The Compound and Friends - The World According to Joe Lonsdale

Episode Date: March 31, 2025

On episode 185 of The Compound and Friends, Michael Batnick and Downtown Josh Brown are joined by Joe Lonsdale and Jacob Miller of Opto to discuss: entrepreneurship, AI in America, democratizing private markets, Elon and DOGE, and much more! This episode is sponsored by Betterment Advisor Solutions. Visit: http://Betterment.com/advisors to learn more! Sign up for The Compound Newsletter and never miss out!: https://www.thecompoundnews.com/subscribe Instagram: https://instagram.com/thecompoundnews Twitter: https://twitter.com/thecompoundnews LinkedIn: https://www.linkedin.com/company/the-compound-media/ TikTok: https://www.tiktok.com/@thecompoundnews Investing involves the risk of loss. This podcast is for informational purposes only and should not be or regarded as personalized investment advice or relied upon for investment decisions. Michael Batnick and Josh Brown are employees of Ritholtz Wealth Management and may maintain positions in the securities discussed in this video. All opinions expressed by them are solely their own opinion and do not reflect the opinion of Ritholtz Wealth Management. The Compound Media, Incorporated, an affiliate of Ritholtz Wealth Management, receives payment from various entities for advertisements in affiliated podcasts, blogs and emails. Inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith, by the Content Creator or by Ritholtz Wealth Management or any of its employees. For additional advertisement disclaimers see here https://ritholtzwealth.com/advertising-disclaimers. Investments in securities involve the risk of loss. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. The information provided on this website (including any information that may be accessed through this website) is not directed at any investor or category of investors and is provided solely as general information. Obviously nothing on this channel should be considered as personalized financial advice or a solicitation to buy or sell any securities. See our disclosures here: https://ritholtzwealth.com/podcast-youtube-disclosures/ Learn more about your ad choices. Visit megaphone.fm/adchoices

Alright, let's clickety clack it up. You live in Austin? Austin, Texas. How long have you been there? Five years. Okay. Alright, so before it became cool. My little brother went there a year before me.

I went there about the same time as Elon and we brought a lot of people with us. So yeah, it's a good part of the world. We're building a lot. Did I put this on? Yeah, so you can hear yourself. We love Austin. We have a financial advisor there and we have two people there. And I don't know, we there every other year? We're there a lot.

I like Lambert's, the boy ribs. Of course. Good stuff. Great city. Austin's a solid city. It's a great place to build things. All right. How are we looking, Nicole?

We good? We have three claps. All right. Here we go. The Call of Cries has episode 185. Whoa, whoa, whoa. Stop the clock. Here's a word from our sponsor. Today's show is brought to you by our sponsors at Betterment Advisor Solutions. Imagining a better future is the first step.

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Welcome to The Compound and Friends. All opinions expressed by Josh Brown, Michael Batnick, and their castmates are solely their own opinions and do not reflect the opinion of Ridholtz Wealth Management. This podcast is for informational purposes only and should not be relied upon for any investment decisions. Clients of Ridholtz Wealth Management may maintain positions in the securities discussed in this podcast. 185 here we go again. Today is a special edition. We are so excited. You guys, I don't even know if you understand the prestige of this pod right now. We have two very special guests,

two first timers on the compound and friends. I can't wait for you guys to hear from them. Let's start with Joe Lonsdale. Joe is an entrepreneur and investor who has founded several companies, including Palantir, Adapar. I didn't know that until recently. That's interesting. I'm gonna ask you about that. And Opto, he is also the founder of APC,

a venture capital firm that invests in technology-driven businesses. Joining Joe is Jacob Miller. Jacob is a co-founder and chief solutions officer for opto Jacob The crowd is going absolutely I can't stop them. I love my face prior to opto Jacob was a portfolio strategist at equium and an Investment associate at Bridgewater Joe Jacob. Welcome to the show. We're so happy to have you Say something crazy, Joe.

Yeah. Yeah, Joe. Freak everybody out. I want to add to your bio, if you don't mind. What's that? So, just going through some of the things that you've been involved with. OpenGov, which is one of the biggest software providers for local governments. That's a nice win. Last year we sold a great important company. Okay. Adapar is a giant in our industry.

It's huge. So Adapar is what's the best way to portfolio accounting software for RIAs, family offices? Yeah, I mean it's really the infrastructure for a huge part of the RIA industry, of the wealth management industry. We do a lot of big banks, a lot of top RIAs, a lot of other RIAs, family offices. Okay. And Oscar, which I think most people have heard of, but I know it's insurance related. Oh, I invested in this. Josh just started that one. That's an insurance company.

It's a great company. I've invested in a lot of things because I've run a lot of my venture fund to stuff in it, but Mario is a great CEO. Josh Kushner is a friend. So, you know, a lot of good companies here. We've invested in town too here in New York. Okay, let's get to our first topic.

Israel versus Palestine. I love it. I just got an award yesterday from Chabad while I was in town. It was like 500 Jews. It was the more Jew thing than usual for me. It was like everyone, but it was great. Where do they give those awards at, Barney Greengrass?

No, it's like a beautiful synagogue downtown. And you know, it's great. They give you a giant kiddish cup. Okay, I like it. I like it. So we want to start with current markets and the macro situation and both of you guys are uniquely situated to have a point of view that maybe we don't have on the show all the time.

We're frequently talking to people that come from Wall Street and the asset management world and I know you guys do as well, but you also have kind of this background technology and probably very connected within venture capital and maybe just a different perspective. We thought up until a month ago this would be the year that IPOs would come back. I know they're trying. I know we'll see Klarna. God willing we'll see Corwee, Vitoro. Some of these things are going to get through the gates finally. But like on a day like today we're recording right now, the NASDAQ is blood red once again, combination of tariffs and Nvidia stuff.

I'm curious if you think the IPO window will actually open this year and stay open long enough for us to get back to let's say, a pre 2021 level of exits and new issues. What do you think? Yeah, listen, the markets are a bit constipated right now in the tech world, right? It's a great way to put it. I'm very afraid of that. I'm friends with Brandon who built Core with he crushed you with that one. I hope he gets it out strong.

It's a really great company. Listen, there's a lot of stuff that's doing very, very well in the private markets. It's true. I'm actually a big fan overall of the Trump administration and Elon and many other friends there. There is some uncertainty and markets don't like uncertainty and hopefully we can give people some more certainty

over the next year, be really clear about things. And then that plus this wave we're seeing from AI, I'd assume it opens back up in the next few years, but I have no idea if it's gonna work this year or not. It might take a little while. What do you think? I mean, I think it's also about the background of what's happening in terms of private capital.

There is enough supply of liquidity to stay private for longer. And so- Is it trillion dollars or so in like, quote unquote, dry powder, just in PE? Just in the dry powder side, let alone new funds being raised each year. And so, you know, before, I mean,

Amazon IPO four or five years into existence because they needed capital to expand operations. When you think about why companies are IPOing today, it's not because they need the check in from that to go build the next factory, it's a liquidity event. I think the employees kind of need it more than the corporate treasury does. So at Adapar, for example,

we're already getting profitable this year, a huge company, they've just raised, I don't know what to announce, I'll get myself in trouble here, just raised a bunch of money from people. We didn't need the money just in case to make the company stronger. And you know, we're doing the law of it for liquidity for early employees. And so that's one way you could do it is we'll probably go public at some point. But for now, let's take care of people. If you got married, you want to buy a house with your share, sure, we'll help you get

some out. But you don't need to be public yet. Do private markets need public markets to be open? Like does the window need to be open for them to thrive? It's not needed, but it helps at some point. You need wins. I mean, the one thing that really screwed it up even more than that was the FTC blocking a lot of acquisitions.

