My First Million - From PayPal Intern to Starting 4x Billion-Dollar Companies - Joe Lonsdale Interview

Episode Date: April 26, 2024

Episode 578: Shaan Puri ( https://twitter.com/ShaanVP ) sits down with Joe Lonsdale ( https://twitter.com/JTLonsdale ) to talk about how he leveraged one internship at PayPal into one billion dollar success after another. Today Joe is Managing Partner of 8VC and an early investor in Anduril. Want to see Sam and Shaan’s smiling faces? Head to the MFM YouTube Channel and subscribe - http://tinyurl.com/5n7ftsy5 — Show Notes: (0:00) The One Reason strategy (3:18) Learning Global Macro Finance from Peter Thiel (5:35) Taking multi-million dollar bets at 4:30am (8:43) Hire for raw IQ over expertise (10:33) Nurturing employees into unicorn founders (12:24) Solving hard problems with Addepar (13:53) Always “Being on” (15:32) How to spot opportunities for new businesses (21:10) How Epirus landed a military defense contract (27:09) Getting hits in hard domains (28:24) Business Idea: AI-powered Estate Planning (29:19) Business Idea: Business Process Outsourcing for local government (30:58) Big swings vs. base hits (31:49) Idea vs. execution (32:38) Focus vs. diversity of thought/attention (33:33) Insights from Elon’s inner circle (35:36) Joe Lonsdale’s unfair advantages (38:48) How to invest your time to make your first $1M (40:40) Working on an A+ problem as an intern at PayPal (43:15) Be within 2 standard deviations of top talent (44:14) Early days at Palantir (46:56) Building a top engineering culture (48:31) Borrowing trust as 21-year old defense contractor (52:22) Peter Thiel’s biggest contrarian bet — Links: • Joe's Twitter - https://twitter.com/JTLonsdale • Joe's blog - https://blog.joelonsdale.com/ • Joe's podcast - https://www.americanoptimist.com/ • 8VC - https://www.8vc.com/ • Addepar - https://addepar.com/  • Palantir - https://www.palantir.com/ • Epirus- https://www.epirusinc.com/ • OpenGov - https://opengov.com/ • Prologis - https://www.prologis.com/ • Lessons from Peter Thiel - https://joelonsdale.com/lessons-peter-thiel/ — Check Out Shaan's Stuff: Need to hire? You should use the same service Shaan uses to hire developers, designers, & Virtual Assistants → it’s called Shepherd (tell ‘em Shaan sent you): https://bit.ly/SupportShepherd — Check Out Sam's Stuff: • Hampton - https://www.joinhampton.com/ • Ideation Bootcamp - https://www.ideationbootcamp.co/ • Copy That - https://copythat.com • Hampton Wealth Survey - https://joinhampton.com/wealth My First Million is a HubSpot Original Podcast // Brought to you by The HubSpot Podcast Network // Production by Arie Desormeaux // Editing by Ezra Bakker Trupiano Past guests on My First Million include Rob Dyrdek, Hasan Minhaj, Balaji Srinivasan, Jake Paul, Dr. Andrew Huberman, Gary Vee, Lance Armstrong, Sophia Amoruso, Ariel Helwani, Ramit Sethi, Stanley Druckenmiller, Peter Diamandis, Dharmesh Shah, Brian Halligan, Marc Lore, Jason Calacanis, Andrew Wilkinson, Julian Shapiro, Kat Cole, Codie Sanchez, Nader Al-Naji, Steph Smith, Trung Phan, Nick Huber, Anthony Pompliano, Ben Askren, Ramon Van Meer, Brianne Kimmel, Andrew Gazdecki, Scott Belsky, Moiz Ali, Dan Held, Elaine Zelby, Michael Saylor, Ryan Begelman, Jack Butcher, Reed Duchscher, Tai Lopez, Harley Finkelstein, Alexa von Tobel, Noah Kagan, Nick Bare, Greg Isenberg, James Altucher, Randy Hetrick and more. — Other episodes you might enjoy: • #224 Rob Dyrdek - How Tracking Every Second of His Life Took Rob Drydek from 0 to $405M in Exits • #209 Gary Vaynerchuk - Why NFTS Are the Future • #178 Balaji Srinivasan - Balaji on How to Fix the Media, Cloud Cities & Crypto • #169 - How One Man Started 5, Billion Dollar Companies, Dan Gilbert's Empire, & Talking With Warren Buffett • ​​​​#218 - Why You Should Take a Think Week Like Bill Gates • Dave Portnoy vs The World, Extreme Body Monitoring, The Future of Apparel Retail, "How Much is Anthony Pompliano Worth?", and More • How Mr Beast Got 100M Views in Less Than 4 Days, The $25M Chrome Extension, and More

