Tyler Cowen interviews Gaurav Kapadia, founder of investment firm XN, whom Cowen describes as 'one of our generation's Warren Buffetts' despite being notably publicity-shy. Kapadia grew up in Flushing, Queens, and serves on boards including the Mellon Foundation, Whitney Museum, and Council on Foreign Relations.

The conversation spans Kapadia's unique perspective on New York City development, his concentrated investment philosophy at XN, and his approach to art collecting focused on American artists of his generation. They discuss everything from Queens' economic growth without new infrastructure to the role of AI in investment analysis.

Kapadia also reveals his new magazine project Totei, celebrating craft and craftsmanship across disciplines, while sharing insights on museum governance, contemporary art markets, and why he believes we're at a positive inflection point despite widespread pessimism.

Queens Success Without Infrastructure Investment

Queens GDP has grown dramatically despite minimal new infrastructure because 'around transit hubs, you end up having a lot of development' and Flushing is 'one of the closest outer cities in an outer borough to the center of Manhattan'

Kapadia's family exemplified density innovation by converting their two-family home into a four-family home where '15 people were living in it' despite being 'zoned for basically four people'

As dictator of Flushing, he would focus on 'increasing density' by tearing down 'old Archie bunker style homes that were kind of past their prime' and changing zoning laws

Robert Moses: Power Without Process

Moses was 'both' hero and villain - The Power Broker showed 'a masterclass in wielding power' but 'the lack of due process as we go 50 years later, 100 years later, is starting to show'

Kapadia leans toward 'like him less' because 'having one person decide the taste for the whole city is also probably not the best use of time'

The challenge is balancing efficiency with democracy: 'reducing administrative burden where it doesn't make sense, but keeping it where it does make sense'

XN's Concentrated Investment Philosophy

XN maintains only '10 to 15 public positions at a given time' with holding periods so long they're 'only adding one or two or three IEDs in the corpus every year or so'

They exclude entire sectors like healthcare because 'there's just no chance in the world that Exen is going to be able to be the best healthcare investor in the world because of the combination of regulatory, scientific research that you need'

The Figma investment exemplified their approach: after antitrust blocked Adobe's acquisition, they got 'a best-in-class asset with an extraordinary founder mode leader' at 'roughly half the price Adobe was going to pay with a significant break-free on the balance sheet'

Hiring for Founder Mode Energy

Kapadia follows David Chang's philosophy: 'you have to be good enough and then you have to have something special on top' rather than selecting 'purely by resume'

The firm maintains 'rigor and kindness' as cultural mantras while keeping 'the bar high on everyone' across all 50 employees, not just the 10-12 investment professionals

Open office design enables interconnected thinking: 'who would have thought of a world five years ago, 10 years ago, where you have to have a conversation about software, power, and semiconductors all together?'

AI's Investment Revolution

AI will transform analysis speed and depth: 'so much of our analyst time is spent on initial evaluations of companies' but AI will provide 'better, faster, more in-depth analysis much more quickly'

The technology will also reduce operational burden since 'legal, the compliance burdens are off the charts' and AI offers 'huge opportunity in making the quality of life and accuracy much better'

Most investment firms lack innovation capacity because 'the general industry pressures encourage you to not innovate' - requiring founder mode energy to push through change

Contemporary Art as Investment Training

Art collecting 'exercises the right side of my brain' and develops the same skills as investing: 'judgment and developing your own taste' rather than taking 'somebody else's judgment and taste'

Kapadia focuses specifically on 'American art' from 'artists of my generation' - starting this criteria when he was 29 and maintaining it as both he and the artists age

He values artists who take risks like Rashid Johnson, who 'could just make anxious audience paintings for the rest of his life' but instead 'directed a play' and makes 'really complicated installations'

Totei Magazine and the Future of Craft

Totei celebrates 'craft and craftsmanship' across disciplines because 'almost everyone at a high level that I know appreciates dedication and craft' whether it's 'quilt making,' 'stand-up comedy,' or 'design'

The magazine launches digitally in late 2024 and physically in 2025, appearing 'two to three times a year' because 'the amount of effort we put into every issue is extremely high'

Despite widespread pessimism, Kapadia sees 'huge reasons for optimism' and believes 'we're at a positive inflection point' with 'innovation that drives from pessimism to optimism'