From PayPal Intern to Starting 4x Billion-Dollar Companies | Joe Lonsdale Interview

You have now created, by my count, at least $4 billion companies directly, probably more than that. What would you say you are doing different than the average good founder?

So, listen, I have some unfair advantages, right?

Okay, Joe, thanks for doing this, man. And thanks for inviting me into the morning workout, the cold plunge, and everything in between breakfast.

Good to have you here, Sean.

So I want to start with lessons learned. You— one of them that we were talking about this morning when we were doing our workout was making decisions on blended reasons or having like a blended strategy for how you're— we're going to win, we're going to win doing these 5 things and why that sounds like a good idea to the average person, but it's actually a very bad idea. Can you explain that?

Yeah. And I wrote this piece online, like 9 Lessons from Peter Thiel. I sent to all of Palantir. That's been like sent out to my other companies as well. And it's one of my favorite pieces. And that's one of them in the I think it's one of these logic things where usually there's like one reason that dominates everything else. And that's just, that's just the nature of the world is that, is that when something's successful, it's kind of like the power law rule, right? Like in a venture capital, like fund, even there tends to be one thing that's successful that's like bigger than everything else. And that's true inside of companies as well. It's very unusual, extraordinarily unusual for there to be like two similarly equal, like, like, like products or revenue lines or something like that. Especially early on in a company. So usually if you, if you think you have like 2 or 3 reasons for doing something or 5 reasons for doing something, what that means is that you actually haven't figured out—

you have no actual reason.

You have no strong reason yet.

Yeah.

Like, that means you have 5 weak reasons, which is not good. You want to find like, what's like one really strong thing you're driving towards? And that, that's how startups work. And this is— it's a really seductive trick. I mean, first of all, you have to be taking a big risk to even do a startup, it feels like, rather than like, you know, most people— a lot of people like do incubators because they're like, oh, I don't want to do one company, I'm gonna do 10 companies. And like, by the way, that's like much less likely to have a big success because you're focused. And so even within a company, they're like, they're trying to do the same thing. They're trying to be like, well, here's 5 ways I'm going to make money. And like, no, no, no, man. If you really want to do a company, figure out the way you're going to make money. And that tends to be how it works, you know?

And that applies to revenue streams. So 8 revenue streams means you probably don't have one awesome revenue stream.

Exactly.

Growth strategies. If you have 7 things we're going to do for growth means you haven't figured out which one's actually the one that's going to— the one that's going to just compound like crazy.

And it may change. It may change over time. But what's the thing that's working now you're pushing on? Yeah.

And then the other version of that is blended reasons for doing something. I think I read once that Reid Hoffman uses the same philosophy. And he said, he gave the example of, oh, if there's like a trip to China and I'm deciding, should I go to China? It's far away, it's gonna take 2 weeks, and should I do this trip? He's like, and my chief of staff came with like a list of pros and cons.

Yeah, it's like multiple pros.

Multiple pros and then a couple of cons. That's an almost impossible, it's a guaranteed way to make mediocre decisions is to do long blended lists of pros and cons.

If you don't have a key reason to be there, like stick to your work.

Yeah, exactly. That's what he said. He's like, if we don't have one reason that that alone is worth doing, then we should just say no. Is that something you do?

Reid was one of the key, key minds at PayPal, of course, with Peter Thiel and others. So who knows who actually came up with these ideas? It may all be Reid's ideas that I'm recycling. He's a very smart guy.

Well, I say them as if they're mine now. So I think that's the best way to, you know, the highest compliment is to meme an idea and to let it spread. And so Peter's helpful with that. He's— well, what are some of the other things like, do you remember? I mean, even at the beginning, one thing I kind of wonder is you've been around a bunch of special people, Peter Thiel, Elon Musk, all this stuff. Is it clear in early, like in the early days? Like, do you remember the moment where you're like, oh, this person's kind of different? They are that 5 standard deviations.

Yeah.

No intelligence or conviction or whatever.

One of the— I mean, we all try to like set strategies for ourselves and goals and whatnot. And like, I remember in college I thought, wow, this is a really good opportunity at Stanford to reach out to a bunch of successful people and kind of learn from them, see who I see, who I admire, who I want to be like. And, you know, I've met some of the legends of global macro finance who I'm still in touch with. I met a bunch of other big business people and run Fortune 500 companies. And Peter, to me, had by far the most interesting intellect. He was— he was clearly just one of the smartest people I'd ever met. And he was interested in some of the same things I was interested in. He had taken some of the logic farther than I ever had. So, so, so I always learned the most from conversations with him. So that's— that to me was one of the reasons he was most attractive to try to work with and try to build with.

And so before you start multiple other companies, you do Clarium, which is his hedge fund, I guess, is the way—

Global macro fund. Yeah. It's like the most fun part of finance. There's always— there's lots of parts of finance. Finance is like all sorts of areas. Global macro is looking from like the highest possible perspective at everything going on in finance. It's like the bond yields around the world, the flows of money around the world, how equities are being valued. They basically just like just from very top down, like what is happening in the world of finance and how do you map it out and you look at relationships, you understand, you know, of course, like, you know, the Australian currency is going to be really correlated with the price of metals and there's different ways in which they can get way off and you can create a regression trading system if they're way too far off where you can make money based on the reversion. Right. But then you say, oh, normally I would trade this, but actually this is happening because, because China just like, you know, invaded this thing over here. So actually it's not a good time to do it. And it's just, it's just really, really fun map of the world. And we were really interested in like long-dated oil prices, what was happening with oil. We're very interested in how Fannie Mae and Freddie Mac, which are the two big giant housing groups, they'd gotten to be much, much bigger in the US in early 2000s. And they're— they had these giant mortgage-backed security portfolios that are worth trillions of dollars, and they had to hedge these portfolios basically. And I won't go into all the details, it's a little bit esoteric, but based on how they were hedging their portfolios was completely changing the global fixed income market, completely changing the pricing of bonds. We found some really interesting ways to do things there. I actually, my favorite, my favorite story that I'll give you is just to give. So, so we were working at the hedge fund, markets open. It was in San Francisco. We're in 555 California, right? That big building downtown. Like after, after 9/11, I think Peter had a parachute in his room. I always told him he should have parachutes for us too. But anyway, it's like there's one parachute. Okay, that was just a joke, but it's probably— but no, so it's like cool office on the 42nd floor and the market's open at 6:30. So the traders are supposed to be in at 6:30, except the first Friday of every month you had to come in at 5:30. Because the nonfarm payrolls come out still now the first Friday of every month at 8:30 a.m. on the East Coast. And it turns out this is a very important number because it shows you what's going on in job growth in the whole economy, you know, based on the Bureau of Labor Statistics numbers. And what was really cool is Kevin Harrington was our head of research, is like genius, crazy physics, biology, interesting guy. He's, he's ended up being on the National Security Council later, like super interesting, smart guy. And he like had mapped out this thing I'd helped him with. Where we realized that they were adjusting the numbers wrong based on seasonal adjustments. And so we were able to predict whether the number would hit or miss, and this thing would move bond markets like crazy, like, like hundreds of billions of dollars and move around based on this number. And we figured out they're systematically misdoing it. This is totally legal. You're allowed to do this in finance. So we figured, okay, this is a mistake. 75% of the time we can make money trading this and then we can adjust it, make it even better based on where the market was positioned. So the market's going to be surprised and we can kind of tell there's a good chance it might be. We take a big position right, like the night before or whatever, and then like make a ton of money that morning when it worked.

