Trae Stephens - Find Good Quests - [Invest Like the Best, EP.319]

My guest this week is Trae Stephens. Trae is a partner at Founders Fund and co-founder and Executive Chairman of Anduril. Trae’s philosophy can be boiled down to finding good quests, which has led him to investing in businesses that work closely with the government on societally important issues. Clearly, that extends to co-founding Anduril and I would highly recommend listening to my Business Breakdowns episode on Anduril if you haven’t already. In this conversation, we discuss the importance of lobbyists, why the high-tech defense firms of the past became stale, and how he hunts for disagreeableness in founders. Please enjoy my conversation with Trae Stephens. For the full show notes, transcript, and links to mentioned content, check out the episode page here. Listen to Founders Podcast Founders Episode 136 - Estee Lauder Founders Episode 288 - Ralph Lauren ----- This episode is brought to you by Tegus, the modern research platform for leading investors. Whether it’s quantitative analysis, company disclosures, management presentations, earnings calls - Tegus has tools for every step of your investment research. They even have over 4000 fully driveable financial models. Tegus’ maniacal focus on quality, as well as its depth, breadth and recency of content makes it the one-stop, end-to-end research platform for investors. Move faster, gather deep research to build conviction and surface high-quality, alpha-driving insights to find your differentiated edge with Tegus. As a listener, you can take the Tegus platform for a free test drive by visiting tegus.co/patrick. ----- Invest Like the Best is a property of Colossus, LLC. For more episodes of Invest Like the Best, visit joincolossus.com/episodes. Stay up to date on all our podcasts by signing up to Colossus Weekly, our quick dive every Sunday highlighting the top business and investing concepts from our podcasts and the best of what we read that week. Sign up here. Follow us on Twitter: @patrick_oshag | @JoinColossus Show Notes [00:03:17] - [First question] - Why Trae thinks most high-margin businesses are bad for society [00:04:28] - What would he change to impact energy technology most if he were in charge [00:06:18] - His investing focus on dynamism and mission-driven tech companies [00:09:42] - Analyzing why relatively few people strive to make society-level advancements [00:11:35] - What he’s done as a parent to enable his kids to develop passions [00:12:41] - The most noteworthy adventures in his career [00:14:41] - Founding Anduril and what it taught him about the tech industry [00:18:40] - The cutting-edge of defense technologies today [00:21:29] - What Shyam Sankar of Palantir taught him about defense tech [00:23:34] - Why some of the biggest defense tech companies have stopped innovating [00:28:29] - What he and Anduril have learned about sales and scaling in the public sector [00:35:22] - His take on Peter Thiel’s notion that competition should be avoided [00:38:24] - The importance of being psychologically disagreeable when building a start-up [00:39:54] - The origin story that stands out the most from companies he has interviewed [00:41:12] - How he developed an investor mindset on his unorthodox path to the venture world [00:43:57] - What he has learned from playing supporting roles and aligning with great leaders [00:46:11] - Important but uncommon lessons about entrepreneurship [00:48:21] - Venture investing lessons he’s learned from Lauren Gross [00:50:00] - His first VR project and aspirations for the future of VR [00:54:50] - The role of religion and spirituality in his business philosophies [00:59:13] - Why he tries to capitalize on morality as opposed to sin [01:03:57] - The kindest thing anyone has ever done for him

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Patrick O'Shaughnessy?

  I know firsthand how complex the tech stack is for asset management firms. And seemingly every new tool and data source makes the problem even worse, adding more complexity, more headcount and more risk. RidgeLine offers a better way forward. One unified platform that automates away the complexity across portfolio accounting, reconciliation, reporting, trading, compliance, and more, all at scale. RidgeLine is revolutionizing investment management, helping ambitious firms scale faster, operate smarter, and stay ahead of the curve. See what RidgeLine can unlock for your firm. Schedule a demo at ridgeline.ai. This episode is brought to you by Tegus, the modern research platform for leading investors. I'm a longtime user and advocate of Tegus, a company that I've been so consistently impressed

• 0:42Patrick O'Shaughnessy?

  with that last fall, my firm, Positive Sum, invested $20 million to support Tegus's mission to expand its product ecosystem to unify and streamline investor research processes. In addition to the library of 55,000 transcripts, Tegus now combines at-cost, on-demand calls with a full suite of financial workflows. Whether it's quantitative analysis, company disclosures, management presentations, earnings calls, Tegus has tools for every step of your investment research. They even have over 4,000 fully drivable financial models. Tegus's maniacal focus on quality as well as its depth, breadth, and recency of content makes it the one-stop end-to-end research platform for investors. Move faster, gather deep research to build conviction, and surface high-quality, alpha-driving

• 1:26Patrick O'Shaughnessy?

  insights to find your differentiated edge with Tegus. As a listener, you can take the Tegus platform for a free test drive by visiting tegus.co/patrick. Before we transition to the episode, I want to highlight the Founders Podcast, which is part of our Colossus network. David Senra, who hosts Founders, has devoted his life to learning from history's greatest entrepreneurs, and every week he distills the lessons of a different founder. If you want an entry point, I highly recommend starting with episode 136 on Estee Lauder or episode 288 on Ralph Lauren. I hosted David on Invest Like the Best last summer, and it's hard not to walk away insanely energized after listening to any episode with him. You can find a link to Founders and those episodes in the show notes of this conversation. You can also search all past transcripts on our website, joincolossus.com.

• 2:15Patrick O'Shaughnessy?

  Hello and welcome, everyone. I'm Patrick O'Shaughnessy and this is Invest Like the Best. This show is an open-ended exploration of markets, ideas, stories, and strategies that will help you better invest both your time and your money. Invest Like the Best is part of the Colossus family of podcasts, and you can access all our podcasts, including edited transcripts, show notes, and other resources to keep learning at joincolossus.com.

• 2:40Speaker 01

  Patrick O'Shaughnessy is the CEO and founding partner of Positive Sum and the CEO of O'Shaughnessy Asset Management. All opinions expressed by Patrick and podcast guests are solely their own opinions and do not reflect the opinion of Positive Sum or O'Shaughnessy Asset Management. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions. Clients of Positive Sum or O'Shaughnessy Asset Management may maintain positions in the securities discussed in this podcast.

• 3:12Patrick O'Shaughnessy?

  My guest this week is Trey Stevens. Trey is a partner at Founders Fund and co-founder and executive chairman of Anduril. Trey's philosophy can be boiled down to finding good quests, which has led him to investing in businesses that work closely with the government on societally important issues. Clearly, that extends to co-founding Anduril, and I would highly recommend listening to my Business Breakdowns episode on Anduril if you haven't already. In this conversation, we discuss the importance of lobbyists, why the high-tech defense firms of the past became stale, and how he hunts for disagreeableness in founders. Please enjoy my conversation with Trey Stevens.

• 3:50Patrick O'Shaughnessy?

  So Trey, I've heard you say in a couple of spots that most high-margin businesses, I think you were talking specifically about high-margin software businesses, but let's just say high-margin businesses tend to have either no positive impact on society or sometimes even negative impact on society. Why do you say that? What's behind that belief?

• 4:06Speaker 02

  There are probably some high margin software businesses that are really good for humanity. But I think the high level point here is that a lot of these are advertising. A lot of them are pulling at consumers' attention. A lot of them are really wonky dev tools or something like that for specific enterprise environments. And I think the reason that I would articulate that those are maybe bad for society is because they draw engineers and the tech community away from things that have more importance. So it's not that the thing itself is necessarily bad. It's that it's a distraction for the things that we should maybe be spending more time working on, which in many cases are much lower margin. They involve critical natural resources.

