Paper Belt on Fire: How Renegade Investors Sparked a Revolt Against the University (Part 3)

Welcome to Readers, the podcast for the lifelong learner. Join us on our weekly dose of wisdom where we talk about the real-life lessons and applications of books. Enjoy. Welcome back to Readers, everyone. This is the final part of our series on Paper Belt on Fire by Michael Gibson. Last episode, we covered the talent scouting framework, right? We talked about Vitalik and the birth of Ethereum. We talked about the founding of 1517 and the brutal lessons of Sand Hill Road. This episode takes us through chapters 11 to 16 and the coda, the biggest and most ambitious stretch of the book. We get the Austin Russell Luminar story, a teenage laser physicist who built a company that went public at a multi-billion-dollar valuation. We get Michael's obituary for San Francisco. There's a brutal fundraising saga that runs all the way through to the Chinese border, right? The mysterious thread returns, right, as Michael travels all the way to Switzerland to investigate his father's mysterious Swiss bank account. And the book closes with the coda, the vision he calls the Invisible College. Welcome back to the podcast, Michael. It's great to have you back, and I'm really excited to get into this final part here.

Awesome. Well, yeah, amazing. It's been fun going through it.

Yes. And so, you know, without further ado, let's jump right into chapter 11, right? I think this chapter introduces a guy named Austin Russell, a 17-year-old who talked like a, you know, a Southern California surfer, but had been building lasers in a UC Irvine lab, and whose fellowship application kind of mentioned years of advanced research on a device that could, you know, project holograms and detect cancer and all these things. He founded Luminar to build LiDAR for self-driving cars, right? And you guys bet on him pretty hard. $17 million, I believe, in total.

Yeah.

That was the maximum out of the fund, plus dedicated side funds, right? One of the investors actually passed on you guys because he backed a competitor whose founders were, you know, quote, ex-Apple, Stanford, stuff like that, right? The pedigree. Your whole fund was riding on Austin, right? I don't— let me know if that's an overstatement to say, but it seemed like it at the time.

Yeah, I think that's fair.

Yeah, I want to understand the conviction though, right? When you're betting the whole firm on one teenager's hardware against Google and the whole industry, what makes you— what makes you do something like that?

Yeah, it was a unique situation. We met Austin, I think it was in 2012. We hosted a summit every year we would, because it was kind of interesting. The first year, I mentioned this a little bit in the book, is like the first year we had a finalist round for the fellowship. And just that meant, you know, bringing 50 people together, not just the 20 who would win. So it's like there were more of them. And we brought them to the Hyatt Regency in San Francisco up near the Embarcadero. And the excitement when these like 50 people just started hanging out in the lobby was really palpable. And they were just so jazzed because they were lonely people who lived in, you know, places that didn't have tech ecosystems or visionary proclamations or anything. So, you know, it was the first time they met someone who was willing to talk about asteroid mining or life extension. And that was so palpable that we decided, hey, what if we just have an event? We don't— you know, it's not part of the finalist round for, you know, to get the fellowship, which can be very stressful. So we started doing that every year and turned into, you know, a really great event people look forward to. In one year, Austin came, I think it was 2012, and he was just, yeah, this 17-year-old guy talking about how he could use lasers to make holograms or replace Hollywood cameras. And, you know, he was really persistent, persistent guy. You know, he even showed up at our office once to try to meet Peter Thiel. And I, you know, talked to him for an hour and, you know, he tried his best to convince me. And I'm just like, look, man, it doesn't work that way. But yeah, we tracked his progress. He became a fellow. We gave him, you know, the $100K and over 2 years he developed that that laser, the LiDAR system. You know, LiDAR, I should say it was the laser originally. And then, you know, there were these use cases, could have been a camera, and then it could have been used for sensing purposes. And there was a coming wave that really picked up in that time. In the late 2000s, you had a DARPA challenge where Google showed a driverless car could win a race down in Baja. And the effort to create driverless technology really started to pick up at this time. That wave started gathering energy. So Austin, sensing that, decided to build a sensor because he saw what was available on hand. The LiDAR systems at that time in 2013 were very expensive. They looked like Kentucky Fried Chicken buckets. They were so big. Some people might remember those on top of cars. spinning around. And their performance metrics weren't that great either. Their vision was quite limited in range and in its ability to discern certain things or operate in tough circumstances like, you know, the rain. So Austin just saw a real great opportunity there, and he teamed up with one of his mentors to found Luminar. We started 1517 in 2015, so he had a couple of years worth of development there. And we were just excited about him. You know, very charismatic, if kind of goofy and funny guy. But there's something we just love about a garage workspace with, you know, cutting-edge tools and a quirky group of people. And he was down in Irvine. He also lived up in the Bay Area in a group house we know. And so, yeah, we were the, you know, among the, I guess, that pre-seed investment into the company. So we were on the way. And what happened was that wave of the driverless tech started really gathering force over time. And with it, other competitors emerged. They all had founders with prestigious backgrounds or spinouts from other companies. And there was a race to figure out what is going to be the sensor suite operating first for these driverless cars, and then ultimately for other things like drones and robots. How are the robots going to perceive the world? There were 2 main schools of thought. The first and foremost was formulated by Elon Musk with Tesla and their full self-driving program. And Musk, you know, he just saw the cost of LiDAR. You know, it can drain energy from the car because you're— it's a whole system. And it was quite expensive. And so he adamantly refused to use LiDAR famously now at this point.

Yeah.