And it was at 4:30 in the morning, it's like the best 75% chance.

And so if you do it enough, you're going to do it well over time. And it was the most fun thing because we take these like giant positions on this thing and you'd be there with like Peter and Kevin.

It's just like the highest stakes game of poker.

It's the most fun poker. And you're like, literally personally have like a few million dollars riding on it at a time. As early 20s, these guys, you know, Peter probably had $100 million riding on every time. And you're like high-fiving if it goes right or you're depressed if it goes wrong. It was the most— it was like, it's just most fun heist exam.

Is he sweating or what's his, uh, demeanor like?

Everyone's like, what's gonna happen? It's like so exciting. And then you're like, I remember so many like celebrations. We'd all like go to like our favorite breakfast place afterwards if it worked out. It was pretty cool.

Yeah. What'd you do if it didn't work out?

Yeah. Sometimes we go there anyway. But, but, uh, for some reason in my mind, this is maybe who I am. I remember all these times it worked out. I barely can remember the times it didn't. I know it didn't sometimes, but like maybe this is like a serial entrepreneur sort of thing where you just have the good memories, you know?

Right.

Yeah, it's like, but I remember it was, it was, it was a fun time.

That's an entrepreneur survival tactic.

You have to block out the trauma, all the traumas.

Because if you know, if you remember how hard something is, you're very much less likely to start it again or do another thing.

There's no fucking way I would have built all these companies if I had to force myself to like think about that too much.

You know, the way you just described like the global macro fund, you're pretty young when you're doing this and that's not what you were doing just before. So it's not like you had tons of experience.

My little brother got me reading like a bunch of economics and finance stuff when I was young. So I kind of had a weird both computer science and finance background. So, and I had opinions about it. So I think it's a weird— those are like my two things. And so, so, you know, yes. So I knew that world pretty well. And yeah, you learn a lot being in it. You just do. You just have to be in it to do it.

But I mean, credit to them for betting on you to be able to, to do that. You know, they could have hired somebody who's been doing that for 20 years.

This is New York. We talk about lessons from Peter Thiel. I think one of the most important ones I've seen from him that I've definitely taken to heart in what I've done is I'd much rather hire— I'd much rather hire for talent and ambition and hard work than hire for expertise. So I'm almost— and there's exceptions, right? So if you have a company that's already really working and already really scaling and there's like a machine that has to be run, you want to hire the guy who knows how to run the machine. That's fine. That's like, that's like, that's the operator who knows what they're doing already. But when you— before you've actually built the machine or when you're doing something with a group in like high finance or whatever, You want to hire for raw IQ and hard work and just iterating and figuring it out. And that's, that's a different skill set than the people who run the machines.

Hey, real quick, as you know, we're big on ideas here. We love bringing new ideas, business ideas, brainstorming ideas for the podcast. Well, a lot of people ask, what do you do with all those ideas? Can we go find them? Is there a list somewhere? The great people at HubSpot have put together a business ideas database. It's totally free. If you just click the link in the description below, you can go download a collection of over 50+ business ideas that are from the archive listed out for you, curated. And so, uh, what are you waiting for? Go Download it. It's free. Check it out. It's in the description below. All right. Back to the show. What's your way of filtering for that IQ? Well, you know, how do you interview or what are the signals you look for?

This is like super hard. I think you start with like hard math problems that people—

what are you doing?

We used to do that at Clarion. We had these really hard problems. I remember my friend, Stu Jo, ran Dropbox. One of his partners there at his new— his new ventures, Chen Li, was like the highest scorer on this test I gave. Smart, smart, smart guy. I— yeah, we had to do really hard tests. But, you know, once I already had around me a bunch of people who were really top talent, it's like they knew people like, oh, who is the smartest guy in your physics PhD at MIT? Who is, you know, things like that. So it's like, it's like you kind of, you kind of get a network that's already really solid and then you go out from there.

And so let's go more on that. So, uh, two things. One, Ben told me something that like, there's some number, I don't know the exact number, 20, 30 people who have worked at your companies that have then gone on to start like unicorn companies. Dude, what is that? What is that number roughly?

Oh gosh, you know, I don't actually keep track of the official number, but there's over 20 people who've worked directly for me who've started huge companies. And it's something I'm really proud of is that we've had a lot of super talented people. And, you know, in some ways it's like I like to like back my mind like, oh yeah, I'm a great guy. I take credit for shaping them. But in some ways it's like they were already really amazing. And, you know, and so I was like, maybe I'm just good at convincing them to have worked with me ahead of time, you know? So it's like there's a—

well, there's a nature-nurture thing, right?

So yeah, there's— and there's some of both. I do like think that we've given them useful frameworks, just like I learned from Peter. They might have learned some of these things from me too. But, but I mean, one of the ones, you know, not all of them have even backed, like some of them I backed, some of them went off and then did it themselves. And right, you know, which, you know, usually they let me back them.

Yeah. Yeah. That's the worst when you don't— you didn't get the call.

Actually, I'm still proud. I'm still, I'm still proud of like, I'll tell you, the guy who came right out of school to help run Atapar with me and, and I was like, he became president of the company. Super talented guy. And I did not know what I was doing, even though I'd just already done Palantir. There's all these mistakes I was making because there's like things I didn't realize I had advantages of Palantir. And, you know, I had parts of a multibillion-dollar company. Now it's great, but there's things that took longer. There's mistakes, but there's also obviously good things we did because the company worked out really well. And I think he had— he had like went off on his own and he had like, you know, his own tough time or whatever for a little while afterwards. And then he ended up partnering with someone and he started a company that became worth $3 billion in like 4 years and he sold it. Wow. Which I'm like, oh wow, that's pretty fucking cool. But I was like, and you know, and I— he didn't— they didn't bring anyone else into that company, but I was still really proud of the fact that I'd worked with this guy and then he'd gone on and had like crazy success. I mean, it's a cool feeling, you know?

But for the record, it's always— I'm more proud if I got to invest too, right?

No, come on. Take care of your buddies.

Yeah, exactly.

No, it was most of them, like 95% of them. It's like people will bring me in and I'll still like help them, will coach and work with them together.

So let's do a big hit number 2, Atapar. Yeah. You explain, like, explain in layman's terms what even is Addepar. And then I have some questions for you. But let's first do the— explain like I'm 5 years old. What is Addepar?

So Addepar is, is the leading wealth management technology company in the US. And so there's people who work at what are called RIAs, registered investment advisors. There's tens of thousands of these, and they will help you or your parents or whoever kind of manage their wealth. They'll give you reports, they'll do your trusts and estate. They'll just do everything around kind of the wealth planning. Man, it was really freaking hard. We, built all this stuff and we like hooked up to Schwab and Fidelity. Those are like two of the biggest— everyone's heard of those, right? The biggest custodians. And we had all this wrong data in the reports, like, what are we doing wrong? And it turned out the data coming from Schwab and Fidelity was oftentimes wrong. Like, what is wrong with this space? It's like the whole thing's a mess. So it was, it was a hard company to build. Took about 3 or 4 years before we really got to the point where it was useful to people.

And so you didn't give up, though, during that time?