• 4:49Speaker 02

  They involve different forms of hardware. And so I think it changes the curve and that makes them harder to start, harder to achieve these crazy network effects, but it doesn't make them any less important.

• 5:01Patrick O'Shaughnessy?

  As you think about the things that are, I guess I'll call them bottlenecks to human progress, however you wanted to find that, if you were to think about it like Thanos or something like you could snap something into or out of existence, what would you snap into and out of existence that you think could most positively impact human progress?

• 5:17Speaker 02

  I think it has to be energy. What we could do as a planet if we had unlimited zero emissions energy. And that could be some really interesting nuclear thing. It could be a Dyson sphere. There's all of these crazy science fiction versions of this, but that would enable every other industry in a way that I think it's even hard to imagine.

• 5:39Patrick O'Shaughnessy?

  Do you think that we as a species are like putting enough behind that? It seems in the last year or two, there's been some really cool examples of real funding, Helion and other firms like that, but it seems like a government scale thing. The amount of resources you need to marshal for this are huge, but I don't hear much about it. So do you think that enough emphasis is placed on that pursuit?

• 5:57Speaker 02

  We've definitely lost track, there's no doubt. Going back to Eisenhower's Adams for Peace speech where he basically said, "In the near future, energy will be so cheap that we won't even have to meter it." And then the National Labs worked through dozens of different nuclear power plant designs. And then we just decided that it wasn't worth it anymore. There were, I guess, reasons related to nuclear accidents, obviously, Three Mile Island and Chernobyl and things like that. And I think the net result of that is that we just leaned back into the carbon economy. And some of them are also just hard technical problems. The idea of a Dyson sphere is really cool. Are we close to actually building a Dyson sphere? No, of course not. I can't even imagine how we would get there.

• 6:41Speaker 02

  But man, it would be awesome if we could get a Manhattan Project-level effort going to reinvest in figuring out something that could change the world.

• 6:51Patrick O'Shaughnessy?

  You're obviously known both for building with Anduril and other companies and investing in through Founders Fund, a very specific breed of company. And I don't want to overly narrowly define that as government-facing companies or something like that, but really more companies that are doing something, sometimes much technically harder, much more expensive to do upfront, different and new, not marginal software or something. I don't know what you call this category of companies, but as you consider a new one, what are the sorts of features that you're looking for in the early meetings with founders that have these ideas?

• 7:22Speaker 02

  You could put a name on it, I think. Catherine Boyle's language at Andreessen Horowitz where she calls it "American dynamism" is interesting. Catherine actually started her career in venture as an intern at Founders Fund. I think she's had this breathing into her. It's not necessarily important that it be nationalistic or patriotic or anything like that. The American part of it is probably less interesting than the dynamism part of it. I think there's just something about the founders that operate in this space. When they talk about what their mission is, oftentimes, if you really pressed a technology founder for what their mission is, most of them, at the end of the day, it would just be making money. That's the thing. They might not say that out loud, but that's actually what it is, is their mission is they want to make a bunch of money.

• 8:07Speaker 02

  And there are founders in these other sectors where it's hard and it's not the easy path, but it's really strategically important, where I believe they are building teams where they actually are motivated by a mission, by something that is bigger than them, something that is resonant, something that has strategic importance to the techno optimistic future that they have in their mind. And I think that gives them a certain power that we're really lacking in the technology industry today.

• 8:36Patrick O'Shaughnessy?

  I liked your partner, Mike Solanas, framing of this as finding good quests. Can you talk about that phrase and what you like about it?

• 8:42Speaker 02

  Yeah, actually, that was my phrase. Me and Marky Wagner, who used to be at Delphi Labs, she and I wrote the piece on Pirate Wires about choosing good quests.

• 8:50Patrick O'Shaughnessy?

  I look at that. I'm giving him the credit. Good branding.

• 8:53Speaker 02

  Yeah, exactly. I'm so excited for Pirate Wires that I'm happy to co-opt attention into that because I think it's such an important project. But yeah, I think it really is about good quests. And the way that Marky and I were talking about it in the essay is really more referencing people who had already made it in some prior version of their life. And then how do you get the right people to focus on the right things in their second act? Because a lot of these people do really boring things. Those really boring things could be becoming public intellectuals, thinkfluencers, Twitter personalities, or it could be becoming a VC, or it could be starting a really goofy lifestyle business on the back of their

• 9:35Speaker 02

  brand. In Hollywood, people do this all the time. For every George Clooney that starts a tequila business, or a Kardashian that starts some fashion or cosmetics business, Silicon Valley has this in droves. It's like VCs and enterprise SaaS founders. It's not any different. It's a commodity. They're just building the same thing that everyone else has built and they're attaching their brand to it, hoping that their brand is the thing that makes the business successful. This is just kind of pathetic. It doesn't actually advance humanity. I want these really powerful second act brands going out and starting semiconductor companies and starting energy companies and starting defense tech companies. We need those companies to exist in order to really move the ball forward on the future.

• 10:15Patrick O'Shaughnessy?

  Why do you think it is that so few people have a quest at all? It strikes me as odd that people aren't more in search of something like this, like a greater purpose, especially given the modern conveniences and opportunities that we as talking as well to do Americans here, easy for us to say, but there's a lot of things that most people have that didn't exist 100 years ago. And yet, most people I meet aren't on any sort of quest. Why do you think that is? Good or bad quests, by the way, just any quest.

• 10:39Speaker 02

  I saw you actually tweet something about this. I can't agree with you more. I think that there's a lack of passion that exists that comes out of the liberal arts education mindset where people are told, don't over specialize, be a jack of all trades, have as broad of an education as you possibly can. And I think what we end up doing is we end up saddling these 18 year olds with a crisis of identity at the point that they go to college because we're saying, we've told you to not specialize your whole life. And now we're going to tell you, go and pick the thing that you want to do for the rest of your life. And I think it's really hard for people to be able to commit that I want to be a computer scientist and I have a reason for that. Or I want to go work in journalism and I have a reason for that. Or I'm going to go work in finance and I have a reason for that.

• 11:22Speaker 02

  And so I think it ends up just being a lot of very tracked behaviors. People just do the thing that feels the easiest or the natural next step. And then they keep pushing those decisions further and further and further down the path. And then by the time they're in their mid 30s, they look back and they're like, I don't even know how I ended up here. And I think so much of this, at least for me, I have two kids, I have a nine year old and a seven year old. I want to lean into their passions. If they demonstrate that they're really interested in something, man, I just want to like over invest, making sure that they chase that passion all the way to its conclusion. Obviously, that presents opportunities for burnout and there are ways that you should handle that as well. But I think as a society, we need to do a better job of cultivating and encouraging people to be really spiky rather than being really well-rounded.

• 12:08Patrick O'Shaughnessy?

  My kids are the exact same age and I feel the exact same way. And I'm curious tactically, what you've done that you think has been most successful at helping them chase down a passion?

• 12:17Speaker 02

  I think it's just finding what excites them and energizes them and then giving them opportunities to explore that. My kids are totally different. My nine-year-old is really creative. He's musically inclined. He's art inclined. He loves building things. If you left him alone for a day, he would be making stuffed animals. He'd be using a sewing machine. He would be drawing things, making comic books, playing piano. My seven-year-old is physical. He just wants to run. He wants to do martial arts. He wants to play soccer. He'll dabble a little bit in these creative pursuits with his brother, but they don't hold his attention in the same way that they do for my nine-year-old.

• 12:57Speaker 02

  And so we try to direct him in the channels where his attention is held and where he's excited. And I think hopefully over time that will develop into passions, things that he can't imagine waking up and not pouring his time and energy into in the future.