And insisted on using— he says, Musk says, we have eyes to see. We don't need LiDAR. We can drive with eyes. So he believes that video cameras should be satisfactory, maybe supplemented with some radar. The other school of thought was, okay, you're gonna need cameras, but there are gonna be circumstances probably at night where cameras are not as good as LiDAR. Also, when it comes to range, you know, or, you know, left turns of certain types and so on, it just, it felt like, you know, at that time that LiDAR was going to be a necessary component of the perception stack. If you could get that cost down, the power requirements down, and maintain that, you know, or improve those performance dimensions. And Austin had a plan. He had a team. They started hitting their milestones. You know, our first check was pretty strong. I think at a fund 1, our first check was a $750K check, pretty solid first investment.

Yeah.

But it became clear from like 2015 to call it 2018 that like, you know, they had a clear lead against these other LiDAR companies when it came to being able to, you know, create, you know, hit the performance requirements that the car companies were asking for. So it was wild. You would see in the news these, these companies claiming that they could see something from 200 meters out. But then you learned, okay, that was done in a completely white room off a black surface. And that's nothing like driving on the road or at night. And yet Luminar was doing it and they were developing the interest from these automakers. We did our best to talk to people. Who were knowledgeable, either investors or former employees from other, other, other LiDAR companies. And it was just lining up to be the case that Luminar was going to be, you know, if not the premier, then, you know, one of the top 2 LiDAR component makers. And they just kept hitting every milestone on the way. So yeah, we just kept plowing more money in as they raised more. We just had that much confidence. And it felt like it was a strong arbitrage because, because of what you mentioned. It's like some of these companies just had prestige or pedigree based on coming from some other company. And we just saw that massive advantage in overlooking Luminar. Another thing, Luminar in its first few rounds, they did not raise money from a tier 1 VC. And sometimes that can also create the underdog track where a lot of people won't invest unless they see Sequoia or Kleiner or someone of that stature has invested in the round. So, yeah, we just saw it as a major arbitrage opportunity. It was a gamble in the sense of nothing can be certain. But as more and more evidence came in over time, it just seemed to be the case that they were going to be one of the winners. Fast forward to, okay, 2019, 2020, Now you have Musk, you have Uber, you have Lyft. You know, everyone is saying there are going to be driverless car taxi fleets in just 2 years, right? 18 months. It's crazy if you look at what people were saying back then. And so there was a little bit of mania in the sector. And because Luminar was the lead, they had secured contracts with companies like Volvo, Toyota. They were supplying all the training, even for Tesla. It's funny, is like Tesla would use Luminar to train their systems and then take it off. You know, and sometimes Musk would get angry if he ever saw a Tesla with a Luminar stack on it. But, but yeah, they were in the lead. And so, you know, we, we invested out of the main fund. One of the things we can do to follow on is set up these side vehicles. We did that. And so I think out of the main fund, there might have been close to $2 million. And then, yeah, another $15 million we put into the company.

Yeah.

through side vehicles. And then Luminar, that was an era where this idea of a SPAC, to round out the story.

Absolutely.

So a special purpose acquisition vehicle. There was a real bottleneck in IPOs, companies going public. This is true today where companies are staying private much longer. There are reasons they want to do that, but one of them is just like, it's really hard to go public. There are regulatory compliance issues. There are the challenges of quarterly reporting. So to enable more companies to go public, some people innovated this idea of a SPAC where basically you go public, you know, there's this publicly existing company that acquires the private company and the merger occurs, you know, the company becomes public.

Yeah.

And just based on all that momentum and the mania, made sense for Luminar to raise money in the public markets and they went public. And I try to take people behind the scenes there in the book. So I'll leave it there. It was just an incredible story of us tracking the development of a technology.

Yeah.

The founder had vision. He had all these attributes we look for in great founders, the hyperfluency, they're hardcore, the imaginative, spending and daring involving spending. Yeah. The ability to attract an epic team to work on breakthrough tech. You know, Austin had it all. And yeah, and we were there all the way through. And yeah, so, you know, real quick on our numbers, like we invested, you know, $17 million. And based on that, we returned about $200 million to our investors.

Yeah, which is insane. I would definitely want to get back on that later, especially on that day that the IPO actually happens. Right. But yeah, right now, I think one of the most most interesting parts about just the whole space is how important proximity to essentially creativity is, right?

Yeah.

Obviously, the reason that so many people live in these founder houses or kind of all get together in one place to build and builders backing builders, right? That's such an important thing, especially today. I think obviously when you think about that, a lot of people may think about San Francisco, they may think about Silicon Valley, and We'll definitely get to that a little later, right? Especially considering the obituary you wrote for San Francisco, right? But chapter 13 also takes us to the Chinese border, right?

Mm-hmm.

At this point, you and Danielle are trying to get into Shenzhen to pitch investors, right? And you have this realization, right, as you're walking through the city that Shenzhen, which went from, what, 30,000 people to 13 million in just a few decades, might be the most overlooked innovation story of the century, right? You actually argue here that China recreated something America lost, right? The dynamism of the frontier through special economic zones where vested interests essentially couldn't block experimentation, right? That's a pretty bold claim, especially in the political climate that we live in now.

Yeah.

That an authoritarian state essentially did a better job preserving conditions for innovation than we did, right? But also since you wrote it, China's hit a pretty serious wall, right? The property crisis, youth unemployment, Xi Jinping has centralized power, cracked down on the tech sector, all these things have happened. So do you feel like the thesis still holds or did China just end up demonstrating your own point that essentially the political forces, I guess, protecting the status quo do eventually just catch up to everyone?