You do need wins when people want to acquire things. And you have, because the Venture Fund sends money back. It shows it's doing well. They can raise more. So you do need to have something going on. So if we can fix the FTC, which I think we're doing, that does a lot of it. But yeah, at some point, of course,

you've got to take more of these things public. It's healthy. Right, not every exit's going to be an IPO. Most of them aren't. Most is M&A. Yeah. And we sold OpenGov a year and a half ago to Cox for $1.8 billion, a nice win for me.

It's funny, because of the FTC, it was one of the biggest wins of the year. Normally that wouldn't be one of the bigger wins, but they're slowing a lot down right now. But fundraising becomes a challenge, right? Like if there's not an exit. Yeah, so you're waiting, a lot of investors, especially on the institutional a challenge, right? Like if there's not exits. You're waiting. A lot of investors, especially on the institutional side,

are going to wait for you to return capital and then roll that back in. And so if you can't return, you could struggle to fund raise. At some point, like if you see one, like it's marked whatever, I don't know what it's supposed to talk about numbers. But we've returned more money than they've given us for our initial fund.

We have things like Androl in it. And we could sell a lot more. Androl is the defense company's recent round, like $30 billion valuation. Anybody will buy that from you right now And I literally get like 10 emails a day from brokers like spamming me I can't figure out how I get away from them about it So so as our investors know that it's real they know that they don't mind that they don't want me to sell most of it

You just raised a new fund. I did ABC six. How is that? Well, you know, it's actually really funny I'm a little bit controversial So like five years ago during the height of woke all the pensions were a little afraid of me and it took a little longer to raise. And now I'm doing really well. They're all trying to prove that they're swinging with the pendulum. So now we're like three times over subscribed.

Just like Josh. Yeah. It's like, it was very easy. It's a great time for people who are in the middle of the AI wave. There's so much money right now. Cause it's working and they want to be part of it. I mean, there's a big dispersion in terms of who has access

and who actually knows what they're talking about. I mean, Joe, the Palantir network of engineers, these are the people who are, and then the Adapart network that followed that, these are the people who are going to be building that wave. And people know the difference between someone who've spent two years at Google and is like, I'm a VC now and someone who knows all the top engineers,

like that's how you win. You have to attract the best talent. And soigree is extremely important and network network is everything So like we talked to a lot of you see a lot of people are struggling like if you see did this really quickly because Of who they are a lot of people are really struggling to raise that next round without having returned So do you guys I don't this is a cynical ticker It's just it is what it is. All of the institutional investors that have 40% of their portfolio in private markets, like they're not going to go to 150% of their portfolio,

right? It's a lot harder to raise new money from them. And so the giants of the world are going to wealth managers to end investors to a $5,000 minimums. And that is the next runway for the next decade. Is this going to set us up for some trouble? They're talking about like there's

an article in the FT tapping the 12 trillion dollar retirement system. Like is this going to be gnarly? I mean that's why we're here. It has the potential to be. There's a lot of chicanery out there, a lot of layers of fees. That is true. There's a lot of people who the way they access the RA world is they get paid to sell stuff. Like most of what anRA is hearing from is they're hearing from someone who's getting paid to sell them things. That's really dangerous because when you're paid to sell stuff, you're going to have whatever looks good enough that you can just like push as far as you can and you're going to have the things that pay you a lot of money to sell them,

which is probably not going to be the very best funds, right? So there is a misalignment. Right. So we talk about like we hear democratized private investing. Okay, but who's getting the democratization? Like if you're able to invest 10 bucks into something, let's be honest. It's probably not great. Well, it depends how you're accessing it. Right. So if you, if you happen to know somebody who's built a multi-billion dollar company and has like a friend who's at one of the very top funds and they're giving you access, that's probably good. Right. You should take that seriously.

If you have a broker who's coming from New York and who's paid one of the very top funds and they're giving you access, that's probably good, right? You should take that seriously. If you have a broker who's coming from New York and who's paid to sell you something, look at it a few times. Like if there's a big company pumping in, and that's why when we build models for how we're doing things, obviously, is we're saying we wanna be on the same side of the table as the investor, not getting paid

for how much we can push them. And that's a really important distinction. We'll go further in depth on what you're doing there with Opto, and I think it's a really good idea because one of the, one of the obvious conflicts that I see is most people working in the wealth channel are quite frankly, myself included, not equipped to vet private market deals for their clients.

And that's okay if they have assistance from a platform or from a consultant or somebody is in there with them, but that's probably not how it's gonna go. I think you're gonna just have a lot of people freelancing, a lot of rep as PM, basically saying, let's invest in this because I went out to a really great lunch with the salesperson from- He's paying for my hunting trip to wherever.

Yeah, the other thing is, I mean, there's a million problems. One of the problems is like, what are the odds that a dentist in Des Moines is going to be offered access to a top quality fund or fund manager? Very, very low, very slim odds. It's much more likely they're going to get the third, fourth or fifth best version of whatever they're investing in. So that's one of the things I think you guys are trying to solve for.

How does that end investor actually get access to something that's quality? And then of course, there is the agency problem. Whoever is the advisor selling these things or pitching these things or allocating to these things, how upfront are they being about the potential, for example, of no liquidity for seven or eight years? How honest are they being about the hit rate? You know, it's one great investment in some cases pays for two losers in PE or two break evens.

In venture, obviously, it's a much harder ratio to overcome. It's a power law. Yeah, it's a much harder ratio to overcome. It's a power law. Yeah, it's power laws and everything. And how well-equipped is the typical wealth manager to even explain these concepts, let alone be honest about them when they're allocating? It's really important. And we're living in a really fascinating time,

because this AI stuff is working. We do see there's trillions of dollars of wages in industries where we've shown we can more than double productivity, more than double cash flow. So this is like a really important trend the next 10 years, but it's going to be dominated by probably like a few dozen or maybe like 50 or 60 of the top funds are going to take most of the returns.

And the question is, how do you know if you're even accessing one of the top funds or not? And so for me, I was kind of disgusted. Like, obviously, so Out of Power powers all these things. And I saw all this stuff going on in that world. I'm like, wow, there's a lot of sketchy broker stuff going on. Let's build something where it's like a line with me. And so the way this works for me is that rather than charging

by selling it, we actually, over a hurdle, over like a 10% hurdle or whatever the hurdle is, depending on the space, we take 5% carry of the custom funds we design. So our incentive is let's just get the very, very best stuff in my friends who I think are actually running the best funds. And then we only make real money if it actually crushes it. So I think something like that's good. So you're along for the ride with the investors.

100%. Because the better the fund does, the more that carries. If I can find a fund that's going to be 40% an hour, in my mind, it's one of the very best small ones. Let's freaking get as much as we can in there and get to people. And so I think things like this. And of course, depending on the investor, some of it's going to be an alternative credit,

some of it's going to be other things that are. But for my part, I'm most passionate about, of course, is the venture side of it. Let's get the very best things in there, and let's make sure we crush it. So are investors going to get access to the next wave of AI? Because we've been talking a lot about,

are the winners just going to be the incumbents, like the Microsofts of the world? Or are there going to be smaller winners? And so like how do we how do we get access to that. So that so that so here's here's area. I will do a quick investing in AI thing. There's five layers of which you can invest in AI layer one is the chips layer two is the data center.