• 13:14Patrick O'Shaughnessy?

  Keeping with the quest theme of the conversation, as you think back on the most impactful calls to adventure that you've heeded in your life, what comes to mind?

• 13:25Speaker 02

  I've been really blessed. I've had these turning points at every transition for me. So I was always really into international politics and international relations type stuff. So prior to nine 11, I really wanted to be a foreign correspondent for a major media company. I was 100% aligned that way. I was the editor in chief of my high school newspaper. I had applied exclusively to journalism schools early in my senior year. And then nine 11 happened and it just completely flipped. It was no longer about journalism. It was about civil service. I wanted to go and work in service to the country. So I completely changed my tact and pointed myself at foreign policy and security studies. That's what ended me up at Georgetown, which landed me into the government after graduation.

• 14:09Speaker 02

  And I had no idea that I would ever be working in the technology industry and only ended up working in this space because I saw a demo of volunteer and got really excited about it, ended up getting recruited to come and join the company early. Quickly found out that I was not nearly as technical as maybe the government. Thought that I was, I did sales at Palantir instead.

• 14:31Patrick O'Shaughnessy?

  As one does.

• 14:32Speaker 02

  As one does, and got to know Peter Thiel, who's the co-founder, chairman at Palantir. And then in 2013, he asked me to join him at Founder's Fund. Again, not having any interest or exposure to venture capital before. Every single one of these transitions has been a surprise. But the cool thing about it is that it narrows and draws me closer and closer and closer to the passion project that has existed since the beginning, which is the interest in geopolitics and how that intersects with our ability to keep our population safe and advance the cause of democracy and freedom. And I keep getting closer and closer and closer to the right application of that mission set for my personal skills.

• 15:14Patrick O'Shaughnessy?

  Maybe tell the story around Anduril specifically, since you were co-founder of the business and sort of there at its primordial ooze stage of inception and vision. And use that as an example to tell the story of this kind of company. So obviously Anduril's done a lot of things for the first time, or maybe some of the things learned from Palantir, but it set a unique kind of standard. We did an episode with Brian that was really good, that people, if they're really interested in Anduril, they can hear the full story there. But I'm interested in it from your perspective as like an exemplar of this kind of project and company. So maybe you could tell your version of the story from that perspective.

• 15:47Speaker 02

  Again, when I came over to Founder's Fund at the beginning of 2014, I didn't know anything about venture. Literally, I was reading Venture Deals 101 books and stuff to try to learn what this whole industry was about. The partnership was super gracious in giving me the time to get up to speed. And part of the lesson of doing that was trying to find the next Palantir SpaceX. The one thing I did know was government procurement and the defense technology space. And so I spent the first couple of years at Founder's Fund. Going through with a fine-toothed comb and meeting with every founder who would take a meeting with me, who was doing work with the government or a bid on federal contracts, and met with hundreds of companies in that process, trying to figure it out.

• 16:32Speaker 02

  We ended up making one investment in the category, this company called KDM, that later was renamed Expanse, which was then acquired by Palo Alto Networks. But that was about it. There was really nothing else that we had identified. In early 2017, I was talking with the founder's son team and I said, it's really surprising. You would expect that there would be something out there that would be addressing the core problems that the Pentagon is facing, but all of these things are like really niche point solutions that don't have the ability to scale. And what we really need is a 21st century reboot of Lockheed Martin. We need a prime that's software-focused, that has really ambitious plans for low-cost systems, for being able to leverage technology to lower defense spending while increasing

• 17:16Speaker 02

  capability. And to my surprise, the team encouraged me to go and build the company if I thought that I knew what it should look like. I was already friends with Palmer again from the Oculus days. I knew Palmer was also interested in national security. He and I started jamming on this. And I kid you not, he said, I'm probably going to get fired soon. So as soon as I get fired, let's meet up and talk about this again. And so sure enough, in probably the end of the first quarter in 2017, Palmer calls me and he's like, it's on. I got fired. I got fired. It's time to start this business. So we launched into an earnest from there. And I guess to your question, how does this connect to all of these other good quests that people should be working on?

• 18:00Speaker 02

  My interests are very much mine. I'm a defense tech guy. I've always been a defense tech guy for my career. This is what I'm passionate about. It's what I think about when I'm staring at the ceiling at night. I'm thinking about integrated deterrence. I'm thinking about geopolitical intrigue. This is where my mind goes. That is not where other people's mind goes. My old boss at Palantir, Shamsan Kar, he had this analogy that he used of the X-Men. He said that if our company is going to work, it's because we're We're each leveraging our own superpowers to accomplish an audacious goal. Storm doesn't try to shoot laser beams out of her eyes. Cyclops doesn't try to throw playing cards that explode. Everybody has their own lane and they're just doing the thing that is in their superpower lane.

• 18:44Speaker 02

  And I think that's how in an ideal situation, the world works. I'm not interested in healthcare. There are people who are super interested in healthcare. I don't know anything about semiconductors, but there are people that know a lot about semiconductors. And I think we need to find those people that have really unique ideas, that have really novel approaches to solving core problems and just push them into this lane where they can just lever their passion and superpower to make a huge difference in the world.

• 19:12Patrick O'Shaughnessy?

  If you think about the modern version of nuclear deterrence, which is probably a concept or a story that just about everyone listening is familiar with, and its impact on the modern style of warfare, or even the frequency or nature of warfare in general, what is that today? What would you teach us about the cutting edge or the frontier of deterrence technologies? And just defense technologies writ large that are the most impactful on the world?

• 19:39Speaker 02

  The thing about nuclear deterrence is that it doesn't really work in the way that it did during the Cold War. There has to be a credible threat of someone actually doing something. And I think today, as you can see in Ukraine, there's a little bit of gamesmanship around this where we don't want to press too hard because we don't want Moscow to do something irrational or to use a tactical nuke. But really, very rarely are we talking about strategic nuclear weapons being used to annihilate cities. It's kind of a Cold War era thing. And as a result, we haven't been able to lever American strategic nuclear deterrence as a capability to deter conflict. Probably 10 years ago, I would have said to deter low-level conflict.

• 20:21Speaker 02

  But over 100,000 people have died in Ukraine and nobody's talking about launching a strategic nuclear weapon. So it's not only low-level conflict, it's also our tolerance for. Conflict in the world, it doesn't really match with the way that we've historically thought about nuclear deterrence. And so I guess to your question, there are a lot of different ways that deterrence works outside of the nuclear regime. We have a cost deterrence. Can we counter someone's offensive in a way that's significantly more expensive for them than it is for us? And how does that work in the opposite? Is it actually really inexpensive for an adversary to press conflict and we maybe have the ability to counter it, but it's incredibly expensive? And how does that

• 21:04Speaker 02

  break down our deterrence edge? And I think this is a lot of what you're seeing in so-called modern warfare is people using really low-cost attributable systems, drones that are in the low, single-digit million-dollar range. And in order to take them down, we have to shoot a two-plus-million-dollar missile. The trade just doesn't make a lot of sense. And so a lot of what Anduril is focused on is reducing the cost of countering conflict to the point where the trade-off is no longer worth making. An adversary would never say, I can do a bunch of stuff under the threshold and it will work out well for me and I'll be able to get some strategic advantage, or I'll be able to negotiate for something that I

• 21:46Speaker 02

  want. We need to get to the point where we make it basically unthinkable because they know we'll prevent it from happening and we're going to prevent it from happening at a cost far lower in lives and money and all of these other things than they would be able to wage on their own.

• 22:02Patrick O'Shaughnessy?

