Scott Kupor's New Plan to Bring Tech Workers Into the Federal Government

If you're a high-skilled tech worker, then potentially huge fortunes await you working for a startup or one of our booming AI giants. But the government needs these types of workers too. And the government is not set up to pay commensurate salaries with the private sector -- particularly for these types of roles. This challenge has long been understood, and there have been numerous efforts over the years to infuse the government with high-tech talent. Scott Kupor is the director of the US Office of Personnel Management, which manages and coordinates recruiting of new government employees across the federal workforce. Scott was also previously one of the top partners at the famed VC firm Andreessen Horowitz. So he has a mind for bringing the recruiting practices of the tech world into DC. But of course, that's easier said than done. On this episode, we talk about how federal hiring works and doesn't work, and also his new endeavor called the US Tech Force, which aims to bring in top talent for a two-year stint of solving problems across the bureaus. We also talk about the DOGE initiative, and how he thinks about recruiting top talent at a time when the administration has been aggressive about shrinking the size of the overall federal workforce. Read More: Federal Workforce’s Toll After a Year of DOGE and Trump: 317,000USDA Lost a Third of DC Staff Even Before Relocation Effort Join the conversation: discord.gg/oddlotsOnly Bloomberg.com subscribers can get the Odd Lots newsletter in their inbox — now delivered every weekday — plus unlimited access to the site and app. bloomberg.com/subscriptions/oddlotsSee omnystudio.com/listener for privacy information.

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• 0:00Joe Weisenthal?

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• 1:11Speaker 01

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• 2:22Speaker 03

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• 2:37Joe Weisenthal?

  Hello and welcome to another episode of the Odd Lots Podcast. I'm Joe Weisenthal.

• 2:42Tracy Alloway?

  And I'm Tracy Alloway.

• 2:44Joe Weisenthal?

  Tracy, one of the topics that we like to talk about, but we haven't talked about it for a while, public sector tech, public sector hiring. We've done a number of episodes on this. It's been a while, though, since we've revisited this question, but it raises so many fascinating things.

• 2:58Tracy Alloway?

  I remember the ones that we did with Jennifer Palco, which were fantastic. And we got a good sense of some of the issues facing public technology, including, I think it was 7,000 requirements in a single RFP. That was at the state level, but you hear stuff like that and it just kind of blows your mind how complex the whole process of developing new technology actually is in government.

• 3:26Joe Weisenthal?

  Right. So, right, and we've also, Patrick McKenzie is the other one we've talked about this with, like, these legacy systems, they have all of this crap or whatever, and some of it's tech and some of it's related to hiring. Everyone, I feel like, comes in to the public sector and they're like, why can't this look more like the private sector, et cetera. But I have a, I have an observation that I thought about after the last time we talked to Jennifer, which again, they're excellent conversations. I mean, we'll move the ball forward. So there are all kinds of obvious problems with the public sector, and we'll get into them. That being said, and I think you had the same experience, you hear these descriptions of like, say, what's, what's broken with the hiring process? And it's like, you know what? That sounds kind of familiar. I've experienced that in the private sector, too.

• 4:09Tracy Alloway?

  Yeah.

• 4:09Joe Weisenthal?

  A lot of these pathologies seem to exist in large organizations.

• 4:14Tracy Alloway?

  I was gonna say, I think it's endemic to bureaucracy.

• 4:17Joe Weisenthal?

  Yeah.

• 4:18Tracy Alloway?

  Right? And I remember Jennifer specifically saying that, like, one of the main choke points is just the operational process of getting stuff approved or getting a new candidate through a hiring process that has been dictated by human resources and you have to fit into certain slots or certain categories. So it's a big deal.

• 4:38Joe Weisenthal?

  But that's the, the whole, dealing with HR thing and their role as gatekeepers of the hiring process and they're a whole-

• 4:46Tracy Alloway?

  Careful what you say, Joe.

• 4:47Joe Weisenthal?

  I love our HR people here at Bloomberg. I'm just saying, some of it sounded a little bit familiar.

• 4:51Tracy Alloway?

  Yes.

• 4:52Joe Weisenthal?

  So I'm gonna, I'm gonna just leave it at that. Some of it sounded a little bit familiar.

• 4:54Tracy Alloway?

  Fair.

• 4:55Joe Weisenthal?

  So of course, we know that the new administration, of course, lots of people from the tech world have come to it. I think probably most famously Elon Musk and the whole Doge endeavor, which, you know, we'll get into perhaps where, where we stand on the verdict for that. But widely viewed as not particularly transformational. It's under, nonetheless, a lot of like buy-in, a lot of people from the tech world, thinking about what aspects of our most dynamic industry in America can be brought into the public sector to perhaps make it a more dynamic place, maybe more efficient, maybe more effective, and a maybe a more desirable place to work for talented people.

• 5:33Tracy Alloway?

  Right. And the government, the Office of Personnel Management is launching a new cross-government program, right?

• 5:39Joe Weisenthal?

  Yep.

• 5:39Tracy Alloway?

  To recruit top technologists to modernize the federal government. And I would just add, it kind of has some new urgency because the Trump administration has identified the AI race with China as like this existential threat to the US. So you, you can see stuff kind of coalescing.

• 6:00Joe Weisenthal?

  Totally. Well, we literally do have the perfect guest because we are going to be speaking with the director of the Office of Personnel Management in DC. We're going to be speaking with Scott Cooper. He's a former venture capitalist who's at Andreessen Horowitz. So he knows all about the public world, the private world, et cetera. Literally the perfect guest. Scott, thank you so much for coming on the Outlaws Podcast.

• 6:19Speaker 05

  Well, thank you for having me. I'm glad to be here.

• 6:21Joe Weisenthal?

  Absolutely. What is, um, let's start from real basics. What is the job of the office, the director of the Office of Personnel Management?

• 6:29Speaker 05

  Yeah. It's a great question, and, and I didn't know the answer to this one before I started talking to the administration about the job either. So I think the simple way to think about it is, look, we're the talent management organization for the federal government. So there's about 2.1 million federal employees roughly in the government today, and we are responsible for all policies related to people. So how do you hire, how do you fire performance management systems? So H R I T. systems. And then we're also a cross-functional organization that everything we do obviously touches all the different agencies. So we're trying to make sure that we've got consistency of policies across the government. And the simple goal in my mind is just, how do we make sure we have the right people and the right jobs in the federal government? That's basically the, you know, foreword articulation of what we do.

• 7:08Tracy Alloway?

  Why did you decide to go from Andreessen Horowitz to what seems like, you know, something of a challenging job and possibly lower paid? You don't have to tell us your salary, but you know.

• 7:19Joe Weisenthal?

  It's probably public somewhere, but I assume it's definitely lower than a partner at Andreessen Horowitz.

• 7:24Tracy Alloway?

  Right, right.

• 7:25Speaker 05

  My salary, my salary is public, actually. In fact, you know, you know, when you hit a high point in your life, when your oldest daughter, who is, I won't give her age, but she is, let's say, under 30, is making more money than I am at this stage.

• 7:37Joe Weisenthal?

  Congrats to her.

• 7:38Speaker 05

  So, exactly, I'm very proud of her. Yeah, it's a great question. Look, the honest answer is, it was a couple of things. One is just, it was the right time. You know, I'd been at Andreessen, as you know, from the founding, for 16 years, super proud of what we did there. And Ben and Mark were incredibly gracious in giving me this opportunity. And I really felt like there is an opportunity in this administration to do something differently. So you mentioned a bunch of technology people coming into the administration. There's also just a bunch of, you know, business people more generally. And, look, we're not going to make a mistake of applying every private sector, you know, method and model to the federal government. But I think what the president has asked us to do is to think differently about things and given us kind of the permission and the flexibility to do that. And so, to me, look, I've been around the venture capital business, you know. Ultimately, companies succeed or fail.