So all my friends who built like the big tech companies they all are data center investing right and there's tons of money going to that level three is the actual AI model companies. This is like openAI, Anthropic, and Elon's XAI, right, I'm invested in. Level four is infrastructure for AI. This is how you deploy AI. It's stuff like a llama, which engineers millions of use per month to deploy open source AI stuff. Lots of stuff there. Palantir is kind of level four, if you want to think about it that way. And level five is the AI services companies actually performing the service and the economy. Right? So you have these five levels the AI services companies actually performing the service in the economy. So you have these five levels of AI companies and venture, of course, you could do some

level three. There's only three or four of these companies that are the actually OpenAI itself and XAI itself, but most of what we're doing is level four and five. Now the big argument in venture is level four going to be eaten by level three. Are the model companies themselves going to build out the infrastructure and own it? So how do you think about that? But then the biggest area is this level five thing. The level five is about building things in the service economy.

So for example, just to make it clear, you know, healthcare billing is a 280 billion a year revenue industry in the US, massive service industry, 120 billion of that's actually paid to companies, 160 of its internal spend, but massive example of industry, right? Out of the five trillion, it's like 5% of the whole services economy. And like that's something where we're making it already three times more productive, three times higher margins versus thousands of companies using AI. So there's, and it takes like years to build it out,

to get it right, to deliver. It's not just, it has a mode. You have to have a framework. I mean, it's basically, you can imagine having two agents, one for insurance, one for the hospital. You need to have a framework. How do we negotiate on billing? What are the codes? Yes, so it's all, same as any other company, you need a big team, you need the hospital, you need to have a framework. How do we negotiate on billing? What are the codes?

So it's all, same as any other company, the big team, you'd iterate, you'd do it. And so, you know, the venture capital firms that are gonna be crushing it, sure, some might be exposed to a couple of model companies, whatever, but most of it's gonna be level four and five, and you have to be in the best firms tied to the best engineers to access that,

because there's going to be trillions of dollars of wealth created. So how much money is gonna be lost investing in the losers? Well, it's always the nature of these things. It's like how much stupid money does a sector attract? And I think this one's going to have, and the bigger a sector is in the returns, the bigger the stupid money it attracts as well.

So you're saying the most well-known companies to the average person, like everyone's aware of like Anthropic and the Claude model. You're saying like that might not be the layer to which most of the gains accrue. I don't think it's the layer that 10X is from here. Or maybe 10X is. From here, because they're already very valuable.

Open AI is already very valuable. And it's unclear, but basically, for example, when you invest in the SaaS wave for the last 15 years, the layers people knew about, which might be like AWS Cloud, that probably did capture maybe 25, 30% of all the value, which was a great investment. So there probably are some great investments just in the infrastructure layer, everyone knows.

But I think by far the best risk reward is the really great companies on top of it that you can back early and that grow into companies worth tens of billions. Which is Salesforce or even younger companies? Well, I'm thinking for the AI wave, of course, you're not coming. So the SaaS wave Salesforce would have been great to get into right at the beginning. That's what I'm, for the AI wave, of course, you're coming. So the SaaS wave Salesforce, it would be great to get into right at the beginning.

Yeah, that was great. Right. So what's the core? So the corollary to that is not necessarily the open eyes. It's the corollary to that to say Salesforce would be like things you don't know about yet like cognition or like bedrock or these companies that are doing AI services on top and they're the best talent in the world for different parts of coding or different parts of construction using AI or different parts of healthcare billing with Candid. Things like that, which you guys don't know, no one's heard about

yet unless you're kind of in the middle of the cycle. So do you guys think that this is going to expand margins for all companies? Are we going to go from 18 to 23%? This is a great question. I actually do think that the whole society does benefit as well. So I think the market itself, there's a big macro question about where the heck think that the whole society does benefit as well. So I think the market itself is a big macro question about where the heck things go the next few years, and that's a separate thing. But over the next 10 years, every Fortune 500 company should benefit.

If you look at what Dell's doing, for example, using AI, they've already removed billions of dollars a year of expenses. He's probably ahead of everyone else, but all the big companies are eventually gonna do that. It is gonna expand margins. And that's the length of the bet you're taking in private markets.

You're talking about a five, seven, 10 year bet. That's the timeframe over which companies are're taking in private markets. You're talking about a five seven ten year bet Yeah, that's the time frame over which companies are actually able to implement this and you know We're already seeing the green shoots of that but there's so much wood to chop in terms of inefficient One of the big debates in the market right now is if there's some sort of an economic downturn Whether it's tariff driven or whatever if we just if we have a deceleration in GDP growth or God forbid a recession is it realistic that the spending plans of both the people building out all this capex, but also the end consumer, will that hold up? And some of the bulls would say, that's when AI spend becomes even more crucial, because in a downturn, you need to save as much money

as you can. And this is in the end about saving potential expenses. All right, I buy that argument. I don't know if the stock market will, at least not on day one. I feel like the stock market's initial reaction is to disbelieve all of the capex plans actually coming to fruition. Maybe that creates the opportunity. And then the second part of that, I'd love to hear from you guys.

If all of this CapEx is justified by usage and the Fortune 500 is gonna start coming out and surprising us all, like, hey, we said we were gonna do 20 cents this quarter. We did more like 30 cents. And that's because the money that we're, the ROI that we're getting from all this CapEx spend, it's already dropping to the bottom line. Is that next quarter or is that 2026?

So like, how do you guys think about the macro versus the obvious secular AI build out? There's, there's, there's definitely big forces opposing each other here, which are very hard to tease apart. And it's not what I do for a living. I, I I'm lucky to be able to bet five years ahead. So I don't have to worry about it. As much. I, I, I tend to think like, if you want to make fun of tech guys, you could say, listen, you guys keep doing all these things you say are so amazing, but productivity hasn't really moved that much the last 25 years, right?

We got some productivity boost from the web. We have a measurement problem with productivity, but I get what you're saying. Partially true, but it still hasn't accelerated like as much as it. And so if AI actually is being deployed at scale the way it looks like it should, productivity really should noticeably start to surge in the next few years. Right now, all these things I'm doing, I think I'm so important, you know, buying a hundred million or a billion dollars to my company, that's tiny compared to our economy. We need to get these things into the hundreds of billions of dollars to really meaningfully

hit productivity. I think you're going to start seeing that scale maybe a few years from now. So I think sometime towards the end of this administration, you are going to see big productivity surges. And when do you think it's obvious to Main Street that this stuff works and it's productive and it's like... It's becoming obvious in some places now, but a lot of those are too small. So I think it is like the next two or three years. The market probably does start to realize it.

I mean, that may be why the market's held up as well as it has, is that there is this big thing coming despite the challenges. I also think a lot of this is just gonna be so ingrained into the way people live day to day that I don't know if it's gonna be an a-ha moment for many people. So we hear from, so Klarna is coming public and they were one of the first companies to come out

and say, this technology is now enabling us to not hire the next 2,000 people that we otherwise would have had to hire. We're utilizing it in customer service in such a way that we're saving tons of money already. That's a tech company saying tech is good. I'm waiting to hear McDonald's say, hey, profit margins are up one percentage point worldwide,

and it's due to this particular AI investment we've made. And I know that might be a little wild. And Clarnet's interesting, too, because the other thing, I don't know if they're saying in public, but I'll say it, because I've heard through friends, they're trying to rebuild Salesforce. They have to freaking pay Salesforce, I don't know, like 100 million something a year. And they're like, you know what, we know the screens,

we know the data, we have AI, let's just like rebuild it internally, and maybe we can turn it off. So in some cases, this is good for tech, in some cases there might be some older companies it's not as good for. Okay, here's another thing that you'll hear from not bears on AI, but bears on the economy. If even half of the promise of this AI technology turns out to be real, that's actually horrific for the American consumer.

Even if they get new jobs, we invent new jobs down the line, there's going to be a huge gap between when a lot of these people are employable and when actually there are these new jobs created to replace whatever the AI is now doing more efficiently. I'm a student of history. This has been... They say it in every era. Every era.