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, I have some unfair advantages, right? I feel like I can rule the world. I know I could be what I want to. I put my all in it like no days off on a road. Okay, Joe, thanks for doing this, man. And thanks for inviting me into the morning workout, the cold plunge, and, uh, and everything.

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 a workout was making decisions on blended reasons or having like a blended strategy for how you're, we're gonna win doing these five 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 nine lessons from Peter Thiel. I sent to all of Palantir that's been like sent to all to my other companies as well and it's one of my favorite pieces and that's one of them in the 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 successful is it's kind of like the power law rule right, like an venture capital like fund even, there tends to be one thing that successful that's like bigger and everything else. And that's true inside of companies as well. It's very unusual, like extraordinarily unusual for there to be like two similarly equal like products or revenue lines or something like that. Especially early on a company. So usually if you, if you think you have like two or three reasons for doing something or five reasons for doing something, what that means is that you actually haven't figured out. You have no reason. You have no strong reason yet. Yeah. That means you have five week reasons,

which is not good. You want to find like what's like one really strong thing you're driving towards. And 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 going to do 10 companies. And like, by the way, that's like much less likely to, that I would big success because you're not 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 five 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 eight revenue streams means you probably don't have one awesome revenue stream. Exactly. Growth strategies.

If you have seven things we're going to do for growth means you haven't figured out. Which one's actually the one that's going to work? The one that's going to just compound like crazy. And 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 read once, 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 going to take two weeks. And should I do this trip? He's like, my chief of staff came with like a list of pros and cons. Yeah, 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 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? Reed was one of the key, key minds at PayPal, of course, with Peter Thiel and others. So who knows who actually came out with these ideas. It may all be Reed's ideas. And I'm really like, he's a very smart guy. Well, I save them as for mine now. So I think that's the best way that, 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? Do you remember the moment where you're like, oh, this person's kind of different? They are that five standard deviations in 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, 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 ever met. And he was interested in some of the same things out of you're interested in. He'd taken some of the logic farther than I ever had. So, so I always learned the most from conversations with him. So that, that to me was one of the reasons he was the most attractive to try to work with

and try to build with. And so before you start multiple other companies, you do Clarion. which is his hedge fund, I guess. Global macro fund, yeah. It's like the most fun part of finance. There's lots of parts of finance. Finance is like all sorts of areas. Global macro is looking from like the highest possible perspective that 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. Basically it's 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, 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. But then you say, normally I would trade this, but actually this is happening because China just like invaded this thing over here. So actually it's not a good time to do it. And 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 were 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 U.S. in early 2000s.

And 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 markets, completely changing the pricing of bonds. We found some really interesting ways to do things there. Actually, my favorite story, though, I'll give you. It's just to give.

So we were working at the hedge fund. The markets open. We're in San Francisco. We're in 555, California, right? It's that big building downtown. Like, after 9-11, I think Peter had a parachute in his room. I always told me should have parachutes for us too. But anyway.

There's one parachute. Okay. That was just the joke. It's probably good. Anyway. But no, so it's a cool office on the 40 second floor. And the market's open at 630. So the traders are supposed to be in at 630,

except the first Friday of every month you had to come in at 530 because the non-farm 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 clear. cool is Kevin Harrington was our head of research.