• 8:23Speaker 05

  My lesson from the venture capital business is, they succeed or fail almost entirely because of the people in the organization and the organizational structure and the culture and the incentives. It's pretty simple. And so, my view is, look, why can't we learn some of those lessons and apply them as appropriate to the federal government and think about creating a culture where we've got great people who can do great stuff on behalf of the American people?

• 8:43Joe Weisenthal?

  So, I want you to tell me about your new initiative to bring in tech talent. And also, in the answer, maybe like, situated within, maybe what makes it different from other endeavors? What, you know, there was the Code for America endeavor, which, you know, probably had some similar themes. Obviously, there was the Doji experience, which I want to get into further. But talk to us about this new project. What's, what is it? And then, why is it different from past efforts to infuse technology or infuse tech thinking into the government?

• 9:15Speaker 05

  Yeah, so let me take you through the program. So the program is called U.S. Tech Force. So anybody who's interested can go to our X at U.S. Tech Force and find more information about it. Basically, here's the program. The goal is to bring 1,000 engineers into the government, so software developers, AI experts, data scientists, product managers, so anybody who can help us basically with the job of modernizing government infrastructure. It's a two-year program, and we partnered with about 25 of the largest private technology companies, private sector technology companies, I should say, and we're really trying to accomplish a couple of things here. Number one is the government has a dearth of what I would call modern software expertise and modern AI technology expertise, and that's not a knock at all on the organizations, but

• 9:58Speaker 05

  a lot of what these big CIO organizations in the government have to do is they're maintaining these massive legacy infrastructures, and so the ability to do bespoke development is quite difficult in those organizations. So this will be a vehicle to help them accelerate bespoke development across the entire government. The second problem we're trying to solve is we have a massive early-career pipeline problem in the federal government. So 7% of the federal workforce is early-career, let's call that less than five or seven years worth of work experience, and that compares to about 22, 23% in the non-federal sector. So by a factor of three to one, the federal government is completely failing at getting early-career people into government. And if you look at the other end of the spectrum, by the way, so we've got about 44% of our population that's over the age of 50, and that compares with about a third in the non-federal workforce.

• 10:43Speaker 05

  So we've got this looming problem, which is we're going to have a ton of people over the next five to 10 years who, rightly so, are at retirement age and want to go do other things, and we've done very, very little to actually replenish the pipeline. So this program is really intended to do that, and one of the ways we're doing that is by making it a two-year program. So I don't think it's reasonable for us to go to a 22, 25, 27-year-old person and say, "Decide today, do you want to commit 40 years of your life to be a career public civil servant?" What I'd rather do is expose them to the problems in government, let them actually have a great experience, and you know what? Like, we should convince them over time how great this is, but you know what? If at the end of the two-year period, they want to go back to the private sector, that's great, and that's why we've lined up all these private sector partners who are going to actually help run a job fair for us and make sure that we have kind of greater connectivity between the public and private sectors.

• 11:44Joe Weisenthal?

  There are some market stories where you want every detail. Tracy and I have made quite a few podcasts on that basis, but sometimes you've only got 10 minutes and need to know what's moving markets and why. That's the Barclays Brief Podcast. Every week, experts from Barclays Markets and research get you up to speed on what matters and what to watch next, about the time it takes to grab a coffee. So, search Barclays Brief wherever you get your podcasts.

• 12:08Speaker 06

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• 12:39Tracy Alloway?

  Can you talk a little bit more about why historically government roles have not been that desirable for tech workers? What is, I assume you diagnosed the problem before you came up with a solution, but in your view, what is the main choke point or market failure that is leading to difficulty for the government to recruit the kind of people that it wants to?

• 13:01Speaker 05

  Yeah, so I think there's a couple of problems. So, one is, it's, I think the fundamental issue, quite frankly, in my mind, is a messaging problem, which is, I'll give you an anecdote, right? So, when I first came into office, I've been in the office about six months now, I met with one of my managers in the organization who said, "Hey, you guys are ruining things." And I said, "What do you mean?" And by "you guys," she meant Doge, and, you know, I'm not part of Doge, but obviously, look, I come from, you know, I know lots of those people. And I said, "Well, how are we ruining anything?" She said, "Well, our whole value prop to employees has been, come to the federal government and have lifetime employment." And I said, oh, my gosh, you're not going to like my answer because number one, I'm going to tell you like that's a myth and a lie that people have been telling you there is no such thing as lifetime employment. And two, I said, look, that's the most, that's the worst, least compelling kind of narrative

• 13:44Speaker 05

  that I've ever heard that I'm going to go tell some 25 year old like that's the value proposition of coming to work for the government. So number one is like, we have to change the narrative. The narrative in my mind is come work on the toughest, biggest, most complex problems, you know, do some public service, but then give yourself career options. And you know what? If you want to go to the private sector after that, you know, God bless you. That's a proper thing to do. So that's part of the problem. The other problem is the nature of what happens in government. And, you know, you know, Jen Polka, as you guys mentioned in your intro, who's like brilliant on this stuff, diagnosed it perfectly, which is so much of what government does is it's a compliance based culture. Right? It's not just literally, you know, that we follow laws, but if I do something wrong, you know, I'm worried about getting an inspector general report, or I'm worried about a GAO report, or worry about some congressperson hauling me in front of their committee to

• 14:29Speaker 05

  testify about stuff. And so the short answer as a result is like, we have a zero risk based culture inside of government. There's no concept of, you know, you guys mentioned I came to the venture capital world. You know, in that world, look, we take crazy risk because all we're doing is trying to maximize upside opportunity. Now, I'm not proposing we do that in government, and I've been using the term measured risk as a better way to try to describe it in government. But like, we have to kind of change the culture and enable people to think about the upside opportunity that comes from taking modest amounts of risk. And unfortunately, particularly on the technology side of things, that has not been the case. And so again, if you're a young, you know, early career person, I think you want to do cutting edge stuff. You want to learn things. You want to kind of go out a little bit on the risk curve. And right now, at least historically, government has not been an amenable place for that.

• 15:13Joe Weisenthal?

  So you mentioned that the pitch to work in the federal government should not be this is lifetime employment. That that is like, that's not healthy for a lot of reasons. And I think a lot of people can intuitively agree with it. On the other hand, you know, you mentioned the sort of like in the VC world, you're always shooting for the right tail. But when you're talking about no layoffs or lifetime employment means like you're cutting off the left tail, just from a money standpoint, the employee of the federal government never has the chance to experience a right tail outcome. The highest paid worker in the federal government, it's a very decent salary, but you know, and compared to Very even moderately successful people, you know,

• 15:55Joe Weisenthal?

  the most senior successful person in the federal government will make less very often than just sort of like someone who's hung around Google for a long time. So like, how much of the problem actually just comes down to that simple monetary fact?

• 16:10Speaker 05

  So, look, there's no question that compensation is relevant, but I actually think we've been overstating the nature of that problem. So let me give you a couple of thoughts on it. So first of all, part of the reason why we're focused on early career here is at least the pay gap between private and public is a little bit more manageable. And it just kind of, it asymptotes like massively as you go farther through your career. So yes, it's totally unrealistic, you know, unless, unless you're rich and you just decide you want to do something different, it's totally unrealistic for us to think we're going to compete against like a VP at Google for a senior level executive person in government. So that's not even, in my mind, like, that's not even worth worrying about, basically, because like the pay gap is just crazy and nobody's going to do that. But my experience at least, and you know, you guys have been around a lot of organizations, is, look, there are some people who are purely kind of profit maximizing, and that's great.