I think the question is still very much open. Yeah, I wrote or I visited, I think that was 2018 or thereabouts. You know, for a little more context, Danielle and I were raising our second fund at that point. The first fund is all about storytelling, the promise of the vision, and you get support because people, you know, they find it compelling. Typically, there's some reason why they're investing in you. You have a backstory, some, you know, we had the hypothetical track record with the Thiel Fellowship. And so we raised our first fund. Okay, we invested across 3 years. Now we're raising our second fund. Well, would that, at that point in time, investors want to start to see some data. They want to start to see some outcomes. And in the life of a venture fund, the first 3 years are still early days. I mean, these are green shoot years. Companies are raising maybe Series A, Series B. And so the markups on the financials just aren't there yet or strong enough. And so, yeah, we found ourselves crisscrossing oceans and continents in order to meet potential investors. And then, and sure enough, that brought us all the way to Hong Kong and Shenzhen. Earlier in the book, I mentioned Cardwell's Law, this idea that no nation can remain number one in innovation forever that, you know, for interesting reasons we could discuss is like, yeah, the one of them is like the accumulation of vested interests, people who want to block new entry into any market, stop people from doing new things, overregulate them like that. That's one story I think that saps the growth. You know, we want to talk about the story of birth, growth, flourishing, and then, you know, decline into decay. And I think that is driven by that public, you know, the public economy of, you know, these vested interests and regulations. And so in the past in America, you know, the long history of Manifest Destiny was actually driven by people avoiding this problem. It was like the movement west was a way for people to do new things. One, one old example that's pretty great is Hollywood. Hollywood started because Thomas Edison back east invented film, you know, movie technology, you know, in terms of the cameras and so on. And some people, you know, advanced it and made their own, but it wasn't, you know, different enough to persuade Edison that it was not a patent violation. So Edison, you know, would not let these, these people try to make movies back east. And so they— what'd they do? They went west. They went to Los Angeles where Edison wasn't paying attention and didn't care much for his patents, or he just didn't have the people to notice. And so Hollywood began to flourish as a way to avoid, yeah, that incumbent. And then, you know, similarly with Silicon Valley and other places. So, You know, when I visited China, you know, it dawned on me that the history, you know, China, you know, the communist movement begins in the teens and '20s. And after the Second World War, finally wins the civil war to establish its dominance. And then, you know, what proceeds is just like a horrific couple decades where, you know, people starve to death, people are murdered. Executed, uh, you know, just for having different views. We're just— and this isn't thousands, this is millions. It's just like a terrible piece of history. Um, and Mao finally dies in, in '77, I believe. And, and, you know, the, the Deng and, and the others who come into power, they've had— there was a little spit of land off to the side of China that was still governed by the British. And it had a British administrator in charge who was very much a laissez-faire classical liberal. And so there was a natural experiment you had for about 30, 40 years where you had communism on the mainland and really hardcore capitalism on this tiny spit of land. And the difference in the outcome between the two was so extraordinary That, you know, the after Mao died, these people were like, oh geez, you know, what are we going to do? We we got to learn from this. The other example that learned from Hong Kong was Singapore. So Lee Kuan Yew, a lot of people love Lee Kuan Yew. I do too. But he was he was inspired by this man John Calperwaith, who who governed Hong Kong. And so what what happened there is like, okay, Singapore, Hong Kong, China says, okay. How are we going to transition from awful murderous communism to you know some style? Yeah, what did they call it? Capitalism with Chinese characteristics. Sorry, or socialism. I can't remember. Is it socialism with Chinese characteristics? The idea, I think it was the idea is being is like okay, we can open, we can liberalize some part of the market here, but we're gonna you know still hem it in and. and keep it in check. But what do they do? They try to recreate Hong Kong, not far from Hong Kong, just across the river in Shenzhen. And that story of Shenzhen turning from a tiny fishing village of tens of thousands of people to now a bustling city, GDP growth is just astonishing. And what they did, yeah, they recreated the frontier. I've been a part of an effort. You know, it's gone under different names at different times. Sometimes it's just called competitive governance. Sometimes it's startup cities or charter cities. And the idea has always been, can we do what Deng and the Chinese did? Can we find uninhabited land and, you know, set aside a chunk of it where we could, you know, institute a set of rules, the rules of abundance. And the rest of the country, wherever this is, you know, they could abide by their own rules. And anyone moving into that area could opt in and choose to live according to those rules. And, you know, that's what drives innovation. You know, one of the key elements of innovation is new entry. So government is like any other industry. If there's, if there's a monopoly or a cartel, we're not going to see many new things as we have. And so, you know, me and some other people have been theorizing, like, if we could experiment by having new forms of government, you know, it'd be interesting to see what evolves. And so to visit China and see that it was done as a, you know, evidence proof was truly astonishing. But you're right in the sense of like, okay, I visited China. It's like I felt the presence of their surveillance state. Hong Kong was still free at that point. They had an agreement with Britain that it would remain its own independent state to a great extent for some number of years, I believe 50 years. But there were signs that that independence was eroding due to Xi. He really didn't like that situation. That led to all sorts of human rights violations. There were journalists bookstore owners, people who were disappeared. That was, you know, the words that you, you could be disappeared into the mainland, just kidnapped and, uh, you know, thrown into some prison without trial. Um, so yeah, the, the, the independence of Hong Kong was eroding. And, and by, I think it was 2020, 2021, I guess that, you know, Hong Kong as we know it ceased to exist and was fully subsumed into Into China, and and I think what you put your finger on is right. Is there is a can they? I think Xi is wrestling with trying to control the tiger he that that was unleashed. He has cracked down on entrepreneurs, people like Jack Ma, who seem to represent some kind of threat to to Xi's power. Ma was put under house arrest, and I have to believe as a as a good libertarian. economist that undoubtedly this puts a chill on the ambitions of entrepreneurs in China. You mentioned some other secular trends that are certainly not in China's favor. One of them is just the amount of debt that they've accumulated building out cities and housing that people aren't even living in. Making that worse is their demographic crisis. So the one-child policy created a disaster today where they have a rapidly aging population and not a high replacement rate. So, you know, things— those trends, if you take these trends, the demographics, the debt, and the, you know, the strengthening of the communism, I think it does not bode well for China as a whole in the long run.