I agree. I agree. Destroying jobs is a good thing, which is the opposite of what politicians have to say because also building jobs is a good thing, but destroying jobs through efficiency has always been a good thing for everyone overall. Yes, but not right away and not for each person. That's true. There are some people that are going to have a tougher time, but it's vastly better overall for everyone around them.

And if this AI even works... Well, that's been the history. If this AI even works even a tiny bit, it's going to be massively disinflationary. This is going to be so good for poor people. So that comment obviously pisses people off, right? It feels insensitive. But it is the history of progress. And the thing is, it's not just like, oh, I'm saying it's good for rich people or good for me.

It's actually especially good for all the poor people. Because all of a sudden, everything in their life is way cheaper. People have no idea how cheap everything should get and how convenient everything should get for these people. Like a whole other order of magnitude if this thing stuff works. So it's really good. People have no idea how cheap everything should get and how convenient everything should get for these people. Like a whole nother order of magnitude if this thing stuff works. So it's really good.

Rewind 200 years, a pair of shoes was like two months pay. Yeah. That's not a good world to live in. Well my shoes still are. So. We gotta talk after. But yes, there are dislocations and actually you have some interesting adult education companies

that could help with some of that transition, but everything gets cheaper for everyone. And this is part of the measurement problem you're talking about. You went from, I need to either have a blockbuster subscription or buy the DVD, to I pay $9.99 a month and I have access to every movie that's ever made. GDP actually shrinks.

But everyone has a movie as everyone's quality of life, everyone's, what they call a hedonic adjustment, like everyone's quality of life is better, but they might not even perceive it. The consumer productivity stuff is hard to measure, you're right, what you say with that, but it's better for everyone. But the thing I think people don't realize,

so what's actually problematic in our society is the stuff that's gotten more expensive, right? Let's be honest, we're talking about well-being of people. College education, auto insurance, health care. Exactly, these are, and education in auto insurance, health care. Exactly. These are in education in general too and probably home prices. These are all the areas that actually AI is really, really good for. Right.

And so, and this is partially a policy problem as well as a tech problem. But if the tech makes it so obvious how to do these cheaper and better, I think we're going to be able to break through and fix the policy. Alright. So just as an example, how does AI make housing cheaper? So multiple things there. One is that any permit should be able to be approved instantly right away. There should be no reason you need like Betty in the permitting department who's an angry 66-year-old who hasn't retired,

like sitting on your thing for four months and like no one can build. I'm going through this right now. Don't get me started on title insurance. Yeah. Well, that's for that good too. But housing. So it's the permitting. It. Yeah. Yeah. Yeah. Yeah. Yeah.

Yeah. Yeah. Yeah. Yeah. Yeah. Yeah. Yeah. Yeah.

Yeah. Yeah. Yeah. Yeah. Yeah. Yeah. Yeah. Yeah.

Yeah. Yeah. Yeah. Yeah. Yeah. Yeah. It's kind of AI. It's kind of just Elon stuff in general But if you could actually make infrastructure really cheaply like tunnels and other things far out of cities But then you can live somewhere cheap and then get to the city right away and be part of the economy that Massively reduces is that ever gonna happen? Yeah, we're doing it. We're building right now. Where who's building? Boring company has all over Vegas. We're doing stuff in Texas doing stuff in Florida and getting going on it So it's it's I mean, it's it's it's it's accelerating It's gonna take a couple of so obviously one of the East Coast like Josh and we're talking we don't we don't see Waymo So we don't see the the driverless cars like it like there is magic happening

Just not just a little plus. It's like going around walk around Austin or any city on the West Coast That is coming to DC. Yeah, you'll see many cars with no driver and now it's magic and think about the productivity from that too if you have a lot of commuters in this country if Even though the productivity is just you're resting and listening to some music instead of focused on the road, but let alone like you can take calls. Yeah, I love that idea. And as a parent of teenagers, I wish this had come like five years earlier.

Because I'm teaching them how to drive or I've taught one of them how to drive. I want to shift gears and talk about something that I also think is one of the biggest debates on Wall Street and get you guys to weigh in on it. So to start off the year, the US stock market stumbled out of the gates. That happens, but it was a really big surprise this time because in December, all of the strategist notes were about American exceptionalism. And you know, in the post Trump election period, stocks were just ripping. People were pumped.

They were excited for lower tax rates. They sort of disbelieved worst case scenarios about tariffs and earnings had been growing and the Fed was cutting and it just it felt like, yeah, this this long US ignore the rest of the world thing. It'll keep going. That reversed really hard. European stocks are a big this year German stock market There's a lot of talk about the revitalization of those economies being the thing that Trump actually made great, which is an interesting

An ironic twist, but I want to share something with you from Ruchir Sharma of Rockefeller International who wrote in the FT this week And just see what you guys think of it as investors. Many of the people who hyped the election of Donald Trump to the White House as a huge boost for American exceptionalism now see the recent decline in U.S. stocks and the dollar as a sign that this era of U.S. dominance is under threat. They tie it to Trump and tariffs, etc., etc. But then he notes, even after the declines of the past month, the real value of the dollar remains at highs rarely seen since the end of fixed exchange rates in the 70s.

The S&P 500 is down less than 10% from the February peak, still trades 25% above its rising trend line. Despite the sharp rally in Europe and China, it's still a 50% premium to international markets. That's the S&P. Close to the widest leads on record. America's share of the main global market benchmark remains well over 60%, even though we're only 30% of global GDP. And I guess the question now is like, do you chase this rally in international stocks because

something has materially changed about American exceptionalism or is this a blip? Nothing has materially changed about the way that Europe or China treats business. The best founders in Europe moved to America for a good reason. We are an exceptional country. America is so dominant right now. It's actually ridiculous how dominant it is. It doesn't mean we should have hubris about it. Like we should watch, we should get better. We shouldn't fuck it up with bad trade policy.

But listen, I have hundreds of friends who are very successful. A lot of them going into the election were terrified and were saying, I'm gonna have to like protect my gangs. I'm gonna like, you know, move somewhere else. I'm gonna like, you know to go live somewhere else out there. I'm going to be a target. It's just really scary.

And then so many of them instead now are saying, wow, this is great. It's time to build. I'm going to start new companies. I'm going to invest in a creative. They were worried about Trump, you're saying? They were worried about. Before the election, they were worried about the radical populist left targeting them and taking after them.

And they were very cynical and very negative. And I had friends flee the country, go to Switzerland, go to Singapore. These are successful people who are like, America is going to demonize me and attack me for being too successful. And by the way, that is what happens in China. I literally have friends who were killed in China for being too successful and being multi-billionaires who were speaking up and who were not kowtowing. Like friends don't let friends become Chinese multi-billionaires.

They, 72 of them disappeared, right? So, and a lot of American billionaires saw what was happening with the same energy and said, wow, this is terrifying. And all of a sudden, instead, they're all investing and building. And I'll tell you what, America is just so far ahead in this AI wave. It's so far ahead in allowing creative destruction.

What AI is about is about changing the fundamental way all these services, economy, businesses work. And this stuff's working, and we're going to let it happen here. Europe and China are mostly not going to let that happen, right? They're too hampered by how they do things. And also, I mean, this is sort of less a market point,

but China has artificially suppressed the value of their currency in a non-competitive way, which did contribute to the shelling out of American manufacturing. Other tariffs, I'm not sure I totally understand the thrust behind, but we should tariff China until that feels fair and we should rebuild here what they've taken from us and we shouldn't rely on them for key industries. It's a fair point of view.

Foreign investors like Australian pension funds, Japanese insurance companies, they're still buying US stocks. So like there's been like... 16 trillion, that's how much they own. Yep. So like there there's been like 16 trillion. That's how much they own. Right. So they own foreign investors have tripled their equity holdings in the United States to like 20 trillion over the last decade. Foreigners now own 30 percent of the U.S. stock market, which is still a record high. So all the talk about everyone's pulling their money out. Maybe people are looking at ETF flows and they're getting carried away.