Oh, no. That's like the last— like, you have to have a personality where you're not going to give up. I mean, I'll give up if it turns out someone else has already solved it perfectly. Like, if Adaport already existed, would have been a stupid thing to do that I learned that. Then maybe you give up and pivot. But the fact that it's a hard problem, you're not going to give up. You're just going to like double down and like fix it, you know?

Interesting. So you're, you're a— you don't give up if it's too hard to be seen.

It's like, that's better. That means once I do solve it, it's going to have this giant moat. Like, Adapar has the biggest freaking moat. We were talking earlier about guys like Rocket Internet will like go around copying things and annoy people. Like, good luck if you want to try to copy that. You got to take a billion dollars in 10 years, you know? No chance. No chance.

You talk about hard work. I have when I was doing research for this, I called somebody who works on your team and I said, tell me about it. What's he like? What's it like to work with him? One of the things they said was like, he's always on. I've never seen him just go like, go dark, go off, or just like turn his brain off or be like, I just want to chill on the beach and just drink Mai Tais and not do anything. Is that accurate for you?

This is like my game though. I mean, I think you have to love what you're doing, right? So like you shouldn't play games you don't, you don't like, right? If you're not playing, you're not enjoying the game, you got to switch it up.

Yeah.

So this is, this is, this is, this is, this is what I'm doing this because I really enjoy it. It's really fun. I'm really good. I think one of them, you know, Aristotle would talk about how like one of the highest pleasures is like, is like using your mind in its highest capacity, right? So let's explain, like you actually enjoy chess more than checkers if you're good at both because chess has more levels to it. It's a more complicated game. So you, you want your mind to be engaged in interesting, complex, useful things that are getting things done. It's like a positive part. I think it's how humanity works, right?

How do you still recharge or just get clarity of thought, because one of the challenges is if you're always on, you might not have that chance to step back and reassess.

You do need open time for creativity. I've noticed when I overschedule myself, I'm not nearly as creative then. And I think the cold plunge helped, right?

Yeah, that was a quick—

you were in there for a little bit.

60-second, 51-second reset we had.

I think I stayed in for the full—

yeah, you, you actually did 2 plunges. That was pretty good. What is this typical schedule like? Uh, what's a day in the life? Because you got You're fine. You got companies, you got all kinds of— you got your—

yeah, my number one, my number one is HVC. And HVC has a build program, which is my favorite part of it. A third of our money now goes towards building new companies. So my favorite thing is like the strategy for recruiting talent and then strategy sessions with, you know, to figure out what we're going to build.

Right. And so when you said strategy for talent, what was the other one? Strategy for building the company?

Yeah. You're basically— strategy when you're— the way I look at, the way I look at opportunities for new businesses is you're looking for conceptual gaps in the world. You're saying like, what is this? Here's where this industry is now. Like, here's how this thing is working. Here's how this process is done in the economy. And here's where it could be if it was using like the right new technology or the right new incentives or this, or this right effective cultures or whatever it is that like could be better about it. And the question is not just, it's actually very easy to find conceptual gaps in the world. I'll put forward, if you spend some time with like a few smart friends and you like study an industry and talk to people, you're like, you usually will find, oh wow, this thing could be done this way. And so the harder question is not just what could be done, but like, what's the path to get there? What could we put in place that would allow us to get there? How do we build this thing? How much is it going to cost? How do we— how do we make the people want this? There's a lot of things, for example, in like healthcare and hospitals that are done completely wrong, but it makes hospitals more money. So, so, so it's like, so even though it's like clearly not the right way of doing things, they're not going to just fix it. You have to find some way to get from here to there with the actors being willing to do it right.

So let's do an example. So give me an example, either maybe something that you're— that's top of mind because you're thinking about it right now. Maybe it's not all figured out or a recent one.

Yeah.

So a recent one, gap and a path that you kind of figured out.

100%. So it turns out that there's tens of thousands of loading yards around the country in logistics. These are places where trucks come, they get in line, they drop things off, they move things around, they pick things up. And it's just— it's a pretty interesting area. And like the biggest warehouse company in the country is Prologis. And it turns out the founder investor with me is based in, based in, you know, nearby in California. We're back there. And then it turns out there's like a handful of the biggest carrier companies like Ryder, you've probably heard of, and others. And we've actually sold a company to Ryder. So we're close to those guys too. And so, so because we knew a bunch of these guys, we started analyzing what can we do with AI to make your yards better? And what we figured out is that if you put just a couple of cameras in, at first we thought we need 6, but just a couple of cameras, you can kind of watch and map out where everything is. Map out how efficient the gate is, map out the processes, create accountability incentives, people to go faster, create ways of pinging the carriers if it's backed up to like to use the other loading yards nearby, just like basic little ways on the margins of like making these things work better and timing them and creating— because you want a little bit of competition. People always respond well, you know, if you do it properly. And so we've mapped this out and we ended up founding a company with a really strong AI team and we ended up kind of co-founding it with these, like, you know, the warehouse companies, the carriers and others based on their needs. And it's really cool because the way we built it with them is we have like a few hundred million revenue already built in that we can scale up into their, into their yards they already own. And then we can have something all the other yards want to use as well.

Let's do more detail. So you, you're already kind of adjacent to that world because you've done stuff, but how does the brainstorm work inside your office or wherever? Like when does somebody ask the question, hey, could you use AI for these loading yards? Like how do, how do they like take me all the way to that? Like where does a question like that even come from? Where does the nugget of insight come from?

So my partner Jake's in charge of logistics and supply chain. He's the, he's the kind of biggest driver here. And he's, you know, done some strategy sessions with, you know, our friends running these different companies we're close to. We'll get together. I have a vineyard in Napa Valley and we like bring every year like the 100 top logistics CEOs and all, you know, drink and strategize and hang out. You know, it's like a good way.

And you kind of are asking them questions to try to find their pain points.

What are your problems? What works? What are you spending money on? What are you seeing? And we'll bring like new entrepreneurs and we're backing and like get their take on things and we'll bring what are called EIRs, entrepreneurs in residence, you know, who will talk with them and iterate on the idea.

Right.

So we kind of knew loading yards is a big thing. Let's go talk and iterate on ideas, what we could do to apply new things to it. And, you know, in this case, there's a really strong AI team that happens to be in the UK that we'd met through other friends that like had worked on some really cool visual problems we thought was very, very good for this and ended up recruiting them as co-founders, which, which worked out really well.

So we're constantly on the lookout for like Separately for town, like napkin math, you're like, okay, so if we can improve the loading yards by this, that's the size of the prize. And then that kind of clears a hurdle for you.

Yeah, this, this is, this is— and you know, the other thing here, which I don't love but is definitely helpful, is California had some new regulatory rules about things you had to actually map out as well. So they're going to have to do something anyway, but why not create more value based on— and then, but then like be the thing they put in when they're going to have to do it anyway in the next year, right? Yeah, the rules coming up, there's like, you know, logistics has had a few of these things. There are some rules on telematics where you had to like I think for purposes of not making people drive too long, you had to like record things differently, which was kind of an insertion point for a couple of telematics companies we helped back as well, which is the thing that tracks the trucks and stuff. So there's things like that where the regulatory thing was helpful too. And then, yeah, you just, you sit down, you map it out, you know, you've known people for a long time. I mean, one of the unfair secrets of business is the more success you have, the more it's like a platform for a bigger thing you can do next time. And that's just the way it is. You just got to keep in the game because like, it's like the— I think when I was really young, I used to think, oh, I could start a business and make a lot of money and then go to the beach and then that'd be like fun. And that's like, that's not nearly as fun as the fact that once you've already started and successful once, now you get to do like bigger things more easily, right? So it's like, it's like, and that's why like I think when you're young, partner with someone else who already has an unfair advantage, help them use their unfair advantage, build something with them. Now you have all these extra unfair advantages. You could do it again. So this is like, there's like this naive thing where like you're like this lone business founder. I think you can do that, but it's so hard, right?

