Uncapped #1 | Shaun Maguire from Sequoia

This week I spoke with Shaun Maguire, a Partner at Sequoia Capital. He led their investments into SpaceX, The Boring Co, and X among others. Prior to Sequoia Shaun co-founded a cybersecurity company which was acquired for $1B and worked at DARPA. I could have happily spoken with Shaun for four hours. --- We covered: (0:00) Speaking his mind in public (13:38) Trust and the media (24:27) Tech’s political flip (29:27) Investing in hard tech vs. software (45:27) Thinking with a beginner's mind (52:30) Fulfillment in investing (59:33) Investing in outlier people --- Linktree: https://linktr.ee/uncappedpod Twitter: https://x.com/jaltma Email: [email protected]

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

• 0:01Jack Altman?

  All right, Sean, thanks for doing this. I'm really excited to talk to you today.

• 0:03Speaker 01

  Thrilled to be here, Jack. What's going on, man?

• 0:04Jack Altman?

  All right, so I want to go right into it. So the first thing I want to talk about is sort of like the current state of the media and social media. I'm not sure if I-

• 0:12Speaker 01

  I have no opinions on this topic.

• 0:13Jack Altman?

  You got nothing? We can move on.

• 0:14Speaker 01

  I'm just kidding.

• 0:15Jack Altman?

  I don't know if I have the timing exactly right, but the way I experienced sort of you on Twitter was October 7th happened and you got super vocal. And you started sharing a lot of opinions on X that were kind of controversial, that were strongly rooted. They were ones that I agreed with, but you know, ones that many people were sort of afraid to say in those ways. I wanted to start there of just like, what happened in that moment? And did I read that right? That there was some change in you or the way you thought about how you were going to show up around that moment?

• 0:43Speaker 01

  For sure. You nailed it. It's a pretty long backstory on this, so I'll try to keep it brief. But I'm a child of the internet, was born in 1985. First time using the internet was 4th grade at my friend Nick Palchikoff's house AOL. We went in AOL chat rooms. We realized that we could impersonate being a professional baseball player, Mike Piazza. If you're listening, Mike, I've never met you, but I did a great job pretending I was you in 4th grade. You know this too, but there was just really something about the internet in those points. It was very new and the social elements of it were brand new. And this is a weird tangent, but like in physics, when you study some system, you start with very simple toy systems that you can actually understand.

• 1:26Speaker 01

  You study a single ball on a spring or a single ball on a string, you know? Or you study with some simple system and then you try to build up from there. When you understand a simple system deeply, it makes it much easier to understand the complex systems. I feel like I got lucky with when I was born, where I was on the internet in the very beginning of the social element. And so I think I was able to understand as a participant, like how manipulation works, how misinformation works, how it spreads. And I'll give you an example on Mike Piazza. And I've talked about this maybe twice before, but you know, my friend and I, we would A/B tests. Like, can we convince people as 4th graders that we're a professional baseball player? And we basically learned a tactic accidentally that worked.

• 2:12Speaker 01

  Almost every time, call it eighty percent of the time. You know, if you just come out in a forum and say, I'm Mike Piazza, no one's gonna believe you. But if you join some chatroom and you're talking to people and you seem normal and oftentimes AOL the time would then go into a sidebar, you'd be talking to someone one on one. You know, after you're talking to someone for a little bit about random stuff, you know, the weather, whatever their hobbies are, you know, they'd ask, what do you do? And if you're not the one that starts, you know, with that and they ask you, what do you do? And be like, oh, I play baseball. And they'd be like, what do you mean you play baseball? Like, you know, like, I get paid to play baseball. And they're like, so you're a professional baseball player? It's like, I guess so. It's like, who do you play for? Play for the Dodgers. They're like, you're lying. Like, what's your name?

• 2:56Speaker 01

  Like, my name's Mike Piazza. They'd be like, shut up, you're lying. You know, and they'd be asked some question about you and you'd be like, you know, you have to know all the trivia on the person. And so then you answer some basic questions. And then I basically lead with, look, I know it's hard to believe, but it's really hard for me to meet people in the real world. I like to come on AOL and just talk to people, you know, like, no one's judging me. All this, and that would click with people, at least in nineteen ninety-five.

• 3:22Jack Altman?

  Yep.

• 3:22Speaker 01

  Or, sorry, call it ninety-eight, something like that. It was actually shocking where if you kind of did it that way, at least in that time, today that wouldn't work, but back then it worked. So anyways, I really grew up in the early days of the internet. I started building websites. I'd build a lot of prank websites and just gained intuition for how information spreads, what would go viral, all of this. And I basically followed information warfare from an early age. And then I actually worked in the US government, doing some of that work. But I was basically quiet online.

• 3:56Jack Altman?

  That's what I was gonna say. So you figured this out when you were like twelve or thirteen?

• 3:59Speaker 01

  Yeah.

• 3:59Jack Altman?

  And then, you know, twenty years go by, well, you just know this and you're probably learning more. Then you started exercising it.

• 4:05Speaker 01

  Well, I did some things anonymously, that some very-

• 4:09Jack Altman?

  You wanted to be anon accounts?

• 4:10Speaker 01

  I was running some anon accounts.

• 4:12Jack Altman?

  I bet, some.

• 4:12Speaker 01

  And I did some very high-impact stuff. And so I was still practicing a little. It was, it was just something like that I understood but was not taking that seriously.

• 4:20Jack Altman?

  Why didn't you do it? Do you want to and you were held back? Or were you just like not interested in, in doing it?

• 4:26Speaker 01

  It's a great question. I, in some ways, I was being held back and not by any one employer, not by that, but it's, I mean, candidly, one thing is- Before you're 18 and after, the rules are very different. It's ill-advised to take risk with some of these things.

• 4:44Jack Altman?

  Well, I mean, I think we all kind of hold back a little bit. You know, like, speaking for myself, like, you know, I wish I could be a little bit more fearless online than I am. I think a lot of people are. And then I think, you know, people see what you do. And there's a, you know, there's like a sort of a jealousy admiration thing of like, I wish I could kind of do that. And so I think most of us feel, whether it's from our employer, our friends, or, you know, we're just afraid of people. I think most people, I think the default is people feel held back from, from going all the way open.

• 5:11Speaker 01

  Yeah, look, I, I felt that way for a while. And when October 7th happened, it was a moment in my life where, for a variety of reasons, I felt like I have to speak. And there, there's a lot to that. One of the things is I had followed basically every conflict in Israel in my lifetime, you know, and in the region. And had learned some of the information warfare tactics from prior flare ups. So that was one thing is I felt like I understood what tactics were going to be used in the future. And so therefore had something to offer the conversation.

• 5:50Speaker 01

  Another was, I was just, to be very blunt, like, I was at a point in my life where I had sold a company for a billion dollars. And I didn't obviously make a billion dollars, but I had made enough money to where if I got fired and, you know, I, I wasn't going to starve to death. And that's a very lucky, privileged position.

• 6:07Jack Altman?

  But you were unafraid.

• 6:08Speaker 01

  I was unafraid. Like, I, you know, it's, you get to a point where it's okay if you, you know, get fired. And so I was very lucky to be in that point. So it's like, I, I felt like I had a lot of context and stuff to say. I was at a point in my life where I was willing to face any consequences. As crazy as it sounds, like, even death, like, I-

• 6:26Jack Altman?

  Really?

• 6:27Speaker 01

  Really.

• 6:27Jack Altman?

  You actually felt if I get killed, that's okay?

• 6:29Speaker 01

  Yeah.

• 6:30Jack Altman?

  Wow. How, why? How did you get to that? Because that's such an uncommon place to, to get to.

• 6:34Speaker 01

  When I embarked on this endeavor, and I've quieted down on the Israel front some in the last, you know, six months. In part, and I'll get to death in one second, but just one basic philosophy I have with information warfare is basically the first two weeks are by far the most important. There's, there's basically three phase transitions, the first two weeks, then the next six weeks, so first two months, and then basically everything after. And that first phase, you have 90 plus percent of the world's attention, almost everyone is, you know, reading the news, trying to understand what's happening. Then the next six weeks, probably 80% of people drop off, other than the people that have vested interests, like people that are Palestinian or Jewish or live in the region or whatever,

• 7:19Speaker 01

  they're still going to be paying close attention. But a lot of like random people that work in, you know, Fortune 500 company, 80%

• 7:26Jack Altman?

  They're on to the next thing.

• 7:27Speaker 01

  80% are on to the next thing. But some still pay attention, especially a lot of students still pay attention for those next six weeks. And then you get a big drop off and you're basically left from there, just with the, either the people that have a vested interest in the conflict, or people that are students to where it's like their job to be learning right now, or people that have unlimited free time, or who in those first two months became obsessed with this conflict, to where now it's part of their identity. And so my philosophy is like, you want to put, I put 80% of my time into those first two weeks and then, you know, a lot of time in the, the next six weeks.

