Lance Glinn:

Welcome in to another episode of the Inside the ICE House podcast. Today's guest is Ben Miller. He is the Co-Founder and CEO of Fundrise. Ben, thanks so much for joining us Inside the ICE House, happy to have you here.

Ben Miller:

Thanks for having me.

Lance Glinn:

Access to private markets for so long have been gated off to retail, largely available to these institutional investors and these high-net-worth individuals. The common person for so long couldn't get access to these say pre-IPO companies. When you had the idea for VCX, the Fundrise Innovation Fund, what did you view as broken about the system, and what inspired you to find a way to open those doors to everyday investors?

Ben Miller:

Well, so I started Fundrise or co-founded it back in 2012 so it's been a long journey, and I've been investing and raising in private markets for 25 years, so even back to the '90s and so I've seen it evolve. The problem that we're talking about, which is access to the best investments, it's only gotten more acute over time that companies have stayed private. They used to go public when they were much younger, when they were earlier in their growth cycle, and now they don't. As an investor, as an operator, as a founder, I watched how sausage is made, and I started to realize that there's this problem was not going to get better, it's only going to get worse. When we were sitting around a room one day and we're talking about what's the next hill to climb? We've been democratizing, investing in real estate and credit, now why not tech? Why not venture capital?

Lance Glinn:

You have this mission to democratize this access to tech and venture capital. But how has your perspective evolved over time over these last couple years? Democratization, I think it sounds obviously simple in theory, giving people more access to something they didn't previously have access to, but it obviously involves regulation, involves education, it involves this trust aspect too. What were some of the biggest challenges that you had to overcome to bring this idea to life and really commercialize it in a way to the greater audience?

Ben Miller:

Yeah. I mean, the history of finance is this long arc of democracy because used to be before New York Stock Exchange, private markets were like how all things were bought before the 1920s. I think some of what people don't appreciate is why the 1920s became so wild was that was almost the invention of the public stock exchange where everybody could start buying shares of anything and it got out of control. Over the last whatever, hundred years, whether it's mutual funds or index funds, or Charles Schwab brokerage, online brokerage, then free trading apps, it's always been about using technology to drive the cost of intermediation down. And as you use technology, you then end up driving more access. Access to more people and technological progress have always gone hand-in-hand.

Lance Glinn:

So then as VCX has started to scale and obviously reach this broader audience, I'm curious how you think about evolving or the evolution around what access really means. To me, it's not just about opening the door because obviously, yes, I guess in practice, you look at the Webster dictionary access as allowing someone to enter or gaining access to something, but I also think it's about helping people make informed decisions. I think that comes back to that education point too. How do you think about bridging that gap between that access, giving the people the ability to do something, but also then helping them understand what they're doing?

Ben Miller:

Yeah. Well, I think we're at an inflection point because it used to be that you had to get educated, or you hired somebody who was educated, but now AI actually is able to make decisions or help you get educated, or outright just make the trading decision as good. I think that an AI is at least as good as an average financial advisor, probably better, more objective. What we're seeing, we have millions of customers. We're seeing our customers get a lot more sophisticated, ask much more technical questions, have an ability to look at millions of pages of documents and then ask really good insightful questions. And so overnight, this question of education I think has now changed. It's no longer about education. It's actually about how you leverage AI to help people make better decisions.

Lance Glinn:

Is that a good thing? Do you think that's a good thing? Because if you're just relying on AI, at least for me, you're saying it's not necessarily about education, but more about leveraging AI, which I completely agree with. I mean, we live in a world where you can ask any AI platform you choose almost anything and they can give you an answer of some sort. But in your mind, is that a good thing? Because you're then taking away the education piece when you could argue people need to be educated, even if AI is available.

Ben Miller:

Yeah. I mean, I think it is a good thing. I mean, like all things, there's always double edges to it. And so in this case, I think that AI is going to be better than a normal financial investor advisor, less conflicted. Essentially, the cost of it's close to zero. Index investing with zero cost and no bad incentives, I think you end up with a better outcome. But yeah, when people drive with Waymo or drive with Google, when you're driving Google Maps, do you know where you are? Do you know where you're going? Or is just Google Maps telling you where to drive? You don't know, but nevertheless, you're not going to not use Google Maps, you're better off with GPS.

