MiB: Sebastian Mallaby on the history of venture capital
This week we speak with journalist Sebastian Mallaby about his new book, “The law of power: venture capital and the creation of the new future.” Mallaby, a two-time Pulitzer Prize finalist, is a senior fellow at the Council on Foreign Relations. He is also the author of “More Money Than God: Hedge Funds and the Creation of a New Elite.”
We discuss how modern venture capital traces its history to Arthur Rock, who is described as the father of venture capital. Mallaby explains how the concept of “liberation capital” was used to free the “treacherous eight” of Shockley Semiconductor to create Fairchild Semiconductor. Years later, he freed two Fairchild executives – Gordon Moore and Robert Noyce – to create Intel.
Mallaby outlines the differences between East Coast and West Coast VCs – embracing risk and failure is key to Silicon Valley success, while East Coast is more about managing assets under the “rule of the prudent man”; Even the names of investment firms, like Prudential or Fidelity, reflected a form of risk aversion that had persisted since the Great Depression.
It also explains why the California legal system, which does not allow standard non-competition agreements, created a group of technical engineers and human capital. The net result was a whole system of talent that circulated rapidly from start-up to start-up.
A list of his favorite books is here; A transcript of our conversation is available here on Monday.
All of our previous venture capital related interviews can be found here.
You can stream and download our full conversation, including podcast supplements on iTunes, Spotify, Stitcher, Google, Bloomberg and Acast. All of our previous podcasts on your favorite pod hosts can be found here.
Be sure to check out our Master in Business next week with David Kotok, who co-founded Cumberland Advisors in 1973. The firm manages $4 billion in assets. Kotok is program chairman of the Global Interdependence Center (GIC) and was part of the Treasury transition teams for New Jersey Governors Tom Kean and Christine Whitman, but he is probably best known as the creator of Camp Kotok. His recent research focuses on the economic consequences of pandemics and what Covid long means for financial markets.
Sébastien Mallaby’s favorite books
The money game by Adam Smith
A little life by Hanya Yanagihara
Black Edge: Inside Information, Dirty Money, and the Quest to Bring Down Wall Street’s Most Wanted Man By Sheelah Kolhatkar
Digital Gold: Bitcoin and the Inside Story of Misfits and Millionaires Trying to Reinvent Money by Nathaniel Popper
Books by Sebastian Mallaby
The law of power: venture capital and the creation of the new future by Sebastien Mallaby
More Money Than God: Hedge Funds and the Creation of a New Elite by Sebastien Mallaby
The Man Who Knew: The Life and Times of Alan Greenspan by Sebastien Mallaby
The Banker of the World: A History of Failed States, Financial Crises, and the Wealth and Poverty of Nations (Council on Foreign Relations Books by Sebastien Mallaby