• 8:01Jack Altman?

  That's on any topic.

• 8:02Speaker 01

  On, on any topic. This is like a universal truth of information warfare.

• 8:07Jack Altman?

  Do you need to be a prepared mind on the subject for that to work?

• 8:10Speaker 01

  A hundred percent. Like you have to be willing, you have to basically already know what you're going to say the second that the thing happens, because you can't get up to speed fast enough, especially if you're on the weaker side, like the side with fewer people, all of that, because if you get a single talking point wrong, you're going to get piled on and basically lose your credibility very early on. If you can't anticipate what's coming next, then you'll also get kind of embarrassed. And if you also, if you don't already know what's interesting to say, or what's important context, and it won't get attention, especially when you're on the weaker side. And look, the reality of this one is, you know, there's a hundred times more Muslims than there are Jews.

• 8:50Speaker 01

  And, you know, obviously not, Muslims are not a unit point of view, but vast majority of them side with Palestinians and it's, it creates like a giant asymmetry in terms of the support on this issue and the amplification of information. On the, literally thinking through, like I'm willing to die on this topic. There are many people that have been killed by Islamic radicals like in the last few decades and you know you have, there's a certain line, like I'm not even going to say it, but if you criticize a certain person, you're almost certainly going to get killed. And you have things like the Charlie Hebdo cartoon in France or you know, there's like,

• 9:35Speaker 01

  and that's, that's a line I would never ever go to and I, I don't think is, like, I wouldn't feel right going there.

• 9:41Jack Altman?

  Yeah.

• 9:42Speaker 01

  But when you say things like, there were certain things I was willing to say that were a line below that did lead to lots of death threats. Like I've, I've gotten many dozens of like credible death threats in the last 18 months. And like the, the line that I felt was very important, or I think the two lines that I was willing to go up to or a little over are one, like, and I'll say it here, but like, if you mention children, like you get, like it's just such a sensitive topic and the reality of this conflict is that like child soldiers are loo, are used, like the UN is

• 10:24Speaker 01

  not on the side of Israel, but the UN, the UN's own data says that Hamas has used child soldiers as young as 11 years old for suicide bombings and the official recruitment age of Hamas, according to the UN, at least before this conflict, because they're now starting to scrub their data from the past, but before October 7th, the official, according to the UN, the official recruitment age for Hamas was 15.

• 10:44Jack Altman?

  Wow.

• 10:45Speaker 01

  I think it's important to be willing to say those things so people have context that when they read, you know, like a 16 year old was shot, it can be an innocent 16 year old and in that case, it's a, it's an absolute tragedy and we should all be very sad, but it could also be a 16 year old that's like armed or on the front lines and that's just something that has to be thought about differently and like there's a different, it's not always a Western standard that's being applied in some of these conflicts. And I think a lot of people lose sight of that.

• 11:14Jack Altman?

  In some ways, I feel like these issues, maybe to your point, are just so tremendously complicated that for most people in the West, we don't even have the frame to start thinking about these things. And so that's probably part of why people are silent on a lot of these issues is they have a certain feeling, but they, they know that they don't have the prepared mind, they know they're not ready for the next argument. And so a lot of people just kind of, you know, if they kind of feel something, they'll, they'll sort of clam up perhaps and.

• 11:38Speaker 01

  This is one of the most complex topics in the world and. Look, there is this fundamental asymmetry, which is because the pro-Israel side is so outnumbered in the information warfare. And it's not just civilians. Like, I think people, people don't understand how much of a nation-state involvement there is here. And so on the simplest level, there's Al Jazeera. Like, Al Jazeera is, you know, a mouthpiece of Qatari government. They have strong Muslim Brotherhood ties. Al Jazeera is like one, another, like, lesson of information warfare that I've picked up over the last few decades is

• 12:16Speaker 01

  the most sophisticated actors, they do something smart, which is, so take Al Jazeera, Russia today, RT. They're the most accurate source of news you can possibly find on 95% of topics. If they don't care about the topic, it is literally the most accurate source of news you can find. Because that way, they get a lot of credibility and someone will watch it and be like, wow, this is really amazing reporting. Like, it's more nuanced, better than the BBC, better than CNN. But then they leverage that credibility on the 5% that they actually care about, where they want to present misinformation to you. And that, and it's not only Israel. Like, one of the topics for Al Jazeera that's heavily misinformationized is India.

• 13:00Speaker 01

  And so anyways, it's, when you have this lens that they're trying to gain credibility to launder it on the things they care about. Anyways, it, it just changes how you perceive all these things. And so in this information battle, there's population asymmetry, but there's also 55 Muslim-majority countries, probably five of whom have spy services that are literally have for decades been gaining information credibility to try to use against Israel. And so you're going against that, you, you really have to have your facts straight. Because if you get anything wrong, you're gonna get absolutely destroyed.

• 13:38Jack Altman?

  As somebody who used to trust the media, like, when I was younger, I was just like, yeah, it was, you know, it's the media. And I, you know, now I trust it very little. I think that's like, you know, common is, it's not that I think everything's wrong, but it's this 95-5 thing. It's like, I don't know which thing I don't trust. And then, once that happens, it's very hard. But so then, we're in this kind of like fog-of-worry moment where... You know, we don't have these media outlets that we fully trust. You've got this like citizen journalist thing, which I think is good.

• 14:04Speaker 01

  Also, it's good, but it's also flawed.

• 14:05Jack Altman?

  But you don't know. Yeah, exactly. You don't exactly know who to trust there. And, you know, people have the same kind of flaws. And somebody who's very trustworthy on one topic might be completely untrustworthy on another and all this stuff. And so it does feel to me like we're in a moment in time where truth is hard to come by. I'm hoping at least that this is like a transitory moment and there's some resolution here. But I'm curious your read on the situation and like, where does this evolve into? Cause it feels in flux or something.

• 14:31Speaker 01

  I couldn't agree more. I think we're at basically a low point in the truth in our lifetimes. And hopefully we come out the other side in a stronger place. But I, I think there's, there's like at least two really important factors here, if not three. And just to calm myself, I think it's important to know what you're dealing with. One is I think that we basically have had a phase transition in Western media in the West that I think really started in the late 90s. And candidly, I think Fox News like defected in prisoner's dilemma. And they realized that they can start putting out, you know, highly editorialized.

• 15:12Jack Altman?

  Took a way to put it about.

• 15:13Speaker 01

  It was literally prisoner's dilemma. And I think until like through the early 90s, I think both sides were for the most part.

• 15:20Jack Altman?

  Yeah.

• 15:20Speaker 01

  You know, trying to do their best. But Fox News defected, in my opinion, they were one of the first. Once they defected, CNN defected and then everyone defected. And that was happening at a similar time that, you know, before social media, but then a decade later, social media came. And then that changed the incentives where.

• 15:37Jack Altman?

  It's not worth it. You should go for the headline.

• 15:39Speaker 01

  You gotta go for the headline. So that created a second incentive, which, you know, just in this negative feedback loop, we defected in prisoner's dilemma. And then, once we were already out in the lower quadrant, we were incentivized to basically put out fake news and, you know, tell stories very quickly of this. So this is like one big trend. The second thing that I think not enough people really understand is just how much nation, nation state involvement and. Like, intelligence operations are involved in the misinformation on all sides, including the US, massively.

• 16:12Jack Altman?

  You're saying like, the US is influencing like, the media outlets?

• 16:15Speaker 01

  Everywhere. Everywhere. And, but so is China, so is Iran, so is Russia. All nation states are doing this and have been doing this for a long time. But I think it's gotten much more extreme recently. And just a couple of points on this. If you go back to 2016 election, there was, there were all these fake news bot farms on Facebook. Attributed to Russia, I think probably Russia. These tactics, like, people don't ever stop doing what they were doing. They just get better at hiding it. They get more sophisticated. And they were, Russia was not sophisticated enough at the fake news in 2016 to where we were actually able to catch them as relatively obvious as like, an American citizen. But they got more and more sophisticated over time. And now it's at the point that you can't even tell what's happening. And it's not just Russia, it's basically everyone.

• 16:59Speaker 01

  But, I mean, the US has been doing this forever as well. Like, even during the Cold War, you know, we would start Radio Free Europe and start, you know, radio stations to put out pro-democracy, you know, content on, on the airwaves, which my interpretation of is that's great, but everyone does this. Living in America, greatest country in the world. I am a maximum pro-America patriot.