Why play the game on hard mode?

Yeah, why play the game on hard mode? Why not? Why not find— there's so many places in the world there's unfair advantages and like an unfair advantage. What I mean by that is like every time you have a success, you now have the respect and attention and understanding of all these people who will then help you do the next thing, right? And once you prove you're competent once, then, you know, there's— you know, I have a bunch more things I could be doing now if I had more competent young people around me who want to be entrepreneurs and partner with me. We have a bunch of them, but we always need more because there's the thing we lack. We don't like ideas, we don't like money. We lack really talented, hardworking people with persistence.

You know, I love that. That was so good. Can I come back for seconds? Can we do another example, another gap or another origin story of one of these ideas that, that I think makes—

I'll give you another crazy gap. I mean, these are— these are— I'm taking big swings right now. So these are going to sound a little crazy, but like, I was pretty bullish on China like 15 years ago. A lot of us were. I'd like— I thought I was opening up. A lot of my friends there were like reading Milton Friedman and, you know, free economy stuff. I'm like, this is going to be great. There's so many smart people there. So we start making bets there. We start working there, doing a bunch of stuff. And then this guy Xi Jinping takes over. And then like, I'm told by all these different senior people, they're like, Joe, yeah, none of the stuff that you want to work on here is going to be allowed. It can't be foreign. And I'm like, oh, that's too bad. So I just stopped working there as much. And then I kind of hear from them like terrible things are happening. And then a couple of them disappear. And then I hear he's making all these engineers work on defense. Like, okay, this is pretty effed up. I'm kind of nervous about this now. And we start mapping it out. At the same time, we'd done Palantir. Started in 2003. So this is now like 2015, 2016. And I wasn't— I'm not running Palantir anymore, but I'm still an advisor watching it. And like a few of my guys there are noticing that the defense— the defense world in the US has gotten to be like a lot more dysfunctional, a lot more broken. There hasn't really been— so what happened in defense is all these companies consolidated in the 1990s after the Cold War spending went down. So they all merged and became like these giant primes. And these primes started acting a lot more like government agencies themselves, like not super nimble, not super adaptive. Kind of like the way they get the contracts is by having the right lobbyists, not necessarily by— and they have to convince— we call innovation theater. They have to pretend they're innovating, but they're not necessarily great innovating because that's not— because they're so big, they have no competition. And so we're like, oh, this is kind of scary. All this stuff, like none of the best engineers are going into these primes. Their stuff's getting worse. Meanwhile, China has the best engineers. They're getting better. This is— we better do something. And so, so 3 of my best ex-Palantir guys, they partner with Palmer, of course, start Andruil. You've talked to him before. So I backed them early along with Peter, and I'm like, okay, guys, we're back in defense. Let's figure out what the hell else to do here. So we, we basically mapped out like, what are 20 new possibilities in defense? I want to find 20 of them just to see. And then we got to choose what's the most important one.

And by the way, is that something you tell your team, like, come to the table, I want to hear 20 ideas?

Well, you put— you have to have like a guy whose job it is. You have to have a guy who's helping them. You have to have like advisors who are able to like get them into the right places to talk and explore. But let's— yeah, let's talk to our— let's talk to our smartest friends in this space. Let's talk to our network. I want to hear You know, I want to hear, you know, about 20 ideas of new things. Like, and I want to see where we think gaps might be. And we come back and there's like 8 or 9 pretty good answers. A few things that I thought were bad answers, but, but, you know, we find some interesting stuff. And one of the areas that's pretty cool is it looks like there might be new possibilities in, uh, in, in EMP, in electromagnetic pulse space. And it's really directed EMP. Of course, you don't just want to set one of these off and screw up all your stuff. But what this does, what an EMP does is it fries electronics, right? And so, It turns out that if you can direct these, what it is that you're taking microwave energy and you're shooting it in a blast, you can actually turn things off. And the government has spent billions of dollars on this stuff, but they hadn't really applied any of the new, any of the new chips basically.

And you want that to protect against like drones, for example.

That's one. That's one of the really good ways of doing it. So basically you can have a chip, you can, you can control power on very small timescales. You could take, you know, take, you know, the gallium nitride emitters and you could build this correctly with the top talent. It turns out there's like a co-founder who's a friend of a friend of mine from Stanford, who's just genius, who helped figure a lot of this out also. And you could shoot down things like 10 times farther away. And then, you know, theoretically you could use this against missiles and turning their guidance systems off. You could use it against a truck coming to your base really fast. You just blast it. You know, it might be that the truck has a terrorist coming to shoot you and you want to turn it off. It might be there's a pregnant lady there trying to get to the base to give birth. Like, you don't want to necessarily have blown it up, right? So it's good to blast it and you're not turning a truck off. You're not killing the person. So. Right. Pretty cool, like, non-lethal way of, like, stopping stuff that's giving you trouble.

Right.

And long story short, we were able to put together money, put together a prototype, and, you know, with about— with less than $30 million in the second round, we got to the point where we fought our way into a contest against the other primes. And so basically, one of the key things in government is, like, we're always trying to get them to have contests. The primes do not want contests.

They're like, how do we compete on merit, not on longevity, relationships?

I'm not going to be better at playing golf with a senator. Right. But if you can let me into the contest, maybe we can win, right?

How do you convince them to do the contest?

That you push the Congress to make laws to allow competition. You have— there's competent generals, there's competent admirals. Like, you know, thanks to Palantir and SpaceX, people had seen outsiders massively outperforming and they're more open to the ideas. So we're pushing things in the right direction.

Gotcha.

And so they do this contest and like they didn't really take us seriously because the other guys had really spent billions of dollars on this. Like, what can you kids do? Right? It's kind of like the old mindset in the US in the 1950s, '60s is like innovation is expensive. Outsiders aren't going to be able to do. And that was true 50, 60 years ago. But long story short, we ended up shooting down the hardened drones 9.5 times further away than the other guys. They actually had to have— they used to have these binoculars to like watch, right? Like shooting them down really far away. And, and people were just like flabbergasted.

Like everybody was lined up and it's like, okay, we'll see who performs. Like, you're going to need binoculars to see ours because it's going to be out of range compared to whatever else.

I think, I think, I think their people are just totally shocked. And yes, that's the same amount of power.

Is that the name of the company?

Epirus. Epirus is a cool name. Epirus was a name in legend of the bow of Theseus. Theseus started Athens and his bow had infinite arrows. And so this is kind of like a bow with infinite arrows because you can keep firing the pulses.

That's cool.

There are 10,000.

Wasn't Palantír like a Lord of the Rings reference?

