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

Shaan Puri

You have now created, by my account, at least $4,000,000,000 in companies directly. Probably more than that. What would you say you are doing differently than the average good founder?

Joe Lonsdale

So, I have some unfair advantages, right?

Shaan Puri

Okay, Joe, thanks for doing this, man. And thanks for inviting me into the morning workout, the cold plunge, and everything in between—breakfast too.

Joe Lonsdale

Have you here, Sean.

Shaan Puri

So, I want to start with **lessons learned**. One of them that we were talking about this morning during our workout was making decisions based on blended reasons or having a blended strategy for how we're going to win. We're going to win by doing these five things. While that sounds like a good idea to the average person, it's actually a very bad idea. Can you explain that?

Joe Lonsdale

Yeah, I wrote this piece online titled "9 Lessons from Peter Thiel." I sent it to all of Palantir, and it's been shared with my other companies as well. It's one of my favorite pieces. In it, I discuss one of these logical concepts where usually there's one reason that dominates everything else. That's just the nature of the world. When something's successful, it's kind of like the power law rule in venture capital. Even there, there tends to be one thing that's successful that is bigger than everything else. This is also true inside of companies. It's very unusual—extraordinarily unusual—for there to be two similarly equal products or revenue lines or something like that.

Shaan Puri

Right.

Joe Lonsdale

Especially early on in the company, if you think you have like 2 or 3 reasons for doing something, or 5 reasons for doing something, what that means is that you actually haven't figured it out.

Shaan Puri

You have no.

Joe Lonsdale

Actual reason.

Shaan Puri

You have no strong reason.

Joe Lonsdale

No strong reason yet.

Shaan Puri

Yeah, like this. That means you.

Joe Lonsdale

You have five weak reasons, which is not good. You want to find one really strong thing you're driving towards. That's how startups work. It's a really seductive trick. First of all, you have to be taking a big risk to even do a startup. It feels like, rather than, you know, most people— a lot of people do incubators because they're like, "Oh, I don't want to do one company; I'm going to do ten companies." By the way, that's much less likely to lead to big success because you're not focused. Even within a company, they're trying to do the same thing. They're like, "Well, here's five ways I'm going to make money." No, no, no, man. If you really want to do a company, figure out the way you're going to make money. That tends to be how it works, you know?

Shaan Puri

And that applies to revenue streams. So, **eight revenue streams** means you probably don't have one awesome revenue stream.

Joe Lonsdale

Exactly.

Shaan Puri

Growth strategies: If you have seven things you're going to do for growth, it means you haven't figured it out yet.

Joe Lonsdale

Out what?

Shaan Puri

You want.

Joe Lonsdale

The one that's gonna work.

Shaan Puri

That's going to just compound like crazy.

Joe Lonsdale

It may change... It may change over time. But what's the thing that's working now that you're pushing on? Yeah.

Shaan Puri

And then the other version of that is **blended reasons** for doing something. I think I read once that Reid Hoffman uses the same philosophy. He gave the example of, "Oh, if there's a trip to China and I'm deciding, should I go to China? It's far away, it's going to take two weeks. Should I do this trip?" He's like, "My chief of staff came with a list of pros and cons."

Joe Lonsdale

Yeah, it's like multiple pros.

Shaan Puri

Multiple pros and then a couple of cons... that's an almost impossible way to make decisions. It's a guaranteed way to make mediocre decisions is to do long blended lists of pros and cons.

Joe Lonsdale

If you don't have a key reason to be there, then just stick to your work.

Shaan Puri

Exactly, that's what he said. He's like, "If we don't have one reason that alone is worth doing, then we should just say no." Is that something you do?

Joe Lonsdale

Reid was one of the key minds at PayPal, of course, with Peter Thiel and others.

Shaan Puri

So, right.

Joe Lonsdale

Who knows who actually came up with these ideas? It may all just be Reed's ideas, and I'm recycling them. He's a very smart guy.

Shaan Puri

Well, I save the message for mine now, so I think that's the best way. And you know, the highest compliment is to meme an idea and to let it spread. Peter's helpful with that. He's... well, what are some of the other things? Like, do you remember? I mean, even at the beginning, one thing I kind of wonder is: you've been around a bunch of special people - Peter Thiel, Elon Musk, all this stuff. Is it clear early on? Like, do you remember the moment where you're like, "Oh, this person's kind of different. They are that 5 standard deviations..."

Joe Lonsdale

Yeah, no, I...

Shaan Puri

**Intelligence** or **conviction** or whatever.

Joe Lonsdale

One of the... I mean, we all try to set strategies for ourselves and goals and whatnot. 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 admire, who I want to be like." You know, I’ve met some of the legends of global macro finance, who I'm still in touch with. I met a bunch of other big business people who run Fortune 500 companies. Peter, to me, had by far the most interesting intellect. He was clearly one of the smartest people I’d ever met. He was interested in some of the same things I was interested in, and he took some of the logic farther than I ever had. So, I always learned the most from conversations with him. To me, that was one of the reasons he was the most attractive to try to work with and try to build something together.

Shaan Puri

With, and so before you start multiple other companies, you do Clarium, which is his hedge fund, I guess.

Joe Lonsdale

Is the way of the global macro fund?

Shaan Puri

Global macro.

Joe Lonsdale

It's like the most fun part of finance. There are lots of areas in finance. Global macro looks at everything from the highest possible perspective. It encompasses things like bond yields around the world, the flows of money, and how equities are being valued. Basically, it's a top-down view of what is happening in the world of finance and how to map it out. You look at relationships and understand that, of course, the Australian currency is going to be really correlated with the price of metals. There are different ways in which they can get way off, and you can create a regression trading system if they are too far off, allowing you to make money based on the reversion. However, you might say, "Oh, normally I would trade this, but actually this is happening because China just invaded something over here." So, it may not be a good time to do it. It's just a really fun map of the world. We were particularly interested in long-dated oil prices and what was happening with oil. We were also very interested in how Fannie Mae and Freddie Mac, the two big housing groups, had become much larger in the U.S. in the early 2000s. They have these giant mortgage-backed security portfolios worth billions of dollars, and they had to hedge these portfolios. I won't go into all the details; it's a little esoteric. But how they were hedging their portfolios completely changed the global fixed income market and the pricing of bonds. We found some really interesting ways to do things there. I’ll share my favorite story. So, we were working at the hedge fund, the market was open, and we were in San Francisco at 555 California. It's that big building downtown. After 9/11, I think Peter had a parachute in his room. He always told me he had parachutes for us too. But anyway...

Shaan Puri

It's like there's one parachute. Okay, that was just a joke, but...