• 17:25Speaker 01

  But freedom of speech is kind of a root vulnerability for America in that our adversaries get to use freedom of speech as well. And we don't get to use that. We don't get to go into China or Russia and, you know, say whatever we want. Our news platforms, everything gets shut down there, but they get to use it here. And so we're in this maelstrom right now of the news defected in the 90s and fully deteriorated. Social platforms changed the incentives, you know, to go more for clickbait, have very fast responses. And our nation-state adversaries got more sophisticated. And especially in an era of social media and all that, it was easier to, there's less of a check.

• 18:07Speaker 01

  Like, New York Times in the 60s, 70s, 80s, they knew that Russia was trying to infiltrate their newsrooms. And so they were actively monitoring for it. So just like, all those checks went off the rails. And what we're left with right now is just an extreme... Soup of lies and fake news and misincentives. And I think the best thing that anyone could do is just really like assume that everything you're consuming is is wrong or a lie. And I do think there's some optimism that we can improve these things over the next few years. Like, I think we're close to rock bottom right now, but people at least have to have this awareness.

• 18:43Jack Altman?

  One thread I'm curious to pull on there is when you think about, you know, decades ago and what the US was like in the world then and us sort of, you know, maybe slightly paternalistically or very paternalistically, sort of like trying to, you know, push democracy and Western ideals through the world. But we were like, sort of like a hegemonic power at the time. And now it's a little bit different. And so now you sort of see, without needing to go into a specific topic, but, you know, we could take any of the conflicts around the world and you could ask the question, should the US just look out for its own interests right now? Or should we go like fight somebody else's battle and like push our interests even at like a short term cost to us? That's kind of how, on some level, you know, when I think about, you know, Russia, Ukraine,

• 19:24Jack Altman?

  when I think about like all these dynamics, a lot of what's at stake here is US sort of pushing for its own ideals in the world, where in the 50s or 60s, I would have been like, of course, the US would do that. And now it's like less clear when there's more in the balance. And so what's like the optimal strategy there? So I guess I'll just maybe quickly, your read on that dynamic and is that the right read?

• 19:45Speaker 01

  Such a good question. And obviously a big and tough question. I have to call out that I'm coming from an extremely strong pro-America perspective. I love America. I think it's the greatest country in the world. But every country has flaws and I think we have to be realistic about where we are today. And, you know, next point, do you ever play poker?

• 20:08Jack Altman?

  Yeah.

• 20:09Speaker 01

  When you play poker, you have to adapt your strategy based on your chip size. Like, when you're the big stack and it's like, it's only two people left at the table and you have 100x the chips of the other guy, you should just make them go all in every hand, basically, because

• 20:24Jack Altman?

  Yeah.

• 20:24Speaker 01

  the probability's on your side and you'll almost certainly beat them.

• 20:28Jack Altman?

  Yep.

• 20:28Speaker 01

  Whereas You know, when you're

• 20:31Jack Altman?

  Small, you gotta pick your spot.

• 20:32Speaker 01

  When you're small, you gotta pick your spot. Or when you, you know, when there's 10 people at the table and everyone's relatively similar chip size. You just, you have to adapt your strategy based on the chip size people have. And, you know, you use the word hegemonic, like, America 20 years ago, 30 years ago, we just had such a big chip stack that we were able to play a very different game. Or if you go to the Cold War after World War II, like, after World War II, Europe had been pretty decimated. It was, it was really like a bipolar world at the time. So the strategy when it's US, Russia, and both are relative, or US, Soviet Union, like, use a different strategy there than where we're in right now, which is it's a multipolar world.

• 21:13Speaker 01

  And America has sadly eroded our chip stack over the last 20 years through many things, through Iraq War, through sending our debt load to 35 trillion, through outsourcing manufacturing to China, specifically. Europe, in my opinion, being in a relatively weaker position than they were in 20 years ago. And as our top ally, she's like, we have to adapt to where the world is right now. And sadly, I don't think America is strong enough right now to fight every battle. So we have to pick our battles, we have to pick our spots, like, to use that poker analogy.

• 21:52Jack Altman?

  So do you think the right, like, 30-year strategy is to, like, hunker down, build the chip stack back, and then go back to try, you know, aspirationally getting back to that kind of place?

• 22:02Speaker 01

  The right strategy for the next 30 years is a lot more hunkering down than it was the last 30 years. I think we've been, made a big mistake of being too loose with our chips the last 30 years. It's not, I don't think the strategy is to go all the way. Like, I think it's strongly in our interest to still have, like, choose some strategic spots where we exert a lot of leverage around the world. So it's some, you know, it's, but it is to pull back some. But I don't think we should ever go back to that, like, as hegemonic as we were.

• 22:32Jack Altman?

  Every battle's our battle, kind of thing.

• 22:34Speaker 01

  Every battle's our battle. I think that's the wrong strategy, and I think it cost us a lot. If nothing else, I think that that approach didn't properly account for the second order effects. For example, Iraq War, first order effects are, you know,

• 22:51Speaker 01

  There's a lot of first order effects, but you know, ran up our deficit, depleted some of our arsenal. But some of the second order effects is it just create a lot of resentment for America in the world, all over the place. And that weakening of soft power has all sorts of ramifications around access to resources, around, you know, like Europeans voting, like them having resentment that they send troops to support us in foreign wars and, you know, and not voting with us in UN. There's just all these things and I don't think we've done a very good job of keeping track of the second order effects. And so, look, I do think we need to have much more of an inward focus the next two decades, three decades than we've had before.

• 23:34Jack Altman?

  Yeah, I guess it's just tricky because as you unwind that poker position, your opponents at the table start to see that you're not going to push and then that changes their behavior too.

• 23:44Speaker 01

  Hundred percent.

• 23:45Jack Altman?

  They see that if you're not gonna, you know, if not every battle is your battle, well, like maybe this battle is not going to be their battle either. And I'm gonna go, I'm gonna go maybe do something over here.

• 23:51Speaker 01

  Yep.

• 23:52Jack Altman?

  So.

• 23:52Speaker 01

  But an expert poker player would, you know, it's like, we played a couple of hands, we lost a couple of hands. Maybe this optimal strategy to play the hands, we got unlucky or whatever. Now that everyone can see the chip stack, like it's, it's visible, you know, it's a, and so I think, I think it's, everyone can see that it's rational. But when you play poker, you have to bluff sometimes, like you can't just only, the optimal strategy is to still bluff.

• 24:16Jack Altman?

  Right.

• 24:17Speaker 01

  You can't only play perfectly rational because then.

• 24:19Jack Altman?

  Yes, you still have to surprise your opponent.

• 24:21Speaker 01

  Yeah, you still have to surprise your opponent. And so like the next few decades, I think we should still be doing some very surprising things.

• 24:27Jack Altman?

  Let's talk about US politics a little bit and sort of what sort of, I guess specifically the switch that tech has gone through. And I actually want to draw a parallel between, you know, from the tech side, like inside companies, you know, what Brian Armstrong at Coinbase did, where he was like, I can't remember exactly what, you know, when he said this, but you know, at one point he was like.

• 24:51Speaker 01

  It was roughly May 2020.

• 24:54Jack Altman?

  Yeah.

• 24:55Speaker 01

  And I know because I had been with him like a week or two before.

• 24:58Jack Altman?

  Yeah.

• 24:58Speaker 01

  He's such a legend and proud of him.

• 25:00Jack Altman?

  And when he did that. Which now, you know, be like, you know, our, we're focusing on our customers and our products. That's a very bland thing to say today. At the moment, people were pretty up in arms.

• 25:10Speaker 01

  Yeah.

• 25:10Jack Altman?

  And like, so that transition happened where, you know, he went out on what seemed like a limb. But now it's like, of course he was right and like, everybody remembers that. At the same time, tech sort of politically went through this big transition where Trump in 2016 and 20 was like, you know, it was like a pretty heretical thing, like people were, you know,

• 25:27Speaker 01

  For sure.

• 25:28Jack Altman?

  very quiet about if they were supporting him and most weren't.

• 25:31Speaker 01

  I was not, for the record.

• 25:33Jack Altman?

  Yeah, and, and now it's, you know, it's, it is definitely not heretical. And it's also much more mixed in terms of the way people are falling politically. So I guess those two things seem to have something in common, of course. But like, what is that, what is the underlying thing that's happened so that tech, I think, has like, swung as sharply as it has in this sort of like, deeper way than either just like how it's voting or how it's behaving at companies?

• 25:54Speaker 01

  I, I just need to say one thing about my own personal journey that then all tied into the broader tech journey. But, you know, I came on and in the beginning of this, I'm saying how I'm some misinformation expert and information warfare expert. And, and I honestly think I am, and I have a pretty long track record of public and non-public stuff there. But I got fully manipulated in 2016. To, to be very candid, like where it came from is I was too trusting of the US intelligence community. And I had worked in and with the US IC. And I think there's many unbelievably great people, some of the greatest heroes in America and the world are in that community.