• 16:54Speaker 05

  It's not, I'm not, have no normative objections to that, obviously. But my sense is that's actually a relatively small minority, the population of employees. I think most employees come to work every day because they're being challenged, they're learning, they have career development opportunities, they work for someone who cares about their career, and they feel like, you know, they can be rewarded when they actually do good stuff, they feel like they're held accountable. Like, that, to me, is a culture that we can create inside of the federal government. And, you know, even if it means, yes, in, in a short period of time, you are going to have like a, you know, remuneration challenge relative to the private sector. But this is also why, again, just to go back to it, this is why I think this whole narrative of come, you know, work for the federal government for 40 years, to me, is just crazy. Like, we should have an open idea that you can go back and forth between the public

• 17:39Speaker 05

  and private sector, and you know what? If you have points in your life where you think like profit maximization is the most important thing, then yes, like, you should go to the private sector because the government's never going to deal with that. But I think we just have to break this, like, to me, this dichotomy that there's one way to go or the other, it makes no sense. So, look, in the perfect world, I'd wave a magic wand and say, we pay everybody like what they can get paid at Google, but that's not realistic, and quite frankly, as you know, there's, there's zero support in Congress for that.

• 18:02Joe Weisenthal?

  Yeah.

• 18:03Speaker 05

  The final thing we can do, though, just, Joe, to give you one last perspective, is we can do things inside of OPM to mitigate some of the challenges on the compensation side of things. So let me give you a very specific example. So as you probably know, there's a GS schedule, which is like everybody gets paid, you know, GS one through 15, these are different levels. Today, all those GS schedules are driven off of tenure and they're driven off of degree requirements. So if I don't have a college degree and I haven't worked for 10 years, no matter how good I am, I can't get to a GS 15 level in government. In my mind, that's just silly, quite frankly, right? That's the opposite of a merit-based culture.

• 18:35Joe Weisenthal?

  Yeah.

• 18:36Speaker 05

  You all will remember, since we've talked Doge, right? You'll remember, I won't mention his name, but you know, there's a Doge engineer with a very colorful name that I'm sure your listeners have heard of.

• 18:43Joe Weisenthal?

  Yeah.

• 18:44Speaker 05

  You know, when all the kind of exciting Doge stuff was happening, there was a quote from an administration official who said, "This guy's terrible. We never would have hired him because he didn't graduate from college and he didn't have whatever, five years of work experience coming here." And in my mind, like, I literally wanted to pull my hair out when I heard that because I was like, "That's the craziest thing in the world." Like, if this guy is capable of performing at a GS 15 level, why should we care about what his tenure is or whether he has a college degree? And so, one of the things we're doing inside of OPM is we're going to eliminate all degree requirements and all tenure requirements in the pay schedule. And so, as a result, if someone is doing awesome, like, we can hire them at the appropriate level. So some of the pay gap problem is not just a numerical problem, it's a leveling problem. And I think we can solve that even in the absence of congressional legislation.

• 19:28Tracy Alloway?

  Yeah, I remember Jennifer, again, said something very similar about, like, the best coder in America, or a young guy who had won this huge coding competition and then couldn't get hired by the government because he didn't tick all of the official boxes. Kind of crazy.

• 19:45Joe Weisenthal?

  For that specific role, yeah.

• 19:46Tracy Alloway?

  Yeah. Since you mentioned doing awesome, how do you actually go about evaluating the performance of a tech worker in government? And how do you figure out which people you actually want to hire in terms of talent?

• 20:01Speaker 05

  Yeah, so, the short answer is, we have to do it differently from how we do it today, but let me give you the very specifics. So, on the front end, historically, we have relied on self-attestation of skills in order to hire people into the federal government. So, I apply for a software engineering job, and I get this application where I check boxes and I say, "You know what? I'm an expert in Perl programming, I'm an expert in, you know, AI technology." And I literally check the boxes, and that is the basis on which, like, my application gets through or doesn't get through to the next round of screening.

• 20:32Tracy Alloway?

  I assume this is tested at some point, though, right? There's some sort of competency test?

• 20:39Speaker 05

  So in many roles, there's not, and the reason is, let me give you a perspect, there's a historical reason for this. So way back when, we used to have literally a civil service exam. It was called PACE was the name. I forget what the acronym stands for, but it was P A C E. That existed until 1980, and there was a lawsuit at the very tail end of the Carter administration, very beginning of Reagan administration, first Reagan administration, where there was disparate, it was a disparate impact claim, basically. So the kind of test results on this exam were disproportionately negative for minority applicants versus majority applicants. And so in 1981, the government entered into a consent decree where basically they banned essentially the use of these examinations. And from 1981 until literally four months ago, we were living under that consent decree. Nobody ever revisited it.

• 21:24Speaker 05

  And as a result, every agency was terrified to use any kind of actual merit-based assessment for hiring because they were afraid they would run afoul of this consent decree. Luckily for us, we revisited it along with the Department of Justice, and we got out of the consent decree. We actually found the original plaintiff actually was still alive, Levano was his name. And we actually, you know, finally said, okay, 43 years later, we think it's time to get rid of this consent decree. And they agreed to that. So for the first time ever now, we have kind of avoided, we've eliminated the risk that the agencies were worried about, which is if I use a technical assessment to judge somebody in their employment process, I might get sued, you know, under some type of disparate impact theory. So we are now doing that. So number one, to answer your, this is a long way to answer

• 22:07Speaker 05

  your question, but so like, the way we're going to evaluate people is they actually have to demonstrate merit. So there's lots of private sector tests, as you probably know, code signal, all these other things that every single private sector company uses where they're like, hey, basically, let me give you a coding test if you're applying for a software development job. And then we can level you and figure out, are you a, you know, GS5 or GS15 based on that. And then we can do secondary stuff, like obviously an in-person interview or other things to make sure that, you know, you're actually a good fit for the organization. So that's kind of thing number one, we have to do on the front end. Does that make sense at least?

• 22:37Tracy Alloway?

  Yeah.

• 22:37Speaker 05

  And kind of, you know, a little bit of perspective.

• 22:38Tracy Alloway?

  Yeah, it totally does. It is kind of wild to think that, you know, Last year or a few years ago, or just four months ago,

• 22:46Joe Weisenthal?

  Yeah.

• 22:46Tracy Alloway?

  Joe and I could literally say that we're like coding experts.

• 22:50Joe Weisenthal?

  I'm a 10x engineer.

• 22:52Tracy Alloway?

  Yeah, that's right. And apply.

• 22:53Speaker 05

  I know.

• 22:54Tracy Alloway?

  I'm a cobalt expert. Cobalt, cobble, I can never remember.

• 22:58Speaker 05

  Cobalt expert would be very much in demand. Cobalt, cobalt, no T.

• 23:01Tracy Alloway?

  Cobalt, thank you.

• 23:02Speaker 05

  Cobalt is cobalt is the mineral. There's a cobalt mineral.

• 23:04Tracy Alloway?

  No, no.

• 23:05Joe Weisenthal?

  Cobble, yeah.

• 23:06Tracy Alloway?

  Yeah, I never know if it's cobble. I want to say cobble because it's like cobbled together across IT systems, but cobalt.

• 23:13Speaker 05

  That's actually really good. Okay, I didn't think about that. Okay.

• 23:15Joe Weisenthal?

  Um, actually, but on the second part of Tracy's question. Okay, so once they're in,

• 23:19Speaker 05

  Yes.

• 23:20Joe Weisenthal?

  Once they're in the office, and again, because it's not a for-profit entity, like, how do we current, how does the government currently go about evaluating how someone did this year? And what would be the optimal way for the government to evaluate how productive someone there is in their state? And this is a problem in private sector, too. I'm pretty sure that if you went into Facebook or Google, etc., they would also not have a clean answer of like, which software engineer is more productive or contributed more value than the other one?

• 23:48Speaker 05

  Yeah. No, you're absolutely right. Look, this is not a problem that's unique to the government. But what I think is unique to the government is historically, basically, everybody gets an A in government. To give you a perspective, most agencies rank people one through five at the end of the year on their performances, one being the worst and five being the best. And if you look historically over long periods of time in government, about 80% plus of people get ranked a four or a five. Okay, so, meaning basically, you know, everybody is in, you know, kind of like Wobegon.

