Episode summary
Value Investing Meets Venture Capital w/ Kyle Grieve (TIP801)
We Study Billionaires
· · 57 min · Guests: Kyle Grieve
Summary
Kyle Grieve argues that value investors can borrow the most useful parts of venture capital without adopting its whole playbook. His core point is that investing outcomes are often shaped by power laws: a tiny number of winners can drive most of the returns, so the goal is to keep finding businesses that keep improving and not sell too early when the thesis is still compounding.
He uses examples like Micron, Apple, Expo, Lumin, and Berkshire to show how businesses can become stronger while the market still treats them as risky, unpopular, or misunderstood. Grieve says investors should scale into positions as risk comes down, especially when a business is de-risking on product, distribution, leverage, or competition. He also leans on Moore’s Law and Metcalfe’s Law to explain why technology and network-effect businesses can become extraordinary long-term winners.
The episode also pushes back on classic value habits like anchoring to an original purchase price. Grieve says he now prefers averaging up in strong businesses, using long-horizon patience to let fundamentals matter more than short-term price moves. He closes by framing long-horizon arbitrage as the ability to hold through volatility while the business continues increasing intrinsic value.
Key takeaways
- Grieve says two of his roughly 40 stock picks have driven about 45% of his investing returns, which is why he focuses on power-law outcomes.
- He argues investors should add to a business as it becomes de-risked, rather than waiting for every uncertainty to disappear.
- Grieve says value investors should be comfortable averaging up when a business keeps compounding and the multiple is still reasonable.
- He points to Apple as a case where Buffett bought only after technology, product, and distribution risk had largely faded.
- He says unpopular businesses can outperform for years, citing Expo’s move from a 20-cent penny stock to over $100.
Notable quotes
“a tiny number of winners completely dominate. Knowing this going in means that I should try to keep finding these winners”
“I definitely would not have sold any of my shares. Unfortunately for me, I bought my micron shares at a cost basis of about $45”
“The beauty of investing in equities is that you can buy businesses that have much better protected downsides in VC”
“You don't necessarily have to size up massively. You can also take a smaller initial position in a business that you like”
“What I think is really important to anchor on isn't your initial purchase price”
How the episode opens
00;00;00;00 - 00;00;16;17 Unknown A private business will often go through multiple financing rounds, and that's where a VC firm can get some validation on whether their bet is working or not. If the business is valued at 10 million in its first funding round, then it's worth 100 million in the second. That's considered a win, but I think value investors should focus their attention on whether a business is getting better.
00;00;16;18 - 00;00;23;09 Unknown We're not. 00;00;23;12 - 00;00;44;27 Unknown Hey, real quick, before we jump into today's episode. If you've been enjoying the show, please hit that subscribe button.
It's totally free. Helps out the channel a ton and ensures that you won't miss any future episodes. Thanks a bunch!
Today we're going to discuss lessons from the world of venture capital that long term investors can utilize in their own investing strategy to improve their own decision making. 00;00;44;29 - 00;01;10;00 Unknown Now, you may be thinking that VC is a very strange place for value investors to look for insights. Don't VC businesses primarily invest in soy stocks where 90% of them or more go to zero?
And I can't argue with you on that point. Yes, VC invest in a very specific way. But as I learned more and more about the deep details of cloning from my co-host William Green, we can clone just the parts that we find useful and disregard the rest.
00;01;10;03 - 00;01;32;01 Unknown While VC does a lot of things that I don't think value investors really need to bother themselves with, they are also masters at leveraging the power law. When most people think about the world, they think in more linear terms. Let's say we are thinking about the average return on investments across the broader investing universe.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- venture capital power laws
- value investing decision-making
- technology investment opportunities
- scaling positions as businesses de-risk
- long-horizon arbitrage
Watch the episode
Watch “Value Investing Meets Venture Capital w/ Kyle Grieve (TIP801)” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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