The Pomp Podcast - #1263 Shaun Maguire | Sequoia Partner on Bitcoin, Elon Musk, SpaceX, and DARPA

Episode Date: October 17, 2023

Shaun Maguire is a partner at Sequoia Capital. In this conversation, we talk about Shaun’s time with DARPA, including a deployment to Afghanistan, and what DARPA was thinking of bitcoin in the early days. We also talk about a company that Shaun helped co-found which sold for a billion dollars, breakdown of Sequoia Capital, SpaceX, Tesla, Elon Musk, and more. ======================= Auradine, a leader in web infrastructure solutions including blockchain, AI, and privacy, has unveiled the world's first 4nm Bitcoin mining systems, featuring breakthrough EnergyTune™ technology, setting new standards in performance and energy efficiency. The Teraflux™ product line from Auradine offers best-in-class performance, efficiency, and total cost of ownership (TCO), positioning it as the optimal choice for Bitcoin mining needs. With EnergyTune™, a patent-pending technology, Auradine's Teraflux™ systems enable rapid demand response and optimal energy usage, fostering a symbiotic relationship with electrical grids, and contributing to sustainable energy practices. Designed and manufactured in the US, Auradine's Teraflux™ product line not only ensures cutting-edge technology but also mitigates supply chain risks and provides increased supply chain resiliency. Visit ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠www.auradine.com⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ for more information the Teraflux bitcoin mining systems. ======================= Get Better Crypto Data: Do you want faster, easier crypto data? Sign up for Velo Data, a new product that we have been working on to solve this problem: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠velowaitlist.com⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ ======================= Pomp writes a daily letter to over 250,000+ investors about business, technology, and finance. He breaks down complex topics into easy-to-understand language while sharing opinions on various aspects of each industry. You can subscribe at https://pomp.substack.com/  

What's up everyone? This is Anthony Pompliano. Many of you know me as Pomp. You're listening to the Pomp Podcast, which is my effort to find the most interesting people in the world and sit with them for hours while I ask questions in an effort to learn. So it would mean the world to me if you would subscribe to the show on your favorite audio platform, watch episodes on YouTube, and tell your friends and family about the podcast. My goal is to help millions learn from the world's most interesting people. So let's get into today's episode. Today's episode is with Sean McGuire. Sean is a partner at Sequoia Capital. In this conversation, we talk about Sean's time with DARPA, including a deployment to Afghanistan

and what DARPA was thinking about Bitcoin in the early days. Then we talk about a company that Sean helped co-found, which was sold for a billion dollars, how Sequoia itself thinks about traits of the best founders, how they make decisions internally, and how they think about allocating capital in an ever-changing environment. And then Sean and I go super deep on all types of different technologies, including how he looks at SpaceX, where Sequoia and himself have invested over a billion dollars in the last couple of years. We talk about Tesla, Elon Musk, and much, much more. I really enjoyed this conversation with Sean, and I really hope that you guys enjoy it as well. I really learned a lot from Sean, and I think that this is going

to be one of those episodes that people will come back to quite often. Here is my conversation with Sean McGuire. Anthony Pompliano runs Pomp Investments. All views of him and the guests on his podcast are solely their opinions and do not reflect the opinions of Pomp Investments. You should not treat any opinion expressed by Pomp or his guests as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his personal opinion. This podcast is for informational purposes only. This episode is brought to you by AuraDyn. They're a brand new startup led by a number of Silicon Valley legends who just raised

$81 million to build the future of internet infrastructure. You're probably wondering what that means. Let me explain. There are numerous new disruptive technologies that are being adopted simultaneously from blockchain to artificial intelligence to zero knowledge technologies. In order to ensure that these technologies thrive in this new world, we need new infrastructure. And that is where AuraDyn comes in. They just launched their first product line called Teraflux, which is a Bitcoin miner powered by the world's first four nanometer silicon chip technology.

These air cooled single phase and dual phase immersion cooling miners have unrivaled speed and efficiency. They have superior uptime and they leverage a brand new innovation called EnergyTune that allows miners to dynamically adjust the energy consumption and Bitcoin hash rate based on demand response needs of electrical grids. Auradine is an ambitious company working on hard problems I'm really impressed with them And if you want to check out more, you can go to Auradine.com That's A-U-R-A-D-I-N-E.com Go check them out at Auradine.com today Before we get into this episode, I also want to tell you about a brand new product called Velo

Velo is faster, easier crypto data Everyone in the industry is always looking for What's the price? What's going on on the exchanges? Where are assets flowing or not flowing? How is things like open interest and derivatives actually playing out in the market? Well, that's where Velo comes in. It's faster and easier crypto data.

You can go to VeloWaitlist.com today. Myself and a couple of friends, we invested in the business. We're advising the founder and we think it's pretty cool. This one is something that keeps me informed on a daily basis. So you should check them out at VeloWaitlist.com. That's V-E-L-O Waitlist.com. All right, guys, bang, bang. I've got Sean here with me. Sean, I thought a great place to start is you as a civilian worked with DARPA and you both went to Afghanistan for a number of months.