  I've seen you say somewhere that the CTO at Palantir, Shamsankar, I think you said something like, he taught me everything I know about defense tech. So what did he teach you? What were those lessons?

• 22:12Speaker 02

  Part of it was, he knew a lot of things that I didn't know. Part of it was that neither of us knew a bunch of things that we needed to know and we learned together. So I think we got both of those things going. The general idea that we had at the beginning of Palantir was that there are probably all these channels that we should hit. And so it was like, partner with consulting firms, hire channel resellers, work with SAP, do all of these things that sound like the right thing to do. It seems Very logical that you would work with all these people that are already sold to the government. As it turns out, like, none of these things worked. And the reason that Palantir survived was really paranoia. We're always deeply paranoid that our deals were going to get scooped, that people were going to figure out

• 22:54Speaker 02

  some procurement reason why it was impossible to buy the tech. There was some custom bespoke solution that one of the primes was going to build to replace what it is that we were doing at very high cost to the taxpayer. And we developed all these antibodies to ensure that the organization had a healthy level of paranoia to prevent all of these eventualities from happening. And Shum had a way of institutionalizing that. It was the reason that Palantir survived. He got it intuitively. And he was willing to press really hard into the areas where he knew that we needed to reach in order to get sticky and to stay active in these customer engagements. And I think that's really helpful to me, not only in the general context.

• 23:37Speaker 02

  It's also helpful as an investor who spends a lot of time in this space that I want to see the founders that are walking in the door, working on these really hard problems. I want to see them paranoid. I don't want to see them overly confident. Yeah, everything's just going to be easy. I'm the best in the world at this. I know everything that I need to know to make it work. I want to see people come in and say, this is crazy hard. And there's all these incumbents that are going to make it even harder than you can imagine for me to make this work. And it's my paranoia that's going to get us through that at the end of the day.

• 24:07Patrick O'Shaughnessy?

  Speaking of the incumbents, if you go study the Northrop Grumman is alone a great example, or you go far enough into the history and you see this incredible story of innovation or go read Skunk Works. There's lots of literature out there about a golden era of the defense primes. And then you look at Grumman since the nineties and it looks like a Warren Buffett story or something. It was like a serial M and A story, and then they've been buying back shares aggressively. They show up in all the quantitative screens as a great stock because they're really good about returning capital to shareholders and so on. It does seem like the innovation story that fueled those companies in their early days is gone. Go read about the development of the F22 platform or something. It's like a sad story to read in a modern context. Why is that happening? Why have some of the firms that were so innovative ossified?

• 24:50Patrick O'Shaughnessy?

  And then I want to talk about how you build a new innovative platform from first principles. But first, why have the other ones ossified so much?

• 24:57Speaker 02

  I don't think that there's any malintent. There are a lot of really smart, capable, patriotic people that work at the primes. And I think they would like to do things differently as well. But you have to think of the primes as basically, they're like government agencies. And they just respond to the incentives that they're given in the structure that's been presented to them. During the Cold War, there was a very different incentive structure. We needed to move fast. There was a lot of money in brown paper bags that was being passed under tables at restaurants. I mean, this is literally how the U2 was funded originally. And things just moved really fast. You referenced the book Skunk Works, which is by Ben Rich. I highly recommend the book to anyone who's interested in the space. He was the second director of Skunk Works after the legendary Kelly Johnson.

• 25:43Speaker 02

  And he said something along the lines of, during my 40-year career at Lockheed Martin, I worked on dozens of aircraft. It was constant iteration and working through these new technologies. He said, if you were an engineer that joined Lockheed Martin in the early 90s, you've maybe worked on two. The pacing has just gone significantly down. And then former Lockheed Martin CEO Norm Augustine said, I forget the year, he referenced something like, in the year 2050, the entire DoD budget will be used to buy one airplane. He was joking, obviously, but maybe not by much. I mean, that is the trajectory that we're on. And so the question is, what caused that shift to happen? Because there was so much talent at Skunk Works that led to the development of all these cool technologies.

• 26:25Speaker 02

  I think it's largely related to this forced consolidation in the defense industry that was prompted by what colloquially became known as the Last Supper in the defense community in 1994, where the Secretary of Defense pulled together the large defense contractors and said, effectively, consolidate or die. Defense spending is going down, the Cold War is over. You guys need to get way more efficient in the way that you run your business. And we are going to do our part as the defense industry to ensure that there is competition and to ensure that we have options for our major platforms across the large providers. And so the super communist way to think about this, what they said is that we're going to make sure that Boeing has the naval airframe. We're going to make sure that Lockheed doesn't enable airframe. We'll make sure that

• 27:09Speaker 02

  General Dynamics doesn't enable airframe. And if you all compete and one of you comes out on top, basically, the team that was working on the proposal and the other company will just shift over to the new company to ensure that they still have jobs. We're going to distribute work programs essentially for each of these across the whole country. So platforms like the F-35 are currently made in 400 congressional districts to make sure that it's basically impossible to kill because there are jobs behind almost every member of Congress that are reliant on that program. And did it do what they intended it to do to sustain competition? More than one bid on every platform that mattered? Yeah, I guess so. But it did it at the expense of dynamism. They did it at the expense of

• 27:53Speaker 02

  allowing for new entrants to come out of nowhere. And I think in the early 90s, it was easy to imagine a world in which all of the most relevant technologies for national security were going to come out of the Department of Defense because that's the way it had worked for the last 50 years. And so if everybody's leveraging the same lessons that are being learned from the national labs, well, maybe it is fairly close competition. But that's not how it works anymore. Most of the technology that matters the most to the Department of Defense over the next 20 years are commercial technologies, things that were built in the private sector, research and development that was funded by the private sector. A lot of the technologies that we need are technologies that we should be getting from new entrants. We should be getting from people that have access to the pools of talent

• 28:37Speaker 02

  and to the new tech that the primes don't have. And yet, the system still functions the way that it was built to function, which means it's incredibly hard for those new entrants to break in. So we're kind of in this loop. We're stuck. And I think it will require a very charismatic, heroic champion to come in and reset that culture so that the procurement system can work the way that it needs to work for us to be prepared for conflict in the future.

• 29:02Patrick O'Shaughnessy?

  It seems like there's a lot of false starts these days where it's very easy to get a pilot program funded from the government and then extraordinarily hard to get a true, fully scaled out, deployed system, or whatever you want to call it. Maybe talk about Anduril's learnings of, I think you called it a pincer movement of sales, bottom up and top down, and how you broke that because it just seems like the major problem here is not people developing cool stuff. As a country, we've gotten really good at tech. It's in the culture. The startup thing is a real thing. Lots of people want to solve these problems, but then landing them to get the businesses scaling is hard. So how did you do it? And how would you recommend other entrepreneurs out there think about doing it if they want to attack this space?

• 29:43Speaker 02

  I would say it's never been easier than at any point in American history to win a pilot with the government. The DOD has done a really good job of creating theater around their innovation efforts. There's SBIR programs, there's over 100 innovation organizations that exist across the department. You have really great efforts in, by the way, all of these spaces. The DIU does really good work. Inkytel does really good work. They're appropriately focused on transition. And yet I think that the leadership of those organizations would all say across the board, we don't transition very well. It is still very difficult. And I think the approach that we took at Palantir, the approach that we took at Anduril, and to be honest, the approach that SpaceX has often taken as well, is we need to focus on

• 30:28Speaker 02

  the core programs. We shouldn't be focusing on how many of these more or less non-dilutive grants we can win out of the innovation budget, but how can we actually go and make sure that we have access to the multi-billion dollar contract that's going to end up funding the thing that the warfighter is going to use in a future conflict? And those conversations are way harder, but they also are multiple orders of magnitude larger than you're ever going to get out of these smaller grants, essentially. As you hinted, our strategy is top down and bottoms up. You have to get the user to believe that the technology that you're building is going to be helpful for them. That's like table stakes. The product has to

• 31:12Speaker 02

  Work, you have to be able to demonstrate that it works. But that's not sufficient. You have to work from the top down as well to make sure that the people that are appropriating budget in Congress, the decision makers in the department, which could start with the secretary. It could be the undersecretary right below them. It could be the person running the program office. You have to make sure that they also understand that you are going to back them up to align the incentive structure towards getting them what they want as well, which is a successful program, a de-risk on signing up for a massive boondoggle. They don't want to be the person that's stuck behind a Theranos or something like that. They want to be very confident that it's going to do what you say it's going to do. And you have to push both of those equally hard.