Joe Lonsdale

It's probably there you are, but no. So, it's like a school office on the 42nd floor, and the market opens at 6:30. The traders are supposed to be in at 6:30, except the first Friday of every month, when you have to come in at 5:30 because the non-farm payrolls come out. Still now, the first Friday of every month at 8:30 AM on the East Coast, it turns out this is a very important number because it shows you what's going on in job growth in the whole economy, you know, based on the Bureau of Labor Statistics numbers. What was really cool is Kevin Harrington was our head of research. He's a genius, a crazy physics and biology interesting guy. He ended up being on the National Security Council later—super interesting, smart guy. He had mapped out this thing I helped him with, where we realized that they were adjusting the numbers wrong based on seasonal adjustments. So, we were able to predict whether the number would hit or miss. This thing would move bond markets like crazy—like hundreds of millions of dollars would move around based on this number. We figured out they were systematically misdoing it. This is totally legal; you're allowed to do this in finance. So, we figured out, okay, this is a mistake. Seventy-five percent of the time, we can make money trading this, and then we can adjust and make it even better based on where the market was positioned. So, if the market's going to be surprised, we can kind of tell there's a good chance it might be, and we take a big position.

Shaan Puri

Right.

Joe Lonsdale

Like the night before or whatever, and then make a ton of money that morning when it worked. It was...

Shaan Puri

At 4:30 in the morning, it's...

Joe Lonsdale

Like a 75% chance. So if you do it enough, you're going to do it well over time. It was the most fun thing because we took these giant positions on this thing, and you'd be there with Peter and Kevin.

Shaan Puri

Is this just like the highest high-stakes game of...?

Joe Lonsdale

Poker that you play, it's the most fun.

Shaan Puri

A game.

Joe Lonsdale

Of poker, and you're like literally personally having a few million dollars riding on it at a time. It was early in my twenties. These guys, you know, Peter probably had a hundred million dollars riding on it every time. And you're high-fiving if it goes right or you're depressed if it goes wrong. It was the most... it's his most fun high stakes you have.

Shaan Puri

Is he sweating or what's his demeanor like? Everyone's like, "What's going to happen?" It's so exciting, and then... you're like...

Joe Lonsdale

I remember so many celebrations. We would all go to our favorite breakfast place afterwards. But it worked out; it was pretty cool.

Shaan Puri

Yeah, what would you do if it didn't work out?

Joe Lonsdale

Yeah, sometimes we go there anyway.

Shaan Puri

But yeah.

Joe Lonsdale

But for some reason, in my mind - this is maybe who I am - I remember all these times that worked out. I feel like I 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 see all the good memories, you know?

Shaan Puri

Right, yeah, so it's...

Joe Lonsdale

It was a fun time.

Shaan Puri

It's a certain entrepreneur survival tactic. Yeah, you have to...

Joe Lonsdale

To you, you have to keep your trauma... all the trauma institutes.

Shaan Puri

Because if you know how hard something is, you're very much less likely to start it again or do another thing.

Joe Lonsdale

The way I would have built all these companies if I had to force myself to think about that too much.

Shaan Puri

You know, the way you just described the global macro fund, you were pretty young when you were doing this. That's not what you were doing just before, so it's not like you had tons of experience.

Joe Lonsdale

My little brother got me reading a bunch of economics and finance stuff when I was young, so I kind of had a weird background in both computer science and finance. I had opinions about it, so I was thinking it's so weird those are like my two things. Since I saw... you know, it is... it's like, I knew that world pretty well. Yeah, you learn a lot being in it. You just do. You just have to be in it to do it.

Shaan Puri

But it's... I mean, credit to them for betting on you to be able to do that. Versus, you know, they could have hired somebody who's been doing that for 20 years. This is New York, we talk.

Joe Lonsdale

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 in what I have done is: I'd much rather hire for talent, ambition, and hard work than hire for expertise. There are exceptions, right? If you have a company that's already really working and scaling, and there's a machine that has to be run, you want to hire the person who knows how to run that machine. That's fine; that's the operator who knows what they're doing already. But when you haven't actually built the machine yet, or when you're doing something with a group in high finance or whatever, you want to hire for talent, ambition, and hard work. You want people who are willing to iterate and figure things out. That's a different skill set than the people who run the machines.

Shaan Puri

Hey, real quick! As you know, we're big on ideas here. We love bringing new ideas—business ideas, brainstorming ideas—for the podcast. Well, a lot of people ask, "What do you do with all those ideas? Can we go find them? Is there a list somewhere?" The great people at HubSpot have put together a **business ideas database**. It's totally free! If you just click the link in the description below, you can go download a collection of over **50 business ideas** that are from the archive, listed out for you and curated. So, what are you waiting for? Go download it! It's free. Check it out; it's in the description below. Alright, back to the show. What's your way of filtering for that IQ? Well, you know, how do you interview or what are the signals you look for?

Joe Lonsdale

This is like super hard. I think you start.

Shaan Puri

What are you doing with hard math problems?

Joe Lonsdale

We used to do that at Clarion. We had these really hard problems. I remember my friend ran Dropbox, and some of his partners there at his new ventures. Chen Lee was like the highest scorer on this test I gave. He's a smart, smart, smart guy. Yeah, we had to do really hard tests. But, you know, once I already had around me a bunch of people who were really top talent, it's like they knew people. Like, "Oh, who's the smartest guy in your physics PhD at MIT?" 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.

Shaan Puri

And so, let's go more on that. So, two things. 1. Ben told me something that there's some number—I don't know the exact number—20, 30 people who have worked at your companies that have then gone on to start like unicorn companies. Dude, what is that number roughly?

Joe Lonsdale

Oh gosh, you know, I don't actually keep track of the official number, but there are over 20 people who have worked directly for me and started huge companies. It's something I'm really proud of. We've had a lot of super talented people. In some ways, it's like I like to think in the back of my mind, "Oh yeah, I'm a great guy. I take credit for shaping them." But in some ways, it's like they're already really amazing. So I was like, "Maybe I'm just going to convince..." you know, which, yeah, usually they let me back them.

Shaan Puri

Yeah, that's the worst when you don't get the call.

Joe Lonsdale

Actually, I'm still proud. I'm still proud of it. I'll tell you about the guy who came right out of school to help run Out of Par with me. He was the president of the company, a super talented guy. I did not know what I was doing, even though I had already worked at Palantir. There were always mistakes I was making because there were things I didn't realize I had advantages of at Palantir. You know, Out of Par is a multibillion-dollar company now, which is great, but there are things that took longer and mistakes that happened. However, there were also obviously good things we did because the company worked out really well. I think he had a bit of a tough time on his own for a little while afterwards, but then he ended up partnering with someone and started a company that became worth $3 billion in like four years.

Shaan Puri

He sold it. Wow!

Joe Lonsdale

Which I'm like, "Oh wow, that's pretty cool." But I was like, and you know, I... he didn't have... they didn't bring anyone else into that company to help them. We'll coach and work with them together.

Shaan Puri

So, let's do big hit number 2: Adipar.

Joe Lonsdale

Yeah.

Shaan Puri

You explain, like, in layman's terms, what even is adipar? And then I want to... I have some questions for you. But let's first do the "explain like I'm 5 years old." What is it?

Joe Lonsdale

Adapar is the leading wealth management technology company in the U.S. There are people who work at what are called RIAs, or Registered Investment Advisers. There are tens of thousands of these advisers, and they help you, your parents, or whoever manage their wealth. They provide reports, handle trusts and estates, and take care of everything related to wealth planning. Man, it was really freaking hard. We built all this stuff and hooked up to Schwab and Fidelity because those are two of the biggest custodians—everyone's heard of those, right? However, we had all this wrong data in the reports. I kept asking, "What are we doing wrong?" It turned out the data coming from Schwab and Fidelity was often incorrect. I thought, "What is wrong with this space? It's like the whole thing's a mess." So, it was a challenging company to build. It took about three or four years before we really got to the point where it was useful to people.