You guys were investigating Bitcoin. There's all kinds of different technologies that very, very early on DARPA was interested in. Describe a little bit like what is DARPA and how did you get involved with that organization? Oh, that's a good one. How much time we got for this one? as much time as you need all right this is a crazy story um but so what is DARPA DARPA is the research arm of the department of defense uh in the past the way DARPA has operated is kind of set a vision of there's some technology pain point or technology need and we'll then go create a program and what that means is like there'll be a program manager that for example DARPA created the internet you know it wasn't Al Gore it was it was DARPA and the way that happened is basically

it's kind of realized by some people at DARPA and in other places that there are all these computers getting built we had to network them together so that you could share resources like share printers which were really expensive at the time and just have them talk to each other DARPA doesn't build the technology though historically DARPA just comes up with the idea manages it and has the money. And so in the case of ARPANET, which was the precursor to the internet, came up with the idea, or at least managed the program, and then puts out what's called a solicitation for proposals where hundreds of people will apply hundreds of groups. And then the program manager is kind of like a DJ, where they'll say, hey, I think UCLA is the best at the networking side of this. And

And this other group is best at building the firmware that would go on an early router. And the program manager is also in charge of building in redundancy in case one group doesn't perform. And so they'll usually choose to call it, they'll break the problem of, say, designing an early internet into maybe four or five sub-pieces and choose two to four groups to build each of those. But DARPA created the internet, stealth technology, kind of precursor to GPS, mRNA vaccines are very controversial these days, but DARPA had a big role to play in that, basically of giving

Moderna a bunch of money when it was kind of an undiscovered company around 2012. On and on can list 50 plus technologies created by DARPA. For myself, I have a very weird background in every way. I'll just, I'll get this out of the table. I got an F in algebra two in high school. I'm very proud of that. It's one of my proudest accomplishments. It's a good story, but I was just a weird kid.

I was hacking on computers and building stuff, just kind of doing my own thing. But a lot of my family was actually in the military. Both of my grandfathers served in the military. My dad's dad, all three of his brothers served in the military, two of them died in World War II. One of my dad's brothers was a career naval officer. When I was a kid, he was a doctor. And when I was a kid, he was the doctor that ran Pendleton Hospital, where the SEALs train.

And so my cousins lived on the base. And then he went and ran Walter Reed Hospital, or Bethesda Naval. That goes by two names. And so my cousins lived on that base. And so I basically, a lot of Americans grew up with no exposure to the military. I grew up, like, if I wanted to see my cousins who lived an hour away from us, we would drive down and go on the base. And then my mom's dad, he was also a former Navy guy.

And so he and I would go ride bicycles around Pendleton and I just kind of, I had a lot of exposure. And as a kid, I actually really wanted to enlist. That was something that I thought very seriously about, but with the F in Algebra II and kind of like a really bad track record at 18, you know, if you enlist in, say, the Navy and I mean, my goal would have been to try to become a SEAL. That was kind of my dream growing up around Pendleton. You know, if you don't make it, if you wash out for whatever reason, if you have a, even

weird things, like if you have a heart arrhythmia that you didn't know about, then you kind to get put into the normal enlisted ranks and you will have, you will struggle to find someone that's worse at taking orders than me. Like I'm, I'm pretty good in chaotic, unstructured situations. I'm absolutely horrible with structure and, you know, I, I'm embarrassed. I didn't have the self-confidence to, you know, go do it and, and like shoot my shot. But I was, I was genuinely really nervous about kind of not making it. But so, for myself, I had, from time as a kid, I had this, like,

ambition to go serve my country and kind of be in the military. But I ended up, despite the F in Algebra II, I ended up getting a Ph.D. in math. And, I mean, technically, it was in the physics department, but it started in the math department. And kind of while I was doing my Ph.D., I was at, started at Stanford, and then I was at Caltech. um through total fluke is like out of a movie i met this woman her name is regina dugan she

she was the director of darp at the time she's an unbelievable person she's one of the people in the world that means the most to me i haven't i don't talk to her that much anymore but regina like you're you're the goat i appreciate you and there was like a caltech lunch that she gave a talk at there were probably 25 people in the room a girl said something stupid it kind of led to an awkward situation. I jumped in. I kind of stood out for it. At the end, she was really busy and she stopped in the doorway and she said, if any of you want to get involved in it, she stopped in the doorway, but she looked me right in the eye. And she said, if any of you want to get involved in a DARPA project, find my contact information online and get in touch with me. And I was like,

was she talking to me like the director at DARPA and but I found her contact information I sent her an email at like 9 p.m that night we were I was staying in like a little youth hostel in DC she responded I mean I have the emails but I think it was 4 44 in the morning like she she's a beast and she said yes I was talking to you um you know what's your cell phone number I'm going to call you later she called me around 10 a.m and she basically asked if i could go to darpa immediately and meet with a few people um i initially so i was supposed to fly to panama like like literally at 2 30 p.m or something it's 10 a.m and i was in bethesda maryland at the nah and she was asking me to go to arlington virginia for any of you that know dc geography it's you know it's an hour away

or whatever. And then I had to get to Dulles airport. Uh, and, and if I didn't make it, I would miss my friend in Panama. Um, and for what it's worth, El Salvador goes into that story if we want to get there later. But, uh, so when met, sorry, I actually initially said, no, I can't make it hung up the phone. A minute later, I just had this deep, deep pit in my stomach of, I was closing a door on like, oh, truly once in a lifetime opportunity. I could just kind of hear her voice deflate. And she said that she would have me do some phone calls with people, but I just called her back and just redialed the number she picked up. I was like, I'm on my way. I'll be there as fast as I can. I got there. I joined a very unique program. It's like basically

something that DARPA hasn't really ever done. Normally DARPA doesn't build technology. Normally normally DARPA just like builds technology for 20 years in the future but she realized when she came in she basically went and asked a bunch of generals like people at the joint chiefs is DARPA actually useful and the reaction she got was DARPA is useful 20 years in the future like DARPA is useful for the next war but it's not useful for the current wars and at the time you you know, things were still very active in Afghanistan in particular. And to her, she felt like that was unacceptable. And so she decided to spin up kind of a live operational team inside of DARPA

that was actually building technology, you know, like fast, fast prototyping based on needs or gluing existing technologies together that could be deployed very rapidly. And there were really like ten of us that were the core kind of architects uh and drivers here and then some people that help support us but part of this is we'd be rotating in and out of afghanistan because it's just really hard to know what to build if you're not actually on the ground and seeing the gaps and what people need um and so she recruited me