It's like genius, crazy physics, biology, interesting guys. And he ended up being on the National Security Council later, like super interesting, smart guy. And he like had mapped out this thing that 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 bottom markets like crazy,

like like hundreds of billions of dollars and move around based on this number. And we figured out there systematically miss doing it. This is totally legally. You're allowed to do this in finance. So we figured, okay, this is a mistake. 75% of that time, we can make money trading this. And then we can adjust and 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 us a good chance it might be. But we take a big position, 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, it's about 75% chance. And so 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. Is this just like the highest stakes game of poker you ever played? It's the most fun ice against game of poker. And you're like literally personally, have like a few million dollars riding on at a time as early my 20s these guys you know peter probably had 100 million dollars running out every time and and you're like high five if it goes right or you're depressed if it goes wrong it was the most it's his most fun high-stakes

game of poker 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 you do if it didn't work out yeah sometimes we go there anyway but yeah for some reason my mind this is maybe who I am. I remember all these times that 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. So it's like, but I remember it was a fun time. That's a certain 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 less likely to start it again or do another thing. There's no freaking way I would have built all these companies if I have to force myself to like think about that too much. The way you just described like the global macro fund, you're pretty young when you're doing this. 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 I had opinions about it. So that's like weird. Those are like my two things. And so, you know,

so I knew that world pretty well. And yeah, you learn a lot being in it. You just have to be in it to do it. But I mean, credit to them for betting on you to be able to do that. You know, they could have hired somebody who's been doing that for 20 years in New York.

We talk about lessons from Peter Thiel. I think one of the most important ones I've seen from Ham that I've definitely taken to heart and what I've done is I'd much rather higher, I'd much rather hire for talent and ambition and hard work than hire for expertise. So 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 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 kind of 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. 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 was like hard math problems. What are you doing? We used to do that at Claren. We had these really hard problems. I remember my friend, Suji, I ran Dropbox, one of his partners there, his new, his new ventures Chen Lee was like the highest score on this test I gave. It's smart, smart, smart guy. Yeah, we had to do really hard tests.

But, you know, once I already had around me a bunch of people who are really top talent, it's like they knew people, like, oh, who is the smartest guy in your physics PhD in MIT, who is, you know, things like that. So it's like you kind of get a network. It's already really solid. And then you go out from there. And so let's go more on that. So 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 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 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're already really amazing. And, you know, and so I was, maybe I'm just going to convince them to have work with me ahead of time, you know? So it's like there's a nature and nurture thing, right? Yeah, there's some of both.

I do like to think that we've given them useful frameworks, just like I learned from Peter. they might have learned some of these things for me too. But, but, I mean, one of the ones, you know, not all of them have even backed. Like some of my back, some of them went off and then did it themselves. And, you know, which, you know, usually they let me back them. Yeah. Yeah, that's the worst when you didn't get the call.

Actually, I'm still proud. I'm still proud. I'll tell you, the guy who came out of school to help run out of par with me. And I was like, he was being president of the company, super talented guy. And I did not know what I was doing. Even though I just already done Palantier, there's always mistakes I was making because there's like things I didn't realize I had advantages of Palantir. And, you know, out of parts of multiple billion 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 like, he had like, he had like, you know, his own tough time or whatever for a while afterwards. And then he ended up partnering with someone. And he started the company that became worth $3 billion in like four 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 have, they didn't bring anyone else into that company. But I was still really proud of the fact that I'd work with this guy.

and then he'd gone on and had like crazy success. I mean, that's a cool feeling, you know. But for the record, it's always, I'm more proud if I got to invest too, right? I know, come on. Let's take care of your buddies. Yeah, exactly. It was most of the 95% of them.

It's like people will bring me in and I'll still like help them. And we'll coach and work with them together. So let's do a big hit number two, at a par. Yeah. You explain like, explain the layman's terms what even is at a par. And then I have some questions for it. But let's first through the, explain like I'm five years old.

What is at a par? So at a par is, is the leading wealth management technology company in the U.S. And so there's people who work at what are called RAAs, 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 your reports.

They'll do your trusts in a state. They'll just do everything around kind of the wealth planning. Man, it was really freaking hard. We built all this stuff and we hooked up to Schwab and Fidelity. Because 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 Vodelli was oftentimes wrong. I'm like, what is wrong with this space? It's like the whole thing's a mess. So it was a hard company to build. It took about three or four 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. We'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 Atapur already existed, it would have been a stupid thing to do. And I learned that, then maybe you give up and then maybe you give up and you're just kind of like double down and fix it, you know? Interesting.