Shaan Puri

And so, you didn't give up though during that time?

Joe Lonsdale

Oh no, that's like the last... you have to have a personality where you're not going to give up. I mean, I'll give up if it turns out someone else has already solved it perfectly. Like, if Adapar already existed, it would have been a stupid thing to do that, and I learned that. Then maybe you give up and pivot. But the fact that it's just a hard problem, you're not going to give up. You're just going to double down and fix it, you know?

Shaan Puri

Interesting. So, you don't give up if it's too hard, too busy, but it's...

Joe Lonsdale

Like, that's better. That means once I do solve it, it's going to have this giant moat. Like, Adapar has the biggest freaking moat. We were talking earlier about guys like Rocket Internet who will go around copying things and annoy people. Like, good luck! If you want to try to copy that, you gotta get to $1,000,000,000 in 10 years. You know, like, no chance. No chance.

Shaan Puri

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. What's he like? What's it like to work with him?" One of the things they said was, "He's always on. I've never seen him just go dark, go off, or just turn his brain off. He doesn't say, 'I just want to chill on the beach and drink my Thai and not do anything.' Is that...?"

Joe Lonsdale

Well, is this accurate for you? Like, my game though, I mean, I think you have to love what you're doing, right? So, like, you shouldn't play games you don't like. If you're not enjoying the game, you gotta switch it up. Yeah, so this is why I'm doing this. Because I really enjoy it. It's really fun, and I'm really good at it. I think one of the... you know, Aristotle would talk about how one of the highest pleasures is using your mind at its highest capacity. Right? So, let's see if you explain. Like, you actually enjoy chess more than checkers if you're good at both. Because chess has more levels to it; it's a more complicated game. You want your mind to be engaged in interesting, complex, useful things that are getting things done. It's a positive part. I think it's how humanity works.

Shaan Puri

Right. How do you still recharge or just get clarity of thought? Because one of the challenges is if you're always on, you might not have that chance to step back. You gotta pause and reassess.

Joe Lonsdale

You do need open time for creativity. I've noticed that when I over-schedule myself, I'm not nearly as creative. I think the cold plunge helped, right? I don't...

Shaan Puri

I don't know if that was a...

Joe Lonsdale

Quick mind.

Shaan Puri

That was a quick... you were.

Joe Lonsdale

You were in there.

Shaan Puri

For a little while, second 51, second reset, we had, I think I...

Joe Lonsdale

Stayed in for the full.

Shaan Puri

Yeah, you actually did two plunges. That was pretty good! What is your typical schedule like? What's a day in the life? Because you have your fund, you have companies, you have all kinds of things, and you have your podcast.

Joe Lonsdale

My number one is AVC, and AVC has a build program, which is my favorite part of it. A third of our money now goes towards building new companies. So, my favorite thing is the strategy for recruiting talent and then strategy sessions to figure out what we're going to build.

Shaan Puri

Right, and so when you said "strategy for talent," what was the other one? "Strategy for building the company," is that it?

Joe Lonsdale

You're basically strategizing when it comes to opportunities for new businesses. The way I look at it is that you're searching for conceptual gaps in the world. You're saying, "Here's where this industry is now. 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 the right new technology, the right new incentives, effective cultures, or whatever it is that could be better about it." The question is not just about identifying these gaps. It's actually very easy to find conceptual gaps in the world. I'll put forward that if you spend some time with a few smart friends, study the industry, and talk to people, you usually will find, "Oh wow, this thing could be done this way." So, the harder question is not just what could be done, but what's the path to get there? What could we put in place that would allow us to achieve it? How do we build this thing? How much is it going to cost? How do we make the people want this? For example, there are a lot of things in health care and hospitals that are done completely wrong, but it makes hospitals more money. So, even though it's 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.

Shaan Puri

Right, so let's do an example. Give me an example of something that’s top of mind for you, something you’re thinking about right now. Maybe it’s not all figured out, or a recent one.

Joe Lonsdale

So, a recent one... gap.

Shaan Puri

And a path that you kind of figured out.

Joe Lonsdale

100% So, it turns out that there are tens of thousands of loading yards around the country in logistics. These are places where trucks come, get in line, drop things off, move things around, and pick things up. It's a pretty interesting area. The biggest warehouse company in the country is Prologis, and it turns out the founder's investor with me is based nearby in California. We're back there, and it turns out there are a handful of the biggest carrier companies, like Ryder, which you've probably heard of. We've actually sold a company to Ryder, so we're close to those guys too. Because we knew a bunch of these people, we started analyzing what we could do with AI to make these yards better. What we figured out is that if you put just a couple of cameras in—at first, we thought we needed six—but just a couple of cameras, you can kind of watch and map out where everything is. You can map out how efficient the gate is, map out the processes, create accountability incentives for people to go faster, and create ways of pinging the carriers if it's backed up to use the other loading areas nearby. These are just basic little ways on the margins of making these things work better and timing them to create a little bit of competition. People always respond well if you do it properly. So, we've mapped this out and ended up founding a company with a really strong AI team. We co-founded it with the warehouse companies, the carriers, and others based on their needs. It's really cool because the way we built it with them, we have a few hundred million in revenue already built in that we can scale up into their yards that they already own. Then, we can have something that all the other yards want to use as well.

Shaan Puri

Let's do more details. So, you're already kind of adjacent to that world because you've done stuff. But how does the brainstorming work inside your office or wherever? When does somebody ask the question, "Hey, could you use AI for these loading yards?" How do... like, take me all the way to that. Where does a question like that even come from? Where does the nugget of insight come from?

Joe Lonsdale

So, my partner Jake is in charge of logistics and supply chain. He's the biggest driver here. He's done some strategy sessions with our friends running these different companies. We're close, so we'll get together. I have a vineyard in Napa Valley, and every year we bring together the top 100 logistics CEOs. We drink, strategize, and hang out. It's a good way to connect.

Shaan Puri

To and you kind of are asking them questions to try.

Joe Lonsdale

To find their pain points, we ask questions like: "What works? What are you spending money on? What are you seeing?" We'll bring in new entrepreneurs and back them, getting their take on things. We'll also bring in what are called Entrepreneurs in Residence (EIRs), who will talk with them and iterate on the idea.

Shaan Puri

Right.

Joe Lonsdale

So, we kind of knew that loading hours is a big thing. Let's go talk and iterate on an idea about 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. We met them through other friends who had worked on some really cool visual problems. We thought they were very, very good for this and ended up recruiting them as co-founders, which worked out really well. So, we're constantly on the lookout for talent separately.

Shaan Puri

Like napkin math, you're like, "Okay, so if we can improve the loading yards by this, that's the size of the prize." Then that kind of clears a hurdle for you.

Joe Lonsdale

This is... and you know, the other thing here, which I don't love but is 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... and then, like, be the thing they put in when they're going to have to do it anyway in the next year?