Lance Glinn:

There does come that trust factor I think that I had mentioned too. It's not just about relying or asking the prompt, it's how much do you then trust the platform that you're getting the prompt from? Like you said, I use Google Maps all the time. I'm just trusting that Google Maps is going to get me from point A to point B. I don't know where I'm going, but I trust that Google Maps does. It would be the same way for AI and the prompt that you're deciding to use.

Ben Miller:

Yeah. I mean, again, we're in this transition, and I think that younger people absolutely use AI for almost every decision. Older people don't trust it. This generational, this always happens with change. Young people embrace technology and old people skeptical. I was actually thinking about how people used to be afraid to put their credit card on the internet. That's like the internet showed up, people were like, "Oh, I don't know if I can trust the internet to put my credit card, internet." Obviously now, nobody keeps that off the internet. And so I think that what we're going to realize is AI is better at, let's say 80% of the decisions, AI is better than people, more trustworthy, faster, cheaper, just smarter. And as that becomes a realization, everyone will start to trust it more than people actually.

Lance Glinn:

Ben, when you look at the financial system today, do you think true democratization is more about access to the deals and the company themselves or more about access to the infrastructure, like data tools and transparency that typically institutions have had an edge with?

Ben Miller:

That's a great question. I think it's all about infrastructure. I think that the idea that you're going to pick a deal or pick a stock and make extra money is not how generally society progresses. I think it's about index investing into the private markets. How do you create a low cost, regulated, fair process to get the best investments to everyone? And I don't think that's about any specific deal or any specific company. Facebook was a hot company before they went public. Everybody wanted access. They went public. Now it's in the past.

There's this ongoing change of who is the company that people aren't getting access to, what's the growth? And that growth in the private markets has only become astronomically large. It's now trillions, used to be hundreds of billions. Probably, the next 10 years, we'll see tens of trillions in the private markets. One of my counterfactuals I tell people in the private markets, I said, if the Mag 7 had been private and all that 401(k) growth for normal people had been just accumulating to the top 1%, we would have a collapse of our social fabric.

Lance Glinn:

Can you dive a little further into that?

Ben Miller:

Yeah. I mean, I think that with most technologies, there's positives and negatives. People were mad about how Amazon shut down Main Street retail, but it made everybody's lives better. It made everybody wealthier. You're talking about tens of trillions of dollars of wealth creation for people's retirements. If people couldn't retire because their portfolio essentially was, they invested 100 grand 30 years ago, but it was still 100 grand because all of the gains were in the private markets. I think that would actually undermine the social contract. And I think that's where private markets are headed today.

Lance Glinn:

When you look a few years back and you're starting up this innovation fund, you are venturing into tech and venture capital and making that pivot with Fundrise. Was there an initial sense of skepticism? Was there a little bit of worry, of concern, of caution that Fundrise had been doing something so well for so long that making this pivot was going to set the company off course?

Ben Miller:

Yeah. When we expanded into venture capital, we got a lot of skepticism from our customers from Reddit, from the board, from team. Oh, I work in the real estate department. What happens to me if we expanded in another area? And it's all change, basically people are always skeptical to change, and they're always worried about it and they have a bias towards the negative side of what can go wrong. And then in retrospect, where it looks like it was inevitable, somehow we should have rockets and AIs if that's inevitable, and it's not. For us, we're lucky we came out in a good time, 2023. It was a great time to launch a venture fund because the market had reset and there's this new technology called AI that we were able to get in at the ground floor of.

Lance Glinn:

Absolutely. So when you look at what you've built with the fundraise innovation fund with VCX, how do you evaluate whether democratization is working in practice, not just in terms of access and giving people access to these private markets, but in terms of how investors are engaging with the platform and the kinds of outcomes that they're seeing? How do you really gauge success from this?