It feels like New York is dead. Remember like during COVID? Like as stupid as that. NVIDIA is worth more than the German stock market. We produce exceptional companies and many exceptional companies also choose to move here. When I was a kid, Europe and US were kind of like the same civilization. We basically had about the same standard of living. There would be a little more regulated, whatever. It's a different civilization nowadays.

We're literally our poorest state. When you think, when you make fun of poor people, not you make fun of, but you think like make fun of how poor certain places are in America, they are richer than UK and Germany, our poorest states. West Virginia, Louisiana, the back country of these places. They are richer than the rich European countries. Like this place, Europe is just like,

it's like a bombed out mess of itself. It's cynical, it's arresting people for crazy things. It's like, and the best people there, they are fleeing to be part of building here. Like they make fun of us for working too hard. That's about as much as they can say. It's like, come on. So when Macron says the French government's

going to put up $100 billion worth of funding for AI startups. That's great. Why would you try? Companies like Mistral come, like you don't believe that this is like a new mentality. Also why would I believe that the French government is good at investing? Oh I don't think any government's good at investing. I think

I think I think it's great that certain leaders there see how far behind they are and they want to fix it somehow. I think it's misguided for government to fund these things like they're desperate to support their own stuff and there are some stuff there it's gonna be okay there's some good companies there but it's just it's just if you look at the ratio of the number of unicorns here to there It's not anything close. So you're a backer of and they're all which has been an outstanding success. So far every round Yeah, good free by the way congratulations It's obviously not only

Doing amazing things, but it's like inspiring so many other companies Some of the big things that we've heard overseas are like, you know, Germany saying like, why don't we have a defense industry? The United Kingdom, all those stocks started to rally after JD Vance's visit, where he basically said like, hey, this is not going to continue where we just pay to support NATO and you guys do nothing. It's important they try. The real context here is that after the Cold War ended, a bunch of our defense primes were forced to merge. They became very bureaucratic, very much an arm of the government.

And there was really two companies that broke through as new companies, new primes. One was SpaceX, one was Palantir. And the DNA out of those companies has now formed a bunch of others. Andrew is the most important new one. Three of the guys who started it were from Palantir, and then my friend Palmer Lucky.

And so there's people like, Cerotic now is building hundreds of ships also multi-billion dollar new company I helped create with a bunch of Palantir, SpaceX, other DNA and so you have these new winners here they're growing really fast it's interesting eight nine years ago when I first started building in defense again people would attack me they say I don't want to work with you anymore so it's immoral and ethical to build in defense and now everyone realizes this is necessary. I remember Josh Wolf from Lux having that same, like people would go at him on Twitter

that he was funding defense investments. And it's almost like, you understand I'm American, right? Yeah, we want America to be the strongest and win. Oh, so I actually wanted to ask you about that. So of course, the success of Palantir in the stock market over the last year, I think woke a lot of investors up to the idea that like not everything being built in Silicon Valley is For like a fucking social media app like there are people building serious things that are gonna maybe save our lives Oh, yeah, I kind of like that

I feel like it's made venture capital investing more tangible to the average person And I feel like there should be a bigger awareness of like, hey, we're not just funding like Instagram clones. We're funding like metal. We're curing diseases, we're delivering healthcare, we're running the global logistics industry, we're building defense, we're doing advanced manufacturing here. I mean, this is one of the biggest differences

between the USA and the rest of the world is our venture capital, the vibrancy and the dynamism of willing to take chances and risks and fund things that might be zeros. Yep. And attracting the best talent to do that. But this is the difference between, you know, in my mind, between great and just okay venture capital of, you know, if you can get some quick wins in a social media company that

attracts a bunch of users quickly, it takes time to build a palantir. It takes time to cure diseases. And I think the best VCs think big and think long term enough to see those bets. So let's talk about the rise of private markets. From the advisor's point of view, you should see my inbox. It feels like, I'm not saying it is a bubble, it feels like a bubble just based on the volume of emails I'm getting from private real estate, private credit, XYZ.

John, throw up chart four. We have, this is from Torsten Slott comparing public and private markets. So the global private capital, AUM, is a staggering $13 trillion. But it pales in comparison still to the global fixed income, which is $103 trillion. Global equity markets, $101 trillion. And the global size of banking sector balance sheets, $98 trillion. Are private markets going to continue to eat into banks and public markets? They're definitely growing on a secular...

Where does it come from? Like, if that goes from 13 to 26, where does it... Does it come from fixed income? Well, I mean... The bulk of it is going to be, I think, credit, because that's the nature, is the credit market numbers are bigger. Just as the way it works. But, I mean, there will be a few trillion dollars,

I think, in new private companies created with the AI wave and the growing venture wave, and that's going to be a big part of it. There's going to be a lot of derivatives, mostly credit off of those companies as well. And the thing about this is private markets have much higher disparity, much higher differences in returns than the public markets.

And so what that- Oh, that's interesting. Why? Because people are less benchmark aware and they're more focused on the returns than not looking like others? They're not as standardized and regularized. It's much easier for a person who doesn't know what they're doing to come in and lose all of their money on it.

It's also a place that the very, very best stuff exists. And so it's one of those areas where it's really important you're accessing the top talent, the top things, because if you're not, you're going to get crushed. Yeah. I have a really simple framework for this. Like if you want to outperform markets, it's a really hard thing to do. I think there's really only four ways.

Maybe for you. Yeah. Again, you have really nice shoes. Yeah. Four ways. You can have unique information, unique access, unique insight. You can get lucky. Okay. First, unique insight, you can get lucky. First two are illegal in public markets.

Okay. That's a great point. Do not pass go, do not collect $200, but that's the lifeblood of private markets. And not in some nefarious backroom dealing way. It's, if you're ABC and you've backed a lot of the best defense tech startups, if someone, if the best scientist

and someone coming out of procurement team up and they're building a company, who's their first call? Yeah, the top guys out of the under a lot of do something else, then I'm going to know about it. This is a Peter Thiel point, which is a very good point. It's what Jake just said. If you're working in a market where inside information is legal and you don't have that information, you're going to get crushed. So it's not unethical.

It's just the nature of private markets. You do have more information. You're going to win. I think there's a fifth way, but maybe you could kind of fold it into your second point. I feel as though in private markets, more so than in public markets, you have more of an ability to actually affect the outcome because you're an influential investor.

That's a great point. So is that part of choice too? I would put it into access, because part of what a great LP brings is access. Access and influence. Yeah, and so you can bring new clients, you can grow revenue by, you know, if you are connected with a great logistics family

and you invest in a shipping company, you can connect those groups. Now you could do that in the public markets if you're Bill Ackman or you're Carl Icahn. Carl Icahn famously got Tim Cook to pay his first dividend and do his first buy back at Apple. But it's harder for, you can't have 50 of those people. Whereas in private markets, you can have a commercial real estate expert who just by

giving his imprimatur to a deal in real estate, other people are going to want to fund that deal and therefore he or she is actually impacting the outcome of the investment. It's the size of the basis thing too. Like if I find a company right now is doing 25 million ARR, and I know I'm connected with a group who would be a great client for them and would be a $50 million ARR client. That's a huge impact.

I can 3X that business by being an investor. Okay. So the area of my inbox that is most crowded, not unique to me, all advisors, is private credit. And Jake, you and I were talking earlier that the idea that a loan should trade on a daily basis probably doesn't make that much sense. Like, I loan you money, you pay me back. You pay me interest and you pay me back. But the size of the private credit market is getting so big that there is now more money chasing fewer deals and therefore the terms are getting a little bit looser.