for that program i mean like within three hours of meeting her in per of meeting people at darpa i had a this is like i had an early smartphone i didn't have an iphone yet this is in 2009 um and i got an email like saying when could you be in dc and i was literally sitting on a plane to panama at the time at like 2 30 i made the flight um and i responded like i'll be there in eight days because i basically went to panama met my friend we this was like winter break during our phds in 2009 and we see my friend jeff marlo shout out jeff uh and we basically rode buses from panama city to uh to yucatan peninsula so you know through all the countries there including through el salvador and that was just very fast for crazy massacres so it was like call it one long bus ride

a day we made it through call it eight countries and in eight days and then i moved to dc with my backpack and spent two years living out of backpack uh doing crazy obviously there's a bunch of stuff that uh you guys do that you can't talk about but um when you're doing these rotations into afghanistan um it reminds me a lot of uh maybe elon musk talking about hey the engineers got to be right next to the production line right the designers need to be right next to the engineers like there has to be that feedback loop and understanding what's working what's not working and what your design decisions actually have in terms of implications what are some of the things that you guys would do on the ground to actually get that feedback to

really understand uh what to build and maybe what not to build amazing question um i mean it was that there's just no substitute for talking to lots and lots of people that are like actually just coming back from combat and they have an immediate memory of some problem or pain point or just literally moving around the country like i i kind of i mean i don't remember exactly how many blackhawk flights i did while i was there but probably 30 you know in in three and a half months i would just go kind of and and like rode in cars around like seeing stuff happening every day almost and just the act of um moving and talking to people it just completely changed your perspective i'll give you an incredibly simple stupid example um i had a i had a lot

of data sets one of the data sets was around id stuff um that's basically all i should say but But one of the variables in there was, like, this was a massive data set. And one of the columns was called culvert. I didn't know what a culvert was. So I just kind of ignored that, like, column. Culverts are kind of like when you have storm drainage under a road or whatever. It's like what the water flows through. I mean, I'm very embarrassed that I didn't.

Maybe it's my poor high school education. But I didn't know what that was. And it turns out it's incredibly important for finding IEDs because you don't have to dig up the road if there's a culvert on it. You know, someone can just crawl into the culvert and put an IED down there. And, you know, if you're going to try to, if you're like sitting in D.C. looking at a data set and, you know, there's hundreds of columns in it, it's just sometimes hard. And this was pretty deep learning. And so still a lot of this was like human intuition based and we called it statistical learning rather than, you know, these black box neural nets. And so things like that. So powerful. But I mean, another example was I I was.

Basically, I had kind of a schedule where a couple of days a week I would go from this one base to another base and I was about an hour and a half drive. Normally it was only maybe five miles, but there was insane traffic and it was, I would do it a few days a week and I would do it every Friday. Normally it would take an hour and a half. This one Friday, we got there in like 15 minutes. There was literally no car on the road. It was eerie. It was so scary. And we get to the base and the base was HQ ISAF. It was like the primary base for for the joint command of kind of all the different allied nations that were all the allied western nations that were deployed there and right when we got there we went to like all the intel channels to try to understand is there like do we is there an attack coming or what's happening

and there wasn't any clear like obviously there's always a lot of noise but there wasn't anything clear and then a few hours later like a large combined attack happened coordinated attack across like multiple bases you know rockets into towers and stuff and um it's just one of these things where the context of like oh wow when when somehow people knew and that having no cars on the having like the car traffic decrease was clearly predictive that something was going to happen and and maybe not a hundred percent of the time, but things like that. It's just, if you're not there, it's hard to have the context that that's relevant. But when you're there, it's just the most obvious thing in the world. You know, you have a routine and now you just have this major

break from your routine. And so, I mean, I could give lots of examples. The best examples are, you know, ones I can't talk about, but I don't know. What's interesting about it is it's like human intelligence right obviously is incredibly powerful and um one of the things that over 20 years you know of uh kind of dealing with insurgencies and these like forever wars um it seems like uh people on the ground really started to understand that you can have all the best technology in the world you can have you know all of the vehicles that can sustain uh you know explosives you can do all sorts of data analysis you can have the best uh kind of trained teams literally the difference between life and death could be like does the guy on the street corner

like you enough to simply tell you don't go down that road right and that's the difference and that happens all it's such a good point like that happens all the time i just want to call it one one thing that i glossed over part of part of why i gave those examples is i was working on this from 2010 to 2012 primarily and that was the very early days of like big data it was a very very very beginning and so we were always we kind of had a mandate to work with any type of technology but the thing where we got the most leverage at that moment in time was kind of big data trying to take all these data sets or sensor systems whatever that had never really been analyzed and so that just that's why i gave those examples um and you know and the other thing i just want

want to say is I hopefully from the preamble around like having a lot of family that served it's not that I'm so special or anything but there's something about when you are deployed in uniform and you have like a job and everyone else's life depends on you doing that job very well and you're working like 14 hours a day in super stressful situation it's hard for your mind to like go come up with new ideas or sometimes even to like see the patterns that are like should be obvious but are just not obvious when you're so stressed and so focused on a single task and so we had this weird mandate to just kind of go be observers almost but like very very technical observers that were aware of what technologies existed and what was possible and

just kind of go be glue to fit in there it's like it's i i think it was a g it was literally a genius idea of dr dugan uh and and it really was it was a life-changing thing for me while you were at darpa uh obviously 2010 to 2012 is right after bitcoin is created and kind of launched to the world um i know that darpa and a number of other organizations pretty quickly started to pay attention to this thing um what do you remember from that time period of just like what were people thinking internally uh were they excited were they not i know there's research going on around it just talk a little bit as to uh kind of what that experience was yeah i mean it was like it was crazy to be at darpa in the early day to be at darpa embedded in afghanistan during this