• 24:15Joe Weisenthal?

  Yeah.

• 24:15Speaker 05

  And well, well above average. And then about 0.2% of federal workers get ranked a one or a two, meaning that you're performing below expectations. So, number one, like, we've had no system that actually recognizes like outstanding performance and quite frankly, unfortunately, no system that actually holds accountability on the other end of the spectrum. We're changing that. We've already put out regulations for the most senior executives, what are called the SES, which are the most senior executives, where we effectively, for the SES, have put out a regulation that requires a forced distribution, so a cap of 30% of fours and five rankings, which we think is appropriate to actually distinguish people, you know, in terms of their performance. So, number one is we got to reform the system, period, and we're working on that, and you'll see more regulation from us on that. Number

• 24:58Speaker 05

  two, you're actually right, which is look, like, sometimes the metrics are hard, right? So, you know, you don't really want to measure like lines of code that somebody produces because obviously all code is not created equal. But, you know, what I think does work in the private sector is, look, managers are responsible for their frontline workers. They meet with them one-on-one. They have, you know, weekly. They have a sense of what they're doing. They provide feedback along the way. Like, I think the performance management ongoing process works better in the private sector. In the public sector, what I found is, instead of managers, we use the term supervisor, which I think actually unfortunately does a disservice to what the job is. Like, I don't think the job is necessarily supervision. The job is to manage, meaning, are they working on the right stuff? Are they doing the right things? Do they need training for this kind of stuff? And historically, we haven't done a great job on that. So, one of the things

• 25:41Speaker 05

  that we just did, for example, is we just rolled out a brand-new training program that's mandatory for all supervisors, specific to this issue on performance management. So to teach them, like, what does a one-on-one look like? You know, those of us who grew up in the technology industry, the first book that we were all assigned to read was Andy Grove's Only the Paranoids Survive, which I still think is a fantastic book. I don't know if y'all have read it. It's actually a really awesome book.

• 26:03Joe Weisenthal?

  I have read it, years ago. I have read it. Yeah, keep going.

• 26:06Speaker 05

  Yeah, I mean, basically, he literally talks about, like, what is a one-on-one meeting with your, you know, team member? Like, what should it look like? And it's like, you know, it's very much like management one-on-one stuff. But I think the honest answer is, like, most people don't get that training. And so, as a result, we have had a performance management culture where we have inflated grades, and we have basically, once or maybe maximum twice a year, people actually get feedback. So it's totally unfair to the employee, and it's also just unfair to top performers who are not actually getting differentiated reviews and differentiated compensation.

• 26:34Tracy Alloway?

  I was just about to ask, just to be 100% clear, compensation is going to be tied to performance?

• 26:40Speaker 05

  Correct.

• 26:41Tracy Alloway?

  Okay.

• 26:41Speaker 05

  Correct. Yes.

• 26:42Tracy Alloway?

  All right.

• 26:43Speaker 05

  Yes. And again, it's not that it hasn't been before, but the problem is, if everybody's a four and a five, and you have a finite bonus pool, then you're peanut buttering out the bonuses, basically. So like, yeah, just, you know, Tracy, just to give you a sense, like, when we gave guidance on this SES, these very senior executives, where we said there's a 30% cap, we also said, we think 60% of the bonus-based compensation should go to those, that 30% of the individuals. And, you know, that's a, you know, we can argue whether it's 60% or 80%, but the point is, like, let's, let's actually really pay performance, and let's differentiate compensation, as opposed to giving everybody a $300 or $500 bonus, which, in the scheme of things, has little retentive or incentive value for employees.

• 27:20Tracy Alloway?

  So you mentioned project management just then, and I was looking at some of the press releases and documentation that you put out as part of this program, and there really is an emphasis on getting project managers. And I am very curious why that particular role seems to be in short supply, because I know someone who moved from a completely different industry into project management for a graphic design company. They had never done it before, and it didn't, it didn't seem that hard.

• 27:50Speaker 05

  Okay, so I'm going to distinguish between project management and product management, which is, I think, I hope we wrote product management in the, in our stuff.

• 28:00Tracy Alloway?

  Oh, did I miss for you, Det? Oops.

• 28:03Speaker 05

  Well, I don't know that you did or not, we may, we may have put it in there, but what we need is what I would call a product manager job, which is, you know, a, a product manager, in my mind, is basically somebody who, sometimes they come from an engineering background, they might actually have been developers themselves, but they're kind of people who sit between the engineering organization and the end user customer, and they listen to the customer and say, great, okay, tell me your problems, what are you trying to solve? And their job is kind of to translate that into ultimately, in tech speak, what we'd call a PRD, a project requirements document for the engineers to develop against. So like, that's the role we need. So in a well functioning engineering organization, you have developers, you have designers, and then you have product managers, and the product managers probably aren't putting their hands on the keyboard, actually, you

• 28:44Speaker 05

  know, you know, typing, you know, ones and zeros, but they are literally that go between, between like, the end user customer and then the requirements that ultimately drive the development process.

• 28:53Joe Weisenthal?

  It's interesting. I feel like that's something I've really come to appreciate in working for a larger organization, how valuable translation skills are, because you have this one part of the room that knows one very specific thing, and then there's these generalists on the other end that have some vague thing, and that person who can sit in the middle and talk to both sides is clearly a very, is a valuable person. You know, so you mentioned, like, the one thing that comes up a lot, in a common theme on our podcast, is like, the importance of this sort of like, tacit organizational knowledge, things that are like, cannot simply be written down, they do not exist necessarily in one person's head, there are just things that are sort of collectively known, process knowledge

• 29:37Joe Weisenthal?

  and so forth. How do you think about that in light of the fact that these are two-year roles? And, you know, again, maybe in some cases, someone will

• 29:49Joe Weisenthal?

  Do two years, then continue their career in the federal government. But that, but you know, especially given the pay gap that emerges specifically for technologists. Like that's probably you're, you're taking on the one area where the pay gap probably gets the widest over time. How do you think about fostering, fostering and maintaining that kind of knowledge, especially given what you laid out at the very beginning, which is this sort of, I don't know if crisis is the right word, but these looming retirements of all these people that do have years of accumulated knowledge about how things really work?

• 30:23Speaker 05

  Yeah, so you're absolutely right, which is, look, we have to balance kind of the two-year time period against the need for actually the organization being able to maintain these systems once people leave. So let me just give, I'll give you a real world example, Joe, just so you have it, because it might be helpful. So in my organization, OPM, we own the retirement process and retirement for, you know, several million ad new tenants, basically, who have, you know, kind of completed their professional careers.

• 30:45Joe Weisenthal?

  Yeah.

• 30:45Speaker 05

  And we are complete, it's a very, I won't go into the details, I won't bore you, but there's literally, it's a like a ridiculously manual, paper-based process where for years we have had people literally filling out paper applications as recently as beginning of this year and sending paper by postal mail and all kinds of stuff. And we literally have a mine in Boyers, Pennsylvania, which is very fun if you ever want to come see it, where we have hundreds of millions of file cabinets of people's retirement records that we consult.

• 31:11Joe Weisenthal?

  We'd love to, I would love to, I've always wanted to go like those, those like huge, like under mountain, like big, like iron mountain.

• 31:18Speaker 05

  Yes, it is, that's what it is.

• 31:18Joe Weisenthal?

  They literally bury a lot.

• 31:19Speaker 05

  It is iron mountain.

• 31:20Joe Weisenthal?

  I'd love to check out one.

• 31:21Tracy Alloway?

  The Indiana Jones warehouse for government bureaucracy.

• 31:24Joe Weisenthal?

  I've always wanted to check out one of these places. We'll, we'll, we'll arrange that after the episode.

