decriminalized? All this stuff is still unsorted out, but it's people want to sort it out. And in a world where we've been exporting the dollar, there'll be US dollar loans overseas. Boy, when you can start making payments with yield bearing instruments, that is going to challenge the fractional banking system, that just erases all sorts questions, and what I said, anyone who's listening, who's from the traditional markets, like I am, should be either hard if you've never heard this before, you're either horrified or you think I'm crazy. And I'm okay with that, because it could be horrifying and I might be crazy. It's just go read the clarity act and then come back and send me an email and tell me what you think. Because if you haven't read it, it's It's the gateway to get there, and the Genius Act, which is the stable coins you're asking about that's past. We know what a stable coin is, but a yield bearing payment instrument. Wow and that is very significant notice. I haven't used the word crypto because the blockchain is a useful way of doing all this, but it's not fundamentally, we don't have to bet on crypto. We're talking about digital dollars you can do it many different ways. And so it's not as Connor. It's not as politically oriented, it's more of what kind of capital markets do you want and this would be a very transformational move that is in progress.

Ryan Miller  

So is that part of what you've told me, the 10 Black Swans all at once?

Jeremy Kranz  

Yes, arguably that one could be the more the soonest and the biggest of the Black Swans, isn't that wild. You know Ryan, when if you go back to every election, and you look at the debates, you know the final candidates, and you look at the topics that they debated, it's like nine out of 10 elections. It wasn't those topics were not the things that define things. It was like, it was like covid, it was some other war that wasn't anticipated. I feel like that's how tech feels to me. It's very moody, it's very if everyone's talking it must be the most important thing. And I don't want to downplay AI, I'm an investor in that category, for sure. I just think these orthogonal Black Swans, they're also happening, we're not we could pay more attention, especially when they're led by the federal government. I think it's a big deal. 

Ryan Miller  

Man, that that is, 10 Black Swans all at once. So all I can think is, buckle up buttercup but more important, importantly, it's something to pay attention to, to prepare for, and also position yourself for. As I like to say, fund management is more risk management than asset management, and it's a subtle nuance, but I think it underscores the importance that a big part of this industry is managing those risks, and as we like to say, to look around those corners, so.

Jeremy Kranz  

Ryan, if I may, now personalize it to the art of fund management, this is one of your expertise. So what do I do, right, I set up a fund. I go to I write an email my LPs, I like do a capital call right now. This is how private equity has worked for the longest time. The capital call comes in, I would say it's 10 million. Every LP has some share of it, so I finally get it after the demanded two weeks. And you have two weeks notice, I have to have it, but for whatever reason, the deal gets delayed three months. Oh, you know what, the deal never happens. So I got to send the money back, that's the honorable thing to do, and that's three months of lost interest. So stable coins tokenized money market funds. And one last piece we didn't talk about, a smart contract attached to it says that my LPS can keep their money accruing interest. I push a letter out that says I'm doing 10 million capital call, leave your money in those accounts, get your interest, and the day that I need it, we will instantly settle it, I'll transfer it. You put a smart contract on that digital dollar. That's the world as a fund manager I have to prepare for, not in 10 years, like in two years, like it's coming, and that's the banks are going to be excited to do that. There's some unique benefits to providing that service to institutions. So as a fund manager, just there, it touches me. Now, how much money are we talking about? How much interest preserved from my LPS would that look like? How many broken deals happen in buyout space? It's not a small amount, I'm not talking about a feature. I'm talking about Black Swan kind of in fund management, among many others. That's why I give this so much attention.

Ryan Miller  

Wow, that's absolutely brilliant. And you know, you remind me, because I've been and I'm sure you have too, is where you have colleagues that are in this, and they're also running funds a couple of times over my career, I remember I was on vacation with my family in San Diego, and I had a good friend from the UK call me, and he said it was he just launched his fund, and he said, Ryan, I'm I'm screwed, like it's a billion dollar deal. This is the biggest deal of my life, there's tons of people involved, and I didn't know all the details, like he did, but there was a billion dollars, and he had one investor that was not responding to the capital call, and it was 20 million bucks that was going to absolutely melt down a billion dollar investment. And he was freaking out and he was like, we put, you know, I got all these people accounted on me, and you know, you're feeling it in that moment. How great would that be to get rid of that issue where you're saying you made the commitment check, and now it automatically settles. So we're not, you know, resting on, how does someone feel today? And we have a legal agreement which is codified in in this transaction with the settlement agreements. And once conditions are met, I don't, I just have to let you know but it's automatic. Wouldn't that be great that the counterparty risk is already inherently implicit in this transaction arrangement, and then you're not calling your other fund manager buddies, be like, I need 20 million bucks in a week or I'm doomed. You know? It's just like, nope. Counterparty Risk completely baked into this, I love your vision of the future, right?

Jeremy Kranz  

Ryan, this is, this is the other answer of why I started Sentinel, is that there is an important translation of certain innovations, like blockchains into practical utility, like the one you just described, where you said, wow, you weren't like, I'm afraid you're like, that sounds very useful for my friend who was in a stuck position. Yeah, it's good business. It's sound use of software. It isn't speculation, and the world is going to taste that in short order. You could argue that a lot of people have, I mean, stable coins are penetrating the global markets quickly. I don't know if you have a friend that owns a few. It's like, it just when do they become tokenized payments and other things, it's coming. The rate of change is very, very significant, and people are grossly under appreciating it.

Ryan Miller  

That's brilliant. Now we're kind of talking about the macros working our way into the micro. So let's, let's go even deeper, more precise on this one. So when it comes to Sentinel's Global strategy, and you get deals, you have founders that come in, how do you guys assess whether a founder can truly integrate with an Enterprise Client?

Jeremy Kranz  

Okay, we built Sentinel Labs for this purpose, we looked at particularly if you have pioneering technology, and you're bright eyed and you love your tech, you're an engineer. Most tech companies and most startups are tech or engineer LED. What happens when you go to the traditional markets and you try to get implemented is you learn a lot of lessons that will call brain damage. This is in the enterprise, you know, selling to banks, selling to governments. And so our thesis was to hire people who have been founders, like these guys, who had to go and sell the governments and financial systems and understand the tactical realities of specific areas of tech, where implementation can go very wrong very quickly, and the way we go about keeping up with it. And this is the inversion of like the role of venture capitalists is rather than spend a majority of our time with founders, we do spend a lot, but most of our time is spent with enterprises and learning about their adoption and then taking those lessons back to the founders. We call it ride along. We'll say, hey founder, we're gonna go with you on the sales call, and we've seen these guys get sold to and implemented for the last three years, we'll watch how things are going. We'll predict if it's gonna go well or not based on how the conversations are unfolding. And, you know, it's a very difficult ambition, because you're talking about 75 to 100 conversation with enterprises. We focus on enterprises outside the US, because it's a more of an opaque experience for the US founder, and we try to get smart about the tactical realities. 