time because one of the core things we were doing was with especially from the perspective big data was a lot of follow the money work um so like trying to understand how money gets in and out the country trying to reverse engineer the chain of shell companies and figure out sources of where money is coming from. It was a major thing we were doing. And I think at least four or five things we did made the front page of the New York Times. I'm very, very proud of that. So we were actually successful at this uh and if you're doing follow the money work you know with terrorist financing in 2010 to 12 bitcoin was just like an unbelievable revelation we would talk about it almost every day of what does this mean like should we be tracking it more like is it being used you know and

uh it's easy now in 2023 to like understand to look back on it but in the moment we just had no idea what was going to happen to it like it was a tiny little thing um but it was very disruptive it wasn't now today i would say that bitcoin is the most traceable money in the world at the time it wasn't clear like how the on ramps and offers would work and you know if it would be traceable or not um but looking back like bitcoin to me is the most traceable money in the world but it's also to me the best money i i am a mega bitcoin fan but it was just it was a truly a core part of what we were doing and then leaving darpa immediately from there um myself and two friends came up with we basically decided to start a research company that was doing darpa research

So we kind of were getting contracts from DARPA to do AI research, big data research, cybersecurity research. And about a year and a half later, we brought in another person who came up with a really smart idea that became our product, which became the whole business. And in late 2013, that idea actually used bitcoin like we actually we were using bitcoin base it's kind of a long story but we needed we needed to do computation that no one would be able to trace back to us and we were using bitcoin to basically pay like estonian and uh some like baltic server companies to go kind of run compute jobs for us which then would get pushed on the internet and And as crazy as it sounds, we actually needed to do that back then.

And the architecture evolved beyond that after maybe six months. But anyways, we were using it. And what was the idea in terms of like, what were you guys trying to do? And I know that this business ended up growing quite large and you guys eventually were able to sell it. But what was the original idea that you guys said, hey, look, let's turn this into a product? Yeah. So the original idea, the observation was that if you go back to 2012, 2013, if you ask basically any company or government agency, what is your network?

Like, give me a list of all of the computer devices you own. Give me a list of all the video cameras, the servers, the routers. Give me a list of all of the devices that you own. Believe it or not, no one had those lists. No one had a map of their own assets on the internet. And if you're going to defend something, you need to have a map before you can defend it. I have so many crazy examples of, I mean, like, servers that had been running for 30, 40 years that were, like, put inside drywall that people still, like, you know, didn't know existed anymore. And so, basically, we, that was the insight.

I was not the one that came up with that insight. One of my co-founders did, to give them credit. it. But it was such an obvious insight to us once we had it based on what we've been doing. And so we decided, okay, this is a super important problem. Cybersecurity is going to be huge. Let's go solve this problem. And so now this is a category in cybersecurity called attack surface management is what it got named later on. And so the way we solved this, the insight that another co-founder had, one had the idea of what the product should be.

The other had the idea of how to build the technology and I basically sold it and, you know, executed on it and hired a lot of the team. But my co-founder kind of realized that in 2012, we had just gotten to the point where you could use big data ideas and send traffic, send packets to literally every single device on the internet,

like to every single device and on a regular cadence, like every hour or so, and see what responses you get back. And like through kind of what we call fingerprinting, you could figure out what those devices were. And so we started off by building a super set of every single device on the public internet. If something was behind a properly configured firewall,

or if it was on a blacklist or whitelist of what we weren't supposed to send packets to, then we wouldn't touch it. But otherwise, we knew everything on the internet. And then from there, we would try to figure out from the superset of everything, who owns what? You know, does Goldman Sachs own this? Does JP Morgan own this?

Does the Navy own this? And so we kind of would start from the top and then segment everything. And part of why we needed Bitcoin is we were sending so much internet volume that if people knew that all the packets were coming from us. Like if we were sending from the same server infrastructure, then they could just ban any packets from those servers going to them. And so we wanted to have a server infrastructure that wouldn't be traceable to us and that we could kind of move around so that people wouldn't realize that we were kind of effectively like a very light DDoS, but kind of a DDoS. How much did you guys sell the company for?

A billion dollars. And it's funny, the public, it was publicly reported as a little less than that. And it's kind of, I don't even know why, but the acquirer wanted to report it as less. And so they didn't include basically, so it was a billion and $15 million, 1.05 billion to the cap table. So like to investors or any employees that were no longer there. But they didn't include in the announced number, like the revested equity for the people that were continuing, or not just revested equity, just any equity that had been granted, but not yet fully vested. And so that was a discrepancy. Yeah. It's interesting how they kind of think about that. Another thing is you've tweeted a bunch of times about Naeem Bukele down in El Salvador. And I think that

he obviously is implementing a pretty radical plan, radical just being different, right? Not necessarily good or bad. The impact so far or the results seem to be pretty encouraging. There's obviously some people who have concerns about, you know, kind of the style or the concerns in terms of what could potentially be used as abuse of power. But so far, it looks like he is drastically stomping down on uh criminal activity he seems to be cleaning up uh a lot of corruption and then uh it looks like you know citizens basically are headed towards a better life right one that has more freedom more prosperity etc what has been your experience i know you've gone to the country a bunch of times and seem to have studied you know what he's doing what's your

read on what's going on there so i i've been to el salvador i think five times and i've traveled it pretty extensively you know i've taken buses from the south to the north i've been to the volcanoes i've been to the beaches san salvador etc um and i have a few friends there that i kind of still get to check in with and see how things are going and it's it's weird the first time i went there i fell in love with the country it was super dangerous i think the first time i went was 2007 and it was super dangerous at the time and when you would talk to I mean like my friend had security at their house like it was they were it was you could feel MS-13's presence and look I'm I've been really impressed by Bukele

