Rocket Science: Glenn Yu

Glenn Yu is cofounder and CEO of Melange, a company building prediction markets that help financial institutions see the future.

How did you come up with the name Melange for your company?

In Dune, the spice melange is a drug that lets you see the future. It’s the most valuable commodity in the universe because it’s what enables humanity to navigate the universe. It’s also meant to be a standin for LSD and psilocybin, according to interviews with Frank Herbert.

But what’s even more interesting to me is that the plot of Dune shows how the stories we tell about the future — our prophecies — often fulfill themselves by their mere existence. And that’s actually a big part of my epistemology: the idea that the world is built upon the stories we tell ourselves.

That’s kind of my model of what a CEO is. The CEO is the chief storyteller. As CEO, you’re telling stories all day to investors, employees, recruits, and customers. You don’t really do anything. I’m not coding or writing legal documents. I’m just crafting the story and then convincing others of that story so they can manifest it into reality.

What are prediction markets?

A prediction market is a market that trades on the outcome of future events. Usually they are structured as binary options, where the contract trades to $1 if the event happens and to $0 if the event does not. Under this structure, the price at which any contract trades at any given moment implies the probability of the event occurring. So if a contract is trading at 33 cents, it means there’s a 33% chance that the event will occur.

What’s cool about prediction markets is that they are astonishingly accurate at predicting the future. If you look at a sportsbook, which is one type of prediction market, you’ll find that the odds are so accurate that it’s become a household idiom that you can’t beat the house.

The reality is that if a sportsbook says the probability that the Eagles beat the Chiefs is 60%, then the event will probably occur 60% of the time. That means if you repeated the game a thousand times, the Eagles would win six hundred times. It’s weird to think about but that’s the magic of the market.

What is Melange?

Rather than applying prediction markets to facilitate gambling like a sportsbook does, we are applying it to help hedge funds make better decisions. In the same way that a sportsbook can derive the odds of the Super Bowl from the laws of supply and demand, we are deriving the probability of events like central bank appointments, war, pandemics, and elections.

What’s a problem you see in the startup community?

I think software is kinda dead. I think most of the good ideas have been taken. And I think venture investors in this space are in for a reckoning because the reality is that, compared to say 2005, today there are multiple orders of magnitude more money chasing an order of magnitude fewer viable ideas.

It isn’t clear that entrepreneurship opportunities are linear with time. Consider that the day before the internet was invented, there were no Internet companies to start, and what companies you could start were soon to be disrupted by the Internet. Then, the internet gets invented the next day, and a thousand ideas become viable. Innovation is discontinuous.

I think we are in a lull right now. I think all the low-hanging fruit is gone in software. The good consumer companies have been built. Apple, Facebook, Netflix, Uber, and Spotify have already been built. The best B2B SaaS companies too. You can’t build Slack, Twilio, Rippling, or Ramp again.

I think the world needs to change drastically soon if we’re going to have more software companies. I’m hopeful that at worst, in 30 years when energy is cheap or free, there will be software companies to build again, but for now, we are scraping the bottom of the barrel.

What’s the worst poker bet you ever made?

I can distinctly remember the worst poker session I ever had, but the worst bet I ever made? I was tripping on mushrooms with my friends in Boston Common during my junior year of college. At the time, I was playing a lot of poker. Mostly online, four or five tables at once, eight hours a day — but also sometimes in real life with the international students at school, and I was owed a lot of money.

When I took the mushrooms, I realized I was a miserable person. On a daily basis, I was filled with rage that these people weren’t paying me back and I couldn’t do anything about it, and it was seeping into all of my personal relationships. I realized that gambling had kind of ruined my life. I had become a bad friend and my life mostly consisted of gambling with a bunch of people who I didn’t really like.

So it was during that trip that I decided to quit poker, and I also decided to forgive all of my debts. At the time, I was filled with love. I saw these debts as a source of great evil, so I felt it was the right thing to do.

But the other thing I did — the bad bet — is I also decided to create a $600 fund for anyone who owed others money. I said they could take money out of the fund in order to forgive some of their debts on the condition that they would stop gambling.

What ended up happening, of course, is that they immediately took out the $600 and nobody stopped gambling. I just remember feeling so bad about it. I was very upset.

If you had to give advice to beginning poker players, what would you tell them?

Building a bankroll requires discipline, and it’s important to never violate or rush the process of building your bankroll. Never deposit more money and move up to stakes you didn’t earn. If you do, you’ll set a bad precedent because if you were really ready for those stakes, you’d be there by the strength of your play.

Give us some new music. What are you listening to these days?

Keith Jarrett has a solo piano concert series in Japan called The Sun Bear Concerts that’s unbelievable. All his stuff is fully improvised.

His concert in Köln is the most beautiful piece of music I’ve ever heard. It’s not a part of any of my Spotify playlists because I make sure to only listen to it on special occasions so I can maintain my appreciation for it. If I’m remembering correctly, it was played on a piano that was broken.

What’s an interesting city we should travel to?

The Arcosanti in Arizona. It was the vision of this architect named Paulo Soleri, a friend of Frank Lloyd Wright. He was ambidextrous and would draw his architectural drawings with both hands at once, and the Arcosanti was his vision of the city of the future.

Soleri died a couple of decades into its creation, but people still live there. People who believe in this vision, a story of a city that is to come in the future, but mostly they’re just chilling. They’re not building the city. They don’t really have active plans to expand. It’s kind of abandoned. People are still living there waiting for a leader, I think.

What’s the most unexpected lesson you’ve learned as a founder?

I’ll probably continue to learn this lesson my entire life, which is that you shouldn’t judge people too much based on a single interaction.

I think I constantly fall into the habit of saying this person’s great, or this person sucks, and that’s just never really true. For one, everybody comes off differently at different stages of their journey. And you, as the evaluator, can’t know what part of the journey they’re on.

I think starting a company has made me a lot more humble. I used to think that I was awesome. And I still think I’m awesome, but I don’t think I’m more awesome than other people. And I think that when you can really accept that, the world opens up to you. You begin to realize that everybody has a deep inner life. When you ask people questions and you genuinely want to hear what they have to say, you start to hear really interesting things.

It’s embracing humanism more. Everyone is of value. Everyone has meaning. And everything is fractal of everything else, including you. If you approach life from this point of view, you’ll get more out of it.

Originally published at https://smallplanet.com on February 23, 2023.