Jeremy Kranz  

What we discover to, you know, we're always surprised, so we discover is that the headlines in the media and the realities around implementation are dramatically different. So let's take AI in the enterprise, I know it feels like it's going and transforming, it's not. Actually, most companies haven't even started their efforts, or they did a project. It didn't work, and they feel a little bit like, oh my god. It feels like everyone else is winning and we're not. So they don't want to talk about it anymore. One of my favorite subjects was a CTO of a large car company who told me, six months ago, they up their budget for IT as a consequence of their AI ambitions, and they bought an enormous amount of GPU capacity during this recent panic, then there was, we're all going to run out. So if you were the car company, you didn't have it, you're going to be in trouble. And they watched the utilization. They had less than 20% utilization. But the more alarming thing was, of all those GPU systems that they set up, almost all the applications should have and could have been run on a CPU. So people wanted to show their bosses they did something special when they actually could have done on the old stack. And so we're very careful about recognizing the true tactical realities of what's going on in enterprise so that founders can navigate more productively. Otherwise, you can meet 100 companies and go down the rabbit hole and fail. We try to make to make sure we lower that risk. 

Ryan Miller  

Brilliant. So, when they come and they pitch you guys, and you're really analyzing, it sounds like you guys are very focused on a couple of things. One, sure, founder, that's fine, but I think where you're headed, and you keep me honest, it sounds like you're more focused on researching the firm. How are they integrating, like you said, and really just assessing the the end client or the end user of a lot of these technologies, and then working backwards from there to say when we get pitched, we have a good sense of what what end users are looking for, and therefore that gives us a little bit of an edge to do our analysis, rather than, I, like the founder, he's got a cool resume and a haircut, we're in you're more methodical on that, is that what I'm hearing?

Jeremy Kranz  

You got it right and we have a few frameworks for this that illustrate how methodical you could be. So you could go on one extreme you could say, I met this guy. I looked into his eyes, I saw into his soul, and I know he's a killer, you know. By the way, for all you VCs listening, if you're the one who says I knew all along that guy was a killer and he was a winner, then did you feel that way about the 99 other ones that didn't work out? Like I always struggle, like I set up, is that even a skill? I'll say I don't have this skill and if someone else does, I haven't really seen anyone that has it either. It's it's not possible. So we try to understand the industry and the voice of the customer, and that's what you're pointing out. But there's another element to this, we try to assess the acumen of the operating team, and we break it down. And we break it down because there's a lot of psychological biases in investing in tech. I think you've seen a demo in your lifetime like this is amazing. It's gonna take over the world and it never became a thing, you know Juicero, have you ever tried it was probably good juice, but like it wasn't gonna work. What happens is you have to break down and decouple your emotions of the facts of the evidence you're gathering about the true story that's unfolding, particularly for enterprise. And what I mean is this, for every company, we look for the vision of the CEO, whoever in the team has it, this guy's gonna have a vision about where the world is gonna go. We look for the bean counting of a CFO, meaning they understand that there are union economics that are true today, that are probably negative and horrible, but can be improved over time through careful understanding and planning of the industry. And that particular acumen at the startup phase is ridiculously important, in our view, because you could blow a lot of money to get it wrong and then still need more money to get it right. So in enterprise, you don't want to make that mistake. So we are very careful looking for the acumen of bean counting. 

Jeremy Kranz  

The third one is the acumen of engineering. Does this team have the capacity to build the hard thing that they say they're going to build? Do they have they demonstrate it from the past? And the fourth one is, are they choosing to build in the sequence that makes sense where the customer is at and that's the product management question. And there was a time where in the drone space, I did a lot of work, and I only invested really in this one Chinese drone company. And the reason that I couldn't get comfortable with the US companies was that on the product management side, they all had this idea that they were going to wow insurance companies and to fly them over buildings, and they're going to help them with underwriting. And I was like, that is a product roadmap that says I'm going to revolutionize insurance tomorrow with my drone and its images. So now you're really gonna have to learn about underwriting, like, that's not a good product roadmap. You need to start with something simple, like, I'll send you a picture, and you decide what to do with it. So that's the element. Is the vision of the CEO, the being counting the CFO, the capacity to build something hard to do in engineering, and the product management acumen to know what to do, first, second and third. And we believe that in enterprise and pioneering tech, the combination of those skills, even if all in the brains of one person, are pretty much required at some early stage of the company to efficiently build the business and get to the finish line. And so that's how we go about you said we're analytical, yes, it's not so much quantitative, but those are the things we look for. 

Ryan Miller  

Brilliant. Sounds like you guys do a ton of research. And so my question, and I'd love for you to talk about how Sentinel Labs Research has changed some of your investment outcomes. Maybe walk me through a little bit of the inside view on that.

Jeremy Kranz  

We go to our LPs and our founders, and we ask them, What are questions that you're wrestling with so and we give them an answer. And the practice that I just described is not the way that it's normally been done in venture. So normally in venture, the venture capitalists will write a blog post and put on their website, and now you've written one thing for the entire world. So whoever the audience is, they get the same thing. What we do is we personalize and we make it very timely, if you've asked me a question, if Ryan asked me a question, I know about, question, I know about Ryan, I'm giving the answer that's right for him. And so we've been building this muscle for several years, and the reason we did this is that it prepares us to either cater to a founder or whoever it is, in a way that gets closer to the what's meaningful for us and for them in the conversation. And that's helpful because it helps, like, identify new customers that weren't identified before it comes up with new trends. 

Jeremy Kranz  

I'll give you a funny example of this, and I say funny only because it's one of those anomalies or counterfactual to our perceptions. There's a company that we invested in, and I don't want to promote my books. I won't even name the company, just tell you a general story, and the company does, they sell to the defense industry blockchains for cybersecurity use. If you go to the website, it would actually say, we sell blockchain to the Department of Defense and that sounds like, how can that even be? And our research was that there's a type of blockchain called zero knowledge proof, something we specialize in, and it's really useful for cybersecurity. And so we were without looking for this, we understood like there's some cybersecurity problems that can really only be solved through a mechanism that can replace an API. That's what this does, replace an API so that you can ask the question of a database and only get a yes or no answer instead of knowing the underlying database, and now you can't hack the API and all the credit cards are gone or find out where the war theater is. And so this company applied a technology that we knew was robust and applied in a context that was uniquely suited for a customer who really needed it to protect the war theater. And that was really the work of Sentinel Labs doing the research and thinking through where, where are the problem statements in cyber security, and where are the technologies that match to it right now for what needs to be solved right now. And in our case, we were getting bombed American soldiers in Syria and other places. How do they find out where we were and what we're doing so easily. All right, so someone is of it is that there's 30,000 pieces of equipment that have API's, and they can get hacked. This is the thing that closes that loop.

Ryan Miller  

Brilliant. So, so it sounds like this just gives you that level of intelligence. And one of the things, you know, when we first met, you were telling me about a big part of that also is what I like to call being a Solution Architect, so you actually go to some of your investors and provide some of this intel, as long as it's applicable is that right? 

