From PayPal Intern to Starting 4x Billion-Dollar Companies

Sean O'Brien
You have now created, by my count, at least $4 billion companies directly. Probably more than that. What would you say you are doing different than the average good founder? So I have some unfair advantages, right? I feel like I can rule the world.

Joe Lonsdale
I know I could be what I want to. I put my all in it. Like days off on a road less. Okay, Joe, thanks for doing this, man. And thanks for inviting me into the morning workout, the cold plunge and everything in between.

Breakfast. Good to have you here, Sean. Start with lessons learned. You one of them that we were talking about this morning when we were doing a workout was making decisions on blended reasons or having, like, a blended strategy for how you're going to win. We're going to win doing these five things and why.

Sean O'Brien
That sounds like a good idea to the average person, but it's actually a very bad idea. Can you explain that? Yeah. And I wrote this piece online, like, nine lessons from Peter Thiel I sent to all of Palantir. That's been, like, sent to all my other companies as well.

Joe Lonsdale
And it's one of my favorite pieces, and that's one of them. It's one of these logic things where usually there's, like, one reason that dominates everything else, and that's just the nature of the world, is that, is that when something's successful, it's kind of like the power law rule, right? Like in a venture capital like fund, even, there tends to be one thing that's successful that's, like, bigger than everything else. And that's true inside of companies as well. It's very unusual, like, extraordinarily unusual for there to be, like, two similarly equal products or revenue lines or something like that, especially early on in a company.

So usually if you think you have, like, two or three reasons for doing something, or five reasons for doing something, what that means is that you actually haven't figured out. You have no actual reason, you have no strong reason. You have no strong reason yet. That means you have five weak reasons, which is not good. You want to find, like, what's, like, one really strong thing you're driving towards, and that that's how startups work.

And this is, it's a really seductive trick. I mean, first of all, you have to be taking a big risk to even do a startup. It feels like, rather than like, you know, most people, a lot of people, like, do incubators because they're like, oh, I don't want to do one company, I'm going to do ten companies. And, like, by the way, that's like, much less likely to have big success because you're not focused. And then, so even within a company, they're like, they're trying to do the same thing.

They're trying to be like, well, here's five ways I'm gonna make money. I'm like, no, no, no, man. If you really wanna do a company, figure out the way you're gonna make money. And that, and that tends to be how it works, you know? All right, so here's the deal.

Things are changing fast in the tech world and the Internet marketing world. And that's a big deal because you have to know which trends to stay on top of in order to market better, in order to acquire customers for cheap. And so you can run your business as efficiently as possible. Staying on top of all those trends is a pain in the butt, though. And so the folks at HubSpot had made this amazing report.

It has a very official sounding name because it is a very official document. It's the 2024 State of Marketing report. They've looked at millions, tens of millions of bits of data to find the top marketing trends that have the most immediate impact on your business. And so what HubSpot did was they surveyed over 1400 marketing pros from across the world and they looked at what are people using effectively, what's not working, more importantly, and they've been able to compile it in a really easy to read document. So if you want to learn ways, how to optimize for social, or how to boost engagement, or how to strike the right balance between privacy, but still being personal with your customers, go to HubSpot.com stateofmarketing to get the free copy.

Or just Google HubSpot state of marketing and it'll come up, check it out. And that applies to revenue streams. So eight revenue streams means you probably don't have one awesome revenue stream. Exactly. Growth strategies.

Sean O'Brien
If you have seven things we're going to do for growth means you haven't. Which one's actually the one that's going. To, the one that's going to just compound like crazy. And it may change, it may change over time, but what's the thing that's working now? You're pushing on.

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

Yeah, it's like, multiple pros. Multiple pros and then a couple of cons. That's almost impossible. It's a guaranteed way to make mediocre decisions is to do long, blended lists of. If you don't have a key reason to be there, like, stick to your work.

Sean O'Brien
Yeah, exactly. That's what he said. He's like, if we don't have one reason, that's that alone is worth doing, then we should just say no. Is that something you do? Reed was one of the key minds at PayPal, of course, with Peter Thiel and others.

Joe Lonsdale
So who knows who actually came up with these ideas? It may all be Reid's ideas, and I'm recycling. Very smart guy. Well, I saved the message for mine now, so I think that's the best way to, the highest compliment is to meme an idea and to let it spread. And so Peter's helpful with that.

Sean O'Brien
What are some of the other things do you remember? I mean, even at the beginning, one thing I kind of wonder is you've been around a bunch of special people. Peter, Thiel, Elon Musk, all this stuff. Is it clear and early, like, in the early days, do you remember the moment where you're like, oh, this person's kind of different? They are that five standard deviations in intelligence or conviction or whatever.

Joe Lonsdale
One of the. I mean, we all try to set strategies for ourselves and goals and whatnot. And I remember in college, I thought, wow, this is a really good opportunity at Stanford to reach out to a bunch of successful people and kind of learn from them, see who I admires, who I want to be like. And I've met some of the legends of global macro finance who I'm still in touch with. I met a bunch of other big business people and run Fortune 500 companies.

And Peter, to me, had by far the most interesting intellect. He was clearly just one of the smartest people I'd ever met, and he was interested in some of the same things I was interested in. He need taken some of the logic farther than I ever had. So I always learned the most from conversations with him. So that, to me, was one of the reasons he was the most attractive to try to work with and try.

Sean O'Brien
To build with multiple other companies. You do clarium, which is his hedge fund, I guess, is the way. Global macro fund. Yeah. It's like the most fun part of finance.

Joe Lonsdale
There's always, there's lots of parts of finance. Finance is like all sorts of areas. Global macro is looking from like the highest possible perspective at everything going on in finance is like the bond yields around the world, the flows of money around the world, how equities are being valued. They basically, it's like just from very top down, like, what is happening in the world of finance, and how do you map it out? And you look at relationships, you understand, of course, like, the australian currency is going to be really correlated with the price of metals, and there's different ways in which they can get way off.

And you can create a regression trading system if they're way too far off, where you can make money based on the reversion. But then you say, normally, I would trade this, but actually this is happening because China just invaded this thing over here. So actually, it's not a good time to do it. It's just really, really fun. Map of the world.

And we were really interested in long dated oil prices and what was happening with oil. We were very interested in how Fannie Mae and Freddie Mac, which are the two big giant housing groups, they've gotten to be much, much bigger in the US. In the early two thousands. They had these giant mortgage backed security portfolios that are worth trillions of dollars, and they had to hedge these portfolios basically. I won't go into all details, it's a little bit esoteric, but based on how they were hedging their portfolios was completely changing the global fixed income markets, completely changing the pricing of bonds, we found some really interesting ways to do things there, actually.

My favorite story, though, I'll give you, is just to give. So we. Were you working at the hedge fund markets open? We're in San Francisco. We're in 555 California.

Right. It's that big building downtown. Like after. After 911. I think Peter had a parachute in his room.

I always told him he's got parachutes for us, too. But anyway, there's one parachute. Okay, that was just a joke, but it's probably anywhere. But no. So it's like, cool office on the 42nd floor, and the market's open at 630, so the traders are supposed to be in at 630.

Except the first Friday of every month, you had to come in at 530, because the non farm payrolls come out still. Now, the first Friday of every month at 08:30 a.m. On the east coast. And it turns out this is a very important number because it shows you what's going on in job growth in the whole economy. Based on the Bureau of Labor Statistics, numbers.