today like i've been blown away by him today i think that he inherited a horrendous situation i mean you can go look at the murder rates in the country 10 years ago compared to today and it's kind of like he inherited a trauma patient that had been shot like four times and was bleeding out and he had to take like really radical kind of risky action to stabilize the a patient. And I think he's done that masterfully. There's still a question around the future. So I think he's done the stabilization step incredibly well. We don't know exactly where it'll go in the future. But so far, what I've seen from Bukele has been just like incredible nuance, like huge bravery, willing to look stupid in the short run to be vindicated in the long run, which I think

very few politicians are willing to do these days so i hope that's actually an example for other politicians that sometimes you know he looked really stupid when he bought bitcoin and the price went down uh but now he has a 93 approval rating and um you know he's just i've been really impressed by him i've been very impressed by his nuanced views on things and kind of of the risk-taking and the ability to try to engage the technology community. So I don't know where it'll go, but I've been really impressed so far. When you think about a politician like that, how much do you think age plays into it? Like obviously El Salvador seems to be like the exact opposite of the United States.

And one of the things a number of friends and I've been talking about is just like, matter how innovative you want to be, no matter how, you know, kind of refreshed thinking you want to be, age does play a role, right? And especially if you are then not only yourself getting older, but then you're surrounded by older people as well. I think one thing that venture capitalists figured out very early on is like, hang out with young people, right? And like, that's where the fresh ideas are. That's where kind of innovation comes from. I really don't know, right? Maybe politicians are spending time with a bunch of young people. It doesn't strike me that way. But Bukele seems to be, obviously one, he's younger, but also two is the average

age in some of these developing nations tends to be younger as well. And so do you think that actually plays a huge role or is that something that like we want to kind of put it into a box and explain it, but maybe isn't as impactful as we would think? Personally, I think it plays a big role um i you know the the nuanced view though is i think you kind of want all age groups kind of all together i think that we are today american politics is just skewed way too old like the the median age is probably 15 to 20 years too old but you know the the thing that that old people bring is huge amounts of experience and like the wisdom that comes with that.

The thing that young people bring is fresh eyes, you know, work ethic, energy, being closer to the technology changes that are happening, you know, and just like understanding the voice of a different cohort of people because they're much closer to it. And so I just, to me, if I could wave a magic wand and, you know lower our american say congresses or this yeah the house or the senate's median age

by 15 to 20 years i think that would be hugely impactful uh but it's you know it's not to say that we don't have some phenomenal you know elderly uh politicians let's um let's talk spacex uh obviously i think people are very excited it's been you know 20 plus years since the company was started um i think that you've invested like a billion dollars in the business um spacex is known for rockets starlink is becoming uh a much bigger story uh they recently announced direct to sell uh which is an entire you know concept of like screw the carriers screw everybody else we're just gonna go straight from the satellite to your cell phone how do you think about that business and like maybe what the potential outcomes could be uh both in terms

of size but also importance in the world oh man i i see facex gets my my fire going i mean it's just such an incredible company and one of the i mean i just want to call out from the beginning you know one of the things about getting to be a little bit close to the company is you see the work ethic of the team and man i mean part of the beauty of having such an exciting mission that's so clearly stated and it is like for many people existential you know like how i think a lot of people do view going to mars as a kind of a really important thing for humanity it's just like the the work ethic and sense of purpose and that company is unreal i've never seen anything like it and it and despite what the media wants to say like it starts from elon like that guy is is a

a, he's a, it's incredible how hard he works. You know, I'm 37 and I can't, I couldn't even come close to keeping up with the number of hours he works. It's insane. And so I don't want to take any credit for what the team is doing or whatever. I'm very lucky to kind of get to be a fly on the wall and make some money from it, but I don't want to take any credit. For myself and for Sequoia, we haven't really talked about this.

It's not a secret, but yeah, we've invested about a billion dollars into the company. The largest investment was in July 2020, so this was kind of when Starlink was, you could demo, do the earliest demos of the constellation, but it was right before they had any revenue. And so kind of the, we just, we saw the inflection that was going to come as they were able to convert this 20 years of potential energy, you know, of building like this insane launch platform and now start launching secondary, like very kind of profitable mass consumer businesses on top of it.

You know, some of the things that I think are just unbelievable, you know, last year the company put, and Elon's tweeted the numbers, something like 60, 65% of all the world's mass to orbit. So if you look at all of the mass from every space program globally, that's both private and public, including the Chinese space program. Last year, SpaceX was about 65%. This year, it's going to be like 75 or 80%, you know, in 2023. three. SpaceX has not had that many really major inflection points in its history. But the company

is kind of right at arguably the biggest in its history. And so even those numbers, like 75, 80% of the world's mass to orbit in three years when Starship is like really, really working and it's just, it's flying, you know, a hundred times a year. I mean, it's, it's gonna, the numbers are to be really crazy and so you know the the things i would keep in mind about the company are it took 20 years to kind of build the system that can make the system and to kind of get the company to a very stable strong place and now we're just at the very beginning of converting that kind of stored up potential energy to kinetic energy which would be seen as like uh revenue profits just mass scale activity you know the companies you know starlink obviously still has lots of new markets to launch

into um that i i don't want to say anything that they haven't shared like you know they announced direct to sell two days ago what that means is like the initial thing is basically for any of their global cellular partners so like t-mobile was one of the first in in the us uh if you're a t-mobile customer you'll be able to if you're i think i shouldn't go into the exact details on like how the plans work whatever but if you're t-mobile customer you'll be able to get start a starlink add-on which will give you no dead zones so like if you're hiking if you're you know driving and there's a dead zone it'll the network will just kind of automatically spill over from the t-mobile network to space like literally your cell service is going to come from