Yeah.

But nevertheless, it's like the energy behind their tech sector is still quite strong.

Oh, yeah.

They are no longer the copycat nation. Maybe they started that way, stealing IP, who knows what. But now it's like, is it BYD, I think is the company, electric car company? They're doing exciting things. As I understand it, they're as good as Teslas and maybe cheaper. The biotech sector in China is truly impressive. They've gone from stealing IP to now running clinical trials and, you know, at a rapid rate that, you know, we in the West and in the US are not willing to do. And so a lot of the big blockbuster deals in pharma have come from Chinese companies now. And then you look to something like drones. China, DFJ, is the premier drone maker in the world. people, I talked to engineers and they sort of marvel at the company's ability to make its quadcopter engines or motors and just at the cost that they do. And in warfare, you can see the effect of these drones. There was something like, I think it was like 10,000 drones were dancing in synchrony from one laptop in Shanghai. It was like a record. I forget what it was.

Yes.

But I mean, just imagine, you know, on one laptop, 10,000 drones, imagine You know, in one command, those are sent to Taiwan. So China has very much gained a lot of distance in this race. And I don't think they're behind anymore. In some ways, I think they're— we're running side by side. And it's creating a precarious situation geopolitically. So I think it all— okay, that was a long-winded story, but it all goes back to that 1977 moment.

Yeah.

Yeah, and that's why we're here. Yeah, where we are today.

I want to harp a little bit on that note, like on that Cardwell's Law point, right? Of like, you know, no one nation stays in power or stays doing whatever, you know, they were doing for an extended period of time or beyond a certain point, right? And I think that brings us to chapter 14, right? Um, Unreal City. And that's— this is like your obituary for San Francisco, right? Obviously we talked about China. I want to bring it to what we have always thought of as like the tech hub, the innovation hub, at least in the US, right? Now you lived there for a decade and you write about, you know, the tent encampments, the car break-ins, the poop control in hazmat suits, right? You talk about the city spending over $100,000 per homeless person while also banning anything taller than 40 feet across most of the city. I mean, crazy, crazy stuff. You also declare Silicon Valley dead, right?

Mm-hmm.

Killed essentially by what you call codified nostalgia and greed. Now, here's the thing, right? Obviously you called it dead in 2020 and then—

Yeah.

At least obviously from what it seems where it is now, the opposite almost seemed to happen, right? The AI boom landed in San Fran. The city's had what seems like a real revival narrative. And, you know, people are saying things are coming back to life. I'm wondering what's your take on that city now? Would you say that that deadline's just been pushed a few years or, you know, we, you know, they got lucky with this new thing or would you say this is has flipped that narrative. What's, what's, you know, your opinion on the city that every founder wants to move to today?

Yeah, I guess I was wrong. Yeah, I think, you know, I, the obituary was premature. In 2020, I think the evidence pointed in that direction. All those things you listed, the crime, the humanitarian crisis with homelessness, drugs, The, you know, back to the regulation and zoning, you know, you couldn't build any new housing. So there was a housing crisis and prices were just skyrocketing. It was insane.

Yeah.

Yeah, all the, all the pieces were in place to, you know, call the city just, you know, it was done. And then COVID hit and people started working more remotely. And, and you had, oh man, you had politicians you know, wagging their fingers and treating tech people like garbage. I think there's some famous tweet from— I can't remember what she is, someone in the California legislature. You know, she hated Elon Musk and basically told him to fuck off. And, you know, he just said, noted, you know, it was this kind of hatred of the tech industry that—

Sure.

Was really intensifying. And so, yeah, it just felt like, you know, all the young people we met, fewer and fewer were coming to the Bay. And it felt, you know, my judgment was that it was done. But lo and behold, you know, yeah, no, I even remember. The invention of a whole new technology platform, a whole new level of computing, which is now, you know, greater than a trillion-dollar industry. It took, you know, the creation of a trillion-dollar industry to save that city. And it's not even all the way back. That's the crazy thing.

No.

It's like OpenAI, Anthropic. They're just— and then all the surrounding ecosystem, as you said it, all the young engineers who want to work in AI are moving to the Bay Area today. As I, you know, we're back to seeing the housing crisis develop again because they haven't built anything and now people are pouring back in. The mayor was replaced. They brought in a new one. This guy actually cares about crime. So that all bodes well for the city.

Yeah.

But what I will say is, I will say this is, you know, a dead cat, if you toss it from a building, bounces twice. So, you know, maybe the first bounce, I thought it was dead. It bounces up a little and it may come down again, which is that the state of California is in a perilous situation. They are teetering on the edge. They are. California is accumulating great debts. There's so much waste, fraud, and corruption. And the politicians and other interest groups may still yet kill the golden goose. Number one would be the billionaire wealth tax that is being proposed for referendum. If that passes, that is an insidious law that forces people to try to value how, how much their private holdings are in companies and real estate and and so on, and get taxed on it. What makes it really hard in the tech industry is there are some companies, founders, CEOs who have special shares in companies. Like if you look at Google and Facebook, the way they're set up, Sergey and Larry have shares that no one else has. And these are the voting shares that ensure that they'll forever, as long as they're alive, they'll get to— you know, guide and lead Google. Well, this billionaire tax would count those shares as holding monetary value. They would be forced to sell them. So it's not just about the economics, it's also about control. So that's why these— something like $1 trillion has fled California because this law might pass. So like I said, it's like, okay, wow. On the one hand, you have the potential to create artificial general intelligence usher in an age of abundance, the likes of which we can't even imagine. But then we still have corrupt government, wasteful government that may strangle it before it happens or while it happens. I don't know. It's kind of exciting.

