What's Going On in Silicon Valley | Joe Lonsdale, Palantir & 8VC Co-Founder

Hey, everyone. Thanks for having me today. I guess I'll give you a few minutes on some of how we're thinking about what's going on in Silicon Valley, and then we're going to, I guess, open it up to a little chat up here. But I guess, so yeah, at a high level, I started off as an entrepreneur and built a few companies, and a lot of my friends who worked with me ended up building companies, so I found myself as a VC on the dark side, I guess, as they say, at the end of the day. But, you know, a lot of what we're doing, I guess, as a venture capitalist, is trying to focus on, like, what are the next really big companies going to be, and where are they coming from? And obviously, the top talent is one key thing for that. But I think, I think, I think whether or not you're a venture capitalist or an entrepreneur, the question is, like, what are the really big new things that are happening right now? Like, I think the question is, what's possible now that was not possible 3, 4, 5, 6 years ago? And if you— what I mean by that, so for example, an obvious thing is, like, before the smartphone existed, You couldn't have Uber or DiDi or Lyft, right? That doesn't make any sense. And if you try to do a ridesharing company now, you're probably 10 years too late. Maybe you'll make something work. You're probably not going to have a really big giant company when something's already been possible for 10 years. And so, and the nature of this question, like, what's possible now, being an important question means you get waves in Silicon Valley, right? You get a bunch of certain types of companies that tend to start around the same time. Yeah. And the reason is because they're possible now and they weren't possible before. So then they compete and you get winners of these waves. And so this is like one useful kind of high-level concept as an entrepreneur or investor. And if you look at the last 100 years of Silicon Valley, these are kind of up on the screen, kind of like what we think are the main waves that have happened over the last 100 years. And so in the 1920s and '30s, you had the electronics wave, right? So the most successful company from the electronics wave was the top 2. students at Stanford in electrical engineering, which was the kind of leading engineering discipline at the time. Like, the professor there, Terman, he took the top 2 students. You guys probably know who they are. It was, you know, Dave Packard and Bill Hewlett, and they started Hewlett-Packard, and they hired, like, a lot of the most talented people from MIT and Caltech and all these other schools and brought them here for, like, 20 years. And so that was the very first wave that really populated Silicon Valley with a lot of engineers and made it work. And I don't have to go through all of them, but I guess another one that gives us a name is obviously when the transistor was invented. Do you guys know the story of Shockley Labs? Is that something that you just talk about here at all? So basically, Bill Shockley was one of the guys who got the Nobel Prize for inventing the transistor, and he got together 8 people who he thought were just like the most amazing young scientists, and he brought them all to Shockley Labs. And apparently this guy, Bill, this guy Shockley, he was a genius, but he was like a total jerk, and no one wanted to work for him, and he kept giving everyone lie detector tests, 'cause he didn't trust them. This is probably not something you should do to your employees. And they eventually said, you know what, screw this guy, we're leaving. And they all left, and they were called the Traitorous Eight, which I like, because my fund's named 8VC. We talk about the Traitorous Eight. But the Traitorous Eight, they started Fairchild. And of them, one of them was Moore of Moore's Law. One of them was Kleiner, who started Kleiner Perkins. Other ones started Intel, and their colleagues there started Sequoia. Kleiner and Sequoia being the first 2 big funds, and they were really successful. And so you basically had, out of these, kind of the very beginning of the semiconductor wave, A lot of Silicon Valley as well come from there. And then of course, a lot of these guys who started National Semiconductor, you know, all these are, you know, Intel, Fairchild, they started all these funds. And the reason they started all these funds, in my opinion, was because basically after the semiconductor companies, you had computers for the very first time in all these businesses, right? You didn't used to have a computer at the library or at the government or at the hospital. So you had these computers and now you need to use them for something. And so you need to build software. And so these funds started 'cause these guys were trying to help build software. And so the very first kind of big wave in Silicon Valley post all the computers was the original enterprise software wave. And that was, you know, late 1960s, 1970s, 1980s. And so you get all the enterprise software companies. And then, of course, you had to connect everything and had to talk to each other. You had the networking wave. Of course, that leads to the internet. This is oversimplifying things, but the internet wave gives you consumer. I think most people around the world still think of the consumer wave as the tech world, right? Because that's what everyone's seen is the consumer wave. And I think you can break that up into 3 things, really. It's Web 1.0, Yahoo and Google and Amazon. Web 2.0, which is obviously Facebook, LinkedIn, etc., and then the consumer wave, the mobile wave companies, basically. And so you still have, obviously, the impact of the consumer wave, or like the dominant companies in Silicon Valley. I don't think you've had— I'm open to being challenged and proven wrong— I don't think you've had since 2010 really very many at all very important consumer companies started. And the reason is, 'Cause you had 3, you had the big paradigm shifts. You had the internet, you had all the different types of programming that led to Web 2.0, and you had mobile. Those were kind of 3 big paradigm shifts on the web. I don't think you've had another one yet. Some people think AR/VR could be a big paradigm shift there. That's why I was an early investor in Oculus, 'cause I think that's really cool stuff, and I thought maybe that could lead to a new wave. I don't think it really has yet. And so consumer is still very interesting to me, but there's not a lot of new stuff going on there, in my opinion, that's really big. And then, of course, you have what we call the smart enterprise wave. This is where I focused a lot of my career, and it's really, the last 10 years, I think it's really been a lot of the dominant new companies. And what this is, is basically, and there's lots of ways of summarizing it, but you're basically going back to that original enterprise wave, and for the very first time, you're replacing a lot of these systems. And so you're going into logistics and