What was really cool is Kevin Harrington was our head of research. This genius, crazy physics, biology, interesting guy. He ended up being on the National Security Council later. Super interesting smart guy. He had mapped out this thing I'd helped him with where we realized that they were adjusting the numbers wrong.

Based on seasonal adjustments, we were able to predict whether the number would hit or miss and this thing would move bond markets like crazy, like hundreds of billions of dollars and move around based on this number. And we figured out they're systematically misdoing it. This is totally legal. You're allowed to do this in finance. So we figured, okay, this is a mistake.

75% of the time, we can make money trading this, and then we can adjust it, make it even better based on where the market was positioned. So the market's gonna be surprised, and we can kind of tell there's a good chance it might be. We take a big position like the night before or whatever, and then, like, make a ton of money that morning when it worked, and it was at 430 in the morning with about 75% chance. And so as you do it enough, you're gonna do it well over time. And it was the most fun thing.

Cause we take these, like, giant positions on this thing, and you'd be there with, like, Peter and Kevin. Is this just like, the highest stakes. Game of poker gameplay? It's the most fun, I think, of poker. And you're like, literally personally have, like, a few million dollars riding on it at a time.

It was early twenties. These guys, you know, Peter probably had $100 million riding on it every time. And you're, like, high fiving if it goes right or you're depressed if it goes wrong. It's most fun, high stakes game I play. Is he sweating or what's his, like, what's gonna happen?

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

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

Right. But I remember it was. It was a fun time. That's a entrepreneur survival tactic. You have to block out the traumas.

Joe Lonsdale
All the traumas, because if, you know. If you remember how hard something is, you're very much less likely to start it again or do another thing. There's a way I would have built all these companies if I had to force myself to think about that too much. The way you just described the global macro fund, you're pretty young when you're doing this, and that's not what you were doing just before, so it's not like you had tons of experience. My little brother got me reading a bunch of economics and finance stuff when I was young, so I had a weird both computer science and finance background, and I had opinions about it.

So that's things that weird. Those are my two things.

So I knew that world pretty well. And, yeah, you learn a lot being in it. You just do. You just have to be in it to do it. But, I mean, credit to them for betting on you to be able to do that.

Sean O'Brien
They could have hired somebody who's been doing that for 20 years. In New York, we talk about lessons from Peter Thiel. I think one of the most important ones I've seen from him that I've definitely taken to heart. And what I've done is I'd much rather hire for talent and ambition and hard work than hire for expertise. So almost, and there's exceptions, right?

Joe Lonsdale
So if you have a company that's already really working and already really scaling, and there's, like, a machine that has to be run, you want to hire the guy who knows how to run the machine, that's fine. That's like, that's like, that's the operator who knows what they're doing already. But when you, before you've actually built the machine or when you're doing something with a group in, like, high finance or whatever, you want to hire for raw IQ and hard work and just iterating and figuring it out, and that's. That's a different skill set than the people who run the machines. What's your way of filtering for that iq?

Sean O'Brien
How do you interview? Or what are the signals you look for? This is super hard. I think you start with hard math problems at people. What are you doing?

Joe Lonsdale
We used to do that at Clarion. We had these really hard problems. I remember my friend, studio run Dropbox, one of his partners there, his new ventures. Chen Li was the highest scorer on this test. I gave smart guy.

We had to do really hard tests. But once I already had around me a bunch of people who are really top talent. It's like they knew people like, oh, who is the smartest guy in your physics PhD at MIT who is things like that. So it's like you kind of get a network that's already really solid, and then you go out from there. And so let's go more on that.

Sean O'Brien
So two things. One, Ben told me something that, like, there's some number, I don't know the exact number, 2030 people who have worked at your companies that have then gone on to start, like, unicorn companies. Dude, what is that? What is that number, roughly? Oh, gosh.

Joe Lonsdale
You know, I don't actually keep track of the official number, but there's over 20 people who've worked directly for me who've started huge companies. And it's something I'm really proud of is that we've had a lot of super talented people. And, you know, in some ways, it's like, I like to, like, back my mind. Like, oh, yeah, I'm a great guy. I take credit for shaping them, but in some ways, it's like they were already really amazing and, you know, and so I was.

Maybe I'm just going to convince him to have work with me ahead of time, you know, so it's like there's a. Well, there's a nature nurture thing, right? So. Yeah. And there's some of both.

I do like to think that we've given them useful frameworks, just like I learned from Peter. They might have learned some of these things from me, too, but. But, I mean, one of the one you're not. All of them even backed, like, some of them I backed, some of them went off and then did it themselves and. Right.

You know, which usually they let me back them. Yeah, that's the worst when you didn't. Get the call, actually. I'm still proud. I'm still proud of, like, I'll tell you, the guy who came right out of school to help run out of par with me, and I was like, he became president of the company.

Super talented guy. And I did not know what I was doing, even though I just already done palantir. There's always mistakes I was making because there's, like, things I didn't realize I had advantage as a palantir. And, you know, out of parts of multibillion dollar company now, it's great, but there's things that took longer, there's mistakes, but there's also obviously good things we did because the company worked out really well. And I think he had, like, went off on his own and he had, like, his own tough time or whatever for a little while afterwards.

And then he ended up partnering with someone, and he started a company that became worth $3 billion in, like, four years. And he sold it. Wow. Which I'm like, oh, wow, that's pretty fucking cool. But I was like.

And, you know, and I. He didn't have. They didn't bring anything else into that company. But I was still really proud of the fact that I'd worked with this guy, and then he'd gone on and had, like, crazy success. I mean, that's a cool feeling, you know?

Sean O'Brien
But for the record, it's always, I'm more proud if I got to invest too. Right? No, come on. Let's take care of your buddies. Most of the 95% of them, it's like, people will bring me in, and I'll still help, and we'll coach and work with them together.

So let's do big hit number two. Add a par. You explain, like, explain in layman's terms, what even is Addapar? And then I have some questions for you. But let's first do the explain.

Like, I'm five years old. What is Addapar? So Addapar is the leading wealth management technology company in the US. And so there's people who work at what are called Raas, a registered investment advisors. There's tens of thousands of these.

Joe Lonsdale
And they will help you or your parents or whoever kind of manage their wealth. They'll give you reports. They'll do your trusts in estate. They'll just do everything around kind of the wealth planning, man. It was really freaking hard.

We built all this stuff, and we hooked up to Schwab infidelity. Because those are, like, two of the biggest. Everyone's heard of those, right? The biggest custodians. And we had all this wrong data in the reports.

Like, what are we doing wrong? And it turned out the data coming from Schwab and Vidali was oftentimes wrong. We're like, what is wrong with this space? It's like, the whole thing's a mess. So it was a hard company to build.

Took about three or four years before we really got to the point where was useful to people. So you didn't give up, though, during that time? Oh, no. That's, like, the last. Like, you have to have a personality where you're not gonna give up.

I mean, I'll give up if it turns out someone else has already solved it perfectly. Like, if adapt already existed, it would have been a stupid thing to do. And I learned that then maybe you give up and pivot. But the fact that it's just a hard problem. You're not gonna give up.

You're just gonna, like, double down and like, fix it, you know? Interesting. So you're, you're a. You don't give up. If it's too hard, too messy.