Shaan Puri

Right, they have.

Joe Lonsdale

The rules are coming up. There’s, like, you know, logistics has had a few of these things. They had some rule on telematics where you had to, like, I think for purposes of not making people drive too long, you had to record things differently, which was kind of an insertion. For a couple of Tomac's companies, we held back as well, which is the thing that tracks the trucks and stuff. So there are things like that where the regulatory aspect was helpful too. And then, yeah, you just sit down, you map it out. You've known people for a long time. I mean, one of the unfair secrets of business is that the more success you have, the more it’s like a platform for a bigger thing you can do next time. That’s just the way it is. You just gotta keep in the game. Because, like, I think when I was really young, I used to think, "Oh, you start a business, make a lot of money, and then go to the beach." That would be, like, fun. And that’s not nearly as fun as the fact that once you’ve already started successful ones, now you get to do, like, bigger things more easily.

Shaan Puri

Right.

Joe Lonsdale

So, it's like... and then that's why, when you're young, partner with someone else who already has an unfair advantage. Help them use their unfair advantage.

Shaan Puri

Right.

Joe Lonsdale

Build something with them. Now you have all these extra unfair advantages. You could do it again. So, this is like... there's this naive thing where you're like this lone business founder. I think you can do that, but it's so hard.

Shaan Puri

Right, why play you again with hard mode?

Joe Lonsdale

Yeah, why play you on hard mode? Why not find them? There are so many places in the world where there are unfair advantages. An unfair advantage... what I mean by that is, every time you have a success, you now have the respect, attention, and understanding of all these people who will then help you do the next thing, right? Once you prove you're confident, then, you know, 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 that's the thing we lack. We don't lack ideas. We don't lack money. We lack really talented, hardworking people.

Shaan Puri

With persistence, you know, I love that. That was so good! Can I come back for seconds? Can we do another example, another gap, or another origin story of one of these ideas that I think makes sense? I'll give...

Joe Lonsdale

I'll give you another crazy gap. I mean, these are... I'm taking big swings right now, so these are gonna sound a little crazy. But like, I was pretty bullish on China like 15 years ago. A lot of us were. I thought I was opening up a lot of my friends there who were reading Milton Friedman and, you know, free economy stuff. I thought, "This is gonna be great. There's just 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. I'm told by all these different senior people, "Joe, yeah, none of the stuff that you want to work on here is gonna be allowed. It can't be foreign." I'm like, "Oh, that's too bad." So I just stop working there as much. Then I kind of hear from them that terrible things are happening. A couple of them disappear. Then I hear he's making all these engineers work on defense. I'm like, "Okay, this is pretty messed up. I'm kind of nervous about this now."

Shaan Puri

And we

Joe Lonsdale

He started mapping it out. At the same time, you know, we've done Palantir, which started in 2003. So this is now like 2015 or 2016. I wasn't running Palantir anymore, but I'm still an advisor watching it. A few of my guys there are noticing that the defense world in the U.S. has become a lot more dysfunctional and a lot more broken. What happened to defense is that all these companies consolidated in the 1990s after the Cold War. Spending went down, so they all merged and became these giant primes. These primes started acting a lot more like government agencies themselves— not super nimble, not super adaptive. The way they get contracts is by having the right lobbyists, not necessarily by convincing clients. We call it "innovation theater." They have to pretend they're innovating, but they're not necessarily great at innovating because they're so big. There's no competition. So we're like, "Oh, this is kind of scary." None of the best engineers are going into these primes; their stuff is getting worse. Meanwhile, China has the best engineers, and they're getting better. We better do something. So, three of my best ex-Palantir guys partnered with Palmer, of course, to start Andral. You've talked to him before. I backed them early along with Peter, and I'm like, "Okay, guys, we're back in the defense sector. Let's figure out what the hell else to do here." So we basically mapped out what are 20 new possibilities in defense. I want to find 20 of them just to see, and then we're going to choose what's the most important one.

Shaan Puri

The way is that something you tell your team? Like, "Come to the table, I want to hear 20 ideas." Yeah, well...

Joe Lonsdale

You have to have a guy whose job it is to help. You need someone who can assist him, along with advisors who can get them into the right places to talk and explore. But let's talk to our smartest friends in this space. Let's reach out to our network. I want to hear about 20 ideas for new things. I want to see where we think the gaps might be. When we come back, there are about 8 or 9 pretty good answers. Some of the things I thought were bad answers, but we find some interesting stuff. One of the areas that's pretty cool is that there might be new possibilities in the electromagnetic pulse (EMP) space. It's really directed EMP. Of course, you don't just want to set one of these off and mess up everything. What an EMP does is it disrupts electronics. It turns out that if you can direct these, what you're doing is taking microwave energy and shooting it in a blast. You can actually turn things off. The government has spent $1,000,000,000 on this stuff, but they haven't really applied any of the new chips at all.

Shaan Puri

And you want that to protect against, like, drones, for example. That's one... that's one of the...

Joe Lonsdale

Really good ways of doing it. So, basically, you can have a chip that allows you to control power in very small time scales. You could take the gallium nitride emitters and build this correctly with top talent. It turns out there's a co-founder who's a friend of a friend of mine from Stanford, who's a genius and helped figure a lot of this out. You could shoot down things like 10 times farther away. Theoretically, you could use this against missiles by turning their guidance systems off. You could also use it against a truck coming to your base really fast. You just blast it. Now, it might be that the truck has a terrorist coming to shoot you, and you want to turn it off. Or it might be that there's a pregnant lady trying to get to the base to give birth. You don't want to necessarily blow it up, right? So, it's a good way to blast it without turning off the truck or killing the person. It's a pretty cool, non-lethal way of stopping things that are giving you trouble.

Shaan Puri

Right.

Joe Lonsdale

And, long story short, we were able to put together money and create a prototype. With less than $30,000,000 in this second round, we got to the point where we fought our way into a contest against the other primes. So, basically, one of the key things in government is that we're always trying to get them to have contests. The primes do not want contests.

Shaan Puri

How do we compete on merit, not on longevity or relationships?

Joe Lonsdale

Gonna be better at playing golf with the senator, right? But if you can let me into the contest, that's the way we can win, right? That's how.

Shaan Puri

Do you convince them to do the contest?

Joe Lonsdale

Then you push the Congress so they make laws to allow competition. You have competent generals and competent admirals.

Shaan Puri

Like you.

Joe Lonsdale

Thanks to Palantir and SpaceX, people have seen outsiders massively outperforming, and they're more open to the ideas. So, we're pushing things in the right direction.

Shaan Puri

Gotcha.

Joe Lonsdale

And they say, "Do this contest," and they didn't really take us seriously because the other guys had really spent $1,000,000,000 on this. It's like, "What can you kids do?" Right? It's kind of like the old mindset in the U.S. in the 1950s and 60s. It's like innovation is expensive; outsiders aren't going to be able to do it. That was true 50 or 60 years ago. But long story short, we ended up shooting down the hardened drones 9 and a half times further away than the other guys. They actually had to use binoculars to watch us shooting them down from really far away, and people were just flabbergasted.