• 31:29Speaker 05

  All right, we're, we're gonna, we're gonna work on that one together. Anyways, I bring that up to say, okay, so look, we've, luckily, we've had a small team of developers, Joe Jebbia, who you guys may recognize the name, he's a co-founder of Airbnb, he joined the administration even actually before I got there, but he's been, he's been kind of housed in OPM and he has like a team of like three developers and you know, a, a design person, and they've been completely redesigning this retirement application. So we now have what we call ORA, the online retirement application, where instead of paper, people actually can go, you know, in the year 2025 onto a, you know, computer and, and, you know, type in their, their information, upload their documents, it gets routed to the HR and it's, you know, it's, you know, vastly better than what we've had. So I bring this up to say, look, I think. This is me is a good example, which is all those people are going to disappear at some point in time.

• 32:14Speaker 05

  And then the responsibility for that application is going to shift to the existing CIO organization within OPM to maintain it, to integrate it with other systems. And so a requirement of being able to do that development process for Joe and his team is, look, they have to do documentation, they have to do training of the team. Look, I think it's not an insurmountable problem. I just think it means as part of your process, you just have to anticipate that there is going to be a time where people are going to disappear. And quite frankly, it's a smart thing to do anyways because we just know, and look, this happens in private companies all the time. Look, people's average tenure in private companies, I can tell you in Silicon Valley, it's way less than four years is what the average tenure of an engineer is. So these are not new things. They are new things to the government, which is this idea of kind of knowledge capture, knowledge management, you know, kind of in light of the fact that people might not be there for their entire career.

• 32:58Speaker 05

  But I think it just means as we've designed this program that we have to have the appropriate level of documentation, of integration, of source code notes and all those things that are, you know, you would do in a normal circumstance to recognize that. Now, look, Joe, in the perfect world, I hope people love it and they're like, wow, this is exactly where I want to spend the rest of my life. And that's awesome if they want to do that, like, we want to keep them in government. But, you know, I think we'll also have to deal with the practical realities that, you know, the current generation of, you know, people are not thinking about, you know, three, five, 10-year, you know, employments, basically, things are much more clear than that.

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• 34:13Speaker 07

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• 34:44Tracy Alloway?

  What are you doing to streamline the operational side of the process? Because I imagine you mentioned culture before. If the pitch is come work for government, it's important, but you're going to be lower paid and you're going to have to constantly deal with paperwork and put together, you know, RFPs that have 7,000 requirements and things like that. That that's a tough sell to someone who's used to the whole move fast and break things culture.

• 35:13Speaker 05

  Yeah. So anyways, let me just be totally clear, which is we are not going to move fast and break things because we can't quite do that in government. We can move faster than we currently do and we can afford to take some risks, but we generally don't want to break things because, you know, people do need to get their social security checks and, you know, the IRS needs to actually make sure you get your tax refund. So, but it's a great, it's a great question. So look, there's a couple of things that we're doing both inside and outside this program. So outside the program, more generally, one of the big things that OPM is driving along with OMB, you know, kind of the ops of management budget is we're working with all the agencies to basically what I would call do headcount planning and reshape the priorities for the organization. So there's a huge amount of government is very good about adding things to the plate and they're very bad about actually ever taking anything off.

• 35:58Speaker 05

  So every time something new comes down from Congress, we add, you know, thousands of more people, we add stuff to the plate, and then we have this list now of 20 things. Probably five of which we've been doing for 20 years and quite frankly, nobody even remembers why we're doing them anymore. They've just now become like, you know, embedded into our culture. So, part of the exercise in order to kind of make the throughput faster and to make sure that an engineer isn't like sitting on their hands dealing with, you know, crazy bureaucracy is, we have to go back and look at prioritization and actually remove services that are no longer statutory and they're no longer valuable to the American people. So, that's the exercise we've started. That's the exercise that we're kind of is ongoing right now. But the purpose of that will be not only to make sure that we're hopefully spending our money in the right places, but will also be to remove layers

• 36:41Speaker 05

  that ultimately slow down the actual work product of government. The second thing we can do is, as I mentioned, we're really trying to kind of change the performance management culture in government and eliminate barriers to people being able to move through the organization and change the idea that you can't take any risk. I mean, obviously, that's a big cultural challenge that we have in government. So, everything from down to like what's your performance plan look like. Your performance plan should have, you know, efficiency. It should have, you know, some measured amount of risk-taking in there. So, things that again will speed the pace of deployment and, and make sense. The third thing we're doing is, and this is again, you guys asked me, you know, how is this program different from other programs? As we hire these thousand engineers, ultimately, they will live in various agencies, right? So, Dr. Oz at CMS says, you know, it's like,

• 37:24Speaker 05

  look, I need 75 engineers to do, you know, kind of important projects there. Or, obviously, Department of War, you know, has lots of stuff. So, they're going to live in those agencies. But what we're not going to do, which is historically where I think these programs has failed, is if you drop these teams just into the blob that is the federal government, they're going to have a terrible experience and they're going to get lost and their two years will literally go by without them actually having accomplished anything. So, our whole goal with this is keep these teams together. So, when I, you know, what I'm, what I'm hoping from Dr. Oz is, there's going to be a team of 75 engineers who are going to be a team. And they're going to work on the projects that he thinks are the most important projects. And of course, they have to integrate with the existing CIO organization because so much of what we do has integration backends and all that kind of stuff. But-

• 38:07Speaker 05

  We've got to make sure that that happens because otherwise, you know, you hire a random, you know, intern to and you plop them into an organization and they get swallowed by the beast, basically. It's just, it's understandable why that happens. So we've got to think about the organizational implications of bringing people in and make sure they're set up for success. And, you know, my expectations are, and certainly the conversations that I've had with all the agency heads are that they understand that. And they understand that for them to achieve what they want to do, they have to create the organizational structure that enables these guys to actually do what they're there for.

• 38:35Joe Weisenthal?

  Yeah, I think that this is another thing that we can probably say from firsthand experience is you come to a big organization, you've spent a long time, maybe the first year of just getting to know the lay of the land, who are the people that you should talk to, etc. It's a real challenge. It's a real challenge being effective of actually accomplishing anything, the amount of time. I mean, I've been at Bloomberg and they're

• 38:58Tracy Alloway?

  We've all experienced.

• 38:59Joe Weisenthal?

  Yeah, they're still, I've been here 10 years and there is like, who do I call about? It's just like the nature of large organizations. I want to talk about, you know, people who you say, okay, like you need, we need to do something about the fact that all these people are going to retire and there is this pipeline, etc. Setting aside optimal levels of how big the federal workforce should be, etc. One thing that I could see as a bit of a problem about maintaining a career is if federal workers do not feel that they are respected in their jobs. And there is rhetoric that is, that you hear, it's like, federal governments, they, you know, again, some people, it's like, oh, they're leeches. They're part of the deep state. They're all woke and they spend money on this and that's waste. But even that spending looks like what I observe as spending in

• 39:44Joe Weisenthal?

  the private sector, etc. And then, you know, there's, at least from this administration, there's been these sort of seemingly from the outside and probably from the inside capricious layoffs or arbitrary layoffs. And so if you respect this workforce, then how could you possibly have just like cut so arbitrarily? I mean, these are, this is what it seems like. When you think about building a talent pipeline, do you think about this dimension? And do you agree with the sort of premise of the question that it's a challenge, that no one is going to work at a place if their bosses to some extent sort of think they're, you know, do not respect them?