Jeremy Kranz  

Yeah, I told that story of the GFC and the thematic thing. So part of what we do is we know we're venture capitalists, and yes, you can call us and we can. We don't want to shoot from the hip if you we had an LP who was very sensitive to the launch of deep seek. The Open Source LLM, and they own a lot of data centers, so they're like, what should we be thinking about? And we assembled an answer to the question, specific to their what they own, specific to the situation and open source is one of our top specialties. That's what we love the most, is the application of open source. So we had a lot to say, but rather than chew from the hip, we prepared a very well packaged report specific to them. Now on our website, we did have a redacted version, and others can read if they're interested in that subject. But we for them, we're like we know we have to solve this problem in the context of what you care about, making you entertain. I call it infotainment, giving you infotainment. Anyone who knows Jeremy Kranz knows I do not like infotainment. I want to study the hell out of something, and I want to report the evidence and then put editorial on top of it, and that's what we did. In the same week that deep seek was launched, we gathered as much evidence as we could, we assembled it, we personalize it to that audience, and we put our editorial on it. It doesn't mean we were right, but it's a practice that is just not going that's not how venture normally is done, and what it allows me to do is to answer questions about investment management and technology's effect on it. So, you know, modular I remember, in my old job, I had to do a lot of analysis on the effect of modular buildings. You know, you where you put the entire when you build a building like Legos instead of stick building. And we made some investments, and they didn't work out and we use the lessons of that to personalize the answer for people in real estate, we hosted a whole conference trying to explain our lessons, that there's some real failure points that are not going to be surmountable anytime soon. We admit our defeat on this, and that was valuable to people in real estate who otherwise were healing from the valley. This is absolutely going to work, it's just a matter of time. Actually, to this day, it still doesn't work. So turns out it's very valuable, and that relationship becomes more trusted as a result.

Ryan Miller  

So well said, man. So how phenomenal is that and I just wanted to, I wanted to bring that up, just from a point of illustrating how different in the excellence that we're doing of more on a traditional metric of client retention. I know that's like a common piece of jargon that's thrown around a lot, but what it's saying is, hey, we're not just going to investors and pitching deals. We actually put in resources to help you solve problems, not help you invest in deals, necessarily. And I know I'm really splitting hairs here, but I think it's one that deserves the attention, and in providing that insight, being a Solution Architect, now it's saying, hey, we'd love to be useful to you and and you are. And so I think that's a really smart strategy, I think, for our listeners around the world to really listen to say it's not just about the deal. Obviously, have good deals. Bet those things, sure. Business as usual, you got that covered. But I think what you're doing at Sentinel is absolutely brilliant. I've never heard of that before, and as soon as you said it, I was like, how is this not obvious and so good for you on doing that. Now, my question, with all of this research we're still running, and we talked about computing, we talked about the finternet, we're talking about a lot of stuff. What would you say is, right now, one of the most overlooked investment opportunities in open computing today?

Jeremy Kranz  

Okay, the forces at work that matter to answer the question are open source. It better provide some evidence of that before I use it as my argument. So if you go back in the history of tech, many of the big super cycles that we've all experienced and loved and enjoyed were really predicated on open source as an important feature. So today, if you are on a website, the likelihood that it's runs on WordPress, if it's a corporate website, is very high. I think it's like 40% of all the corporate websites. Well, WordPress is open source project if you're on any browser at this point, that matters, be it Chrome or the edge from Microsoft. You're talking about open source. It's all in Chromium, Android, open source the apple in 2007 when it came out, why was it stable, because part of that stack, the whole thing was Linux Kernel, that's open source. So look me in the eye and tell me that you know, a company called Open AI, you know, like open source didn't matter. 

Jeremy Kranz  

Now, here's the rub, here's the rub, here's the rub. When I entered into venture in 97 I was assigned two things, and no one else wanted to do in the shop. And I was youngest guy says you cover outside the US, that's why I know ages so well, they sent me there young. And the second was, cover open source, because it's not worth anything. Now, over those decades, I've seen things that surprised me, like open source, doing cryptocurrencies right, there's an incentive to build it. I get paid. But this next frontier that matters is that AI can write open source. The compounding effects of that are way under appreciated, so much so that I'll make a make a bold statement, is my my moment here, drumroll and my bold statement, I 100% believe. I've had the privilege of investing in a whole bunch of companies that made it to from a venture stage to over 100 billion. But I'll be honest, I only ever thought one of them would you know if you read my memo, I only thought one would. 100 billion was like a crazy thing that I didn't think would happen for me. So some of these companies did and when I think about my practice of venture today, some people who know me, they're like, Jeremy, what's the next 100 billion dollar opportunity? And I say, whoa, whoa, whoa, that's not the right way to think about it. We're living in an era where the cost to build anything is going down. What do we talk about today? A digital dollar that will be interoperable, protocol based, I don't have to call a bank and apply for anything, I just run my digital dollar. That's like a database of dollars that's that's a new thing, that's not a WordPress that's more complicated, and it's available today. 

Jeremy Kranz  

So we're heading down a path where the process of building a company has never been a will at some point be cheaper, I know right now it's a little bit of a weird moment, but it will be very cheap to build a company. And so I say to people, the way to think about entrepreneurship, and what's under appreciated is we're entering an era where the competition for Capital and Talent isn't what's going to matter, it's the idea and how quickly you assemble it and how you distribute it. And as a result, there will be 100 1 billion opportunity, $1 billion companies built that as a venture capitalist, if I can get my head around it, I will have a more lucrative outcome and by the way, the founders will too, than trying to find in the next Uber. You know, it's like more sensible to me to have lots of little companies that get big on little capital and little talent requirements. And the most amazing part about what I just said for me, what makes me so delighted is, why am I called Sentinel Global, because I think outside the US, they're figuring this out sooner. Remember what software is gonna eat the world? Well, venture companies become more expensive to build in the last 10 years than I've ever imagined. You know, like series 100 million and there are these counter factors, like, Yeah, but they produce 100 million revenue 18 months. Yes, that's that one guy, and then there's the rest of them. So in a world where efficiency hasn't truly been realized in the US, but the infrastructure is being built to provide it to the world, watch out, man, watch out, there'll be 100 $1 billion companies flourishing every quarter, and it is the 100 billion dollar opportunity every quarter. And yes, they'll also be crazy anthropic outcomes and yes, I love all that, but I think the underappreciated are these very capital efficient businesses that do very good point solutions, and they'll be all over this planet and it is a unique investment opportunity.

Ryan Miller  

Brilliant. It's the classic, the sum of the parts is greater than the whole, if you've ever heard that expression. So these instead of 100 billion in one shot, it's from a probability standpoint. I think of what I'm hearing is the probability weighted average, 25 cent word that we were taught in college. Probability weighted average is if instead of $100 billion Ultra corn, we want to find 100 $1 billion companies and then probability, probability around that probably puts us a little bit better position as far as portfolio goes, is that what I'm hearing?

Jeremy Kranz  

Yes, yes, you're Making Billions, may have to be called Making Trillions, maybe Making Trillions 1 billion at a time. You know, it's like that. We're That's right. It's going to be a mosaic of stuff. And if I may, one last more addendum, if I could be more provocative, I would say and the way these companies are built, not only functioning is different, but the way they raise capital is different. So we're in a moment right now where public stocks are being tokenized and distributed outside the US. It's called Robin Hood, Coinbase is next, so that's happening. Private companies at any stage, at some point after the Clarity Act, are likely going to have the privilege to decide how to raise their money from whom, and how to manage their cap tables and deal with liquidity. So the prosecution of $100 billion opportunity, either as one company or as 100 companies, I think, also is going to be different. So I prefer to look at the small because I can manage, I can manage the risk of tokenization across a wider portfolio.