It's like, that's better. That means once I do solve it, it's gonna have this giant moat. Like, Addepar is the biggest freaking moat we were talking earlier about. Guys like Rocket Internet will like, go around copying things and annoy people. Like, good luck.

If you want to try to copy that, you gotta take a billion dollars in ten years, you know? No chance. No chance. You talk about hard work. When I was doing research for this, I called somebody who works on your team and I said, tell me about him.

Sean O'Brien
What's he like? What's it like to work with him? One of the things I said was like, he's always on. I've never seen him just go like, go dark, go off, or just like, turn his brain off or be like. I just want to chill on the.

Beach and just drink my ties and not do anything. Is that. Well, this is, like, accurate for you? This is like my game, though. I mean, I think you have to love what you're doing, right?

Joe Lonsdale
So, like, you shouldn't play games you don't, you don't like, right? If you don't play, you're not enjoying the game. You gotta switch it up. Yeah. So this is, this is, this is, this is what I'm doing this because I really enjoy it.

It's really fun. I'm really good. I think one of the, you know, Aristotle would talk about how, like, one of the highest pleasures is like. Is like using your mind in its highest capacity, right? So let's explain, like, you actually enjoy chess more than checkers, if you're good at both, because chess is.

It has more levels to it. It's a more complicated game. And so you, you want your mind to be engaged and interesting, complex, useful things that are getting things done. It's like a positive part, I think it's how humanity works. Right?

Sean O'Brien
How do you still recharge or just get clarity of thought? Cause one of the challenges is if you're always on, you might not have that chance to step back. You gotta pause and reassess. You do need to open time for creativity. I've noticed when I over schedule myself, I'm not nearly as creative then.

Joe Lonsdale
And I think the cold plunge helped. Right. I don't know if that includes your mind. That was a quick. You were in there.

Sean O'Brien
62Nd, 50 1 second reset we had. I think I stayed in for the first. Yeah. Time you actually did two plunges. That's pretty good.

What is this typical schedule? Like, what's a day in the life? Because you got your fund, you got companies, you got all kinds of stuff. My number one is eight VC and ABC has a build program, which is my favorite part of it. A third of our money now goes towards building new companies.

Joe Lonsdale
So my favorite thing is the strategy for recruiting talent and then strategy sessions to figure out what we're going to build. And so when you said strategy for talent, what was the other one? Strategy for building the company. Yeah, you're basically, when you're. The way I look at.

The way I look at opportunities for new businesses is you're looking for conceptual gaps in the world. You're saying, like, what is it? Here's where this industry is now. Like, here's how this thing is working. Here's how this process is done in the economy, and here's where it could be if it was using, like, the right new technology or the right new incentives or this, or this right effective cultures or whatever it is that, like, could be better about it.

And the question is not just, it's actually very easy to find conceptual gaps in world. I'll put forward. If you spend some time with a few smart friends and you study industry and talk to people, you're like, you usually will find, oh, wow, this thing could be done this way. And so the harder question is not just what it could be done, but what's the path to get there? What can we put in place that would allow us to get it there?

How do we build this thing? How much is it going to cost? How do we make the people want to. So there's a lot of things, for example, in healthcare and hospitals, that are done completely wrong, but it makes hospitals more money. So it's like, so even though it's like, clearly not the right way of doing things, they're not going to just fix it.

You have to find some way to get from here to there with the actors being willing to do it right. So let's do an example. So give me an example. Either maybe something that you're just top of mind because you're thinking about it right now. Maybe it's not all figured out or a recent one.

Yeah, so a recent one. Gap and a path that you kind. Of figured out 100%. So it turns out that there's tens of thousands of loading yards around the country in logistics. These are places where trucks come, they get in line, they drop things off, they move things around, they pick things up, and it's just a pretty interesting area.

And the biggest warehouse company in the country is prologis. And it turns out the founder investor with me is based in nearby in California. We're back there and then it turns out there's a handful of the biggest carrier companies like Rider you've probably heard of, and others. And we actually sold a company to rider, so we're close to those guys too. So because we knew a bunch of these guys, we started analyzing what can we do with AI to make your yards better?

And what we figured out is that if you put just a couple cameras in first we thought we need six, but just a couple cameras, you can kind of watch and map out where everything is, map out how efficient the gate is, map out the processes, create accountability and incentives for people to go faster, create ways of pinging the carriers if it's backed up, to use the other loading arrows nearby. Just basic little ways on the margins of making these things work better and timing them and creating. Cause you want a little bit of competition. People always respond well if you do it properly. We've mapped this out and we ended up founding a company with a really strong AI team and we ended up co founding it with the warehouse companies, the carriers and others based on their needs.

And it's really cool cause the way we've built it with them is we have like a few hundred million revenue already built in that we can scale up into their own, into their yards they already own. And then we can have something all the other yards want to use as well. Let's do more details. So you, you're already kind of adjacent to that world cause you've done stuff. But how does the brainstorm work inside.

Your office or wherever? Like when does somebody ask the question, hey, could you use AI for these loading yards? Like how, how did, like, take me all the way to that? Like, where does a question like that even come from? Where does the nugget of insight come from?

So my partner Jake's in charge of logistics and supply chain. He's the kind of biggest driver here and he's done some strategy sessions with our friends running these different companies we're close to. We'll get together. I have a vineyard in Napa Valley and we bring every year the 100 top logistics CEO's drink and strategize to hang out. It's a good way to you asking them questions to try to find their pain points.

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

So we knew loading ours is a big thing. Let's go talk and iterate an idea of what we could do to apply new things to it. In this case, there's a really strong AI team that happens to be in the UK that we'd met through other friends that had worked on some really cool visual problems we thought was very good for this and ended up recruiting them as co founders, which worked out really well. We're constantly on the lookout for separately. For challenges, napkin math, you're like, okay, so if we can improve the loading yards by this, that's the size of the prize.

Sean O'Brien
And then that kind of clears a hurdle for you. Yeah, this is, and you know, the other thing here, which I don't love, but it's definitely helpful, is California had some new regulatory rules about things you had to actually map out as well. So they're going to have to do something anyway. But why not create more value based on, but then like, be the thing they put in when they're going to have to do it anyway in the next year. Right?

Joe Lonsdale
Yeah, the rules coming up, there's like, you know, logistics has had a few of these things. There had some rule on telematics where you had to, like, I think for purposes of not making people drive too long, you had to like record things differently, which was kind of an insertion point for a couple of telematics companies. We help back as well, which is the thing tracks the trucks and stuff. So there's things like that where the regulatory thing was helpful too. And then, yeah, you just, you sit down, you map it out.

You've know, you've known the people for a long time. I mean, the, one of the unfair secrets of business is the more success you have, the more it's like a platform for a bigger thing you can do next time. And that's just the way it is. You just gotta keep in the game. Cause like, it's like the, I think when I was really young, I used to think, oh, I could start a business and make a lot of money and then go to the beach, and then that'd be like fun.

And that's like, that's not nearly as fun as the fact that once you've already started successful, once now you get to do, like, bigger things more easily, right? So it's like, it's like. And that's why, like, I think when you're young, partner with someone else who already has that unfair advantage, help them use their unfair advantage, build something with them. Now you have all these extra unfair advantages. You could do it again.