So you're, you're a, you don't give up. If it's too hard, too messy. It's like, that's better. That means once I do solve it, it's going to have this giant moat. Like, Atapar is 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? Like, no chance. No chance. You talk about hard work. 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 I 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 my ties and not do anything. Is that? Well, this is like 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 know, you don't like. Right. If you're not enjoying the game, you got to switch it up. Yeah. So 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 the, 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 level. to it. It's a more complicated game. And 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 you get a pause. You do need open time for creativity. I've noticed when I over-chage of myself, I'm not nearly as creative

then. And I think of the cold plunge help, right? I don't know if that's great mind. That was a quick you're in there for a little bit. 60 second, 51 second reset. We have. We had. I think I stayed in for the phone. Yeah, you actually did two plungers. That was pretty good. What is this typical schedule? Like, what's a day in the life? Because you got your fund, you got companies, you got all kinds of stuff.

You got your podcast. Yeah, my number one, my number one is 8VC. And APC 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 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 that?

Here's where this industry is now. Like, here's how this thing is working. Here's how this process is done on 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 right new 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 it could be done, but like, what's the path to get there? What could we put in place that would allow us to get it there? How do we build this thing? How much it's going to cost? How do we how do we make the people want? So there's a lot of things, for example, on like health care and

hospitals that are done completely wrong, but it makes the hospitals more money. 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 it. example. So giving an example, either maybe something that you're this 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. What was a 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 a pretty interesting area. And like the biggest warehouse company in the country is prologist. And it turns out the founder's investor with me is 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 another. And we've actually sold a company to Ryder, so we're close to those guys too. And 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 cameras in, first we thought we need six, but just a couple 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 for people to go faster, create ways of pinging the carriers if it's backed up to like to use the other loading euros 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 the but this 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 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 in adjacent to that world because you've done stuff but how does the brainstorm work inside your office or where like when does somebody ask the question hey could you use AI for these loading

yards like how to how to like take me all the way to that like where does the question like that even come from so what does the nugget of insight come from so my partner jakes in charge of logistics 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. So we'll get together. I have a vineyard in Napa Valley. And we like bring every year like the 100 top logistics CEOs and we'll like, you know, drink and strategize to hang out, you know, it's like good way. And you're kind of asking them questions to try to find their pay points. Yeah, what are your problems, what works? 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 and residents, 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 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 worked out really well. So we're constantly on the lookout for like separately for talents. If you do some 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 is this is and you know the other thing here, which I don't love, but it's definitely helpful,

is California had some new regulatory rules about things you have 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. Yeah, the rules coming up. There's like, you know, logistics has had a few of these things. There had some rule 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 telematics companies we help back as well, which is the thing 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've known the 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. It's 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 successful once, now you get to do like bigger things more easily. Right. So it's like, and that's like, and that's why like 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 advantage. advantages you could do it again. So this, 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 you on hard mode? Yeah, why play you on a hard mode? Why not, why not find? And there's so many places in the world where 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

know, once you know, I have a bunch of more things I could be doing now. If I have more competent, like 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 I think is it makes sense? 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 thought I was opening up. A lot of my friends there were like reading Milton, free men and 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 there. Like, Joe, yeah, none of the stuff that you want to work on here is going to be allowed.

It can't be foreign. I mean, oh, that's too bad. So I just stop 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. Right. And we start mapping it. At the same time, you know, we'd done Pallenteer, sorry, in 2003. So this is now like 2015, 2016. And I wasn't, I'm not running Pallentor 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 U.S. has gotten to be like a lot more dysfunctional, a lot more broken. There hasn't really been. So what happened to defense is all these companies consolidated 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. But they have to convince we call it innovation in theater. They have to pretend they're innovating, but they're not necessarily great innovating because they're 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 three of my best ex-palantier guys, they partner with Palmer, of course, start Andrew. 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 basically mapped out like what are 20 new possibilities in defense. I want to find 20 if just to see and then we're going 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. Yeah. Well, you have to have like a guy who's job.

You have to have a guy who's helping him. 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, let's talk to our smartest friends in the space. Let's talk to our network. I want to hear, you know, I only 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 eight or nine pretty good answers. There's a few of things that I thought are bad answers.

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, in, in, in an EMP, in electromagnetic pulse space. And it's really directed EMP, of course. You 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 at all. And you want that to protect against like drones, for example? That's one of the really good ways of doing it. So basically you can have a chip. You can, you can base control power on very small time skills.

You could take, you know, take, you know, the guy and nitrite emitters, and you could build this correctly with the top town. It turns out there's like a co-founder who's a friend of a friend of mine from Stanford, who's just a 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. They're 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 by blasts it and you're not turning a truck off. You're not killing the person.