Ryan Miller  

And that goes right back to what you're talking about, of how the right now mainstream and alternatives are going to flip, and alternatives are going to be mainstream, and mainstream is going to be the alternative. Does that kind of tie into this, this black swan, this where the polls flip, and now we're figuring out where's gravity and where's the center of the universe, is that big part of that?

Jeremy Kranz  

It's a big part of it. Yeah, you know the I was talking to an investor last night who is very sophisticated out in Asia, and I was trying to explain what the app store of AI would look like, and kind of summarize everything I was saying, one which is like, the app store of AI, which might be open AI. Is just that I wake up, I vibe code an application on open AI that does all the sophisticated stuff, you know, go get me a stable coin, build me a bank account, you know, make me an app, do all these things. My application is up and running with me and a friend in a week. And as long as I know how to sell and get it out to people, I don't know if I need 50 more employees anytime soon. Customer Service, it's a SaaS thing. I guess it's we're getting into a weird time where we don't understand that mosaic of how you build a company is quickly going to change again outside the US, they get it. They're salivating, they can't believe it's finding their chance they don't have to get beat on talent and capital. 

Ryan Miller  

Brilliant man. So how do you think tokenization will reshape capital markets as we go forward?

Jeremy Kranz  

The answer is fully, not part, not even partially, if not, this is not me saying I'm going to do it, but if the powers that be execute the plan as they say, they're going to plan, they're going to do it, then the answer is fully. Now I don't want to be I don't mean like everything changes everywhere, like there's certain things that to tokenize them feels like a bad idea, or like too much pain, like real estate fraction, like when there's a mortgage and everything. I don't understand how you go to court all these virtual owners, but maybe someone will figure it out. But simple stuff, like private and public stocks, what will happen is the rebundling the new financial instruments that are going to come. 

Ryan Miller  

So then that's the alternatives are no longer alternatives, it's just investments.

Jeremy Kranz  

Or even better, I said I was in the valley when this very smart group of VCs formed the first ETF as an incubation. Right now I see we're doing some and I see others doing really great stuff where they're incubating. What would be like if ETF was rebundling of public stocks in a cheap form that you can get say, like, I want an ETF for ESG. I want an ETF for biotech, I want an ETF for Brazil. Why can't you have that be an ETF for AI that has some anthropic, some Nvidia, some open AI, some Alibaba, like, maybe you decide what's in it, and it just makes it for you, and it's like a new security for you willing to pay for it. I think we're entering in a way, in a world where it's not the tokenization that matters, it's that it enables rebundling. It could be my fund. Should someone decide in my fund or invest in a group of funds at once with one button, without ever meeting me, like maybe that's a thing. How about divesting from my fund? You know now you have to wait 10 years. It's like a blind pool and all this stuff but maybe the whole secondary exchange market of fun ownership can be tokenized. You can start to smart contract KYC and AML and I may not either meet the buyer of from one LP to another, like we are going to do those experiments, not in five years, Ryan, not it's happening now. Our team is sitting there meeting entrepreneurs from Wall Street who left their jobs to go build that stuff and run those experiments. So I think it's fully but it doesn't mean I'm trying to be inflammatory, like everything changes. I just think it's going to touch enough of investment management, then it'll be a hot topic for any CIO. I don't know how you ignore it at this point. 

Ryan Miller  

Brilliant. Yeah. And that goes right back to the tech that's being built right now to mitigate a lot of the counterparty risks that are in place too. So you mentioned KYC, AML, a lot of these things, that says, if we're going to do business together, there's a few boxes we need to check. And sounds like it's being built right now to mitigate a lot of those unknown, known unknowns investments.

Jeremy Kranz  

Yeah, let me, let me tie this together. I think was after the GFC Japan had a nuclear plant meltdown, it was very sad scenario that unfolded. And I remember I was at GIC, and the question came up, what is the impact of that meltdown on everything we own? So we call that thematic event, and we not only came up with our answer, but then we asked all of the great fund managers of that era, like, how did you go about the answer? And I'm going to overstate the average, but it's roughly like it took six months to find out what happened yesterday, fully. The reason why tokenization is interesting is not that you're going to find out the answers that much faster other systems can get you there. The more interesting thing is you can deal with it. So let's just say that you owned a building, and the building was, you know, it happened to be a place where they produced Japanese whiskey. And I believe, if I remember correctly, Japanese whiskey is one of those industries that got decimated or got impacted by the nuclear meltdown. So what, so you know that you own it, so you can cry with tissues like it sucks, you know? No, you might be able to bundle pieces of the ownership and find someone who and do it in rapid order and de risk investment management's never had that opportunity. You the reason you do asset allocation, and you sort of set it and forget it and just deal with some manager selection on the way, is that your the assumption is it's hard to make changes, and it won't be as hard every year that passes for the next 10 years, it's gonna get easy, and I think it gets more than twice easy. It gets like 10 times easy. And that's the big deal, that's what I mean fully, your job as a CIO is about to change. 

Ryan Miller  

Can't wait, man. I'm looking forward to it. Speaking of that, so the thematic events and a lot of changes, the 10 Black Swans, all at once. I love that. What would you say are some of those boring infrastructure layers that matter the most with this AI boom?

Jeremy Kranz  

Boring infrastructure layers, safety, safety, safety. And safety isn't like you know, I want the AI to not be racist, that's good, but that's not what I mean by safety. Safety is that I put something in production that AI contributed to, and nothing important broke. So like vibe coding. It turns out, I think if you put vibe coding in a very important critical role, it's probably going to break without a lot of human correction along the way, because it's not at that level yet. And so that's like one part, part of infrastructure, is really important. There are the known things that I'm not an expert in, like, okay, we have to solve our power issues. We have to build a lot of data centers, you'll find another guest who can give you all the facts and figures. I don't even track it, I just, I see so much money slurring around. I'm like, ah, geez, money will solve problems sometimes. 

Jeremy Kranz  

But I will tell you a funny thing about about what we what we what we tend to research, all of us, myself included, because we think we're supposed to remember when Bitcoin was so we talked about infrastructure, Bitcoin was everyone's enemy. Who cared about ESG because it was going to cost too much energy. So like, what about AI is less energy than Bitcoin? And by the way, Bitcoin is big now, so is that, is that, you know, carbon emissions, and I don't actually know the answer. I'm just surprised how it's not a topic like it's not a thing. So when it comes to the boring areas of infrastructure, there's probably a lot of stuff that is being overlooked, and there's probably a lot of things that are being talked about frenetically that may not matter as much we spend time on. Like I said, the combination of the CPU, the GPU and the QPU, we feel. Like the dominant design, the end state is a more complicated data center with with a whole bunch of different systems and capabilities. And right now we're in this, like, blackberry and palm phase. So do we need to make the palm keyboard bigger, you know is that, are you asking me, what the infrastructure? I don't think that. I don't even think I think that way. I'm like, there's going to be a leap here from BlackBerry to an iPhone in how the whole infrastructure is even being built, and there'll be some winners and some very sad losers who didn't, who none of us saw it coming, but it just happened, fast. 