• 26:37Speaker 01

  But I was, I was raised, like a lot of people in my family were in the military and I was just like extremely trusting of that community. And my root vulnerability in 2016 and 2016 to 2020 was I deeply trusted that community. And so things like, you know, when people in the IC said that Trump has ties to Russia in 2016, like that, for me, worst possible scenario would be we'd have a Manchurian candidate president that's owned by Russia and somehow skates through. And then in 2020, I, I wrote about this a bunch, but I still didn't vote for Trump there, even though I had really. Like just policies in 20, his first term, right two weeks before the election,

• 27:20Speaker 01

  51 intel officials, five former CIA directors came out and, you know, said that the Hunter Biden laptop was Russian disinformation and that sowed enough doubt in my mind that, wow, maybe if Russia wants this guy to win, then like I want whoever Russia doesn't want to win, to win. And that really worked on me. I think everyone had different vulnerabilities, different things that they, you know, data source that they waited. But for me, two things coincided, which were, one, I had, I learned that I had just been deeply manipulated and that was infuriating to me. And the second thing was Silicon Valley, starting around 2016 or so,

• 28:06Speaker 01

  the Trump administration, and I think that became such a, so much animosity and people got more political and more vocal against Trump. It coincided with like the DEI movement, James Demore at Google, Me Too movement, cancel culture. I think a lot of people in tech simultaneously got so frustrated by like cancel culture in the valley at the same time where people were realizing that they'd been manipulated for a long time. And those two things came together and it was just like, fuck it, I'm pissed. Like, you know, I'm gonna start speaking my mind. And once some people started to speak up,

• 28:48Speaker 01

  it's just like every time one person says something, it gets easier for the next person. The next person snowballs and that is something like from, in an information theory perspective, you can codify. And that was something that was, I was actually going through my, my mind was like that you can trigger an information cascade with like small, small change in bits.

• 29:07Jack Altman?

  Yeah, it goes back to sort of the, the prisoner's dilemma thing where once you see other behaviors like that, it just gets much, much safer. I also really like the root vulnerability concept. I think that is like a, I haven't heard it quite like that, but I think that's something that like all positions have that and understanding your own weakness and where you can get trapped. Is probably really essential. As tech's politics have kind of flipped from the left to the right. What's interesting is I think we like historically weren't that deeply embedded in the government. And and now we actually are in like what looks like a much more obvious way to me. And you see like a bunch of players inside of tech having much more influence with the government. The government seems to care about tech in a way that it never did. People get invited to the White House. They're like, you know, it seems like they've got a voice in all of these places.

• 29:51Speaker 01

  It's ironic that this happened with Republicans, not Democrats, for what it's.

• 29:55Jack Altman?

  It's crazy. And it seems like that was like a real fumble from the Democrats. And it seems like they like had that at their disposal this whole time. And but, you know, here we are. And one of the things I'm wondering about is will will this drastically change the types of companies that become important? And so I'm thinking about the types of companies that, you know, maybe maybe this got most like accurately memetically captured by like Andreessen's, you know, American Dynamism Fund. You know, there's all these companies that require the government to do government scale things. And you see this with Anduril and SpaceX and OpenAI and like many others of, you know, what are kind of like the the biggest, most important companies at the moment. You know, coincidentally have these big government relationships.

• 30:38Jack Altman?

  And so I'm curious, will this will this sort of tech government hybrid? Will this change companies? Or will this just make it a little easier to navigate? Like, what's the impact for tech here?

• 30:47Speaker 01

  There's a lot of directions to take this. One initial quick thing. In some sense, it's challenging and risky to have tech be closer to Washington. You know, like whenever you take a side, you're more at risk if something goes wrong. The conflicts of interest are more acute. And so I I hope that like I I think that we should have a deeper relationship between tech and Washington and Washington should be funding more ambitious tech projects. And I think a lot of times, like the government investments into tech or loans, whatever, have been, I think, treated unfairly.

• 31:28Speaker 01

  They're seen as a conflict of interest, whereas oftentimes these programs were, you know. There's a broad agency announcement and a lot of people bid on it and a tech company happened to win it, or the loan was given to 10 companies, nine were incumbents, one is a tech company, but the media focuses on the tech company. So, look, I think we should be doing a lot more and I hope we don't jeopardize that. But the even bigger thing to me, and I haven't said this too much publicly, I wrote a manifesto for Sequoia a few years ago, I think it was three years ago, it's a hardware manifesto. I've been obsessed with hardware my entire life, you know, I have a PhD in physics, I'm literally was obsessed with semiconductors as a kid, like completely obsessed, obsessed

• 32:12Speaker 01

  with the chemicals industry, and I was also obsessed with early Silicon Valley. And if you look at Sequoia, Sequoia made almost all of its money the first 25 years on hardware investments, you know, one of the first investors in Apple and Cisco and Linear and many, many other companies, Nvidia, first investor in Nvidia, the last 25 years Sequoia's made almost all of its money in software. And kind of a question I asked myself was, like, is hardware dead? Long live hardware? Or is this kind of a secular trend?

• 32:55Speaker 01

  Secular, you know, in a finance perspective, especially like Wall Street oftentimes means like longer trends than just one economic cycle. And so I wrote this manifesto three years ago. Now, like, it's obvious to everyone, but literally in my manifesto, I had like two stocks, one was Nvidia, one was Tesla. And I really strongly believe we were just in like a secular period where it was all about software and not about hardware. And some of my realizations, there's a bunch of things, but one that I think is not fully appreciated.

• 33:30Speaker 01

  Almost by definition, to like every software revolution is preceded by a hardware revolution. You can't, you can't have some new software platform if you don't have the hardware to run it. And for example, you can't have Uber and DoorDash if you don't have the iPhone. Well, you need to have the App Store and the App Store needs to have the iPhone and the iPhone required 20 years of development with Qualcomm, Broadcom, you know, fiber CapEx, all sorts of Cisco. But there was 20 years of hardware before that. To have, you know, deep learning, you needed to have the GPU, to have the cloud, you needed

• 34:15Speaker 01

  20 plus years of cheap, you know, of CPUs getting really cheap. Like the, kind of the whole point of the cloud is that we got to a point where hardware got cheap enough that you can, you know, put a ton of relatively commodity hardware in one place and operate and you get a, like an economic advantage to, to do it that way. Anyways, you can name any software revolution history and it's preceded by a hardware revolution. Something like VR today, part of why we don't have great VR software is the hardware's not good enough and it's getting better very quickly. And the input to VR hardware, like a lot of it, it's byproduct of what's been happening with the iPhone.

• 34:56Speaker 01

  Like a lot of the, I think, I think sensors in general, one of the most underrated technologies in the world. There's, my estimate is about a trillion dollars in market cap of companies that are basically sensor companies or selling sensors. A lot of the market cap of Honeywell or Raytheon or from sensors, but there's many other companies. Kian's is a hundred billion dollar market cap company. Anyways, like is hardware dead or, or?

• 35:23Speaker 01

  Are we missing something? And I really think we've been missing something. I think that thing is that basically the way Moore's law happened, you know, hardware matured in a bunch of different areas all around the same time, which led to a bunch of software ecosystems all catching on. And now, as you go to, and now a lot of those have run out, like the app store is very few new interesting apps getting created. VR is not quite here because the hardware has to get better. In my opinion, AI is still hardware limited. You see it with the AI data center build outs, but it's not just going to be Nvidia that benefits. There's going to be a bunch of other companies on the hardware level that that benefit. We're seeing the beginning of autonomous vehicles, like just on and on and on. I think we're at the beginning of a new hardware revolution.

• 36:06Speaker 01

  Silicon electronics are starting to become silicon photonics. We've just kind of gotten the first commercial applications of silicon photonics that are actually economically viable. And anyways, I think we're entering a new era where the next 25 years through robotics and AI and space and

• 36:25Speaker 01

  you know, and then some of the later platforms like VR and then brain computer interfaces and medical technology, all these things. I think we're entering like another golden era. And obviously, defense technology to a massive extent. I think we're entering another era where that's going to be like a very money making

• 36:42Jack Altman?

  Yeah.

• 36:42Speaker 01

  opportunity. And like that requires government partnership, or at least it's enhanced. If we want to compete with China.

• 36:49Jack Altman?

  Because it's such big dollars or something else?

• 36:51Speaker 01

  Because it's big dollars, also because a lot like the, look, the biggest driver historically as an early adopter of hardware has been the Defense Department. Like, I don't think that's something that

• 37:03Jack Altman?

  Yeah.

• 37:03Speaker 01

  should be ignored. You know, and I think one of the other biggest trends in the world right now is like literally one of the biggest macro trends is for 25 years, we were outsourcing manufacturing to China. Now we're bringing it back and that re onshoring is just an insane driver also of of like hardware development in in America.