Palantír was Lord of the Rings. So Epirus is more— is more real mythology. Palantír is more in the fake mythology world. But no, we have quite a few things named after Tolkien and stuff. It's an inspiring story. The idea with Palantír— Palantír is a seeing crystal, right? And in the story, this is super dorky, but in the story they're built by like the elves of the outermost west and they're basically this thing created for the humans to get rid of the bad guys. But then 2000 years later, a bad guy takes over the technology, right? And is using it for evil. And so the idea with Palantir is we thought we were very civil liberties obsessed. We wanted to build it in a way that would like go after the bad guys. But then we got to be able to watch the watchers and be really careful about how the technology is used because it's very obvious if you're doing something to kill the bad guys. That a bad guy could use this for something horrible. Right. And so it is a dangerous area. We believed it was a necessary thing to create. And we, you know, we ended up eliminating thousands of terrorists. So we were happy with the results.

So what's fascinating to me is that not only have you had multiple hits, but they're in areas that are different, but also just hard areas where I don't even— those are not even ideal. I don't think about these like the logistics yards or EMP pulse technology, like These are so in different domains. I'm curious, is that, is that intentional? Meaning, do you like— because most of the entrepreneurs around me in Silicon Valley were like, oh, B2B SaaS, you know, what's the problem? Oh, let's make a to-do list app because I know that problem. I'm so familiar with it. Is it a strategy for you to go fish where other people are not fishing, or is that just what happened?

No, I think it's definitely, definitely a strategy of sorts where you don't want to build like yet another like restaurant app or yet another to-do list app because it's like That's what every other 21-year-old is thinking about. Like, this is probably why I missed Stripe early on, as we'd been in PayPal and I had to like see every payment app. There's like literally hundreds of payment apps. I was like, oh God, you know, because it's like— because Peter would make me take the meetings after work. I didn't want to anymore. So it's like, no, you want to listen. There's parts of the world that are big parts of the economy that are very important that are not as exposed to technology cultures. And so you want to kind of take your— our advantage is we have a really tough technology culture. Let's figure out How to expose it to something that's not likely to, to have seen that before and then find ways to work together to fix problems.

And what are some other ideas either? Um, I wanna either hear ideas that, um, you're not doing just cuz you can only do so many things at once, or it might be that would work, but it's too small for me. Or it's, it's not like kind of using my, my current platform can do bigger things. But this happens to me all the time. I see ideas that somebody could do that I'm tempted to do cuz it's so clear to me, but it's like, that would be not the right game for me to be playing right now.

There's so many things that if I had the right talent, I'd be doing more. You know, I do a lot in the wealth management world. I think that the process of starting a trust and like the actual legal work around this stuff could be very automated with AI. You could have like a smart lawyer and like a few smart engineers. You could like have a whole new trust company and a whole new like estate management company. We have SaaS software for estate stuff you'd plug into. I have a lot of distribution for this ready, but I would need like the right engineers. AI people. And I'm not sure if it's bigger than a billion-dollar or $2 billion business, but it's like, it's still worth it, you know, and it saves a lot of time. So, but I'll give you a really big one I want to do, but I don't have the right people around me. Um, local government. So we just sold OpenGov for $1.8 billion. And, and local government, there's a lot of lessons from this company, a lot of mistakes. It took us 12 years. Zach Buchman, the CEO, my co-founder, did a great job. Um, we learned that you only can really do things they already have a budget for. There's about 90 things local governments you pay money for software to do, and OpenGov does about 40 of them. So we know the space really well. Like, this is like, it's big, right? It's a lot of processes. And anyway, the idea is that there's trillions of dollars spent by local governments, and a lot of them can't find the right staff for certain processes, and a lot of them have people retiring soon too. So I think, I think a BPO, a business process outsourcing thing for certain tasks for local government, uh, that are augmented by AI could be like just a huge business to basically help them with this. And Right now it's not a standard way they work, but I could see if you do it really well, it could become a standard way. And that's the kind of area where you can make tens of billions of revenue before anyone even notices you because it's such a big part of the economy. So that's, that's, that's another—

what would the first like 6 to 12 months of that company look like?

You'd basically have to find early partners willing to trust you and work with you on outsourcing some one of those 90 processes. And it'd be something like where you like augment their ability to do licensing and permitting faster, or you're augmenting some of their grunt work on tracking their assets and asset management, or you're doing something for their budget for them automatically. It's way faster. The CFO doesn't have to hire 3 people. They can only hire 1 person, which is you, or something like that. But you have to go in and figure out what processes are cities even willing to let you do. And it's a very unnatural thing because it's not how they work right now. But it's one of those things where there's like a secular trend towards like, you know, local government not having enough money. So if you can find ways to save them massive amounts of money and make a higher quality service, there could be something there, right?

All right. I want to play a little agree or disagree game. So I want to say a statement. I want to hear you agree or disagree with it. So the first one is on this idea of big swings that are solving like huge problems, mission-oriented things versus like getting— just getting your first win under your belt. A guy came on the podcast and he said, my theory is you first you go get your nut and then you work on your noble mission. And he's like, you know, you go and you develop your skills, you make a few million bucks, you get personal autonomy, and then you should pick a noble mission, a noble quest, and go on that. Agree or disagree with that philosophy?

I agree in general. I think it's a really good thing to do. You want to have a solid base before you do something that's like a huge, crazy, risky quest. You don't want to be like poor for 12 years while you're, while you're doing something if you can help it. I mean, I'm not saying that's going to be the path for everyone, but if you can do what he said, that's a really great way to do it.

Okay. Another one. A lot of people say that ideas are cheap, ideas are a dime a dozen, execution is everything. And I agree that execution is very important, but I think ideas really matter too. I think that project selection, picking the right market to go after, is a, um, is a huge lever. So I think that the execution is everything philosophy is BS. Agree or disagree?

That's a tough one because I've seen a lot of good ideas with— they actually aren't worth that much because they couldn't actually bring together the talent to do them. So I, I, I— you, you, you it's necessary but not sufficient. You do need both, right? The execution is the harder part. But you're right, you can have amazing execution. And I've seen this and people going after the stupidest ideas and it's not going to yield something. So you need both, but the ideas by themselves are not that valuable.

Okay, that's why I'd say another one. Focus is a superpower. And I would say that like we were talking about this earlier, you recognize the value of focus and just compounding one thing. But you've also done a variety of things. Agree or disagree that, you know, focus is the way to go? Focus should be the strategy.

Focus is clearly the right strategy for the most successful people in the world. If you look at the wealthiest people in the world, they nearly all focused and compounded over a very long length of time. If you look at Palantir and Atapar, the two companies where I focus full time on them, they're two of my most important companies. It's— I think when you're having impact on the world in different ways, sometimes it's okay to do different things. I think, I think philanthropically, I think for me, coaching entrepreneurs, something I enjoy joy. I think I'm, I think I'm obviously creating a lot of value right now, but I think, I think as an entrepreneur, as a business person in general, it's you, you, especially if you haven't already had like a giant win, you should just focus and get that giant win and compound.

Um, you're friends with Elon. What, um, what's something you've learned from him or something you admire about him? Uh, maybe that the rest of us don't know by, you know, when we only know him from the outside.

Yeah, I, I mean, I guess I'd say I really admire his boldness in his life. Obviously, it's— he's really good at focus. He's really good at saying no even to friends about anything. It's just not like tied to what he's like really passionate about and focused on to win. And he's just really, really bold, like clearing like nonsense out of the way and clearing mess out of the way and just like going right for the thing that matters, right for the substance. So I think— I think most people in my life would be— think I'm maybe too bold or too direct or too extreme. And Elon's like a whole step further, which I think is great to see. I'm like, okay, I could do better. There's more here. Yeah, I could be—

I could be more myself.