Shaan Puri

Like everybody was lined up and it's like, "Okay, we'll see who performs." You're going to need binoculars to see because it's going to be out of range compared to whatever else is doing.

Joe Lonsdale

I think the people are just totally shocked. Yes, that's the same.

Shaan Puri

The amount of power, guys. Is that the name of the company?

Joe Lonsdale

Epirus... Epirus is a cool name. Epirus was a name in the legend of the Bow of Theseus. Theseus started Athens, and his bow had infinite arrows. So, this is kind of like a bow with infinite arrows because you can keep firing the pulses.

Shaan Puri

That's cool.

Joe Lonsdale

There are 10,000 of...

Shaan Puri

The pulse was Palantir, like a *Lord of the Rings* reference.

Joe Lonsdale

Palantir is like "Lord of the Rings." So, *Epirus* is more real mythology, while Palantir is more in the fake mythology world.

Shaan Puri

No, I have... we have quite.

Joe Lonsdale

A few things are named after Tokyo and stuff. It's an inspiring story. The idea with Palantir is that Palantir is a seeing crystal, right? In the story—this is super dorky—but in the story, they're built by the elves of the outermost west. They're basically this thing created for humans to get rid of the bad guys. However, 2,000 years later, a bad guy takes over the technology and is using it for evil. So, the idea with Palantir is that we thought we were very civil liberties obsessed. We wanted to build it in a way that would go after the bad guys. But then we had to watch the watchers and be really careful about how the technology is used. It's very obvious that if you're doing something to kill the bad guys, 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, and we ended up eliminating thousands of terrorists, so we were happy with the results.

Shaan Puri

So, what's fascinating to me is that not only have you had multiple hits, but they're in areas that are different and also hard areas. I don't even think about these, like the logistics yards or EMP pulse technology. These are in such different domains. I'm curious, is that intentional? Meaning, do you like... because most of the entrepreneurs around me in Silicon Valley are like, "Oh, B2B 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 where to fish where other people are not fishing, or is that just what happened?

Joe Lonsdale

No, I think it's definitely a strategy of sorts where you don't want to build yet another restaurant app or yet another to-do list app. Because it's like, that's what every other 21-year-old is thinking about. It's probably why I missed Stripe early on, as we've been to PayPal, and I had to see every payment app. There's literally hundreds of payment apps. I was like, "Oh God." You know, because Peter would make me take the meetings out because I didn't want to anymore. So it's like, no, you want to listen. There are parts of the world that are big parts of the economy that are very important but are not as exposed to technology cultures. So you want to kind of take your advantage. Our advantage is we have a really tough technology culture. Let's figure out how to expose it to something that hasn't likely seen that before and then find ways to work together to fix problems.

Shaan Puri

And what are some other ideas? I want to hear ideas that you're not doing, just because you can only do so many things at once. Or it might be that it would work, but it's too small for me, or it's not using my current platform to do bigger things. This happens to me all the time: I see ideas that somebody could do that I'm tempted to do because it's so clear to me, but it's like... that would not be the right game for me to be playing right now.

Joe Lonsdale

There are so many things. If I had the right talent, I'd be doing more. You know, I do a lot in the wealth management world. I think that the process of starting a trust and the actual legal work around this could be very automated with AI. You could have a smart lawyer and a few smart engineers to create a whole new trust company and a new estate management company. We have SaaS software for estate management that you could plug into. I have a lot of distribution for this ready, but I would need the right engineers and AI people. I'm not sure if it's bigger than a $1 billion or $2 billion business, but it's still worth it, you know? It saves a lot of time. But I'll give you a really big idea I want to pursue, although I don't have the right people around me. Local governments just sold OpenGov for $1.8 billion. In local government, there are a lot of lessons from this company and many mistakes. It took us 12 years. Zach Bookman, the CEO and my co-founder, did a great job. We learned that you can really only do things for which they already have a budget. There are about 90 things local governments pay money for software to do, and OpenGov covers about 40 of them. As we learned this, we realized it's a big opportunity with a lot of processes involved. The idea is that there are trillions of dollars spent by local governments, and many of them can't find the right staff for certain processes. A lot of them also have people retiring soon. I think a BPO (Business Process Outsourcing) solution for certain tasks in local government, augmented by AI, could be a huge business. It would basically help them with these tasks. Right now, it's not a standard way they work, but if you do it really well, it could become a standard. That's the kind of area where you can make tens of billions in revenue before anyone even notices you because it's such a big part of the economy. That's another idea I have.

Shaan Puri

The first 6 to 12 months of that company looked like...

Joe Lonsdale

You basically have to find early partners willing to trust you and work with you on outsourcing some of those 90 processes. It would be something like augmenting their ability to do licensing and permitting faster, or you're augmenting some of their grunt work on tracking their assets and asset management. Alternatively, you could be doing something for their budget automatically, which is 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 have to go in and figure out what processes our city is even willing to let you do. It's a very unnatural thing because it's not how they work right now. However, there's a secular trend towards local government not having enough money. So, if you can find ways to save massive amounts of money and provide a higher quality service, there could be something there.

Shaan Puri

Right, alright. I want to play a little "agree or disagree" game. So, I want to say a statement and I want to hear you agree or disagree with it. The first one is on this idea of big swings that are solving huge problems, you know, mission-oriented things versus just getting your first win under your belt. A guy came on the podcast and he said, "My theory is you first go get your nut and then you work on your noble mission." He's like, "You go and you develop your skills, you make a few million dollars, you get personal autonomy, and then you should pick a noble mission, a noble quest, and go on that." Do you agree or disagree with that philosophy?

Joe Lonsdale

I agree in general. I think it's a really good thing to do. You want to have a solid base before you do something like a huge, crazy, risky quest. You don't want to be poor for 12 years while you're doing something if you can help it. I mean, I'm not saying that's going to be the path for everyone, but if you can do what he said, that's a really great way to do it.

Shaan Puri

Okay, another one: A lot of people say that ideas are cheap, ideas are a dime a dozen. "Execution is everything," and I agree that execution is very important, but I think ideas really matter too. I think that project selection—picking the right market to go after—is a huge lever. So I think that the "execution is everything" philosophy is BS. Agree or disagree?

Joe Lonsdale

That's a tough one because I've seen a lot of good ideas that... they actually aren't worth that much because they couldn't actually bring together the talent to do them. So, it's necessary but not sufficient. You do need both, right? The execution is the harder part, but you're right, you can have amazing execution and I've seen this in 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.

Shaan Puri

Okay, that's what.

Joe Lonsdale

I'd say.

Shaan Puri

Another one: **focus is a superpower**. I would say that, like we were talking about this earlier, you recognize the value of focus and just compounding one thing. But you've also done a variety of things. Agree or disagree that... you know, focus is the way to go? Focus should be the strategy?

Joe Lonsdale

Focus is clearly the right strategy for the most successful people in the world. If you look at the wealthiest people, they nearly all focus and compound their efforts over a very long period of time. If you look at Palantir and Adder, those are two companies where I focus full-time. They are two of my most important companies. I think when you're having an impact on the world in different ways, sometimes it's okay to do different things. Philanthropically, coaching entrepreneurs is something I enjoy. I believe I'm creating a lot of value right now. However, as an entrepreneur and a business person in general, especially if you haven't already had a giant win, you should just focus and aim for that giant win to compound your success.