Yeah, 100%. I mean, I remember just being from Texas, right? Obviously thinking Austin was going to be, you know, the new San Fran or something like that. Everyone was calling it, you know, Silicon Hills and, uh, this and that. So like, definitely remember all of that. And then the ups and downs, you know, the Austin housing market went through with just people moving in and then a bunch of companies moving out and stuff like that. So it was definitely a wacky time.

I still think Austin is like in place to be 2 or 3 in the rankings of cities. You know, I hope so because I'm there right now. Okay.

Yeah, but I want to switch gears just a little bit here, right?

Sure.

Obviously, we talked a little bit about proximity. We talked a little bit about just these cities and the places where innovation happens. But I want to go a little bit more into chapter 15 here, right? The payoff. Now, this is around the same time, but this is also where you guys started to see some success, where you started to have some big milestones, right? And now, you know, this is essentially the payoff. December 2020, right? An empty, essentially COVID-era Times Square. You bring up Austin Russell again, right? The kid that you guys backed at 17 with no degree, right? And this guy rings the NASDAQ opening bell as Luminar goes public, right? I mean, that's got to be something to see, right? The guy you backed at 17 doing something like this.

Very cool.

Now, you'd been cut from the guest list, so you talked your way in somehow. Which I'd love to hear about. But, you know, in that time, 1517 made its investors over— you mentioned $200 million, right? Yeah, that's right. Which is incredible, right? Austin obviously became the youngest self-made billionaire in the world, and you mailed the Wall Street Journal headline to the investor who had passed on you with a Post-it that read, as promised, right? Which I thought was pretty cool too. Now, obviously, since then, lots has happened, right? Luminar stock collapsed and Austin was pushed out as CEO in, I believe, 2025, and company filed for bankruptcy, all this stuff. But that was all after everything you guys had done, right? And that moment, I'd love you to walk us through that moment. What if—

Right. It's post-book. You know, that book, I can't— I published it and, you know, Luminar was still tracking really well. So in the context of that chapter, real moment of celebration, meaningful financially for our investors, for us personally, Danielle and me, just real incredible to feel vindicated that we placed this huge bet on this company and got to realize some returns for our investors. It also proved our thesis in a sense. It's like, geez, we were a $20 million fund. We're returning a lot of money. It was like, to stay in the venture business, you got to 3x, 4x your fund. Well, we did it. Okay, we're in the top tier doing that. And then it also was like the Thiel Fellowship. I'm on the floor of the NASDAQ and I text Peter Thiel. And it's funny, it's like, for those who have heard the first episode where I talk about going to Peter's house the morning we started the fellowship. Fast forward to Austin Russell and Luminar going public, and I text Peter, and he texts me back, we know what we were doing that morning 10 years ago. So it was a real moment of vindication for us. But since then, as you pointed out, the company struggled. So what happened? Number one is Peter Thiel has a rule. Never bet against Elon. I should have listened.

No.

I think that the race was still very much on. But as I described earlier, those 2 warring camps between those who thought, you know, they could get by with video and those who were counting on, you know, elements like LiDAR contributing. What I didn't foresee were the major advances in GPU architectures and other forms of compute. You know, Musk's bet was that the compute would become so powerful that even if the data was weak or low quality coming into the camera, the compute would be so strong it could figure it out. And it wouldn't need the rich data from the LiDAR. So Musk was right on that trend. The other thing that happened was after COVID, You know, the inflation, when you had the, uh, you know, all these bills passed to infuse money into the COVID economy, help people out who didn't have jobs, uh, cut interest rates at the Fed, it just, it, it washed the economy full of money and inflation started to kick in. Um, it got to the— what, we're at 8, 9% inflation. Suddenly the Fed decides it's got to step in. hike rates and do what it can to try to tame inflation. What I didn't know was these macro movements in the greater ocean of the economy would start to influence how companies were performing. In just simple terms, it just sucked a lot of capital out of the markets. That meant there was less money to put at risk. It meant there were fewer checks written. This made its way all the way down into even what we do at the pre-seed, seed, Series A. You know, just there was less capital out there. So there were some tough years for everyone from, call it, 2022 to 2024, higher interest rate environment. And what that did for public companies, the way Wall Street analysts evaluate stocks, you know, they're always trying to figure out future cash flows and how much they can depend on those future cash flows. interest rates can affect the value assigned to those future cash flows. And for companies that are counting on growth in the future, much deeper in the future, high interest rate environment will decrease the projected value there. And so growth companies really suffer in that environment. And Luminar was one of them.

Yeah.