• 37:20Jack Altman?

  So like if you think about this, you know, as it applies to investors, Sequoia did all this, you know, investing in these crazy companies a long time ago. You know, over the last 20 years, software, you know, not to do another Andreessen thing, but software is eating the world. That's obviously what dominates.

• 37:34Speaker 01

  Software, Andreessen, amazing at marketing, obviously.

• 37:38Jack Altman?

  Very good. And, and that was right. And, you know, that's kind of what's played out. And I think, you know, outside of a couple of names, which are incredibly important asterisks, you know, like Anduril and SpaceX and, you know, some, some other companies that are very hard, hard tech problems and companies. I think most investors who invested in, you know, hard tech over the last 15 years, maybe let's say, like just like mostly didn't go well. I don't know what the overall returns is if you, you know, if you, if you include these like outlier companies, I don't know, like maybe actually with the long tail, it's actually very good. Still, but my question is, was it, was it a bad time and now it's a good time? Or is your mental model that hardware companies are even more of a power law than software companies?

• 38:22Jack Altman?

  And so as a result, it is very good to invest in this kind of stuff if you are capable of doing it. But if you're bad at it, you are like more likely to lose your money than than average. You know, like another way to say this would be, I think the sort of prevailing wisdom, which you, you might agree with, you might disagree with, but you know, would be like a smart enough, reasonable, in the mix San Francisco investor.

• 38:41Speaker 01

  Yep.

• 38:41Jack Altman?

  Who runs around making investments in a lot of sort of good, you know, what we would think of as, you know, sort of classic AI software companies right now will probably get a hit. They will probably do fine. But, you know, going and investing in hardware companies, like unless you hit a big one, you're going to like, you might get zeros all around. So like, how, how do you think about, is it about the time or is it about not everybody's equipped to do this type of investing?

• 39:05Speaker 01

  I think all of the things you just said are true. I think it was a bad time to be investing in hardware on average the last 25 years and. With the caveat that I think some of the best, simultaneously, some of the best investments of the last 20 years were hardware companies.

• 39:23Jack Altman?

  Yep.

• 39:23Speaker 01

  SpaceX, Tesla. I'm of the camp that Interl is going to be an absolutely giant company.

• 39:27Jack Altman?

  Me too.

• 39:28Speaker 01

  But I think on a relative basis, I think like the amount of market cap that will have been created retroactively by hardware companies in the last 25 years will be very little compared to what it was for the 25 years before and what I think it will be the next 25 years. I believe it was a bad time. I also think that most VCs were not equipped to invest in hardware. But that's okay. It's like the industry evolved for that because it was a bad, like just bad macro time.

• 39:54Jack Altman?

  Are you saying that VCs were not in that moment? Or do you think even in a good moment for hardware, most VCs are not equipped to invest?

• 40:00Speaker 01

  I think a lot of the VCs that were good the last 25 years are not equipped to invest into a hardware era.

• 40:07Jack Altman?

  It seems like a really different mindset because, you know, to your point, hardware comes first and then the software comes. And so you have to think way differently.

• 40:15Speaker 01

  For sure.

• 40:15Jack Altman?

  Versus when you see these things working now, I can just bet on some application of it.

• 40:20Speaker 01

  Earlier today, I was reading the story of how Kleiner incubated Genentech. And I mean, like, they literally incubated the company. I can't remember the name of the partner that really did the work. But basically, this, this person had been following some of the top bio work out of, you know, in the Bay Area. And there was faculty member, Stanford faculty member, UCSF, where he'd been following their work. They basically approached them to try to commercialize the work. And Kleiner convinced them to start a company. Brooke Byers, my friend Blake Byers' dad, was one of the people that was kind of on this team. But it was three people from Kleiner that, that basically approached them and convinced them to start the company.

• 41:01Speaker 01

  The idea of like, you have a VC that's reading the scientific literature and finds these two professors and thinks they can create a new platform in biotech and then goes and starts a company with them. And then, you know, you build a company for decades. That's just not how most VCs have been doing the job the last few decades. And granted, I think it's still how a lot of people in life science VC have been doing it. But actually, I don't think that's where the biggest hardware opportunities are going to be the next 20 years. And so just to use that as a thought experiment, that's just not how VC has been done the last few decades. But I think there's also something very important you said, which is, look, I do think the power law curve of hardware is steeper. One of my

• 41:45Speaker 01

  Insights around, I think, why? I think one, I think there's a fundamental difference between software companies and hardware companies, many, many, many. But one is with software company, if you have a successful first product, the probability that you come up with an organic second successful product in your company is very low. It's like almost if you do the conditional probability, like it's, it's basically the same probability of being successful with the product from the outside. You don't get many advantages once you have a product. There are some distribution advantages, but you don't get much of an advantage for creating a new product. You can acquire things that already work and roll that in, such as how Facebook acquired Instagram or, you know, Google acquired YouTube.

• 42:29Speaker 01

  But with hardware companies, it's fundamentally different. Like basically every hardware company in history that's had a first successful product will have dozens of subsequent successful products. Like name any hardware company, go on their website, they'll probably have dozens, if not hundreds of products. Go look at, you know, Broadcom, Qualcomm, Cisco, Danaher, Tesla, Nvidia. And for a lot of reasons, one is, one's Apple. Like any hardware company, if you're doing it right, I think sometimes you're not taking much market risk. It should be something where if you build it. People want it. People want it. Yep. But building it is very hard. And the hardest part about building it is oftentimes not designing it. It's, it's like figuring out the supply chain.

• 43:14Speaker 01

  It's, you know, it's, it's figuring out the. Cost at scale. Cost at scale, the capital cycles, all of this. Yeah. Like take Apple, because I think it's a simple example. They have so much leverage over their supply chain now. Right. That after the iPhone, if they want to make the iPad, they have so much leverage and they can go get, you know, production capacity from TSMC or whatever. Apple probably has the best sensor team in the world, especially for MEMS-based sensors, like micro mechanical machines. And like they reuse their sensors across all the different product lines. They use the infrared camera for Face ID in the phone and in the iPad and now in the VR goggles and, you know, and each individual component is a moat in and of itself. Right.

• 44:00Speaker 01

  And so what happens is, I think with these hardware companies, once you're successful, that success just compounds, I think, at an even greater rate on average. It's harder to get success with the first product, but once you do.

• 44:13Jack Altman?

  It leads to a lot more.

• 44:14Speaker 01

  It leads to a lot more, whereas with software companies, the first market you go after is much more important.

• 44:20Jack Altman?

  Yeah, I mean, I think that's mostly right. I mean, you know, what was going through my mind as you said that, as I was starting to think of examples like a Microsoft or a Workday that do become these, you know, we saw what happened with Teams and Slack.

• 44:33Jack Altman?

  So it's not to underestimate that distribution advantage.

• 44:36Speaker 01

  For sure.

• 44:37Jack Altman?

  It's more that the hardware company also has that distribution advantage and now they have this creation advantage.

• 44:41Speaker 01

  They also have a supply chain advantage and a creation advantage and just much bigger moats. But I think the Microsofts of the world, I think they're few and far between compared to hardware companies. Like, I challenge you to find a hardware company that doesn't have dozens, if not hundreds, of successful, organically grown products.

• 45:02Jack Altman?

  And it's just because, once you've already got all that stuff, it's so much easier for you to make the next one.

• 45:07Speaker 01

  For sure, for sure.

• 45:08Jack Altman?

  It's actually amazing that Apple restrained itself to as few products as it did for as long as it did, given that they could have clearly just proliferated, but like everybody else did. And they're just like, we're gonna have five.

• 45:17Speaker 01

  For sure. You have to get to the point where you're really strong before you go start taking on all these other products. But once you're really strong, like with one product, it's gonna compound like crazy.

• 45:27Jack Altman?

  As you were talking about, you know, how a lot of investors operated decades ago and, you know, incubating and Genentech and all these things. There's a part of me that, as I reflect on my own sort of journey here, where, you know, I've been building, you know, a company up until a year ago and now I'm, you know, investing, which I really love doing. If there's an insecurity I have, sometimes I'm like, I was doing the work and now I'm supporting the people doing the work. I don't think that that's like a productive mindset necessarily, but like that, you know, if I'm on a day where I'm like insecure about what I'm doing, that's what the insecurity is. And you also.

• 46:05Speaker 01

  You'll grow out of it.

• 46:06Jack Altman?

  Yeah, hopefully, yeah. I'll just forget that I did it ever and that'd be great. But you built a company and you were very successful and now you've been an investor for a while. Like, talk me through, you know, will I grow out of it? Like, did you have that and how do you think about this? And are there ways to do it where you agree with that statement versus not?