In that direction and I'd be more successful if I would, you know, I'm obviously done very well, but, but, but I think he's a whole nother level of bold. And that's something that it's good to see that for me because it reminds me that that's like a, that's a good direction for entrepreneurship.

You know, is he focused though? Because he's got like 5 things, you know, he's got Twitter, he's got SpaceX, he's got Tesla, he's got Neuralink, he's got Boring Company. He's got so many things. What is it? How do you square that? Is that, is it focus or is it—

I mean, I think he was insanely focused for a very long time on, on the things he was doing and on scaling them. And I guess Yes, sure. There were two companies for a very long time after doing one company for a very long time. And, you know, he's at a level of success again, societally, where there's things that really matter for society that only he can do. So it makes sense if he would expand that. I think I told you earlier, you know, my partners are allowed to work on up to 6 things at once. And I think when you're like coaching and like managing things and stuff, I think that's about the right amount. I think if you're just operating, you want to do like 1 or 2 at most, right?

Yeah. Last question because I think we got to go, but what the whole— my whole thing when I come to an interview like this is what's the one question that really matters? Like, forget the hour, like, what's the one question that really matters? And all the questions I've asked you have been beating around the bush with this one thing. So now I'm gonna ask you it directly, which is you have now created, by my count, at least $4 billion companies directly, probably more than that. I call that the entrepreneur's Grand Slam. You have done something that Anybody who wants to make one successful company would be, would be envious of how, wow, how does he do it? You know, you see also a lot of other founders, you meet them through your fund or just people who probably come up to you. What would you say you are doing different than the average good founder?

So let's say I have some unfair advantages, right? And it's, it's actually not that hard once you've been really successful to like to do it again relative to the first time. But what am I doing differently? I have a huge talent apparatus. So we have people at like dozens of universities. We have all sorts of things we do.

What does that mean? You have people at universities?

What are they doing? It's like you'll have fellows who apply and you'll have people who run your program there. You'll host parties and meet talent. You'll, you'll have a certain playbook we've built since Palantir of knowing how to show up.

So you have like a scouting department.

Yeah, you have like a huge talent scouting department. Works in different ways, different places, and, and really talented people. We spend a lot of time and each of our partners and I, that's our job is to scout for talent and to use our network. And the more wins you have with smart people, the more you get to meet their smart friends. And so, so we have a huge advantage in talent, first of all, because that's really key. We have a huge advantage of like knowing the people who run a lot of big industries and like having good relationships with them, having them as advisors, having them as being part of things we've done where we can like understand what's happening in those industries, get quick feedback and iterate on ideas. Like, like one of the biggest mistakes founders make is they have an idea and they're afraid someone's going to copy it. They're afraid the idea is valuable. It's really dangerous to think ideas are too valuable because then you just don't share them. You think that they're yours. And so one of our advantages is that, is that one of the Peter Thiel thought experiments was imagine there's 5 founders who each have an idea and like 4 of them are like secretly working on it and one of them is like talking to everyone and iterating, like which of the 5 is going to win, right? So it's clearly the guy who's iterating a ton instead of 5 people, the same idea. We were able to have that same idea and then like iterate faster than anyone else because we know everyone running everything and we know how to get back, back, you know, how to know how to get to the right answer much, much more quickly. So not only we have the best talent, but we are able to iterate ideas with people who respect us, with people we involve. And then whenever we start a company, maybe this is a mistake because maybe I could have had a lot more money, but I've always been like a minority owner of my companies. I've always been like someone who might have like— like when we started out the BUILD program, our fund might take 20% and our— and when my team and I might take 10%, so we might have 30 total. And like maybe 35 or 40, but, but like, but we have something where it's less than half and we're very generous with the founders, with the early employees, with the advisors, with the partners. So like when we start these things, like just even from the beginning, I don't have to wake up in the morning being the only one worried about this thing. There's like, there's another 30 smart people waking up who, and that's their focus and they're, and they're on it. And that's such a big advantage to like have other people like obsess over this thing. And our people who truly feel like co-founders, by the way, I think is one of the big mistakes. You're like, I'm the founder and you guys are the, people working like, like, what are you getting from that other than your ego? Like, I'd much rather— there's so many companies that people don't even know I'm the founder of. And the people— and that's way better because first, they're not going to harass me about stuff. And like, there's people who are proud founders who get to be out in the press doing it. And, and they're going to sleep worried about it because this is their reputation and their focus.

In the intro, I'm going to say something like, this guy has started more billion-dollar companies than anybody in America, which I think is an amazing claim to fame. But forget about a billion. Let's talk about a million. The name of the podcast is My First Million. And I went and read a Quora answer that you did. Somebody said, if I want to make $1 million, how should I invest my money? And you said something like this. You said, I'll pull it up. You go, if you want to make $1 million, it's not about how you invest your money. It's about how you invest your time. And you said it's about how disciplined you are with investing your time. How should somebody who wants to make $1 million invest their time?

You know, it's— yeah, it's right. You can't just make $1 million from investing. If you're probably the average person, maybe you can over like 50 years or something. My grandma passed away at 103 last year and she was a multimillionaire having grown up in the Depression just from saving money and cutting coupons. And that could— that could work for 100 years. Thrifty, being thrifty like that. That is a thing like over a very long time horizon.

I think you'd say like she bought one stock or something also, like my grandfather worked for Abbott and she held it for like 60 years.

It happened to work really well. Great. You know, really good for my, for my cousins and their inheritance. But, you know, she was a wonderful lady. But, you know, in general, that's not probably how you want to make, make money. You want to make money, especially these days. I mean, gosh, going back, back then was probably a lot harder. But these days there's so many places with your time you can learn how to help build things, how to help create things, how to help be useful to other people. And like, that's what you want to be doing. You want to be finding What are you passionate about? What are you good at? You have to figure out what you're good at. There's— you have to be willing to say, this is what I'm not good at, what I'm good at. And then who else is good at this too? Who I could maybe learn from, who I could be like, and spend your time trying to find a way to help those people, try to find a way to learn how their businesses work, be part of a business and growing it. And that's, that's how you see how everything works. And, you know, if you're talented enough, then that the people you succeed with, they're probably going to be able to help you do something new later.

And that's what happened to you, right? That's how you spent your time. My understanding, if we, if we walk back in the journey, it's You're in college, you go to Stanford, and you, you end up working at PayPal. You become an intern at PayPal.

I tried a couple of times. They rejected me the first time I applied.

What happened?

Why did they reject you as a freshman at Stanford? And I remember being at a whiteboard with Max Levchin, and he probably doesn't remember this. He was the co-founder with Peter on the tech side and arguing about some tech thing.

Was PayPal already a big deal? Is that why you wanted to work there?

It wasn't that much of a big deal yet. Like Peter Thiel wasn't who he was. Elon Musk wasn't who he was. Like those, you know, their companies combined to start it. But I saw like all the smartest people, all these people I admired and all these kind of iconoclasts going there, like people who thought differently, you know.

And so you try one year, rejected, try again the second year, you're in. What's your job? You're an intern at PayPal. What are you doing?