You saw the automotive industry as a whole. So the driverless, I told you there was a mania, people were going crazy. Well, For whatever reason, whether it was macro or the technology wasn't quite there, a lot of the big programs started to struggle. So GM bought this company Cruise. Eventually, they had to shut it down after Cruise was involved with a crash involving humans. So a lot of these efforts meant that the customers were leaving the market. Production. So you had supply chain issues with COVID that slowed down the production of everything, including cars. And so the rollout of the Volvos that had Luminar on them was delayed. So all these forces were in play and working against the company. There was one major decision that was fatal that they made, is that in that world where the interest rates rose and the stock prices falling. For some reason, the company decided to take its excess cash reserves that they had and spend it on buying back stock to try to maintain the stock price up a little bit. That was foolish. It ended up depleting their coffers, which shortened their runway. Not a good position to be in. And then, you know, we evaluate— it's funny, it's like the big lesson I have outside of like having to keep track of macro events. Is, you know, we believe in the character of the founding team. And I think, you know, Austin, as much as I love him, I think he did get distracted to some extent. There was like a story about him buying or being part of a group to buy Forbes, the magazine and media. You know, to me, this just felt like something not, you know, it was not within his zone of competence and focus. when it came to— he should have been focusing on Luminar. So all these things came together, and I think they didn't help the company out. So that sucks. You know, I don't want to— I want to make a lasting contribution to Silicon Valley. We were part of that story. It pushed the edge forward. The competition was good for all the companies involved. But I am disappointed now that, you know, the success we had no longer exists. You know, thankfully we returned money to our investors and they cashed out or whatever. But, you know, it's still a sad and disappointing story for me that the company did not make it, you know, beyond the 3, 4 years after it went public.

Sure, sure. I mean, I get it. I think this part in your journey reminds me a lot, at least of, you know, Joseph Campbell's hero's journey, right? Where essentially, you know, you kind of have this call to action and, you know, you meet a mentor, you go through, you know, your trials and failure, kind of have this sort of death-rebirth almost part in your journey, right? And then you return changed, right? You kind of reach a new status quo.

Yeah.

And I think chapter 16 returns to that same thread that the book opened on, right, of your father. And this almost seems like that new status quo where you kind of come back to to where it all began, but obviously with a new outlook and, you know, with resources that maybe you didn't have at 25, right?

Sure.

You go to Europe, you hire a former FBI agent and a Swiss lawyer, and, you know, you sit outside this Julius Baer Bank, and what you find is essentially a void, right? A 1974 application to open an account, no evidence that it was actually ever opened. You know, forwarding address to a mysterious, quote, Albert Van Damme, right? And records that appear to have been scrubbed.

Yeah.

Now, your lawyer's best guess seemed that, you know, an intelligence agency closed the account, destroyed the documentation. I'm curious, right? Your whole career has been built on finding people, right? Intelligence, human sources, closing the puzzle. And this seemed like the one search that wasn't closed, right? And this is personal for you. The records are gone. mystery is still there. I'm curious, how do you sit with that, right? Being obviously so good at finding everyone except the one person that you started off wanting to find. And honestly, do you still want that answer, or has the not knowing, you know, almost become a part of who you are?

Man, I love the way the attention you've given to my book is wonderful. Thank you so much. Um, I did want to present this story of growth of who I am from someone who, yeah, felt inadequate and not equipped to find out more about my dad. You know, someone who, who had no idea how to run a business or how to, you know, even think of investing in them to grow into someone who is, you know, now running a, you know, one of the best VC funds in our class, you know, spotting and helping develop talent. You know, and I thought that story of working with Teal and these Teal Fellows, it was— there was a lot I learned there. There was wisdom gained. And I felt more, more myself, you know, in the sense of identity and more at home in that. And I wanted to express that, you know, the— in that chapter. So, so, yeah, I have more means, meaning like I can hire people to help me investigate. my origins, you know, who am I and who was my dad. And now it's like these little pieces of information come out. And, you know, as a kid, I always sort of didn't believe my mom when she told me stories because it's like, this sounds so crazy that, you know, she— he said he was involved in intelligence work and then he's dead. I don't know, you know, maybe my mom's just, you know... had trauma and can't make sense of it. But, you know, there were little clues that would bubble up, and one of them was the existence of a Swiss bank account. So I traveled to Switzerland to find out more about it. I hired a lawyer. She was— is an expert in recovery of assets in Swiss bank accounts. She's Swiss, so she's dealt with a lot of cases involving Jewish families in the Second World War.

Yeah.

And she had never seen anything like this. The idea, you know, yeah, you know, the existence of an account, the piece of evidence I'm referring to. When my dad died, he, I guess he had mentioned to my mom, you know, that he had this account. And, you know, a few days after he died, my mom called the Swiss bank and they, they took the call and sent her a letter. And the letter, you know, said, hey, thank you for your call. You might want to try this forwarding address to this guy, Albert Van Dam. And when I brought this to the Swiss lawyer, she was like, she couldn't believe it. She says, not possible. Like the fact that, you know, Swiss banking was so private in the '70s. You know, they wouldn't even acknowledge the existence of an account. So the fact that these people in this letter on formal letterhead sent it to my mom saying, Hey, we acknowledge the account and here's the forwarding address. It was like, geez, there was an account. This is this is evidence. And so yeah, we were trying to get the bank to tell us more. But you know, proved to be the case that the bank, you know, they told us a little bit. But you know, I went all that way and and didn't come away. You know, it confirmed something. It's like, okay, it doesn't make sense. Like why did my dad have a Swiss bank account? He's an NBC engineer.

Yeah.

What does he— you know, he has reported income. You don't bring taxed income to Europe. So, you know, maybe he was up to something interesting. And, you know, maybe I am someone continually searching for someone in the Odyssey. You know, it's a story of homecoming in the sense that Odysseus has been at the Trojan War for 10 years, and it takes him 10 years to come home. But the beginning of the book really starts off differently. It starts off from the perspective of his son, who's searching for his father. And his son isn't strong enough to ward off the corrupt and unjust suitors who want to take control of the kingdom.

Yeah.

He's not brave enough to yet set off and try to discover more. And the story's really about how he decides to do that. And the first step to becoming a man is sort of searching for your father. And so that was the story I was trying to tell there. You know, people ask me, it's funny, is people want to know, well, yeah, have you found out more since the book? And so I've— there's some more circumstantial things. I did hire another Private investigator in Europe to try to hunt down Albert Van Dam. This man, you know, there are some traces of his existence in properties owned in Amsterdam and in London. But, you know, sad to say, there's no—he's long since dead, and I can't find any, any in his, anyone in his family. The Dutch government. this PI looked into, there were no records, you know, relevant on him. So, so that sadly was a dead end.