• 40:27Speaker 05

  Yeah, so the short answer is yes, like absolutely, this is a critical part of making sure that the federal government is an attractive place for the people who are there and also the people who, you know, we're trying to recruit in. So I got a million thoughts. Let me try to see if I can keep them in the time we have remaining. So I'll give, tell you one thing. So just to back up, as you know, I've worked at Andreessen Horowitz and Ben Horowitz, in my mind, is one of the, you know, best CEOs, best managers that I've ever learned from. And I, I'd worked for him for literally 10 years prior. So for 26 years of my life, I've had the benefit of learning from Ben. The most important thing I learned from him is exactly what you described, which is when you have restructurings in companies, basically you have broken trust with your employees. Okay. So particularly in the startup context, right? Like, you know, when we were in startups, we personally recruited every

• 41:10Speaker 05

  single person into that company and we told them how we were going to conquer the world and how awesome we were going to be. And we believed it. We weren't like lying to them. But it turns out we were wrong. Like the market changed, we didn't have enough money and, and, you know, we had to live through this in our loud cloud ops where days, we laid, we had to lay a bunch of people off. And so you've immediately broken trust with those employees. So you are from that day forward, basically in a situation where you have to rebuild that trust. Right? So you have to demonstrate to them that, you know, it wasn't capricious and arbitrary and that you're not like lying to them and a jerk, but that you actually do care about them. And it turns out through no fault of their own, their next door neighbor who sat in the cube next to them unfortunately lost their job because like we couldn't afford to pay them anymore. So I say that only to say, look, I recognize that very clearly. I understand that. And if you literally go

• 41:54Speaker 05

  back to like the testimony I gave when I went through my hearing, I said that very explicit. I think that's important. All that being said, I think, look, the way to think about, let me just give you the context of the headcount reductions that happened in the government, because I think there is, in my mind, at least some misinformation out there that I think is worth talking about. So it'll give you some numbers, you know, you've got a very sophisticated audience. As of the end of this year, roughly about 317,000 people will have exited the federal government. Okay. We started the year at about 2.4 million ish roughly in terms of civilian, these are civilian employees, by the way, so forget about the armed services, because my organization doesn't touch that. About 2.4 million civilian employees will be roughly 2.1 million civilian employees as of December 31st of this year. At the same time, we hired about 66,000 employees.

• 42:36Speaker 05

  So on a net basis, call it 270, you know, 260, 270,000 roughly kind of net departures from the government. If you go back to that 317,000 number, 92.5% of those people took some form of voluntary retirement. So we had this thing called DRP, Deferred Resignation Program. That was the bat, that was literally half of it. 154,000 people took that, which was an eight-month severance that we gave to people to voluntarily leave government. And then the rest of it was, there are some other programs, the acronyms aren't relevant for your, for your listeners, they're called VIRA and VSIP if people want to look them up. But those are other voluntary kind of, you know, retirement programs. And then only 7.5% of people were removed through either RIFs or what we call probationary employees, which is in the government, if you've been, if you've been there for one

• 43:21Speaker 05

  or two years, depending upon the job, you're kind of the closest thing to an at-will employee that we have in the federal government. And so there were about 7,000 of those probationary employers who were removed and about 17,000 people who were ultimately RIFed, you know, reductions enforced as a result of restructurings. So I say that, number one, not to, I want to be totally clear with your listeners, not to make light of any of this, obviously, those are real people with real jobs and real families and stuff, but the numbers, again, you know, kind of, I think bear out what we tried to do in the government, which is tell people that things were changing, tell people that, you know, we do have a different view as to what, you know, we think the federal government should be doing, and give people an opportunity to voluntarily say, okay, this is not what I signed up for, which is a very noble thing to do, and say, you know, it's time for me to go do something different.

• 44:04Speaker 05

  So 92.5% of the people who left the government did so because they decided, you know, this wasn't an environment they wanted to be in. So, that being said, now, look, I totally agree with you, which is, we have to demonstrate to the people that are there and to the people who are coming in, that, you know, we obviously care about them and that we, we think they do valuable work. And, and, and I think that's the case for the vast, vast majority of people there do great work. Like any organization, yes, there are some people who are not doing great work, and we have a system that makes it very hard to hold them accountable, we're going to try to fix that, but, look, that's true of any organization. So I don't think it, we're not, it doesn't make sense to kind of demean the broad federal government based upon the work of a few. But we have to do that, and, and we also have to be honest and transparent with our people, which I, which I believe very strongly, and is, look, we can't be all things to all people. Like, we're running $2 trillion deficits, that's not sustainable.

• 44:48Speaker 05

  And so, look, we've got to be smarter, we have to use technology to find ways to improve efficiency, we have to think about, if we're doing 20 things, are all 20 of them still required, do they still add value? Because ultimately, we're stewards of the taxpayer dollars. Like, this is not our money we're spending. And so I think it's incumbent upon everybody, and this is the message that I'm trying to get across to my team and to the rest of the government, is efficiency doesn't mean just cutting costs. Efficiency means, are you thinking about delivering a better service, but doing so, you know, at or below, like, what you do today because you're thinking about organizational changes, you're thinking about technology? Like, to me, that is just, like, quite frankly, required of anybody in any organization to do. And so, that, to me, is like what I'm trying to convey to people. And, yes, that means that there may be some jobs that are impacted because of technology,

• 45:31Speaker 05

  but those things are going to happen, whether, you know, kind of, you know, we want them to happen or not. The question is, do we actually set up the workforce and do training and do all the kinds of things we need to do to make sure that people have opportunities in light of what is a very, very rapidly changing, you know, technological market?

• 45:45Tracy Alloway?

  So I get that part of the problem that you're trying to solve is an operational one, this idea of like, a cobalt programmer who's been there for decades and he retires and walks out the door and no one knows how to do what he was doing, or no one understands the system that he's basically had control over for ages. But at the same time, you know, we're talking about a decent amount of turnover, a lot of new employees, if this goes the right way. How are you, I guess, guiding for safety? Are there any sort of, like, institutional guardrails that you're putting in so that the government doesn't actually end up breaking things?

• 46:27Speaker 05

  Yeah. I mean, look, there are, you will hopefully appreciate this, but look, there are a ton of institutional guardrails. You know, in my mind, like, the problem is we have too many institutional guardrails. And again, you know, rational people may disagree with me, but, you know, I can just tell you, like, the entire culture of everything we do, everybody I've talked to in government, and luckily, we've had lots of kind of impact on making change early on, everybody is like, "We can't do that because of X," right? And the answer is either because, like, it's statutory, and the honest answer is when you dig and dig and dig, the reality is it's not statutory. Like, we built up this, like, urban myth over time that something is statutory. Or, as I mentioned, because, like, I'm terrified that... I'm going to get a GAO report, an inspector general report, or a congressional inquiry.

• 47:12Speaker 05

  And like, we have built such a compliance culture that we are just literally like unable to do anything that actually is kind of modern and, you know, forward-thinking in terms of government. And so, this is what I'm, this is what I'm trying to do. And as I told you guys from the beginning, like, yes, this is not the private sector. We're not going to take crazy risks. We're not going to like, go like, put everything on black, you know, in the casino. But we can have a rational conversation, which is, okay, like, what are the risks we're taking and what's the upside? So, if you'll give me a minute, let me give you a very, very tangible example for your listeners. So, I mentioned to you that we handle retirement services, and it's a very manual process. And so, like, it takes us a really long time to get people formally retired. So, you quit from, you know, you retired from the government on September 30th. In the current process, you know, it takes

• 47:57Speaker 05

  60, 90, 120 days sometimes for you to actually get a check, because we have this ridiculous manually paper process that takes forever to, for us to calculate, what are you actually entitled to, and to make sure you're getting the right money and all that stuff. So, that's a huge burden on retirees, right? You've been getting a paycheck every two weeks for the last 40 years, and now I'm going to tell you, like, sorry, like, go manage your cash flow some other way while I'm doing this? Like, that's terrible in my mind. And it's a complete disservice and completely disrespectful to people who are retired from the government. So, we have a process in the retirement services thing called interim pay, right? Which is, as the name sounds, right? The idea is, okay, can we get you some money on an interim basis that may not be 100% accurate, but at least helps bridge this gap between when you, when

• 48:37Speaker 05

  you retire and when you get your actual annuity check? Okay? So, going into, and then couple this with, we've got this massive, you know, we've had a lot of exits in government. So, the 317,000 I mentioned, not all of those are retirees, but like, on average, people, we have about 100 to 150,000 exits a year. So, we're, you know, more than double the number. So, and as a result, there's more than double the number of retirees that are happening. So, you've got this terrible payroll process, like, massive volumes, and we're just going to make life miserable for all these people who can't get money. So I asked the team, I said, okay, how many people go through interim pay today? This is kind of pre our change. And it's about like 30% of people. And I was like, well, what's the problem? They're like, well, that's how we've always done it. So, you know, again, part of the answer was statutory, which it's not, it's not statutory.