Ryan Miller  

Man. And where does the role of well, I call it over correction, some people call it hallucinations. Where does that play as far as getting that piece right for the AI, boom?

Jeremy Kranz  

We've all experienced hallucination, but I have a recommendation for the audience to experience it in the most impactful way, and when you can never look the other way again. So you go to any of the LLMs, whatever you prefer, and just put the memory function on, because we say hallucination, but it's hallucination, sounds like it just made up something that's completely wrong, and you could spot it. I'm about to give an example where it's more subtle. So I did this on a Saturday. I put the memory button on, and I decided I wanted to ask about a topic that I know really well, which is how to set up your audio visual for your home theater. And I gave it all the components of my current theater, and I said, I want to make these subtle changes so that I can get whatever better sound and visuals tell me how to go about it. The answer they came back with had the level of sophistication that inspired me. Wow, with charts and this, and buy this from in this place, and it's just so good, but 10% was wrong and the problem is that only an expert could ever know that 10% was wrong. So that's okay, I have memory, right? So I go in there and I say, hey, ChatGBT good news. I'm an expert. I'm gonna give you a correction, and the correction came back. Hey, thanks. Now you've clarified the answer, yeah, okay, here's a new answer. Why I tell you this story is what happened the next day I came back, remember, memory was turned on, and I enter the same prompt, assuming you remember what I told you yesterday, right, ChatGPT, well, it comes up the new answer, also inspiring and also about 10% wrong, but this time in a new way. And now I'm going to tell you the answer your question. LLMs are super size memorization tools. If I'm simplifying, I want to give them credit where credit is due, they're impressive, but they're we're spending a lot of money to make the memorization capability like that much better. And the value for that is very high. I don't want to discount it, but what we're really talking about in true AI is we're seeking chain of thought, and chain of thought is solving a complex problem. 

Jeremy Kranz  

On the question of infrastructure and on hallucinations. It's all the same thing for me, which is we're not actually getting things that are truly thinking, I know it says it's reasoning and all that it is, but it's reasoning through memorization. And when we poll experts, not myself, like we poll the experts in AI implementation, they always tell us this, memorization is not a pathway to chain of thought. And what is chain of thought like, why would that be so useful? Is chain of thought is not only just solving the problem, but thinking about the dimensionality of the problem. So there's a very clever government official in Singapore that gave me this example. If you go to an LLM and you say, I'm gonna show up in Singapore, I'm going to go to the airport without a visa, and what would I do, right, and it'll give you the answers that it can figure out based on memorization. Because there are blog posts and there's rules from the government, but it turns out there's this one weird answer that's also true, but you'd have to reason it yourself, which is, you could take off all the bags and everything you have and just be in your shoes and shorts and T shirt, and you can actually walk up a certain perimeter and leave the country. There's like, a way to do it, but it's such an irregular answer, right, it's not part of any formula that anyone's really tried, but it is a reasoned answer, it could be done. And that is the infrastructure and hallucination problem is that we're not we shouldn't be perfecting memorization tools. If it is possible to build chain of thought, and if it is possible to chain of thought, then that's different between Blackberry and iPhone, conceptually. As a venture capitalist, I'm about chain of thought, I want to see chain of thought. I know chain of thought matters more, but I will admit the value creation of just great memorization tools is very high, not to be ignored. And yeah, so that's like, I think the next frontier. If I remember we talked about China the beginning, I suspect China is building chain of thought tools, I suspect they've got it figured out. I suspect they're very far along on quantum that's what I think is going to happen. But, you know, I don't have the evidence that I need to say definitively.

Ryan Miller  

So speaking of that, I wouldn't call China an emerging market, but just in a general category, it seemed like covid a lot of things shifted. You mentioned, we can call it an event horizon, right? You remember the world before, and you remember the world after, and you kind of pinpoint to say at this moment everything changed. Covid was an event horizon, not just economically, geopolitically, but sometimes personally as well and so covid was one of those event horizons, I would argue. And it seemed to have shifted, it created a shift from in emerging markets to shift them, from maybe some of them were following, to a lot of them now leading. What do you think was the catalyst behind that?

Jeremy Kranz  

Just clarify, following, leading in what way?

Ryan Miller  

In AI, in development, just a lot of the things that happen in China and around the world. We're looking for a lot of those. I'm curious, from your perspective of what do you think the catalyst during that covid time that shifted people to really bring them to the forefront? Because it sounds like this happened a long time ago, like you said, 10 years ago, 2015, you were seeing things, and so these things were happening, maybe in stealth. But it seemed like covid was the thing that really brought a lot of these things to the forefront. I'm curious if you have any thoughts or opinions on some of those active catalysts that really started to propel people to the top, where it's not a US centric, but we're in a real race now.

Jeremy Kranz  

Yeah, on the consumer application side, it's a fairly understood, you know, they say like this for that. So if there's an Uber here, there'll be a flip card or and I played that game quite a bit as a venture capitalist. So I won't go through the simple minded answer that reflects on that consumer app front, but I will tell you a story that just reflects the cultural element, which I think is the underpinning. All right, like when I visited ByteDance again, the company that ended up Giving birth to Tiktok. When I visited ByteDance 's research arm, they did a demonstration for me. And it reflects the culture of innovation that I think covid only made it exposed it. It was always there, you just didn't see it. And the culture of innovation that I saw was that I brought my Xiaomi phone because I needed a dummy phone. So I had my Xiaomi phone, they asked me to download an app. And this is 2015, the latest, 10 years ago, I put the phone on a stand, and Bonnie, who was my teammate, based in China, we were doing this demo with the research team. And the demo was a following, it was a pop star that I don't know, a Chinese pop star, and she was teaching me how to dance. She was a video of her, it looked just like her, but it was an AI generated video, but it was custom. So she'd be like, you know, hi Jeremy in Chinese, I have a Chinese name, crazy dragon. She's like, hi Jeremy, hi crazy dragon and she's says, do your dance moves. And my front facing camera on my dummy phone, I did, you know, right arm here, and the left arm there, and there I am trying to dance to with the K popper. Bonnie's loving it, because she knows this pop star, and she's like, this is a very, you know, admired, you know, maybe the Janet Jackson of the market there. And I was playing around, and I sat there and I said, like, who built this? The research team. 

Jeremy Kranz  

So the culture in emerging markets, but mostly China has been the pridefulness of not just researching but turning it into an application. And if you look at the I'll jokingly say the fat, lazy elements of like R&D and large public companies in the US, it's like you can just print papers and say, I wrote the definitive paper on this or that the other thing, and have a career at Microsoft Research, you know and so in China, they're like, we're going to bring this shit to market, we will. We're not handing off our work, we're going to bring this to market. And what astonished me was that the founder of ByteDance, when I asked him these questions, I said to him, like, in my lifetime, research will hand it off to someone else in production. He's like, no, no, you're like, these guys made it. And even more crazy, this was 10 years ago. That product never went to market. That's the punchline, that's how incredible their innovation was, it didn't make the cut. They had better stuff. So maybe you just realized what I had been seeing between the three Red Dragons, between the ByteDance being Alibaba, JD, logistics NIO, which was the Tesla of China. When they, their first car was remarkable, then they won the Formula E with their second car, which is the drag, you know, the Formula One race with electric car. I think we're talking about a market that just we projected our views of how the world should work, and the reality was, they've been great. 