Ben Miller:

I don't know if you know this quote by, I think it was Deng Xiaoping, somebody asked him about the French Revolution and he said, "It's too soon to tell." And so I think that this democratizing venture capital, maybe it's a year old, maybe it's two years old, it's so new. It's too soon to tell exactly how it's playing out. And I'm seeing what I thought would happen and what I definitely said would happen was you'd see more people enter the space, and now you have Robinhood, there's Ark, there's COtwo. So we're building a category, and the categories are more important than any one company in the category, and the category will go through ups and downs. Right now, we're going through an up, lots of people are having success and returns are good and everybody's happy. At some point, there'll be-

Lance Glinn:

Sure.

Ben Miller:

... the other side of that, all investment cycles have ups and downs and then people will say it was a bad idea, it was terrible, and then it'll come out again and start to cycle over. I think that at the beginning of the next cycle, so let's say that's 10 years from now, it'll be the most normal, boring thing and everybody will think it always existed. And then they'll, just like New York Stock Exchange, it didn't exist, it's an invention and then it became digitized and changed again, and so I think of it as you know it's successful and no one thinks it's novel.

Lance Glinn:

You mentioned how it's still too early to tell, but when you're looking out, is there an endpoint, or is it just a constant continuation because of all these different cycles that are happening?

Ben Miller:

Yeah, I think it was continuation. I look at Jack Bogle, invented index funds, and he's no longer with us, but index funds are completely normalized and became the most standard way people invest. I think that will happen with democratizing into private markets. I even think that over the next 10 years, AI will just destroy the idea of public-first private markets and probably the idea that everything is intermediated by AI and how you get access and how you make decisions is through AI. I don't even think that you'll think about private versus public, you'll just think about how my AI is making decisions that have good outcomes. It stops being technology when it becomes invisible. How does your internal combustion engine work in your car? You have no idea.

Lance Glinn:

Yeah, it does.

Ben Miller:

You don't even drive it anymore, it just gets you from A to B, and that's how I think we'll end up with finance.

Lance Glinn:

To talk just generally about Fundrise, now we discussed this focus on real estate for so long, real estate investing, this evolution into also including tech and venture capital. When you're just thinking about portfolio construction at Fundrise as a whole, whether it be real estate or tech and venture capital, how do you approach determining the right mix? What guides how you identify companies or just general assets that are worth backing?

Ben Miller:

Yeah. My experience, because I've been through the 2001 bubble or 2001 collapse and then I went through the 2008 and then 2020 and then whatever we're in now. I've seen the cycle go up and down. One of the things I've experienced firsthand is that the macroeconomic drivers are the most important things. You can have the best built building in 2008, it doesn't matter. You can be wiped out. You can have the best office building in the world in 2020 and COVID can wipe you out. The macro is first and foremost what drives returns, which is hard because you said, what's the alpha? It's not in the execution. So you have to make sure you're on the right side of history, and so that's why we went all in on AI.

The macro construction is about you work your way down from what I think are obvious trends and then anybody who's like, "This is Peter-Lynch-type thing from Fidelity." Make big, obvious decisions about how things will play out. And then underneath of that, you start to then build a portfolio. And venture is so different than real estate venture. There's a saying at venture versus real estate, in venture capital, you make 100 investments, you lose money on 99 of them and you make all your money on one. And on real estate, you make 100 investments, you make money on all 99 and you lose all your money on one, and so you end up then with very different strategies around the nature of the underlying investments.

Lance Glinn:

Before Fundrise became what it is today, how did you think about not just building a company to solve a need at a specific moment, but a brand that lasts for years? Because it's one thing to solve one problem and then not evolve to solve future ones, but a whole nother thing to create something that's long-lasting. So how do you as a founder and as a builder create something that is long-lasting and not just here for the moment and gone for the next?

Ben Miller:

Yeah. I used to think it was about, I had a mentor say that it's like find a big problem and then spend your time solving that problem. Don't find a solution. Solutions are temporary, but big problems are forever, like healthcare, making people healthy. That's a forever problem, so I think that's how to think about it. But as I've done in this now for a long time, I start coming away thinking, well, it's really just a team of people, and that team of people who have come together and it could be 10 people and sometimes seems like some of these big companies is only a couple.