Oh, it's not very glamorous at all. They basically had me setting up the PeopleSoft instance, which is terrible. But I, you know, I sat next to this guy. We were in like— so Roloff, who's now like star partner at Sequoia, was a CFO and we were kind of in his domain at first. And I sat next to this guy who was managing all the money on Bloomberg, like a Treasury thing. So I got to learn finance and treasury. And then, and then what was happening is, is the big challenge in the companies were going bankrupt because the Chinese and Russian mafia were stealing all of our money at the time. And so I ended up like hanging out after work and with these, all these guys who were like working on how do you stop the bad guys?

Because PayPal's like a honeypot. It's got all the money.

So like you go to 7-Eleven and the clerk there is like maybe having a, maybe having a bad year and, you know, angry at capitalism, who knows? And so they're writing down secretly the numbers on the credit cards and they write down 500 of these numbers, they can sell them each online for $5 or $10. The Russian mafia is buying them up. And then all of a sudden you get a chargeback that says $200 on PayPal or something and you're like, I didn't do that. So you see, you see, you charge it back and then PayPal's left with the bill, right? And this was like costing PayPal several million dollars a month. And a lot of our competitors went bankrupt. And so we got to learn at the time how to basically stop the bad guys, which was a kind of a fun problem.

And so I like what you did there, which is one of the pieces of advice I give on the pod is you got to work on the A+ problem at any company. So regardless of what your role is, you should try to at least know what is the A+ problem.

Yeah, try to be helpful to the real problem.

And then try to be helpful on that. That's like, because that's the needle mover and that's where you're going to get the most learning, the most action.

And I didn't necessarily do this on purpose. I actually wanted to quit at first because the PeopleSoft thing was so dumb and so horrible and I couldn't figure it out. And my dad convinced me, don't quit, just like do what you can to be helpful otherwise there. So that was a good dad.

Yeah, good dad.

An 18-year-old. Yeah.

You— I almost quit college for the same reason. And my dad was like, because I was like, you know, I'm, pretty mediocre here. I was like, I'm used to being good. Then you go to a good—

like, you go to a top school, you didn't feel like you were the best.

Now I'm just— these were all the best high school kids. Now I'm kind of in the middle. So I was like, you know, it's too expensive. Maybe I shouldn't be here. And he's like, that's exactly why you should be there.

You want to challenge—

you want to be surrounded by people who are better than you.

So one of the things Alex Karp had an insight on, my co-founder of Palantir, who was really good, is you can't really appreciate a talent unless you're within 2 standard deviations of it. So you think of talent as being on a normal curve for any typical, typical skill. It could be for math, could be for podcasts or whatever it is. And like, so you kind of have a natural level of talent. You could shift slightly. And so the very best people in the world at something might be 4th or 5th standard deviation. But if you yourself are 2nd or 3rd standard deviation, you can at least start to appreciate that. Whereas if, let's say you're not great at physics, I don't know, if you meet like Albert Einstein versus a top physics professor, you're going to have no idea which one's Einstein, right? So it's the same thing in any other area.

But if you can differentiate—

exactly. But once you can recognize that talent, that lets you then harness it for things you're building and doing. So it actually is very useful to be very good at something, even if you're not the best.

Right. Okay. Because you can notice what—

because you can understand—

is actually the 5 standard deviation talent.

I was good enough at computer science. Like, I got able to get A-pluses at Stanford. I had friends who were way smarter than me in computer science, but I was good enough to know who those kids were and how to harness them and how to hire them. Right. So there's things like that.

That's interesting. So now you— the next thing you do, you go and you start Palantir, which—

yeah, well, actually, I worked for Peter's family office for a while, and he was the first investor in Facebook. It was just his family office. There's tons of crazy shit going on. It was really fun. It was like you know, a really expensive restaurant that went bankrupt. There was like a spam company, someone was starting. There was like, there's all sorts of crazy shit. And I was there and like, Peter's a genius, but he's not really a manager. So I started like, I said, you know, okay, I'll just, I'll take charge here. So I started hiring people with him and, and kind of helping him run things. And some of the older guys like, who the fuck is this 21-year-old kid? So we ended up working on a project that summer to map out like, what if we'd taken all this stuff we did at PayPal for anti-fraud and we, and we generalized it to like for the intelligence community, what would that look like? And And my roommate Stefan and I from Stanford at the time were like sketching up all these cool products and we were building prototypes. And that was kind of the genesis of Palantir.

Oh, interesting. Okay. So you guys, you basically had the PayPal showed you a bit of a bit of the problem.

It's like they like show us a solution to a problem. They're like, wait a second, because basically what happened is I got to know all these guys at PayPal. They're in the Secret Service and FBI. Those are the two groups that are in charge of anti-fraud, of like arresting the mafia guys. And these guys would come to us and ask us for advice on other things. Because it was like, you know, it's kind of fun. It's cops and robbers. Like, every— I don't know if every young man likes this, but, you know, of course, of course you want to help get the bad guys. So like, so like we were teaching them about cyber fraud or whatever you call internet fraud in 2000, 2001. And they start coming to us and then 9/11 happened and then the government started spending billions of dollars on like supposed solutions to catching bad guys, watch what's going on. And we knew these guys and we watched what they were spending money on and we were like, oh my God, this is stupid. Like, this is way behind Silicon Valley. Not that like I'm so smart, but Silicon Valley itself had gotten way ahead just because they brought talent from all over the world. So whatever was being done, what we call like the Beltway, basically in D.C. with the old integrators, they're still doing stuff from 20 years ago. And we're like, oh my gosh, this is like our nation's under attack and we're wasting billions of dollars on stupid shit. So that's, that's when we said, okay, let's get together, let's draw up like what we could actually be doing here if they did it better.

What happens next? So like, walk us through because, okay, we see today— I think I looked this morning, it's a $50 billion market cap company. That's amazing. But it's also 20 years later. So if we rewind the clock to where most of the people who are going to listen to this are early stage, trying to figure things out, unclear which pathway to go, unclear if this is even going to work. Take me back to that. What did you do to— what was it like and how did you figure out like the first few steps?

Well, there's lots of different ways to build successful companies, right? So I don't ever want to be like, this is the path. But our path was we were kind of watching all these companies come out of PayPal. So I was very lucky to be sitting there seeing like these guys, you know, doing Ironport and LinkedIn and YouTube and Yelp and etc. So like watching these and the ones that I could tell were more successful, it was obvious at the time, were the ones that are attracting the very best engineers. It's almost like engineers were lined up trying to get into these companies, right? So you think like a lot of times people have a business idea and you're like, how do I hire an engineer? And like, and like it's the opposite. It's like the ones that are crushing it, it's like a nightclub where the engineers wish they could follow those people in. And it's those cultures, something about them, it's just the whole— it was just so dynamic. It was like they're able to try 10 times as much really quickly. You can just kind of tell like, wow, like you can be really smart at business, but like if you could try like 10 times as many things, like you can be like slightly less smart business and still succeed, right? Because you get to iterate. So it's like, okay, we need to build somehow a really top engineering culture. Like that was like one of our core principles early on is how do we— we used to say the engineer is king. Like how do you, how do you have a culture that attracts the very, very best and, and respects them and like makes them partially in charge of the company, you know, with, with you. And so we spent a lot of time on that. It's a little bit chicken and egg. We obviously— I was lucky to have a bunch of my friends from growing up who are national math and chess champions, all smart guys. And like, so we bring this really core culture together, convince some of these really top PhDs from MIT.

What was your pitch to them? Like, what's— what was the quick version that was getting them excited? It's because you need a magnet, something to bring the talent in.

