Palmer Luckey explains why, after Oculus, he pursued a different approach for his next company: he felt pressure to prove himself and chose a venture where he could leverage his technical strengths. He describes three ideas he considered—national security contracting to fix cost-plus incentives, a nonprofit private-prison operator paid based on reduced recidivism, and petroleum-derived synthetic food products (including paraffin "cheese")—and gives reasons he rejected the latter two.
Chapters
So I decided to start my second company in a totally different way than I started the first at Oculus. It was a hobby and I liked doing it. And I had no expectations of making money. But once you've had a measure of success, at least for me, you get addicted to it and you want to win. Also, just like I said, I was fired from my last job. So I have a chip on my shoulder and I'm bitter and angry about it. And so I have to prove to everyone that I'm better. And if I were to take a job where I would just go do something that was fun but it wasn't particularly successful, then everyone would think that I'm a loser. And I don't want people to think I'm a loser. So for better or for worse, I was kind of forced in my next move. I said, okay, I have to do something that proves that they shouldn't have fired me, that I am smart, and that I'm not a one hit wonder. Because being a one hit wonder would be so depressing. If I had done Oculus and then failed in my next company and then failed again, I would be in a very mentally bad place. But instead, I'm doing pretty good. So I guess the difference here is on my second company, I didn't approach it as like, oh, let's just see what happens. I'll just do what I like doing and maybe it'll be fun. I have a lot of hobbies. There's lots of things that I like doing. I collect erotic anime figurines, but I didn't start an erotic anime figurine dealership because you can't make money doing that. So I said, okay, there's kind of three things I think I can make money doing. And there were three areas I thought about starting a company in. One was working in the national security space. I thought, okay, cost plus contracting is a broken contract structure. It leads to massive cost overruns. Everyone has the wrong incentives. I think that I could start a company that does a lot of these things that companies like Lockheed and Raytheon and Northrop are bad at doing that I'm good at doing, and that I can hire people who are good at doing those things. The other was, I considered starting a non profit private prison company that could out compete all of the publicly traded private prison companies. People may disagree with me. I think private prisons are very bad. I think they lead to terrible outcomes. They're a lobbying machine where all the money that is generated largely goes back into lobbying government officials for Stricter sentences on the people who are the cheapest to incarcerate. So not the terrorists, not the murderers, it's the non violent offenders. It's the victimless crime criminals. Those are the ones that private prisons want to house because they're not going to kill people, they're not going to cause you too much fuss. And that's how you end up with all these mandatory minimum sentencing laws for crimes that don't matter, in my opinion. So I, at first I thought you could just get rid of this by lobbying. Then I realized that's not possible because there's so much money in it. So I said, okay, I'll just start a non profit private prison company and I'll just make a non profit prison company and I'll have a different model. I'll say, hey, I'll incarcerate your people in my private prison. Except I don't get paid anything until they've been out of prison for five years without going back. And if they go back, I don't get paid. It means that I'm taking on the risk and it means my incentives are going to be very aligned with getting people out of prison and, and not having them come back. Whereas current prisons is the opposite. I decided against that because I realized that it was not actually a skill set that I had. I'm a technology guy. And as much as I thought this was going to be a very interesting thing to do and I would like to do it someday on some time scale, the legal issues with doing this state by state are very, very tough. A lot of these prisons are also, they do these multi decade long contracts. And so it's like, oh, I want to do this in California. Well, I have to wait at least seven years for the next opening and then it's like four more years till the next one. It's like, okay, so this is like a 30 year bet before I can do anything. And then the last one was petroleum based food products. I think the only way to solve obesity in America is to allow anybody to eat as much as they want of anything with no self control or changes to their physical activity whatsoever. It has to be the holy grail or we're all just going to keep dying of obesity and related problems. And so if you're a food scientist, you generally make things out of foodstuffs and I think that's a big mistake. If you're a chemical engineer, material engineer, and you want to make something with a certain texture, a certain feel, a certain property, you start with long chain Hydrocarbons, oil. It is the perfect building block for everything. You can build tires, glues, gels, you can build anything out of it. So if you're going to try to make a fake burger that tastes like a fake burger and feels like a real burger, why would you start with plants? You wouldn't build tires out of plants, you wouldn't build gels out of plants, you wouldn't build rubber out of plants. So why would you try to make something that has many of those same properties out of plants? Because plants suck. So if you could make synthetic foods out of petroleum derivatives, you could make foods that have largely the same characteristics as real foods but have zero calories because your body's gonna process them. So I started building paraffin cheese. And paraffin cheese totally works. It has no calories, it tastes mostly like cheese. And I think that you could get it to be better than cheese on some time scale. And because it's actually easier to adjust it and play with it and iterate on it than with cultured dairy products. Anyway, I decided against that because it turns out the FDA completely bans this idea. It's completely illegal. And by the way, another thing about petroleum based food products, you can recycle them when you're done with them. And people don't like that idea either. They don't like the idea of taking what comes out one end and putting it back in the other. So that was why I decided against that. I said, this is going to be too much of a marketing problem. People aren't going to accept this. And also the FDA literally says doing this is crime. I would have to convince them to allow the food industry to pivot to making not food with no calories. And so I decided I was going to work in the national security space because that was an area where I do have a lot of technical talent. I can hire people to work in it. I can make a lot of money and do something successful with it. And if I'm able to actually accomplish my goals there, I'll still be very, very happy with myself. So I rambled for a bit there, but you asked, how did I, you know, how did I decide to start this company? And it was very much a conscious, I have to do something that is going to matter. I have to do something where people say, wow, Palmer did it again. And of those three things that I came up with, then there's a long list of much worse ideas, if you can believe it. But I'm going to get to those someday. I'll solve obesity someday. And I'll save everybody from private prison someday. But I can't do everything at once. One other thing. I'm on a tangent now. Elon Musk is able to run multiple companies at the same time. I cannot. It's not possible. I will never do it.