from space it's it's pretty sweet uh it's basically like having a uh a consumer-friendly sat phone right satellite phone it is uh kind of the the sense that i get in terms of what i was reading that's true but um look for me it's it's more just it's more like cell towers in space you know if you in the past part of why like satellite internet and all that has a bad reputation is in the past basically all the satellites lived really far away from earth they you know they lived i i think it's a factor of a thousand higher orbit than then where starlink satellites live the round and the round trip time for a signal to go to one of these satellites and back was about a second and so you have you know latency there's a lot of loss of like the

the kind of the energy in the beam as it's as it's going that long distance and so like the total bandwidth that you can get to the ground is not that great um with starlink you know know people will rewrite history but four or five years ago people didn't think it was possible to like i when i did diligence on the company almost every expert i talked to said it's not possible to have you know broadband internet from space at a mass scale where like lots of people can be using it and really you know fully power rural environments and have as much bandwidth as they need um here like i i think it's the way i would think about is it's really like spoofing cell towers in space is really just kind of lifting, lifting the, some of the ground

infrastructure into space. And it's low enough, you know, on the order of between 400 and 600 kilometers above the earth that, you know, you're just, you're really not that far away as crazy as that sounds like it's, it's really just, it's almost right above us. Yeah. To me, I think that's what um becomes really interesting is almost uh elon's learning from tesla of vertical integration and you know a lot of people i don't think really understand how many of the parts they make in house and how they've been able to simplify supply chains and just you know the more you learn about it i think you're just like wow that's really hard very complex but obviously if you can pull it off it's super successful it feels like almost in a weird way he is now vertically integrating

uh hey if i can get things into space what are all the use cases of things that i could do up there and Starlink seems like a pretty good place to start, but I got to guess that he is considering, you know, what else could he be doing? Yeah, they are. I'm just, you know, I don't, I want to be sensitive to, you know, I don't want to step on anyone's toes, but I do want to say my mental model

for both Tesla and SpaceX is they're like, they're each 20 companies in one, you know, like for Tesla, they're obviously they make cars. First of all, the thing that, But so I was negative on Tesla like seven years ago, and it was just a stupid, naive argument that all the hedge fund people had, which was, oh, if you add up the market cap of all the automakers, you know, like Tesla doesn't even make anything yet and it's already bigger. The thing I got wrong is I'm actually on the board of a LIDAR company called Luminar that is selling into the automotive industry. um the thing i didn't appreciate back then is that the oems today like they don't make that much they basically buy almost all of their parts from a large supply chain like for example there's a

public company called nxp that makes semiconductors for cars you know there's there's like a company in called there's a company called active that does a lot like the wire harnessing so they kind like harness up all the electric cables you know a lot of that's manual and there's just like there's all these sub companies many of which are like large companies um there's also the gas stations like there's this whole thing a lot of people are looking at just you know the oems today basically just sell cars do the financing and like a little bit of the design they don't make many of the pieces tesla is making almost everything it's literally 20 companies in one they're making semiconductors they're you know they're making the batteries they're even gonna

like refine lithium you know they're they have the gas stations through the charging network they have autonomous vehicles they have like the software the control systems for the cars you know like it's just they they even have they make like the speakers for the car you know like which is the on and on and on it's it's 20 plus companies that also has all this potential upside through things like self-driving, things like Optimus, the robots that we're seeing. And so I just had the wrong mental model for the company. And SpaceX is very similar to me. Obviously, the rocket is the core thing. That's the workhorse. But to make the rockets, there's so many different subcomponents. But even to make satellites, like with Starlink, they make the

engines that power the satellites so when satellites are you know when people talk about space debris um in the orbits where starlings live you know call it below 600 kilometers there's actually still some atmosphere there's a little bit of atmosphere up there and so when these satellites are flying they're actually colliding into you know atmosphere molecules whether it's oxygen or you know carbon dioxide or whatever it is they're colliding molecules and every time that the satellite collides into one it slows it down a little bit and that would cause it to start descending to earth you know it would cause it to fall into earth's gravity well and ultimately burn up and so to keep these things in orbit you know like with space debris if you're below 600

kilometers or whatever where starlink lives if you if you turn off your engine you will within a couple years just fall into the atmosphere and burn up including all the debris if god forbid one word break there was a collision um but so for example like they make these engines that power the satellites and so there's just it's they're making the phased array antennas that um that like go into the starlink user terminals so it's it's really just unbelievable i think people have the wrong mental model for just how impressive these companies are how do you guys at sequoia or just yourself think about some of these new technologies right so obviously spacex and tesla I think, have become these household names. Obviously, Elon, very well known for doing some

of this stuff, but you are literally in the business of going and finding the next SpaceX, it's the next Teslas. And so what are the areas that you're looking for? How do you guys think about trying to underwrite like, hey, maybe there's innovation happening, but is it going to be commercialized? Is there actually a business opportunity here or is it more of a research project? Just talk through maybe some of the things that you've learned over time and kind what that process looks like. Yeah. So Sequoia is a partnership and it's kind of, this may sound crazy, but we, the way I would describe it is it's a bunch of people that are simultaneously, like we're simultaneously a bunch of individuals that are all very, very different from each other

and have very different investment styles, investment interests. We're also like It's simultaneously an incredible team that really tries to push each other's thinking and really tries to work together and really tries to help each other whenever it's needed. And we've almost constructed our team the way you would construct a portfolio. To have a good portfolio, you want a lot of diversification in the portfolio. If you were going to have a portfolio that's 100% AI companies in the year 2021 or in the year 2023 or whatever it is, you're so heavily indexed just what happens to AI in that vintage that you don't really control what happens as much as just the macro environment.