saying, there's all this data in the world we should be using for logistics, right? We should be coordinating things differently. It's like, there's all these trucking companies that don't coordinate. They don't know they're both driving half full on a route, right? There's millions of things in logistics that are wrong. There's things like that in finance and healthcare. So there's all these verticals that are going back for the very first time and kind of replacing the systems there. And so a lot of what we do in smart enterprise is we focus on various verticals, enterprise software in finance, in real estate, in healthcare, logistics, and government, something I've done a lot of too. And so these are examples of companies, you guys probably know some of them that we work with that are doing really well in different verticals. And I think that's really been where a lot of value has been created. in the last decade is going back and for the first time kind of replacing these 30, 40-year-old systems using big data, using the cloud, using different ways of coordinating to make these industries work better. So that's one kind of high-level thing going on in the Valley. The other, even kind of newer in my mind, also very exciting area is what I'd call the bio-IT wave. And I don't know how much you guys focus on this here. This is harder to do if you don't have partners that really understand biology, but the The summary I'd say, because I think this is the big thing going on in the Valley, like if you tell me right now you put $1 million into a company and you got 100x or 1,000x return, I'd tell you, you know, 5, 10 years from now, what company is it? I'd say chances are that right now this year, that's probably something in the bio-IT wave. And the reason this is happening, you guys probably heard of this before, the reason it's happening is a few things. The obvious one is obviously the cost of genomic sequencing has gotten way, way, way cheaper. I was just speaking in Australia at something, and the analogy I gave is the first-class round-trip flight to Australia, if it's come down as much in price the last 15 years as sequencing, it would cost 2 cents to fly round trip to Australia, right? So this is like a whole new paradigm of like really, really cheap data. And then of course you have gene editing is working for the first time very well with CRISPR and everything. It's actually working right now that we can edit genes very accurately. And what you could do is you can edit things and you see what happens. You edit bacteria, you edit plants. You edit cells and you see what happens in the same day, same week. So you're kind of all of a sudden learning all these new things about biology really quickly. And then on top of that, you have things like synthetic biology. Synthetic biology was first figured out, you know, first paper was in 2000 in Nature, right? So it's been around for 18 years, but we're just now getting the tools to be able to use synthetic biology to take DNA, put it into things like yeast, run the program, see what happens, and really easily create things synthetically. And then on top of that, of course, there's tons of new tools coming out. So there's a whole kind of wave of tools and breakthroughs that are making things possible in bio-IT. I'd love to talk more about it. People are into it. And for me, that's probably the most exciting new wave going on in the last 3 or 4 years, where there's literally companies I'm involved in today doing things we thought were totally impossible 3 or 4 years ago. So that's a very fun area. Anyway, these are some of the areas I mentioned. Other things in this that are really cool, obviously, is the microbiome. It's a whole new area where there's just so much stuff going on there. Epigenetics is something that I have a colleague here who's got a PhD in at Stanford. I don't understand it very well, but it turns out genes are a lot more complicated than they should be. At least from a computer scientist, you kind of want to think of genes as like a program, and it turns out it's not like that at all. There's actually all sorts of reasons genes do or don't express themselves depending on the environment, depending on things going on with your body. And so there's just a really interesting kind of wave of understanding how the body works a lot better happening right now. So you're saying that the more you know about the body, the more you're going to be able to control it? And then, and then finally, I'll mention one other area that I'm really passionate about, kind of combines these 2, which is the health IT area. So in the US right now, this is probably one of our biggest crises economically. You guys know, we have about 18% of our, of our GDP spent on health stuff, and a lot of other countries do it with only 8, 9, 10%. I think we do have a little better innovation, but we have a lot of waste, a lot of really bad things going on there, and there's tons of ways you can combine bio-IT and health IT. The most kind of fundamental, really interesting health IT thing going on is what's called value-based care. I don't know if you guys focus on that at all, but basically, if you want to make healthcare cheaper, you have to align the incentives between the payers, which is the insurance companies, and the providers, which is, you know, your hospital or your clinic. And in order to align the incentives, you need to be able to say, rather than every time you come in, they treat you, you get money, they have to be able to create episodes of care, which is something happens, how much should it cost the next 180 days or the next 360 days? And by being able to know really precisely based on who you are and your health history and what's going on, what they should be paid on average, it then creates the incentive to do preventative care, to do other types of care to lower the cost. And so, in order to do value-based care well, in order to give those incentives and align them where the payers and providers are on the same side, you need really, really good data. And right now we don't have really good data because the health— the EHRs, the electronic health record systems, don't let you share data, don't let you take it out very easily. So that's a big thing a lot of us are trying to fix is, How do we share data in order to make value-based care work, in order to bring down the cost of healthcare and fix the incentives? Another way of thinking about it is all these hospitals are like local monopolies, and it's really hard for local monopoly to be efficient. But if you can give local monopoly incentive data, you know, incentives based on data, you can suddenly create competition where none existed before to bring down prices. So that's one really big area there. There's a lot of other things I'm very excited about. We're using data in healthcare to make it more efficient, to treat patients better. So anyway, that's kind of a very high-level summary of things we're looking at. Great. And excited to chat with you guys and answer questions.