But for me, for us, it's a team, and that team just has this relentless drive to keep going. Our team is able to keep doing the next thing because we seem to have the right stuff, the right mix of skills, and not any one of us I think would be nearly as good as the group. And at some point, the team gets old. Companies age, teams age, and then they go out of business. I mean, happens to GE. I mean, it happens to every business eventually ages out, and then new young businesses get started and the average employee ages with the business too. I mean, it's like people don't see corporations as very, very much like people.

Lance Glinn:

As things change, people change, people evolve, things transform, how do you make sure that you... Especially we talked about it with venture capital and tech, we're trying to find that next big thing, how do you make sure you're able to get ahead of that next big thing to make sure that while people age and companies age, you still have an understanding of what that next sector or what that next big innovation could be so that you can get ahead of it in a way.

Ben Miller:

Yeah. I mean, it's different for every sector, but for venture, there's like the traditional way and then what we're doing. The traditional way is that they end up bringing in young partners, young partners can connect with the rising generation. But typically in venture, the person who makes the money is the GP, it's the venture sponsor, they're getting paid two and 20. Our fee structure is much more like a low-fee passive index that we don't get any carried interest and so we have to come up with a different approach.

My whole thing is if you make it structural, if it's structurally we're indexed at the top 20 companies or some filter of the top 20 companies and the companies and the markets start seeing that as normal. Of course, you raise from Vanguard or VCX when you get to your Series D and E and F because it's like long-term passive money, it democratizes access. Who wouldn't take that money? And then it's not about me and people having genius alpha, it just becomes structural, and the more it becomes structural, the lower the fees you can get. The lower the fees, the bigger it gets. The bigger it gets, the more it gets access, and so I'm playing a different game than the venture guys.

Lance Glinn:

I want to look at or continue to look at this founder's journey for you, right? Fundrise starts gaining traction, moves beyond what companies can have this early survival phase that business and industries go through. So now that you're on your footing, and this is obviously taking back few years, but you've found or you feel like you have some solid footing with what Fundrise is, were there still moments or have there still been moments where the conviction in what you were building and what you obviously have built has been tested? Obviously, it's not always going to be smooth sailing. Have there been instances where you're like, "Maybe this isn't going to work"?

Ben Miller:

Oh, yeah. Oh man, it's horrible. It's the worst. I mean, and essentially you have two different things happening. You have things that are about your company and you have things happening that are cyclical about the world. COVID was the moment. Real estate industry, we didn't start VCX because we thought real estate would blow up, but real estate industry is in a deep recession. I mean, it's 2001 meets 2008. I mean, the real estate sector across the board is in, people don't really know about it or aren't paying attention, but if you're in commercial real estate essentially you're in deep distress.

Lance Glinn:

It's tough times.

Ben Miller:

It's really tough. There's very few companies we're able to pivot. The way that Blackstone did it is they pivoted into QTS and data centers. We pivoted into tech. The tech is what basically allowed us to refound the company and rebirth. If we stayed pure play real estate, multifamily and industrial, we would be much more in the hurt locker. I don't think I'm on solid footing, I basically feel like I'm never on solid footing. There's always the next crisis, there's always the next cycle, and I think that's what basically makes you want to retire.

Lance Glinn:

So we obviously live in a much different technological world than when Fundrise was founded in 2012. Earlier this year, Fundrise introduced real AI. What was just first and foremost the vision behind the launch and how does it benefit the consumer? What is essentially the purpose of real AI?

Ben Miller:

Well, I mean, this is the masochism of being a founder, and so you sometimes want to solve, you see some opportunity, you see some problem, you want to do it, and then you do it and you regret it. We were sitting there, we know a lot about real estate, Fundrise has hundreds of tech people, software engineers, and so we just know, we've built a lot of software over the years. And so we were like, "Well, let's start working on something that leverages AI for real estate."

That was three or four years ago, and you just find opportunities, problems that you can leverage AI. We ended up building something that is unique because we focused on the data. Our view was if you have the most real estate data and when we created data sets, that's what took us three years. You can make better decisions and you can make better investments, operate better so we built real AI and it turns out that was really smart because the AI companies, AI platforms are eating the application layer, and the data is one of the only things that survives the current innovation cycle.