So this, this is like, there's like, this naive thing where, like, you're, like, this lone business founder. I think you can do that. But it's so hard, right? Why play the game on hard mode? Yeah, why play game on hard mode?

Why not? Why not find there's so many places in the world where there's unfair advantages and, like, an unfair advantage. What I mean by that is, like, every time you have a success, you now have the respect and attention and understanding of all these people who will then help you do the next thing. Right. And once you prove you're competent once, then I have a bunch more things I could be doing now if I had more competent young people around me who want to be entrepreneurs and partner with me.

We have a bunch of them, but we always need more because there's the thing we lack. We don't like ideas. We don't like money. We lack REallY talented, hardworking people with persistence. I love that.

Sean O'Brien
That was so good. Can I come back for seconds? Can we do another example, another gap, or another origin story of one of these ideas that. That I think makes sense? I'll give you another crazy gab.

Joe Lonsdale
And these are, I'm taking big swings right now, so these are going to sound a little crazy, but, like, I was pretty bullish on China, like, 15 years ago. A lot of us were. I, like, I thought I was opening up. A lot of my friends there were, like, reading Milton Friedman and free economy stuff. I'm like, this is going to be great.

There's so many smart people there. So we start making bets there. We start working there, doing a bunch of stuff, and then this guy Xi Jinping takes over. And then, like, I'm told by all these different senior people, they're like, Joe, yeah. None of the stuff that you want to work on here is going to be allowed.

It can't be foreign. And like, oh, that's too bad. So I just stopped working there as much kind of hear from them. Like, terrible things are happening, and then a couple of them disappear. Then I hear he's making all these engineers work on defense.

Like, okay, this is pretty effed up. I'm kind of nervous about this now. And we start mapping it out at the same time we'd done. Palantir started in 2003. So this is now like 2015, 2016.

And I'm not running Palantir anymore, but I'm still on advisor watching it. And like a few of my guys there are noticing that the defense world in the US has gotten to be like a lot more dysfunctional, a lot more broken. There hasn't really been. So what happened in defense is all these companies consolidated the 1990s after the cold war spending went down. So they all merged and became like these giant primes.

And these primes started acting a lot more like government agencies themselves. Like not super nimble, not super adaptive. Kind of like the way they get the contracts is by having the right lobbyists. Not necessarily, but they have to convince, we call it innovation in theater. They have to pretend they're innovating, but they're not necessarily great at innovating because that's not because they're so big, they have no competition.

And so we're like, oh, this is kind of scary, all this stuff. Like none of the best engineers are going into these primes, their stuffs getting worse. Meanwhile, China has the best engineers. Theyre getting better. This is, we better do something.

So three of my best ex palantir guys, they partner with Palmer, of course, start Andrew, youve talked to him before. So I backed them early along with Peter and Im like, okay, guys, were back in defense. Lets figure out what the hell else to do here. We basically mapped out what are 20 new possibilities in defense. I want to find 20 just to see.

And then were going to choose whats the most important one. By the way. Is that something you tell your team? Come to the table. I want to hear 20 ideas.

You have to have a guy whose job it is. You have to have a guy who's helping him. You have to have advisors who are able to get them into the right places to talk and explore. But let's talk to our smartest friends in this space. Let's talk to our network.

I want to hear about 20 ideas of new things. I want to see where we think gaps might be. We come back and there's eight or nine pretty good answers, a few things that I thought are bad answers, but we find some interesting stuff. And one of the areas that's pretty cool is it looks like there might be new possibilities in EMP, in electromagnetic pulse space. And it's really directed EMP.

Of course you don't want to set one of these off and screw up all your stuff, but what an EMP does is it fries electronics. It turns out that if you can direct these, what it is that you're taking microwave energy and you're shooting it in a blast. You can actually turn things off. And the government has spent billions of dollars on this stuff, but they hadn't really applied any of the new chips basically at all. Do you want that to protect against drones, for example?

That's one of the really good ways of doing it. Basically, you can have a chip. You can basically control power on very small timescales. You could take, you know, take, you know, the gym nitrite emitters. And you could build this correctly with a top talent there.

Turns out there was like a co founder who's a friend of a friend of mine from Stanford who's a genius who helped figure a lot of this out also. And you could shoot down things like, ten times farther away. And, you know, theoretically you could use this against missiles and turning their guidance systems off. You could use it against a truck coming to your base really fast. You just blast it.

You know, it might be that the truck has a terrorist coming to shoot you and you want to turn it off. It might be there's a pregnant lady, they're trying to get to the base to give birth. Like, you don't want to necessarily have blown it up. Right? So it's good to by blast, and you're not turning the truck off, you're not killing the person.

So pretty cool, like non lethal way of like, stopping stuff that's giving you trouble. Right? And long story short, we were able to put together money, put together a prototype, and, you know, with about. With less than $30 million in this, in the second round, we got to the point where we were, we fought our way into a contest against the other primes. And so basically one of the key things in government is, like, we're always trying to get them to have contests the primes do not want contest.

Sean O'Brien
How do we compete on merit, not on longevity, relationship. I'm not going to be better at playing golf with a senator. Right. But if you can let me into the contest, then maybe we can win. Right?

How do you convince them to do. The contests that you push the Congress to make laws to allow competition? You have, there's competent generals, there's competent admirals. Thanks to Palantir and SpaceX, people had seen outsiders massively outperforming, and they're more open to the ideas. So we're pushing things in the right direction.

Gotcha. And they do this contest and they didn't really take us seriously because the other guys had really spent billions of dollars on this. What can you kids do? That's the old mindset in the US, the 1950s, sixties is innovation is expensive. Outsiders aren't going to be able to do it.

Joe Lonsdale
That was true 50, 60 years ago. But long story short, we ended up shooting down the hardened drones nine and a half times further away than the other guys. They actually had to have. They used to use binoculars to watch us shooting them down really far away. And people were just flabbergasted.

Sean O'Brien
Everybody was lined up and it's like, okay, we'll see who performed. He's like, you're going to need binoculars to see ours because it's going to be out of range compared to what. Everyone else is doing. And people were just totally shocked. Yes.

Joe Lonsdale
That's power. Is that the name of the company? Epirus. Epirus is a cool name. Epirus was a name and legend of the bow of theseus start at Athens.

And his bow had infinite arrows. And so this is kind of like a bow with infinite arrows because you can keep firing the pulses. That's cool. There are 10,000 Palantir, like a lord of the Rings reference. Palantir was lord of the Rings.

So Epirus is more. Is more real mythology. Palantir is more in the fake mythology world. But no, we have quite a few things named after Tokyo and stuff. It's an inspiring story.

The idea with Palantir. Palantir is a seeing crystals, right? And in the story this is super dorky, but in the story they're built by like the elves of the uttermost west and they're basically this thing created for the humans to get rid of the bad guys. But then 2000 years later, a bad guy takes over the technology and is using it for evil. And so the idea with Palantir is we thought we were very civil liberties obsessed.

We wanted to build it in a way that would, like, go after the bad guys. But then we gotta be able to watch the watchers and be really careful about how the technology is used because it's very obvious if you're doing something, kill the bad guys, that a bad guy could use this for something horrible. Right. So it is a dangerous area. We believed it was a necessary thing to create.

You know, we ended up eliminating thousands of terrorists. So we're happy with the results. So what's fascinating to me is that not only have you had multiple hits, but they're in areas that are different but also just hard areas where I don't even, those are not even ideas. I don't think about these, like, the logistics yards or EMP pulse technology. Like, these are so in different domains.