So 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 photo. And with about with less than $30 million in this in the second round, we got to the point where we were, we fought away into a contest against the other primes. And so, 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 contest. You're like, how do we compete on merit? Yeah, exactly. Longevity relationships. I'm not going to be better at playing golf with the senator. Right. But if you can let me into the contest, then maybe we can win, right? How do you convince them to do the contest? That you push the, the Congress to make laws to allow competition. You have there's competent generals. There's competent admirals. Like, you know, thanks to Palantterter. And you know, thanks to Palantty. And you know, thanks to Palant in 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? That's kind of like the old mindset in the US,

the 1950s, 60s is like innovation is expensive. Outsiders aren't going to be able to do it. And that was true 50, 60 years ago. But long story short, we ended up shooting down the hardened drones nine and a half times further away than the other guys. They actually had to have They used to have used binoculars to like watch. Right. Like shooting them down really far away. And people were just like flabbergas. Like everybody was lined up.

And it's like, okay, we'll see who who performs. He's like, you're going to need binoculars to see ours. Yeah, exactly out of range compared to whatever else is doing. I think, I think there people are just totally shocked in, 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. They're 10,000. If it wasn't Palantir, like a Lord of the Rings reference? Palantir is Lord of the Rings.

So Epirus is more real mythology. Palantir is more in the fake mythology role. But no, we have quite a few things named after Toki and stuff. It's an inspiring story. The idea with Palantir is a seeing crystals, right? And in the story, this is super dorky, but in the story, they're built by like the Ls of the uttermost west. And they're basically this thing created for the humans to get rid of the bad guys.

But then 2,000 years later, a bad guy takes over the technology. Right. And is using it for evil. And so the idea of Palantir is we think, 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 going to watch the watchers and be really careful about how the technology is used because it's very obvious if you're doing something killer 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 limiting 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 idea 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 Silicon Valley were like oh B to be SaaS you know what's a 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 or to fish or other people are not fishing or is that just what happened no what I think it's definitely a strategy of sorts where you don't want to build, like, you had 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, it's probably why I miss 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 out before they didn't want to do it anymore. So it's like, no, you want to, listen, there's, 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 have seen that before and then find ways to work together to fix problems. And what are some other ideas? I want to either hear ideas that you're not doing just because 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 not like kind of using 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 it because 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 have 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 can 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 a state management company. We have SaaS software for state stuff you'd plug into. I have a lot distribution for this ready, but I would need like the right engineers and AI people.

And I'm not sure if it's bigger than a billion dollar or two billion. dollar 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. Local government, so we just sold OpenGov for $1.8 billion. And local government, there's a lot of lessons from this company, a lot of mistakes. It took us 12 years. Zach Buckman, the CEO, my co-founder, a great job. We learned that you only can really do things they already have a budget for.

There's about 90 things local governments pay money for software to do, and OpenGov does about 40 of them. So we learned this base really well. Like, it's a big, right? There'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 are retiring soon too.

So I think a BPO, a business process outsourcing thing for certain tasks for local government that is 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 what would the first like six 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 grant work on tracking their assets and asset management. Or you're doing something for their budget for them automatically. It's way faster. This is so CFO doesn't have to hire three people. They can only hire one 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'm going to say a statement. I want to hear you agree or disagree with it. So the first one is on on this idea of big swings that are solving like huge problems, yeah, 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, 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. It's like a huge, crazy, risky quest. You don't want to be like poor for 12 years 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 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 there actually aren't worth that much because they couldn't actually bring together the talent to do them. So it's necessary but not sufficient. You do need both.

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're nearly all focused and compounded over a very long length of time. If you look at Palantir and Adap, a part of 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 philanthropically, I think for me, coaching entrepreneurs, something I enjoy. 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, especially if you haven't already had like a giant win, you should just focus and get that giant winning compound. You're friends with Elon. What's something you've learned from him or something you admire about him? maybe that the rest of us don't know by you know who only know him from the outside yeah i i mean i guess i'd say i really admire his boldness and his like obviously it's he's really good at focus

he's really good just saying no even to friends about anything it's just not like tied to what he's like really passionate about and focus on to win and he's just really really bold at like claring like nonsense out of the way and clearing mess out of the way and just like going right for the thing that that matters right for the substance so i think i think most people in my life would be a 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 can do better at this. There's more here, yeah.