Shaan Puri

You're friends with Elon. What’s something you’ve learned from him or something you admire about him that the rest of us don’t know, you know, when we only know him from the outside?

Joe Lonsdale

Yeah, I mean, I guess I'd say I really admire his boldness. Obviously, he's really good at focus. He's really good at saying no, even to friends, about anything that's not tied to what he's really passionate about and focused on to win. He's just really, really bold at clearing nonsense out of the way and clearing mess out of the way, going right for the thing that matters, right for the substance. I think most people in my life would think I'm maybe too bold, too direct, or too extreme. Elon is like a whole step further, which I think is great to see. I'm like, "Okay, I could do better."

Shaan Puri

There's more here.

Joe Lonsdale

I could be more myself in that direction, and I'd be more successful if I would... You know, I've obviously done very well, but I think he's on a whole other level of bold. That's something that's good for me to see because it reminds me that's a good direction for entrepreneurship.

Shaan Puri

You know, is he focused though? Because he's got like five things. You know, he's got: - Twitter - SpaceX - Tesla - Neuralink - The Boring Company He's got so many things. How do you square that? Is that focused, or is it...?

Joe Lonsdale

I mean, I think he was insanely focused for a very long time on the things he was doing and on scaling them. I guess there were two companies for a very long time after doing one company for a very long time. You know, he's at a level of success, again, societally, where there are things that really matter for society that only he can do. So it makes sense if he would expand that. I think I told you earlier, my partners are allowed to work on up to six things at once. I think when you're coaching and managing things, that's about the right amount. If you're just operating, you want to do like one or two at most.

Shaan Puri

Last question, because I think we gotta go, but... What's the one question that really matters? Forget the hour, what's the one question that really matters? All the questions I've asked you have been beating around the bush with this one thing, so now I'm gonna ask you it directly: You have now created, by my account, at least four $1,000,000,000 companies directly. Probably more than that. I call that the entrepreneur's grand slam.

Joe Lonsdale

mhmm

Shaan Puri

You have done something that anybody who wants to make one successful company would be envious of. How... wow, how does he do it? You know, you see also a lot of other founders. You meet them through your fund or just people who probably come up to you. What would you say you are doing differently than the average good founder?

Joe Lonsdale

So, this... I have some unfair advantages, right? And it's actually not that hard once you've been really successful to do it again relative to the first time. But what am I doing differently? I have a huge talent apparatus. We have people at dozens of universities, we have all sorts of things we do to [recruit and develop talent].

Shaan Puri

Talk to people at universities. What are we doing?

Joe Lonsdale

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...

Shaan Puri

Have like a scouting department almost.

Joe Lonsdale

Yeah, you have like a huge talent scouting department that works in different ways and in different places. We have really talented people, and we spend a lot of time with each of our partners. That's our job: to scout for talent and to use our network. The more wins you have with smart people, the more you get to meet their smart friends. So, we have a huge advantage in talent, first of all, because that's really key. We also have a huge advantage in knowing the people who run a lot of big industries. We have good relationships with them, having them as advisors, and involving them in things we've done. This allows us to understand what's happening in those industries, get quick feedback, and iterate on ideas. One of the biggest mistakes founders make is having an idea and being afraid someone’s going to copy it. They think the idea is valuable, which is really dangerous. If you think ideas are too valuable, you just don’t share them; you think they’re yours. One of our advantages is that one of Peter Thiel's thought experiments was to imagine there are five founders, each with an idea. Four of them are secretly working on it, while one is talking to everyone and iterating. Which of the five is going to win? Clearly, it’s the one who’s iterating a ton. We can have the same idea and iterate faster than anyone else because we know everyone running everything. We know how to get to the right answer much more quickly. Not only do we have the best talent, but we can iterate ideas with people who respect us and who we involve. Whenever we start a company, maybe this is a mistake because I could have had a lot more money, but I’ve always been a minority owner of my companies. When we start out, the build program might take 20%, and my team and I might take 10%. So, we might have 30% total, maybe 35% or 40%, but it’s less than half. We are very generous with the founders, early employees, advisors, and partners. When we start these things, I don’t have to wake up in the morning being the only one worried about this. There are another 30 smart people waking up, and that’s their focus. That’s such a big advantage—to have other people obsess over this. There are people who truly feel like co-founders. I think one of the big mistakes is thinking, "I’m the founder, and you guys are just working." What do you get from that other than your ego? I’d much rather have it where there are so many companies that people don’t even know I’m the founder of. That’s way better because, first, they’re not going to harass you about that stuff. These people who are proud founders get to be out in the press, and they’re worried about their reputation and focus.

Shaan Puri

In the intro, I'm going to say something like, "This guy has started more billion-dollar companies than anybody in America," which I think is an amazing claim to fame. But forget about a billion, let's talk about a million. The name of the podcast is "My First Million," and I went and read a Quora answer that you did. Somebody said, "If I want to make a million dollars, how should I invest my money?"

Joe Lonsdale

mhmm

Shaan Puri

And you said something like this - 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 $1,000,000 invest their time?

Joe Lonsdale

You know, it's... yeah, it's right. You can't just make $1,000,000 from investing for probably the average person. Maybe you can over like 50 years or something. Like 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. And that could... that could work for 100 years.

Shaan Puri

Being thrifty.

Joe Lonsdale

Being thrifty like that is a thing, especially over a very long time horizon.

Shaan Puri

I think you said she bought one stock or something also.

Joe Lonsdale

She's my grandfather worked for Abbott, and she held it for like 60 years. It happened to work really well. Great, you know, it's really good for my cousins and their inheritance. But you know, she was a wonderful lady. In general, that's not probably how you want to make money. You want to make money, especially these days. I mean, gosh, going back then it was probably a lot harder. But these days, there are so many places where you can learn how to help build things, how to help create things, and how to help be useful to other people. That's what you want to be doing. You want to be finding what you are passionate about and what you are 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." Then, who else is good at this too? Who can you maybe learn from? Who can you be like? Spend your time trying 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 help grow it. That's how you see how everything works. If you're talented enough and the people you succeed with, they're probably going to be able to help you do something new later.

Shaan Puri

And that's what happened to you, right? That's how you spent your time, my understanding. If we walk back in the journey, it's: 1. You're in college 2. You go to Stanford 3. You end up working at PayPal 4. You become an intern at PayPal

Joe Lonsdale

I tried a couple of times. They rejected me the first time I applied. I actually...

Shaan Puri

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. He probably doesn't remember this, but he was the co-founder of PayPal on the tech side, and we were arguing about some tech thing.

Shaan Puri

Was PayPal already a big deal? Is that why you wanted to work there?

Joe Lonsdale

It wasn't that much of a big deal yet. Like, Peter Thiel wasn't who he is now, Elon Musk wasn't who he is now. 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, you know?

Shaan Puri

And so, you try one year, rejected. You try again the second year. You're in... what's your job? You're an intern at PayPal. What are you doing?

