Famed Apple investor Alan Patricof has warnings of AI bubble

Longtime venture capitalist Alan Patricof, who made early investments in Apple and AOL, just got engaged at 88. He talks with On The Money about his investments in longevity and why AI valuations could be a bubble.

You’ve seen the 2000 dot-com bust, the 2008 financial crisis, and you saw pandemic upheaval. Are there any common threads when you’re evaluating investments?

Until about 30 days ago, what we go through here has been a lot more digestible than it was in 2008 or 2000. 2000 was the worst — it was a bubble that broke overnight and you had two or three terrible years. 2008 was developed by a few exogenous factors. The problem in the most recent crisis is because of excess valuations that occurred in 2021 and 2022. Most firms have had to bite the bullet in the last quarter and accept the reality that new companies — and follow on later stage investments — just weren’t worth the overall market climate and interest rate environment. 

We’ve seen big names like Tiger Global who have had to do that. 

It’s causing upheaval in the business and there has been a return to reality in the last several months — hopefully the system is washed out to a large extent. But we don’t know whether there is more to come. 

You avoided many of the biggest pitfalls like the metaverse and NFTs. Do you see similar pitfalls today?

There are an awful lot of companies that want to go into AI and the valuations are in the billions. But let’s tune in 12 or 24 months from now — those companies are spending a lot of money so they may come back to the market to raise money. Everyone wants to be at an AI company — it’s the flavor of the month — but the best way to get into AI is to get into a company that has learned how to use AI as a tool instead of buying into an AI platform.

Clearly there is a real need for many of the products and services you have invested in. 

Longevity was something relatively new a few years ago. But there is a fundamental need for this fi🅘eld: There are mo𓆏re people entering old age, who are living longer, who have more money and they want to do anything to live longer. They’ll spend money on it and buy products.

Do you think this notion of retirement decades before death will last?

For some people, yes. But there are a lot more people who are going to work longer and you have to figure out how to deal with that. There will be a need for retirement homes, senior day care centers, assisted living facilities and all the services that go with that. 🥀;

One company, SafeRide Health, takes care of rides for older people — picks them up, takes them to the doctor, checks their medicine. It’s a very specialized service. As a health plan you can afford to spend a lot of money to avoid one day in the hospital.

The major thing is recognizing this is an area that is underserved — it’s more important to come up with ideas for this market than find another dog walker for millennials or fast delivery companies.

How long do you think you’ll live? You are almost 89 now.

I’m going to live to 114.

What investment did you have the opportunity to invest in but declined that ended up being a home run?

My major miss was Starbucks. I was parochial in saying why would anyone want to invest in two coffee shops in Seattle when there was a coffee shop on every block in town in New York. But I didn’t understand it was a way of life.