I could be more myself in that direction and I'd be more successful. You know, I'm obviously done very well, but, but I think he's a whole not level of bold. And that's something that it's good to see that for me because it reminds me that that's a, that's a good direction for entrepreneurship. You know, is he focused, though? Because he's got like five things. You know, he's got Twitter. He's got SpaceX.

He's got Neurolink. He's got boring company. he's got so many things. How do you square that? Is it focus or is it? I mean, I think he was insanely focused for a very long time on the things he was doing and on skilling them.

I guess, you're 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. He would expand that. I think I told you earlier, you know, my partners are allowed to work on up to six 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 one or two 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 have asked you've been beating around the bush of this one thing. So now I'm going to ask you it directly, which is you have now created at, 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 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, I have some unfair advantages, right? And 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 to try. What does that mean? You have people at universities. Who? What are they doing? It's like you'll have fellows who apply. You'll have people who run your program there. You'll host parties and meet talents.

You'll you have a certain playbook we've built since Palantaire of knowing how to show up. So you have like a scouting department. Yeah. You have like a huge talent scouting department. I mean, and works in different ways, different places, 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 as smart people, the more you get to meet their smart friends.

And 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 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 five founders who each have an idea and like four of them are like secretly working on it. And one of them is like talking to everyone and iterating which is the five is going to win, right?

So it's clearly the guy who is iterating a ton and five people the same idea. We're 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 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 being involved and then whenever we start a company maybe this is a mistake because maybe I could have 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 when we start out of the build program our fund might take 20% and our and my team and I might take 10% so we might have 30 total and like maybe 35 or 40 but but 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 on it.

And that's such a big advantage to like have other people like obsessed over this thing. And are people who truly feel like co-founders, by the way. I think it's one of the big mistakes. You're like, I'm the founder and you guys are the working like, what are you getting from that other other than your ego. 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 there's people who are proud founders who get to be out in the press doing it. And they're going to sleep bored 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 a million dollars, 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 a million dollars,

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 a million dollars invest their time? You know, it's yeah, it's right. you can't just make a million dollars from investing for probably the average person.

Maybe you can't 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 kind of coupons. And that could work for 100 years. Friety. Think thrifty. Like that is the thing like over a very long time horizon. I think you'd say like she bought one stock or something also.

Like 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 money. You want to make money, especially these days. I mean, gosh, going back back to that, it 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. You have to be really to say, this is what I'm not good at. This is 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. Try to find a way to help those people.

Try a way to learn how their businesses work. Be part of a business and growing it. and that's how you see how everything works. And, you know, if you're talented enough, then 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 walk back in the journey, it's you're in college, you go to Stanford and you end up working at PayPal. You become an intern at PayPal. I tried a couple times. They rejected me the first time. I applied, actually. What happened?

Why did they reject you? There was 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 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 People Soft instance, which is terrible. But I, you know, I sat next to this guy. We were in like, So Roloff, who's now like a star partner, 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 what was happening is the big challenge in the companies, we 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 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 7-11 and the clerk there is like maybe having a maybe having a bad year and like, 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 five or ten bucks. The Russian mafia is buying them up. And then all of a sudden you get a charge back that says $200 on PayPal to something. And you're like, I didn't do that. So you charge it back. And then PayPal's left for 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 kind of a fun problem, too. And so I like what you did there, which is one of the pieces of advice I gave on the pot is you got to work on the A plus problem at any company. So regardless of what your role is, you should try to at least know what is the A plus problem of this company right now. And then 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 people's soft thing was so dumb and so horrible. And I couldn't figure it out. And my dad can be if you don't quit. Just like, do what you can to be helpful otherwise there. So that was a good dad. I was a good dad. advice you're an 18 year old. You, uh, uh, 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 group, like you go to a top school. You didn't feel like you're one of the best. No, 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. He's like, that's exactly why you should be

there. You want to be challenged. 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 Palanttyer who was really good is you can't really appreciate a talent unless you're within two serene deviations of it. So you think of talent is being an unnormal curve for any typical skill. It could be for math, could be for podcasts, 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 fourth or fifth stair deviation. But if you yourself are second or third 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 figs 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 we, but we, but we, 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 that's because you can understand. This is actually the five 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 of 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. I was just his family office. There's tons of crazy shit going on. It was really fun. It was like a really expensive restaurant that went bankrupt. There was like a spam company. So I was starting.