Jeremy Kranz  

So in other emerging markets, the story is very different. So let's say, for example, Singapore and Brazil, where Brazil, where I got to give credit, the regulators are especially in FinTech. And now India has really become strong, like they are in Brazil. They practically write code for everybody, like CBDC, open source code for everyone, Central Bank, digital currency, so that you can all have financial payments with each other. In India, they created this centralized, originally fragile, but now a very good system for human identification. You know, like we say in AI, like, how do we know approve of humanhood? Well, India is further along on that government has done a really good job in certain areas where they know they have very large populations they got to get in front of this fast. And they don't have a tech debt or an industry establishment to go and ram through. They can, there's some fertile white territory for them, but China is unique. Okay, I'm sorry like, China is just unique. Take all the research in Europe and, like, what has been commercialized that has mattered to me, and there are stuff, it's just like, I look at the Chinese research to commercialization in nine months, okay, Xiaomi phone. I mentioned, do you know this, that xiaomi's greatest contribution in its first few years was letting the audience online define the features of the phone, and within nine months, they'd come out with a new phone that was crowdsourced which features would go into it. What is the design cycle for anything significant in the US, it's pretty long. What's the last iPhone iteration done for you, a better camera, Siri and I mean, it's just a whole different path, from research to implementation and commercialization. You have to go there and taste it. It's that good. It's just that special. And sorry, I'm very big fan of all the other markets, including my own home market, but I will defend to the end that nothing was nothing happened at covid, it was just we all realized it. It was always happening.

Ryan Miller  

So it's not that covid necessarily catalyzed a lot of development. It more just exposed what was already there. And you could no longer deny, like you said, India, China, Brazil, obviously America. And so now we're saying, okay, now, now we got now we got to fight. This is the the royal rumble of a lot of these, these guys coming together and turns out, surprise, we've been doing this for 10 years, and now it seems like some jurisdictions are trying to catch up.

Jeremy Kranz  

The US is the US is really good, when they see another market do well, we catch up fast. So I think about Anduril, Anduril is an amazing product set of products, and they're doing stuff that I didn't think was possible. Was possible, that I've never seen anywhere else, but I feel like it took DJI to make us pissed off and be like we should have our own, you know, sort of drone industry. And credit to Palmer, lucky for what he's done there. It's a special innovation. So it's not, it doesn't matter if you're first. They were first in a lot of things, we're catching up well, too. 

Ryan Miller  

Brilliant. So, you know, we talked a lot about micro and macros, and I'm curious from more of a macro standpoint, so in your opinion, how does one leverage global networks to scale founders beyond capital?

Jeremy Kranz  

To help founders get to go global? We try to put the enterprises and governments outside the US as like our primary customer. We talked about labs giving custom research real time. We try to take inventory of everyone's learning curve of the implementation of technology, be it AI or tokenization, and then we take those learning curves, we make sure the next guy learns faster and through that hand holding and so we call it solution architecting. We help the founder know is it time to go to a Korean conglomerate or go to Brazil and, you know, talk to New Bank, or go to Europe? And that that navigation is not easy to do. See venture during this covid period, I like to say it de globalized. If you were a venture fund, and you had a fund in India, a fund in Saudi, a fund in all in China, like you don't anymore, I think there's only two or three that still have truly global funds. And as a result, the business development arms faded away, you know. And so our belief was build a venture practice where you invest in a founder in the developed market, but you help them go global, because all of your energy business development wise is in those enterprises and governments outside the US. I'll just say it's like a, it's a, it's a, it's a, it's both an art and just simply a clock in the number of hours just getting out there and talking and being religious on note taking and someone gives you a clue about their experience. It's a lesson, then for every other founder to get make sure you write it down and share it. Those kinds of things.

Ryan Miller  

Brilliant. So I'd love to go even deeper on that. So at Sentinel, what has been that through line of your investment philosophy?

Jeremy Kranz  

Through line, in the context of like, how we make decisions, to our way we operate is all decisions are made with everybody in the room at Sentinel, and everyone gets to give their opinion. Every question is recorded, every answer is recorded, and every vote and what you want to do is recorded. But what we do that is, I guess, more of a psychological game, is we grade everyone particularly the deal leads, what we call the three C's. So that's confidence, competence and courage. How do you apply it? If I was a VC who said, I just like, I looked into the eyes of that founder, and I just knew that's called courage, all courage. If I was the guy who invented a blockchain at Goldman Sachs that is now being used, and now I'm a founder, like, I'm like, a competent person, I know my stuff. You know, I know my stuff. And the third one is confidence, which is like, I can communicate with you in a way that you feel like I've really done the work, I've covered all the bases. I know what I'm talking about not that. I just know it, but I've shared with you, in a way, that it's like I look confident, and you're confident in me. So if you're an investment officer and you're making a decision, in our view, if you lean only on one of those three, you're in trouble. You might work it might work out, but you're probably in trouble. So let's just say you're highly competent, but you have no courage. What are you going to do? The safe, what you think is safe and venture, by the way, like the more you try to do the safe deal, the less safe it is. You have to take risk and venture, if you're only courage. It's easy to get, you know, wrapped up in a we work late stage deal and realize that none of those contracts were gonna, ever gonna materialize into being ROI positive. So it's like, you just don't run the numbers, you don't understand real estate. You just, you know, you're just so into the so this balance between the three C's, we try to measure it as a psychological tool to know not just Is this a good deal or not, but is our orientation, our relationship with the deal, healthy? And if our relationship leans too far in one of those three and the relationship is therefore unhealthy, we try to pull back and say, how do we make this healthier, because better decisions will be made. We don't want 99 deals failing in one do well and then make up a story we always knew we. We actually want to get it right, so we use the three C's, it's a, it's a, it's a way of self policing that whether the memo was done well, or it sounds exciting that we are, in fact, entering in, if I'm a whole ground itself to make that decision.

Ryan Miller  

And I love the the cross reference on a lot of that, where you have everybody in there and it can also do that, that validation of a lot of different theories, ideas, impressions, data. I think getting a lot of those come together, it reminds me of, I think it was Principles by Ray Dalio at Bridgewater, where they have a lot of that, that criteria, where they not exactly the same, but they have a lot of that to say, yeah, we rank everything from everyone before we make a significant move. I love that. 