• 49:21Speaker 05

  And they're like, well, there's huge risk to the system because if we pay somebody more and then they die between the time we paid them their interim payment and we get their actual annuity, there may not be any assets left into the estate and so we might compromise the fidelity of the trust fund. Okay. Now, keep in mind, this is a $1.2 trillion trust fund that is actually cash flow positive. So among trust funds for retirement, it's actually very rare. But we earn 2.5% on government treasuries a year, which is horrendously bad because we're only allowed to invest in government treasuries. But not with spending that, it's actually still cash flow positive and fully funded like almost in any circumstance. So we finally went through the math and I said, let's go through the math and let's assume, you know, we get it wrong X amount of time and all this other stuff.

• 50:05Speaker 05

  And we did a bunch of math and I said, look, if we're wrong 100% of the time, it could cost us a couple million dollars of overpayments out of a $1.2 trillion trust fund. But we can shrink from 90 to 120 days, the time somebody gets a payment, to either zero to seven days if we put more people through this interim pay process. So in my mind, like, this is just the most obvious thing to do. And we are doing it, by the way, we decided to do it. But like, it's a great example, at least in my mind, of where we have so ingrained in the culture that risk, any kind of risk is bad, without actually people being willing to have the conversation to say, okay, like, what is the cost of that risk relative to the upside opportunity that that taking that risk entails? And I'm perfectly happy, you know, I told them, I said, look, you don't need to protect

• 50:49Speaker 05

  me if it turns out some congressperson wants to yell at me because like I took a modicum of risk in order to like make, you know, hundreds of thousands of retirees' lives better and not have to like take loans out after they've given their career service to the federal government. Like, I'm totally fine defending that. I think that's a perfectly rational answer. So that to me is the issue.

• 51:06Joe Weisenthal?

  I have one last question and maybe I'll sort of ask you a little bit to put your VC hat on, maybe because maybe you will go back to VC when this that rolls over, but who knows? Someone who knows a lot, a lot about technology. So we had an episode recently with Tyler Cowen, where we talk about one of the weird things.

• 51:21Speaker 05

  Oh yeah, he's great.

• 51:21Joe Weisenthal?

  Yeah, is that, you know, the AI, we haven't even really talked about AI. So this is my AI question. AI, the tech, you know, makes your jaws drop when you see it. On the other hand, the impact so far on the economy or the real world is sort of muted. It maybe is like you might have, given the capabilities, you might have expected more, more revolutionary change. And his thesis that he put forth was like, we're really not going to see that sort of meaningful impactful diffusion of the tech until we have organizations that to some extent are built ground up from AI. That, you know, yes, you can maybe get some productivity gains here and there by putting AI into some existing workflow, but that the real breakthroughs will come from whether it's companies or so forth that are truly AI native from day

• 52:04Joe Weisenthal?

  one. I'm curious, you know, when you think about, you know, again, going back to the VC world, A, does this feel intuitive to you that the real deployers will be AI native? And then does that have any implications for like, we're not going to have a revolution, I guess, hopefully, at the, at the federal level, not going to have a complete destruction and starting over. Does that have any implications then for thinking about how AI will be diffused within federal processes?

• 52:33Speaker 05

  Yeah. So obviously, yeah, Tyler is a brilliant guy. So far from me to disagree with him, but let me give you just a couple of thoughts on what he said. So look, I guess I generally agree with most of what he says, which is, and this is true, by the way, I think of adoption of most new technologies, which is we go to the common use cases and we think about incrementality as the first thing to do it. So if you go way back when Marc Andreessen told me this, so if it's, if it's made up, I'll blame him. You know, when, when we, when we first, when we first had movies, you know, actual like, you know, moving pictures. They were just plays, basically, that people filmed, right? So like, they weren't like producing them, they weren't new content. It was literally just, we said, wow, we have this cool thing called a camera. Let's film a play and then go show it in a thing.

• 53:14Speaker 05

  Now, it's obviously, that's not that relevant to this conversation, but my point is just like, we tend to go to these very common incremental use cases for things. And so, look, I believe that if you look at any major Fortune 500 company, I guarantee you that every single board conversation is, what the heck are you doing about AI? And how do I get 3% to 5% to 7% greater EPS growth relative to last year? Because you can fix my customer support problem or stuff like that. So I think that's what's happening right now. I do agree that, yes, what often happens is then there will be a new generation of companies, and we see this in the venture capital world too already, which is the most obvious use cases that people did is there's a ton of companies who have customer support applications for AI. And there's a ton of companies who have, you know, how do we help lawyers read documents better using AI?

• 53:58Speaker 05

  And that's great, and those companies are fantastic. But the real breakthrough is going to be, yes, like when someone says, okay, we're not just going to make Salesforce.com more efficient, but like, we're just going to rethink customer relationship management with an AI-first mentality. And like, the AI should know who my customers are, it should anticipate what I want to do, and it should send me emails and texts and say, like, you haven't talked to this person in five weeks, and I just saw that they, you know, spoke at this conference and they talked about this, and, you know, you're not following up on it. So that's where we will get, and I have no doubt we will get there, quite frankly. And look, I'm an optimist by nature, you have to be, to be in the venture capital business. But yes, I would agree with him generally, I think that's right. What does it mean for the federal government? Very simple, which is that if the private sector is incremental, the federal government's

• 54:39Speaker 05

  going to be like, you know, 100x incremental relative to 100x less incremental, I guess is the right way to describe it. But that's, in my mind, that's okay. Like, so again, I've told everybody in my team, I'm not asking you, I don't want you to go build like the 2040 AI plan, because we have no idea what the heck that's going to look like. That's a total waste of our time. What I want you to do is look at a process you do today and figure out, can you use an AI tool to help you get 3%, 5%, 10% greater performance out of your organization, right? So we do a ton of, I'll give a very simple example, we do a ton of regulation writing, obviously, because, you know, that's what we're ultimately in the business of government is producing regulations. And we're about to put out a regulation. We got forty thousand public comments on this regulation. We literally assigned each one of those forty thousand comments to a person

• 55:22Speaker 05

  to read and to draft a response to. Now, to me, that's just insane, right? And I'm not saying that like the AI, we should just like the AI should do it, but like clearly AI is very good at, you know, summarization, at, you know, helping people think about stuff like that's like that's all we if we did that, like we would unleash so much creativity and opportunity to govern if we just said, take the very basic stuff we're doing today and use your, you know, companion chat GPT or XAI, whatever your favorite tool is and just, you know, eke out a little bit of productivity. So anyway, that's how I think about it. So yes, look, government is not gonna, we're not gonna transform government overnight. But what we're trying to do and what the US tech force is trying to do is, can we get the right people in here who understand those things so that we start to drive ourselves

• 56:05Speaker 05

  forward? So we don't wake up five years from now and find that we're the last dinosaur, basically, and, you know, the world has passed us by.

• 56:11Tracy Alloway?

  So you sort of mentioned it just then, but can you talk at all about what kind of platforms you're using currently or what kind of models? Because, you know, I'm sure some people would find it very ironic if the federal government was using DeepSeek or something like that. And I'm curious whether you lean towards like an open source thing or a closed source thing because of privacy concerns.