Sean O'Brien
I'm curious, is that, is that intentional? Meaning do you like. Because most of the entrepreneurs around me in Silicon Valley were like, oh, B. Two b SaaS. You know, what's a problem?

Oh, let's make a to do list app. Because I know that problem. I'm so familiar with it. Is it a strategy for you to go fish where other people are not fishing, or is that just what happened? No, I think it's definitely, definitely a strategy of sorts where you don't want to build, like, yet another, like, restaurant app or yet another to do list app, because it's like, that's what every other 21 year old's thinking about.

Joe Lonsdale
Like, this is probably why I missed stripe early on as we'd been at PayPal, and I had to, like, see every payment app. There's, like, literally hundreds of payment apps. I was like, oh, God. You know, because it's like, because Peter would make me take the meetings after I didn't want to anymore. So it's like, no, you want to listen.

There's. There's parts of the world that are big parts of the economy that are very important, that are not as exposed to technology cultures. And so you want to kind of take your. Our advantage is we have a really tough technology culture and figure out how to expose it to something that's not likely to have seen that before and then find ways to work together to fix problems. And what are some other ideas?

Sean O'Brien
Either I want to either hear ideas that you're not doing just because you can only do so many things at once, or it might be that would work, but it's too small for me, or it's not like, kind of using my current platform can do bigger things, but this happens to me all the time. I see ideas that somebody could do that. I'm tempted to do it because it's so clear to me, but it's like, that would be not the right game for me to be playing right now. There's so many things. If I had the right talent, I'd be doing more.

Joe Lonsdale
I do a lot in the wealth management world. I think that the process of starting a trust and the actual legal work around this stuff could be very automated. With AI, you could have a smart lawyer and a few smart engineers. You could, like, have a whole new trust company and a whole new, like, estate management company. We have SaaS software for estate stuff.

You'd plug into, and I have a lot of distribution for this ready, but I would need like the right engineers and AI people. And I'm not sure if it's bigger than a billion dollar or $2 billion business, but it's like it's still worth it, you know, and it saves a lot of time, so. But I'll give you a really big one I want to do, but I don't have the right people around me. Local government, we just sold open Gov for $1.8 billion. And local government.

There's a lot of lessons from this company, a lot of mistakes. It took us twelve years. Zach Bookman, the CEO my co founder great job. We learned that you only can really do things they already have a budget for. There's about 90 things local governments pay money for software to do, and opengoverns about 40 of them.

So we learned this really well. This is big, right? It's a lot of processes. Anyway, the idea is that there's trillions of dollars spent by local governments, and a lot of them can't find the right staff for certain processes. And a lot of them have people retiring soon too.

So I think a BPO, a business process outsourcing thing for certain tasks for local government that are augmented by AI could be like just a huge business to basically help them with this. And right now it's not a standard way they work, but I could see if you do it really well, it could become a standard way. And that's the kind of area where you can make tens of billions of revenue before anyone even notices you, because it's such a big part of the economy. So that's another thing. So what would the first, like six to twelve months of that company look like?

You'd basically have to find early partners willing to trust you and work with you on outsourcing some one of those 90 processes. And it'd be something like where you're like, augment their ability to do licensing and permitting faster, or you're augmenting some of their grunt work on tracking their assets and asset management, or you're doing something for their budget for them automatically. It's way faster. The CFO doesn't have to hire three people, they can only hire one person, which is you or something like that. But you'd have to go in and figure out what processes are cities even willing to let you do.

And it's a very unnatural thing because it's not how they work right now, but it's one of those things where there's a secular trend towards local government not having enough money. So if you can find ways to save the massive amounts of money and make a higher quality service, there could be something there, right? All right, I want to play a little agree or disagree game. So I'm going to say a statement, and I want to hear you agree or disagree with it. So the first one is on this idea of big swings that are solving, like, huge problems, mission oriented things, versus, like, getting, just getting your first win under your belt.

Sean O'Brien
A guy came on the podcast and he said, my theory is, first you go get your nut, and then you work on your noble mission. And he's like, you know, you go and you develop your skills, you make a few million bucks, you get personal autonomy, and then you should pick a noble mission, a noble quest, and go on that. Agree or disagree with that philosophy? I agree. In general, I think it's a really good thing to do.

Joe Lonsdale
You want to have a solid base before you do something that's like a huge, crazy, risky quest. You don't want to be like, poor for twelve years while you're, while you're doing something, if you can help it. I mean, I'm not saying that's going to be the path for everyone, but if you can do what he said, that's a really great way to do it. Okay, another one. A lot of people say that ideas are cheap.

Sean O'Brien
Ideas are a dime a dozen. Execution is everything. And I agree that execution is very important, but I think ideas really matter too. I think that project selection, picking the right market to go after is a, is a huge lever. So I think that the execution is everything.

Philosophy is b's. Agree or disagree. That's a tough one, because I've seen a lot of good ideas with. They're actually, aren't worth that much because they couldn't actually bring together the talent to do them. So it's necessary, but not sufficient.

Joe Lonsdale
You do need both. The execution is the harder part. But you're right, you can have amazing execution. And I've seen this, and people going after the stupidest ideas, and it's not going to yield something. So you need both.

But the ideas by themselves are not that valuable. That's what I'd say. Another one. Focus is superpower. And I would say that we were talking about this earlier.

Sean O'Brien
You recognize the value of focus and just compounding one thing, um, but you've also done a variety of things, agree or disagree that, you know, focus is the way to go. Focus should be the strategy. Focus is clearly the right strategy for the most successful people in the world. If you look at the wealthiest people in the world, they nearly all focused and compounded over a very long length of time. Uh, if you look at Palantir and add apart the two companies where I focus full time on them, they're my.

Joe Lonsdale
Two of my most important companies. It's, uh. I think when you're having impact on the world in different ways, sometimes it's okay to do different things. I think. I think philanthropically, I think for me, coaching entrepreneurs, something I enjoy, I think I'm obviously creating a lot of value right now, but I think as an entrepreneur, as a business person in general, especially if you haven't already had a giant win, you should just focus and get that giant winning compound.

Sean O'Brien
You're friends with Elon. What's something you've learned from him or something you admire about him, maybe, that the rest of us don't know, who only know him from the outside? Yeah, I guess I'd say I really admire his boldness and his, like, obviously, he's really good at focus. He's really good at saying no, even to friends about anything. It's just not, like, tied to what he's really passionate about and focused on to win, and he's just really, really bold at, like, clearing, like, nonsense out of the Way and clearing mess out of the Way and just, like, going right for the thing that matters, right for the substance.

Joe Lonsdale
So I think most people in my life would be, think I'm maybe too bold or too direct or too extreme, and Elon's, like, a whole step further, which I think is great to see. I'm like, okay, I could do better. There's more here. Yeah. More myself in that direction, and I'd be more successful if I would.

You know, I'm obviously done very well. But, but, but I think he's a whole nother level of bold, and that's something that, it's good to see that for me, because it reminds me that that's like a, that's a good direction for entrepreneurship. You know? Is he focused, though? Because he's got, like, five things.

Sean O'Brien
You know, he's got Twitter, he's got SpaceX, he's got Tesla, he's got neuralink. He's Got boring company. He's got so many things.