Joe Lonsdale

Oh, it's not very glamorous at all. They basically had me setting up the PeopleSoft instance, which is terrible. But I sat next to this guy... we were in like, so roll off [possibly meant to say "Sarbanes-Oxley"] who's now like a star partner at Sequoia. He was a CFO and we were kind of in his domain at first. I sat next to this guy who was managing all the money on Bloomberg, like a treasury thing. So I got to learn finance and treasury. And then what was happening is... the big challenge in the companies: we're 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 with all these guys who were working on how to stop the bad guys.

Shaan Puri

Because PayPal is like a honeypot; it's got all the money.

Joe Lonsdale

So, like, you go to 7-Eleven and the clerk there might be having a bad year and, you know, angry at capitalism—who knows? They could be writing down secretly the numbers on the credit cards. If they write down 500 of these numbers, they can sell them online for $5 or $10 each. The Russian mafia is buying them up. Then, all of a sudden, you get a chargeback that says $200 on PayPal for something, and you're like, "I didn't do that." So you see the chargeback, and then PayPal is left with the bill. This was costing PayPal several million dollars a month, and a lot of our competitors went bankrupt. We got to learn at the time how to basically stop the bad guys, which was a kind of fun problem too.

Shaan Puri

And so I like what you did there, which is one of the pieces of advice I gave on the pod: **you've got to work on the A+ problem at any company**. Regardless of what your role is, you should try to at least know what is the A+ problem.

Joe Lonsdale

And what's the real problem right now?

Shaan Puri

And then try to be helpful on that. That's like because that's the needle mover, and that's where you're going to get the most learning and the most action.

Joe Lonsdale

And I didn't necessarily do this on purpose. I actually wanted to quit at first because the people saw a thing was so dumb and so horrible, and I couldn't figure it out. My dad convinced me, "Don't quit, just do what you can to be helpful." Otherwise... so that was good dad advice.

Shaan Puri

To an 18-year-old.

Joe Lonsdale

Old, yeah.

Shaan Puri

You know, I almost quit college for the same reason. My dad was like... because I was thinking, "I'm pretty mediocre here." I was used to being good. Then you go to a group, like you go to a top school...

Joe Lonsdale

Didn't feel like you were one of the best.

Shaan Puri

Now, I'm just... these were all the best high school kids. Now, I'm kind of in the middle. So I was like, "You know, it's too expensive. Maybe I shouldn't be here." He's like, "That's exactly why you should be there."

Joe Lonsdale

It's my challenge.

Shaan Puri

You want to be surrounded by people who are better than you.

Joe Lonsdale

So, one of the things Alex Karp had an insight on, my co-founder at Palantir, is that you can't really appreciate a talent unless you're within two standard deviations of it. You think of talent as being on a normal curve for any typical skill. It could be for math, podcasts, or whatever it is. You just kind of have a natural level of talent that you could shift slightly. The very best people in the world at something might be at the fourth or fifth standard deviation. But if you yourself are at the second or third standard deviation, you can at least start to appreciate that. Whereas, if you're not great at physics, I don't know if you meet someone like Albert Einstein versus a top physics professor, you're going to have no idea which one's Einstein, right? So, it's the same thing in any other area.

Shaan Puri

But you can't differentiate exactly.

Joe Lonsdale

But once you can recognize that talent, it lets you harness it for the 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.

Shaan Puri

Right, okay. Because you can notice what... because you can understand this is actually the 5 standard deviation talent.

Joe Lonsdale

I was good enough at computer science; I was able to get A pluses at Stanford. I had friends who were way smarter than me in computer science, but I was good enough to know who those kids were and how to harness them and how to hire them. Right? So, there are things that...

Shaan Puri

That's interesting. So now, the next thing you do is go and start Palantir, which...

Joe Lonsdale

Yeah, well actually, I worked for Peter's family office for a while. He was the first investor in Facebook. It was just his family office, and there was tons of crazy stuff going on. It was really fun. It was like a really expensive restaurant that went bankrupt. There was a spam company that was starting. There were all sorts of crazy things happening, and I was there. Peter's a genius, but he's not really a manager. So I started thinking, "Okay, I'll just take charge here." I began hiring people with him and kind of helping him run things. Some of the older guys were like, "Who the heck is this 21-year-old kid?" We ended up working on a project that summer to map out what it would look like if we took all the stuff we did at PayPal for anti-fraud and generalized it for the intelligence community. My roommate Stefan and I from Stanford decided to sketch up all these cool products and build prototypes. That was kind of the genesis of Palantir.

Shaan Puri

Oh, interesting. Okay, so you guys basically had PayPal show you a bit of the problem.

Joe Lonsdale

It's like they showed us a solution to a problem. They were like, "Wait a second." Basically, what happened is they got to know all these guys at PayPal. They're in the Secret Service and FBI. Those are the two groups that are in charge of anti-fraud, like arresting the mafia guys. These guys would come to us and ask for advice on other things because it was like, you know, it's kind of fun. It's cops and robbers. I don't know if every young man likes this, but in the tech world, of course, you want to help kids or catch bad guys. So, we were teaching them about cyber fraud or whatever you call it—internet fraud—in 2000 and 2001. They started coming to us, and then 9/11 happened. The government began spending billions of dollars on supposed solutions to catch bad guys and watch what's going on. We knew these guys, and we watched what they were spending money on, and we were like, "Oh my god, this is stupid." This is way behind Silicon Valley. Not that I'm so smart, but Silicon Valley itself...

Shaan Puri

Right.

Joe Lonsdale

Had gotten way ahead just because they brought talent from all over the world. So whatever was being done, what we call like the "Beltway," basically in D.C. with the old integrators, they're still doing stuff from 20 years ago. And we're like, "Oh my gosh, our nation is under attack and we're wasting $1,000,000,000 on stupid stuff." So that's when I said, "Okay, let's get together and draw up what we could actually be doing here if they did it better."

Shaan Puri

What happens next? So, like, walk us through... Because okay, we see today - I think I looked this morning - it's a $50 billion market cap company. That's amazing, but it's also 20 years later. So if we rewind the clock to where most of the people who are going to listen to this are: early stage, trying to figure things out, unclear which pathway to go, unclear if this is even going to work... Take me back to that. What did you do? What was it like, and how did you figure out the first few steps?

Joe Lonsdale

Well, there are lots of different ways to build successful companies, right? So, I don't ever want to say, "This is the path." But our path was that we were kind of watching all these companies come out of PayPal. I was very lucky to be sitting there seeing, like, these guys doing IronPort, and Dan with YouTube, and Yelp, etcetera. So, watching these companies, the ones that I could tell were more successful were obviously, at the time, the ones attracting the very best engineers. It's almost like engineers were lined up trying to get into these companies. A lot of times, people have a business idea and they think, "How do I hire an engineer?" But it's the opposite. The ones that are crushing it are like a nightclub where the engineers wish they could follow those people in. Something about those cultures is just so dynamic. 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 can try ten times as many things, you can be slightly less smart in business and still succeed, right? Because you get to iterate. So, we needed to build a really top engineering culture. That was one of our core principles early on: how do we create a culture that attracts the very best and respects them, making them partially in charge of the company, you know, alongside you? We spent a lot of time on that. It's a little bit of a chicken and egg situation. I was lucky to have a bunch of my friends from growing up who were national math and chess champions—all these smart guys. So, we brought this really core culture together and convinced some of these really top PhDs from MIT. What was your pitch?