• 31:54Speaker 02

  And then eventually that frozen middle that are the most risk averse people in the department, the ones signing the paperwork, you have to make sure that they feel like they have enough support from both sides, that they're able to break through the morass and do the thing that's right for the taxpayer and the warfighter in turn. So that movement is often missed. I think a lot of entrepreneurs that are building in the GovTech space have this belief that the world is actually like the field of dreams. As long as I build a great product, the customer will come. Well, that's just not even remotely true. It is not the field of dreams. It's like the anti-field of dreams. It doesn't matter if you build a product, the customer will not come unless you figure out some strategy, some advantage that you can lever to make sure that the thing that you built is actually going to be used

• 32:39Speaker 02

  the way that it was intended to be used by the people who intend to use it. And that is not the way the piloting prototyping system works.

• 32:45Patrick O'Shaughnessy?

  Can you explain what lobbyists do in all this and just generally like how that world works? It's a term that I think probably if you did a poll of America, probably has a slightly negative connotation, but also I think is a critical layer of this influence sphere. So what do they do? How do you think about working with lobbyists? What skill sets do they have? I don't know much about that world. I'd love to learn.

• 33:07Speaker 02

  No, you're absolutely right. I think it almost definitionally has a negative connotation. People think of lobbyists as sitting in smoke-filled rooms, negotiating deals that are unjust and unfair. But I think this is totally the wrong framing. I don't want to pretend that there aren't bad people in the system as well. But think about it this way. In the late 1700s, when the United States was founded, it is conceivable that the early founders of the country had read every important piece of literature that had ever been written in the history of humanity. There wasn't that much out there. They had probably read all military strategy books that mattered. They had probably read all philosophy that had mattered up until that point. They could sit in the Capitol Building and they could debate the merits of healthcare policy.

• 33:52Speaker 02

  They could debate the merits of the Department of War, which is what it was called at the time. They could kind of work their way through all of these things and have a rough understanding. Obviously, today, that's not the case. These members of Congress have maybe expertise in one field. Probably not even that, though. I mean, the vast majority of members of Congress are professional politicians at this point. They didn't even have a career before they were on Capitol Hill. And so they need to be educated. They need to be able to get information about the votes that they're going to be making in the most efficient way possible. And this is effectively what lobbyists do in our system. They consume information. They communicate that in their network to the offices on Capitol Hill that are critical,

• 34:36Speaker 02

  which is usually committee-based. If you're doing work at the Defense Department, you need to be close to the Armed Services Committees and the appropriators. And they do that in a way that hopefully helps the members of Congress be informed on the topics that they're voting on. And obviously, there are competing interests and people that are all pushing at the edges. And so it's up to the members and their staffs to sort through all of that. But there wouldn't be a very efficient way of doing this otherwise. There's just too much going on. It will be very, very difficult for them to get the information that they need. That's kind of the way that I think about it.

• 35:08Patrick O'Shaughnessy?

  Companies selling into this space, when should they hire a lobbyist? Is it early? Is it a key part of the company stack that you would recommend, given your experience?

• 35:17Speaker 02

  Totally. I think earlier is better. It's not cheap. I mean, you're going to spend $100,000 or more a year. So maybe you want to give yourself a little bit of time to get at least an early demonstration of your products in place or hire people that can manage that process. But at Andorl, we started the company on a Monday and on Wednesday, me, Brian and Palmer, were walking around the halls of the Capitol Building briefing people on what it is that we were doing. So with a lobbyist. So if you have a sense for how it works and you kind of know what relationships you need to start building, yeah, you probably need to get the ball rolling sooner than you would expect.

• 35:54Patrick O'Shaughnessy?

  Can you explain your interpretation of Peter's very famous competition should be avoided concept? And how that impacts what you build, what you back, the kinds of people you look to work with. It's a very elegant idea, but I'd love to hear a more gritty take on it from the trenches.

• 36:11Speaker 02

  Probably the best lesson that I've ever learned from Peter is tied back to the philosophical roots of this question around competition, which is a theologian philosopher from Stanford, whose name is René Girard, that wrote a lot about this idea of what he called memetic theory, which is the idea that most conflict doesn't arrive from differences. It arises out of similarities, competition over scarce resources. People want what other people want. That's like the motivator for all of the conflict that exists in society, because we're all going after what other people want. And there are all these ways that the internet supercharge those behaviors where people have more exposure into what other people want.

• 36:53Speaker 02

  And I think this is what has created a lot of the more competitive categories of technology. Is where someone says, well, I saw this other company do this thing. It's like Uber build a ride sharing company. And so everyone else is going to start building a ride sharing company because it's easy. It doesn't require a whole lot of thought. The unit economics are reasonably well understood. It becomes more of a competition over capital than a competition over technology. The problem is, is that in highly competitive spaces, all the capital gets competed away. Because when there's basically perfect competition, it's really, really hard for anyone to Merge from that into being a large company. This is where Peter starts talking about in a more controversial way. He starts talking about the importance of monopolies.

• 37:36Speaker 02

  The reason that these things become monopolies is that someone had an idea that someone else didn't have. That's how it became a monopoly. And so we're looking for natural monopolies. We're looking for contrarian ideas. We're looking for people that aren't just moving in the direction that the crowd is pulling them. And one of the insights that he pointed out in his book Zero to One is that a lot of the founders of the most impactful companies, technology companies of our generation are slightly off socially. They're not quite super high EQ. And the reason for that is very likely because they didn't have that memetic contagion gene that all of these other people had. They were willing to do things where they weren't going to get social validation.

• 38:21Speaker 02

  They weren't going to have people cheering them along on the sidelines. They were just willing to be less popular at the beginning because they were chasing something that other people weren't willing to chase. Now, that does definitely motivate decision making at Anduril as well. There are a bunch of companies working in different aspects of the defense stack. I don't think we should be building products that have a bunch of venture backed companies already working in those spaces. That seems like a bad use of our resources and it seems to be pitting us against competition that will be kind of a waste of time for us to be putting ourselves up against.

• 38:57Patrick O'Shaughnessy?

  One of the words that I think about a lot is disagreeableness. You want a high degree of disagreeableness in people that are building this style of company. Because almost by definition, if they're not disagreeable, they're not going to do anything distinctive. And you sort of get this cost of capital like return or homogenous outcomes that you referenced. How do you suss that out in people when you're meeting with them? I'm especially interested in like the one on the line. I'm sure sometimes it's obvious this person's highly disagreeable or this person's just down the fairway. But what about the ones where you're not quite sure? What are the ways that you are sussing people out and their ideas out that you found valuable?

