This week, we speak with Josh Wolfe, co-founder of Lux Capital. The venture firm was set up to support scientists and entrepreneurs who pursue counter-conventional solutions to the most vexing puzzles in physical and life sciences.
Wolfe discusses the process of investing in entrepreneurs in basic sciences as requiring a mix of skill and luck, and a diverse thought-process.
One of the first companies Lux invested in was during a period of rising alternative energy investment like solar, wind, biofuels, ethanol, batteries etc. In the face of that consensus, the variant perception was nuclear. The nuclear energy process biggest issue was the processing and clean up waste products of the nuclear energy industry. So Lux invested in a high tech solution to nuclear waste was materials science, chemicals, physics, and vitrification. The started a firm called Kurion to solve this issue. The company played a huge role in the Fukushima cleanup, following that nuclear disaster. It was eventually sold to French energy giant Veolia.
Wolfe explains the advantages of locking up investor capital for 10 years via a 3X return on invested monies. The assumptions are that 1 or 2 companies will return all of the initial capital (1X). The next 5 companies return will similarly generate that return (1X); then the next ensuing 15 – 20 investments should also return that (1X). The rest of the investments are most likely to show losses.
Wolfe mentions two of the thinkers who influenced his thinking: E.O. Wilson’s ideas of melding hard and soft sciences (e.g., physics and psychology) and Charlie Munger on mental models and rationality.
You can stream/download the full conversation, including the podcast extras on Apple iTunes, Bloomberg, Spotify, Google Podcasts, Overcast, and Stitcher. All of our earlier podcasts on your favorite pod hosts can be found here.
Next week, we speak Jay Bowen of Bowen, Hanes. They hav been the sole manager of the Tampa Firefighters’ and Police Officers’ Pension Fund over the last 44 years, and have managed to significantly outperform the markets during that period. The “Tampa Fund” has become shorthand for a simpler, cheaper and more effective way of managing capital in the public pension space