The government spending Tens of billions of dollars in this area. They're way behind what we figured out how to do in Silicon Valley. It's clear there's going to be a multibillion-dollar company that solves this problem. And you describe the problem to us as a very hard technical thing that if we have the best engineers, we're going to be able to do it. And we're iterating closely, you know, with national intelligence, with defense agencies, and you get to go and solve this problem. And if we succeed, we're going to save thousands of lives and we're going to protect civil liberties. That was, that was, that was how it was like, you know, it's a fun, big mission.

One of those things you said is we're working closely with these agencies. Like, how easy was it to work with them? Because, you know, you're young. How do they even take you seriously? You're young and you're different, right?

You have a different approach. Yeah. So, so maybe it wasn't entirely the case that they were iterating as closely as I'd like them to be with us for the first year or two. So Alex Karp was very good at this. Alex was— Alex was at first just an advisor to us, helping us. And then, and then, and then Peter kept trying to get us to hire a CEO because Stefan and I were 21 and you couldn't really have a 21-year-old running something. Working with like senators and the Defense Department. But like these guys, these generals or former admirals would come in and they just did not understand tech culture. And I'm sure they're great guys. They just wouldn't have fit at all with us. And so finally, Alex Karp had been like helping Peter raise money for things, or friends from law school. And, you know, he was a— he was a PhD in philosophy in Germany. And in Europe, a lot of the billionaires like to pretend they're philosophers. It's like the high status thing to do, kind of like here. They like to pretend they're podcasters or something. I don't know. But so basically basically like he knew all these wealthy people. And so he started advising us how to talk to them, how to meet them, how to think about how institutions worked. And he had always like casting things in terms of like how you had to approach people to take you seriously, which—

what do you mean by that? I don't understand.

Like if we show up and we're like these like quirky 21-year-olds in Silicon Valley, that's like, that's like, that's the wrong casting. Whereas if you show up and you walk in the door with you, the former head of the CIA and Peter Thiel made the intro after the PayPal and another one of his friends who's senior has like, has explained to them that this is a project that they're helping, that it's going to help in this way based on this big advancement made in Silicon Valley. And they've been— and that they've already been talking to a bunch of people, the FBI and etc., and they want your feedback. Like, that's like a— that's like a high-status way to come in the room, right? Whereas if I come in the room, be like, look how smart I am, look how right this is, this is better than what you're doing, right? Like, look at how smart it is.

Are you wearing a hoodie?

Yeah, exactly. They're like— they're like, yeah, I guess— I get a lot of young people maybe underestimate the substance is important, but it's— you can't lead with substance because substance is not taken seriously. So you have to have the substance to win, but you have to have all the trappings of why they're taking it seriously and why they're comfortable doing it and why they're— what, you know, why it makes sense. So anyway, there's these things like this about how the real world works and who to talk to in an institution, who to get your help. So Alex just had like this wisdom about like people and institutions and how to navigate that. Like the rest of us, we have the best tech culture. We didn't have that. And so we actually convinced him to pretend to be CEO for a few years so that Peter would stop trying to hire like a really like senior, like military guy. But then he was such a good CEO, then he actually— he actually was— he's still CEO 20 years later, right? So it worked out.

And you mentioned Peter. Peter was not active day to day necessarily.

No, but he was critical for the company.

What was he doing?

Peter was like, first of all, he's the financial support that no one would give us crazy kids. Like I told you, there's always crazy projects going on. Like a lot of people around him are like, this is the craziest thing you're doing. Like, it's one thing to waste money on a restaurant, but you're sending these kids to pretend to be spies and build things. Intel, like, what are you thinking? There's no such thing as a company that does this. So So like, you have to give him credit for like being willing to bet on a crazy idea.

He put a lot of money into it, right?

Like it was several million dollars early on, which is like— and then, and then we had— then this fund started putting things alongside others. But I mean, yeah, that's like, that's a huge amount of money for like crazy kids is what are we doing? And, and then like Peter was really good for strategy. He was really keen on— I think one of the most important things is he stopped us from a couple of early partnerships. This is one thing that people screw up a lot with startups. A lot of startups when you're getting going, you want to like, you get really excited about some partnership on the table and you think it's going to really help you. But, but a lot of partnerships will cap your upside. A lot of partnerships will limit your ability to iterate and to try other things. And I think because he had the experience and he was going for multibillion-dollar win, he was really able to like steer us away from a lot of big mistakes early on. Like what would have been a partnership that would have been maybe like we would have like spent like all of our time selling our interface in Europe to give them all the rights to it. We would have to fly over there and support things they were doing or just like random things that like sounded really good because when you're getting going, you're desperate for that first $500,000 million in revenue and stuff and like, but you have to make sure you get it in a way that's going to actually scale into something much bigger. That's not like a mess. It's going to distract you.

Right, right. And Peter is, is an interesting guy for sure. He— you said restaurant. Curious.

Like, I mean, there was everything. I think so. This is, this is like not unique to Peter, by the way. This is a really common rule is that whenever someone becomes very successful for the first time, they usually become more expansive if they're an entrepreneur. I mean, all of us, we like to build things or we like to create things. And so it's once you have success, you're like, okay, I'm really good at that. I probably could be really good at these 6 things as well. And then I think we all forget, okay, the reason I was really good at this first thing is because I was like obsessively working on it for 80 or 90 hours a week. And I brought like 30 of my smartest friends into it and we all iterated like crazy and we almost died multiple times. So we barely made it work.

But you kind of forget that.

You kind of forget that part and you're just like, oh yeah, I did this. And you do all these things.

Not my fingers.

Exactly. Like, we're going to do this, this, this, this. It's like, it's like playing Risk, you know, where you're conquering. And like, it turns out that's not, that's not a good way. But this is what I've seen almost everyone go through this, like, unless I'm lucky to have watched multiple other friends go through it. So I still made the mistake in different ways. But you— but so, so there was very expansive and there were some things that maybe didn't make as much sense. And, and then, then of course, but you know, he's so freaking smart that some of them did make a lot of sense. He wrote the first check into Facebook at that time. So I mean, give me a break, you know, you can you can— I mean, everyone in venture is not going to have 100% hit rate. And so you learn from your mistakes.

Were you around when he wrote that check into Facebook?

Yeah. I mean, I get no credit for it.

And like, at the time, did it seem like a big deal or was it just like one of many things he was doing? It was unclear that that was a— that that was—

it was one of— it was one of many things. They seemed particularly smart and interesting. And, you know, I was— I can't say I thought it was going to be as big as it was. I don't think anyone realized that. But, but it was— it was clear they were really smart, really interesting guys who were very aggressive. And so it was— it was a fun thing to be exposed to. I think One of my good friends who actually helped Peter write the check is played in the movie by, by an African-American guy, I think, which he jokes about. But it's like, you know, it's a good— it was a good time to be there. It was fun.

He's like a 5'4" white guy.

He's a little Jewish guy.

That's the ultimate compliment.

Sorry, James, no credit for you.

If anyone out there wants to rewrite me as like a super handsome black guy, I would love that. Exactly. Thank you for doing this.

Awesome.

Thanks, Sam. I'll give you the highest compliment, which is I learned a lot today. That's my goal with all these is what are some of the things that, you know, couple of golden nuggets that come out of this. So thank you so much for doing it.

Awesome. It's fun getting to know you.

Yeah, right on.