Lance Glinn:

And then so how do you think about making sure real AI isn't just additive or redundant, but actually something unique? Because I think that's important. I mean, we're seeing hundreds, if not thousands of AI companies popping up all over the place and you see some of them stand out, obviously. You see other ones that just seem to be a carbon copy of other ones that came out previously. There is nothing necessarily unique to them or special to them, they're all just sort of the same thing. How do you make sure that real AI isn't that additive or redundant, but is instead something unique and has something that others don't have so that consumers flock to it?

Ben Miller:

Yeah. I mean, there seems to be the venture industry is now realizing that most software businesses won't have great terminal values because AI is going to make that software very easy to replicate, so it leaves you with going two directions and you see them going both directions. You need to have data, data sets, large scale, large scale data sets like trillions or quadrillions of data points. That's something that you can't just create with an AI, a really smart person. If you think of a genius doesn't just create data, they have to go gather it, and so that's one way. That's what we did.

The other direction people are going is trying to make it a service, and so you're trying to eat a service with AI. That one, that's where most of the venture industry is going. I'm a little skeptical of that one having been in the service business. Well, we just came from a very different point of view. We weren't like, "Oh, let's build workflows with AI," which is what most people did, and they ended up building a layer on top of the models and the models are eating that layer.

We ended up saying, "Okay, what do I need to know to make the best decision?" We are now building plugins and connectors to Claude and to OpenAI so that their AI can use our data because I don't really care who uses it as long as that you get the best decisions from the data.

Lance Glinn:

And where do you ultimately want? Because this is a question I ask a lot of people, sometimes I ask a little bit differently, but where do you want the technology to lead versus still having that user stay in control? Because I think, and this is not just for AI, this is just for AI as a whole.

Ben Miller:

Yeah. I mean, I guess I think of myself as a realistic optimist. I don't think people actually are that great at making decisions if you think about technology, nuclear weapons, all these things have made the world much more advanced, much more dangerous, but people haven't changed. People have the same brains more or less they've had from 50,000 years ago, and so I think we need something like AI to help us navigate a much more complex world that we weren't designed for and that AI is essential in a world with accelerating progress. It's not that I think AI is so good. I think that people are so bad. The biggest risk with AI I think actually is Putin, Xi Jinping, it's authoritarian powers, it's people. People are the risk. I think that the AI will actually be massive net gain, and not without some transition pains, but I don't know how we survive this progress without something increasing our quality of decision making.

Lance Glinn:

Do you think that's the next big step for humanity to take really? Changing our decision making so to speak, that's something that I would think would normally take centuries potentially for it to happen, but could it be potentially sped up now?

Ben Miller:

No, I think it'll take tens of years to, in this case-

Lance Glinn:

Because of AI and because of the technology, not just AI, but all the technology we now have at our fingertips.

Ben Miller:

Yes. I mean, it's very hard to predict, but it's sort of like the internet did ultimately, it's a communication tool that drove better communication, e-commerce, things like that, that in retrospect were obvious. AI is a intelligence tool, it's going to increase our net intelligence. We're going to have better decisions. I think that people will come to make almost all decisions with AI and AI assisted and that on balance will make way better decisions, relationship decisions, parenting decisions, job decisions, investment decisions. And AI, I mean, I don't know how much better it gets, but it gets a lot better, and I don't think that it's going to replace people.

I think it's going to augment people and then people... We already have Neuralink, I mean, we're going to end up... Once we're making all the decisions with AI, exactly how we end up incorporating into our bodies, I mean, it's scary because it's very hard to imagine a world that changes this much. But I mean, a few hundred years ago, we were just living on farms, you wouldn't leave. The furthest you get away from the farm might be three miles your whole life. You always did what your father and your grandfather and your grandfather's grandfather did. I mean, there was no change, no progress. You probably never learned to read. The decisions you made day-to-day were totally different. It's just like this is the nature of human progress, and I'm optimistic that we'll rise to the occasion.

Lance Glinn:

I want to bring it back now to this investing in private markets, this democratization that we spoke about a lot at the beginning of our conversation. You've obviously now been building in these private markets long enough to see these different cycles, this obviously shift in investor behavior as well. When you just look at the current environment, we talked a lot about education and trust and regulation earlier in the conversation, are there still some big misconceptions that you see that everyday investors have about private market investing? Are there some things that you or your colleagues or other people in the industry talk to or have to educate investors around, "No, you might be thinking this, but actually this is happening." Are there any misconceptions like that?