Sure.

But, you know, the one, you know, circumstantial thing that's kind of interesting that I'm about to dive into. And so to continue the search is like, again, my mom is, you know, I'm always in conversation with her and learning about the past. And my mom, because I wrote this story and I've looked into it more, she's sat down now and started to write her own version of those events. And so I don't think I mentioned it in the book, but my parents met on the game show Jeopardy. My mom was a contestant. My dad was a cameraman at NBC, engineer.

Yeah.

And my mom, you know, got a question right, but the judges said she was wrong. It was about a song lyric, the song South of the Border. And my dad knew she was right. So after, at the commercial break, he came over, he said, hey, you know, you were right on that. Um, and I'm gonna tell the producers. Uh, so she's like, oh wow, really? And, and so they hit it off. I don't know, maybe flirted.

Yeah.

And he invited her to the commissary, the, the cafeteria at Rockefeller Center where, where Jeopardy was filmed at the time.

Mm-hmm.

So my mom goes to the commissary and she was remembering recently, she said, she said, geez, you know, it dawned on me that there were no windows in the cafeteria. I wonder why that was the case. And so she, she looked it up, she Googled it. And it turned out what I didn't know was that Rockefeller Center and NBC and RCA, this was the center of British intelligence after Germany had invaded Poland and France.

Oh.

So the Brits set up their intelligence hub in Rockefeller Center in, you know, '39, '40. And they work with the Americans. So they were working with FDR and people under him to try to dissuade America from not entering, you know, to get America to enter the war.

Hmm.

And then, you know, for America to set up its own intelligence services. And all of this started at Rockefeller Center where my dad worked. He starts working there in '41, '42. So I'm starting to dive into this history. It's a really interesting piece of World War II history. One of the things that came out of my dad, he served, he was sent to Calcutta in the Second World War.

Okay.

And what's weird is like there weren't— America wasn't fighting in India.

Yeah.

The British, it was a British colony at the time. So there was a strong British presence. And so what I learned through this investigation into the British intelligence that Rockefeller Center, is like they were part of this, like, effort to work with the Americans to run intelligence operations abroad. And one of the places that they did it was in Calcutta. So this is really— I've got to, you know, I'm starting to pick up the research here. And it'll be interesting to see what I can uncover. You know, I, you know, one plausible story is that, you know, my dad got, got picked up into the intelligence community during that time. And, you know, and maybe he had connections to the British as well. And that's what brought him to Europe. I don't know. But yeah, so it's like I— to end your question, like, I am still flipping stones over to see what's underneath them. There aren't many of them left. But every so often, I find something that, that is very suggestive or interesting.

Yeah, wow. Well, you know, if book 2 ever comes out and it's, you know, a mystery or something, uh, let me know. I'm happy to hop on the mic again. Okay. But, you know, for, for this book here, right, uh, the final question here, because I know, you know, we're coming to the end of the time, but, um, the book here closes with the coda, right? And this is almost like the accumulation of everything we've been talking about, not just from a personal aspect but from essentially your worldview your ideas of how you want future education to look, what you feel like future young people's goals should be. And this is essentially the invisible college, right? And you name it after a secret 17th century scientific society. Try saying that 5 times fast. But you lay out unsolved problems across energy, health, computation, and more, right? essentially saying that we should get talented young people attacking these problems now instead of waiting, right? And, you know, you even write, obviously as a joke, right, in this respect, child labor is good, right? Meaning obviously let the young do real work now.

Yeah.

And the goal that you set is an institution that funds and finds young people to produce Nobel-caliber work between the ages of 24 and 36, right? And so kind of 2 questions here, but That's essentially the constructive heart of the book, right? Not just burning the paper belt down, but what you'd build instead. So, a few years later on, right? What does the Invisible College actually look like today? Is it a real working institution yet, or is it mostly still the venture fund with a bigger dream still attached? Is that something you still are looking at, or is that just a promise, you know, you're waiting to see kind of pay off, right?

Yeah.

And second question here, right? The book's title is a promise, right, to light that paper belt on fire. It's been a few years now. Do you feel like that fire actually caught? Is it the revolt, you know, you called for genuinely happening, or did the institutions, you know, that you went after simply just absorb the critique, put her on a panel, and kind of carry on more or less exactly as before?

Yeah, the great theme of the book is, you know, maybe if I steal from— there's an old soccer book, I forget when it was published, called Inverting the Pyramid. And this was about soccer tactics. And I wish I could steal this title in a way because it's so thematically rich for me, which is like what we're trying to do is invert the pyramid. There's a hierarchy of prestige. It forms this pyramid that people fight to climb up. And what we want to do is flip it under— upside down by focusing on competence and creativity and insight. But what dawned on me is this also applies to the way most, you know, that our society and schools and higher ed have approached the frontiers of knowledge, which is that they think it's another pyramid that you have to spend all these years paying your dues, accumulating knowledge of what's been done in the past. You know, you spend 10, 12, 15 years. Before you reach the top and you finally get to ask questions about, okay, what, what are the biggest problems in my field? What's unsolved? And maybe inverting the pyramid there would be to say, no, what if we, we instead, when you're starting out, think about, geez, what are the mysteries and riddles of existence that I want to focus on and then start to build my education around that? And when you do that, it could be interesting because maybe it means that, you know, you start working more interdisciplinary in a way, or you're just, you know, you're finding the tools you need rather than, God, wasting year after year accumulating, you know, maybe knowledge that's not even going to help. So that was the great aim there was like, okay, how can I make people aware that there are a lot of unsolved problems out there from education, health, care, diet, mental health, energy creation, you know, diseases, top 10 killers of humans, you know, whatever. It's like, if people were just aware of, you know, what remains unsolved, maybe that would help inspire them to try to do it, you know, try to work on that. Because it's like you enter college and you think all the answers have been solved by my professor who seems like a genius. Well, what if you walked into these departments and you saw, you know, the top 10 unsolved problems in the field? And that also meant that, you know, even the smartest professor in this department hasn't been able to crack that.

