“Securities” is back*
After a long winter foraging in the wilderness of content management systems, “Securities” has finally declared independence and moved entirely to our own infrastructure after Elon Musk unceremoniously dumped Revue and deleted all of our data (well, I scuppered the site a day early so it’s really me that deleted Musk, but who’s tracking?)
We now have a new front page right on the Lux website that has both this newsletter and the “Securities” podcast in one place. We’ve also got a new coat of paint — we’re still fixing bugs, so please hit reply if any of the text or design looks janky.
We’re going to get back to our weekly cadence here but *be prepared for a skipped issue or two while we get our groove back.
The Lux Riskgaming Initiative
The world is more competitively constrained than ever before. Eight billion souls are now breathing on Earth, nation-states are intensely clashing over resources, industries, and clout, and nearly every arena of human endeavor requires a ferocious fight for dominance. Victory requires more people with more skills and backgrounds to cooperate, and yet, miscommunications between scientists, technologists, entrepreneurs, policymakers, and others hinders collaboration on these pressing challenges.
That’s why we’re starting the Lux Riskgaming Initiative to help all kinds of leaders build up their expertise, risk-taking acumen and decision-making skills by confronting them with realistic but challenging scenarios on the frontiers of our collective understanding.
Wargaming has been a critical practice for military experts and field armies to encounter, contextualize, understand, and ultimately command complex defense issues. Unlike think tank memos or nonfiction books, the goal of a well-designed wargame isn’t to convey statistics or make recommendations, but rather to transform participants into experienced leaders with a deep appreciation for the tradeoffs and limits that a scenario forces on its players. Fantasies and dreams are quickly replaced by the sober rationality that all competitive environments require.
Wargaming’s history goes back to the 1800s, when the Prussian army used a newly-created game called Kriegsspiel to help officers and soldiers understand battlefield maneuvers. Since then, they have become a mainstay at the Pentagon and particularly at the Naval War College, and competitive simulations are now widely used across international relations, policy, business, and economic modeling to understand how individual players compete with each other to achieve their own objectives.
While the word “war” is present, that’s really a synonym for competition, and we believe that wargaming should expand far beyond the remit of defense. How will synthetic biology and the CRISPR economy change the organization of American healthcare? How do public schools compete with the prevalence of homeschooling in an era of social distrust? How will emerging markets compete in industries that require large capital outlays like semiconductors?
During the “Securities” hiatus the past two months, I’ve developed our first scenario that centers on the future of the Norfolk Naval Shipyard, one of the U.S. Navy’s most important installations and the key construction and repair facility for America’s aircraft carriers (including, yes, the Gerald R. Ford we talked about in “Defense Fordism”) as well as nuclear-powered submarines. The shipyard is the nation’s oldest, but it is increasingly among the most vulnerable given the rising waters from climate change. What are the dynamics influencing the future of this shipyard? And what would happen if a hurricane hit the Hampton Roads region (which has never happened despite being in the middle of the Eastern Seaboard)?
I’ve dubbed it “Hampton at the Cross-Roads” and we’ve already operated the scenario three times in the Lux office with friends. It’s been incredible to watch seemingly normal people transform into power hungry local politicians, fame-seeking journalists, and legacy-preserving Navy leaders in sometimes as short as 10 minutes.
Scenarios don’t provide answers, but rather offer something far more valuable: intuition. We want players to forego their present lives and motivations in order to inhabit new characters with different goals and behaviors. That creates distance between ourselves and the strategic questions on offer, and also deepens our empathy, allowing us to understand why people make the decisions they do.
While scenarios can indeed be quite sobering as the last three runs can attest to, the other important half of wargame is “game”, and everyone has enjoyed the chance to act outside their normal boundaries, to try new strategies, and to experiment. Open-ended play is just as useful for learning in adults as it is in children, and a stimulating scenario is infinitely more interesting and memorable than a dry report prepared in some basement dungeon of an office.