• 39:31Speaker 02

  The first question I generally ask in every pitch meeting is what is the origin story of this? Business and that's usually the easiest way to suss that out. I think there are a lot of companies that are started in what I would call a whiteboard founder kind of way. A couple of people standing in front of a whiteboard, they write every idea they have on the board. And then they narrow it down to the least bad idea. And they're just like, the thing that we really want more than anything else is to be entrepreneurs. The idea is secondary. Those people are not particularly disagreeable. As you just said, because that's not what they're in pursuit of. Their mission is to be entrepreneurs and to make a lot of money. I want to find people that it's very clear from their origin story that they believe something to be true.

• 40:14Speaker 02

  That most of their peers would disagree with him about. And they're willing to put their time and their reputation on the line to prove that there's something to be learned in a sector that other people weren't considering.

• 40:27Patrick O'Shaughnessy?

  Is there an origin story that you've been told that pops to mind as extraordinary? The first time you heard it, which one pops most to mind?

• 40:34Speaker 02

  We've been investors in Flexport since the beginning. Ryan is one of my favorite entrepreneurs that we've met since I started here almost 10 years ago. The first time I met with him, we were joking as a team. One of my partners made the comment that he was either the strangest person and most passionate person he's ever met. Or he was on drugs. He's like, no one is more passionate about international freight logistics than me. In fact, I moved to China and I was exporting ATVs and bath fittings back to the United States because I figured out there was an arbitrage opportunity. I learned how to speak Mandarin. And then I started this company called Import Genius that collects customs data. And I still own that business that throws off a bunch of cash.

• 41:17Speaker 02

  And now I want to go for broke and build a modern digital freight forwarder. It's like, what kind of person gets that excited about international freight logistics? And it's those sorts of stories where it's like, this person was built to build this company. There is not a better person in the world to build Flexport than Ryan Peterson. And it was very obvious from that first 10 minutes of our conversation that that was the case and that he was going to figure out how to make it work. And I think he's done a great job with that over the last eight, nine years.

• 41:45Patrick O'Shaughnessy?

  I love that your path into investing. Was unorthodoxed and I'm still interested in how you've developed what I'll call the Wall Street sensibility of at the end of the day, like I still want to earn a great return on my outlays of capital. How have you evolved or progressed there as an investor, considering the napkin math of returns alongside if Ryan had pitched you, but the price was 300 posts or something at the seed, there's always a price that can ruin any investment regardless of the passion. How have you evolved on that side of the job?

• 42:17Speaker 02

  Late 2020, 2021, I was not a particularly effective investor because of this exact problem. As someone who was also involved in operationally running a company at the same time, my concern was always wrapped around what are all the ways that I can get out way over my skis that it's going to screw me in the long term. And some people might remember the Palantir story. It was certainly very ever-present with me and Matt and Brian, who are two of the other founders of Andro, who also came from Palantir. We raised it ever higher valuation. And then there was this point where a bunch of the newer employees were underwater. The market turned, the secondary market softened significantly, they had to reissue shares at a lower price. I mean, it was this whole drama that really sapped morale from the company.

• 43:02Speaker 02

  So that was very present for me, not only as a founder of Andro, but also as an investor. And it was shocking to me, you would have these conversations with entrepreneurs, you're like, look, I get that you can get this price. I get that there's someone out there that's offering you this, but what happens if the market turns and you're sitting on a 1,000x multiple on revenue? What happens to the business? Are you really willing to mortgage your business on the back of getting a really high price in a booming venture economy? And I think that's where we're finding ourselves today is there are all these companies that are trying to figure out how to survive this. Do they take it down round? Do they raise some sort of a bridge, take on debt to be able to survive until that multiple

• 43:44Speaker 02

  comes down as their revenue goes up and they're in a healthier place where they can do something flat or marginally up? How do I grapple with this as an investor? I do think that fundamentally, the rule is the same as It's always been, which is that there are in of one founders in sectors that matter that we want to deploy capital into. And in almost every case, especially early, you should be deploying in even if the price is a little uncomfortable. But over time, it's important that those founders have a thoughtful approach to how they take on capital. So they don't end up putting the company in a bad place because of their capital strategy, rather than putting the company in a bad place because the company isn't working for some more operational or tactical reason.

• 44:30Patrick O'Shaughnessy?

  You've had history doing everything. You've been a primary founder and co-founder. You've been an investor. And you've been a third category, which I'm especially interested in, which is a supporting player, working for other people in another company. Not everyone can be like an N of one founder. In fact, by definition, most of us are supporters. What have you learned about doing that role well, aligning yourself with a great leader? And playing a supporting role rather than a leading role?

• 44:57Speaker 02

  To be honest, I don't think I could do any of the things that I'm doing today if it weren't for my time at Palantir. I learned so much about the tech industry. I learned so much about how software companies work. I learned so much about entrepreneurship. It was a completely irreplaceable six years of my professional life. And I'm shocked that more people don't do this because it is such a good training ground. It's like a hundred times better than graduate school, living and breathing that supporting role. Shom was obviously great and I learned a ton from him. I could say the same thing about Dr. Karp, the philosopher king of Palantir.

• 45:38Speaker 02

  He like birthed the strategies that ended up building this company that has really changed the way that a lot of data analysis, particularly in government context is being done today. But in addition to that, some of the best, closest relationships that I have in the venture capital space, in the tech company founder space are relationships that I built at Palantir. Two of my co-founders at Anduril, who are also two of my best friends, Matt Grimm and Brian Schimpf, were former Palantir. We've invested in a bunch of Palantir alumni founders here at Founders Fund, Nima Gamsari, Roscoe Hill, Eugene over at Blend Labs, which just IPO'd very recently. Those are Palantir founders

• 46:20Speaker 02

  working very closely with Joe Lonsdale, who is one of the co-founders of Palantir, on a bunch of co-investments that we made together. So the relationship side of this is also really, really powerful groundwork, foundation for the future of anyone's career. And I would encourage anyone to like, go and spend some time working in those roles prior to diving into VC or entrepreneurship. I just think it makes you more capable, more qualified to do those things at a later point.

• 46:44Patrick O'Shaughnessy?

  What do you think are the most important things for people to know about entrepreneurship that are commonly not talked about in the books and the podcasts and the content that gets produced on it?

• 46:52Speaker 02

  The one that probably comes up the most that I feel really strongly about is that fundraising is a skill and entrepreneurs need to be good at this skill. At least one person on the founding team needs to be really good at it. And I think a lot of times people are like, I'm going to start a company and if my company is good and VCs aren't dumb, they'll give me money. And if my company is good and VCs don't give me money, it's because they're dumb. That's kind of the way that people think about it. They don't think about themselves as being on the hook for being good at fundraising. But you can go look at companies that are dumb, that raise a ton of money, and it was just because the founders were good at fundraising. Do I think Adam Newman is a brilliant fundraiser? Absolutely. Was Elizabeth Holmes a good fundraiser? Maybe not with VCs,

• 47:37Speaker 02

  but she was able to raise money. She was clearly good at telling the story. I think that's probably the biggest miss for most entrepreneurs is that there's not enough self-ownership of getting capital for your business. You have to be good at that. If you're not good at it, you need to figure out skills to become better at it. And blaming VCs for not being able to raise rounds is a ridiculous way to absolve yourself of responsibility for developing that as a skill. The other thing is, everyone talks about, there's this tension about how important is working hard versus work-life balance and mental health and founders. And there's a lot of really good, important things that people are talking about there. But I will

• 48:17Speaker 02

  Say that the most successful founders in the founders on portfolio are people who had very low ego and the things that they were required to do. And they realized that it was possible to mech turk your way through a lot of early lack of features on your product side. Having hustle is important, not because you need to be frenetic with energy and it's not that you need to work 100 hours a week. But I think having a willingness to actually just do whatever role needs to be done at the company. No matter how high status or low status it is, is a very key indicator of a successful entrepreneur.