And so for us, we think a lot about portfolio management. And so that means you want some companies, there's like max risk really swinging for the fences. You want some companies that are relatively straightforward. It's a software company that's already working and maybe the market is capped but like we're high confidence that it will get to some level and so we construct both our portfolio and our team with this kind of similar lens of trying to have a very diverse collection of people and so we all have really different investment styles interests i am on i'm one of the people on the furthest extreme is not the furthest extreme of like i'm kind of swing for the fences investor and and the way i do that is i like to i'm there's there's like

two pieces to it one is i i just try to study all the markets in the world like all the large markets if there's a market that has more than 100 million 100 billion dollars worth of revenue flowing in it like i want to know that market i want to understand that market um and just like already have a prepared mind on how it works so i kind of i hold the markets in one side of my brain and then the other side i'm i'm always looking for changes in the world you know like what are the why now so like maybe there's some new regulation that just got passed or maybe there was just some major like you know major failure somewhere or you know you have decoupling of you know china manufacturing and u.s manufacturing or i'm just always looking for kind of the

intersection of really large markets that have already thought about a bunch and then some some new wine now whether it's a new technology or regulation or whatever and kind of that intersection is i think when you get the biggest opportunities like that's when you have the swing for the fences opportunities where you really you might have the first time ever incredible path to go, you know, create a space internet constellation or, or like, last night, I had dinner with one of my founders, Ali, I mean, Java Harry from Node, K-N-O-W-D. This is a chemicals marketplace. Most people don't know anything about the chemicals industry. I'm obsessed with the chemicals industry. It's, there's $5 trillion a year of chemicals sold. You know, that's about

five times bigger than pharmaceutical industry. You know, it's bigger than oil and gas, but no one knows about this industry. It's just kind of like goes over people's heads. And so I had studied that industry for like 15 years. It was out of curiosity. And then when I met this brilliant founder that had this kind of crazy insight and he was coming from the industry, I had enough of a bare mind to realize that that might actually work. And that might actually let you go kind of become a large player in this gigantic industry. So that's how I think about it. When you meet these founders, whether it's this founder you're talking about with the chemicals marketplace or others what are the traits of great founders right you know it's

interesting because you've been doing this for a while now sequoia has obviously been doing this for decades and probably has a bunch of institutional knowledge of just like higher probability of successful founder lower probability what are some of the things that you all are looking for or try to tease out when you meet founders number one is probably grit so it's people that are just never going to give up. Every single startup is hard and has major trauma that happens. And if you find a founder that will never give up, if on average, every startup has four major trauma moments, if you find a founder that will never give up compared to a founder who's like 50% likely to give up at any one of those four traumatic moments, then it's like

16 to 1 more likely that the gritty founders succeed simply because they didn't ever give up you know publicly inside i just i think that's number one is the grit and you know one there's a lot of things that can signal grit in someone's background immigrants are oftentimes have more grit you know it takes a lot to pick up wherever you are and like go take a risk leave your family and and go start somewhere new um you know people that have had trauma in their lives oftentimes have more grit but it's something that's really important it's number two is speed um and it's and it's really not it's not even about like iq it's about um it's about just like email response time it's about you know time to take a risk you know just like ship a new product

feature and see what happens to me elon is probably the best in the world at speed it's part it's one of his many advantages and he's willing just like test products in in public and sometimes it works sometimes it doesn't but he gets that data incredibly fast and then can kind of move on number three i would say is and this is not going to be popular but this is like i'd say street smarts or judgment they're kind of the same thing to me um like i'd much rather work with a founder that has incredible judgment, just to kind of always gets the right answer rather than someone who has really high IQ and just kind of is really book smart. I think street smarts are more important in business than book smarts. How do you tease that out? So I think

that makes sense. And you kind of look at it as, hey, I'm betting on this person. Everything's going to change around them. They're going to have to really make good decisions to get us where we need to go. But when you are meeting with someone, even if you meet with them four, five six seven ten times before you invest how do you decide whether someone's a good decision maker or not uh amazing question it's just kind of an art form it's kind of a skill like i think i'm i'm not perfect at it but i think i'm better than most at assessing other people's judgment uh Uh, but I do have tricks for how I do it. Like, like probably the biggest one is I, I rarely invest in people that I've

only known for less than a month. I like to know people for at least three months and really watch them operate a little bit. Like watch, see if they do what they say they're going to do. See if they kind of chose the right strategy as the small number of kind of problems arise. you usually don't have like a major problem in those three months, but small things arise and you see how they react to it,

see like what decisions they make there. And so look, I think simultaneously, if I'm being honest, I think I'm just better naturally at assessing judgment and I get that from my mom. But then the other part is, is just kind of watching people. And so as you begin to work with these people, right. What do you see them doing in terms of building company culture that kind of sets it apart right so we talked a little bit about elon and just its speed if you read uh

walter isaacson's new book about him like i mean there's some crazy stuff that they're doing there right literally just like the surges and and getting people uh to believe in this big mission what are some of the things that you all have seen in your portfolio companies where you know you've already made the investment you already kind of believe in the founder but you begin to have a deeper conviction like this was a good bet and we can see the early signs that this company's going to be one of the companies that breaks out? Judgment is certainly one of them, which companies are faced with crucible decisions all the time. Not that many, but call it one or two a year. A lot of times there's different magnitudes of crucible decisions.

