China Market Exodus

Joe Lonsdale shares a story about how political changes in China led him to pivot away from investments there and into defense technology.

"I was pretty bullish on China 15 years ago. A lot of us were. I had friends there reading Milton Friedman and free economy stuff. I thought 'this is going to be great, there's so many smart people there.' We started making bets there, working there, doing a bunch of stuff.

Then this guy Xi Jinping takes over, and I'm told by all these different senior people, 'Joe, none of the stuff that you want to work on here is going to be allowed - it can't be foreign.' So I stopped working there as much. Then I started hearing from them about terrible things happening, and then a couple of them disappeared. Then I heard he's making all these engineers work on defense.

At the same time, around 2015-2016, we noticed that defense in the US had become a lot more dysfunctional. The defense companies had consolidated in the 1990s after the Cold War spending went down. They merged and became these giant primes that started acting more like government agencies - not super nimble, not super adaptive. They got contracts through lobbyists rather than innovation.

So we mapped out 20 new possibilities in defense, and that's how we started getting into defense technology instead."