• 48:53Patrick O'Shaughnessy?

  Can you say a few words about what you've learned from Lauren Gross, speaking of fundraising?

• 48:58Speaker 02

  Lauren is the goat of operations of a venture fund. It's almost funny to me to see the engagement from other funds with Lauren where she's the Sherpa to all of these COOs at venture funds. Because they know that she's like a magician. She is the most talented relationship manager I've ever met. She has a way of connecting with people. She's super high EQ. She's able to navigate the drama between very low EQ partnership at Founder Sun, which I think is famously true. So I'm not revealing anything that people don't already know. It's undervalued. A lot of VCs have this tendency to believe the quality of our GP is the thing that's going to make or break this.

• 49:43Speaker 02

  I think the quality of your fund manager is also really, really important. And Lauren adds stability to the fund in a way that I don't think even Peter at his best would be able to do.

• 49:57Patrick O'Shaughnessy?

  I love the background story. You probably haven't heard the name, but like, if you know, you know, you've heard the name. But she operates behind the scenes and that'd be fun to ask you a brief question about her.

• 50:06Speaker 02

  Which is honestly the way that she likes it. She doesn't talk publicly. No one's interviewing her, but man, she's just a force. And it's hard to overstate just how important it's been to the success of Founder's Fund. And how helpful she's been to a lot of other venture funds, coaching them through how to set it up, how to manage it, how to fundraise, how to like manage the team, how to deal with conflict across the partnership. I mean, she is just a wizard. It's really a sight to behold.

• 50:33Patrick O'Shaughnessy?

  You're recently a co-founder of another company called Soul. I'd love you to describe it and I'd especially love you to describe the key early things that you've done to build a new hardware product in a unique way. I'd love to hear the origin story of this particular product and business and your motivation for doing it.

• 50:51Speaker 02

  I'm both a VR enthusiast and a voracious reader. Founder Sun was the first institutional investor in Oculus, which is how I got to know Palmer originally. I've seen a lot of virtual reality demos as a result of my friendship with Palmer and our position in Oculus. And to be honest, is there a lot of really underwhelming, very incremental stuff out there? And so Founder Sun hasn't made a ton of investments in this space, but I remember going back to Palmer. This is even before we started Android altogether. I asked him, man, why are these demos so bad? And he laughed and said, the reality is, is that most of the stuff that we talk about as being the future of virtual reality, things like haptics and omnidirectional treadmills and full immersion.

• 51:35Speaker 02

  All of this stuff is actually physics limited. There's basic science research that needs to be advanced before we can build the things that are going to really get us into Ready Player One as a reality. And he said, but there's a lot of single purpose stuff that we can do really well today. And he actually referenced the Jetsons, which I thought was an interesting connection where he said, you know, in the Jetsons, there's no smartphone. There's no supercomputer in people's hand that does everything. And there's actually all of these really cool, single purpose devices that do one thing. A thing that dries your hair and there's a robot that does this thing. There's a robot that does this thing. And he's like, so what is the thing that you want to do? What do you want to do in VR that you don't think you can do today? And my answer was very simple. I wanted to read.

• 52:18Speaker 02

  I want to lay in bed with a pair of glasses on and read. And he kind of laughed at me and he's like, dude, that's totally possible. You can build that. And I'm like, oh, we should get some people together and do it. And he's like, I didn't say it was a good idea. I said it was possible. That's a really dumb idea. And so I left this in the back of my mind and occasionally I would bring it up to friends and conversation. And the response was always the same. It was, oh yeah, no, I see what you're saying. It's kind of a dumb idea, but you definitely shouldn't waste time. On that. And then a couple of years back, I was having this conversation with a friend of mine who was looking into the next thing that he wanted to do in his career. Had been a successful founder and hadn't exited. He was doing some stuff in the investing space. And I said, I have an idea that you can totally run with if you want.

• 52:59Speaker 02

  Imagine you have an ebook on your face in a head mounted display. And he laughed and he said, Trey, that's such a dumb idea. And then a week later, he sent me a text message of a picture of a rigged up head mounted display that he had built. And he said, I'm not gonna lie, I rigged up this very janky system and I've been laying here playing around with it and it's actually kind of hot. He decided to spend at least a few months seeing what was possible and what he would need to do. And by the time that he had built a third or fourth generation prototype, we realized that it was not only possible and something that was useful to us as the first two users,

• 53:41Speaker 02

  but it was something that we thought we could get a lot of other people excited about as well, if we could get them in glass. And so for the last 18 months, we've been building out the company and we have a team of around 10 people. We're launching pre-orders right now and the product is honestly really, really awesome. Everyone that we get in it, that we send one of the prototype pairs, they are really reticent to give it back to us when we ask for it to be returned. So do I think that this is a general purpose VR thing that's going to sell a billion units, lead us into a Ready Player One reality? Definitely not. That's not what this is. This is a single purpose device for people who want to read, people that don't want to be distracted with notifications, text messages, Slack messages.

• 54:24Speaker 02

  They just want to lay down and hands-free read a book in a really low-power e-ink, very easy on the eyes way. It is magical if that's what it is that you want to do.

• 54:36Patrick O'Shaughnessy?

  It's funny, actually, my mind goes to treadmill. I spend a lot of time on an inclined treadmill. And I literally sit there holding my phone like this, reading stuff. And obviously you can walk with it outside, but if you're on a treadmill like at a steady pace, I'd be interested to see if you start to capture that zone of attention too, not just lying in bed. You kind of showed it to me before we started recording, just even seeing it through the zoom camera is pretty cool. So I'm excited to see V1.

• 55:01Speaker 02

  It's super lightweight. It's way closer to a pair of Ray-Bans than it is to an Oculus Quest 2. It's very lightweight, very small, fits in a normal sunglass case. So it's very easy to just like throw in your bag and travel with. I read with it on airplanes. I read with it on vacation, laying next to a pool. I read with it in bed. It is by far the most comfortable way to read a book in my experience.

• 55:23Patrick O'Shaughnessy?

  I spent most of my early twenties studying the world's religions and philosophical traditions. I studied philosophy in school. And one of the things I came away from that experience with, I think different texts hit different people in different ways. The ones that hit me most were the Indian ones, the early Vedic stories like the Penishads. But the stories are kind of all the same in all of them, where the core lesson is one of service and participation in some greater unity or greater thing. There's lots of names for that, et cetera. I'd love you to talk a bit about the role of religion in your life, because it's become like a funny, weird taboo, modern topic. And I think in place of the purpose that used to fill people through some type of religion, lots of other maybe less productive things have filled in

• 56:06Patrick O'Shaughnessy?

  that gap. And I'd love you to riff on that concept a little bit, because I think your perspective is unique.

• 56:11Speaker 02

  Religion is super important to me personally. I think there's a deeper meaning that you can derive out of a spiritual experience in life. I was raised in a Protestant tradition. In fact, my grandfather was the pastor of my church growing up. So it was very much deeply ingrained in my family. I went to a Jesuit Catholic college. My wife also was raised Christian. And so that historically has been an important part of our life. But I will say that a lot of times, people start drifting away from these religious traditions and experiences if they don't make it their own. And I think that my wife's experiences growing up were very different from mine. And so you have to find the expression of that that is most

• 56:56Speaker 02

  resonant with you as a person. And I think for me, there was a depth of theology that I wanted to explore, that, again, going back to our conversation about passion, that connected with me in a way that made me better and more effective at all. All the other things that I cared about. I'll give you an example of how that played out. When I was growing up, religion was something that was very closely tied to your personal life. And profession was something that was really tied to your ability to pay your bills for your family. I grew up in a somewhat rural background in Ohio, and there wasn't a connection between these three things of a profession, personal life and religious life.