How do you square that? Is that. Is it focus or is it. I mean, I think he was insanely focused for a very long time on. On the things he was doing and on scaling them.

Joe Lonsdale
And I guess, yes, sure. There were two companies for a very long time after doing one company for a very long time, and he's at a level of success again, societally, where there's things that really matter for society that only he can do, so it makes sense he would expand that. I think I told you earlier, my partners are allowed to work on up to six things at once. And I think when you're coaching and managing things and stuff, I think that's about the right amount. I think if you're just operating, you want to do one or two at most.

Sean O'Brien
Last question, because I think we got to go. But what the whole, my whole thing when I come to an interview like this is, what's the one question that really matters? Like, forget the hour. Like, what's the one question that really matters? And all the questions I've asked you have been beating around the bush of this one thing.

So now I'm going to ask you it directly, which is you have now created, by my account, at least $4 billion companies directly. Probably more than that. I call that the entrepreneurs grand slam. You have done something that anybody who wants to make one successful company would be envious of. Wow.

How does he do it? You know, you see also a lot of other founders. You meet them through your fund or just people who probably come up to you. What would you say you are doing different than the average good founder? So I have some unfair advantages.

Joe Lonsdale
Right. And it's actually not that hard, once you've been really successful, to like to do it again relative to the first time. But what am I doing differently? I have a huge talent apparatus. So we have people at dozens of universities.

We have all sorts of things we do. What does that mean? You have people at universities. What are they doing? It's like, you'll have fellows who apply, and you'll have people who run your program there.

You'll host parties and meet talent. You'll have a certain playbook we've built since palantir of knowing how to show up. So you have a scouting department. Yeah. You have a huge talent scouting department and works in different ways, different places, and really talented people.

We spend a lot of time and each of our partners and I, that's our job, is to scout for talent and to use our network. And the more wins you have with smart people, the more you get to meet their smart friends. And so we have a huge advantage in talent, first of all, because that's really key. We have a huge advantage of, like, knowing the people who run a lot of big industries and, like, having good relationships with them, having them as advisors, having them as being part of things we've done where we can, like, understand what's happening in those industries, get quick feedback, and iterate on ideas. Like, one of the biggest mistakes founders make is they have an idea and they're afraid someone's going to copy it.

They're afraid the idea is valuable. It's really dangerous to think ideas are too valuable, because then you just don't share them. You think that they're yours. And so one of our advantages is that one of the Peter Thiel thought experiments was imagine there's five founders who each have an idea, and four of them are secretly working on it, and one of them is talking to everyone and iterating which of the five is going to win. So it's clearly the guy who's iterating a ton.

And five people, the same idea. We are able to have that same idea and then, like, iterate faster than anyone else, because we know everyone running everything, and we know how to get back, know how to get to the right answer much, much more quickly. So not only we have the best talent, but we are able to iterate ideas with people who respect us, with people we involve. And then whenever we start a company, maybe this is a mistake, because maybe I could have had a lot more money, but I've always been, like, a minority owner of my companies. I've always been, like someone who might have, like, when we start out the build program, our fund might take 20% and our.

And when my team and I might take 10%, so we might have 30 total and, like, maybe 35 or 40, but we have something where it's less than half. And we're very generous with the founders, with the early employees, with the advisors, with the partners. So, like, when we start these things, like, just even from the beginning, I don't have to wake up in the morning being the only one worried about this thing. There's another 30 smart people waking up who. That's their focus, and they're on it.

And that's such a big advantage, to have other people obsessed over this thing. And our people who truly feel like co founders, by the way, I think, is one of the big mistakes. You're like, I'm the founder, and you guys are the people working. Like, what are you getting from that, other than your ego? I'd much rather.

There's so many companies that people don't even know I'm the founder of, and that's way better, because first they're not going to harass me about stuff. And there's people who are proud founders who get to be out in the press doing it and what they're going to sleep worried about, because this is their reputation and their focus. In the intro, I'm going to say something like, this guy has started more billion dollar companies than anybody in America, which I think is an amazing claim to fame. But forget about a billion. Let's talk about a million.

Sean O'Brien
The name of the podcast is my first million. And I went and read a Quora answer that. You did. Somebody said, if I want to make a million dollars, how should I invest my money? And you said something like this.

You said, I'll pull it up. You go, if you want to make a million dollars, it's not about how you invest your money, it's about how you invest your time. And you said, it's about how disciplined you are with investing your time. How should somebody who wants to make a million dollars invest their time, you know? Yeah, it's right.

Joe Lonsdale
You can't just make a million dollars from investing for probably the average person. Maybe you can over like 50 years or something. My grandma passed away at 103 last year, and she was a multimillionaire, having grown up in the depression just from saving money and cutting coupons. That could work for 100 years. Being thrifty.

Being thrifty, that is the thing. Over a very long time horizon, I. Think you'd say she bought one stock or something. Also, like, grandfather worked for Abbott and she held it for like 60 years. It happened to work really well.

Great, you know, really good for my, for my cousins and their inheritance. But, you know, she was a wonderful lady. But, you know, in general, that's not probably how you want to make, make money. You want to make money, especially these days. I mean, gosh, going back, back then, it was probably a lot harder.

But these days, there's so many places with your time you can learn how to help build things, how to help create things, how to help be useful to other people. And, like, that's what you want to be doing. You want to be finding, what are you passionate about? What are you good at? You have to figure out what you're good at.

You have to be willing to say, this is what I'm not good at. This is what I'm good at. And then who else is good at this, too? Who I could maybe learn from, who I could be like and spend your time. Try to find a way to help those people.

Try to find a way to learn how their businesses work, be part of a business and growing it, and that's how you see how everything works. And, you know, if you're talented enough, then that the people you succeed with, they're probably going to be able to help you do something new later. That's what happened to you, right? That's how you spent your time. My understanding, if we walk back in the journey, you're in college, you go to Stanford, and you end up working at Paypal.

Sean O'Brien
You become an intern at Paypal. I tried a couple times. They rejected me the first time I applied. What happened? Why did they reject you?

Joe Lonsdale
I was a freshman at Stanford, and I remember being at a whiteboard with Max Levchin, and he probably doesn't remember this. He was the co founder of Peter on the tech side and arguing about some tech thing. Was Paypal already a big deal? Is that why you wanted to work there? It wasn't that much of a big deal yet.

Peter Thiel wasn't who he was. Elon Musk wasn't who he was. Their companies combined to start it. But I saw all the smartest people, all these people I admired and all these kind of iconoclasts going there, like, people who thought differently. And so you try one year, rejected, try again the second year you're in.

Sean O'Brien
What's your job? You're an intern at PayPal. What are you doing? I was not very glamorous at all. They basically had me setting up the Peoplesoft instance, which is terrible.

Joe Lonsdale
But I sat next to this guy. We were in Roloff, who's now star partner. Sequoia was a CFO, and we were kind of in his domain at first. And I sat next to this guy who was managing all the money on Bloomberg, like a treasury thing. So I got to learn finance and treasury.

And then what was happening is the big challenge in the company is we were going bankrupt because the chinese and russian mafia were stealing all of our money at the time. So I ended up hanging out after work and with all these guys who were working on, how do you stop the bad guys? Because PayPal is like a honey pot. It's got all the money. So you go to 711, and the clerk there is maybe having a bad year and angry at capitalism.