Jeremy Kranz  

And for all the fund managers, listening, listening, one of the reasons that I turned to this approach wasn't to make better decisions, it was to train young people. And I learned early in my career, my very first venture job, I worked for an three women in a row in venture those are my role models. They were all named Lisa, which is funny, but they're wonderful people. And one of the things I saw in the venture practice that they led and I followed was that there was a lot of sort of like screaming, you know, brow beating, using emotion to kind of get your way. And there is a great deal of benefit to towards diversity of thought and experience in making decisions. And over the years, I realized that young people will start to either build very bad habits of the people around them, because, like, hey, if I scream my way to get my deal, if I showed only courage, then they will do that too. And so you're not really training them to be investors, you're training them to be actors who get their deal done, or political people. So there's a professor that I follow who I admire quite a bit, and there's an author, his name is John Levy, who's written books about this that when it comes to team orientation, let's say a founder or a venture practice, often we overrate the founder and we say like they got it all, but it's really about the team. And when they look at what makes a team good. For the last 10 years, we just say one word, we say diversity. But now studies are coming out that diversity is best measured not on like ethnicity or where you went to school, but more of what are the diversity of ideas, experiences and networks that you bring? 

Ryan Miller  

Yes.

Jeremy Kranz  

And we find in our work that we have a very diverse team, and for many reasons, and by the way, you, we all have some friend who goes to the page of some place and says it looks diverse to me, that is a terrible way of that's not fair. You have to really understand the people, right? So there's a diversity of thought and experience, and that will bring better balance of courage, confidence and competence. People will spot it and talk more openly. And the best example of it were the three women that I worked for first, they would often say, I don't know if I trust the founder, that you the other person screaming that we have to I don't think I trust the founder, there's something that didn't feel right. And that intelligence, which I believe strongly, is intelligence, is best harnessed if you create diversity of your team and openness of that grounding that I talked about. Sorry to sound like some Zen teacher, but the truth is, psychology is what makes is a big part of decisions in group dynamics, in any job, certainly in venture and so we take quite seriously getting a diverse team, getting everyone to talk, and making sure that young people see that the habits of success are in grounding, in evidence based decision making, in thorough debate, not in brow beating. And I was lucky that I worked for three people early on who said, do the work. Be right. Do the work. Don't political, don't become political. About It. Mind you, I covered open source. I had to really prove my point.

Ryan Miller  

I also have a wonderful Lisa that works at my company as well, so I figure I'll give her a shout, something with the name. But you bring up an interesting point, because I know the word diversity was, was a big or is, but I think it was quite prominent and quite loud for a very long time and I think it was well intended. I just shot from the gut, more of a courage position, which is an element, but not the end all. And I always you just confirmed a good impression that I had, which was neuro diversity beats bio diversity. So I think, and I think that's was the original intention, I don't think diversity was ever anyone would argue with that. But I think where maybe some people get heartburn, which is not what we're talking about, is the implementation of it. So I think we can see there's value in diversity of thought, like you said, or neuro diversity, as I like to say. And I think when we start to cultivate that, we again, like I said, our job is to look around corners and I can see what I see, but I need other people to help me understand what I don't see. And that's where that neurodiversity comes in. And that through neurodiversity, I think, is extremely, extremely strong. Anything else you can add to that?

Jeremy Kranz  

The debate around neurodiversity. So what do you tell your HR department, you know, like, give me neurodiversity. I'm really excited about, like I said, there's a book coming out in a few months, and it's going to spell out through careful instruction, a framework of how to screen, how to filter and select based on various forms of diversity that make your organization more effective. 

Ryan Miller  

I'd read that all day. Let me know. 

Jeremy Kranz  

Yeah, there's a, I have one more interesting academic based on this, which is that be careful about diversity in the following way. There was Professor Adam Galinsky, I took his class many years ago at Northwestern and I don't know if he's the one who pioneered this or his mentor did at Princeton, but he taught my class, an incredible lesson. He taught, he told us that we're all going to write papers in groups. And so I remember I was a very ambitious student. I want to do a good job but he picked the groups for us. So you got a number, and you like, you show up in your group. And Northwestern Business School has a very diverse population in all the great ways. And my group was one where I was friends with people, but interestingly, not a single person came from the same country, and there was a lot of language and communication issues that would erupt. Now, he asked us to write a paper on a subject, doesn't matter what, and this was like, big part of your grades. We didn't know why we were putting these groups, so we submitted our paper, and then we took a survey. How did it feel to do your paper? So my group surveyed that it was the most painful, uncomfortable thing, and we assume we wrote a bad paper, because I remember D. Suruki, one of my friends, Japanese who I believe had like a 4.0 in school, but his English wasn't that good, and his writing wasn't as clear as someone who had been schooled in the US. We gave him a whole section to write, you know, go write it. And there were, I think, when we finally wrote the paper, there were sections that some of us had read for only, like two minutes, like his big, like, 30 page paper, but it's a big part of our grade, now this is why I'm telling this story. We get the results. So he decided the professor, he would grade all these papers, not knowing which group wrote what. So he has no idea who wrote it and we got nearly a perfect score. 

Jeremy Kranz  

Then he, then he actually taught us the lesson. We all came back in the room and he said, now I'll tell you how I picked the teams. There are two types of teams, one is called the complementary team, and the other one's called the cohesion team. Cohesion is when everyone's very similar, the complementary team is everyone's very different, but has something to offer and I wanted to know, because I've been doing this for years, every time I do it, which team will perform better, but I changed the task this year's task, you had to really solve creative problems, to write a very interesting paper and to do good analysis. And teams that are more diverse, neurodiverse, in this case, complementary. They tend to produce better results, but they perceive that they had a terrible experience getting there, and that they must not have produced a better result. And this has been tested again and again, and again and again, you know, in venture this happens. A lot of venture funds have teams that don't get along. They don't like working with each other, but, man, they produce some great decisions. So the other possibility is cohesion. Everyone's the same, and it's like no one ever has an outlier paper, no matter what the task. No one but no one writes a terrible paper, and they always grade themselves as we probably got a perfect score. He's done it again and again and again over decades, and this keeps happening. So I think we're going to learn not just like how to be diverse, but how to create the right cohesive or complementary team for the context, including whether it be a set of founders, you know, to build a company or a venture team, or whatever it is. And I think we're going to advance our understanding of this enough that will do a better job making the right team for the right task. Something went amuck for the last 15 years, and we're going to fix it. I'm optimistic about it. 

Ryan Miller  

That's brilliant, man. What a phenomenal finding. So there's, there's maybe less cognitive dissonance in the where the the teams that are similar, but it sounds like there's greater output when there's complementary versus cohesion. Is that what we're hearing here?

Jeremy Kranz  

Although, to be fair, based on many papers over many times, I believe the answer is that those very diverse teams could either write the best paper or the worst paper. It's possible that the range is much greater, we just happen to be the one that wrote, I guess, a great paper, but that you could also fail. And that's why, when you think about forming a team, you're like, I better pick my friends, who I know, who I trust, who are more like me. Or if I form a company right, like cohesion. You see cohesion because it provides that comfort, but if you actually want the outlier, you might actually need the differences to come out.

Ryan Miller  

So that might come back into hiring or investing in fit.

Jeremy Kranz  

So the book that's coming out, went and looked at all the greatest companies of the last 10 years, where we only know the name of the founder, and it looked at the actual teams. Were they cohesive or they got and it left the punch line out, because I think it should stand on its own. But it turns out there's a pattern, and it's less about the founder and more about how the kind of teams they surround themselves with in the context of the task and generally diverse teams have better outliers.