• 46:23Speaker 01

  You'll definitely grow out of it. You know, that said, you may get the itch at some point to start another company. Like, I think they're different phases of life. I'm going to use a few weird analogies. I have a lot of weird analogies. One is with mathematicians. So there's this saying, it's not 100% historically accurate, but that a lot of the best, like almost all of the best mathematical results are from young mathematicians, call it before the age of 30, roughly. And like the Fields Medal, it's for work before the age of, you have to be 40 by the time you get it. So, you know, the work has to be a few years before that. You know, there's this saying that mathematics is a young person's game. There are some counterexamples, like some incredible mathematical work that people did later in life.

• 47:08Speaker 01

  But I think for the most part, it's true.

• 47:10Jack Altman?

  Yeah.

• 47:10Speaker 01

  And as I, like, as I've, as a former kind of mathematical physicist, the reality of life is, like, there are different phases of life. And like, I have two boys, little boys, is the best saying in the world. But it would be very hard for me to do math the way I used to, like with all the responsibilities I have now and having a family and being a parent I want to be.

• 47:36Jack Altman?

  Yep.

• 47:37Speaker 01

  And all this, like, it's basically impossible. When Gregory Perlman solved the, like, the point-correct conjecture, basically spent years living in Russian forests, you know, just, literally just thinking about this one problem in Max's autist way, which I respect a lot, he pushed humanity forward in the process. Or when Andrew Weil solved Fermat's last theorem, like, he, I think it was seven years of work where he was just fully, it's the only thing, waking up, breathing this thing. And I think it's hard to, for those types of problems, I think it's hard to do anything else. You have to put all the concepts into RAM in your head and just keep them there and

• 48:22Jack Altman?

  100%.

• 48:23Speaker 01

  Process. Like, if you shut down the computer and purge the memory, the I/O time is very long and you'll just never make any progress.

• 48:32Jack Altman?

  I don't want to interrupt, but I, um, I'm sure you've read the book A Mathematician's Apology, the G.H. Hardy book, and it, we, it's about, you know, this great mathematician. Reflects back, you know, reflects back.

• 48:41Speaker 01

  And Hardy's the one that basically found remuneration.

• 48:44Jack Altman?

  Yeah, yeah, exactly. And he's, and he's sort of like reflecting later on, you know, I did this work when I was at a certain age to do that work.

• 48:52Speaker 01

  Yeah.

• 48:53Jack Altman?

  And then, you know, how do you grapple with that over time? And I think different people grapple with that differently. I think for some people, there's like a, I think the unhealthy, the grappling I don't want to have.

• 49:02Speaker 01

  Yeah.

• 49:02Jack Altman?

  With, you know, to bring it to where I think you're going to go with metaphor of building a company is the negative grappling would be to sort of have those be the glory days. And, you know, you're always like dreaming you were back in high school on the varsity team. And versus a positive grappling, I imagine would be to be like, that was a beautiful chapter of life. And now how can I productively make that something I pass on and support people in their, you know, being a 25 year old mathematician days.

• 49:25Speaker 01

  Exactly, exactly right. Like I, I think we have to celebrate the different chapters in life. You know, and like to continue the mathematics example, I have a friend, Yu Fei Zhao, who is a legendary, talented, young mathematician at MIT, who he was doing the best work at a young age. He still does incredible work, but he then got really involved in coaching the Putnam team at MIT and basically trained a whole generation of young mathematicians. He basically broke the Putnam at MIT. And like that work of mentoring the next generation and then taking on a lot of students and teaching them how to kind of write their first paper and do real research grade mathematics.

• 50:08Speaker 01

  Like that's just a different skill, but I think that probably has even more of an impact. Like, you know, enabling that whole generation of next people. And then, you know, I think Yu Fei is going to have another chapter in his life coming up, which, another analogy from science, my PhD advisor, John Presko, who's an amazing guy, I haven't seen or talked to John in a while, but he's, I'm sure John's gotten shit for my political views recently, given the state of academia. But John, I still love you. You're an amazing guy. I've learned so much from you. But John had a saying where basically every 10 years, you should kind of switch subfields of physics.

• 50:49Speaker 01

  He started his career doing particle physics, high energy physics. Like had one of the proposals for a dark murder, dark matter particle candidate. And then he moved into in the early 90s, kind of the early.

• 51:06Speaker 01

  Like string theory days, like holography, how does all that work? And then in the late 90s, he was one of the first kind of real theoretical physicists to go into quantum information theory and early quantum computing. And then about 10 years, he went, and I mean, he built like the top quantum information group in the world. And then over the last 10 years, he kind of went back to thinking about what happens inside black holes. And going back early in his career, he had won a few bets against Stephen Hawking, and they were some of the early people that thought about like the black hole information paradox. But he went back to it 30 years later with much deeper tools. I think this is another philosophy is like every, I think that every 10 years to switch what you do a little bit.

• 51:51Speaker 01

  It's very powerful because you then cross pollinate ideas. You you basically cross pollinate relationships. You have wisdom from this area. Also, things just naturally go stale over some period of time.

• 52:05Jack Altman?

  Yeah, you force yourself back to some amount of beginner's mind. I think that's like what I've appreciated is I like got to a place where I was like, I kind of have my ideas about how I should do this as a CEO at this stage and whatever. And you unshackle when you do a new thing and you're like, I have no choice but to go back to thinking like a beginner, which is, it feels healthy.

• 52:22Speaker 01

  Completely agree. I think good articulation, I think that was in a lot of ways like the key point he was making. So you articulated better than I did.

• 52:30Jack Altman?

  So when you think then about the, you know, given sort of this sort of way of doing it in a way that you're, you know, proud of or excited by or, you know, resolves nicely in the sort of fuller context of life. Are there types then of investing that are more in line with what you think is? The word honorable just came to mind. That's not the word I mean exactly, but like that are more fulfilling and meaningful versus types that are more just like, who cares? Even if I'm going to make money on this, it just doesn't, who cares? What am I doing?

• 52:59Speaker 01

  I shouldn't answer this, but I'm going to. As you started in the beginning, I don't want back. Look, I generally get way more fulfillment from hardware companies. I think that at the end of the day, hardware companies are the ones that really move the ball forward on humanity in general, more than software. And that's not exactly, it's not always true. But as a general statement, I think that hardware companies are something that. Like if if one hardware company doesn't happen, the whole category might not happen. Like if Elon didn't push SpaceX, who knows where humanity would be with space today? If he didn't push Tesla, who knows where EVs would be? If Steve Jobs didn't push Apple, like who knows where personal computing would have been?

• 53:42Speaker 01

  And like it would have happened, but maybe five, 10 years more slowly. You know, if there's just so many examples of this where I think that an individual hardware company can really change the timeline in which whole industries happen more than software. I think software is more inevitable. Once the, once the macro ingredients come into place, like I think the software companies are almost inevitable and going back to science, there's this concept in science that like ideas are in the air. Calculus was invented simultaneously by Newton and Leibniz and other people like all the raw ingredients are there. I think with hardware, ideas are, it requires more of like a stroke of genius or the

• 54:23Jack Altman?

  Like great man theory type stuff?

• 54:24Speaker 01

  Yeah, great man theory. It's like Edison and Tesla were like psychos. And if they didn't exist, you know, like it's hard to know if the Wright brothers, like it's hard to know what would have happened with aviation. So I do believe a little bit more in the great man theory with this. And so therefore the places where I've gotten the most fulfillment have been like seeing something with hardware earlier than others and being willing to

• 54:50Jack Altman?

  Yeah, I mean, the other big differences like science and math, you know, you might say eventually must get discovered. Like versus like if it, if it's true and eventually someone's going to find out that it's true. Versus with like, nobody had to make Apple, like Apple didn't have to be like Apple. It could have been anything, you know, somebody decided to make it that way.

• 55:06Speaker 01

  And because Steve did it with such a specific intent, like being like, I just watched an amazing clip yesterday of him talking about Microsoft. And he basically says like,

• 55:22Speaker 01

  They had no spirit. They had, you know, and he respects them. They built a great business, but that they had no design sense, no spirit. And that he viewed Apple as like a cultural movement and that it's, you know, that, for example, if, if he didn't bring in type setting, like it might not have ever happened. We might've had ugly text forever, you know, it just, not only does it take someone to do it, but the person that does it gets to really set the agenda for how that field happens.

• 55:55Jack Altman?

  I saw a clip of him the other day talking about how like, this is like a long time, decades ago, like eighties or nineties or something. He's talking about how like, wouldn't it be amazing if you could ask Aristotle questions and how like, you know?

• 56:07Speaker 01

  Totally.

• 56:08Jack Altman?