And so is there going to be like a blow up a day of reckoning or is this could be a slow bleed or low returns? What do we think about private credit? There's just lots of areas of private credit right? I think there are probably more popular areas that are dangerous. I think there's still a lot of esoteric areas, certain parts of assets and venture for example that I'm not seeing very many bids to loan against. And so I think if you have someone with unique access who's really good at this game, I think you're still, just like everything else in private markets,

there's going to be some really good stuff to go into. So what should advice be aware of? Like if we don't have expertise, what should be like the stay the hell away from this? Yeah, so I mean, in the private credit space in particular, where we get most concerned is the mega loan space. So you have a small handful of these super large BDCs that raise billions of dollars a quarter and basically have to put that to work really quickly and they're paying huge like Dividends. Yeah, they're trying to early basis. They're trying to pass through that yields

The issue with that is there's only so many companies that let's say I can write ten loans and I got to deploy four billion dollars Those are big loans There's only so many companies in the world that can take that size alone and And me and the five other big people are trying to lend to the same companies and that's where you get that bidding down. Okay. So you're willing to accept less in exchange for the same amount of risk.

You gotta put the money to work and so you accept lower returns. Now to your question, I don't see this right now as a blow up. Where you get bubbles and blow ups is really high levels of leverage, insider selling to outsiders, and unrealistic expectations. Expectations are a little unrealistic.

Leverage levels are totally in control, and these firms are large sponsors and can basically roll their own loans if they need to. And so it more looks to me like if you've averaged 10, I'd probably haircut that by three to five for the super big stuff. But to Joe's point, if you go below 200, certainly below 150 in loan size, it's like the world you'd expect.

Rates have risen, banks have stepped back, spreads are wide, covenants are really strong and collateral is good. So I think there's an illiquidity risk that's, I wouldn't say underappreciated, but I don't know what you do about it. We had this blow up with B-REIT a couple of years back. It kind of smoothed itself out, but effectively you had a market disruption where a lot of people wanted their cash out of that at once. And of course the outdoor is only so big because the underlying holdings are like buildings. So-

Quick, sell the hotel. So obviously, written into those documents for the people that invest it is like you might not be able to get your money the exact second you summon it. It's not, it's not an ETF that's trading treasury bonds. Like you might have to relax for a minute. People didn't like that. Everybody investigates it. More recently, we had an ETF come public, P.R which is a private market, ETF, a little bit of an evolution. Now effectively you can buy private assets via an ETF. And when you redeem or sell the ETF, there's a company standing behind it saying, we'll buy those assets automatically no matter what, and we'll provide liquidity. I guess when they say democratization,

that's what they mean. Not every asset class should be democratized, I think would be my comment. Maybe that's a neat gimmick, but do we really need that sort of daily liquidity in the private markets? It's very dangerous also when some things aren't working there.

There's not going to be the money there if something goes wrong. Yeah. Or the company that's on the hook for it maybe is on the hook for more than they thought they would be exactly okay I mean these assets are fundamentally not liquid now they range like they're not all 10-year things there are three-year things and five-year things but Any time you might need liquidity before that that introduces risk now

I might argue that that's also true in public markets It can take seven years for a bet to pan out in terms of your cap backs, but you're subject to the daily fluctuations. But philosophically, are these really still private markets if there are 100 million individual participants? Are they real? Are they actually private anymore or are they just illiquid but highly public markets? I know it's like this is a really good question. We talked a lot about the bettafication of the space.

Yeah. You know, right now there is no index. That's part of the other reason why you see a lot of dispersion, like there's no benchmark to even track against. I think this is almost the start of the development of that. There will be essentially private market beta, definitely in credit, maybe in other spaces.

It'll be harder to, probably impossible to do in venture, harder to do in private equity. But you shouldn't pay a lot for beta. And these still have fees as if they're alpha-like funds. I mean, that's a big watch out for, you know, democratization to me is a scary word in this space. I think you want to be working with a fiduciary, and that fiduciary should be picking a partner,

and like, there's a lot of layers of diligence that need to go into making sure you're investing with the best. So give a plug for Opto. What are you guys doing with advisors? Yeah, so, I mean, Joe and I looked out of the space in 2020, and we're, you know, you said it earlier, pretty disgusted by how things generally run,

which is people build platforms, those platforms charge GPs, you know, two, five, 10% to raise capital. The best funds don't have to pay to raise capital. And so it's generally the biggest stuff, not the best stuff. And someone shows up, the wholesaler, you know, drops a book on the table, gets you to buy some stuff,

and then you never hear from them again when it's down 5%, and they just want to know why. Yeah. It also was crazy laborious and difficult. Like, if you have even a few hundred families and 15 funds you might choose from, the factorial of all those families, all those funds, and all the sub-docs, and all the K-1s, no one wants to or should hire the staff out to do that. RIAs are not set up to manage that many

pieces of paperwork. And so combining those two things, how do we build a technology platform that's aligned with clients and makes us as turnkey as possible while maintaining quality and maintaining what's unique to that firm? And so it's not one off the shelf fund to fund

with 50 things in it and they're at different vintages. We sit down, have a goals-based approach, say what do we need? Do we need the Josh Growth Fund and the Josh Income Fund? Do you want to co-invest vehicle? Should it be by asset class? What will work for your clients? What's the right risk level?

Create that as a custom object. It's your fund, it's a separate entity. It's a single subdoc, single K-1. We're even building some of the registered space as well. And then have a timeline to go out and find the best. We don't have to deploy all day one. We can go do thorough due diligence across sectors, across asset classes, and bring the best to portfolio.

In the wake of the financial crisis, the last people standing were hedge funds. Not all hedge funds, of all hedge funds of course, the ones that got quote unquote got the crisis right. And they had positive returns while everyone else got destroyed. So of course there was this huge outcry from retail investors, how come I can't access those hedge funds? And Wall Street did what Wall Street does best.

They spun up all these fund to funds businesses, all these platforms. Anthony Scaramucci came along and democratized it. But like the idea was like, the idea made sense. It's like, yeah, people should have access to strategies that don't do what the S&P does, or can bet against the housing crisis or whatever. The outcomes though, ended up obviously not being great. And when you talk to a lot of the financial advisors at Morgan and Merrill, you ask them like, why are you allocating to these particular funds or hedge funds period? It was like, it's a differentiator. Like, what can I do that Vanguard can't? I could do this shit. And if you if you look so, so we started that apart 15 years ago, and, and I'm allowed to see the aggregate data, right?

I can't look into the specific families and stuff. That's not appropriate, but I see a lot of aggregate data, and I study it, and I talk to a lot of people, because RAs come and talk to me all the time. And it is interesting, like the very top performing people tend to be family offices with access. There's some RAs that are top performing too, but they tend to be the very top families.

They're still run by that usually patriarch who built the business, knows a bunch of friends in the space and they get access to the best funds. So they have the best returns. They have the best returns. They have the best returns. Those are people that tend to have the best returns.

And it's usually there because more of their money is in the space. They know well where they know who the top people are, whether they're an energy family or a tech family or whatever else, right? And that's like, and that's how these things work. They have a domain expertise. And that's how I've been lucky to be able to do that too.

I have a pretty good network now for I've built all these companies, having mentors and friends who've done this. And so the question is, how can you offer that to an RAA really easily in a format that's really positive? And so the idea is, let's build all the technology, let's build all the frameworks to help them build a custom fund using that access of what, you know, we're going to help them with things the best. Usually it might be five things, 10 things in the custom fund. Two or three of them might be stuff that they really like as an RA they already know about.