Shaan Puri

To them, like, what's the quick version that was getting them excited? It's because you need a magnet—something to bring the talent in.

Joe Lonsdale

The government is 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. They describe the problem to us as a very hard technical challenge. If we have the best engineers, we're going to be able to do it. We're iterating closely with national intelligence and defense agencies. We get to go and solve this problem, and if we succeed, we're going to save thousands of lives and protect civil liberties. That was...

Shaan Puri

That was my little... it's.

Joe Lonsdale

It's a fun, big mission.

Shaan Puri

One of those things you said is, "We're working closely with these agencies." 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.

Joe Lonsdale

Yeah, so, is that maybe it wasn't entirely the case that they were iterating as closely as I'd like them to be with us for the first year or two? Alex Karp was very good at this. Alex was, at first, just an adviser to us, helping us. Then, Peter kept trying to get us to hire a CEO because Steph and I were 21. You couldn't really have a 21-year-old running something while 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. I'm sure they were great guys; they just wouldn't have fit at all with us. Finally, Alex had been helping Peter raise money for things, their friends from law school. You know, he was a PhD in philosophy in Germany. In Europe, a lot of the billionaires like to pretend they're philosophers. It's like the high-status thing to do, kind of like here where they like to pretend they're podcasters.

Shaan Puri

Or something kind of nasty.

Joe Lonsdale

I don't know, but... So basically, he knew all these wealthy people, and he started advising us on: - How to talk to them - How to meet them - How to think about how institutions worked He was always casting things in terms of how you had to approach people to be taken seriously, which...

Shaan Puri

What do you mean by that? I don't understand.

Joe Lonsdale

Like, if we show up and we're like these quirky 21-year-olds in Silicon Valley, that's the wrong casting. Whereas if you show up and walk in the door with the former head of the CIA, and Peter Thiel has made the introduction after being at PayPal, and another one of his friends, who is senior, has explained to them that this is a project they're helping with, and it's going to help in this way based on this big advancement made in Silicon Valley. They've already been talking to a bunch of people, the FBI, etc., and they want your feedback. That's a high-status way to come into the room, right? Whereas if I come in the room and say, "Look how smart I am," that's not the same.

Shaan Puri

Look how right this is. This is better than what you're doing, right? Like, look at how smart it is. Are you wearing a hoodie?

Joe Lonsdale

Yeah, exactly. They're like, "I guess a lot of young people maybe underestimate that substance is important." But you can't lead with substance because substance is not taken seriously. You have to have the substance to win, but you also need all the trappings of why they're taking it seriously, why they're comfortable doing it, and why it makes sense. So anyway, there are these things about how the real world works and who to talk to in this institution to get your help. Alex has had this wisdom about people and institutions and how to navigate that. The rest of us, we have the best tech culture, but we didn't have that. 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 that he actually was... he's still CEO 20 years later.

Shaan Puri

Right.

Joe Lonsdale

So, it worked out.

Shaan Puri

And you mentioned Peter. Peter was not active day to day necessarily.

Joe Lonsdale

No, he was critical for...

Shaan Puri

The company... what was he doing?

Joe Lonsdale

Peter was like, "First of all, he's a financial supporter." They don't want to give us crazy kids... Like I told you, there's always crazy projects going on. A lot of people around him are like, "This is the craziest thing you're doing. It's one thing to waste money on a restaurant, but you're sending these kids to pretend to be spies and build things? What are you thinking? There's no such thing as a company that does this!" So... you have to give them credit for being willing to bet on a crazy idea.

Shaan Puri

He put a lot of money into it, right? Like, it...

Joe Lonsdale

Was it several million dollars early on? Which is like... and then we had this fund start putting things alongside others. But I mean, that's a huge amount of money for like crazy kids. What are we doing? Then, like, Peter was really good for strategy. 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 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. I think because he had the experience and he was going for a multibillion-dollar win, he was really able to steer us away from a lot of big mistakes earlier.

Shaan Puri

What would have been a partnership that would have been maybe?

Joe Lonsdale

We would have spent all of our time selling our interface in Europe to give them all the rights to it. We would have had to fly over there and support things they were doing. These are random things that sounded really good because when you're getting started, you're desperate for that first $500,000 in revenue and such. 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 [the right approach].

Shaan Puri

Like a mess, that's going to distract you. Right, right. And Peter is an interesting guy for sure. You said "restaurant curious," like, I mean...

Joe Lonsdale

There was everything, I think. So, this is not unique to Peter, by the way. This is a really common rule: whenever someone becomes very successful for the first time, they usually become more expansive. If they're an entrepreneur, I mean, all of us like to build things or create things. 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." Then, I think we all forget: 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. I brought like 30 of my smartest friends into it, and we all iterated like crazy. We almost died multiple times, and we barely made it work. You gotta forget that. You gotta forget that part, and you're just like, "Oh yeah, I did this."

Shaan Puri

See, you do all these things. *Snap* my fingers in here. Exactly like, "We're gonna do this, this, this, this."

Joe Lonsdale

It's like playing Risk, you know? Where you're talking and... it turns out that's not a good way. But this is what I've seen almost everyone go through. Unless... I'm lucky to have watched multiple other friends go through it, so I still made mistakes in different ways, but... So, there was very expansive [investing], and there were some things maybe didn't make as much sense. And then, of course... but then, you know, he's so freaking smart that some of them didn't make a lot of sense. He wrote the first check into Facebook at that time, so I mean, give me a break, you know? You can... I mean, everyone in venture is not gonna have a 100% hit rate. So you learn from your mistakes.

Shaan Puri

Were you around when he wrote that check into Facebook?

Joe Lonsdale

Yeah, I mean, I get no credit for it and like...

Shaan Puri

At the time, did it seem like a big deal, or was it just one of many things he was doing? It was unclear that that was fair.

Joe Lonsdale

One of the many things they seem particularly smart and interesting. I can't say I thought it was going to be... it's because it was. I don't think anyone realized that, but it was clear they were really smart, really interesting guys who were very aggressive. So, it was a fun thing to be exposed to. 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, you know, it was a good time.

Shaan Puri

Be there.

Joe Lonsdale

It was fun.

Shaan Puri

He's like a 5'4" white guy.

Joe Lonsdale

Just exactly, he's a little Jewish guy. He was like, "That's a..."

Shaan Puri

Bit of a compliment. Sorry, James.

Joe Lonsdale

No credit for you if anyone.

Shaan Puri

Out there, someone wants to rewrite me as like a super handsome black guy. I would...

Joe Lonsdale

**Love that.**

Shaan Puri

That's great! Thank you for doing that.

Joe Lonsdale

This is awesome.

Shaan Puri

Thanks, John. The highest compliment is "I learned a lot today." That's my goal with all these: what are some of the things, you know, couple of golden nuggets that come out of this? So thank you so much, John. Fun getting to know you. Yeah, I know. Nice.