• 57:34Speaker 02

  And I found that as I've gotten further in my career and certainly have a deep connection to my mission, my quest in life is a profession, a vocation. I found that there's a sacred tie that exists between all of these things. The giftedness that I have, going back to the X-Men comment, the giftedness that I have is very directly connected to my call, my mission, my quest in life. And these things are breathed into me and imbued by a creator, by an experience of creation, by my upbringing, by all of these other things. And I think that we each have this. We each have what I would call like a sacred vocation.

• 58:13Speaker 02

  It doesn't matter what it is that you're doing. It doesn't matter if you're a mailman, a librarian, a schoolteacher, an entrepreneur, a venture capitalist. There is a way of looking at this that is, I have an opportunity to do something that is going to be good for me, that's going to be good for the world, that's going to draw us closer to a terminal, optimistic, definite view of the future. And there are ways that I can go about life that are going to be working in opposition to that. And there are things that I could do that are going to drag us deeper into this pessimistic darkness of the future that is always a lingering possibility. And so I've chosen actively to step into that and understand what is my calling?

• 58:55Speaker 02

  What is the thing that I'm uniquely suited to do to contribute to a greater good, to a mission, to a purpose? And that for me is like a very religious experience. And we can talk about that certainly in the terms of Christian theology. But to your point, it doesn't necessarily have to be that for you to derive meaning. For me, I believe that's where the meaning comes from, and I'm always willing to sit down with a cigar and a glass of whiskey. In front of a fire and argue with someone in debate about why I think that is the true expression. But at the end of the day, I find a deep unity and connection with people of all religious persuasions that have this draw of something in their soul says the world is bigger than just themselves.

• 59:38Speaker 02

  There is truth and there's justice and there's morality. And we are living out our expression of those things in the way that we are interacting with our families, the way that we're interacting with our coworkers, the way that we're interacting with our quests. And I think that is such an important thing to bringing humanity closer to our ultimate purpose.

• 59:56Patrick O'Shaughnessy?

  I really, really love the total perspective. What came to mind for some reason as you're talking is this funny trope in the world of business that you want to appeal to one of the seven deadly sins to build a great product. Curious where your reaction is to that.

• 1:00:09Speaker 02

  I hate the vices thing. I think it's such a lame way of thinking about the world. Do I think that these are good for business? Absolutely. Could you build an effective investment strategy around the seven deadly sins? Yeah, you probably could, but that's feeding the lowest based part of humanity. And I don't think that's good for any of us. I don't think that it's a good expression of our call or our vacation in life. And I don't think you have to do that. There are ways that we can have a more positive and optimistic view of humanity that doesn't force us to go down to feed people's most basic instincts in a way that draws them further and further away from the highest calling they could have in their lives. And I think this goes to like a lot of the experience of San Francisco.

• 1:00:53Speaker 02

  People talk about how we don't want to interfere with people's lives and their ability to take fentanyl or whatever, shoot up heroin on the side of the street. And I don't think that's love at all. I don't think there's anything loving about looking at someone killing themselves on the side of the street and saying, that's okay, because it's not, it's not okay. And I think people need to speak up more about these very obvious, in my mind, these very obvious moral shortcomings of relativistic society. And to be honest, my interactions with a lot of the founders in Silicon Valley, you would expect that my outward Christianity would ring hollow. But it actually doesn't because I found that a lot of entrepreneurs in particular will come to me asking, how is it possible that someone who I respect

• 1:01:37Speaker 02

  and that I generally think is not dumb, at least as like a low bar, believes in these mythologies or whatever. And my pushback to this is always. The emptiness that you get out of relativism, it drains your soul of all of your energy. And Silicon Valley explored this, like silent meditation retreats and ayahuasca and all of this other stuff, and it works for a moment. You fill this God-shaped hole for like a hot second, some spiritual experience that connects me to the cosmos, but there's no truth. It's all just expression. Everyone's just looking at things from their own perspective and saying, it's my truth. But your truth breaks down when your experiences change and when it's in conflict with everyone

• 1:02:22Speaker 02

  else's truth. There's no foundation. And so that lack of foundation leaves people feeling lonely and frustrated and empty. And I think this unifying characteristic of people saying, I believe that there is truth in the world. I believe there are things that are right and I believe there are things that are wrong. And I'm willing to stand up and use this wisdom and this foundation to inform how I'm going to live my life. It creates a sense of belonging, a sense of community, a sense of wonder and appreciation and awe for the world. And I think it leads people into a more optimistic expression of the future. And at the end of the day, isn't that what Silicon Valley is all about?

• 1:03:03Patrick O'Shaughnessy?

  I think it's quite telling that if you go around, I've done this, ask people to name the deadly sins and the cardinal virtues. The average person can name basically all the deadly sins and very few can name any of the cardinal virtues. It's kind of a distressing exercise. Maybe I don't recommend it.

• 1:03:19Speaker 02

  No, you're absolutely right. The virtues are almost seen in a negative light. The connotation is seen as this gross patriarchal connection with the past. And I think it's really dangerous to think about virtue as some old stodgy historical relic, because they're not. These things live out in every culture in humanity. They have different religious texts that connect them back. Virtue is critical to happiness, to people's experience of the world. And I think we lose so much of that when we rely on ourselves as being the source of all truth. We don't have the ability to do that.

• 1:03:57Patrick O'Shaughnessy?

  So Dad loves to write a book called Regrets of Billionaires because I've done this talking tour and it's a shocking similar story that you hear from lots of people that have been objectively successful in some of the traditional ways, but effectively cite a lack of virtue in different clothing or in different ways in their life and wishing that they could go back and change that. And I think it'd be a good book, some way to slipstream these virtues into people's thinking would be really productive. This has been such a fun and interesting conversation, Trey. I really appreciate all your time. I ask everyone that I do this with the same traditional closing question. What's the kindest thing that anyone's ever done for you?

• 1:04:32Speaker 02

  I got rejected almost everywhere that I applied to college. I learned a very difficult lesson about aspirations and demographics and things like that as I was applying to college. And there was this one night that I was laying on my couch, just sobbing when I realized that I had overshot and didn't know what I was going to do for my future. And my mom, who was a great encourager, just asked me a simple question. She said, where do you want to go to college? And I told her, I want to go to Georgetown. I want to do this geopolitics, national security thing. And she said, all right, we're going to get you a plane ticket and you're going to go to fly to Georgetown and you're going to tell the dean of admissions that you're going to go to

• 1:05:12Speaker 02

  college there. That's our plan. Let's take action on that plan. And as crazy as that idea was, it worked. And the entire trajectory of my life changed because my mom, in that moment of weakness, pushed me down a path of courage to say, the story is not written yet. You have the ability to impact the final story. I don't think anything would have happened in my life the way that this happened if it weren't for that one moment. So that feels like the kindest thing.

• 1:05:40Patrick O'Shaughnessy?

  Incredible. Yeah, I've asked this question a lot. Usually they all fall into one of a couple of categories. That's a pretty unique one that I'll definitely remember. I got rejected from every single college I applied to the first time. So I share that despairing experience with you. My outcome was not quite as cool as yours eventually was, but I love that closing story and so thankful for our conversation today. If you enjoyed this episode, check out joincolossus.com. There you'll find every episode of this podcast, complete with transcripts, show notes, and resources to keep learning. You can also sign up for our newsletter, Colossus Weekly, where we condense episodes to the big ideas, quotations, and more, as well as share the best content we find on the internet every week.