Ben Miller:

People think that you want to be buying companies, but the largest institutions in the world invest in venture funds and venture funds invest in tech companies. High-net-worth people don't invest in tech companies. Unless you're an insides to Silicon Valley person, almost all the biggest investors in the world, pension funds, family officers, they investor venture funds and venture funds are who end up on the cap table of tech companies. When I think about democratizing private markets, I think about venture capital as the medium or not the public markets as the model.

Lance Glinn:

More philosophically then, how do you think about long-term investing in an era where information is instant cycles feel compressed? Obviously AI accelerating decision-making as we just talked about too. Does that fundamentally change what good investing looks like, whether it's real estate or private markets?

Ben Miller:

Yeah. When I talk to people in real estate or talk in real AI or talk to people in private markets and these large tech companies or venture funds, I tell them, "We've already seen this movie before." We know what AI does to markets because we saw it happen in the public markets. In 2007, 2006, traders would make trades, and then the high frequency traders can make trades and see changes faster than any person can. They got rid of the trader and then they got so good that you couldn't even trade against them. The amount of data, the way decisions get made by Jane Street or Citadel or any kind of high frequency quantitative trading algorithm, there's no way a person is going to be better than that. That's what's going to happen in basically every market, not just in real estate investing and tech investing, but also with how you buy soap.

I mean, all decision making is going to become algorithmic, and the idea that you as a person can beat the algorithm generally is just absurd. That's what the future looks like, and so the way that you want to do is you want to buy long-term... That's why passive investing, something like passive investing ends up being the better mousetrap, not some sort of, "I'm smarter. I'm smarter than the other guy," because maybe you are, but you're not smarter than the other machine.

Lance Glinn:

If you look out five or 10 years, what does access to private capital in America really look like? Does it still look like where we are today? I'm assuming because of everything we've talked about, it doesn't in your mind, but what does it look like if we're sitting here at the New York Stock Exchange again in 2031, 2036, whatever the year might be?

Ben Miller:

Yeah, I think if 2031 is too close for anything really to change, but 2036, something like that, I think it's highly contingent. Again, a random walk that depends on politics, and you could see a world where... I mean, it's almost hard to imagine this, but I see a world where government ends up being 50% AI. I've done 120 public offerings. I've gone to SEC and cleared 120 offerings. I can see the SEC being 50% AI is reviewing my documents. The private markets and the public markets converge. They're clearly converging. I don't even know if the concept of public and private markets exist in 10 years. I think that just become one thing, and then everything is intermediate and run by AI.

Lance Glinn:

And then so with that being said, as you think about the next chapter of Fundrise in a world like that, what does success look like to you in terms of both the platform and just the broader impact you want to have on how people build wealth?

Ben Miller:

Yeah. I mean, in all the circumstances, we always go down to the ground of, so with real estate, we're not just the platform to invest in it. We're also the fund manager. We're also the operator of the real estate. And all of that from the person all the way down to the property, we're slowly but surely eating with software. You have to build a better mousetrap, and that's why the same thing with venture. I'm never going to be a better venture investor than Sequoia or Mark Andreessen, that's crazy, but he doesn't want to build the Vanguard of venture. And I think if we build the Vanguard of venture, that's how people invest in venture capital in 10 years, and maybe it's two bips. Maybe it's rounding error in terms of cost, but it's a trillion dollars.

You want to basically get at the structural changes that need to happen, and that's where if you're on the right side of these giant macros and you're willing to change and willing to embrace these structural changes that are the value creation, it's not us, it's really just us riding these waves. Then there's always an opportunity. But I mean, is everything AI in 10 years? You know the whole meme, everything computer? Yeah.

Lance Glinn:

Yeah.

Ben Miller:

We better be an AI company in 10 years.

Lance Glinn:

Yeah. The future certainly remains to be seen, but we've painted quite the picture of it over the course of our conversation. Ben, thank you so much for joining us Inside the ICE House.

Ben Miller:

Yeah, thanks for having me.