  And, you know, maybe that's kind of where AI is going now with stuff. And but like to have that kind of vision and narrative and that's what rallies people to build towards that vision and there, I think that's like a big part of what's required for these is somebody has to just like, hold this North Star for so long to so many people because it's so hard to make this stuff happen. Maybe this, we can end on this question, you know, with that backdrop, you know, and you think about the way that VCs can be operating or should be operating or it's because, you know, what we're talking about right now, like, I'm like, this has me fired up. Like now I'm like, I feel good about being, you know, an investor. Like this is great. But so much of it is so, it can be so, you know, memetic and there's so much herd mentality and there's so much because you're, you know,

• 56:52Jack Altman?

  because you're abstracted from the building unless you're, you know, incubating and building companies yourself. It, you know, seems very easy for people to get caught up in the wrong stuff. And so I guess like, how do you think about like, what VC should be practiced like today?

• 57:06Speaker 01

  Trey Stevens and Marky, I think her last name is Wagner, they wrote this piece a couple of years ago called Choose Good Quests.

• 57:16Jack Altman?

  Yes, I loved that.

• 57:17Speaker 01

  It was amazing. And I thought that was a great articulation of it. I'm not going to knock anyone that wants to create a widget, go create, if that's what gives you joy, go create a widget. But in my opinion, like I get my joy from. Either choosing good quests myself or trying to help other people on good quests. There's probably 20, 30% of the companies I've backed are not there. Like they're kind of more widget companies. And something just to just to call out, I also love people. And like, there are some humans where like, if if I deeply love some founder and they are obsessed with some widget, then sometimes I get excited to give them money to go do that.

• 58:01Jack Altman?

  Also, by the way, widgets sometimes surprise everybody.

• 58:03Speaker 01

  Exactly.

• 58:03Jack Altman?

  You know, the the Y C thing that like, you know, great things often start like a toy. And sometimes it looks like a widget now it grows into something unbelievable. And so widgets aren't always widgets.

• 58:11Speaker 01

  Exactly, exactly. Like the Collison Brothers before Stripe did Octomatic, which I don't even know exactly what it did. It was, I think it was like Substack before Substack and it became Stripe.

• 58:22Jack Altman?

  And potentially even on day one of Stripe, you wouldn't have necessarily had this type of sort of like, like starstruck conversation about what it was they were building. And it evolved into something that turned out to be incredibly important.

• 58:33Speaker 01

  And I'll just say on that, John and Patrick, they're such curious people. They're just, they're like maximally curious, maximum voracious readers. And I understand why they like, I can, I can imagine sitting in an Octomatic pitch from them at 20 years old or whatever, and just seeing their passion for it and be like, okay, these are brilliant young guys that are, I, I don't care about this widget, but they're obsessed with it. So I'll give them money to go do it. And I think there's something very pure in that. And then it kind of not in that company, not that cap table, but that those people and like the kernel of lessons from that

• 59:12Speaker 01

  company became Stripe, which I think is going to revolutionize financial technologies. It's already well on the way towards that. And so I, I, to your point, like, you never know where these things are going to go. And that is some of the investing I do. But I also, I really admire people that choose good quests from the beginning.

• 59:30Jack Altman?

  Sorry, I keep, I have to keep asking.

• 59:32Speaker 01

  No, keep going.

• 59:33Jack Altman?

  Do you think that outlier people are the limiting ingredient to us having more outlier companies?

• 59:39Speaker 01

  I don't think it's the only limiting factor, but I think it's. Definitely one of them. And if you look kind of in any given year in history, like at the number of unicorns or decacorns that are formed, like the, in terms of realized exits, I'm not talking VC fake marks in capital cycles. I'm talking like actual exited companies. It's relatively consistent for a long time. And I think that says something around like at any given moment, there's not that many real big new market opportunities. So I think it says something about that. And I think it also says something.

• 1:00:22Speaker 01

  It either says only purely the number of market opportunities, or it says only something about the number of outlier founders, or some combination of the two. But I think it's both. And I do think we're limited by outlier founders. But I also think we're limited by VCs that are willing to give money to, like that are able to recognize outlier founders that have a good idea and then give them capital. And there's other constraints.

• 1:00:47Jack Altman?

  As you've sort of, you know, working at a place that's obviously, you know, kind of at the top of the game, have you picked up things there specifically about how to identify what that looks like? Because one of the things I, you know, don't have a good answer to is, I mean, I know, I know somebody who's outlier now. Like I know, you know, when I see, you know, the Colson's talk, or you see, you know, these amazing people now, you're like, okay, I know good when I see it now. But that's a very different thing than, you know, they didn't look the same

• 1:01:16Speaker 01

  For sure.

• 1:01:16Jack Altman?

  when they were 20 and all the rest of it. Like, is that, is that, is that kind of taste in people? Is it teachable? Are there things that you learn by watching? Or is there things you could learn by reading or thinking? Like, what is that?

• 1:01:30Speaker 01

  On the first part of the question, I have to say I have learned an unbelievable amount being at Sequoia. Like, really, I have learned a lot being at Sequoia. And that's on all dimensions. It's how to think about markets. It's also how to think about founders, how to find outlier founders. We're pretty obsessive around the language we use for how to talk about founders. And I've also, I've just learned an incredible amount about company building, everything. Like the place, there's 50 years of institutionalized knowledge and an obsessive culture around documenting lessons.

• 1:02:10Jack Altman?

  That language thing is so hard because you'll hear so frequently, people be like, oh, this founder is really spiky.

• 1:02:15Speaker 01

  Yeah.

• 1:02:15Jack Altman?

  Or you'll hear this language that to me comes off as

• 1:02:18Speaker 01

  It's horrible.

• 1:02:19Jack Altman?

  inaccurate.

• 1:02:19Speaker 01

  It's totally inaccurate. And most people are completely uncalibrated.

• 1:02:22Jack Altman?

  It's unhelpful. It doesn't help me be better at assessing next time.

• 1:02:26Speaker 01

  Genuinely, I have learned an unbelievable amount from Sequoia. And you know, there's people like Mike Ritz, Ruloff, Jim Getz, Doug, Alfred, etc. Like these people are all unbelievable reads of people and I've learned a lot. But I also think I've contributed a few things. And one of the things that I contributed that I'll share here is one way that I think about outlier founders is I think about the chess rating scale. And I kind of wrote something internally on this. And here's a thought experiment for you. Have you ever played chess?

• 1:03:01Jack Altman?

  Yeah, I didn't get that far up the elo rating, but I've played chess, yeah.

• 1:03:05Speaker 01

  So in chess, the highest rated players, you know, 2800 plus, like Magnus and others. And like a, still like a pretty good player is even a thousand or whatever. Like and not, but like a thousand rated player will be

• 1:03:18Jack Altman?

  They're not making stupid mistakes.

• 1:03:20Speaker 01

  Yeah, they're not making stupid mistakes and they'll beat someone that doesn't play any chess. If you, here's a thought experiment. If you ask like a thousand rated chess player, you have them watch

• 1:03:34Speaker 01

  They they get to see a game and they don't know who's playing. They just see the moves of like fourteen hundred rated players, eighteen hundred rated players, twenty two hundred rated players, twenty six hundred rated players. They get to see just the moves of each of those games. And you ask them to place on the rating scale, like from one game.

• 1:03:51Jack Altman?

  Yeah.

• 1:03:52Speaker 01

  What is the elo in each of these games? They can't do it. Like, they can't tell the difference of the twenty six hundred versus twenty two hundred.

• 1:04:00Jack Altman?

  I was gonna say, the farther from you it is, the more unable you are to do it.

• 1:04:04Speaker 01

  Yeah, a hundred percent. Yeah, within like one standard deviation or something, you usually can, but beyond that, you can't. Whereas if you do it the other direction, if you ask the twenty six hundred rated player to judge a twenty two hundred rated game, an eighteen hundred game, fourteen hundred rated game, a thousand rated game, they they can watch ten moves and they can basically tell you the elo of those people. And so, one of the things that I I'm like, I'm I obsess over is calibrating on, you know, like if someone says this person is an outlier in AI, are they?

• 1:04:35Jack Altman?

  Are you a one thousand saying that fifteen hundred is an outlier?

• 1:04:38Speaker 01

  Exactly. Are you a one thousand saying a fifteen hundred is an outlier? Or like, what is the rating of the person making the statement? Um, you know, is this Noam Shazer or Ilya Sushkvar or whoever like saying that this person's really good? Or is it like a Stanford undergrad in CS? And a lot of people, they they struggle to understand like the the level of the person giving them the reference. That really fails with tail behavior and tail people.

• 1:05:09Jack Altman?

  I love this analogy, just to push on it, so I better understand it. And I do watch, I do watch chess on YouTube of twenty six hundreds playing. And they make a move and I'm like, that was a dumb move. And I'm like, I know, I just don't understand the move. And so I just, I know, I know that I'm that. I do, I'm terrible at basketball, but I know what an NBA player looks like.