All of this is to say: come join us! Generate ideas for crazy speculative scenarios with competitive dynamics and email me. Sign up for one of our wargame simulations that we’re hosting in the Lux office (details coming!). In time, we also hope to openly release these scenarios so that anyone can play them with their own group of friends and colleagues.
It’s our hope that a combination of grit, wits and conviviality may just be the spark needed to invent the future and save us from the ominous chaotic hell that always seems to be just a few ticks of the clock away.
“Securities” Podcast: Why quitters are heroes with “Quit” author Annie Duke
One of our most popular podcast episodes last year on “Securities” was “Risk, Bias and Decision Making” and so we brought back one of the guests from that episode, Annie Duke, to discuss her new book “Quit”.
They say that you miss 100% of the shots you don’t take, but what if each shot costs money and is actually a tradeoff with taking a different shot? Time and money are limited, and that means we must constantly balance investing in our current projects and ideas against seeking out new opportunities. While there has been prodigious work published on how to find the “next big thing”, few researchers have investigated what it takes to just throw in the towel, jump ship, fold and quit in the face of a bad situation.
In conversation with Lux Capital’s own Josh Wolfe, the two discuss the challenges of walking away, why professional poker players are better at quitting than amateurs, the geopolitics of war, and the importance as always of premortems for quitting.
New fundings: Digital olfaction and fixing the inequities of clinical research
While “Securities” was on hiatus, we missed out on two of Lux’s most recent investments that will change the way we think about smell and solve the bureaucratic stench of clinical trials.
First up, Osmo is building on the frontiers of digital olfaction by using artificial intelligence to predict how humans judge the smell of a molecule (“strawberries in cream”) from that molecule's actual chemical structure. As Emily Mullin wrote in a wide-ranging overview of the flavors and fragrances space in Wired titled “This Startup Is Using AI to Unearth New Smells”:
Chemists at fragrance companies have figured out how to replicate some natural aromas, but it’s still a largely manual process, and many scents don’t have synthetic substitutes. “We need to be building replacements. Otherwise, we’re going to have to continue to harvest these plants and animals from our ecosystem,” says [Alex Wiltschko], cofounder and CEO of Osmo, who headed the digital olfaction team while he was at Google Research. “There’s a huge opportunity to build safe and sustainable and renewable ingredients that don’t require that we harvest life.”
I didn’t even know that “There are just 600 perfumers in the world, according to New York-based International Flavors & Fragrances, one of the major companies that concocts new scents.”
Our own Josh Wolfe is a co-founder of the company, and Lux co-led a $60 million initial funding round along with GV.
Meanwhile, there’s something rotten in the state of clinical trials. For clinicians and researchers, the Kafkaesque bureaucracy burden has only gotten worse. Antiquated systems (when systems exist at all), complicated filing requirements, and terrible collaboration have meant significant overhead for all involved. We have some of the brightest minds in medicine figuring out how to output clinical data in the right formats. That’s ultimately led to a slowing pace for trials, ultimately harming the already alarmingly small drug pipeline.
That’s why we are excited about the potential for Paradigm and its attempt to rebuild the clinical research ecosystem, where Lux joined ARCH and General Catalyst in a $203 million Series A round. Maureen Farrell in The New York Times described the company’s mission and hopes for the future of medicine:
It’s an unusually large sum for a fledgling company, but one that reflects the opportunity in a growing industry held together by a patchwork of outdated technologies that don’t always talk to one another. Last year, more than 430,000 clinical trials were conducted globally, according to government data. By comparison, there were just over 2,000 trials in 2000. “Part of the problem with what we do with trials is there’s a lot of misplaced precision,” said Dr. Laura J. Esserman, a breast cancer surgeon at the University of California, San Francisco, who has been an innovator in clinical trials but is not affiliated with Paradigm. “We spend a lot of effort on things that aren’t particularly meaningful.”
Lux’s Bilal Zuberi is an observer on the board, and the expansive list of executives and directors involved is available in the press release.