And some of them might come from my network. Some of them might come from another network now of other billionaire friends. They can do that all through the Opto platform. And all through the Opto platform, they put it all into one custom fund. That's cool. And they offer it to their clients.

Single subdoc, single pay one. And it's aligned and we only really make money if we get that 5% on top, which by the way, is much less than Fund-to-fund charge. So it's like a much cheaper, more customized version using tech than the other solutions. So the client household of the advisor effectively is building their own fund-to-funds. For cheaper and better and customized for the client and making it easy. And then there's a power of being part of this network.

And so we're working across many, many RIAs and family offices, and not every deal is going to have access capacity, but sometimes if you can go from a five to $20 million check, you can get a significant discount. And so if we can find multiple people who want to participate, everyone can benefit from that. We don't pocket the difference. It flows through to the end client.

Okay. So Joe, a lot of Silicon Valley-like infiltrated politics and won in a big way, obviously, between Elon and Doge and Sachs the Crypto czar. Well, we red-pilled Silicon Valley first, and then they infiltrated politics and won in a big way, obviously, between Elon and Doge and Sachs the Crypto czar. Well, we red-pilled Silicon Valley first, and then they infiltrated it. So, Chamath and Freiburg, getting a lot of Nick and Besant,

but a couple of weeks ago, you, I don't know if it was a quote to you or whatever, but you called out some of the nonsense, or perceived nonsense, with the Bitcoin strategic reserve. And I know you're friends with Sachs, right? I'm good friends with David Sachs. But you disagreed. He gave me a hug a couple of days later, so we're good.

You're not anti-Bitcoin. No, not at all. I think you're anti-taxpayers funding a Bitcoin strategic reserve. Even beyond that, I'll tell you what happened. But listen, this is very funny, first of all, because there's like 30 things I agree with going on with Elon and the administration that I'm helping with.

And then I think I've called out two. and whenever I call it out, of course, it gets a thousand times more attention, which is fair, which is fair. And the thing I called out in that case, and listen, I get I'm a very pro a lot of stuff going on there. I didn't think it was very presidential or appropriate for the people to influence the president to put out the names of coins in a tweet that might go into a reserve and you go to those markets and you see ahead of time that there's someone who's making 50, 100 to one bets. I'm not saying it was necessarily

something the president himself did. There are probably people around him who've been playing games. And that's just, you know, we're fighting so much fraud and so much bad stuff and we're cutting so much nonsense. And I'm so proud of this administration. Why do that with the left hand? Why had this other thing going? Let's be perfectly clean.

Let's be really careful. So I actually agreed with what David Sacks did, which if you're going to have seized Bitcoin anyway, if you want to keep that in the sum of government account versus selling it, that's very reasonable, but let's just not play any games with, with currencies are going to be in a tweet and someone's going to trade it or whatever.

Let's just, you gotta be, you gotta be really clean. You know, you know, you gotta be careful. Okay. So on the scale of one to 10, 10, no problem. One, like this made me want to throw up. When you saw Melania coin come out on the day of the inauguration, like what was your reaction to that? I was a negative 30 on your scale.

I didn't love it. I don't know if it's like, it's not more important to me than all the good things happening. But I just think that these, all these things going on with crypto in that way, that's not to me the highest end and purpose of crypto. And so it wasn't my favorite use of it.

I think like $5 billion went into the coin, which is now worth zero. So effectively, people lost a lot of money. And my best guess is there are people who either thought they would be smart enough to outsmart other people. They're gambling. You know what, if people if people want to gamble, buyer beware. But I think it's a lot of poor. I think it's a lot of poor people that don't know better. This is what happens with all gambling, which is why gambling itself is a very questionable thing in general. We use gambling to fund a lot of things with the lottery. Maybe it's a good way to fund things. You're taking money from... So what's your favorite thing that they're doing? I guess,

I don't know, pick on Doge. Whatever you want. I mean, there's so many favorite things you're doing. I think it does give you two on Doge. Like one is that, is that this USA stuff actually was extremely corrupt. It was tied to grift. There, there's, there's a federal mediation conciliation service, which was like a nine story office with 60 people in it that was buying art,

including from the wife of the boss and was spending money, flying people all around the world. And they were all commenting how they're not really working. And they're just like using the money for sketchy things to pay their friends. Like, clearly just nonsense going on and even beyond just nonsense, there's activists they're funding for hundreds of millions of dollars to push like a very ideological agenda.

So I mean, that kind of stuff is really terrible. I'll tell you the craziest one. They just did most Americans like that. Most Americans like that. They got rid of that stuff. 100%. I'll tell you not crazy when yesterday they did the executive order on it to turn them all off. I think they found 17 magic money computers. Did you hear about this?

So usually when you issue a check from somewhere, it has to come from an account. That's like a normal thing. In this case, the government accounts never quite balance and no one really knows why. But one of the reasons why is there's these computers in HHS, in DOD, in treasury, just issuing money to people. Money doesn't come out of anywhere. It's just being paid. How? Or how do they get on that list?

The recipient list. Exactly. I'm sure some of it was legit. Some of it wasn't. That sounds awesome. But it's like the genie, it's like finding the genie's lamp or something and then instead of using it for themselves, which a lot of people clearly have been doing,

and he's been around for a while, like I'm sure some of them are used well, some are not, they turn them all off, which is great. Is there so much fat to cut or like, what if we get too close to the bone? There is so much fat to cut. I think, I've evolved in hundreds of companies and some of them don't work and some of them get broken.

Some of them get really broken and you have to, if they fail, imagine the most broken companies that you've ever seen and a lot of them get pretty bad. And imagine instead of failing, they just kept being given money for 50 years. Like that is some of these departments. I liked what they did this week. It was crazy. They took this list of people that were listed as over 120 years old receiving Social Security

So let's just we won't we don't have to say it's definitely fraud. Maybe it's benign neglect maybe Their kids that are still around, illegal immigrants using the numbers. I mean, it's all sorts of people. So I love that they did that. I don't know a single person. I don't care if you're a Democrat, Republican, a Libertarian, if you're a centrist. You have to like that finally somebody looked at that. I don't even know the amount of money.

It doesn't matter. It's just the point that nobody's looked at this in 50 years, 100 years. And there's hundreds of billions of dollars in fraud going on a medicare medicaid I talked to President Obama about this he criticized me for not wearing a tie at the time as I learned the lesson You can always wear a tie with the president But you know, but he agreed with me He's like yeah Joe let's go after this and then his office Valerie Jarrett those people they stopped it because Politically, it's not useful for them to find fraud in these entitlement things plus my hypothesis is the law of the frauds

Probably some of the friends of the friends of the people in the party. Because of course, that's a great way to find things. So you're like part of the PayPal mafia. Let's just tell people for like people that are not aware, this is in a good way, it's not in a negative way. But you're one of the early people that built what is arguably now one of the most important technology companies.

I started Palantir, I was a kid at PayPal. I'm not going to take credit for the work there, but I was a kid there. And listen, the way I think about PayPal is you had Peter Thiel and Max Lefkian and a bunch of their smartest friends. Legendary people. David Sacks right off it.

And then you got Elon Musk and his smartest friends and they were competing. And by the way, the Silicon Valley was a place that a lot of the smartest people in the world came at the time to compete. These were two of the very best teams there competing and then they merged and that was PayPal. So of course, when you have all that talent,

you're going to have dozens of top multi-billion dollar companies coming out of this place. And so yeah, as lucky as the kids are to learn from these people. No credit for PayPal, but I did start Palantir afterwards. So here's what I wanted to go with that question. I think you are a huge fan of a lot of the things that Elon is doing, but you probably

are thoughtful enough to realize the manner in which he's doing some of them, or maybe the stuff that he's putting out on social media while he does them, is probably making his job harder, not easier. So you get a chance to be like, dude, you're crazy for those last four tweets, but I love the things that you're actually accomplishing. What if you did one without the other?