• 56:33Speaker 05

  Right now, the honest answer is we're at the very, very early stages, which is most of what people are doing. It literally, this may make your head spin because it made mine. Until about a month ago, we did not even have chat GPT on our government desktops. So like, you know, I literally would sit there on my phone and ask chat GPT questions, my person, my personal phone, just to be totally clear, on my personal phone, and then I would go back to my work laptop and do stuff. So as of about a month or two ago, we actually have chat GPT, we have XAI now. We might even have, we might even have a third one, I don't even know. And of course, we're, we're, the government's a big Microsoft client, so we have Microsoft Copilot. For an individual user in government, that's basically the state, that is like the state of, you know, kind of advanced automation, basically, is we literally have it on our laptops now.

• 57:16Speaker 05

  For the development work that's happening, you're absolutely right, which is, look, there are major security issues that we all have to think about. Look, I'm a big believer, as you can imagine, in open source and certainly our firm, Andreessen Horowitz, you've seen Mark make lots of public comments about this. So I think the government will use open source and can appropriately do so. Clearly, we're not going to use like the DeepSeek commercial version.

• 57:36Joe Weisenthal?

  Yeah.

• 57:37Speaker 05

  But, you know, so much of that stuff is open source. And if you bring it in, you know, to your environment and you make sure that you've got the right security standards, you know, there's tremendous value to develop on open source. But I would just, just to give you a sense of where we are, I would say we're very, very early in that journey in government.

• 57:50Tracy Alloway?

  I have one last, very quick question, which is, how much of a constraint is drug testing on new hires nowadays?

• 57:58Speaker 05

  You know, I wish I had a really smart answer to your question. I don't know the answer to that. I have not seen it. It hasn't, I'd say, it hasn't shown up as some like big red flag where we're losing people in the recruiting pipeline because of that. But the very honest answer is I don't know. But I will find out.

• 58:17Joe Weisenthal?

  I think that's a good quote. We should, I'm actually very curious about drugs in the workforce in general. We should do more on that. Scott Cooper, thank you. No, for real, for real, I, you hear about it. My partner was talking about how hard it was to hire because he's like, everyone is sort of.

• 58:29Speaker 05

  If somebody, I would just say, Joe, if somebody, if somebody clips that and puts it on, the quote's gonna be, Joe is very, I'm very, I'm very curious about drugs in the workforce. That's gonna be a great clip, yeah.

• 58:38Joe Weisenthal?

  We'll get, our producer will clip it. We'll, we'll get ahead, we'll get ahead of that one. Scott Cooper, thank you so much for coming on Oddly. I was really, really appreciate your, take your time. Very helpful. And we'd love to stay in touch and hear more about how these projects evolve during your tenure.

• 58:53Speaker 05

  Thank you both for your time. I appreciate it.

• 59:11Joe Weisenthal?

  I thought that was great. I love, I love these conversations. I mean, because I think they're just, I guess the sociology of them, right? Like, that's what these conversations are really about. And especially, you know, we talk about some of these pathologies that replicate from the public to a private sector, et cetera, that are both like, they're really interesting sociological questions.

• 59:31Tracy Alloway?

  The Department of War needs to get a bunch of ping pong tables and free snacks to recruit the most cutting edge tech workers, right?

• 59:37Joe Weisenthal?

  With a matcha bar.

• 59:39Tracy Alloway?

  That's right.

• 59:39Joe Weisenthal?

  I wonder, I wonder if their experiment, we should have asked that, whether they have a matcha on tap at the office and whether that can move the dial.

• 59:46Tracy Alloway?

  But it's also interesting, again, there's that cultural sociological aspect, but it does apply to large bureaucracies and private organizations. And I think everyone at some point in their lives will experience this type of unnecessary paperwork, whether it's in their jobs or when they're applying for a driver's license or whatever.

• 1:00:07Joe Weisenthal?

  Yeah. You know what? Like, this is like where I have like the sympathy for like sort of like modern life, large, complicated things. How can the individual with our, I mean, how could we do, how could you navigate insurance? How could you navigate all this stuff? It like drives you crazy at any scale. I do think, you know, and this came up also in our conversations with Jennifer, and I believe it, that there is a lot, there is more to a career than pay, right? But I also think that's like a very real issue, especially when you're talking about the tech workforce specifically, where we know that you could just like make an absolute fortune. And in many cases, you can make a fortune as a very young person. You'd be in the right company at the right time and you, many overnight multimillionaires

• 1:00:51Joe Weisenthal?

  in Silicon Valley. So it's not just the late stage, although that's where it becomes the most obvious. I really, the pay is a very tricky situation.

• 1:00:59Tracy Alloway?

  Well, I do think the emphasis on time constraints for the tech force, that's really interesting. And that's kind of a shift, again, a cultural shift from the way people have perceived government jobs for a long time. And I can imagine, you know, like if you're a young tech worker, maybe you're having trouble getting into the private sector, you know, just last year. No, two years ago. Remember, there was the wave of layoffs, right?

• 1:01:25Joe Weisenthal?

  Yeah, absolutely.

• 1:01:26Tracy Alloway?

  And now everyone is recruiting because of AI. But I can-

• 1:01:30Joe Weisenthal?

  Well, I mean, no, I mean, to your point, like, there are even, like, there are many talented tech people. If they're not right there in the sweet spot, leave and know that's not what it used to be.

• 1:01:38Tracy Alloway?

  So I can imagine, like, you go to the government for two years, and it's it's an educational process.

• 1:01:43Joe Weisenthal?

  Yeah.

• 1:01:44Tracy Alloway?

  And you can take some of that knowledge away from you when you then go into the private sector. Although that also opens up the question of rotating doors between the government-

• 1:01:53Joe Weisenthal?

  Yeah.

• 1:01:53Tracy Alloway?

  -and private companies. But maybe that's a topic for a different day.

• 1:01:57Joe Weisenthal?

  I just add, I do think there is, and it's not just this administration, but I think it's been very notable, at least with some parts of the administration or some parts of the rhetoric. There's this sort of vilification of bureaucrats, which is, again, sort of a longtime thing. Like bureaucrats has sort of been a kind of a pejor- I mean, a bureaucrat's a real thing.

• 1:02:15Tracy Alloway?

  The B word.

• 1:02:17Joe Weisenthal?

  Anyway, I do think that's an issue. And I also think, you know, like, maybe we should just bring back civil service exams everywhere. And if you could, no, seriously, and if you can pass this test, you can get a job. Like, it's Lindy, you know, it's like famously, you know, go back thousands of years in China, it's like the big test.

• 1:02:34Tracy Alloway?

  I was about to say, do you know about the Chinese civil service exams? Those are so interesting and crazy. Shall we leave it there?

• 1:02:41Joe Weisenthal?

  Let's leave it there.

• 1:02:41Tracy Alloway?

  All right. This has been another episode of the Odd Lots Podcast. I'm Tracy Alockway. You can follow me at Tracy Alockway.

• 1:02:47Joe Weisenthal?

  And I'm Jill Weisenthal. You can follow me at the stalwart. Follow our guest, Scott Cooper. He's at S Cooper. Follow our producers, Kermit Rodriguez at Kermit Armin, Dashell Bennett at Dashbot, and Cale Brooks at Cale Brooks. For more Odd Lots content, go to Bloomberg.com/oddlots for the daily newsletter and all of our episodes. And you can chat about all these topics 24/7 in our Discord, discord.gg/oddlots.

• 1:03:10Tracy Alloway?

  And if you enjoy Odd Lots, if you want us to go to Pennsylvania to look at a bunch of file cabinets, then please leave us a positive review on your favorite podcast platform. And remember, if you are a Bloomberg subscriber, you can listen to all of our episodes absolutely ad-free. All you need to do is find the Bloomberg channel on Apple Podcasts and follow the instructions there. Thanks for listening.

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