Who knows? They're writing down secretly the numbers on the credit cards. And they write down 500 of these numbers. They can sell them each online for five or $10. The russian mafia is buying them up.

And then all of a sudden, you get a chargeback that says $200 on PayPal to something, and you're like, I didn't do that. So you charge it back, and then PayPal's left with a bill. And this was, like, costing PayPal several million dollars a month, and a lot of our competitors went bankrupt. And so we got to learn at the time how to basically stop the bad guys, which was a kind of fun problem, too. And so I like what you did there, which is one of the pieces of advice I give on the pod is you got to work on the a problem at any company.

Sean O'Brien
So regardless of what your role is, you should try to at least know what is the a problem. You try to be helpful to the real problem and then try to be helpful on that. That's like, because that's the needle mover, and that's where you're gonna get the most learning, the most action. And I didn't necessarily do this on purpose. I actually wanted to quit at first because the peoplesoft thing was so dumb and so horrible, and I couldn't figure it out.

Joe Lonsdale
And my dad convinced me, don't quit. Just, like, do what you can to be helpful otherwise. There. So that was a good dad advice. You.

Sean O'Brien
I almost quit college for the same reason. And my dad was like. Because I was like, you know, I'm pretty mediocre here. I was like. Like, I'm used to being good.

Then you go to a group, like, you go to a top school. You didn't feel like you were one of the best? No, I'm just. These were all the best high school kids. Now I'm kind of in the middle, so I was like, you know, too expensive.

Maybe I shouldn't be here. And he's like, that's exactly why you should be there. You ought to be challenged. You want to be surrounded by people who are better than you. So one of the things Alex Karp had an insight on my co founder, Palantir, who was really good, is you can't really appreciate a talent unless you're within two standard deviations of it.

Joe Lonsdale
So you think of talent as being on a normal curve for any typical, typical skill. It could be for math, could be for podcasts or whatever it is. And, like, so you kind of have a natural level of talent. You could shift slightly. And so the very best people in the world at something might be fourth or fifth standard deviation.

But if you yourself are second or third standard deviation, you can at least start to appreciate that. Whereas if, let's say, you're not great at physics, I don't know if you meet, like, Albert Einstein versus a top physics professor, you're gonna have no idea which one's Einstein. Right? So it's the same thing in any. Other area, but if you differentiate.

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

Sean O'Brien
Because you can notice what. Cause you can understand this is actually the five standard deviation talent. I was good enough at computer science. Like, I got able to get a pluses at Stanford. I had friends who were way smarter than me at computer science, but I was good enough to know who those kids were and how to harness them and how to hire them.

Joe Lonsdale
Right? So there's things like that that's interesting. So now you. The next thing you do, you go and you start palantir, which. Yeah, well, actually, I worked for Peter's family office for a while, and he was the first investor in Facebook, which is his family office.

There's tons of crazy shit going on. It was really fun. It was like, you know, a really expensive restaurant that went bankrupt. There was, like, a spam company song was starting. There was like, there's all sorts of crazy shit.

And I was there, and, like, Peter's a genius, but he's not really a manager. So I started, like I said, you know, okay, I'll just. I'll take charge here. So I started hiring people with him and kind of helping him run things and some of the older guys, like, who the fuck is this 21 year old kid? So we ended up working on a project that summer to map out, like, what if we'd taken all the stuff we did at PayPal Frau anti fraud.

And we generalized it to, like, for the intelligence community. What would that look like? And my roommate Stefan and I from Stanford were sketching up all these cool products, and we were building prototypes, and that was kind of the genesis of palantir. Oh, interesting. Okay, so you guys, you basically had the PayPal showed you a bit of.

Sean O'Brien
A bit of the problem. They showed us a solution to a problem. They're like, wait a second. Because basically what happened is I got to know all these guys at PayPal. They're in the secret service and FBI.

Joe Lonsdale
Those are the two groups that are in charge of anti fraud, of arresting the mafia guys. And these guys would come to us and ask us for advice on other things because it was like, you know, it's kind of fun. It's cops and robbers. Like, every. I don't know if every young man likes this, but in teller world, of course, you want to help get the bad guys.

So, like. So, like, we were teaching them about cyber fraud or whatever you call Internet fraud in 2000, 2001. And they start coming to us, and then 911 happened, and then the government started spending billions of dollars on, like, supposed solutions to catching bad guys watching what's going on. And we knew these guys, and we watched what they were spending money on, and we were like, oh, my God, this is stupid. Like, this is way behind Silicon Valley.

Not that, like, I'm so smart, but Silicon Valley itself had gotten way ahead just because they brought talent from all over the world. So whatever was being done in what we call the Beltway, basically in DC with the old integrators, they're still doing stuff from 20 years ago, and we're like, oh, my gosh. This is like, our nation's under attack, and we're wasting billions of dollars on stupid shit. So that's when we said, okay, let's get together. Let's draw up what we could actually be doing here if they did it.

Sean O'Brien
Better, what happens next? So walk us through, because. Okay, we see today, I think I looked this morning, it's a $50 billion market cap company. That's amazing. But it's also 20 years later.

So if we rewind the clock to where most of the people who are going to listen to this are early stage, trying to figure things out. Unclear which pathway to go. Unclear if this is even going to work. Take me back to that. What did you do to, what was it like, and how'd you figure out the first few steps?

Joe Lonsdale
Well, there's lots of different ways to build successful companies, right? So I don't ever want to be like, this is the path. But our path was we were kind of watching all these companies come out of PayPal. So I was very lucky to be sitting there seeing, like, these guys doing ironport and LinkedIn and YouTube and Yelp and et cetera. So watching these, the ones that I could tell were more successful, obviously, at the time, were the ones that were attracting the very best engineers.

It was almost like engineers were lined up trying to get into these companies. So you think, a lot of times people have a business idea, and you're like, how do I hire an engineer? And it's the opposite. It's the ones that are crushing it. It's like a nightclub where the engineers wish they could follow those people in those cultures.

Something about them. It's just the whole it was just so dynamic. It was like they were able to try ten times as much really quickly. You can just kind of tell, like, wow, you can be really smart at business, but if you could try ten times as many things, you can be slightly less smart business and still succeed because you get to iterate. So we need to build somehow a really top engineering culture.

That was one of our core principles early on is how do we say the engineer is king? How do you have a culture that attracts the very, very best and respects them and, like, makes them partially in charge of the company, you know, with, with you? And so we spent a lot of time on that. It's a little bit chicken and egg. We obviously, I was lucky to have a bunch of my friends from growing up who are national math and chess champions, all these smart guys, and, like, so we bring this really core culture together, convince some of these really top phds from MIT.

Sean O'Brien
What was your pitch to them? Like, what's, what was the quick version that was getting them excited? It's because you need a magnet, something to bring the talent in. The government spending tens of billions of dollars in this area, they're way behind what we figured out how to do in Silicon Valley. It's clear there's going to be a multibillion dollar company that solves this problem.

Joe Lonsdale
And you describe the problem to us. This is a very hard, technical thing that if we have the best engineers, we're going to be able to do it. And we're iterating closely with national intelligence, with defense agencies, and you get to go and solve this problem. And if we succeed, we're going to save thousands of lives and we're going to protect civil liberties. That was.