• 1:05:30Speaker 01

  Yeah.

• 1:05:30Jack Altman?

  And I could see an NBA player. So what parts of being a founder are which?

• 1:05:35Speaker 01

  I think the Chess scale only applies to purely intellectual things. I think that a lot of other skills, like say, sales ability. I think that is something that's more like being good at basketball. It's much easier to audit with your own eyes that almost anyone can tell compared to outlier intellect. And I think the outlier intellect, it doesn't always translate. So being really good at chess doesn't mean you're really good at math. I'll give you, I'm gonna, I have to kind of go through this because I think this is important. I'm gonna take off my jacket.

• 1:06:09Jack Altman?

  Yeah, it's a little warm in here, sorry.

• 1:06:10Speaker 01

  No, no, it's great.

• 1:06:11Jack Altman?

  See the lights.

• 1:06:11Speaker 01

  So I'm gonna give you another crazy example of like just how many levels of outlier there are in mathematics. In mathematics, I mean, I think there are like 20 distinct levels, that order of magnitude, beyond just like really good at math in a high school class. At the highest end, you have like best mathematician in decades or century. You know, these are the like Terry Tao level mathematicians. One level below that, that's kind of a distinct level below, is someone that's basically guaranteed to get a Fields Medal. It's like best in a decade. It's someone that does, you know, three or four things that would be worthy of a Fields Medal, and they're basically guaranteed to get it.

• 1:06:53Jack Altman?

  And they're unmistakably different from each other?

• 1:06:54Speaker 01

  They're unmistakably different.

• 1:06:56Jack Altman?

  The Fields Medal person would be like, I know that, I talked to that person, I know I'm not that.

• 1:06:59Speaker 01

  That person in, the like, best in a hundred years, the like, the Gauss or Euler or, you know, there's a small number of these people in history, they could get a Fields Medal in almost any sub-area of math. Like, they can just go and they know more about almost any sub-area than the experts in that field. It's like you have the once in a century, you have once in a decade, then you have the like, you know, the person that easily got a Fields Medal. And then you have the person that kind of got a little lucky to get the Fields Medal. Like, there's maybe, there was like a 25% chance or 50% chance in this political stars.

• 1:07:36Jack Altman?

  That they picked the right subfield for their brain and for the moment in time and whatever.

• 1:07:39Speaker 01

  Yeah, and, and like the political, they wrote the thing and like the political tides aligning in their favor. Their subfield was a little hot at the time or whatever. And then you have another level would be the people that, like... Don't get a Fields Medal, but get tenure at a top five math department at a really young age. You know, like at Harvard, there was this guy, Noam Elke, who was one of the youngest, if not the youngest tenured math professor there.

• 1:08:02Jack Altman?

  Like early twenties kind of situation?

• 1:08:04Speaker 01

  Early twenties, mid twenties. You know, and it's like, this is like another level. Then you have the people that either easily get tenure at a top five department or get tenure, but call it in their early thirties. Or get tenure at like mid twenties at a five to 20 university.

• 1:08:21Jack Altman?

  Does that 23 year old Harvard tenured professor, do they yet know that they are not one of the higher echelons? Or is it, or is it still an open question at the time they're 23?

• 1:08:33Speaker 01

  It's, it's a little bit of an open question, but not much. I think that the best mathematicians in the world, like Terry Tao, can talk to almost any mathematician and basically understand where they are in the, like almost instantly.

• 1:08:45Jack Altman?

  Age adjusted and everything?

• 1:08:46Speaker 01

  Age adjusted, you know, and not, not below, not at the age of like 12.

• 1:08:50Jack Altman?

  Yeah.

• 1:08:51Speaker 01

  Because so much of that is just like, how passionate have you been at, and what was your early exposure? But by the time people start doing like research mathematics, I think that people can tell very quickly.

• 1:09:02Jack Altman?

  It's crazy.

• 1:09:03Speaker 01

  You know, another level below that is like, okay, you just, you get tenure at a top five math department at any age. You know, and then it's like, you get tenure at a top 20 math department. And then it's just, you get a PhD from a top math department easily. You know, and then it's you get a PhD in math from like a top 20 department easily. And then as you just get a PhD in mathematics. And then it's, you know, you studied math in college and you basically were summa cum laude. And then it's like you were, there's, there's still like another five levels. And then it's even the kids.

• 1:09:37Jack Altman?

  And all these levels are still impressive to most of us.

• 1:09:39Speaker 01

  Yeah, they're all, and they're all distinct and like everything I've mentioned, like obviously this is 800 on the math SAT.

• 1:09:45Jack Altman?

  Of course, so it's not a useful metric.

• 1:09:46Speaker 01

  It's not even a useful metric. There's like 15 distinct levels minimum above 800 on the math SAT.

• 1:09:52Jack Altman?

  Right.

• 1:09:53Speaker 01

  That someone at the top can basically look down.

• 1:09:54Jack Altman?

  Tell you about all of them.

• 1:09:55Speaker 01

  And tell you about all of them almost instantly. So look, you have to like, with founders, you have to think about what is the outlier trait that I'm? That is important for this company. You know, like if it's a robotics company, being really good at robotics is important, but being good at chess is irrelevant. You know, if it's a sales oriented company, it doesn't matter how great you are. But kind of knowing what dimension matters and then being able to place where on the scale they are, so you can actually have like a nuance. You can actually underwriting your investment thesis is very important. Very few people do this.

• 1:10:27Jack Altman?

  So if you're just the, you're merely the summa cum laude, you know, or you're merely the, I got my PhD easily. But you know that these hard companies are built by mega outliers. Like, should you play the game even? Like, if you're like, I'm not gonna know Euler when I see him. Like, what's the point of even trying that?

• 1:10:47Speaker 01

  You know, there's many factors that go into building a company. And so my comment is really just around underwriting for, for this type of company. I think, you know, being like, for this AI company foundation model, just how good are the researchers? You know, like, I think that is an important part of underwriting, you know, like an AI research or in the like robotics world model companies. Like, just how good are these researchers? And you wanna back the absolute best because they're gonna track the best, et cetera. But in, you know, a basic SaaS company, it's not that important.

• 1:11:20Jack Altman?

  How does this language show up in like a Sequoia sort of analysis of a company? Like, how do you use this metaphor, which I love? How do you apply this? Is it about, is it about which partner we should be listening to? And like, who's got like, you know, like sort of Bridgewater style? Like, who is the trustworthy voice here? Is it about like, you know, what, what's it about? Like, how do you apply it?

• 1:11:41Speaker 01

  Yeah, we just try to get very specific on what traits matter for this company? Is this founder an outlier in those, like, in those traits that matter? What level of outlier are they? When we're doing the references on them qualifying, what is the rating equivalent?

• 1:12:01Jack Altman?

  Is this an Elo 25 or 15?

• 1:12:02Speaker 01

  Yeah, like, like, who is giving this assessment? Is this a thousand rated chess player giving the rating? Or is it a 2,400 rated chess player? And so it's. But like, you can't just say this is a spiky founder.

• 1:12:15Jack Altman?

  Yeah.

• 1:12:15Speaker 01

  That's a quote. That's not, that will not fly. And we care a lot about the texture of how we describe.

• 1:12:19Jack Altman?

  It's interesting because I think people who are investors, who are sort of more market driven, or, you know, I think this often comes with later stage investors are, I think, much more precise in the way that they evaluate versus people who are more founder driven are often more vibesy. But I don't think it has to be that way.

• 1:12:38Speaker 01

  Yeah.

• 1:12:39Jack Altman?

  Like, it feels like you could get nearly as intentional and specific about the way that you are founder driven even, and that it's just, most people just don't do that work and know even how to talk about it.

• 1:12:50Speaker 01

  I am naturally not very good at language and was never interested in language. And it's one of the things that I've learned from Sequoia. Like, Sequoia is obsessed with language, obsessed with words. Things like, we don't invest in companies, we partner with founders. We don't, you know, do deals, we partner with companies. When we write memos, we don't say "I", we say "we". I think Don Valentine gets a lot of credit for that. He was obsessed with that. And I think Mike Moritz took it to a different level.

• 1:13:22Jack Altman?

  You do speak in metaphor a lot, though, which is something that I think is very necessary if you're going to try to be accurate about founders. Because I think so much of it is having those devices to try to like, take this very amorphous thing and like, put it onto a map that you can do anything with.

• 1:13:35Speaker 01

  I think that way, but I didn't connect it to language before Sequoia. So this is one of the many things that I've learned there.

• 1:13:41Jack Altman?

  Cool. All right. I'm gonna let you go. It's been a long time and it's warm in here. Thank you for doing this. This was really awesome.

• 1:13:46Speaker 01

  Thank you for having me. It's been a blast. Thank you, Jack.