Tal Zaks
speaker
203 appearances
1 recordings
1 series
first heard Jan 2025
last heard Jan 2025
Tal Zaks’s voice in public audio — every appearance, attributed to the second.
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Appearances
And we need to be super careful and super mindful of the policy implications that we have at the society level of what we think is important and how we reimburse these efforts, because it is the return on investment engine that ultimately drives the innovation that benefits not just us today, but our kids and our grandkids in the future.
As I joined this field, as I became an investor, one of the more interesting books I read is Scott Kapoor's The Secret of Sandhill Road, where Andreessen Hurwitz talks about what it takes to be a VC investor in tech. And they have a mindset where their returns can be 1,000 to 1, and so they're okay to win only 1 in 100. The math still works. In our space, that actually doesn't work like that.
gigantic. To get a 10x return for us is wonderful, not something you see commonly. And to get a larger than 10x return is rare. So we shoot for 3x to 4x returns. 5x return is a great outcome for us, which means that we can't afford to get as much wrong as the tech folks can. because the upside is just not as much.
It means that when you look at your investment portfolio, you have to take a very careful view of the balance of risk. Now, each individual company, you got to, as Carl Gordon, my boss says, somebody has got to come and pound the table and believing that this thing's going to work. There's nobody around to pound the table. We're not making the investment.
So there's got to be that sense of belief in the content and the people and the potential. We tried to take a very hard-nosed look at what the probability of success is across the myriad of dimensions. And there are, as I said, many Now, what do we get wrong? We probably get wrong each and every one of the dimensions. Sometimes we get the team wrong. Sometimes we get the science wrong.
Sometimes we get the clinical application wrong. And sometimes we get the commercial opportunity wrong. I don't know that there's any one that stands out because we try to look at the portfolio, but I think the one that we get probably the most wrong is the one that is still the hardest to predict, which is what is the magnitude of clinical benefit that this will bring?
because clinical benefit is not a black and white. We typically invest in things where we understand the biology and we think we can de-risk it along the way. Okay, that's gonna work. And then we have a belief in the drug because we understand the preclinical pharmacology and that's all good. And so it should work to some extent in the clinic, but how good is it gonna be?
And in a world which is so competitive, It can't just be something that somebody has already done before or even slightly worse. That's going to be dead. So it's got to somehow differentiate. It's got to somehow be better. It's got to offer something. And that's probably the part that's the most challenging to predict.
There's a wonderful obituary that Malcolm Gladwell wrote years ago of Albert Hirshberg. who was an economist in the prior century. His whole economic thesis was that what drives economic progress is the naivete of thinking how easy it's gonna be.
You get excited about an idea, and the example he gives is back when they had to dig a tunnel through the Hoosac Mountains to connect the Boston area with the Hudson Valley. And they said, this is critical for economic development, so what's it gonna take?
So they brought in a bunch of geologists, and they started picking at the stone, and they came to the conclusion that, look, it's a big mountain, we gotta tunnel through it, but here's the thing, the shell of the mountain is really hard, but the core is soft, and so we'll get through the hard part, and then it'll be soft, it'll be easy digging, then we get to the other side a little bit of hard, and we're done.
So give us a couple million dollars in those terms, and two years, and we'll be through it. And five years in, and it's still hard. There was never any soft part in the middle of that mountain. But what are you going to do? You're halfway in. You're going to stop now. So they mustered up and they dug their way through it.
And the moral of the story is it's always going to be harder than what we anticipate when we make the investment. As long as we're clear-eyed about what it is and you've got the right people around the table. And you're in a position where you can take the portfolio approach of those.
Now, it is interesting to me, coming over to this side, the difference between being an investor and being an executive in one of these companies. So I can take a very hard-nosed look at the risk. And I know I owe my LPs a certain return over time, and it's going to be met by this portfolio. An executive in the company? Oh, no, they're going to live and die by that being successful.
And I remember when I joined Moderna, my wife, who's a smart one in the family and has a PhD in biochemistry, looked at me and said, Tal, come on, this thing, I mean, mRNA is never going to work. Really? And I looked at her and I said, honey, not only is it unlikely to work, we're also never going to make any money because the book value was yay high when I joined. And who thought?
But I said, I'd rather fail on something big than succeed in something small, I can afford to take the risk where we are in life. And if this were to work, this would be big. So she said, Okay, fine, go have fun, do whatever.
And we agreed that I do this for three to four years, and then it will flame out, I'd have an interesting experience, and I would still be employable, probably, and it'd be okay. When investors came to me at some point, and I remember when we turned public, and so investors started asking me, well, Tal, what do you think about the stock price?
And the only answer I could come up with, I'm investing in this company, something far more valuable to me than capital. It is my time on earth. So you do with your money what you see fit. But I'm telling you, I'm putting my time on earth into this. That's how I believe in this company. And so it taught me the primacy of sweat equity, if you will.
And so I want to make sure that my capital equity follows the sweat equity of people I believe in. Because at the end of the day, that is the drive. Yes, the science and the technology and the medicine, they all have to work together. but it's the people who make it work.
And it's the people who believe who are putting their time on earth and their talents to drive it that are gonna make the difference and are gonna make the returns.
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