Ryan Miller  

Yeah, I love that. Yeah, that's so cool. Now, before we wrap things up, this has been absolutely phenomenal, man, I want to ask more of a kind of an outlier question. When we first met, we kind of geeked out about our love for music, particularly around the Grateful Dead. This is something that has been very, very important to you. So how has your Grateful Dead ethos of just openness shaped your current thesis at Sentinel and just overall in your career,

Jeremy Kranz  

My first rock concert of my life was in Washington, DC, 1993 RFK, stadium. It was the Grateful Dead. I had no idea who they were, and from that day, from that moment, they've been my favorite band of my life, I've been to over 150 concerts. I am obsessed with the band, you know, it's like, I think I have a mental health issue, I love this band so much. What's crazy is that was when I was 13. It is completely mirrored my life, I'll explain what I mean, who is the Grateful Dead? For those in the audience who don't know, it's a it's a band that will probably the first band ever to go on for 100 years, they just celebrated their 60th anniversary, where, like 60,000 people, three night three days in a row, stood out in the cold and danced, including me. But the Grateful Dead is a pioneer, because they invented a genre of music called the jam band. And the jam band is jamming lots of instruments that were never meant to be going together, like an electric guitar and a harpsichord, many types of drums, including like American Indian drums, xylophones. The Pianist alone, I think, has eight pianos, and sometimes one hand is on one piano and then the other piano. So the jam band is a genre of music like rock and roll that was created by this band called The Grateful Dead. So they were inventors, they were also big pioneers in open source. 

Jeremy Kranz  

Back then, they were the only band in the world that said, if you go to a concert, take your tape recorder, tape the whole thing, and send tapes to all of your friends. At any other concert, you know, any other concert, you would have been thrown out and possibly prosecuted for like, you know, infringement. So the Grateful Dead open source their music in a way that no other band would do, and it's actually what helped build their following. The third thing they did is, remember, they're starting like in the 60s, so the idea of a big outdoor concert venue that was starting to emerge, and their fan base became so radically, you know, they want to be at every concert, like I have 150 concerts. Who would do that, you know, is a certain type of fan of a Grateful Dead that would go to so many concerts. Well, they had these venues that were so big that they didn't have speakers to support it. So they built something called the wall, and the wall was an innovation, 500 speakers towering above them. Go look at a picture online. It's crazy. But even by today's standard, there's nothing like it's like a building four or five stories tall of just speakers. The problem was, if you were in the back, you know, 100,000 people back, it was great, you could hear the speakers, but if you're in the front row, you're never gonna hear the same again, you're gonna blow out your ears. So they had to solve that. So Phil Lesh invented the synthesizer, which took all the microphones on the stage and then synthesized the sounds from all the microphones and placed based on the timing mechanism, if you were 1000 feet away, or 10,000 feet away, you got the sound at the same time that was invented by the Grateful Dead so that their concert venues get bigger and bigger, so there could be a Woodstock. 

Jeremy Kranz  

What does that have to do with my job? Because I think it mirrored my proclivity for every day is an invention, you know, their music is never played the same way twice. That's why you go to so many concerts, it's never the same set of songs, 300 songs, 300 songs, and each time they play them, they play them differently each time. So you're always getting something new and fresh. This idea of invention for the cause, to build a synthesizer so that you can actually have a large concert venue to build the wall of sound that they built. Amazing. In fact, there were such pioneers that there were these knockoff effects. So out here in San Francisco, we have this concert, this festival called Burning Man. Well, one guy in the Grateful Dead named Mickey Hart invented an instrument it never existed before, and it makes some weird sounds that we now call electronic music, and those sounds, along with his unique version of drums, became the music base for Burning Man sound. In fact, the Grateful Dead were like the early burners. So these knockoff effects, one innovation leads to another, and the fact that is open source meant that there was no, I can't do that. I have to get the rights. There was no I need the rights, it's just open. And that allowed for more expansion. So jam bands have been going on for 60 years, there's so many of them. This is a crazy fact, The Grateful Dead is so successful that their cover bands sell out concert venues all around the country to this day, the cover bands do. 

Jeremy Kranz  

So as a venture capitalist, I think about that. Like, how do you build a, I remember, the founder of Alibaba once said to me that his goal was to build 100 year old company and I was like, no one would should think like that. But then in, you know, 20 years later, like the rebel dad is at 60 years and they're talking about how they could go on as 100 year long band, I'm like, wait a minute, there's way of thinking about the long term orientation of innovation. And so sorry for the long thought you struck a chord with me. No pun intended, but I feel like the Grateful Dead were not just my favorite band. They were also kind of a blueprint of how to think about whatever you're passionate about, look for the innovation and then the secondary knockout effects that come from it and help catalyze it in your work. And if people have not heard the Grateful Dead, John Mayer joined them 10 years ago, he's a member of the band. I strongly recommend that you read the history and just listen to one song and just know that that song was probably played that way only once, and then you'll understand a little bit my love for it and also why it informs my work. 

Ryan Miller  

I love that, man. Thank you. My similar Grateful Dead was Stevie Ray Vaughn so that that the blues genre, the Texas blues, that blew me away and I was hooked, man. So seeing these, these innovators all around, it's like, there's no way I could shred like SRV. However, you know it when you see it, and that's pretty similar when you're starting to really get these senses of, like, something here is different and that deserves a little more of a deep dive. And you never know, a lot of these things start to emerge. So before we wrap things up, is there final thoughts? Is there any way, any final thoughts you'd like to say, any way people can reach out to if they'd like to learn more anything at all?

Jeremy Kranz  

Well, I welcome people to reach out info@sentinelglobal.xyz. But even better, if you want to read some stuff and then reach out, tell me some thoughts. We have our Sentinel Labs for what we can produce publicly, we've put a bunch of our papers online, on our website, and for people have interest in tokenization or stable coins or Supply Chain Innovation or AI infrastructure, if there's something struck a chord with you, I'd want to hear from you. I would love it. Or if you have an idea, or if even funner for you and I Ryan, if anyone's an investment manager listening and they're like me, like, is my industry gonna get blown up? I'd love to commiserate with you and talk about it some more. I'm looking for more, because most people are asleep at the wheel. If you want to talk and engage about it, come please, I need someone to talk to. 

Ryan Miller  

I love it, man, well, this has been absolutely phenomenal. So just to summarize everything that we talked about, just remember, as technologies and asset classes emerge, go deep, and don't neglect the infrastructure. Number two is, if you build a fund, be a solution architect for your investors, more than just a pitch man. And number three, pay attention to the emerged markets as it relates to diverse insights and investing. You do these things, and you too will be well on your way in your pursuit of Making Billions.

Ryan Miller  

Wow, what a show. I hope you enjoyed this episode as much as I did. Now, if you haven't done so already, be sure to leave a comment and review on new ideas and guests you want me to bring on for future episodes. Plus, why don't you head over to YouTube and see extra takes while you get to know our guests even better, and make sure to come back for our next episode, where we dive even deeper into the people, the process and the perspectives of both investors and founders. Until then, my friends, stay hungry, focus on your goals and keep grinding towards your dream of Making Billions.