Lux talks 2023 investment themes
It’s January and that means an opportunity to assess and reassess the state of the markets and where the future of venture investing is headed. What’s on our minds? Some highlights:
- In The Information’s weekend Big Read “Josh Wolfe’s War: The Lux Capital Founder Blazes a Controversial Path in Defense Tech”, Margaux MacColl explores all aspects of Lux's approach to defensetech as well as taking a wider lens on us over the past few years. "If you ask Wolfe, the new groundswell of support [for defensetech in Silicon Valley] couldn’t have come soon enough. ‘There’s a reawakening to the reality of the world: It isn’t just Kim Kardashian and Kanye [West] and popping bottles and crypto bubbles. There are bad actors and there are bad people,’ he said. ‘If you go to Anduril and talk to the employees, they really feel a sense of purpose in a way that the employees at Facebook don’t. There’s much more meaning in truly saving human lives.’” Josh also discussed his investing philosophy with a Praying for Exits interview and with Mario Gabriele as part of The Generalist's Modern Meditations series.
- Deena Shakir discussed the future of healthcare at a Barron’s LevelUp event that was recapped by Josh Nathan-Kazis: “‘We have conversations all the time with most of the big pharma companies,’ Shakir said. ‘And I can tell you that almost every single one has brought up women’s health, even ones that have historically not had major pharmaceuticals in that space. So I think that the excitement and interest we’re seeing from investors, and from payers, is starting to be reflected in pharma as well, which is always an interesting sign of what’s to come.’”
- Spacetech-focused publication Payload hosted Navigating Uncertainty: 2023 Space Economy Outlook which included Shahin Farshchi. Ryan Duffy recapped the event and noted that the panel highlighted that “Long-term liquidity for space investors should ultimately not be too much of a concern. Even though SpaceX has been private for 20 years, investors have had many opportunities to generate liquidity through secondary sales. Today’s best companies will have robust secondary markets tomorrow.”
- On artificial intelligence and physical security, Bilal Zuberi discussed where we are going next on Bloomberg with Caroline Hyde and Ed Ludlow. “The good thing is that nobody is looking at exits for these companies in the next year or two. We’re just making sure these companies are fully funded and are able to create great products and take them to market.”
- Our scientist-in-residence Sam Arbesman recommends Matt Clancy’s post “Age and the Nature of Innovation.” "At the outset, perhaps a scientist’s work derives its impact through engagement with the cutting edge. Later, scientists narrow their focus and impact arises from deeper expertise in a more tightly defined domain.”
- Josh Wolfe recommends the animated TV series Primal for its ability to communicate a complicated storyline exclusively through art, as the series has no dialogue.
- Deena Shakir recommends “A.I. Turns Its Artistry to Creating New Human Proteins” by Cade Metz in The New York Times. “‘What we need are new proteins that can solve modern-day problems, like cancer and viral pandemics,’ [Dr. David Baker] said. ‘We can’t wait for evolution.’ He added, ‘Now, we can design these proteins much faster, and with much higher success rates, and create much more sophisticated molecules that can help solve these problems.’”
- I recommend a long read in, of all places, The American Conservative by Peter Robinson on “What ‘Long Covid’ Means.” It's one of the most empathetic accounts of the struggle of helping patients while also handling a disease that's impossible to classify. "A good physician, similarly, is to a degree agnostic about disease: all diagnoses are provisional but some are helpful, if they lead to a successful treatment or prognosis; all diagnoses are to at least a tiny degree tentative; all are subject to later revision. They could be well-reasoned but completely wrong. They could be only partly correct—and this may be the most common case, and fortunately partly correct is sometimes correct enough.“
- Josh recommends the just launched dual and inter-related novels from Cormac McCarthy: The Passenger and Stella Maris with a preference for The Passenger.
- Deena recommends Jared Council’s piece in Forbes on “Boosting Black Women In Physics With The Aim Of Making A Big Bang In Business”
- Finally, I rather enjoyed (via “Securities” reader and podcast guest Eliot Peper) Ted Gioia’s “Notes on Conceptual Fiction” on why fiction tends to look like real life even though it really doesn't have to.
That’s it, folks. Have questions, comments, or ideas? This newsletter is sent from my email, so you can just click reply.