I'm close enough to know where he's coming from and how frustrated he is with some of the things that you're actually accomplishing. What if you did one without the other? I'm close enough to know where he's coming from and how frustrated he is with some of the things and also a sense of humor that I, like where he's coming from, it's like totally coherent and it makes sense and I know why he's doing it. I think the thing that we're gonna try to do is we're gonna try to keep communicating this in new different ways.

You know, I have a bunch of friends who, you know, guys like Tim Urban at Wait But Why, like who Elon likes, who's great communicators, better communicators than me. We need to try to convince some of them to help us communicate some of this stuff better because I think Elon's communicating some pretty well, but the press is just so noisy and so negative that we need to get our story out better. There's a story today. Elon is back in the building, of course, by which they mean Uber headquarters. That's probably a healthy thing.

He means Tesla. Excuse me, Tesla headquarters. I was like, holy shit. Because Travis is done with that. Did he bring sync too? No, but there's like, there's an article today, it's like almost celebrating Tesla's in a 50% drawdown. A lot of his political activities are driving negative attention

on Tesla, which of course it has nothing to do with it. I'm sure the consumer thing makes it tougher. I mean, you have to be a really bold, courageous person to be willing to be controversial in public when you're a CEO of a consumer company. That's tough. My friend Omid runs Tesla with him, amazing guy. They have such great talent there. These are just good people.

And you saw I built the factory in 18 months where we live in Austin, biggest factory in the world. I mean, extraordinary stuff they're doing. I think a lot of the new technology at Tesla is gonna be, you've seen like the self-driving stuff, it's going to be, it's going to make the cars worth a huge amount more. I mean, there's great stuff coming there. If you were giving him advice though, you would have probably told him, go back to Tesla.

Like, keep doing what you're doing, but like also go back to Tesla or you wouldn't have said that. I think Omid's really good at what he does. I'm sure Elon and him are in close touch. Like the thing, the thing I would say is, it takes so much courage and so much of a warrior spirit to keep doing what he's doing at the government. Like he has lost a lot of money from what he has done here in terms of he gets him attacked.

It's not fun. His life's under threat constantly. He's had to cancel a lot of things because people try to kill him where he shows up. I mean, this is not something where, of course he has a sense of humor and has to joke about it because what else are you going to do? But it's not something where he's just like doing this on a whim or something.

He truly believes and I believe he is too fighting to save our civilization. And so I really honor him for that. Whether or not you disagree or disagree with everything he's doing, like that is the energy he's going with this. He, Elon's kind of like a, like a classic, like a, he's a warrior in the tradition of, you know, he's, he's not about luxury. He's not about living well. He's about, he's, I think, classic, he's a warrior in the tradition of, you know, he's not about luxury, he's not about living well, he's about, I think there's a certain- He's about memes.

Wow, the memes are a sense of humor, but he's actually, I mean, he's sleeping on the floor, he's sleeping on the couches, he has the smallest office, like I see where he lives and stuff, he doesn't care about having yachts or having like, he's literally like, he's like a classic warrior from the ancient tradition, and he's trying to fight for civilization So whatever else you think of them, I think he's an extraordinary man. I want to end by just asking you guys not whether or not you agree with the ideas of Besant and Musk and Like some of these things that like feel like they have to get done fast and right now Even if we ruffle feathers and the tariffs cause a slowdown

How do you generally feel about how this year ends up? and right now, even if we ruffle feathers and the tariffs cause a slowdown, how do you generally feel about how this year ends up? Because we're, you know, we're going to do this April 2nd tariff announcement, and it's a big thing. They're handcuffing a briefcase to Howie Mandel, who's going to open the briefcase and announce what the tariffs are. It's very exciting.

It's very exciting. We're all very excited. Listen, Trump's a good negotiator. I hope he gets it right. I hope he gets it right. I guess what I'm asking is like, is this not to agree with it, but like, are we going to come out the other side, like not as damaged as some people feel we're about to be? America is a free society. It's a great society. It's attracting the top talent in the world. This AI stuff is working. This is a civilizational level shift right now

that we're going to make these things a multiple times more productive. As an investor in private markets, my focus is like, is this real? Do we have the best people on it? Is it going to be worth billions of dollars as it scales the next five or 10 years? And that's the focus. This is what's great about private markets is that it's like just this ocean and the waves are moving up and down. And if you look every day, the waves moving up and down, we're like building steadily

and strongly from the bottom of the ocean up to the top. And it's going to be 100X, regardless of how big those waves move up and down we're like building steadily and strongly from the bottom of the ocean up to the top And it's gonna be a hundred X regardless of how big those waves move up and it's worth it's and it's worth risking trade war that potentially causes a recession because The benefit of living through that everyone would better off. Well, listen, listen, it's super complicated, right? If you get the deal, right and you I do have more companies building more things in the US now because of what they're doing, I get where JD and him are coming from. They really do care about the working class and bringing back our manufacturing base. There's legit parts of it. I tend to not be as excited about tariffs as President Trump, but he's a rational actor in this case, and I see where he's coming from.

And I'd separate, in my head again, I separate the China tariffs from anything else. I think those are more than justified, and I personally can go further. And again, if you in an anti-competitive sense steal manufacturing from America, we should fire back. Well, there's two things there. One is China is an adversary and they steal stuff from us and they devalue things artificially. Two, let's be real, whether or not you're on the left or the right, I don't think any of us want our oceans polluted, plastics dumped everywhere, like nasty environmental stuff. That is what happens in these other countries.

If they're not going to have the same environmental regulations as us, we should probably tariff them for the damage they're doing. I mean, that's very reasonable, right? So there's things like that we can all agree on. In terms of this year, though, I'd separate... Tariffs will definitely be quite painful for, like, the large cap equity indices. You have a really high... That'll continue to royal?

I mean, you'll be offsetting that with expectations. I'm not necessarily calling like a sell-off, but it's most painful for those companies. They have the highest overseas sales growth. They have the highest overseas dependence from the manufacturing and staff. That's who's going to get hit. There's a difference between that

and the real American economy. And will that show up in the small caps? I'm not sure the small caps are basically like, they're less relevant because of private markets. Where we're that show up in the small caps? I'm not sure. The small caps are basically like, they're less relevant because of private markets. Where we're seeing the building and the innovation, people building new factories, logistics centers, applying AI to traditional industries in interesting ways, it's happening in the private markets.

And so if I think about where at the end of the year is the average person gonna feel they are, well, a lot of people, when you survey them, look at the stock market and say, I feel good or bad based on that. But if you look through that, I think there's a lot of green shoots to think about how a normal person will be living over the next five years. That's a great place to leave it. And we appreciate hearing you guys say that. And thank you so

much for doing this. I want to tell people where they can go to learn more about Opto and to read more of your commentary and just generally subscribe or whatever. You start, tell us where people can learn more from the investing side. Yeah, go to optoinvest.com. Optoinvest.com, okay. And then I have a more off the cuff blog on LinkedIn. If you want to follow that, that's where I'm a little less filtered. Now can that site be accessed without a VPN?

I wouldn't recommend it. And I'm JT Lonsdale on X. You I get your stuff. And you got my stuff. And I have a sub stack. I publish things. I have a podcast called American Optimists. It's an honor to be on, guys.

Thank you. Okay. Awesome. Thank you guys so much for joining us. Ladies and gentlemen, this has been Jacob Miller, Joe Lonsdale, and please go check out Opto Online and by all means subscribe to these gentlemen's podcasts and blogs. We appreciate you guys for being here. Thanks everybody for listening. Subscribe, do all the things and we'll see you soon.