Sure.

That's exciting to me. So the Invisible College. Yeah. So we, you know, we're still in the venture stage of this. We don't know how to give out grants for pure research quite yet. So, you know, we do, want to make more and more investments into deep frontier technologies. We've moved away from the name the Invisible College, and it's like I'm still motivated by it in spirit because I love it. But it's like there were like a few other people emerged with that name. So we've, you know, we call one thing, we call the Flux Capacitor now after Back to the Future. I mean, maybe we change that. Maybe it goes back to Invisible College. But point being, it's like a $100K Early to, you know, researchers, people who want to drop out, uh, love meeting, you know, still in that non-credentialed theme. But we'll also find some mad scientists who fit, you know, we're like, okay, maybe we want to support you because you're like so unorthodox.

Yeah.

And you're working on the frontier. So we've been doing that for a few years now. We've got companies working on cures for cancer, cures for dementia, fusion. Quantum computing. It's pretty wild to see what's out there.

That's incredible.

We've also started a teen camp. So we're trying to get teens aware of this. Every year, once a year, we bring out 30 teenagers to a camp in Los Altos. And the whole idea is like, can we expose them to some of these unsolved problems and then have them visit startups and people working on them, again, hoping to inspire them. So the wheels are in motion. I think there's some early signs of success there in terms of people changing their careers and focusing on something. My favorite one right now is there's a hot company out of El Segundo called Rainmaker. They focus on increasing the yield from rain from clouds.

Yeah.

And that company started Because Augustus, the founder, read my book. He had a history of working with water management in Texas. He had thought about how to terraform the West and bring more water. But reading my book really galvanized him and inspired him. So I had a small chapter there on cloud seeding, controlling the weather. And Augustus read it. He was inspired. He reached out to us. We invested $100K and now that, that, you know, business is kicking, kicking butt. You know, Augustus is part of the, the Gundo. He's a big personality. So it's created his own little movement there. And the company has demonstrated that they've increased the yield of rain from clouds using drone technology. So, so the book has inspired people.

Yeah.

Moves me and excites me. So yeah, I'm really happy with that. You know, what the future holds is, you know, based on our success, if we can, you know, maybe there's a way we could start doing grants, you know, no strings, bigger no strings grants for people to do some R&D work. I look at Demis Hassabis. He's the co-founder of DeepMind. He won the Nobel Prize in 2024 for chemistry. So DeepMind created AlphaFold. AlphaFold was able to solve this protein folding problem that, you know, people thought would remain unsolved for, for many, many years to come. And AI was able to tackle it and get it done, which is truly impressive. What interests me is like, Hassabis has a PhD, but it was in neuroscience, not chemistry. And DeepMind was a venture-backed, corporate-backed company. And so what I think in the next 10 years is, yeah, we're going to start to see VC-backed companies doing Nobel Prize-winning work, you know, or at least, you know, work worthy of that, of the greatest achievement honor. And that really excites me about the future. So yeah, how can people reach me? Reach out to us on 1517fund.com. We have a form submission if you have your idea about how to build the future. Would love to hear from you. I'm on X a lot as William Blake. I just have an old handle. The poet I admire, and you can find us there. So yeah, we're still trying to build it out. I think it's an exciting time in education. I think one of the upshots of the AI revolution is that I'm meeting more and more people who are, you know, getting themselves out to that frontier of knowledge.

Sure.

And I think, you know, the AI as a tutor or as a guide is starting to pay off where I'm meeting people who have inverted the pyramid on their own. And they're tackling something in really impressive ways despite, you know, being a teenager.

Any final call to action words for any young people, builders, creatives out there who might be listening to this episode today?

I think, you know, life is an adventure. And let's, you know, let's build the future. It can be so exciting. And, you know, if I can help you, reach out to me.

Awesome. I love it. I love it. And with that, we'll wrap this series up. This book, Paper Belt on Fire, I mean, it's been incredible. It's, you know, part memoir, part manifesto, part detective story, right? And it— I think it asks, you know, on a more serious note, asks a question that I think everyone listening really should sit with, right? Are we actually building the future or are we just defending the past? Michael, thank you again so much for joining us today and for this series. It's been an absolute blast. I've learned a lot and, you know, I've definitely, definitely been inspired.

By far the best podcast I've ever done on my book. Thanks for diving in. Thank you. Of course.

And to everyone listening, whatever your background, whatever degree you do or don't have, you know, the core provocation of this book is that the institutions we've trusted to cultivate human potential may not be doing their job, right? And the people who fix that probably won't wait for permission. If this series made you think a little differently about education, talent, credentials, or even of what you're capable of, right? Pass it along to someone who needs to hear it. Highly, highly recommend, again, buying this book, Paper Belt on Fire. Obviously, we tried to cover as much as we could, but there's so much more wisdom between those pages that, you know, we weren't able to get to. So that's our series on Paper Belt on Fire. Thanks for tuning in to Readers. And until next time, keep on learning, keep on changing, and keep on growing.

Thank you.