That was a huge. It's like, you know, it's a fun, big mission. One of those things you said is we're working closely with these agencies, like, how easy was it to work with them because, you know, you're young. How do they even take you seriously? You're young and you're different.

Right. You have a different approach. Yeah. So maybe it wasn't entirely case that they were iterating as closely as I'd like them to be with us for the first year or two. So Alex Karp was very good at this.

Alex was. Alex was at first just an advisor to us, helping us. And then, and then, and then Peter kept trying to get us to hire a CEO because Steph and I were 21, and you couldn't really have a 21 year old running something, working with senators and the Defense department. But these guys, these generals or former admirals would come in, and they just did not understand tech culture. And I'm sure they were great guys.

They just wouldn't have fit at all with us. And so finally, Alex Karp had been helping Peter raise money for things or friends from law school, and he was a PhD in philosophy in Germany and in Europe. A lot of the billionaires like to pretend they're philosophers. It's the high status thing to do. Kind of like here they like to pretend they're podcasters or something.

I don't know. But so, basically, basically, like, he knew all these wealthy people, and so he started advising us how to talk to them, how to meet them, how to think about how institutions worked. And he had always, like, casting things in terms of, like, how you had to approach people to take you seriously, which. What do you mean by that? I don't understand.

Like, if we show up and we're like, these, like, quirky 21 year olds from Silicon Valley, that's like. That's like, that's the wrong casting. Whereas if you show up and you walk in the door with you, the former head of the CIA and Peter Thiels made the intro after being a payPal. And another one of his friends who's senior has, like, has explained to them that this is a project that they're helping, that's going to help in this way based on this big advancement made in Silicon Valley. And they've been.

And that they've already been talking to a bunch of people at the FBI and et cetera, and they want your feedback. That's like a high status way to come in the room, right? Whereas if I come in the room, be like, look how smart I am. Look how right this is. This is better than what you're doing.

Like, look at how smart it is. While you're wearing a hoodie. Yeah, exactly. They're like, I guess I get a lot of young people maybe underestimate the substance is important, but you can't lead with substance because substance is not taken seriously. So you have to have the substance to win, but you have to have all the trappings of why they're taking it seriously and why they're comfortable doing it and why they're, you know, why it makes sense.

So it's only there's these things like this about how the real world works and who to talk to in this institution, who to get your help. So Alex just had, like, this wisdom about, like, people and institutions, how to navigate that, like the rest of us, we had the best tech culture. We didn't have that. And so we actually convinced him to pretend to be CEO for a few years so that Peter would stop trying to hire a really senior military guy. But then he was such a good CEO then.

He actually was. He's still CEO 20 years later. So it worked out. And you mentioned Peter. Peter was not active day to day necessarily.

No, but he was critical for the company. What was he doing? Peter was like, first of all, he's the financial support that no one would give us. Crazy kids. Like I told you, there's always crazy projects going on.

Like, a lot of people around him are like, this is the crazy thing you're doing. Like, it's one thing to waste money on a restaurant, but you're sending these kids that pretend to be spies and buildings intel. Like, what are you thinking? There's no such thing as a company that does this. So you have to give them credit for like, being willing to bet on a crazy idea.

Sean O'Brien
You put a lot of money into it, right? Like it was several million dollars early on, which is like. And then we had, then this fund started putting things alongside others. But I mean, yeah, that's like, that's a huge amount of money for like crazy kids is what are we doing? And then like, Peter was really good for strategy.

Joe Lonsdale
He was really keen on, I think one of the most important things is he stopped us from a couple of early partnerships. This is one thing that people screw up a lot with startups, a lot of startups, when you're getting going, you want to like, you get really excited about some partnership on the table and you think it's going to really help you. But a lot of partnerships will cap your upside. A lot of partnerships will limit your ability to iterate and to try other things. And I think because he had the experience and he was going for multibillion dollar win, he was really able to like steer us away from a lot of big mistakes early on.

Sean O'Brien
Like what would have been a partnership that would have been maybe like we. Would have like spent like all of our time selling our interface in Europe to give them all the rights to it, and we would have to over there and support things they were doing or just random things that sounded really good because when you're getting going, you're desperate for that 1st, 500,000 million revenue and stuff, but you have to make sure you get it in a way that's going to actually scale into something much bigger that's not like a mess that's going to distract you. Right, right. And Peter is an interesting guy, for sure. You said restaurant curious.

Joe Lonsdale
I mean, there's everything. So this is not unique to Peter, by the way. This is a really common rule, is that whenever someone becomes very successful for the first time, they usually become more expansive. If they're an entrepreneur. I mean, all of us, we like to build things or we like to create things.

And so once you have success, you're like, okay, I'm really good at that. I probably could be really good at these six things as well. And then I think we all forget. Okay. The reason I was really good at this first thing is because I was obsessively working on it for 80 or 90 hours a week, and I brought 30 of my smartest friends into it, and we all iterated like crazy, and we almost died multiple times, and we barely made it work.

Sean O'Brien
But you kind of forget that, that. Part, and you're just like, oh, yeah, oh, I did this. And you do all these things. I snap my fingers. Exactly.

Joe Lonsdale
Like, we're gonna do this, this, this. It's like playing risk, you know, where you're conquering. And, like, it turns out that's not. That's not a good way. But this is what, I've seen almost everyone go through this.

Like, unless I'm lucky to have watched multiple other friends go through it. So I still made the mistake in different ways, but you. So, so there was very expansive, and there were some things that maybe didn't make as much sense. And then, of course. But, you know, he's so freaking smart that some of them did make a lot of sense.

He wrote the first check on Facebook at that time. So, I mean, give me a break. You know, you can. You can. I mean, everyone in venture is not gonna have 100% hit rate, and so you learn from your mistakes.

Sean O'Brien
Were you around when he wrote that check into Facebook? Yeah. I mean, I get no credit for it. And, like, at the time, did it seem like a big deal, or was it just, like, one of many things he was doing? It was unclear that that was a.

Joe Lonsdale
That that was one of. It was one of many things. They seemed particularly smart and interesting, and I. You know, I was. I can't say I thought it was gonna be as big as it was.

I don't think anyone realized that. But it was. It was clear. They're really smart, really interesting guys who are very aggressive. And so it was.

It was a fun thing to be exposed. So I think one of my good friends who actually helped Peter write the check is played in the movie by an african american guy, I think, which he jokes about, but it's like it was a good time to be there. It was fun. He's like a five four white guy.

Sean O'Brien
That's the ultimate compliment. Sorry, James, no credit for you. If anyone out there wants to rewrite me as like a super handsome black guy, I would love that. Exactly. Thank you for doing this.

Joe Lonsdale
Awesome. Thanks, John. The highest compliment, which is I learned a lot today. That's my goal with all these, is what are some of the things that, you know, a couple of golden nuggets that come out of this. So thank you so much.

It's fun to get to know you. Yeah. I feel like I can rule the world I know I could be what I want to I put my all in it like days off on a road less travel never looking back.

Sean O'Brien
I feel like I can rule the world I know I could be what I want to I put my all in it like days off on a road less travel never looking back.

Joe Lonsdale
I feel like I can rule the world I know I could be what I want to I put my all in it like days off on a road less travel never looking back.

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

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1. Introduction

2. Building Companies

3. Strategic Hiring

4. Lessons from PayPal

5. Looking Forward

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