And it can be like someone gives you an acquisition offer. Do you decide to take it or not? It can be your business. We had a plan and it's going pretty well, but But then something happens and it's not working anymore and you should probably pivot your business a little bit. Not a big pivot, but change the pricing or maybe a new competitor enters and they have a free product and now it kills your top of funnel of new customers and you have to make a change there. And so I would just say, you can just tell an incredible amount from how founders respond

to these early kind of like strategic decisions um another thing that's funny is a lot of the best founders there's like a balance the best founders you don't want to be too first principle thinking you don't want to reinvent absolutely everything um but the best founders do reinvent some things like there are some things where they're really stubborn and they'll just do something you know steve jobs or elon obviously there's certain things where they're just like so dead set on some they have some vision or they just they believe something to be true and a lot of the best founders just have that stubbornness but then they have to be willing to change their mind when they get data showing that the original kind of vision was wrong and so

for myself one of the things i do with the founders i work with is i try to explain how confident I am in any given advice. Like, I think that, you know, people will ask me for feedback on stuff all the time. And usually I don't know anything about it. And it's like, sure, I'll give you my opinion, but like, don't take my opinion seriously. You do you, you know, it's your business, you know more. But for every company I work with, there's probably like one or two things a year where it's like, I have extremely strong opinion. Like I have been through exactly this two or three times before and you know and it's it's oftentimes non-obvious things but like you need to hire your first sales rep right now because you are getting product market fit right

now you don't realize it yet and you your plan was to hire your first sales rep in six months but like you need to hire him right now or her because it's going to take them a couple months to get ramped and and like you want to be able to service that demand when it comes in and it's it's all levels of this, but there's only two or three times a year, or sorry, one or two times a year per company where I actually have a strong opinion for them. And I try to make it clear when it's a strong opinion versus pulling stuff out of thin air. People always laugh. I say all the time, whenever giving advice, free unsolicited advice, just remember, you kind of get what you pay for. And so here's my advice. And one, it gets a good laugh, but also to just don't put

much weight on it uh because i do think that it's hard to remember like somebody else has all the information right like they were in the room they saw the eyebrow raised they got the sense of saying when you were talking about driving through afghanistan there's no cars on the road it's hard to describe to someone but like you just know something's up um so it makes sense the last thing uh i wanted to ask before i let you go is sequoia given that you have so many partners such diverse um kind of backgrounds and strategies and all this stuff how do you guys make decisions Good question, Pomp. You're a smart guy. One of the things about Sequoia, there's a meta point here, which is we're always evolving.

Sequoia, part of how we've stayed such a successful firm is we're just super paranoid. We're never complacent. We're always willing to take risk. We view that if we are not willing to change or take risks that then like you know we're just gonna lose and so it's crazy it sounds like even the decision making changes a lot like i've only been at square for four and a half years but i've seen the decision making change kind of meaningfully at different points um but i would say some other like the core principles are one we we really try to have like ultra direct honest conversations like there's no sacred cows there's no egos uh you should not take anything personally if someone thinks your company or a company is not working or is a bad investment or whatever like you

you kind of initially when i joined like i took it very personally but then you over time you kind of learn no really this is uh like feedback is love it's this is like really just radically direct discussion so i'd say that's point one point two is we really try to change who has an important voice based on what the conversation is so like if it's a hardware company my voice is pretty important you know if it's a fintech company or payments company ruloff's voice is very important he was the you know cfo at paypal and on the boards you know on the board of block, for example, you know, or if it's a, like an operations business, Alfred's voice is incredibly important. You know, he, he was the COO at Zappos and, you know, at Amazon and works

with Airbnb and DoorDash. He like, he just has so much experience there. And with marketplaces, you know, if it's a AI company, Constantine or Sonia or, you know, Pat's voices are really important it's just it kind of just depends kind of weight someone's voice based on what the conversation is but not based on age or seniority you know like there's some times where it's like the 23 year old analyst who actually knows the most about something and we need to actually be able to elevate them and listen to them and then the the last thing i would say is everyone has veto ability over every investment um just kind of crazy and one of the things that that leads to is it means um there's like a few aspects of it one is it forces us to make like you know to

have really intense conversations and and uh and it kind of gives people the ability to to block things if they if they truly don't think it's a good investment but it also means like once we make an investment if ever if we if we make an investment it means that everyone waived their veto which means that now it is a team investment like there's no looking back in three years and saying that oh man like sean made that stupid investment what a moron like we should fire sean you know it's it's kind of the opposite it's like no you didn't veto it uh sean made the investment he's he is a moron but you didn't veto it so you're a moron too and so it's not that we should fire sean is it and maybe maybe they should but it's it's just like there's a team investment

let's figure out how to make the most of it let's work together let's not relitigate the past and so i think that's the kind of the really important non-obvious part of having veto and i guess as a follow-up to this like there's a social dynamic obviously at play and there's also this like you know whose voice is more important um how do you use maybe check size to also signal confidence right or is it something where we want to put you know the same check size into every single seed company and and if we can do that then that's like better for portfolio construction we do have some like we definitely have some guidelines of what we aim for and what are like normal strike zones for different type of companies. And we do have different decision

makers. So like Sequoia is structured, we have an early team and a growth team. The early team is primarily seed in A. The growth team is primarily, call it $25 million investments and up. And so it's literally a different set of decision makers. in in reality there's actually a lot of cross flow you know like there's a lot of people from the growth team that sponsor investments for the early team or or vice versa you know like i'm on the early team but i led our spacex investment which you know is one of if not the biggest investment it's one of it's one of the two biggest investments in the history of like sequoia us and europe and so there really is like a lot of this back and forth uh and we just it's very fluid like

we at sequoia we really try to stay we have guidelines but we simultaneously try to stay very fluid so that we can make good decisions that um that makes sense where can we send people to find you on the internet uh well my my twitter's pretty spicy right now so you can send them to my twitter you know at sean m mcguire or or you can you know my email is s mcguire at sequoiacap.com it's and it's on the website and i think those are my two residents and when i say twitter i should have said x you know apologies x team uh you know still still getting my head around it i laugh every time i read a mainstream uh uh media article and they're like you know x formerly known as twitter like they they're gonna they're gonna do that for like three years so uh you you're uh

you're perfectly fine i think you might do forever you know who knows no it's possible um i appreciate taking time to do this uh i learned a ton i think a lot of people other uh will find this very interesting as well so we'll definitely do it again in the future pomp you are a legend i appreciate you thank you for having me