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, okay, I'll just, I'll take charge here. So I started hiring people with him 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 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 my roommate, Stefan and I from Stanford to design 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. They're like, oh, they like, showed us a solution to a problem. They're like, wait a second. Because basically what happened is they 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 to answer fraud of like arresting the mafia guys. And these guys would come to us and ask us for advice on other things.

things because it was like, you know, it's kind of fun. It's cops and robbers. Like every, I don't know, every young man likes this, but you know, Intel world. Of course. You want to help get the bad guys. So we were 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 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 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 et cetera. So like watching these and the ones that

I could tell were more successful. Uh, that was, obviously the time were the ones that are attracting the very best engineers is 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? Right. 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 we're, and just those culture, something about them is just the whole, it was just so dynamic. It was like they were to try 10 times as much really quickly. You can just kind of tell like, like, 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 could iterate. So, so 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 use to say the engineer is king. Like how do you, how do you have a culture that attracts the very, very best and in 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 were national math and chess champions, all these smart guys. And like, so we bring this really core culture together, convince some of these really top PhDs from MIT and Stanford. What was your pitch to them? Like, 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 multi-billion dollar company that solves this problem. And you describe the problem to him as this is 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 you succeed, we're going to save thousands of lives and we're going to protect civil liberties. That was that it. It's a high level. It's 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 it may, 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 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 outmoles would come in and they just did not understand tech culture. And I'm sure they were great

guys. They just wouldn't have fit at all with us. And so finally, Alex Karp had been like helping Peter raised money for things, their friends from law school. And he was a PhD in philosophy in Germany. And in Europe, a lot of the billionaires like to pretend their philosophers is like the high status thing to do. Kind of like, here they like to pretend their podcasts 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 all these like casting things in terms of like how you got 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 form ahead of the CIA and Peter Thiel's made the intro after the being a 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'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 et cetera, 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 smarty. I'm.

look how right this is. This is better than what you're doing. Like, look at how smart it is. While you're wearing a hoodie. Yeah, exactly. They're like, they're like, 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, you know, why it makes sense. So anyway, there's these things like this about how the world works and who to talk to an institution, who to get your help. So Alex just had 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 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 were 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 that pretend to be spies and build things until like, what are you thinking?

There's no such thing as a company that does this. So, so like you have to give them credit for like being willing to bet on a crazy idea. You put a lot of money into it, right? It was several million dollars early on, which to the point, which is like, and then we had to, then it's fun started putting things alongside others. But I mean, yeah, 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 key on, I think one of the most important thing is he stopped us from a couple of early partnerships. This is one thing that people grew up a lot was. 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 their 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 earlier 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 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 that like sounded really good because when you're getting going, you're desperate for that first 500,000 million revenue and stuff. But you have to make sure you get it in a way that's going to actually scale them to something much bigger. That's not like a mess that's going to distract you. Right, right. And Peter is, he's an interesting guy for sure. He, you said restaurant, curious. Like, I mean, there's 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 you like to create things. And so once you have success, you're like, okay, I'm really good at that. I probably could be really good at these six 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 far. And you're just like, oh, yeah. Oh, I did this. So you do all these things. Like it's not my fingers.

Exactly. Like we're going to do this, this, this. It's like playing risk, you know, where you're conquering it. 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 so, so there was very expansive and there were some things that maybe didn't make as much sense.

And then of course, but that 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, 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 many things. They seemed particularly smart and interesting. And I, you know, 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 clear they were really smart, really interesting guys who were very aggressive. And so it was a fun thing to be exposed. So I think one of my good friends who actually helped Peter write the check is played in the movie by an African-American guy, I think, which he jokes about. But it's like, it was a good, it was a good time to be there. It was fun. He's like a five-four white guy.

He's like a little Jewish guy. It's like, 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. That's amazing. Thank you for doing this. Awesome. Thanks, John.

You 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, a couple of golden nuggets that come out of this. So thank you so. Awesome. It's fun to get to know you. Yeah. I feel like I can rule the world. I know I could be what I want to.

I put my all in it like no days on. Let's travel never looking back